October 2007 Transportation Times e-Newsletter

Negligent Entrustment

truck driversNegligent entrustment suits and verdicts are increasing. Settlements tend to be large and judgments can often include punitive damages. The focus of negligent entrustment suits is primarily on the insured and its policies and practices. However, the negligent entrustment issue is beginning to grow beyond the insured. Allegations are starting to be made against producers and insurance company personnel who permit a bad driver to operate a vehicle or who ignore known practices of insured's permitting unfit drivers to drive.

What Does Negligent Entrustment Mean?

In simple terms, negligent entrustment means to charge someone with a trust or duty in an inattentive or careless fashion or without completing required process steps.
In commercial automobile operations, a case of “negligent entrustment” may arise when someone allows another person to use a vehicle knowing, or having reason to know, that the use of the vehicle by such person creates a risk of harm to others.

Theories of Employer Liability

There are two other theories of employer liability that are closely related to negligent entrustment: Respondent Superior and Negligent Hiring . Simply stated, “Respondent Superior” holds an employer responsible for the conduct of an employee while the employee is acting within the scope of his/her employment.
“Negligent Hiring” holds an employer responsible for the conduct of an employee if the employer failed to use due care in hiring and retaining such employee. An example of a circumstance involving negligent hiring would be the employer's failure to check a driver applicant's driving record where it would have revealed a poor driving history or, in checking the driver applicant's MVR, determining it to be "poor" and allowing him to drive anyway.

When is Negligent Entrustment Alleged?

In the case of commercial auto operations, charges of negligent entrustment often arise after a collision where the employee or contractor was dispatched on a run without due regard for their qualification/ability to safely operate the vehicle. Although the driver’s own negligence in causing the accident is usually the primary issue, the two main focuses of investigation of a negligent entrustment charge are:

  • A company’s policies
  • A company’s actual practices

In other words, do the theory (the policies) and the fact (the actual practices) match? Basic questions are asked: does the company have a policy regarding driver selection and training? Did the management team adhere to the terms of that policy? Bottom line, did the insured practice what they preached?

What Elements "Make Up" Negligent Entrustment?

There are several issues which are examined in a case or claim alleging negligent entrustment:

  • The driver must be incompetent
  • The employer knew or should have known of this incompetence
  • The employer must have entrusted the vehicle to the driver
  • The driver was negligent on the occasion in question
  • The driver’s negligence proximately caused the crash

Showing Driver Incompetence

Cases in many jurisdictions have focused on establishing the minimum competency of drivers by using the Federal Motor Carrier Safety Regulations (FMCSR) as a reference. In simple terms, these regulations require that a driver:

  • Be of legal driving age for the state where his/her license was issued;
  • Be able to read and speak the English language;
  • By reason of experience or training, be able to safely operate the vehicle;
  • By reason of experience or training, be able to determine whether the cargo is securely loaded; be physically qualified to operate the vehicle; hold a valid driver's license; complete an application form for employment; complete a driving test in the type of vehicle the applicant is expected to operate and be deemed qualified to operate the vehicle (have not committed a criminal offense).

Although enacted to govern companies who are under the authority of the Department of Transportation (DOT), the Federal Motor Carrier Safety Regulations are increasingly being referenced as a benchmark to measure the qualifications of a “professional driver” (a person with driving as a regular part of their job duties). When allowed as evidence in cases involving companies who are not under the authority of the DOT, this principle can make a big impact on the outcome of a court decision. Of course, the easiest method of demonstrating a driver’s incompetence is to show proof of a long history of traffic violations and/or collisions.
Showing the employer knew or should have known of the driver’s incompetence typically, all pertinent employment records of the driver will be reviewed by the plaintiff’s counsel. They will also do a thorough investigation of the driver's background, including his driving record. If the employment records do not contain an accurate and complete driving history of that employee, then the plaintiff's attorney will assert that the employer “knew” or should have known of the incompetence. If the plaintiff’s counsel independently discovers records indicating incompetence, then the employer should have been able to discover the same facts.

Showing the Employer’s Entrustment of the Vehicle to the Driver

If the driver is performing within the scope of their job duties and the vehicle was not taken without permission, the vehicle has presumably been entrusted to the driver by the employer.

Showing the Driver to be Negligent on the Occasion in Question

An investigation of the accident scene, interviews with the parties involved and witnesses, and other evidence, such as a citation issued to the driver, can be used to prove a finding of negligence.

Showing that the Driver’s Negligence Proximately Caused the Crash

There are several ways that this may be established, often involving investigations by “expert witnesses,” but a simple test is to determine whether the driver was issued a citation, was criminally charged, or otherwise ruled to have been “at-fault” after a presentation of evidence.

How to Reduce Exposure
The potential of exposure to negligent entrustment losses can be reduced through the following:

  • Driver recruiting and selection practices.
  • New hire evaluation and orientation.
  • Ongoing driver review and training.
  • Post accident reviews and training.

Each of these four areas must have a component that involves evaluation of the driver’s adherence to acceptable MVR standards.

Exposure from Non-Employees
Insured's often allow contractors’ employees to operate company vehicles. These non-employees can expose the insured to allegations of negligent entrustment. Examples of this type of situation could include:

  • A contracted security guard who uses a company pool car for patrols
  • A temporary employee (from an employment service) who takes a car to the post office
  • A temporary employee (from an employment service) who makes deliveries
  • A maintenance contractor who needs to run out for a part or to another location to do work
  • Transportation operations which contract with owner-operators or run on other companies’ DOT rights

Trip Leasing

These vehicle operators must be qualified in the same manner as the employees of the insured are qualified. If the insured allows non-employees to use company vehicles without determining competence, the insured could be held liable for negligent entrustment

Exposure from Personal Use by Family Members

Similarly, providing company vehicles to family members represents a risk to negligent entrustment allegations if not handled properly. Although the entrusted person is not acting within the scope of employment, the company's vehicle has been made available for their use and their qualifications should be evaluated.
If you haven’t seen the benefit of a corporate vehicle use policy until now, there is no better justification than the issue of negligent entrustment!

State Variations in Negligent Entrustment
The 50 states and the District of Columbia have been ranked – low, medium,
high – as to their proclivity to negligent entrustment lawsuits and actions.
Low: No separate cause of action permitted; no punitive damages allowed.
Medium:  Multiple pleadings allowed; Respondent Superior and Negligent Entrustment/Hiring permitted.
High: Strictest, not only allows separate causes for Respondent Superior and Negligent Entrustment/Hiring, but allows pleadings for punitive damages. A word of advice: do not assume that a state ranked “low” is one where negligent entrustment is not an issue. We are never more than a court decision away from a “low” state becoming one that has set a strong negligent entrustment precedent.
As we are made aware of changes in particular states, the rankings will be updated.

State by State Rankings for Negligent Entrustment

Alabama

Medium

Montana

Medium

Alaska

Medium

Nebraska

Medium

Arizona

Medium

Nevada

Medium

Arkansas

Medium

New Hampshire

Medium

California

Medium

New Jersey

High

Colorado

Medium

New Mexico

High

Connecticut

Low

New York

Medium

District of Columbia

Low

North Carolina

High

Delaware

Low

North Dakota

Medium

Florida

High

Ohio

Medium

Georgia

High

Oklahoma

High

Hawaii

Low

Oregon

Low

Idaho

Medium

Pennsylvania

Medium

Illinois

Medium

Rhode Island

High

Indiana

Low

South Carolina

Medium

Iowa

High

South Dakota

Medium

Kansas

Medium

Tennessee

Medium

Kentucky

Medium

Texas

High

Louisiana

High

Utah

Low

Maine

Medium

Vermont

Medium

Maryland

Medium

Virginia

High

Massachusetts

High

Washington

Medium

Michigan

Medium

West Virginia

Medium

Minnesota

High

Wisconsin

Medium

Mississippi

High

Wyoming

High

Missouri

Low

Wyoming

High

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