Federated Insurance’s Auto Dealer Claim of the Month (January 2024)

An insured had purchased three vehicles at an auction, but only had the ability to drive two of the three back to their intended location. The insured contracted with a vendor to arrange for the last vehicle to be delivered due to employee/time constraints. The vendor arranged for a company to complete the job. The company hired by the vendor subcontracted the job to a second company to complete the delivery. During the delivery of the vehicle from the auction lot to the insured’s location, the hired driver from the second company was in an at-fault accident, seriously injuring three occupants of another vehicle.

After a review of the contracts in place between the parties, as well as insurance limits, the first company had $1 million in total coverage, and the second company and its driver had no coverage for non-owned vehicles. The contracts in place were silent as to indemnity. The insured’s policy was triggered, as the operator of the owned/purchased vehicle was deemed to be a permissive user under the insured’s policy.

CLAIM AMOUNT: $3.5 MILLION

Risk management advice:

Insureds should consider verifying when non-employees are operating their company vehicles, and should carefully review vendor agreements and contracts. They should also take the time to review the insurance in place, as well as contracts that should specify that they indemnify the auto dealership.

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