Liability Insurance
The Office of Fair Trading (OFT) says that by far the greatest number of consumer complaints – over 68,000 in 2008 – relate to second hand cars. What happens when things do “go wrong”?
A motor trader may be completely innocent of the charge laid against him or his business, but a disgruntled
customer can still take him to court. The “burden of proof” in such cases relies heavily on the customer bringing
the complaint but the legal defence costs for the trader can be huge, even if the case is not proven. And with the
growth of “no win, no fee” legal services now available, the public is being encouraged to seek compensation for
almost any mistake, whether innocent or intended.
- Public Liability insurance not compulsory for motor traders, is a necessity and is not expensive. If a motor trader operates from premises or invites customers into his workshop or garage, he owes them a
duty of care – his liability or obligation - to them to provide a safe environment.
It doesn’t take much imagination to see a situation where a visiting customer trips over a jack, breaks a limb and
then sues. Without public liability insurance, the trader and his business could suffer.
When a motor trader undertakes work for a customer, he again has an obligation to carry out that work with a
duty of care. For example, if he fits a new handbrake and that handbrake fails and causes damage or injury to
the customer or another third party, he could be liable. As in all negligence cases, the defendant is innocent until
proven guilty. The customer must prove that the motor trader was negligent but the cost of the motor trader’s
legal defence could be enormous. Servicing and Defective Workmanship liability insurance, which is normally
included in a Public Liability policy, would cover the motor trader’s defence costs and any damages or costs
awarded if the case is proven. Liability insurance does not cover the cost of any fines imposed in the case, eg
for breaches in health and safety.
- Product Liability insurance is another benefit of a Liability policy. If a mechanic fitted a faulty part to a vehicle which is proved to have caused damage or injury to a third party, he or his business could be liable. Despite the fact that the part was at fault, the contract of sale was between the trader and his customer. The customer can therefore sue the mechanic – or his employer’s business - for compensation for injury or damage caused by the faulty part. The trader’s insurers would then sue the part manufacturer to recover any losses, if the case is proven.
- Employer’s Liability insurance is a compulsory legal requirement if you employ someone, even if it’s only a part-timer that paid a few pounds to wash the cars. The policy ensures that your employees are protected from death, injury or disease arising out of and in the course of their employment.