Tyler Matthews was a recent student of mine at Brock University. He completed a Bachelor of Sport Management (Honours) at Brock University and his sport management studies have inspired him to consider pursuing a law degree. To that end, he recently completed an internship with the Sport Dispute Resolution Centre of Canada. Tyler researched and wrote this blog following his experience being named in an automotive insurance lawsuit.
Automotive insurance is simple, right? If you drive a car you must buy insurance, and the insurance company will cover the damages if you get into an accident. There is no need to read your insurance policy because you are required to purchase insurance and they must be all the same, right? This is how many drivers view automotive insurance. Many people also think that if you are a good driver the cost of your policy will go down, but if you make mistakes and have accidents, the cost of your policy will go up. However, the fact is that automotive insurance is much more complex than how it is commonly perceived.
I had to learn this fact through experience. A few years ago, as a teenager, I was involved in a car accident with two other parties. The term “involved” is a misnomer – more accurately, I was following behind two vehicles that got into an accident, and I managed to completely avoid colliding with anyone by swerving and striking a guard rail. I made no contact with either vehicle and I was not found at fault for anything, including my own totalled car (which I had borrowed from my grandfather).
Just shy of two years later I received notice that I was being sued by the injured party for $1 million in damages. I was scared, to put it mildly, and so were my parents. The statement of claim alleged all kinds of deficiencies on my part – such as being an inexperienced driver and a distracted driver. I learned that one of the other drivers was driving a leased car and was travelling on company business. After reading the automotive insurance policy covering me at the time of this incident (truthfully, for the first time) I became a little more confident that I was in the clear. I confided in one of my professors at Brock University who had knowledge of the law and insurance, and I had a lawyer assigned to me by my insurance company. We never ended up meeting as the night before all parties were scheduled to meet in Toronto for the discovery of the facts, the matter was settled by the insurance companies. I do not know, nor will I ever know, how much money was paid for damages, by whom, and to whom. What I did learn, however, was that my policy of insurance was present at the scene of an accident between two other vehicles, and the other insurance companies were going to try their hardest to get access to it.
Sport Organizations and Auto Insurance
Although insurance is a daily fact of life for all of us, few of us take the time to really understand the details of our insurance coverage. These details become more complex when we move from the individual level to the organizational level. A sport organization may own or rent vehicles, may have employees drive owned or rented vehicles, may have volunteers drive owned or rented vehicles, and may have employees and volunteers drive their own vehicles to perform work for the sport organization. So what can a sport administrator do to manage the risks to the sport organization?
There are typically three different scenarios for how automotive insurance and your sport organization relate to each other. The three potential scenarios your organization may experience are: 1) the organization owns its own vehicles for employees and/or volunteers to use, 2) the organization’s employees and/or volunteers use their own vehicles to carry out the organization’s business, and 3) the organization leases or rents vehicles for employees and/or volunteers to use when the need arises.
Scenario 1 – Organization’s Owned Vehicles
This is more common in the commercial sector, but there are sport organizations that own their own motor vehicles for business use. With the choice to own a vehicle for business purposes comes an organizational responsibility to the people who will be driving the vehicle. First and foremost, it is legally mandatory for an organization that has its own vehicles to obtain an Owned Automobile Liability Insurance policy. The scope of the policy will cover accidents that occur during trips that are deemed to be for business purposes only. The organization must ensure that all potential drivers of their vehicle be aware of what is considered ‘business purposes.’ Clear guidelines and policies related to driving a company-owned vehicle should be easily accessible to anyone in the organization.
Scenario 2 – Employees’ and Volunteers’ Personal Vehicles
The situation most common in non-profit sport organizations is having employees and/or volunteers use their own vehicles when carrying out business for the organization. In this situation, all volunteers and employees need to be made aware that the organization does not carry insurance coverage for their personal vehicles. If an employee or volunteer is regularly using their own vehicle for business purposes, then they should inform their insurance broker, and they should consider adding an endorsement to their policy for coverage while conducting the business of their organization. In addition, if a volunteer is transporting athletes for an organization in their own vehicle an endorsement to their policy is required. Otherwise, personal injury or damages to anyone (except the insured driver) may not be covered.
On the organization side, there are steps that can be taken to better manage the enhanced risk of having employees and/or volunteers using personal vehicles for organization business. The most important step is for an organization to purchase Non-owned Automotive Liability insurance. This is an endorsement to an organization’s Commercial General Liability (CGL) coverage. It has the effect of bringing any potential liability arising from employee or volunteer use of a personal vehicle (one not owned by the organization) into the fairly generous scope of the organization’s general liability insurance policy. Obtaining this endorsement is fairly simple, but many sport organizations are likely not aware of it.
Scenario 3 – Renting or Leasing Vehicles
Many drivers wrongly presume that rental companies have broad insurance coverage that is included when you rent their vehicles. The reality is that the basic insurance that comes with a rental car does not include coverage for physical damage to the vehicle. This is a big risk because most rental vehicles are newer vehicles. To protect against it, a sport organization should ensure that 1) employees/volunteers purchase the additional collision insurance at the time of rental, or 2) a further endorsement is added to the Non-Owned Automotive Liability endorsement to the general liability policy to cover rented vehicles. While many credit card companies advertise that collision damage will be covered by the credit card company (as an inducement for a customer to use their card), the reality is that recovering this money can be difficult and time-consuming. The endorsement is a far more reliable approach.
In terms of a vehicle that is under lease to an organization, similar rules apply as to a vehicle that is owned by the organization. An insurance policy is required but, with leasing, the endorsement for physical damage to the vehicle is mandatory (remember, the car remains under the ownership of the leasing company, not the driver or the organization that leases it). In contrast, collision damage is not mandatory under personal automotive policies and, if you are in the habit of driving a heavily-used car, it may not make sense to pay for it.
General Best Practices
Regardless of which scenario applies to your organization, there are some common-sense measures that can be taken to protect against liability arising from the use of vehicles. An organization should have complete information on any employee or volunteer that will be driving on behalf of the organization, such as a photocopy of the driver’s license, insurance pink slip, and vehicle registration. A driver’s abstract is also recommended, perhaps on an annual basis or every two years – this is quick and inexpensive to obtain online or at a motor vehicle licensing office. The abstract will reveal the driver’s history of violations, including suspensions and fines over the previous three-year period. If it is common in your organization for volunteers, parents and coaches to routinely drive players to practices or games, a commitment to educating these drivers about who and what is covered by insurance is also very important.
Insurance is complicated. Driving is one of the riskiest things that we do, yet because we are so familiar with driving, we tend to grossly underestimate these risks. If we are sport people we also tend to be fairly nonchalant about ferrying people and equipment around and offering rides to others. The generous coach who chauffeurs players might not fully appreciate that it is his personal insurance policy that will kick into effect in the event of an accident. Further, organizations that require volunteer drivers should buy insurance coverage for those volunteers, as described above under Scenario 2.
My intention with this blogpost was to provide some education for sport administrators so that they do not get blindsided by an insurance incident, like I did a few years ago. You can contact me at [email protected].