Contract and Non-Contract Drivers

Their accident can become your problem:

Transfer (contract) drivers are used routinely in the automobile business. Driving vehicles to and from auctions, dealer trades (swaps), and transportation to off-site sales are examples of dealership transfer activities. The dealership has asked individuals (other than employees) to occasionally pick up and deliver automobiles on their behalf. In most cases, these individuals are family members, retirees, relatives, or friends. Dealerships often hire these drivers without a formal contract or signed agreement believing they cannot be held responsible for their actions. History has proven these dealers wrong. If the driver is operating your vehicle, you can ultimately be held responsible for their activities no matter how unreasonable or reckless.

The following guidelines can help you avoid losses or problems with these transfer activities:

Most importantly, always use a properly insured subcontractor.

  • This is known as risk transfer – transfer the risk and responsibility to the subcontractor.
  • Require the subcontractor to carry adequate limits of liability for general and auto liability.
  • Require the contractor to “screen” the drivers using MVR checks, drug screens, and medical evaluations.
  • Subcontractors specializing in dealer transfers are available in most major cities.
If it is not possible to use a subcontractor, then additional precautions are necessary:
  • Use your own employees whenever possible.
    • Make sure your employees use a company-owned and maintained vehicle. Do not allow your employees to use their personal vehicle. Most personal policies exclude the operation of a vehicle for business purposes.
  • Establish an “approved” list of drivers who have been approved by your insurance company.
  • Review the motor vehicle record of each driver and compare it to established criteria. When reviewing MVRs, make sure to comply with the Fair Credit Reporting Act and any other applicable state or federal law, statute, or regulation.
  • Make sure all drivers are physically fit; consider requiring them to pass a basic physical examination.
  • Once an “approved” list is established do not vary from it, always use the same drivers.
  • Use responsible drivers who:
    • Have a current, valid driver’s license;
    • Have a good driving record;
    • Are defensive drivers;
    • Obey all traffic rules;
    • Wear seatbelts at all times.
Do not use:
  • Individuals who are not on the approved list;
  • A person you just met at the auto auction;
  • Inexperienced drivers. Although opinions may vary, most insurance companies and rental car agencies consider anyone under the age of 25 as “inexperienced”;
  • Individuals whose medical or health condition may impair their ability to safely operate a vehicle.
Have strict guidelines regarding the use of the vehicle. When delivering or picking up vehicles,
instruct drivers:
  • To take certain predetermined routes;
  • That no personal use of the vehicle is allowed;
  • That passengers are not allowed in the vehicle;
  • What to do at the scene of an accident;
  • To fill out a trip sheet that indicates pickup and delivery time.

* It is important to closely supervise and monitor all transfer drivers.

Final Notes:

Check with legal counsel before implementing the above policies and procedures. Depending on the state in which you are located, the degree of control you exercise over these individuals may qualify them as “employees.” If these drivers are involved in an accident, the injured parties will be looking for “deep pockets,” and the search will eventually lead to you. It makes sense to take as much care in hiring them as you would your own employees, because in the end you can be held legally and financially responsible for them.

It is a well-known fact that accidents involving dealership vehicles are the single greatest factor contributing to the cost of your insurance. Having a company policy that deals with transfer drivers is just part of a good vehicle loss prevention program.

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