Negligent entrustment isn’t just when you expect your spouse to put your box of Thin Mints in the freezer and not eat them, even though you know from previous experience that they can’t be trusted not to snag a cookie or two when you’re not looking. While this may result in relationships issues or the purchasing of more cookies, the impact is negligible compared to how negligent entrustment can harm your organization.

In business, negligent entrustment occurs when an employer leaves or provides a dangerous item for an employee that the employer knows or should have known will use the item in an unreasonable or risky manner. The most common occurrence of negligent entrustment occurs when an entrusted party drives an entrustor’s vehicle.

Negligent entrustment has various definitions and metrics by state, but the intent is the same. There are three common standards to consider when determining if negligent entrustment has occurred:

• An employer entrusted an employee to use an item (tool, car, weapon, etc.) that could cause harm to others
• An employer knew or should have known of the employee’s incompetence or risk potential
• The employee’s incompetence or risk potential played a substantial role in the cause of the injury/accident

The public has a reasonable expectation that employers are hiring competent and qualified individuals for business purposes. If an incident occurs and an employer is found to have ignored the standards for determining negligent entrustment when hiring the employee at fault, there could be a verdict that may include punitive damages.

Depending on carriers’ policies and state laws, punitive damages are not always insurable. Even if they are insurable, the award for damages may far exceed the available policy limits.

Preventing Negligent Entrustment Claims

While negligent entrustment claims are most common as it pertains to automotive incidents, additional business activities can also present a similar risk. While ensuring employees are qualified should be a priority for all businesses, it’s of utmost importance for employers in the following industries.

Hospitality

From preparing food and cleaning rooms to ensuring safety and maintaining amenities, hospitality employees are responsible for the wellbeing of countless guests.

Childcare

As an increasing number of parents and caregivers rely on childcare services, it’s crucial for employers to verify their employees’ qualifications and refrain from hiring anyone who poses a risk to the children’s safety.

Healthcare

If a medical provider’s negligence results in a patient injury or death, it could lead to a medical malpractice claim.

Armed Security

If a potential employee has a history of violence or reckless behavior, employers may need to reconsider entrusting them with a weapon and the responsibility to protect people.

Managing Your Risk

To mitigate the potential of a claim for negligent entrustment, employers should consider training and credentials, prior accident and driving history, and potential restrictions on employment, i.e. not having a CDL or criminal record involving abuse. The best way to avoid claims involving negligent entrustment is by being proactive with hiring processes.

So, what can you do to protect your business from negligent entrustment?

Here are a few options to consider:

• Implementation of a fleet/driving safety program
• Reviewing Motor Vehicle Records (MVRs) prior to employment and then annually
• Policy regarding personal use of company vehicles
• Development of ongoing training for drivers
• Establishing a company policy for an alcohol and drug-free workplace

Reduce Your Risk with Holmes Murphy

Different industries may benefit from other strategies that address specific negligent entrustment risks. If you’re not sure where to begin, working with a partner like Holmes Murphy can connect you with experts committed to the success of your company. Through our partnership with KPA and various carrier partners, we can help you develop an effective standard practice for preventing negligent entrustment and protecting your business.

Ready to learn more? Contact us today and let’s get started!