CMG: Negligent Entrustment: A Hidden Credit Union Business Risk

CUNA Mutual Group (CMG) found that negligent entrustment occurs when your credit union is found responsible for negligently providing another party (your employee) with a dangerous instrument and the entrusted party then causes property damage, injury, or death to a third party with that instrument. In recent years, this risk has increased significantly mainly due to distracted driving claims. The lawsuits can cost millions of dollars and cause reputational damages.

Negligent entrustment occurs when one party (your credit union) is found responsible for negligently providing another party (your employee) with a dangerous instrument — like a vehicle or firearm — and the entrusted party then causes property damage, injury, or death to a third party with that instrument. In recent years, this risk has increased significantly mainly due to distracted driving claims.

Automobile accidents are an expensive liability for credit unions that rely on the use of vehicles for business. If one of your employees is involved in an accident while driving a company vehicle to do something as simple as visiting the post office, picking up lunch for a meeting, or heading to the airport to fly to a business conference, the credit union could be held responsible and found guilty of negligent entrustment and ultimately be on the hook for financial and reputational damages.

In addition, your liability may even extend to employees who use their own personal vehicles to conduct any kind of company business. And as an employer, claiming to not know a driver’s driving history, license status or whether he or she is able to operate a vehicle safely isn’t a good enough defense. It is up to the employer to make sure the driver is competent and safe behind the wheel. If not, you can be found negligent opening the door to civil lawsuits, damages and expensive legal fees.

Click here to read how CMG says a credit union can mitigate some of the risks described above, as well as access additional risk alerts from CMG.

Nee compliance help identify risks to the credit union and stay on track with Compliance?  Contact NJCUL’s Nicola Foggie at nfoggie@njcul.org or call 1-800-792-8861, ext. 112, to hear about our Shared Compliance Program.  You can have your own Compliance Specialist working on behalf of your credit union’s safety and soundness.