The Problem of Customer Lawsuits: Garage Insurance Series

Customers are the lifeblood of your business – but they are also a risk.

That’s strange to think about, I know.  Customer lawsuits? That’s not what we typically think about when we think of customers.

Without customers, you wouldn’t be sitting where you are now, probably reading this at your desk in your dealership or at home with oil still staining your hands from a long day at work.

But the risk is real.  There are lots of ways that a customer can go from a vital partner that keeps you in business to a massive threat that takes money away from you and your dealership or auto body shop.

The primary way that this happens is through lawsuits.  We will mostly get into the kind of lawsuits that auto businesses experience from their own customers, how you can minimize the risk, and how your garage insurance policy protects you.

So buckle up, hold onto your hat, and grab your favorite beverage.

Or better yet, grab a mop.  Because the first risk is slippery.

Slips, Falls, and On Site Accidents Lawsuits

This is probably the first thing you think of when you think about a customer or potential customer suing you.

I mentioned Slip & Fall injuries in my blog on The 5 Most Common Claims in Garage Insurance, and it really is a common occurrence.

Over a million people go to the emergency room every year for slips and falls, and you can bet your business that not all of them occur at home.

In fact, if you search for “slips and fall lawsuit” there are TONS of lawyer websites educating people on how to start legal proceedings against businesses.

These sites walk a  person through if they can sue or not, how they can sue, and even WHOM they can sue.

Nolo.com says:

If you slip because of some structural issue with the building, your claim would likely be against the landlord/property owner. An example of a structural issue would be a water leak. If water is leaking from the ceiling onto the floor, that is usually the landlord’s fault.

But if you slip because of something that the store owner/tenant did (or did not do), then your claim would be against the store owner. An example of a claim against a store owner would be slipping on a floor that the store owner’s employee had just waxed, and there were no safety cones or warning signs to alert customers of the danger.

Yikes.

Make sure you take all necessary precautions to avoid slippery areas in your showrooms or shops, and avoid uneven surfaces or dangerous piles of supplies in areas that customers frequent.

But, if something does happen, your business will be protected by the General Liability part of your Garage Insurance policy.

So we’ve got you covered.

Faulty Work Lawsuits

This is one of those risks where some business owners laugh it off and others are absolutely terrified.  It seems crazy, but it happens more than you’d think.

So what is the situation?

Your body shop or service center makes repairs on a vehicle.  The customer either has further problems with it or, worst case scenario, is involved in an accident.

In both cases, they blame you or your workers for the problems or accident, saying faulty work caused the damage.

In legal terminology this is all about “negligence,” or whether or not you or your employees didn’t perform the work correctly.

If a court determines that you or your staff didn’t perform the work properly and were negligent, then you will have to pay damages.

While this typically is just a small claims court situation, it can balloon into something huge if the faulty work causes an accident.  You could be on the hook for ALL of the damages in the entire wreck, including anyone else involved or hit.

Of course, I don’t have to tell you how to avoid this.  Everyone knows that a person’s good name is the most valuable marketing tool you will ever have.  We all want to be known for doing great work for a reasonable price.

And, if something does happen, your General Liability coverage will save you again under something called Products-Completed Operations Exposure.

One of the great things about Liability coverage is that it covers court fees even if you aren’t found guilty.  Frivolous lawsuits can cost you just as much in court costs as real ones.

Predatory Selling, Lending, or Fraud Lawsuits

I sincerely hope that you read this part and think, “What in the world?  Who would do that?”

But the fact of the matter is that some customers, rightly or wrongly, believe that some dealers or body shops are dishonest and charge them more than is fair.  And they sue in retaliation.

Not only that, but other selling techniques or lending practices have also drawn lawsuits.  Almost all of these involve customers feeling they were lied to or taken advantage of.

And sometimes, they win these cases.

Earlier this year two car dealers in New Jersey found complaints by customers go all the way up to the state, leading to the State Attorney General to sue them.

The Courier Post says:

[T]he dealerships preyed on “financially vulnerable” customers, selling them over-priced cars with high miles, pressuring them into in-house loans with severe penalties.

 “Then (when the buyer defaulted), the dealerships reclaimed and resold the vehicles over and over again to different consumers in a practice known as churning,” he explained.

These lawsuits don’t even have to be that black and white.  One law blog says that fraud is a reason to sue mechanics, claiming that, “[I]f you discover your mechanic has charged you for service or parts he didn’t provide you may be able to sue for damages.”

While instances like this may be a big misunderstanding (as customers often don’t know what parts are what and wouldn’t know if they were used), they can still result in lawsuits.

And just like our example above for faulty work, a fraud claim can go to court even if it is complete bull- I mean frivolous.

The good news is that your General Liability coverage will take care of you here, too.

Even if the claims against you are absolutely bogus, the GL part of your Garage Insurance policy will pay court fees and any damages that result.

Don’t make customers turn on you.

Obviously, a lot of these incidents are caused by slack effort, lazy work, or downright deceitfulness.

Being as professional as possible, keeping a clean work space, and keeping records of all work and payments will go a long way to avoiding these lawsuits.

You want customers raving about you – in a good way!  Make them fans, not enemies, to keep your business thriving.

And if something does happen, make sure your coverage is in tip top shape to keep your dealership or body shop trucking along.

Is your Garage Insurance ready for a lawsuit?

If you haven’t looked at your policy in a while, or you need a new agent, it’s time to talk to someone here at Alliance Insurance.

We have Garage Insurance Experts who help people just like you have world class protection, no matter how big or small your business may be.

Let’s set up a conversation to make sure you’ve got what it takes in case one of your customers decides to take you to court.

Click the link below, and let’s take some action.