What’s with all these customer’s cars stacking up out back?” What advice does a Risk Manager give his clients regarding these ever-increasing recalls?

Lately, I find myself fielding calls from clients around the country concerned about how to manage the potential risk they face in selling a vehicle to a retail customer when that vehicle is awaiting a replacement airbag. At first, late last year, the calls were focused on the retail sale; only recently have I started seeing more concern regarding running a vehicle through an auction lane or wholesaling the vehicle. Sure, the fact and figures are readily obtainable via a quick Internet search as to how different state’s laws affect a sale. The range seems to run from silence on the issue from a state’s legislative and regulatory arms to outright mandates and bulletins on how to handle the sale of an open recall vehicle. While the federal government runs the recall “train” from the locomotive, many of the individual cars (state’s laws and regulations) are wobbling down the track.

If the product safety and recall issue is a national highway safety issue, and the titling and registration of a vehicle belongs to the individual states, the potential liability is a scary one.

 

Compounding matters is the fact that the manufacturer may be of little help when asking specific questions regarding pre-owned, open recall vehicle. Just this week, Toyota dealers participated in a conference call regarding “best practices” while handling vehicles that are in your inventory and how to sell the cars properly. The suggestions did not sit well with many of my dealership clients.

 

On another liability front, what about the customers’ vehicles sitting in back, on the side or all over your dealerships lots? There are some serious “care, custody and control” issues. In March of this year, one Honda dealership I visited had 116 customers’ cars in a cramped back/side lot just awaiting airbags. This was on top of the usual 30 to 45 cars in for service on any given day. Knowing this particular dealerships’ insurance program had a limit for the “garage keepers” coverage that would only account for the typical 50 cars, I quickly pointed out the need to increase the limit for this location to accommodate a potential loss.

 

With recent news of yet another 4.3 million GM vehicles being added to the list, and on the heels of news that the NHTSA is expanding  the investigation to potentially include airbags manufactured by ARC, one wonders how

can a dealer navigate what to sell and what not to sell? What to trade for and what not to trade for? Which to buy and which to avoid. Again, this is a great topic to discuss with not only your management teams but important partners in your dealership’s overall risk management program. Ask your staff counsel, your state dealership associations and your insurance professional, as well. A quick email

to your insurance provider asking what the cost to increase your garage keepers (or customers autos) limit could be in order. You may be shocked to find it is rather inexpensive for the extra piece of mind.