Automobile Dealers and other types of Automobile dealer codes that may apply to this: New car dealers; Used car dealers; Motor vehicle dealers.
Description of operations: Automobile dealers sell new and/or used vehicles and generally provide a variety of services such as financing and insurance for vehicle purchasers. Most sell auto parts and accessories, provide auto repair and body work, and offer vehicle rental and leasing. Some provide towing services, car washing, or the sales and service of recreational vehicles. Most dealerships purchase new cars directly from manufacturers, financing the purchase through arrangements with either the manufacturer or a bank. Used vehicles are generally trade-ins from customers purchasing newer vehicles, or from automobile auctions. While a selection of vehicles may be displayed in a showroom, most are stored in open lots outside the building.
Property exposure comes from flammable paints, lubricants, oils, degreasers, and solvents used in the repair operations. These must be properly labeled, stored and separated. If done on premises, any spray painting should be in spray booths with good ventilation, UL-approved wiring and fixtures and adequate controls. Welding is often a part of the repair and body work operation that needs to be evaluated for proper handling of the tanks and gases and adequate separation from the other operations with either a separate room or flash/welding curtains. Good housekeeping is critical. Greasy, oily rags must be kept in covered metal containers. Work areas must be cleaned regularly and trash removed from the building. Theft is a concern as vehicles and auto parts are considered to be target items. Appropriate security controls must be taken including physical barriers such as chains, fences, or gates, lighting to deter access to the premises after hours, and an alarm system that reports directly to a central station or the police department.
Crime exposures are from employee dishonesty, forgery or alteration, theft of money and securities, computer fraud, money orders and counterfeit paper currency. Employee dishonesty is controlled through background checks, inventory monitoring, control of the cash register, disciplined controls and division of duties. Physical audits should be conducted at least annually. Theft of money and securities prevention requires controls of monies kept in the cash drawers and regular bank drops.
Inland marine exposures are from accounts receivable if the dealership offers credit, computers used to monitor inventory, floor plan coverage for vehicles furnished by manufacturers and held for sale, goods in transit, signs, and valuable papers and records related to the manufacturer and customers. Backup copies of all records, including computer records, should be made and stored off premises. Vehicles stored in open lots are particularly susceptible to damage by hail, wind, flood, vandalism, and theft. Lots should be well lighted with chains, fences or gates to prevent access and transport. The more expensive models should be moved inside to the showroom. An alarm system that reports directly to a central station or the police department should be used. Security guards may be appropriate in some areas.
Auto dealers exposure comes from slips and falls due to public access to the premises and from automobile sales and service operations. Floor coverings inside the showroom should be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked. Sufficient exits must be provided and be well marked, with backup lighting systems in case of power failure. Waiting areas should be provided for customers whose vehicles are being repaired. Customers should not be permitted access to the service area. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the premises is open after dark, adequate lighting and appropriate security for the area must be present. Vehicles in open lots can pose an attractive nuisance. Chains and fences should be in place to prevent entrance to the dealership after hours.
Repair operations are the major products/completed operations exposures. There should be a check-off procedure in place prior to release of the vehicle to the customer to prevent its return with any vital functions not working properly.
Automobile exposure is high due to employees driving demonstrator models and customers taking vehicles for test drives. All employee drivers should have valid licenses with their MVRs regularly checked. All vehicles must be regularly maintained with records retained. There should be written procedures for personal and permissive use of vehicles furnished to employees. A set procedure must be in place for test drives, such as requiring salespersons to accompany the customers and verifying the customer’s driver’s license and other forms of identification. Towing presents a more serious exposure due to the potential for damage to the vehicles towed. All tow truck drivers must be experienced in towing. Towing vehicles must be regularly checked, in particular the hoists and tow bars.
If vehicles are rented to customers, the dealership should keep a copy of the renter’s driver’s license and proof of insurance. The rental contract should identify permitted drivers and state that unlicensed or minor drivers are not permitted. It should also include a hold-harmless agreement in which renters agree to assume responsibility for the operation of the vehicle to limit the business’s exposure to only vicarious liability. If a collision damage waiver is offered, the customer’s signature is needed to document whether this was purchased or declined. The customer should also be required to sign a pre-inspection form to minimize disputes when the vehicle is returned with damages.
Garagekeepers exposure is from damage that can occur to customers’ vehicles left with the dealership for servicing or repairs. Access to these vehicles should be prevented in the same way the company does their own. Keys to customer’s vehicles should be kept in a locked box, with proper identification required to prevent handing the customer’s car to the wrong owner.
Environmental impairment exposures can be significant due to the presence of underground fuel tanks and the disposal of used oils, solvents and other hazardous wastes from repair operations. All underground tanks and pipes should be routinely tested for leakage. Adequate procedures should be in place and must be followed to prevent any leakage or contamination. Contracts should be in place to dispose of all environmentally dangerous chemicals.
Workers compensation exposure is primarily from the garage operation. Employees performing maintenance or repair work on customers’ vehicles should be properly trained. Employees can incur injuries from slips, falls, back sprains, strains and hernias. Test drives, pickup and delivery of customers or vehicles can result in employee injury due to vehicular accidents.
Hoists need to be regularly inspected to prevent falls. The proper use of lifting techniques and of dollies should be encouraged. Safety equipment should be provided. Refueling should be done only in well-ventilated areas to minimize inhaling of fumes. Information regarding chemicals should be available to employees along with early warning signs of problems.
Minimum recommended coverage:
Building, Business Personal Property, Business Income, Computer Fraud, Employee Dishonesty, Forgery or Alteration, Money and Securities, Money Orders and Counterfeit Paper Currency, Accounts Receivable, Computers, Floor Plan, Goods in Transit, Signs, Valuable Papers and Records, Employee Benefits, Environmental Impairment, Umbrella, Auto Dealers, Garagekeepers, Hired and Nonownership Auto, Workers Compensation
Other coverages to consider:
Earthquake, Flood, Cyberliability, Employment-related Practices, Stop Gap Liability
Reprinted with permission from the Rough Note’s Company copyrighted content.
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