It is common practice at SMEs: the salesperson, the technician or the project manager drives to the client in their own car, the company issues a travel order (kiküldetési rendelvény) and pays a mileage allowance. It works for everyone – until, one rainy early morning, the car ends up in a ditch. That is when it turns out that the employee has no casco (comprehensive motor insurance), their no-claims bonus is gone, and they expect the company to pay for the damage. As a broker, I see that this situation has not been thought through either in the fleet policy or in the employer's liability insurance, even though the Labour Code (Munka törvénykönyve, Mt.) points the first question fairly clearly at the employer. This article sets out the legal basis and the boundaries of insurance cover – as a compass rather than as legal advice.
- Under Section 166(1) of the Hungarian Labour Code (Mt.), the employer must compensate the employee for damage caused in connection with the employment relationship – a business trip made in the employee's own car on the employer's instructions is such a connection; the company is released from liability only if it proves a cause outside its sphere of control that was unforeseeable and unavoidable, or that the damage was caused solely by the employee's own unavoidable conduct.
- The employee's compulsory motor third-party liability (MTPL) insurance covers damage caused to others, not collision damage to their own car; the company's fleet policy covers the company's own vehicles – damage to the employee's car is typically decided by the exclusions and clauses of the employer's liability insurance, which differ from insurer to insurer.
- Culpable contribution by the employee (speeding, using the phone) leads to apportionment of the damage (Mt. Section 167(2)), and cost reimbursement under a travel order is not compensation for damage – clear internal rules and settling the casco question in advance leave less room for dispute.
What does the Labour Code say?
Under Section 166(1) of the Labour Code, the employer must compensate the employee for damage caused in connection with the employment relationship. Under subsection (2), the employer is released from liability if it proves that the damage was caused by a circumstance outside its sphere of control that it did not have to reckon with, and that it could not have been expected to avoid the occurrence of that circumstance or to avert the damage – or that the damage was caused exclusively by the injured party's own unavoidable conduct. A business trip that the employee makes on the employer's instructions in order to perform their job is connected with the employment relationship; this differs from commuting to work, which case law may assess differently. And release from liability is not automatic: the circumstances of a road accident often fall outside the employer's sphere of control, but the law requires three conditions to be met together, and the burden of proof lies with the employer – the courts examine case by case whether the particular circumstance should have been reckoned with and whether averting the damage could have been expected. Under Section 167(1) of the Labour Code, damage whose occurrence was not foreseeable at the time it was caused need not be compensated, and under subsection (2) neither need the part of the damage that was caused by the employee's culpable conduct or that results from a failure to fulfil the duty to mitigate the damage. So with collision damage caused by speeding or while using the phone, the damage is apportioned; it is not compensated in full.
Whose insurance protects – and whose does not?
Three policies come into question, and none of them is meant for what one might first think. The compulsory motor third-party liability (MTPL) insurance of the employee's car pays for damage caused to others – the other car, the crash barrier, the injured pedestrian – but not for collision damage to the employee's own car. If the accident was caused by the other party, their MTPL pays for the employee's car and the question is settled; if the employee is at fault, their own loss can be recovered only from casco, if they have it. The casco deductible, the loss of the bonus class and, if there is no casco, the full cost of repair make up the damage that the employee can claim from the company under the Labour Code. The company's fleet policy covers vehicles owned or operated by the company; the employee's private car is typically not included in it, as I also described in the article on fleet insurance. That leaves employer's liability insurance: this covers damage suffered by the employee that falls within the employer's liability under the Labour Code, but Hungarian policy conditions often exclude vehicle damage, or cover it only under a separate clause with a sublimit – this varies from insurer to insurer. If it is common at your company for staff to use their own cars for business purposes, it is worth reading through the exclusion list in the conditions with this line in mind and, if cover for it is missing, asking about the clause.
When it is not the car that is damaged but a person who is injured
With personal injury, an accident on a business trip takes a different course. The employee's harm to health and loss of earnings may also fall within the employer's liability for damages under the Labour Code, and an accident connected with work may qualify as an occupational accident (üzemi baleset) for the purposes of the state social-security system (TB) – this is for the authorities to assess. This damage is typically covered by employer's liability insurance, and group accident insurance supplements it with a fixed sum, regardless of liability; the article on employee claims shows the three routes. If the employee causes damage to a third party on a business trip, the employer is liable towards the injured party under Section 6:540(1) of the Hungarian Civil Code (Ptk.) – for damage caused with the vehicle, MTPL covers this, and damage outside the scope of MTPL may be handled by general liability insurance.
Internal rules, travel orders and the casco question
Most disputes can be prevented if the company decides in advance what it will take on. A short set of internal rules can lay down who may use their own car for business purposes and on what conditions, whether casco is required for this, who pays its premium or deductible, and how an accident must be reported to the company. The travel order and the mileage allowance are cost reimbursement under the Personal Income Tax Act (Szja tv.) – for fuel and depreciation – not compensation for damage; confusing the two misleads both sides when a loss occurs. Some companies allow only cars with casco to be used for business trips and contribute to the casco premium; others prefer to give company cars to staff who travel regularly, which moves the risk into the fleet policy. Neither is “the” solution – the question is whether the decision is a conscious one and whether it has been put in writing. When you take on your first employee, this is still a simple matter; with ten colleagues who travel, it is already a portfolio question.
What should you do now?
Make a list of who uses their own car for business purposes, how often, and whether they have casco. Check the exclusion or clause on vehicle damage in the conditions of your employer's liability insurance, and the limit. Draw up a one-page set of rules on the use of private cars, including how accidents are to be reported. If a loss has already occurred, the question between the employee and the company is decided under the Labour Code, and the insurance question under the policy conditions – on the latter, I help where I can on the basis of the policies; in an employment law dispute, a lawyer is the right partner. If you let me know before the renewal date, I review the clauses of your employer's liability insurance alongside the boundaries of your fleet cover.
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Sources
- Labour Code (Mt.) – Act I of 2012 on the Labour Code, Sections 166–167 (the employer's liability for damages)
- Jogpontok (legal information service): The employer's liability for damages under the Labour Code (publication, updated 31 December 2021)
- Kúria (Supreme Court of Hungary): 215. If the employer proves that the damage was caused exclusively by the employee's unavoidable conduct, it is released from liability for an occupational accident within its sphere of control
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:540 (liability for damage caused by an employee)
- Personal Income Tax Act (Szja tv.) – Act CXVII of 1995 (travel order, reimbursement of costs for the business use of a private car)
