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Van Pools Cut Costs, But Increase Some Risks

October 14, 2008
Related Topics: Workers' Compensation, Workplace Violence, Miscellaneous Legal Issues, Safety and Workplace Violence, Featured Article, Compensation
As more businesses help their workers find lower-cost commuting options, employers might want to learn about the risks such programs can raise.

An employer’s risk can depend on the option chosen. One option that a significant number of employers are using is an employee van pool. A variant on car pooling, a van pool allows up to 15 people to share their commute, with a designated member or members doing the driving.

In 2007, 11 percent of U.S. employers sponsored or operated a van-pooling program, according to the TransitCenter Commuter Impact Survey, a poll of 245 employers sponsored by TransitCenter, a New York-based nonprofit that administers commuter benefits.

A van pool can be run in a number of ways, each presenting different risk scenarios: The employer may own the van and operate the program itself; employees may own and operate the program, usually with employer subsidies; or the program may be run by a third-party contractor, which owns and maintains the vehicle and administers the van-pool program.

Anytime people take to the road, van pools can involve risk—including personal injury, vehicle damage and auto liability. Because of varying state laws, workers’ compensation risks also may arise, experts say.

Use of contractors to operate van pools, in which the employer’s involvement is "at arm’s length," is most common, according to Steve Pederson, vice president of fleet and risk management for VPSI Inc., a Troy, Michigan-based van-pool service provider. That practice has become more common in recent years, he said.

"In California in particular, we’ve seen significant growth in the last six or eight months," Pederson said. "I don’t know how much of it is attributable to pretax benefits or incentives, or maybe just fuel prices."

Fewer states are allowing workers’ comp claims for van-pool accidents, said Carol Kintner, a licensed consultant in New York and Maine who has taught on the subject for the CPCU Society, a casualty insurance professional group.

"Years ago, states were generous and they would grant the coverage," Kintner said. "Now they’re not so generous, and state by state we see them rolling it back."

While the daily commute is normally exempted from workers’ comp claims under "coming and going" rules common to most states, that exemption may not apply if the employer has furnished the vehicle, said Mark Kreindler, insurance manager for VPSI.

There are, of course, exceptions.

In California, for example, an employer is generally protected from workers’ comp claims if the van pool is sponsored or mandated by a government entity. If an employer sponsors a van-pool program to comply with a local trip reduction mandate, for example, "coming and going" in the van pool would not be subject to workers’ comp claims. A similar ridesharing law in Florida does not require a government mandate.

Other states have statutes of varying strengths short of a full shield for employers, Kreindler said, while claims in states without statutes are decided according to case law.

"These ride-sharing laws are basically trying to clarify that these vehicles we’re using for van sharing are not to be construed as work vehicles," VPSI’s Pederson said.

Kintner warned, however, that employers should still be cautious.

"I feel that it’s very precarious, and of course case law can be overturned," she said. "At the very least, the employer’s workers’ comp carrier has to be put on notice that this [van-pool] program is in place."

Getting advice is important, said Pam Ferrandino, executive vice president and casualty practice leader for Willis North America Inc. in New York. She recommends that employers arranging commuting programs consult with their broker and workers’ comp board or department of insurance.

Another risk factor in van pooling is auto liability, which would be greatest when employers own and operate the program, experts say.

"If the vehicle is owned by the employer, that liability would go back to the employer," Ferrandino said.

Outsourced vehicle arrangements can transfer liability risk to the third-party owner/operator.

Most van pools are, in fact, outsourced, according to Jon Martz, president of the Washington-based Association for Commuter Transportation, a transportation interest group.

"It’s pretty rare now" for employers to own and operate their own van pools, Martz said.

Kreindler said that a third-party contractor can often take on potential auto liability. In addition to owning and maintaining the vehicle, many third-party contractors will indemnify the employer for auto liability.

Indemnification usually contains a number of safety measures, including vehicle maintenance and an application and screening process for employees who drive the van.

"I think [third-party operation] is an effective way to manage the risk," Ferrandino said. "If the employer feels they have the critical mass [of employee demand] to manage it professionally, with the expertise of an outside vendor, that’s a decision they can make. It’s about finding a way to mitigate and manage that risk by having a business partner with best-in-business practices."

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