Critical Condition

What happens when employees do not tell their employers they require ignition interlock devices (IIDs) to drive, and are at fault in auto accidents while driving company vehicles? Will insurers still provide coverage to the employers? The answer is that an employer cannot control everything an employee does, but can improve the likelihood of coverage and even reduce premiums. Ignition interlock programs (IIPs) have insurance implications for commercial fleet owners and there are several best practices that policyholders can implement in order to improve coverage and reduce the cost of insurance.

IIPs are provincial programs designed to reduce drinking and driving recidivism. All Canadian provinces and territories except for Nunavut have unique IIPs. Participants in IIPs are typically drivers who have been convicted of driving while impaired. Such a conviction carries with it a federal minimum driving prohibition of one year; however, in some provinces the length of this prohibition can be reduced if the person convicted is registered in an IIP.

An IID measures a driver’s breath alcohol level and is connected to a vehicle’s ignition system. In order for a vehicle equipped with an IID to start, the driver provides a breath sample into the IID that does not contain any detectable alcohol. Additional breath samples must be randomly given after a vehicle has been started in order to prevent someone other than the driver from providing an initial clean breath sample.

A built-in data logger records every event associated with the use of the IID, including any readings where the driver provided a breath sample containing alcohol. Periodically, a participant in an IIP is required to report to an IID installation facility to service the IID and check the data log. Many IIPs require several consecutive months of exclusively clean breath samples in order for a driver to have his or her full licence reinstated.

In Manitoba, Quebec, Newfoundland and Labrador, New Brunswick, Yukon and Northwest Territories, enrolment in an IIP is voluntary for first-time offenders and allows drivers with a suspended licence to get back on the road early. In British Columbia, Alberta, Saskatchewan, Ontario, and Prince Edward Island, enrolment into an IIP is mandatory for a person convicted of impaired driving to be able to drive again. Each province has made

its respective administrative licensing authority responsible for implementing and administering its IIP.

Persons participating in IIPs must apply for admission, and once enrolled, are restricted to driving only those vehicles fitted with an IID, including leased or employer-owned vehicles.

The role of the insurance company is somewhat different in B.C., Saskatchewan and Manitoba, where the Insurance Corporation of British Columbia (ICBC), Saskatchewan Government Insurance (SGI), and Manitoba Public Insurance (MPI) are all Crown corporations and have monopolies on automobile insurance. In Quebec, la Société de l’assurance du Québec (SAAQ) has a monopoly on insurance against personal injuries. Through regulation, these Crown corporations are able to more easily ensure that drivers with the additional risk of an IID licensing requirement are not breaching their restricted licences.

Manitoba appears to be unique in Canada in permitting drivers enrolled in IIPs to drive their employers’ vehicles without IIDs installed, provided that the registrar is satisfied that permitting the driver to drive is necessary for him or her to be employed, and the appeal board has given the driver permission.

In most provinces, no one has any statutory or common law duty to inform an employer of an employee’s driving restrictions. This means that without an employer taking the right steps to be informed about its drivers, an employee could illegally drive an employer’s IID-unequipped vehicle without the employer knowing.

Employers can obtain employee driver abstracts (sometimes called motor vehicle records) to become informed of any driving restrictions. There is typically a modest fee.

In B.C., there is a limited statutory duty on drivers of commercial vehicles to disclose related accidents, violations and convictions to their employers. This duty only applies to drivers of certain vehicles, and requires that the driver inform his or her employer within 15 days of the accident, violation or conviction. Commercial vehicle fleet owners are statutorily obligated to obtain a driver abstract when hiring a new driver, obtain a new driver abstract for each driver at least once every 12 months, and maintain accessible records of drivers for a period of four years.

There are risks in employing drivers who are enrolled in IIPs. Apart from insurance issues, if an employer knowingly allows an employee to drive a commercial vehicle that is not equipped with a required IID, the employer can, in some provinces, face severe statutory penalties, including a fine of up to $20,000. Also, a higher-risk employee can increase accident frequency, causing property losses and affecting the employer’s reputation.

However, the real risk to the employer is that an insurer will deny coverage in the event of a claim arising from an accident.

Assume the employee is at fault in an accident while driving a company car, prompting a claim from an injured third party. If the commercial vehicle fleet owner knew the employee was prohibited from driving a vehicle without an IID, and did not pass this information onto the insurer, the insurer could deem it a failure to disclose a material change in risk. The most likely outcome is a denial of coverage and the owner being vicariously liable for any damages.

Conversely, if the fleet owner was unaware of an employee’s enrollment in an IIP, an insurer would extend coverage, with one key caveat – the owner must have made appropriate prudent inquiries of the employee’s driving record. Insurers may not accept a claim where the owner ought to have known about an employee’s driving restrictions and failed to make inquiries.

In order to increase the chances of coverage, an employer can implement best practices for hiring and managing drivers. Best practices include requiring new applicants to submit a written application with a driver abstract and reference checks, and having an employee sign an agreement requiring him or her to inform the employer of any accidents, violations, convictions or licensing changes.

Obtaining updated driver abstracts for all drivers is prudent. When an employer is informed about its drivers there is less room for an insurer to deny coverage on the grounds that the employer failed to disclose a change in material risk about which it should have known.

For insurers, these best practices also signal good fleet management, which can help to reduce insurance premiums. Implementing best practices has the additional benefit of reducing the risks of a claim, loss of property and interruption of business, as best practices result in employing better drivers. Even if a commercial vehicle fleet owner sets the gold standard in best practices, insurers may expect more in the future. It never hurts to revisit those practices.

An insurer will obtain information about an owner’s fleet management practices through the broker or by directly inspecting the risk. The results may affect the decision to insure that owner, or on the premium being charged, so implementing best practices can have a direct positive impact on risk financing.

Best practices for commercial vehicle fleets generally include the following, which were compiled from fleet risk management and underwriting sources. These recommended steps may not be suitable for every owner but each owner should at least be aware of them:

• conduct annual fleet safety program audits, including review of management policy, driver qualification, driver training, driver supervision, vehicle selection and maintenance, routing and scheduling, and accident reporting, reco rding and analysis;

• actively promote safe driving practices;

• provide suitable and well-maintained vehicles, with safety equipment;

• conduct periodic training in key safety areas;

• establish clear policies and procedures for the use of hand-held and other electronic devices, for carrying passengers who are not employees and for driving company vehicles for personal use; and

• assign responsibility for fleet safety and establish an accountability system.

Best practices for driver hiring include the following:

• using written application forms;

• reviewing driver abstract for all applicants, focusing on violations and accidents of the past three years;

• conducting in-person interviews to review past driving experience, determine the applicant’s attitude towards safe driving and get reason for gaps in employment;

• conducting background and previous employer reference checks;

• skill testing by requiring completion of a well-designed road test and a written exam testing the applicant’s safety knowledge;

• establishing minimum driving experience and maximum accident, violation, and conviction standards; and

• having employees sign agreement acknowledging and accepting best practices as a condition of employment and requiring immediate disclosure of any accidents, violations, or convictions.

Best practices for driver monitoring and training include the following:

• checking driver abstracts for all drivers at least once per year (or more frequently, depending on size of fleet);

• investing in on-board computing (telematics) to actively monitor drivers;

• requiring remedial training for risk taking drivers; and

• conducting periodic evaluation of driver skills.