Know Your Vendors
Over the past 2 months we have reported several claims regarding insufficient insurance coverage carried by Vendors/Subcontractors. In two instances, the claims involved companies contracted to transport vehicles for the Dealerships. Car Haulers??? Yes!
Dealers are normally in tune with the dangers of underinsured contractors regarding building and/or grounds maintenance. They even scrutinize Certificates of Insurance for Detailers and other companies that perform daily tasks at the Dealerships. But what can go wrong with Transporters for hire?
Plenty! Here are a couple of ‘’real life’’ examples for your review…
A Dealership hires a Transporter to move vehicles between two owned locations. Certificates of Insurance were received and reviewed…Additional Insured verbiage attached…all good! Right? Not so fast…
Buried deep inside the Transporter’s Cargo policy is a ‘’Co-Insurance’’ clause. Remember Co-Insurance? Basically, it is a requirement to carry limits equal to a certain percentage of the actual risk…or be subject to a penalty. So, if there is $ 100K in Cargo coverage with an 80% coinsurance clause, there can be no more than $ 125K in values on the truck without a potential penalty.
After loading a few ‘’extra’’ units onto the truck, the total values reached $ 250K…meaning that the Cargo Insured needed a limit of at least $200K to avoid a coinsurance penalty. Oops!
There was a Partial Loss to the loaded vehicles (in an accident) resulting in a Coinsurance Penalty for an Underinsured Load. The Dealership is looking at a $ 50K – $ 60K uninsured loss. The only recourse is to ‘’sue’’ the Transporter. Good Luck with that!
The second incident was more bizarre. The Dealership hired a Transporter to deliver vehicles to a customer. The Transport driver loaded the trailer with a full load (from various Dealers) and went to get a ‘’good night’s rest’’ prior to departure. Where did he park the unit??? Unfortunately, on the street for the evening.
The entire unit…Transport/trailer and power unit…was stolen. Along, of course, with all the loaded vehicles. The Dealership Customer’s vehicles were stolen, and they are seeking indemnification.
Now, we know that because these units were ‘’sold’’ the payment to the customer must lie with the Personal Auto Policy or the Cargo policy for the Transporter. Right???
Well, the Personal Auto policies paid on behalf of their Customer but immediately subrogated against the Transporter’s Cargo policy. That claim was denied by the Cargo Carrier due to a policy exclusion clause denying coverage for ‘’vehicles left unattended at an unauthorized location.’’ Who is left in the ‘’chain”? The Dealership!
Without the proper ‘’waiver of subrogation’’ clause with the Transporter, the Dealership is (again) involved in a legal dispute. Guilty and Responsible…probably not. But, it is an unnecessary nuisance that requires the involvement of the $ 600 per hour folks (your attorney).
Take a little more ‘’time’’ to review the insurance of your Contractors and Vendors. Have them send you copies of policies and/or endorsements protecting your Dealership. Draft insurance requirements that truly protect you and your interest. That ‘’hourly bill’’ from your Counsel can add up fast.