Negligent Entrustment: A Hidden Business Risk

Most companies are extremely well versed in the risks and liabilities of their industry, and have processes and procedures in place to mitigate those potential risks. Pharmaceutical companies spend millions of dollars on clinical trials to not only to make sure that their product works as described, but also to make sure that it’s safe for use. A manufacturer in the aerospace industry knows the potential liability should the cause of a plane crash be traced back to faulty equipment supplied by their company, so their products are quality-checked time and again before shipping out to customer.

However, companies fail to recognize the potential risk that resides beneath the surface of their day-to-day business operations:

Every time one of your drivers gets behind the wheel of a car your company is at risk of something called “negligent entrustment.”

But what exactly is negligent entrustment, and why is it such a threat to your company?

What is Negligent Entrustment?

A basic legal definition of negligent entrustment by Merriam-Webster’s dictionary is “the entrusting of a dangerous article to one who is reckless or too inexperienced or incompetent to use it safely.”

According to JRank’s Law Library:

“Negligent entrustment claims arise when an unlicensed, incompetent, or reckless driver causes damages while driving a motor vehicle owned by someone else. A party injured by such a driver must generally prove five components of this TORT:

1. That the owner entrusted the vehicle to the driver;
2. That the driver was unlicensed, incompetent, or reckless;
3. That the owner knew or should have known that the driver was unlicensed, incompetent, or reckless;
4. That the driver was negligent in the operation of the vehicle; and
5. That the driver’s Negligence resulted in damages

If a plaintiff proves these elements, an owner may be liable for the full amount of damages caused by the driver. In some instances, the plaintiff may also recover Punitive Damages from the owner, particularly if the owner himself acted recklessly in entrusting the vehicle to the driver.”

So why should you be worried about negligent entrustment?

Real Life Examples of Negligent Entrustment

Think that it can’t happen to your company? Think again. Here are some real life examples of companies being held liable for negligent entrustment.

In 2012, a Xerox service technician struck and killed a pedestrian who was on her way home from services at her local church. The driver, operating a company-provided van, was intoxicated at the time of the incident. Furthermore, the driver had a history of DUI’s, with 2 previous convictions and a 2-year license suspension. Xerox admitted that in his entire 22 year career, not once did they ever check the employee’s motor vehicle records. As a result, the victim’s family settled with Xerox for a sum of $5 Million.

In 2001, Dyke Industries, a lumber wholesaler, was ordered to pay $20.9 Million to a woman who suffered permanent disability after being involved in a car accident with an employee of the company. The employee, a salesman driving a company-provided Ford Explorer, was speaking with a client on his cell phone at the time of the crash.

But what about drivers who utilize their personal vehicles? Can companies still be held liable?

Absolutely.

In 2012, a Domino’s Pizza delivery driver, utilizing his personal vehicle, was speeding in an attempt to meet the company’s “30 Minutes or it’s Free” promise. The driver struck another vehicle, killing one occupant, and inflicting permanent brain damage to the other. A subsequent investigation revealed that the accident was, in part, caused by worn tires on the delivery driver’s vehicle. Domino’s Pizza’s corporate policy requires regular inspections of delivery vehicles; however, this policy was rarely enforced. The result was a $32 Million judgement against the company.

So what can be done to increase your chances of avoiding negligent entrustment lawsuits? Click the link to read our next article entitled Negligent Entrustment: Tips to Mitigate Your Risk.