Insurance For Franchise Auto Dealers

Insurance Policies to Consider For Franchise Auto Dealers

1. Commercial Auto Liability Insurance

Any business that deals in vehicles requires commercial auto liability insurance. This type of insurance can protect your business from third-party claims that may occur due to auto accidents. 

Claims filed due to vehicle accidents can compel your business to pay a large sum for the damages that occurred. If you do not have proper liability insurance, you company may not be able to pull through an auto-related lawsuit. 

Your business may be held responsible for accidents involving the vehicles it owns, cars hired through a rental agency, and cars that are not owned but used in operations. For example, an employee-owned vehicle used by a worker on sales calls would be included in this list.

A commercial auto liability insurance generally takes into account:

• Auto accident liability
• Physical damage and crashes
• Medical expenses
• Uninsured motorist coverage

If you have bought an auto liability insurance policy, the following vehicles would automatically be included in the coverage:

• Small trailers 
• Mobile equipment in transit
• Temporary substitutes
  

2. Garagekeepers Coverage

A garagekeepers insurance policy provides compensation in case a customer’s vehicle is damaged on your business premises. This coverage is essential if your business is involved in the service, repair or storage of other people’s cars.

This policy generally takes into account damage due to theft, vandalism, fire, and collision. Garagekeepers insurance offers the following types of coverage:

Legal Liability: This pertains to a mechanic’s neglect. It offers coverage in case your mechanic damages the car or you forget to lock the vehicle’s door and it gets vandalized.

Direct Primary: This implies the protection of your customer’s vehicle due to the mechanic’s negligence, theft not caused by negligence, or vehicle damage due to extreme weather.

Direct Excess: This is similar to direct primary coverage. It covers the damages to a customer’s vehicle, no matter whose fault it was. The only difference is that it is paid only after the amount receivable as per the owner’s policy if the insured cannot be legally held responsible.

Although garagekeepers insurance can prove to be quite beneficial, it does not offer across-the-board protection from all sorts of risks. Here are some of the damages it does not offer compensation for:

• Faulty workmanship
• Any contractual obligation that a franchise auto dealer has signed
• Loss of CDs, DVDs, or any stereo equipment that is not permanently installed
• Loss of telephones, scanners or mobile radios that are not permanently fixed
• Radar detection equipment
• A customer’s personal items inside the car
• Defective parts
  

3. Commercial General Liability Insurance

Commercial general liability insurance offers protection to a franchise auto dealer against personal injury, bodily injury, and property damage due to business operations or products on the business premises.

This kind of insurance policy usually has different levels of coverage. The two main categories of commercial general liability insurance include:

Claims-Made Policy

This considers an insurance policy that offers compensation when a claim is made against the dealership, regardless of when the event in question occurred. Franchise auto dealers usually opt for this policy if there is likely to be a time lag between the event and the filing of a claim by the other party. However, the coverage only extends to claims made while the policy is active.

Occurrence Policy

An occurrence policy typically includes claims filed for injuries sustained as long as the insurance policy is in force. An insured auto dealership is entitled to compensation for damages occurred when the policy was in place, even if many years have passed since the insurance contract was valid. An occurrence policy serves as an alternate to a claims-made one, which is only valid when the claim is made while the contract is active.

There may be some special considerations associated with a commercial general liability insurance policy as well. An auto dealership may need to name other persons or organizations as “additional insured” as per a commercial general liability insurance policy. This is a common practice when it signs a contract with another entity.

4. Physical Damage "Open Lot" Coverage

A This is commonly referred to as Dealers’ Open Lot (DOL) or Dealers’ Physical Damage coverage. It takes into account physical damage coverage for all vehicles owned by a franchise auto dealer, such as cars, trucks, jet skis, and even recreational vehicles in the inventory for resale.

A DOL policy provides coverage for new, used, demonstrators, or service vehicles. It typically offers:

Collision coverage: Offers compensation for damage due to an auto’s collision with another object or by being overturned.

Coverage for losses other than collision: 

Comprehensive coverage: Offers payments for any loss not particularly excluded and not covered under collision.

Specified losses: Compensates for certain incidents that are recognized in the contract, such as fire, windstorm, lighting, explosion, hail, earthquake, flood, theft, and vandalism.

Fire and theft coverage: Takes into account vehicles that are damaged or lost due to fire, explosion, lightning or theft.

False pretenses coverage: This aspect is usually not covered under Dealers’ Open Lot policies, but it can be added by endorsement. If you have this coverage, it can shield you against certain kinds of trickery. For instance, it can offer compensation if someone sells you a vehicle they do not actually own.

While a Dealers’ Open Lot policy is quite comprehensive for franchise auto dealers, you need to keep certain limitations in mind. The policy typically contains:



• The overall insurance limit
• A per-vehicle limit, which is the maximum amount the insurance provider would pay for each damaged vehicle
• Different limits for losses of vehicles in transit and those parked at other locations.