“A customer brought theircar 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; thecustomer paid the cashier and drove off. That car was going over 60 mph whenthe wheel fell off, the vehicle went out of control and crashed. It was aterrible accident. Attorneys for the family contacted us the very next day.”
You may not want to believethat a simple tire rotation or brake job could cost your dealership in excessof one million dollars, but the fact is it can. These incidents happen everyyear and the stories are familiar. Are you a high-end import dealer? If atechnician or someone in your “quick-lube” department forgets to put oil backinto 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 reduceprofits. Both can tarnish a hard-earned good reputation that took years tobuild.
Zurich offers the followingsuggestions on how to protect your business:
• Require all service andrepair, orders to be signed by the customer. This is especially critical if theservice writer recommends preventive maintenance or (manufacturer’s) scheduledservice and the customer declines to have it done.
• Establish a qualitycontrol program in the service department.
• Require third party(service writer, QC manager) inspection upon completion of service work.
• Ensure the quality andsafety of service work is thoroughly evaluated, especially when criticalautomotive safety components are involved.
• Require technicians tocomplete factory and ASE training.
• Technicians must bequalified to perform assigned work.
There are other less obviouscompleted operations or product liability exposures associated with theautomotive retailing industry. The used car business is becoming extremelycomplicated, and consumer protection laws hold the dealer to a higher standardthan ever before. If you “guarantee” used cars or advertise a “100 pointinspection” you should know as much as possible about the vehicle being sold.
Again, these are suggestionsfor protecting your dealership and assets.
• Use a title search companyto verify the vehicle’s history, including:
– mileage
– salvage title
– unusual usage – police,taxi or emergency vehicle.
• Require the customer tocomplete a “Customer title disclosure and trade-in certification” or “Sellersdisclosure” form.
• Thoroughly inspect thevehicle and look for evidence of odometer tampering, replacement or rollback.
• Appraisers must bediligent in evaluating trade-ins, and determining prior damage.
• Conduct a comprehensivesafety inspection of all trade-in vehicles to include:
– brakes
– air bags
– exhaust system
– steering &suspension systems
– other criticalcomponents
Don’t forget thosesubcontractors you use to modify new and used vehicles. Customizing vans andpick- up trucks, installing stereo systems, alarm systems or any otherelectrical devices are not a problem until something happens. If the customer’scar or house catches fire, they will come back to the dealership to talk withyou first. If the subcontractor isn’t properly insured, guess who’sresponsible?
Remember to choose businesspartners carefully. Here are more tips:
• Use subcontractors/vendorswith extensive experience (years in business) in their field and a good trackrecord.
• Require certificates ofinsurance for workers’ compensation, auto, general liability and productliability coverage.
• Policy limits forsubcontractors and vendors should be similar to your own.
• Your dealership should belisted as an additional insured on subcontractors’ insurance policies.
• Never install, use orre-sell used parts or supplies, i.e. tires, airbags, steel, aluminum or othercustom wheels, etc.
The dealer is not immune toproduct liability and completed operations claims. These losses can ruin abusiness quickly with a huge legal judgement, or more slowly with a badreputation.
– Courtesy of Zurich NorthAmerica –https://secure.zurichna.com/zdu
