If you run your dealership like I run my household, you have plenty of insurance but have no idea  what is covered, what is not covered, and how much coverage you have until a loss arises. A recent case  I came across involved a dealership that had two different policies in which the insurer agreed to provide defenses against suits for damages. The dealership thought the policy with the greater amount of coverage applied to a consumer’s suit, but the insurance company, and the court, thought  otherwise.

Wolfe Automotive Group, LLC, was the insured under two policies with Universal Underwriters Insurance Company. One policy provided up to $500,000 for indemnity from and defense  against suits for damages arising from Wolfe’s  “wrongful repossession” of an automobile and was linked to a separate $25 million umbrella policy. The other policy provided up to $25,000 for costs in defending against suits arising from the sale of an  automobile.

Wolfe sold a car to Tyrrell and Liane Jackson and later repossessed and sold the car for nonpayment. Prior to the post-repossession sale of the car, Wolfe sent the Jacksons a notice informing them that they could request an accounting for a $25 charge. After the sale, Wolfe sent the Jacksons a notice charging them attorneys’ fees. Wolfe sued the Jacksons for the deficiency balance, and the Jacksons counterclaimed, alleging that Wolfe’s pre- and post-sale notices  violated the Uniform Commercial Code and the Missouri Motor Vehicle Time Sales Act. Wolfe tendered  the  Jacksons’  counterclaims  to  Universal for defense and indemnity under the larger  policy. Universal refused, claiming that the Jacksons’ claims did not constitute claims for “wrongful repossession.” Wolfe sued, and Universal moved for summary judgment. The trial court granted the motion. The  court agreed with the insurer that the larger insurance policy only applied to repossessions that were wrongful, not to wrongful debt collection  practices – including noncompliant pre- and post-sale notices   – by the dealer after  repossession.

The U.S. Court of Appeals for the Eighth Circuit affirmed. The appellate court found that the procedures required by state law for disposition of repossessed property are not part of the repossession process because sale of repossessed property is a separate event that takes place after the repossession is complete.

This case should serve to remind you why it is important to understand, before a loss occurs, the insurance you have in place and whether it covers the myriad of losses that you could sustain.  Proper insurance can mean the difference between   remaining in business and being forced to close up  shop.

Wolfe Automotive Group, LLC v. Universal Underwriters Insurance Company, 2015 U.S. App. LEXIS 21649 (8th Cir. (W.D. Mo.) December 15,  2015).