There are so many directions in which to go when the subject is inventory; my expertise lays in the area of insurance.

To lay a foundation, we’ll begin with the basics that we all know:

• Your money invested in inventory is immediately at risk once you receive the vehicles.
• Those risks include: fire, theft, vandalism, collision, hail, windstorm, flood, etc.
• If you have a lienholder, insurance coverage is required.
• If you do not provide that coverage, the lienholder will protect themselves only with single-interest insurance. They provide protection for themselves and you pay for it.

Dealer insurance non-weather physical damage claims seem to go in cycles. The last ones with the most impact were the thefts of catalytic converters.  Those have now dropped off considerably.  A primary factor in that reduction is ‘you’ the dealer.

My experience has been that our dealers avoid insurance losses as much as possible and once they become aware of the prevalence of a particular type of loss, additional attention is given to preventing the loss. The coverage is important, but every claim is a cost to the insured, whether it is the deductibles, the time required to settle a claim, increase in premiums or just general disruption of the normal day-to-day activities.

Our goal at Mullen Agency includes working toward a decrease in claims while still providing proper coverage at a competitive rate. And we now need DEALER SUPPORT in a specific area:  vehicle thefts and/or damage while in-transit and the care, custody and control of transporters.

If you are planning to rent a commercial office or dealer location, you need insurance to protect your business and your assets.  Most leases require such insurance before allowing the rental.

WHY:  Your landlord’s commercial insurance policy does not protect YOU or your BUSINESS.  If you are sued or held liable for any action in connection with the operation of YOUR BUSINESS, the landlord’s insurance will not respond.

Landlords are required to maintain the property and keep it safe for you, your employees, and your customers.  They are NOT responsible for your business operations. 

EXAMPLE: A customer’s hand, or that of his child, is accidentally closed in a car door, your landlord’s insurance will not respond, and you could be out of business due to that loss.

To protect you and your landlord, the lessor typically requires that they be included on your insurance as an additional named insured.  Listing the landlord does not take away from your protection, but rather protects him IF he is sued along with you as a result of your business operations. 

This is an inexpensive additional protection for both landlord and tenant. 

EXAMPLE: A customer sues both you and your landlord for a liability loss directly resulting from your business operations.  If your landlord is listed as additional insured, he is exposed to no risk as your carrier will be responding to the claim.

If your landlord is not listed, he must submit the claim to his carrier as well.  Though they WILL DENY coverage, the landlord incurs any damages as a result of claim filing, legal costs if any, time involved in dealing with an unnecessary event.

IN SHORT: AS A COMMERCIAL TENANT, YOU SHOULD PROTECT YOURSELF AND YOUR LANDLORD VIA INSURING YOUR COMMERCIAL OPERATION.  YOU SHOULD LIST YOUR LANDLORD AS AN ADDITIONAL INSURED AND YOURSELF AS AN INDIVIDUAL INSURED, IN ADDITION TO NAMING YOUR BUSINESS AS PRIMARY INSURED.

So many of our dealer customers also have rental income properties, and that trend is on the increase across the industry.  One negative result is dealer-owners getting hit for claims for which they are not or should not be responsible.

The law does not require your tenants to purchase their own insurance. Nonetheless, given its benefits to both landlords and tenants, you, as landlord have the right to require that purchase prior to leasing a property.

The ‘WHY’ is important: A lease requiring your tenant to carry insurance benefits landlords by reducing the landlord’s liability and preventing them from paying for damages outside of their control. The landlord’s liability policy likely won’t cover a tenant’s property if damaged, or someone is injured due to the tenant’s carelessness and/or operation of their business.

However, that does not prevent the injured party from suing everyone in sight.  To increase the landlord’s ability to buy competitively priced insurance, it is typically necessary to require their tenants to carry liability insurance, and to also list the property owner as an additional insured.  This additional protection often has a premium of $50 or less annually and prevents a lot of legal and hassle expense in the event of a claim.

An example of another pitfall of an uninsured tenant is:  A fire or other accident (through no fault of the tenant) causes damage to the tenant’s uninsured personal property, and they have no other recourse to cover the loss of the property or loss of any income.  The first instinct is to come after the building owner whose insurance which may or may pay.  Regardless the cost of attorneys and time are unnecessary expenses if your tenant invests in a policy to cover their business and their business property.  When you require insurance, your tenant will have the option of buying coverage for his personal property, along with many other protections available.

BOTTOM LINE ON REQUIRING YOUR TENANT TO CARRY INSURANCE

TO PROTECT YOUR BUSINESS AND YOUR TENANT’S BUSINESS, REQUIRE YOUR TENANTS TO PROVIDE PROOF OF INSURANCE, AND A CERTIFICATE LISTING YOU AS LANDLORD AND ADDITIONAL INSURED.

The two policy forms most used in Texas are the Auto Dealers Coverage Form and Garage Coverage Form.  The data included here is based on the Auto Dealers Coverage Form and is not intended to provide all the nuances and/or explanations of every coverage and/or exclusion.

For the purposes of this narrative, we will hit only on the ‘high spots’ and those I believe to be of most interest to the typical Independent Auto Dealer.

The first few pages of every insurance policy are called the Declaration Pages.  These pages will include:

ITEM ONE

• The name of the company providing the protection

• The name of your agent

• The named insured. Check this area carefully to be certain your business name and address are correctly shown.   If you are to be named individually, your name should be included here.  Be sure your business form is properly indicated as sole proprietorship, corporation, partnership, limited liability company or whatever is the proper designation.

• The next completed of interest is the premium. Note there is also a section to state whether the policy may be audited and, if so, on what terms.  Most liability policies are subject to annual audit, but more often not, garage policies are NOT actually audited.    You should check this closely to avoid any ‘gotchas’.  Garage premiums are based on, among other things, who works there and what they do.  If a policy is audited, the insurance company will require proof of employee changes, etc.  For instance, if the policy was written with two owners only, but the audit reveals a lot person, a mechanic, someone with a furnished auto, contract drivers, whatever the audited real history is, there will be a premium adjustment made.   The reasoning is: Audited policies provide coverage based on the real circumstances regardless of interim company reporting.  That is rarely true with non-audited garage liability policies, i.e. coverage is provided only as originally presented and subject to whatever endorsements the insured may have requested during policy term.

ITEM TWO

• The next pertinent section lists the various coverages available. If there is not a covered auto symbol, a limit and/or a premium shown for a particular coverage, there is no protection provided unless the word ‘included’ is shown in the premium area.

• Auto Symbols are important. The ones you are most likely to see next to your covered auto limits are:
  1. Symbol 21 — Any auto. This is the broadest auto liability available under a garage policy.
  2. Symbol 22 – Owned autos only and any non-owned trailer attached to an owned vehicle.
  3. Symbol 23 – Private passenger autos only
  4. Symbol 27 – Specifically Scheduled autos, such a service vehicle or designated auto
  5. Symbols 29 – Non-owned autos used in connection with business.

• • The other areas where auto symbols are likely to appear are:
    1. Personal Injury Protection and Un-Underinsured Motorist– Probably 22 or 25 or 26 or 27 – Vehicles subject to non-fault protection requirements.
    2. Auto Medical Payments – Symbol 22 or 27
    3. Garagekeepers -Symbol 30 – Cars you do not owned, but in your care, custody and control for service, repair, storage or safekeeping
    4. Physical Damage – Symbol 31 – Vehicles you own outright or may be financed and/or consignment vehicles held for sale.

• Areas where premium and/or limits may be listed when coverage is provided:
  1. General Liability
  2. Locations and Operations Medical Payments
  3. Dealers Errors & Omissions
  4. Premium For Endorsements

ITEM THREE

• This area lists your location addresses.  Review to be certain they correctly shown and that all locations are listed.  If you have more than three, they may be listed by endorsement

Your exposure to liability and property damage losses is determined by your business plan and goals. Each dealer’s insurance plan should be designed to address the unique vulnerabilities of his/her operation. There are insurance products to extend from the rural mom/pop businesses to multi-location, state-wide ventures.

That is a question we hear every day and one we have heard for thirty-plus years. Yes, there are some insurance and bond coverages that are dictated and required by law for every Texas dealer. But, that is only the beginning of the answer.

Your operation is unique to you. Only you, in discussion with an experienced garage insurance agent, can determine what and how much protection you and your business need to satisfy your insurance philosophy and stay within budget.

If you are like me and so many owners of small to medium sized businesses, you suffer from ‘time-shortage’.  There are not enough hours in the day and too many of the ones we have are spent dealing with whatever today’s crises are.  

Indeed, oftentimes even when I make a real effort to stay in the ‘now’, I find I am addressing a challenge I should have recognized and solved much earlier.  It was a ‘now’ situation a month ago; it is an ‘urgent’ situation today. 

Over my thirty-plus years of working with Texas Independent Auto Dealers, Mullen’s job as a ‘Garage Agent’ has been both enviable and rewarding.  Our Texas Used Car Dealer customers are a pleasure to work with because they are typically:

• Creative
• Optimistic
• Intelligent
• Excellent Judges of character
• Open to New Ideas and possibilities
• Family and Community Oriented
• Curious
• Well-Educated in their industry
• Hard-working
• Focused
• Business Owners with Character and Courage

And those are just a few of the reasons the Texas Independent Auto Dealers industry is Mullen Agency’s insurance niche and focus.