Did You Know? Motor Trade Insurance Part Two
Neil Follett, Director at automotive insurance broker Gallagher, advises on common garage motor trade policy issues in Part 2 of their ‘Did You Know?’ series.
As an insurance broker with specialist expertise in the automotive sector, I’m pleased to share with you the next instalment of our “Did you know” series. In this article we’ll look at some issues that I regularly come across when meeting IGA members for the first time.
Many garages offer courtesy cars for their customers, however not all of those are correctly insured. Whilst carrying out reviews for new clients we have found various issues, the most serious of which is when the garage is told by a broker they do not need courtesy car cover as they ask the customer to insure the vehicle.
This can cause a problem as if the customer doesn’t insure the vehicle correctly or simply isn’t covered to drive the courtesy vehicle, in the event of an accident liability will revert to the garage, who is the legal owner, and whose responsibility it is to insure the vehicle. If they have not advised insurers they require the “loan and hire” extension they may not be insured.
There are two main ways to cover courtesy vehicles:
1. Full courtesy car cover, basically this means if you have a customer’s vehicle in for service or repair, you can lend them one of your vehicles (please check your policy or ask us to, as some insurers, but not all will specify which cars/vans can be used as courtesy vehicles) and that customer is then covered on your policy, subject to the relevant excess dependant on their age and the vehicle in question.
2. Contingent cover – many more garages are opting for this as they do not want to carry the risk of a customer driving on their Motor Trade policy. What contingent cover means is that the garage will ask/advise the customer to insure the courtesy car, preferably getting confirmation of this by way of a cover note, then in the event of an accident the first point of call is the customer’s insurers. If the customer’s insurance fails the garage owner will still have insurance.
Very recently, I visited a garage asking for assistance as they were not happy with their current broker or insurance. On reviewing the cover, it transpired that the broker had placed them with various markets splitting up the Road Risks with one insurer, the Material Damage with another and the Liabilities with a third insurer. Only the Road Risks insurance was placed on a specific motor trade wording.
Under the Liability policy it was unclear if “Defective Workmanship” is covered under the Public Liability section, and unfortunately for the garage the holding broker was not able to confirm.
This cover can be imperative for a service and repair garage - if a customer drives away following work being done and their brakes fail causing an accident due to an error on the garages part, the garage will want to be covered. There could be damage to the vehicle, possibly injuries to the customer or third parties and undoubtedly legal costs, the total of which could be very costly.
Defective Workmanship cover can be imperative for a garage business, and by using a non-specialist insurer or opting for a generic Public Liability policy not designed for the motor trade they could be putting the whole business at risk.
Please ensure you read and understand any conditions, warranties, endorsements and subjectivities applied to your policy. We have been to visit many garages to review their insurances and find that various conditions, warranties, etc. have been applied and they are not aware or have not read them. I have highlighted some of the common oversights below:
This comes up time and time again, and I am not currently aware of any insurers that do not apply this condition on their policy, and it is a “condition precedent to liability” which means that the condition must be complied with prior to insurers accepting any liability.
The condition states that the electrical system should be inspected by a member of the National Inspection Council for Electrical Contracting, Electrical Contractors Association, Electrical Contractors Association of Scotland or the National Association of Professional Inspectors and Testers. It must be inspected at intervals not less than as recommended in BS7671 (usually 5 years). Any work required must be carried out in a timescale specified by the insurers.
Has your electrical system been inspected within the last 5 years?
Portable Hand Tools
Sometimes insurers will warrant that tool boxes are secured to the fabric of the building. If this warranty has been applied and you are not complying with it, in the event of a claim you may have no cover.
Has this warranty been applied to your policy?
Vehicle Keys Warranty
This warranty usually requires vehicle keys to be kept in a key safe out of business hours. If you leave keys in vehicles or in a desk drawer and insurers have applied this warranty, then if a vehicle is stolen and you are not complying with this warranty you may not be insured.
This is just a few of the warranties, conditions and endorsements insurers may apply there are many more and far too many to list. Have you checked these, or has your insurance broker pointed them out to you to ensure you are compliant?
Would you like to talk?
If you would like Gallagher to review your cover and discuss conditions applied to your policy please do not hesitate to contact Neil Follett. Call 07584 582760 or email . .
Gallagher is pleased to provide MOT Loss of Licence cover as standard for any RMI member with an authorised MOT centre taking out an Allianz insurance package, available to RMI members when you purchase an Allianz Motor Trade Policy from Gallagher via the RMI. .
The opinions and views expressed in the above articles are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information. Arthur J. Gallagher Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55, Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909.