I hired a new guy. I left him to finish a Mustang GT. I came back an hour later—the car was gone. He took it for a “test drive” to dry the brakes and wrapped it around a telephone pole. He was arrested for DUI. The customer wants a new car.
Key Takeaways
- Garage Liability (Auto): You need Garage Liability with “Hired and Non-Owned Auto” coverage. This covers liability when you or your employees drive customer cars.
- The Theft/Dishonesty Exclusion: Standard property policies exclude “Theft by Employee.” However, Garage Keepers usually covers damage caused by an employee driving the car (Collision), even if it was unauthorized usage, provided you have “Direct Primary” coverage.
- Negligent Hiring: If the employee had a suspended license or DUI history and you didn’t run a Motor Vehicle Record (MVR), the insurer might deny coverage for “Negligent Hiring.”
- Criminal Acts: The employee’s DUI is a crime. Insurance pays the victim (customer), but they might refuse to defend the employee.
The “Why” (The Trap): “Permission”
Auto insurance follows “Permissive Use.”
You gave the employee permission to move the car.
You didn’t give him permission to joyride or drive drunk.
However, Garage Keepers Direct Primary is designed for this. It pays for the customer’s car regardless of the employee’s stupidity.
The Trap: If you only have “Legal Liability,” the insurer might argue the employee acted outside the scope of employment, so the business isn’t liable. The customer then has to sue the employee (who is broke).
The Investigation: “I Called Them”
I asked about the “Ferris Bueller” scenario.
1. Garage Keepers (Direct Primary)
- Verdict: Covered. The customer gets paid. The insurer then goes after the employee.
2. Standard Business Auto
- Verdict: Denied. “Employee Theft/Conversion” exclusion.
3. MVR Check Requirement
- Verdict: The underwriter confirmed: “If you didn’t run his MVR and he had a suspended license, we might void the policy for misrepresentation.”
Comparison Table: Joyride Consequences
| Coverage | Customer Car Damage | Telephone Pole Damage | Employee Medical |
| Garage Keepers | Covered | No | No |
| Garage Liability | No | Covered | No |
| Workers Comp | No | No | Denied (Crime/DUI) |
Step-by-Step Action Plan
- Run MVRs: Never let an employee touch keys until you run their Motor Vehicle Record. It costs $10.
- Key Control: Use a “Key Box” system. Employees check out keys only when moving cars. Keys go back immediately.
- Fire the Employee: Document the termination for “Gross Misconduct.” This helps contest their unemployment claim.
- Notify Police: Report it as “Unauthorized Use of a Motor Vehicle.” A police report helps the insurance claim processing.
FAQ
Q: Is the employee personally liable?
A: Yes. The insurance company can sue him personally to recover the payout (Subrogation).
Q: Does my Umbrella policy help?
A: Yes, if the damages exceed your Garage Liability limits (e.g., he hit a school bus).
[IMAGE: Screenshot of an MVR (Motor Vehicle Record) report showing “Status: Valid.”]