Plaintiffs’ attorneys increasingly are challenging statutes of limitations that otherwise would limit legal actions against dealerships.
Now, more than ever, dealers should keep all former fixed-operation insurance policies, along with documents for liability, property, comprehensive and other forms of coverage.
Statutes of limitations are not absolute. Whether they call it “equitable tolling” or the “discovery rule,” many plaintiffs’ attorneys essentially are asking judges to disregard the statutes designed to prevent consideration of stale matters.
Getting those time limits waived aims to allow presentation of older claims if alleged wrongdoing by the defendant or other extraordinary circumstances prevented a plaintiff from knowing about the claim earlier.
They argue that the statute of limitations should not commence until the plaintiff discovered or should have discovered that he or she has a claim.
The possibility of becoming a defendant in a case involving a transaction that is many years old is an important reason for keeping all former insurance policies.
If the court rules that the statute of limitations did not begin to run until the plaintiff learned of the claim, the dealer will be forced to defend the case that arose long ago. This can become serious when it is a class action that may include thousands of customer claims for five years, 10 years and beyond.
Under most garage policies, the insurance company owes the dealer a duty to defend and perhaps indemnify against a covered claim that arose during its coverage period.
Even though the claim is asserted years later, the dealer can request coverage for defense and indemnification. That request, if made expeditiously after knowledge of the existence of the new legal action, probably will implicate the coverage of the policy in effect when the claim arose.
If it is a class action for claims that span a number of years, each policy during each year could be involved.
If you still don’t have the policy documentation for the period when you sold the car involved or performed the questioned service on a vehicle, you may not be in a position to claim coverage.
As an initial matter, you must know who the insurance company was during a period covered by the lawsuit and your policy information so that you can make a claim.
If the claim is denied because the insurance company argues it is stale or for some other reason, then you will need your policy so you can consult with your attorney to determine whether the insurance company is acting properly within its scope of duties.
So what does this mean to you as a dealer?
· Get a complete insurance policy every time. When you sign up for a new policy, or when you renew, you generally won’t receive the full new policy for months. Make sure that you follow up and get your policy.
· Keep your insurance policies. Have a digital copy of each policy made and save the hard copy where you keep your important documents. Save the digital copy where you back up your computer information.
· When you receive a claim, decide what insurance may apply. Don’t just assume if you get a claim today that your present insurance carrier is the one to put on notice.
If the claim arose from a matter several years ago, the insurance company at that time probably is the one whose policy potentially is affected. When you get a claim, put the appropriate insurer on notice.
· Err on the side of caution. There is no downside to submitting a claim to a former carrier that may end up not being liable for coverage.
· If you fail to make a claim that you should have made, you may face an insurance company saying it was prejudiced by your failure to promptly report a claim, possibly justifying a refusal to provide coverage. If you are unsure, put all potentially liable prior insurance carriers on notice for all coverage periods alleged in the lawsuit.
Michael Charapp is a lawyer who represents auto dealers. He is at (703) 564-0220 or [email protected]
