How to insure a customer’s vehicle – properly

In the classic motor trade sector, we get asked about this all the time, particularly when the vehicle in question is worth millions of pounds. A car may stay at a classic car garage for weeks or even months while it’s being worked on; something which almost never happens in the mainstream motor trade.

When you have someone else’s vehicle in your custody, you have a common-law duty to take reasonable care of it. If something goes wrong and it can be proved that you have failed in this duty of care, then your business may be exposed to the loss, and you can be held legally liable for any damage suffered as a result. Our clients often tell us: “But my customer has insured the car – why do I need to?”

Here’s why.

The customer’s insurance will be in the name of that individual and in most cases will cover the vehicle wherever it is used or taken for work. If an insured event happens to the vehicle, their insurer will pay them. All motor insurance policies will include a condition which then allows the insurer to look at the possibility of pursuing anyone they consider may have behaved negligently and caused the damage or loss of the original claim. This process is generally referred to as subrogation and the owner of the vehicle has no control over this process at all. The customer’s policy therefore protects them only.

It's possible for the owner to approach their own insurer and request that they agree to remove their right to seek recovery, waiving the above subrogation process. Most insurers will agree to a variation of this, but not where it can be proved that the motor trader has behaved negligently – which in reality is the only time when they can successfully recover the amount paid to their own customer. If the motor trader is found not to have behaved negligently, then no recovery can be made.

Where waivers are provided, they need to be reviewed carefully, as otherwise they may leave the motor trader exposed to the risk of being proved to have acted negligently.

So, while the motor trader does not have a legal obligation to insure their customers’ vehicles, we strongly recommend you do, as regardless of the vehicle’s value, not insuring at all means that as a business you become completely liable for any damage, whether or not you have behaved negligently in the first place.  

In short, we recommend insuring your customers’ vehicles, even if you have waivers in place with your customers.

This is where working with a specialist insurance broker helps. They can identify your exposures correctly and produce a cost-effective solution. They may also correctly review any waivers produced and advise you whether there remains a need to arrange insurance cover for the vehicle.

This is what Howden offers. By adopting a proactive approach, we can identify the risks before they become a claim and aim to ensure that your business is not exposed to what could be a very large and uninsured bill.

We’ve worked hard for our clients for many years to deliver a working solution. Where the motor trader and owner are both insured by Aviva through Howden, the motor trader will not be charged any premium at all to fully insure the vehicle(s) while they remain in their custody.  

For a no-obligation review of your insurance, please call a member of the Classic Motor Trade team on 01252 888 546.