From the April 2010 issue of Treasury & Risk magazine

Distracted Driving Costs

Worried about accidents, companies are telling employees not to use electronic devices while driving on the job.

Jack Hanley, executive director of the Network of Employers for Traffic Safety (NETS), tells the tale of the CEO and the president of a Fortune 500 company who were having a conference call recently with their top marketing executives. One of the execs was talking on his cell phone as he walked out of an airport terminal. As the call progressed, everyone heard an alarm sound as he unlocked his car door in the airport garage. Then they heard him start his engine. "Are you driving your car?" the president asked. The marketing exec replied sheepishly that he was looking for a safe place to pull over and continue the conversation. The Donald Trump-like response, Hanley reports, was immediate: "You're fired!"

This company, which has to remain unidentified, is one of a growing number that have instituted a company-wide ban on cell-phone use by all employees who are driving vehicles, with, in this case, a zero-tolerance attitude toward enforcement. While not every company takes such a draconian stance, it is becoming increasingly clear to risk managers and corporate fleet managers that distracted driving on the job is not just hazardous to employees' health, but, with punitive damage awards reaching into the millions of dollars, poses a costly risk to companies themselves.

The proliferation of electronic devices, from cell phones to GPS devices and even dashboard-mounted computers, has contributed to the risk of distracted driving. According to one study, texting while driving increases the risk of an accident by 23 times, while simply dialing a cell phone increases the risk of an accident by six times. Some studies show talking on a hands-free cell phone raises the risk of an accident by nearly the same amount as a handheld device.

The inevitable costly liability suits against companies whose drivers are found to have been talking or texting in the instant before a serious accident have corporate risk managers and safety officials focusing on measures to limit or halt what Transportation Secretary Ray LaHood has labeled an "epidemic" of cell phone-caused accidents.

Richard Bleser, a senior vice president at Marsh Risk Consulting who specializes in fleet issues, advises clients to adopt a comprehensive distracted driver policy that includes rules on using cell phones and texting devices. "There has been a movement among plaintiffs' attorneys to subpoena cell-phone records in serious accidents, and to attempt to establish fault on the driver's employer," he says.

Gerald Maatman, a partner with the Chicago law firm Seyfarth Shaw, agrees that companies face a significant risk of liability if an employee has a vehicle accident on the job while using a cell phone. "Plaintiffs' lawyers will generally make the argument that the employer is liable, because the employee was on the job," he says, "and juries and judges will frequently be sympathetic with that argument when there are deaths and serious injuries." His suggestion: "Have a company policy that bans cell-phone use and show that you have a record of enforcement. You can't make exceptions. There has to be real discipline when employees violate the policy."

Maatman says that a model policy should be clear and unequivocal, should require employees to adhere to all applicable laws in the jurisdiction in which they are driving, and should be enforced with zero tolerance. "If you have all that," he says, "as an employer you have an ability to at least argue that what the employee did if they were using a digital device just before an accident was prohibited by company policy."

Monsanto, the $11.7 billion seed and biotech company with a long reputation for employee safety, instituted a cell-phone ban for its employees in 2003. Lori Waddell, Monsanto's vehicle safety lead manager, says that the policy has led to a "significant reduction" in accidents involving its 7,500 company drivers worldwide. All Monsanto's 20,000 employees attend a 20-minute training program, she says, and company drivers attend a day-long safe driving training program every three years. The company has a flat ban on hand-held electronic devices but at least so far does allow the use of hands-free devices while driving. "We discourage all cell-phone use while driving," Waddell says, "but we do allow hands-free use if necessary." Enforcement, she says, is not part of the policy, but violations are handled by Monsanto's HR department.

Privately held trucking firm Schneider National takes a more aggressive approach. The $3.8 billion Green Bay, Wis., company, which runs more than 12,000 trucks over 1.4 billion miles a year, bans the use of all mobile communication devices while driving and enforces that ban with a zero-tolerance policy. "If a driver is caught talking or texting on a cell phone, it's grounds for immediate termination," says Don Osterberg, senior vice president for safety and training.

Osterberg says his department conducted a study of severe crashes--those that caused a serious injury or fatality--over a three-year period. "What we found was that fatigue accounted for about 30% of the crashes," he says, "but task saturation and situational awareness, which basically amounts to distracted driving, accounted for about 50%. And since another 7% involved following distance being too close, I would suspect that much of that could be attributed to distracted driving too, so it's likely above 50%."

Based upon that study, in 2003 Schneider National implemented its safe driving program, which Osterberg says basically takes the position that "anything that distracts drivers from their primary task of driving should be minimized or eliminated when possible." Company employees are not even provided with drivers' cell-phone numbers, and the company refuses requests from customers for drivers' phone numbers to prevent any attempt to call them on the road.

As a result of the program banning digital-device use while driving, Osterberg says he suspects Schneider National has cut its insurance rates, but he is quick to admit the causal connection is difficult to prove. "Insurance companies set their rates based on results, not effort," he says, "and while our crash rates are down significantly, how can you say what caused the decline? My instincts tell me that by reducing distracted driving, the frequency and the median cost of our crashes has gone down, but there are so many other variables, like weather. There are often multiple roosters taking credit for the sunrise."

Osterberg says he hopes having a good safe-driving program and enforcing it rigorously will help reduce the company's liability in the event of crashes by company drivers, but he adds, "You're not going to prevent liability, and in any case, I think that the focus of company safe-driving programs should be more on prevention of accidents than on claims management."

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