How To Limit Liability Exposure and Reduce Accident Costs
Minimizing liability exposure in the event of an accident could potentially save your company thousands, and even millions, of dollars. Implementing a comprehensive fleet safety and accident management program will help to reduce accidents and thereby limit liability exposure. Other benefits of a fleet safety and accident management program include:
Reduced accident repair costs.
Reduced driver downtime.
Fewer workers’ compensation and personal injury claims.
Take Proactive Steps When Researching Insurance
Gather statistics on your own and perform an analysis to see how your company compares with others in your industry.
Contact at least two to three brokers and outline the coverage you think you need. Competition fosters better deals to choose from.
Ask for the “moon” but keep in mind the absolute minimum you are willing to accept (such as no deductible versus limited deductibles of $250, $1,000, or $2,000).
Never take coverage that you do not need.
Gather competitive bids from many different insurers.
Agree to a one-year term with quarterly reviews.
Many believe that insurance helps limit exposure to claims losses. And while insurance is a valuable tool in reducing liability costs, it only pays the net effect of a good or bad fleet safety and accident management program. Insurance will always play a role in liability claims; however, not in helping to reduce risk. Insurance in fleet is a difficult mix for many reasons. For instance, depending on the fleet size, collision and comp coverage may not be necessary. However, liability coverage is a must. But using an insurance company to help control accident costs comes at a price. Examples include extended estimate and repair times, along with additional responsibilities being passed on to the driver and fleet manager such as shop selection, arranging for a rental vehicle, follow-up with the adjuster and shop, and monitoring the quality of repairs, to name but a few. Buying the right insurance for the right price depends on many factors, including fleet size. Here are three important points to consider when purchasing insurance: How do you minimize sharing the risk? Can you do anything about deductibles? How much insurance do you need? Companies operate in many different ways and risk ratios vary considerably. Insurance companies have numerous statistics to draw from to include a company in any category they wish. Their ultimate goal is to convince you they have done their job effectively and earned their premiums. However, be proactive when researching insurance companies.
Here are some simple steps to take:
Regardless of whether you manage a self-insured or insured fleet, several areas overlap with insurance coverage on liability. There is a distinct difference in managing a fully selfinsured claim versus involvement of an insurer. Insurance companies treat a corporate driver as the vehicle owner and assume he or she will take an active role in handling the auto loss. This is incorrect. A fleet manager needs to institute procedures to ensure prompt claims management.
React Immediately to Third-Party Claims
Exorbitant repair costs
Third-party claimants can create significant problems and serious cost issues for corporate fleet and risk managers. These include:
One of the quickest ways to help reduce third-party claims is to react immediately to the claim, whether internally or through an outsourced vendor such as an accident management firm or insurance carrier. Insist on helping to create a policy to handle third-party claims and be active in the final payout decision.
Implement a Comprehensive Fleet Safety Program
Limiting liability exposure starts with the idea of preventing accidents in the first place. An aggressive, balanced safety program helps to protect your company. A balanced safety program includes training booklets, audio and/or video tapes, written questionnaires, and classroom and behind-the-wheel training. In addition, a comprehensive safety program should cover all aspects of the following:
A company safety philosophy statement. Consider the goals of your safety program (i.e., to decrease accidents and improve driving habits).
An effective safety program should include a motor vehicle record (MVR) policy. Conduct MVR checks for new drivers and drivers who have been reassigned a vehicle. In addition, conduct MVR checks annually (ideally, at sixmonth intervals) to make sure unreported accidents and tickets are discovered.
Established driver training guidelines and necessary disciplinary actions for negligent drivers. Consider using the point system, where each accident or ticket is assigned a certain number of points. If a driver accrues too many points per year, the driver may need additional training or driving privileges may have to be suspended.
When creating a point system, keep in mind that infractions may appear to be similar, but may be very different indeed because liability can shift based on the surrounding circumstances. For instance, what happens if one driver receives a speeding ticket in a school zone versus another driver receiving a speeding ticket on an interstate highway? While speeding in any area is breaking the law, the risk and liability issues are seriously magnified with the school zone scenario, so this infraction should accrue more penalty points.
Driver training and refresher training. You might require drivers to complete a safety class or defensive driving course. Periodic refresher courses will only be beneficial.
Have drivers periodically review training booklets and audio and/or video tapes.
Compliance with all federal, state, and local regulatory standards. Any violation of these standards should be dealt with swiftly.
An awards or incentive program, acknowledging individuals with solid safety records. Public recognition is a great way to motivate drivers to be safety conscious.
Safety meetings or newsletters. Communicate all policy changes and reminders via safety meetings and/or monthly newsletters. Implementing both of these will ensure effective communication.
Safety and accident review committees. Set your goals to increase safety awareness and reduce accidents, and meet to review these goals. A comprehensive safety program will also cover the rules of personal use. If personal use of a company vehicle is allowed, clearly state if any age limits apply. Insist on mandatory safety guidelines that all authorized drivers must adhere to including seat belt usage, effecting a defensive driving posture, and the forbiddance of transporting of any questionable materials. The cost of a safety program, as well as running MVR checks, is minimal when compared to the overall cost of an accident. A moderate 5-8 percent reduction in claims can affect a corporation’s bottom line by hundreds of thousands of dollars. Development of a safety program can be done internally or by an outside company that specializes in creating such programs. Acceptance from upper management regarding safety policy and MVRs is critical to the success of your program. Be prepared to answer these questions from your senior management:
Why is a safety program necessary?
Why spend the money?
How much money will we save with this program?
Make sure to communicate safety policy to drivers, why it is important, and that the main goal of the policy is to provide a safe environment for drivers, their families, and the company. Any time a program is based solely on savings to the company, drivers resent these actions and resist buying into it. There are many reinforcing policies that can be implemented once a safety program is in place. Find out if there are problem areas that can be focused on by analyzing loss runs to evaluate the frequency of specific accidents (such as front impacts, rear impacts, etc.). Determine preventable versus nonpreventable accidents and target specific problem drivers and types of accidents. Above all, enforce compliance of the safety programs and do not make exceptions on written policy. There are several unpleasant policies that a fleet or risk manager must enforce such as holding a driver responsible for a deductible, suspension of driving privileges, or termination. It is also important to recognize or reward drivers who comply with all policies and have had no accidents. Perpetuation of these policies is recommended even after cost saving flatline. Finally, make sure to measure results and share them with management. It is vital to implement an effective accident management program. While one of the goals of having a safety policy is to try and prevent accidents, it is inevitable that accidents will occur. Detailing what an associate should do once an accident takes place could save a company thousands of dollars. Advise each driver that any accident, no matter how inconsequential, must be reported promptly to the fleet manager. If the associate has an at-fault accident, what are the consequences? Will they need to pay a deductible? If a family member is driving, is the associate financially responsible for damages and subsequent vehicle repairs? Communicate – even overcommunicate – the procedure to follow when the driver reports an accident. Such steps include recording the names and addresses of the owner and driver involved, documenting the license number and registration number of the cars involved, and getting the names and addresses of all passengers in the vehicles. Not admitting fault or indicating the associate is driving a company-owned vehicle is very important as well. If an associate involved in an accident receives a claim/summons asserting liability versus the associate, instruct the individual to contact the fleet manager immediately. No associate should ever manage the matter independently. Robert Martines is president and CEO of Corporate Claims Management, an accident management and fleet services company in Richboro, PA. How to Control Accident Repair Costs
Effective accident management means the difference between successful claims management or ineffective management that results in escalating expenses. There are millions of vehicles that drive the roads every day, hundreds of thousands of which are fleet vehicles. And many of these vehicles will be involved in an accident. The losses generated by these accidents are staggering; however, they are easy to analyze. Since there are hundreds of thousands of fleet vehicles on the road daily, many fleets very likely have similar models to compare costs against. While labor rates vary nationally, parts prices are generally consistent. This makes estimates easy to read and understand. Common problems with inexperienced fleet repairers — whether a service company, a lease company, or actual repair facilities — are excessive labor, excessive parts replacements, and supplements. A survey of comparable fleets is just one way to determine if your company is paying a fair price for accident repairs. Investing the effort to perform a true evaluation provides you with a weapon: bottom-line numbers that cannot be disputed. Ask these questions:
How many accidents/incidents have you had in the past year? (The period of time asked about in this question can vary on your needs.)
What are the total dollars spent on those claims?
What are the net subrogation returns (on those same claims)? Honest answers to these three questions will provide reliable figures to use as a benchmark as well as allow you to measure performance accurately. No other figures will play a role in your analysis. An important note about analyzing the data received from other fleets: Accident costs broken down by miles driven are basically useless numbers. These numbers only have value for analyzing maintenance costs. Regardless if your accident management is handled internally or outsourced, specific procedures must be developed, explained, and enforced. Compliance at all levels is vital and any exceptions could break down the entire process, which will drive up costs and require additional time to address the problem.