Date: April 2020
MCIT members often inquire how coverage will apply to a loss when it involves an employee’s use of member-owned property or equipment for personal reasons. Questions range from the use of heavy equipment, such as a mower or loader, to smaller equipment, such as a projector or a laptop. Another frequent inquiry involves the use of the highway garage after hours to work on personal vehicles.
The Office of the State Auditor (OSA) has stated that a public entity must have authority to expend public funds, which would include allowing employees to use member-owned equipment and property for personal purposes. According to the OSA, this authority may be provided in statute or implied as being necessary to accomplish what is expressly authorized by statute.1 Additionally, the expenditure of public funds must be for a “public purpose.”
The Minnesota Supreme Court has defined “public purpose” as “[s]uch an activity as will serve as a benefit to the community as a body and which, at the same time, is directly related to the functions of government.”2
The OSA has opined that it is unaware of any specific authority generally allowing employees of a public entity to use the entity’s equipment or property for nonwork-related purposes other than what would otherwise be available to the public.
In the event a member sustains a property, liability or workers’ compensation loss because of the personal use of its equipment or property, MCIT coverage generally applies as follows.
MCIT coverage responds to claims for damage to heavy equipment or contractors equipment when it is listed on the member’s inland marine schedule. Buildings must be scheduled on the location schedule. Even when equipment and buildings are scheduled, not all damage is covered.
To be covered, the damage must be caused by a covered cause of loss. For example, heavy equipment is not covered for mechanical or structural breakdown or damage caused by the weight of a load exceeding the manufacturer’s designed capacity. Damage to a laptop is not covered under electronic data processing if it is not properly listed on the member’s submitted EDP inventory.
Covered property losses are subject to a deductible, which for most members is $1,000.
MCIT coverage responds on behalf of the member for an allegation the member was negligent in allowing the employee to use the equipment. Covered liability claims are subject to a deductible, which for most members is $1,000. This coverage does not extend, however, to the employee for allegations of personal negligence.
The MCIT Coverage Document definition of a “covered party” includes “[a]ny employee or authorized volunteer of the Member, but only for acts within the scope of their employment by or duties on behalf of the ‘Member,’ in their official capacity.”
An employee using member equipment or property for his or her own personal activities would not be a covered party for purposes of MCIT coverage. Accordingly, MCIT’s liability coverage would not extend to bodily injury or property damage claims brought against the employee by a third party. As a result, the employee or his or her personal insurance company would be obligated to defend the claim and pay any damages awarded by the court.
Employees using member facilities and equipment after hours, for example, may be injured, which could result in the employee filing a workers’ compensation claim. Injuries occurring on an employee’s personal time generally are not covered by workers’ compensation.
Risk Management Recommendations
MCIT encourages members to consider the legal, financial and political aspects prior to permitting any employee use of member-owned equipment or property for a personal purpose.
As discussed above, employee personal use of member-owned equipment and property is generally prohibited by law. There may be narrow exceptions, such as limited personal use of an entity’s computer or telephone systems pursuant to a member’s acceptable computer use policy. Therefore, MCIT recommends that members consult with counsel regarding the legal authority for personal use.
Members should contact their MCIT risk management consultant if they have questions or concerns regarding coverage for the personal use of member-owned equipment.
MCIT may seek to subrogate the cost of a covered property or liability loss when the loss occurs as the result of employee’s personal use of the member’s owned property or equipment. The purpose of subrogation is to recover the cost of the claim paid by MCIT from the employee (e.g., repairs or replacement of equipment, buildings or other property; damages paid to a third party injured or killed as a result of the employee’s personal use of the member’s property or equipment).