There is increasing concern across the fast food delivery industry that businesses may be operating with inadequate insurance cover and running the risk that, if they are involved in an accident, the business itself could be held responsible. Not only in terms of compensation but also for criminal prosecution.
There can be no excuse for businesses that cut costs by allowing drivers – often young people – to work for them without providing proper insurance cover. For many, it may be that they are unaware that they are breaking the law.
While most operators understand the need to insure their own vehicles, many are not aware that when they use owner-drivers to work for them, the latter’s insurance is likely to be invalid.
Arranging the correct motor insurance for food delivery can be confusing and there is a lot of conflicting advice on the type of cover you need. Some say you need the more expensive hire & reward but, in fact, you might be covered with a normal business use policy depending on your circumstances.
If you employ drivers directly, then the delivery vehicle legally belongs to the company and your shop owns the food you are delivering.
In this case, the food, the courier and the vehicles are all part of your business, so Business Use insurance is perfectly acceptable.
Think of the journey of this product; the food order is legally owned by your company, delivered by a driver you employ directly and handed to the customer (legally transfers ownership) and the transaction ends.
Whether you are delivering sofas, electronics, food etc., if the goods are your own, Business Use is adequate. Business Use covers travelling to more than one place of work, commuting and carriage of your goods.
Hire and Reward is a class of insurance use which allows you to legally carry other people’s goods in return for payment. Hire and Reward insurance is essential for couriers, hauliers, taxi drivers, furniture removers and anyone who carries people or the property of others from A to B in exchange for a fee.
Amazon delivery drivers are a good example. They have parcels in the back of their van that do not belong to them. They are contracted to take the parcel from the depot (A) and deliver them to the end customers (B). The goods are the ownership of Amazon and then the customer, never the contractor.
So, if you are “hiring” drivers or they are self-employed i.e. they are not on your payroll, and they are carrying goods for which a payment – a “reward” – is being received, then you will need Hire & Reward insurance.
In this journey, the food is owned by you and carried by a third party who has no legal connection to your business. In this instance, the driver could be working for you and multiple other companies, so the legalities start to get a little mixed, hence why hire and reward insurance kicks in.
Another example of where you would need hire and reward is if a pizza restaurant next door to you asked you to take a pizza to a customer on your way to drop off your own goods. The pizza never belongs to you or your business. It’s either the restaurant’s or the customer’s. If you collected a fee to do this for the pizza firm, you would need “hire and reward” cover.
Many business operators appear to take on the view that it is not their responsibility to ensure their drivers are covered, and that the onus is on the employee to ensure they have the correct cover arranged while carrying out deliveries in their vehicles. This, however, is a misconception.
By law, a business has a legal responsibility to look after its employees. If it fails to ensure that owner-drivers have adequate insurance, it may also be deemed to be failing in its duties by knowingly allowing an employee to drive for the business without valid insurance. This could result in criminal prosecution.
Under an area of the law called “vicarious liability” an employer could also be drawn into a claim and held liable for compensation payments for third party injury or damage, which isn’t covered under the employee’s motor insurance if it can be shown that the employee was working for the business at the time of the incident.
As well as the financial impact to the business from the resultant legal action, this sort of incident could also result in adverse publicity and in some circumstances even result in a business failure.
And, finally, if you do hire drivers rather than employ them, don’t take their word that they have adequate insurance. If they’ve got it wrong – or worse still, don’t have cover – the reality is they are driving without insurance whenever they are carrying out a food delivery.
It is your responsibility as a business owner to make sure your vehicles are insured properly, but if you use a third party it is your job to make sure they are adequately insured at all times.
Businesses must also advise their Employer’s Liability insurer that they deliver food, as this is a material fact. Failure to do so could void their policy or result in the insurance company seeking a recovery from the business for any claims monies they have had to pay in compensation to an employee who has been injured whilst carrying out a delivery and for which the business is legally liable.
When talking to your insurance company make sure your bolster your public liability insurance too.