Store-to-door deliveries by Wal-Mart employees raises insurance liability question

Wal-Mart execs were unclear on how they will – or have – resolve potential insurance liability problems in their plan to use store employees to deliver online orders from stores to a customer’s door.

The Bentonville-based retailer announced Thursday (June 1) it has piloted a program in three stores – one in Northwest Arkansas and two in New Jersey – for about four weeks in which online orders at Jet.com and Walmart.com are delivered from a store to a home or business.

Employees may choose the days they want to deliver, the size and weight of the packages and how many deliveries they want to make. Wal-Mart has created an algorithm that overlaps employee addresses with delivery destinations on customer orders. The company said an employee will not be asked to drive out of their way to deliver a package. Wal-Mart said it will pay employees extra for the work, and also said it will work within overtime rules.

“Walmart has strength in numbers with 4,700 stores across the U.S. and more than a million associates. Our stores put us within 10 miles of 90% of the U.S. population. Now imagine all the routes our associates drive to and from work and the houses they pass along the way. It’s easy to see why this test could be a game-changer,” Walmart U.S. e-commerce CEO Marc Lore noted in a statement.

If the program is expanded, it could put thousands of Wal-Mart employees on the road each day making deliveries for Wal-Mart. An accident in which the employee is at fault would be just a matter of time.

Marty Clark, president of BHC Insurance which has offices in Northwest Arkansas and is based in Fort Smith, said personal auto insurance policies typically have a “business use exclusion” which would force Walmart U.S. employees who participate in the program to obtain a commercial auto policy.

“And that’s more expensive” for the employee, Clark noted.

The issue of auto liability as it relates to performing a service is not new, Clark said, adding that Wal-Mart lawyers and execs have plenty of examples of what can go wrong.

“There are a lot of problems with services like Uber that the insurance industry has struggled with. … Those problems have been very publicly documented, so I would think they (Wal-Mart) would be aware of all the pitfalls,” Clark said.

He also said Wal-Mart is “very sophisticated … and may have figured out how to deal with that (liability) question, but in my view of what I know about this is that it could place a lot of liability on the driver, on that employee.”

Talk Business & Politics asked Wal-Mart for details as to how liability might be handled. Following was the only response: “Eligible associates must be 18 or older, have a valid driver’s license and proof of insurance. They must also pass a background check which includes a Motor Vehicle Records (MVR) check.”

In addition to potential costly liability exposure to the employee and Wal-Mart, Clark also said the retailer will need a process to ensure the employee maintains the insurance.

“How do you know when that 25-year old driver forgets to pay his premiums … and doesn’t tell Wal-Mart about it, and it just cancels out in the middle of the year?” Clark explained.

Clark, whose company insures pharmacies and other businesses that operate a fleet for home deliveries, suggested a better way for Wal-Mart to handle store-to-door deliveries.

“It would be a much cleaner way … from an insurance angle, if Wal-Mart not only employed the driver, but with a Wal-Mart vehicle and assumed all the liability.”