Non-Owned Auto Can Be A Janitorial Company’s Hidden Nightmare

Author, Jeremy Hoolihan, Partner, Rancho Mesa Insurance Services, Inc.

It is common for employees of janitorial companies to drive their own vehicles, whether that is driving to various jobsites, transporting cleaning supplies, or simply running errands. For the janitorial company, this creates what is referred to as a non-owned auto exposure.

Often overlooked, non-owned auto liability arises when a business is held responsible for accidents caused by employees driving their personal vehicles while performing duties in the course of employment.

As inflation and nuclear verdicts drive up costs of individual auto liability claims, employers must be concerned not only with company-owned vehicles, but their employees’ vehicles being used on company time. If an employee causes an accident while driving their personal vehicle while on the clock, the injured parties may file claims against both the employee’s personal auto insurance and their employer.

To protect your company from non-owned auto liability, it is recommended that companies have an updated fleet safety program that includes the following:

• Employees using their personal vehicles on company time should be required to provide a copy of their MVR. It is critical that the employee’s MVR meets the same parameters as those driving company-owned vehicles.

• Employees who drive company and/or personal vehicles should be required to participate in the DMV Pull Program. This way, if an employee received a major moving violation (e.g., reckless driving, DUI, etc.), the company will be alerted.

• Require all company drivers who drive non-owned vehicles to purchase personal liability coverage. That way, damages of a claim are less likely to exceed the personal auto liability limit and fall on to the employer’s commercial auto liability policy. It is also recommended that employers require their drivers to purchase minimum limits of $300,000.

• Make sure the employee completes routine maintenance as per the car’s manufacturer on their personal vehicle, such as oil changes, tire checks, windshield wiper replacements, etc. This is just as critical as a maintenance program for company-owned vehicles.

• Provide regular fleet safety training to all employees driving company and personal vehicles during business hours.

• Finally, business owners may want to encourage employees to use safety features such as apps that prevent the driver from using their phone while the vehicle is in motion.

Janitorial businesses, in general, have a large non-owned auto exposure that can often be overlooked and leave a business vulnerable to high dollar auto claims, which can result in policy non-renewal and/or increased premiums.

Now is the time to review your current program’s policies and procedures with your insurance broker and make any adjustments necessary.

If you need any assistance reviewing your current program or have any questions, please feel free to contact me at (619) 937-0174 or jhoolihan@ranchomesa.com.  

Best Practices Approach to Insuring Janitorial Companies

Author, Jeremy Hoolihan, Partner, Rancho Mesa Insurance Services, Inc.

Running a successful janitorial company in California can often be cut throat. With low profit margins, janitorial companies continue to face daily challenges like increased wages and material costs, as well as aggressive competition that continues to under bid contracts. It is natural for business owners to explore ways of cutting costs to help their bottom line, but insurance should not be one of them. In fact, they should be looking to add coverages that are unique to janitorial operations and protect the long term health and viability of the company. 

Following are a few key coverages and endorsements to consider that could help insulate a janitorial business from serious losses.   

Crime Coverage (First and Third-Party)     

A commercial crime policy can insure a janitorial company from an employee stealing from them (i.e., a first-party crime). These types of claims include, but are not limited to, forgery or alteration, funds transfer fraud, credit card fraud, and computer fraud.

Third-party crime includes theft of a client’s property. Many janitorial companies have employees cleaning after hours. If property on the client’s premises goes missing, it’s often the janitor that gets accused. This is when 3rd party crime coverage comes into place.

Lost Key Coverage

If you are operating a janitorial company and your employee misplaced or lost a master key for one of your client’s properties, are you prepared to replace all the keys and locks? Depending on the number of locks to replace, your business could be out tens of thousands of dollars. Lost key coverage is typically an endorsement that can be added to a general liability policy. Limits and deductibles often vary, depending on the customer’s request. 

Limited Pollution Liability

With most janitors using chemicals, cleaning products, and power washers, it is highly recommended that the company has the limited pollution liability endorsement added to their policy (or better yet, a standalone pollution policy).  Coverage for accidental job site pollution that may arise from chemical spills and accidental water runoff could prove extremely valuable.

Cyber Liability

Janitorial companies often store clients’ information and process payments online for their customers. This can be very enticing for hackers. Which is why business owners should consider carrying a cyber liability policy that can insure the company for data breaches, cyber-attacks, cyber extortion, business interruption, computer fraud, and much more. 

Cyber-attacks can debilitate a business and bring it to a screeching halt. Cyber liability coverage can assist with keeping a business afloat during these very trying times.

Employment Practices Liability Insurance (EPLI)

EPLI insures a business when a current or former employee sues the employer for such things as wrongful termination, sexual harassment, retaliation, etc.  An EPLI policy can also insure a business if a non-employee sues the business for other similar harassments. With defense costs and settlements commonly reaching well over six figures, these claims can easily put a company out of business. And to top it off, even if a company is proven innocent, the cost of defense alone could jeopardize its financial stability.

At the end of the day, insurance is simply risk transfer. Businesses elect to either transfer the risk to an insurance company or self-insure it. The key is knowing what risk transfer options are out there and what they cost. It starts with partnering with an insurance broker that has expertise in your industry.

I’ve been specializing in insurance for the janitorial and construction industries for over 20 years. If you have any insurance related questions, I am here to help! Contact me at jhoolihan@ranchomesa.com or (619) 937-0174.