Whilst there are options to source a Liability policy that will cover the business use of employee's vehicles, it would unlikely be a cost effective solution for a small business.

Whilst there are options to source a Liability policy that will cover the business use of employee's vehicles, it would unlikely be a cost effective solution for a small business.

I have been running my own restaurant business for 18 years. Despite the GFC we have been able to expand our business over the past five years, growing from one to three restaurants. Until recently we had had one delivery vehicle which was insured for business use with multiple drivers of different ages. Now we are simply receiving too many home orders and are thinking about paying our drivers for the fuel they use. What are the issues surrounding this? Will I need to get additional insurance to cover the employees in their own cars?

Thank you for your question. Firstly, congratulations on the business growth over the past three years - a great achievement in the current market. As you have correctly queried, by asking your employees to drive their own vehicles, there are insurance implications to consider.

The key factor to be aware of in this situation is that your employee's comprehensive car insurance policy will most likely exclude any claims that result from the use of the vehicle for food delivery without having the activity of 'Delivery Driver' being noted on their policy or the vehicle being insured for 'Business Use' by the insurer. Whilst there are options to source a Liability policy that will cover the business use of employee's vehicles or to ammend your own Commercial Motor policy to include employee's own vehicles, it would unlikely be a cost effective solution for a small business such as yourself.

A more economical solution that would form part of a strong risk management program would be to ensure that your drivers have their own comprehensive car insurance that includes their activities as a delivery driver. As the vehicles are owned by your employees, it would be their responsibility to arrange this cover for their own vehicles. It is worth noting though that it will likely come at an additional cost to their insurance policy. Whether this cost is born by the business or the employee will be at your discretion.

Essentially, to ensure your employee's vehicles are adequately protected in the event of an accident whilst performing deliveries for your business, they will need to review and update their own vehicle insurance policy.

Good luck in the continued growth of your business in 2012.

Please note that this information may be regarded as general advice. Accordingly, you should consider the appropriateness of any advice with regards to your own objectives and financial situation before acting on it. For further advice, please contact your general insurance advisor.

Andrew Faber is an Account Director at MGA Insurance Brokers, a general insurance brokerage providing insurance advice and solutions to both SME's and national organisations, across a network of city and regional branches Australia wide. www.mga.com

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