Increasingly, AGRM (now Citygate Network) member missions are seeing the financial opportunity of used car sales operations. These operations benefit both the donor and the mission. The donor obtains a tax-deductible receipt for donating a working automobile to a charitable organization, and the mission receives a vehicle which provides a source of revenue when it is sold.
Risks To Be Considered
However, the typical insurance policy excludes coverage for used car operations, both for the vehicle itself, as well as the liability arising from the driving and selling of the vehicle. Whether your mission resells one car or hundreds, the liability arising from just one accident may negate any value of the entire used car operation. The following component parts should be obtained to address the inherent risks of dealing with used cars under your mission liability insurance:
Garage Liability. This unique form of liability is meant to address a whole host of exposures involving the bodily injury and property damage that others may incur as a result of your mission obtaining used cars, providing some degree of service on them, and then selling them. There is an implied issue of the mechanical soundness of the used car, so it would be advisable that purchasers sign a receipt in which they acknowledge they are buying the car “as is”.
Dealer Plate Liability. This is the liability that arises from the used cars being driven, either by mission personnel or potential purchasers of the car. The convenience of dealer plates is that the liability for road use is provided even though the vehicle has not been registered by the Department of Motor Vehicles.
Driver Medical Payments. It is in the mission’s best interest to provide medical payments coverage for drivers and passengers in the mission-owned vehicles,
for in the absence of such coverage, the injured party may look to the mission as negligent in an effort to have medical bills covered. Medical payments coverage responds regardless of fault.
Uninsured/Underinsured Motorist Liability Protection. Sometimes the other party causing the accident (not the mission’s staff) does not carry any insurance or enough insurance. This coverage pays for your injuries and those of your passengers in this situation.
Garage Keepers Liability (coverage for vehicles of others being stored and/ or repaired). Although few missions have a repair shop exposure, if a purchased vehicle is brought back for a repair, then there may be sufficient value to justify providing coverage on those non-owned autos of which the mission is in control.
Automobile Inventory Protection. You may have a large inventory of vehicles for sale. Exposures to loss include fire, theft, vandalism, falling objects, and collision. A Dealers Lot policy provides coverage against these perils.
As you consider accepting donations of automobiles, be sure you have considered all the risks inherent in such an operation. If you need help navigating the decision process, do not hesitate to give us a call.
Brian is the official insurance consultant for AGRM. The Merriam Agency offers property, casualty, auto, directors and officers, and workers’ compensation coverages tailored to the needs of AGRM members.
Reprinted from Rescue Magazine March/April 2014.