Owning and operating an auto dealership today presents several challenges. Each year, these challenges increase with new regulations and rising operational costs. It is important to remember that you must not short-cut your loss prevention efforts. Plaintiff attorneys are always looking for that next big case. You don’t want to be a target! See if you can check all the boxes below:

• Dealerships should carefully consider policies regarding permissible use of company vehicles.
• MVRs should be obtained prior to hiring employees in positions that involve driving.
• Customers should not be allowed to enter the service department.
• All sales of manufacturer buybacks must be clearly disclosed, in accordance with applicable law.
• New vehicle damage should be properly disclosed to the customer prior to the sale.
• Work done on customers’ cars involving any drivability or safety issues should be checked by a second technician or supervisor.
• Keys to vehicles must be kept secure and key fobs should not be released until sale has been completed.

These procedures may seem ordinary or simple to you, but they may not be common practice even in your own dealership. Following these guidelines could save your dealership a costly liability claim:

• Employees with unacceptable driving records who are allowed to drive dealership or customer vehicles put your dealership at great risk. Even minor accidents can end up costing tens of thousands of dollars. Real Claim Example: The dealership shuttle driver was out, and a customer needed a ride home. The dealership allowed a porter to drive the customer home and was involved in a wreck, causing serious injury. This porter had an unacceptable driving record that was not known until the time of the accident. This was a $200,000+ claim!
• It is important to limit the driving exposures in your dealership. This includes only allowing specific management to drive company vehicles. We suggest restricting use of company vehicles. Real Claim Example: A GSM was allowed to take a dealership pickup truck on vacation. While on vacation, the employee was involved in an accident with the company vehicle, resulting in serious injuries to the other driver. The claim was settled for over $150,000!
• Customers should not be allowed in the service department. Many minor slip and fall claims exceed $25,000 in medical costs. Taking the necessary precautions, such as not allowing customers in your service department, may avoid this type of claim. Real Claim Example: A police officer needed to look at a customer vehicle on the back lot. Rather than bring the officer around the dealership they directed the police office through the service department where he slipped on transmission fluid and was injured. This ended up being a $100,000+ claim.
• Georgia law requires a dealer to provide the customer with a particular form when selling a manufacturer buyback vehicle to the first retail customer after buyback. Real Claim Example: The dealership sold a manufacturer buyback and did not properly disclose it to the customer. The claim was settled for close to the amount of the vehicle!
• Under Georgia law, if a new vehicle incurs paint damage that exceeds $500 and/or damage that costs 5% or more of MSRP to fix, such damage must be disclosed prior to delivery. Even if damage does not meet this statutory threshold, it is advisable to disclose known prior damage. Real Claim Example: A sales manager wrecked a demonstrator vehicle. He did not want the dealership to be aware of the accident, so he had the vehicle fixed. The vehicle was sold without disclosing the damage. The customer became aware of the prior damage and sued the dealership. A violation of this law is a per se violation of the Georgia Fair Business Practices Act, which allows for treble damages.
• Completed operation claims can become your largest exposure, so it is critical to have procedures in place, such as another technician or supervisors checking any drivability or safety repairs. Real Claim Example: A customer had a vehicle in for repair and the dealership did not properly tighten the lug nuts. Due to a technician’s failure to properly tighten the lug nuts, the customer ended up in an accident. If another technician or supervisor had checked this job, the issue would have been caught and resolved. Tragically, the customer was seriously injured in this accident. This was a major liability claim!
• Vehicle thefts continue to increase across the U.S. In the last several years, vehicle theft has increased by roughly 25%. This, combined with the increased value of vehicles, makes this a significant loss to auto dealerships. It is up to each dealership to tighten up vehicle security with well-functioning key machines. It is important not to provide key fobs to customers on test drives and to wait to deliver the keys to the customer once the sale has been completed. In addition, dealerships should be compliant with federal Red Flags Rule and have identity verification procedures in place. Real Claim Example: A customer had purchased a “high-end” used vehicle. The dealership failed to address typical red flags, such as the request to deliver the vehicle to an address other than the address on the driver’s license and inadequate proof of insurance. This claim cost the dealership over $100,000.

Lawsuits are on the rise, and you need to make sure that your dealership is avoiding potential exposures in the best way possible. Please do not hesitate to contact me or any member of my insurance team if we can be of any assistance or answer specific insurance questions.

Shawn Presnell
Managing Director of Insurance
(678) 428-9247 | shawnp@gada.com

Felix Jackson
P&C Account Executive
Atlanta/North GA
(770) 570-8212 | felixj@gada.com

David Crew
P&C Account Executive
Middle/South GA
(470) 303-9051 | davidc@gada.com