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11.4 Auto Dealers Coverage Form

Historically, the Garage Coverage Form was used to insure businesses that sell, service, repair, park, or store customers’ autos. However, auto dealerships face liability exposures that may differ from those of repair shops and other automotive service businesses that do not sell vehicles. To address these dealership-specific risks, the Auto Dealers Coverage Form was developed. This form provides auto liability coverage similar to the coverage included in the Garage Coverage Form. It also offers broader general liability protection for the dealership’s business operations and errors and omissions coverage for certain professional mistakes made by the dealer.

The Auto Dealers Coverage Form is organized into five sections, each addressing a different part of the policy:

  • Section I – Covered Autos Coverages: Provides liability and physical damage coverage for covered autos.
  • Section II – General Liability Coverages: Covers certain bodily injury, property damage, and personal and advertising injury exposures arising from dealership operations.
  • Section III – Acts, Errors, or Omissions Liability Coverages: Provides protection for certain mistakes, errors, or omissions committed during dealership activities.
  • Section IV – Conditions: Explains the rules, duties, and requirements that apply to the policy.
  • Section V – Definitions: Defines important terms used throughout the coverage form.

Section I – Covered Autos Coverages​

Section I – Covered Autos Coverages includes most of the auto-related coverages previously provided under the Garage Coverage Form. Covered autos are identified using the same numerical symbols, 21 through 31, which indicate the categories of autos insured by the policy. Under the Garage Coverage Form, auto liability, Garagekeepers, and physical damage coverages are addressed in separate sections. The Auto Dealers Coverage Form simplifies this structure by combining these coverages into a single section.

Section II – General Liability Coverages​

Section II – General Liability Coverages provides protection that is generally similar to the coverage available under a Commercial General Liability policy. This section includes coverage for bodily injury and property damage liability, fire legal liability, personal and advertising injury liability, and medical payments. Medical payments coverage applies to certain bodily injuries sustained by others as a result of the auto dealer’s operations conducted on the insured premises. This coverage may pay eligible medical expenses regardless of whether the dealer is legally liable for the injury.

Section II – General Liability Coverages contains several exclusions commonly found in general liability policies. One important exclusion applies to defective products. Coverage does not apply to property damage to the insured’s own product when the damage results from a defect in the product or any of its component parts. The section also excludes losses arising from products that have been withdrawn or recalled from the market because of a known or suspected defect, deficiency, or safety concern.

Section II – General Liability Coverages is subject to limits of insurance that are similar to those found in a Commercial General Liability policy. These limits establish the maximum amount the insurer will pay for covered claims and losses under the applicable general liability coverages.

Section III – Acts, Errors, or Omissions Liability Coverages​

Certain professionals are expected to meet a higher standard of care when providing services to customers. When a professional fails to meet that standard, the customer may suffer harm even though no bodily injury, property damage, personal injury, or advertising injury has occurred. Because these traditional liability coverages may not apply, the customer’s loss may instead involve another type of harm, such as financial loss resulting from the professional’s act, error, or omission.

Section III – Acts, Errors, or Omissions Liability Coverages provides coverage for damages the insured becomes legally obligated to pay because of a covered act, error, or omission arising from the insured’s auto dealer operations. Covered negligent acts, errors, or omissions may include:

  • Failing to comply with local, state, or federal laws requiring the disclosure of consumer credit or lease terms, including requirements under laws such as the Truth in Lending Act and the Consumer Leasing Act
  • Failing to comply with laws requiring the accurate disclosure of odometer mileage in connection with the sale or lease of an auto
  • Committing an error while acting as a licensed insurance agent or broker in the offering, placement, or maintenance of auto physical damage, auto loan, credit life, or credit disability insurance sold in connection with an auto sale or lease
  • Creating or failing to identify a defect in title associated with the sale or lease of an auto

This coverage is intended to address certain financial losses that may result from dealership-related professional mistakes, even when no bodily injury or property damage has occurred.

For Section III – Acts, Errors, or Omissions Liability Coverages to apply, the covered act, error, or omission must occur within the coverage territory and during the policy period. This section also includes the insurer’s duty to defend the insured against covered claims or suits. In addition, supplementary payments, such as certain defense-related expenses, are paid in addition to the applicable limits of liability.