The use of employee-owned vehicles is increasingly common and convenient for many business. But so-called ‘grey fleets’ and ‘occasional business use’ of personal vehicles by your employees introduces a range of potential risks you’ll need to understand and mitigate to ensure employee safety and business compliance.
Below, we consider the risks associated with employees using their own vehicles on company business and the measures you can take to mitigate them.
The term ‘grey fleet’ refers to vehicles owned by employees but used for business purposes. This can encompass a range of activities, such as traveling to training courses, visiting clients, or attending company events. Although these vehicles aren’t part of the company's official fleet, their use for business activities imposes certain responsibilities and liabilities on you as the employer.
Insurers define occasional business use (OBU) where a job requires an employee to use their own vehicle for work purposes, but with limited mileage per annum per driver, typically 1,000 to 1,500 miles (limits vary between insurers). Using a vehicle to commute to the main office doesn’t count as work or part of a job, it’s what lies outside of this commute that’s covered by OBU. For example, if your employee is commuting to not just your main office but also external meetings and errands, insurers would typically consider this OBU.
The challenge is to distinguish between personal and business use. ‘Personal use’ is typically defined as social, domestic and pleasure activities. While personal motor insurers often cover commuting to and from the usual or permanent place of business, the specifics can vary. Beyond this definition, there’s no insurance coverage for a vehicle when used for OBU, potentially opening a gap you must address to ensure compliance and the protection of your people and business.
One of the primary concerns with grey fleet vehicles is ensuring there’s appropriate insurance coverage. Your company policy should state clearly that any employee who drives on company business should have an OBU extension on their personal insurance policy.
Standard personal car insurance policies may not cover this additional business use, which can leave both the employee and you exposed in the event of an accident. As an employer, you have a duty of care and must ensure your employee is fully insured before driving for work, with at least a ‘Class 1’ business use coverage on their motor insurance policy (see box for definitions).
Remember, as an employer, you have a duty of care to ensure any vehicle used for business purposes is safe and legally compliant, failure to do so can result in significant legal and financial repercussions.
To effectively manage grey fleet risk, you should check you have a comprehensive insurance policy and consider the following actions:
Using grey fleet vehicles presents a practical solution for many businesses, but it remains vital to implement robust management practices to protect both your business and your employees to ensure resilient and safe operations.
Remember, when it comes to contingent liability, which is the employer’s potential liability for accidents involving grey fleet vehicles, while some motor fleet policies offer extensions to cover this liability, it’s essential you maintain your own valid business-use insurance.
For smarter ways to manage grey fleet risks and OBU insurance coverage, get in touch with our transportation specialists.
