“A customer brought their
car into our service department for a brake job. This customer was a “waiter,”
so we pushed the job through pretty quick. The technician finished the job; the
customer paid the cashier and drove off. That car was going over 60 mph when
the wheel fell off, the vehicle went out of control and crashed. It was a
terrible accident. Attorneys for the family contacted us the very next day.”
You may not want to believe
that a simple tire rotation or brake job could cost your dealership in excess
of one million dollars, but the fact is it can. These incidents happen every
year and the stories are familiar. Are you a high-end import dealer? If a
technician or someone in your “quick-lube” department forgets to put oil back
into an engine, how much will it cost to replace it? Does $10,000 sound close?
It is important to protect yourself from both catastrophic and nuisance claims.
Catastrophic claims can put you out of business and nuisance claims reduce
profits. Both can tarnish a hard-earned good reputation that took years to
build.
Zurich offers the following
suggestions on how to protect your business:
• Require all service and
repair, orders to be signed by the customer. This is especially critical if the
service writer recommends preventive maintenance or (manufacturer’s) scheduled
service and the customer declines to have it done.
• Establish a quality
control program in the service department.
• Require third party
(service writer, QC manager) inspection upon completion of service work.
• Ensure the quality and
safety of service work is thoroughly evaluated, especially when critical
automotive safety components are involved.
• Require technicians to
complete factory and ASE training.
• Technicians must be
qualified to perform assigned work.
There are other less obvious
completed operations or product liability exposures associated with the
automotive retailing industry. The used car business is becoming extremely
complicated, and consumer protection laws hold the dealer to a higher standard
than ever before. If you “guarantee” used cars or advertise a “100 point
inspection” you should know as much as possible about the vehicle being sold.
Again, these are suggestions
for protecting your dealership and assets.
• Use a title search company
to verify the vehicle’s history, including:
- mileage
- salvage title
- unusual usage - police,
taxi or emergency vehicle.
• Require the customer to
complete a “Customer title disclosure and trade-in certification” or “Sellers
disclosure” form.
• Thoroughly inspect the
vehicle and look for evidence of odometer tampering, replacement or rollback.
• Appraisers must be
diligent in evaluating trade-ins, and determining prior damage.
• Conduct a comprehensive
safety inspection of all trade-in vehicles to include:
- brakes
- air bags
- exhaust system
- steering &
suspension systems
- other critical
components
Don’t forget those
subcontractors you use to modify new and used vehicles. Customizing vans and
pick- up trucks, installing stereo systems, alarm systems or any other
electrical devices are not a problem until something happens. If the customer’s
car or house catches fire, they will come back to the dealership to talk with
you first. If the subcontractor isn’t properly insured, guess who’s
responsible?
Remember to choose business
partners carefully. Here are more tips:
• Use subcontractors/vendors
with extensive experience (years in business) in their field and a good track
record.
• Require certificates of
insurance for workers’ compensation, auto, general liability and product
liability coverage.
• Policy limits for
subcontractors and vendors should be similar to your own.
• Your dealership should be
listed as an additional insured on subcontractors’ insurance policies.
• Never install, use or
re-sell used parts or supplies, i.e. tires, airbags, steel, aluminum or other
custom wheels, etc.
The dealer is not immune to
product liability and completed operations claims. These losses can ruin a
business quickly with a huge legal judgement, or more slowly with a bad
reputation.
– Courtesy of Zurich North
America –
https://secure.zurichna.com/zdu