Coverage

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Many general insurance agents have a difficult time writing Dealers.

They do not know which of their carriers will insure them, and what coverages to offer.

Sometimes they do not even call you back.

Here is some general information for new and existing dealerships:

• The official name for a dealership policy is called Garage Liability OR Auto Dealers Coverage Form.

• This policy is used for Dealerships and Repair Shops.

• Dealerships and Repair Shops are unique in that Dealerships have to cover their cars when a person takes a test drive, and Repair Shops have to cover cars the technicians take on a test drive that the Repair Shop does not own.

• So, what are the main parts of a Garage Liability/Auto Dealers Coverage Form policy for a Dealer?

The liability coverage consists of two parts:

• Auto Liability and the Other Than Auto Liability. The Auto Liability will cover you, your employees, a test driver, or anyone else that drives one of your cars with your permission, such as a detailer that has their own shop. You want the test driver and the detailer to have their own liability insurance, but if they do not for some reason, your insurance will cover your car.

• The Other Than Auto Liability covers your premises/lot for slip and fall type of accidents, and it also covers your operations.

The limits available are typically $300,000, $500,000, or $1,000,000 (higher limits are available) per accident/occurrence. The State of Kansas requires a Auto Liability limit of at least $60,000. This is the information they need on the certificate of insurance. Some agents will write an Auto Liability limit of $100,000, so they can deliver "the cheapest policy available" to their customer. I feel that a $100,000 Auto Liability limit is inadequate insurance for dealers, and in most cases, a $300,000 limit is only $100 per year more than a $100,000 limit. I believe you should have the highest limit you can reasonably afford, and I will be happy to quote several different liability limits. You also have two statutory coverages in Kansas: Personal Injury Protection (No Fault) and Uninsured/Underinsured Motorists.

The inventory coverage is optional, but if you have a credit line through an auction, bank, or other dealer financing service, it will likely be mandatory.   It is similar to the Comprehensive and Collision coverage on a personal auto policy, but it covers all of your inventory.  The comprehensive coverage protects your inventory against fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, falling objects, deer hits, and other perils not excluded in the policy.   

The inventory limit on your policy is the average amount of inventory you keep year round. Most insurance companies require you to cover 100% of the actual value of your inventory.  If you cover less than the full dollar amount, they will not pay the full amount of a claim.

You can also purchase coverage for False Pretense, also called Theft by Deception or Extended Theft. It provides coverage for a loss of a car caused by someone who causes the dealer to voluntarily part with a car by trick, scheme, or under false pretense.  This is not considered theft, as you hand the person the keys voluntarily.  Theft coverage under your inventory coverage above typically involves the loss of a car by stealth (Burglary) or force (Robbery).  For instance, if you allow an unaccompanied test drive, and the driver does not come back, this is a false pretense claim. 

NOTE: Most policies exclude false pretense and you have to ‘buy back’ the coverage by adding an endorsement. False Pretense coverage also differs significantly among different insurance companies. 

The inventory limit should be what you have "in" your inventory.  Some dealers refer to the wholesale cost of their inventory.  The limit should be the following added together for each car:

• Total purchase price of the car plus to include any buyer/arbitration/inspection fees

• Any repair invoices

• Transportation invoices

• Interest or other credit line fees for that particular car

 Provides for payment of economic losses sustained in a motor vehicle accident, regardless of fault. The major difference between Personal Injury Protection and Medical Payments coverage is that Medical Payments only covers actual medical bills. The Personal Injury Protection coverage typically provides for payment of medical bills, lost wages or income, hospitalization, cost of caretakers and any other financial loss resulting from the accident up to specified policy limits. 

 Provides coverage for bodily injury or property damage to a dealer’s covered vehicles or authorized operators resulting from an accident caused by a person driving without liability insurance. Kansas requires that uninsured motorist coverage be included in all private passenger and garage liability policies.