Accident at Texas Dealership Demonstrates the Importance of Adequate Insurance Coverage
This unfortunate accident is an example that anything can happen at your auto dealership and illustrates the importance of maintaining sufficient insurance for your business. Garage liability, excess liability, workers compensation, and even property and business interruption. TIADA reached out to insurance professionals Ann Mullen of Mullen Insurance and John Waymer of Waymer Insurance for their opinions regarding this matter. Please note that these are not the opinions of TIADA and any information contained herein in no way should be construed as legal, professional, or claims adjusting.Ann Mullen of Mullen Insurance
“First, prayers offered for all of the people injured and their families in this tragic event. Let me begin my comments with the caveat, I am not a claims adjuster. My comments are based purely on my experience and observations over 30 years of providing garage liability insurance packages to Texas Independent Auto Dealers.”
“The first thing that crossed my mind was: Everyone involved in this claim(s) is in for a long, drawn-out discussion and legal wrangling among all the insurance carriers.The second thing was: I hope Luxer Motors is carrying $1 million limits with a significant excess policy over and above that.”
The bottom line is: One cannot carry too much liability insurance. It's good to insure your inventory, your property, have dealers' error & omissions coverage, employment practices coverage, etc., but without adequate liability protection….and that includes workers comp…the dealer is playing Russian Roulette with his business.
John Waymer of Waymer Insurance
“The type of accident that occurred in the El Paso accident scenario is a prime example for buying proper limits of Garage Liability Insurance. Something like this could happen to any dealer, any day of the week. There are porters / contract drivers, employees, owners & spouses all driving dealership vehicles every day. There are customers test driving vehicles and other people on the street as well. Even if the customer (other person in an accident with the customer) has Personal Insurance, it is often for the minimum limits of Liability ($30,000). As most dealer's know, the customer's personal insurance company will try to deny the claim.
According to John Waymer, “many times when a dealer calls me for a quote they ask how much Liability should they purchase. Unknowingly, they are asking a trick question. My answer to this question is always “YOU CAN'T BUY ENOUGH”. Whatever Limit of Liability a dealer buys, they can be sued for much more. A dealer must consider their personal financial situation (assets) and their budget for insurance when making this decision. The Limits of Liability is the worst possible place for a dealer to try to save money on insurance.”
A dealer should do business with an insurance agent that specializes in Garage Liability. The Garage Liability policy is one of the trickiest types of coverage that an insurance agent can write. The insurance companies all have different coverages that are restricted or excluded. I recommend that Auto Dealers seek out a Garage Liability Specialist to be their agent. Garage Liability Insurance Specialists generally have much better knowledge of these restrictions/exclusions. These Specialist will in many cases, be able to secure contracts with the best A Rated carriers in the state. Unfortunately there are some Insurance agents that down play the importance of proper limits of liability.”
Ann Mullen of Mullen Insurance
As to the specific scenario in this article:
“It seems apparent –assuming the vehicle that caused the Jeep to crash was dealer-owned by Luxer AND the driver was an employee and/or covered contract driver of Luxer AND listed on Luxer's garage policy- that Luxer's' carrier is front and center when it comes to providing coverage for losses incurred.
“So, from a Luxer Motors standpoint-the 1st stop for payment of damages-, the following things need to be in place in their liability insurance plan:
- $1,000,000 primary auto liability
- $1,000,000 excess liability –minimum-certainly not enough to respond to this accident
- $1,000,000 workers comp limits
- The car should be shown as dealer-owned
- The driver must be listed on the garage policy as an employee or covered contract driver.
- The driver must not be excluded from coverage on the garage policy
- The driver must be moving the vehicle in the course of his employment
“There is no way of knowing from the article what caused the driver to collide with the 1st of the 3 additional cars involved, the Nissan Versa. That is another significant key in determining where liability can be placed. If the Luxer Motors' driver was simply negligent, then we are back to Luxer as the 1st source of liability. If there were a mechanical problem with jeep, a whole new can of worms is opened. Was it inherent to the vehicle? Had the vehicle just been repaired? If so, where and what was done? Answers to those questions could add a new dimension and a new source of liability to the picture – from the vehicle manufacturer to the repair shop. “
“Figuring out where the balance of liability for the two additional vehicles' damages is going to be involved and lengthy. Of course, if the Luxer driver was negligent, Luxer's insurance is primary, but it may not be enough. From there, any Under-insured Motorist and/or collision coverage carried by any of the drivers should step up in taking care of their injuries and physical damage.”
“Again, assuming the driver was an employee and/or covered contract driver, Luxer's workers' comp policy should respond to his injuries and expenses.”
SuperStar Motors needs a similar liability plan in place:
- $1,000,000 primary premises liability
- $1,000,000 excess liability (minimum)
- $1,000,000 workers comp
Additionally, they need property insurance.
- Building Insurance – if they own it
- Contents Insurance
- Business Income/Extra Expense
“Ultimately, whomever is deemed responsible for the accident should be picking up the check for all damages, but that is not necessarily what will happen and, even if it did, it won't happen quickly.”
“In the meantime, SuperStar needs to get back to work. Their property insurance may pay the bill for repairs and subrogate. The Business Income/Extra Expense endorsement on their property policy could help between survival and back in business. The BI portion helps to replace loss of income due to a covered incident and EE helps to pay the cost of renting another spot and/or other expenses while repairs are made.”
“Workers Comp should respond to their employees' injuries.”
“The bottom line is again: One cannot carry too much liability insurance. My counsel is to always buy enough liability protection to cover both your business and your exposed personal assets. Liability insurance is the dealer's first line of protection whether it is a customer falling in the parking lot, an employee involved in an accident, a customer driving off in a just-repaired vehicle that fails or whatever it may be.”