It only takes one incident today to subject a collision repairer to a great deal of potential liability. With vehicle sophistication today, the potential liabilities are even greater.
Most businesses face potential liabilities. They can take on many forms, including slander/libel, poor workmanship, component failure, etc.
The collision repair industry is rife with potential liabilities. Particularly when it comes to following OEM repair recommendations, the line has been drawn, and if one goes outside of those lines, they may find themselves in a bad situation.
Insurance
The first step to protecting yourself is to have ample insurance to cover all potential issues that may arise. Such coverage may include:
- General liability insurance for your auto garage (protects against on-premise injuries; workmanship or faulty parts being used for repairs)
- Garage property insurance (building; tools; business personal property)
- Garagekeepers insurance
(stolen customer vehicles; vandalized customer vehicles; natural disaster damage to customer vehicles)
There are many other available and recommended coverages too such as:
- General liability insurance
- Professional liability insurance
- Workers’ compensation
insurance - Employment practices liability insurance
- Business interruption
insurance - Commercial property
insurance (water damage
insurance; fire insurance) - Commercial automotive
insurance - Umbrella coverage
I called a commercial lines broker and asked two questions:
- If a shop were to deviate from OEM repair procedures and, as a result, vehicle occupants were hurt or killed, would the repairer’s insurer provide coverage for defense and payments for the damages? The answer was: “If the shop knowingly deviated from the manufacturer’s repair recommendations, then it is probable the insurer likely would NOT cover the loss.”
- I then asked if there were any insurers that would provide liability coverage to a shop that did not regularly adhere to OEM repair procedures. He said there were no carriers he knew of that currently had such a product. He did state that, with substantial research, they could likely find a carrier who would offer a special policy, but the cost of such a policy would be substantial and even “cost prohibitive.”
Limiting Liability
The second step is to recognize and limit exposure to liability both internally and externally.
Internal liabilities (wet/slippery floors, electrical insufficient and/or outdated fire extinguishers, etc.) are fairly easy to identify and correct. You can get a free inspection from your liability insurance carrier, insurance agent/broker, OSHA or local fire department to have these issues brought to your attention.
External liabilities are those that others outside your organization may expose you to. For example:
- Resulting injuries of the driver and/or their occupants due to a repairer’s poor workmanship or failure to follow OEM procedures
- The loss/voiding of remaining factory warrantees due to the failure by the repairer to follow OEM procedures
- A lawsuit by the consumer against the repairer for their failure to use due care and/or failure to disclose known issues relative to the proper repair of their vehicle
For the sake of protecting themselves, it’s important for repairers to understand who it is they work for and their duties under the statutes, regulations and mandates set forth by the state(s) in which they conduct business. Furthermore, it’s important that they understand that they are responsible for the decisions they make in repairing a vehicle, regardless of what others might suggest.
Should a repairer feel compelled by their customer or insurer to repair the vehicle in way different than the OE states, they can:
- A. Provide the customer their professional opinion and provide documentation to support their position
- B. If the customer decides otherwise, the repairer may choose to decline to provide their services and pass on the repair
- C. Provide them the opportunity to pay the difference between the third-party’s short-pay to enable the repair to be done properly
- D. Review the matter with their corporate legal counsel to determine if a release of liability, liability waiver or hold harmless agreement could be employed
NOTE: While this may protect a repairer from potential liabilities, any and all such legal documents can be challenged and may or may not serve the repairer and their company’s needs. Furthermore, such agreements will not protect a shop and their reputation from a poorly performed repair.
Summary
Repairers have many choices on how to operate their business. The first thing to understand is what those choices are and what effect they may have on their business. This is where investing in a reputable industry consultant has distinct benefits. Consultants should not cost you money…they should coach you on how to earn profits and retain them.
NOTE: This information is not intended to be considered as legal advice and repairers should seek legal counsel on such issues to determine the proper handling within their specific market area(s).
