Company-provided cars can be an asset to an organization and its workforce, but they also pose liabilities when used for personal travel and weekend trips that have nothing to do with business, risk managers say.

“The use of vehicles is key to our business,” said Ron Cooley, director of risk management for W.W. Grainger Inc., an industrial supplier of maintenance, repair and operating products in Lake Forest, Ill.

“We think it's an important part of our strategy. It certainly presents risks, but we feel those risks can be managed effectively,” he said.

The risks are heightened when employees use company cars for personal use, simply because weekend driving increases usage by nearly 30%, said David Jones, Philadelphia-based vp at Lockton Cos. L.L.C. Not only does driving increase, but typical weekend activities such as parties or teaching teenagers to drive might result in more erratic driving.

As a result, companies must worry about more than the obvious risk of an employee causing or being involved in a vehicle accident that results in bodily injuries to one or more people or extensive damage.

They also must consider the public relations risks if an accident is bad enough to spur negative media attention, Mr. Jones said.

Still, companies generally allow their employees to use company cars for personal travel, Mr. Jones said. While an accident might not be tied to work-related travel, the company's commercial auto policy would apply because it is standard for the insurance on the car at fault to respond first.

Some companies may require employees to carry their own additional insurance and furnish evidence that secondary coverage exists. Should the company's carrier subrogate, it would then have something to subrogate against and the company wouldn't incur a higher loss ratio.

“At the end of the day, the company is on the hook,” Mr. Jones said. “It's their car and they willingly gave the keys to the driver, thus the driver has legal care, custody and control of the car, and the owner is liable for damages to third parties.”

That potential liability makes instituting clearly defined policies and procedures critical to managing the risks of company-owned cars driven by employees, he said.

“Policies and procedures will reduce the frequency and severity of claims,” he said.

Mr. Jones said companies should ensure that employees who use a company car take a drivers-safety training course, which can be offered online and is available through a multitude of insurance companies and brokers.

Another safeguard, he said, is to run a motor vehicle record on drivers at least every six months. He also said companies should implement a screening process to evaluate and eliminate higher-risk drivers.

They also might consider instituting a shared deductible program with employees to provide incentives for good behavior through economic penalties, he said.

Grainger has about 200 company cars in use, all of which may be driven for personal purposes, Mr. Cooley said. While he declined to comment on the company's specific policies, he said companies should establish qualifications for drivers, including disallowing points on an individual's license from exceeding a certain level, prohibiting DUI violations and requiring employees to self-report any violations.

Employees who don't meet the qualifications could have their driving privileges revoked, he said.

“It comes down to making sure you have people who have good track records in terms of driving history, having monitoring programs in place once they are on the road, and being sure to have policies and programs in place in case of an event,” Mr. Cooley said.

Wayne Salen, director of risk management for Labor Finders International Inc., said the West Palm Beach, Fla., company has moved away from providing company cars and provides car allowances or mileage reimbursements for employees' personal cars. However, the company still has a small fleet of fewer than 10 cars, and personal use is not prohibited, he said.

He said Labor Finders' policies include disallowing cell phone use and text messaging while operating the car; limiting vehicle use to employees and their spouses, and not extending driving privileges to employees' children; and prohibiting equipment that indicates if law enforcement is in range, typically used to avoid speeding tickets.

The company also does not pay for any citations.

Mr. Salen said company car privileges depend upon annual reviews of employees' driving records and may be revoked at any point. Employees also must sign a contract annually, acknowledging they are aware of the policies and will abide by the company's rules.

He said a signed contract stating the policies is important to ensure employees understand them, as well as mitigate damage in court should the company be pulled into a lawsuit regarding an accident involving one of its cars.

“If you don't have something (like policies or a contract), in a court case you don't look good,” Mr. Salen said.

“We have to exercise our due care relative to our business operations,” he added.

Kelly Pappas, a claims manager for Liberty Mutual Insurance Co. in Weston, Mass., said companies should require employees sign the contract annually.

“Unless you do it every year, it can possibly be of no use depending on jurisdiction,” Ms. Pappas said.

Mr. Cooley said the company car policies and procedures should be clearly and effectively communicated to employee drivers.

“Make it clear the vehicle is an extension of the company,” Mr. Cooley said. “Where it's located and how it's used can have consequences for the company, and that needs to be the overarching theme for how (the car is) used.”