With general liability coverage there is a specific exclusion for “bodily injury or property damage arising out of the ownership or entrustment to others of any aircraft, auto or watercraft owned or operated or rented or loaned to any insured.” No matter how much general liability coverage an insured carries, there will be no coverage for a negligent entrustment incident.

Unlike general liability, a business auto policy has no exclusions for negligent entrustment. Yet even with coverage, an insured may not have enough insurance if one of its employees is involved in a harmful accident.

Because anyone with permission to drive a vehicle on company business is classified as being an insured, it is important for a company to define its permission policy before an incident occurs. Otherwise the insurance provider will do so after a claim has been filed. The rule of thumb in creating a permission policy is to ensure flexibility without creating a personal use permission policy that is too broad.

When it comes to negligent entrustment, it is also important to remember that punitive damages are not insurable in most states. Since punitive damages are meant to punish employers, to do otherwise would be against public policy.

Following are some guidelines for your clients to use to avoid the potentially devastating consequences of negligent entrustment:

1. Read the literature on negligent entrustment to understand the risks.
2. Teach by example, especially when driving with young employees.
3. Put clear safety policies in writing.
4. Enforce clearly defined driver guidelines with zero tolerance.
5. Pre-screen all individuals who are granted permission to drive on company business.
6. Monitor and enforce drug and alcohol policies.
7. Review the driving records of all those with permission to drive on company business annually.
8. Mandate training modules for all at-risk drivers.
9. Maintain company vehicles to meet stringent safety standards.