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Damage to a company car: who is liable for the insurance excess?

16/05/2013

The question frequently arises whether the insurance excess may be charged to the employees if a company car is damaged. This is permitted, provided certain statutory conditions are met. Unfortunately, it often transpires that employers have not taken the right steps to have employees pay the excess. This can lead to disputes with employees and the works’ council, with possible legal proceedings as a result. In this article we offer some practical suggestions to preclude such disputes.

The basic rule

The Dutch Civil Code provides that an employee is not liable to his employer if he causes damage, during working hours, either to the employer’s property or to a third party whom the employer must compensate for his damage, e.g. the leasing company.

Under the provisions of the Dutch Civil Code an employee is liable for damage that he causes outside working hours. Although it follows from the case law that “working hours” must be interpreted broadly (these therefore include driving to staff parties etc), commuting to and from work will not usually be regarded as “working hours”.

Exceptions

The law provides three exceptions to this basic rule:

  • Intent or deliberate recklessness: for example, driving under influence of alcohol. It follows from the case law that this exception is not easily assumed.
  • Exceptional case: traffic fines may be recovered from an employee under certain circumstances. The same exception has not (or at least not yet) been made for passing on the insurance excess to the employee.
  • An employer and an employee may depart from the basic rule by written agreement (e.g. the employment contract, collective bargaining agreement (CAO), company car scheme), but only if the employee is actually insured against the passing on of the insurance excess. Providing the employee with the (financial) opportunity to take out insurance does not suffice. It is difficult to meet this condition as insurance products that offer employees insurance against the limited excess are not customary.

Employer liable for the excess

It can be concluded from the current case law that under the Civil Code the excess, except for intent or deliberate recklessness on the employee’s part, may not be charged to the employee if the damage to the company car was caused during working hours. Thus a clause in a car scheme or leasing regulations whereby the employee must pay the excess if damage is caused to the car during working hours will usually be invalid. This is based on the idea of protecting the employee. This idea is so pervasive that recent case law has extended it to include situations outside working hours. An employee whose car is stolen outside working hours due to negligent conduct on his part, which based on the policy conditions is not covered by the insurance, could by analogy rely on the relevant legislation because driving in a company car would otherwise be too risky for the employee.

In fact, this basic rule gives rise to a strange situation: by not being permitted to charge the excess to an employee, the latter has little incentive to treat the company car with due care during working hours. After all, intent or deliberate recklessness is hardly ever assumed. Thus it is not inconceivable that the Dutch Supreme Court – once this question arises – will draw a parallel with traffic fines, as a result of which the excess could be charged to the employee under certain circumstances.

For the time being we must make do with the available case law. This means that an employer should stay on the safe side. It is possible to limit or better preclude the complicated discussion about whether to charge the insurance excess to the employee or not.

Tips:

In order to prevent problems, an employer could consider the following alternatives:

  • To take out all-risk chassis car insurance that excludes excess for damage caused during working hours. A higher premium may possibly be included in the lease payment. Some insurers do not charge a higher premium if the car is taken for repairs to a party designated by them.
  • To set out clearly in the employment contract and/or the employee handbook:

- when damage is classified as having arisen “outside working hours”;

- when damage must be reported;

- what arrangements apply if damage is caused by family members/partner/third parties driving the employee’s company car;

- adequate information regarding insurance coverage for damage caused outside working hours.

  • To leave the car scheme unchanged in order to have an incentive in place for the employee. As soon as a conflict about the excess arises with the employee, the employer must however be aware that the car scheme is likely to offer – for now – insufficient legal protection.

Authors

Picture of Eva Schothorst
Eva Schothorst - Gransier
Counsel
Utrecht
Picture of Viola Zanetti
Viola Zanetti