In today’s workplace, company driving responsibilities extend beyond traditional fleet vehicles. Employees may drive leased vehicles, rent cars for business travel, or use their own cars for work errands. With this diversity comes a critical question: what insurance coverage is required, and who is liable when crashes happen?

Personal Vehicle Use for Work

When employees use their personal vehicles for business purposes, their personal auto insurance is the first line of defense. However, most personal policies do not provide coverage for business use unless specifically endorsed. That’s why employers must ensure drivers meet minimum insurance thresholds. It is equally important that companies require insurance thresholds and stipulations should a policy be cancelled. 

For example, under a Personal Vehicle Reimbursement Program (PVRP) like the one used for a HUB International client, drivers must carry:

• Bodily Injury Liability: $500,000 combined single limit (CSL) or $500,000/$500,000 split limits

• Property Damage Liability: $50,000 minimum

• Uninsured Motorist: $100,000/$300,000

• Medical Payments: $2,000

• Deductibles: $500 for both collision and comprehensive Employees must also be listed on the policy as a named or additional insured and ensure the declaration address matches their HR record.

Company-Owned and Leased Fleet Vehicles

When vehicles are company-owned or leased through a fleet management provider, coverage requirements and oversight are typically more formalized. During a recent conversation, Amanda Mainville, Director of Client Relations at Motorlease, explained, “There’s a misconception that leasing companies automatically assume liability. But unless specified in the lease, the responsibility of insuring the vehicle, including liability, comprehensive, and collision, falls on the company leasing the vehicle.”

Amanda also highlighted that if a company vehicle is permitted for personal use that the company needs to be certain that they are outlining this in a car policy. She recommended employers create clear personal use agreements and confirm insurance declarations match intended vehicle usage.

Fleet insurers like GMI require:

• No major violations (e.g., DUI, reckless driving) within the last 3 years

• A valid U.S. driver’s license for a minimum of 2 years

• No more than four combined accidents or violations within a three-year period

Rental Vehicles for Business Use

When employees rent vehicles for work, coverage depends on both company policy and rental terms. Amanda noted that many companies fail to centralize rental bookings, leading to uncertainty about coverage.

“It’s essential to align with a corporate rental account. This gives you contractual control over insurance coverage and often includes liability protection.” 

She recommends issuing employees a rental car insurance FAQ outlining:

• Whether to accept or decline the rental company's coverage

• Whether corporate credit cards offer secondary insurance

• What steps to take in case of an accident 

A Hired and Non-Owned Auto (HNOA) policy is a must-have, as it protects the company when employees drive rentals or their own cars for work. 

What is FAVR and How Does It Affect Insurance? 

The Fixed and Variable Rate (FAVR) program is an IRS-sanctioned reimbursement model that allows employers to compensate employees tax-free for using their personal vehicles for business purposes. It replaces traditional company car programs or taxable car allowances and offers reimbursement that reflects both: 

• Fixed costs: Depreciation, insurance premiums, registration

• Variable costs: Fuel, maintenance, and wear-and-tear based on mileage and location 

With FAVR, employees must maintain appropriate insurance, typically with higher liability limits than standard personal use policies. Employers should define insurance requirements and verify proof of coverage to protect both the driver and the business. It is recommended that the insurance policy should state that the vehicle is driven for business use. 

By shifting away from fleet ownership, companies reduce capital costs while still maintaining control and compliance. FAVR also encourages responsible driving and reduces employer liability, as long as personal vehicle use is properly managed and documented.

Liability and Risk Management Considerations

No matter who owns the vehicle, if it’s being used for work, the employer could be held liable. Organizations should:

• Conduct Motor Vehicle Record (MVR) checks at hire and annually

• Set and enforce clear driver eligibility standards

• Provide driver safety training and coaching

• Use continuous MVR monitoring for high-risk drivers

Review Motor Vehicle Records (MVRs) at hire and annually thereafter, as recommended by industry experts and supported by internal fleet safety programs. Organizations should use a customized scoring system to track driving behavior over time and identify high-risk drivers. 

Sample MVR Evaluation Framework (Adapted) 

A modernized MVR evaluation system might assign points based on the severity of violations, such as:

12 Points (High Risk)

• Driving under the influence (DUI/DWI)

• Reckless driving, racing, or hit-and-run

• Speeding more than 20 mph over the limit

• Using a handheld phone or texting while operating a commercial vehicle

• Not wearing a seat belt in a commercial vehicle

6 Points (Moderate Risk)

• Speeding 15–20 mph over the limit

• Passing a stopped school bus

• Any preventable accident

• Driving on a suspended license 

• Seat belt violations in a personal vehicle

• DUI involving off-road or recreational vehicles

• Distracted driving or mobile device use in a personal vehicle

3 Points (Low Risk) 

• Minor moving violations: following too closely, improper lane change, ignoring traffic signals, or speeding less than 15 mph over the limit 

Drivers who accumulate 12 points or more within a 3-year period may be considered high risk and subject to additional safety interventions, training, or loss of driving privileges. 

Amanda Mainville reinforced that “Insurance is only part of the story—you also need a process for qualifying drivers. Documentation and accountability are key in the event of a claim.” 

Next Steps for Safer Fleets 

Whether an employee is driving a personal vehicle under FAVR, a leased company car, or a rental, liability and insurance coverage must be clearly defined. Employers can mitigate risk by implementing comprehensive policies, verifying insurance compliance, and leveraging programs like FAVR to increase efficiency, reduce costs, and ensure legal compliance.