By: Mat Pope and Paul Elliott

When one of our auto dealers lost four vehicles due to damage from rodents and incurred an $80,000 claim against their dealer open lot insurance policy, it was further evidence that dealers are facing a growing problem: protecting their inventory against rodents pre-sale.

Thankfully, our dealer was properly covered for the damage.

Unfortunately, we know other dealers not so fortunate.

According to a report by the Washington Post in February of 2020, this is a growing issue not only for dealers, but also for consumers. Already a half-dozen class action lawsuits have been filed against manufactures due to rodent damage. Even the AAA agrees that this is a challenge that must be addressed.

While rodent nesting is not entirely new, it has been exacerbated by recent green products such as soy-based wiring that have been suggested to attract rats and other pests to chew and eat through wiring, particularly under the hood. In addition, air conditioning, heating ducts, seat cushions, trunk and storage area carpeting have all been prone to pests.

Dealers are responding by adding rodent damage inclusions to their dealer open lot policy and combining insurance with prevention best practices.

 

Valent Group’s Loss Control Recommendations:

Stop, Smell, Spray
Rodents are attracted to smells. Consider where your dealership places trash receptacles and separate from parked vehicles. Clear trash immediately from inside vehicles after test drives and be sure to keep the lot area as clean as possible.

On the other hand, the right smells can potentially help you. Invest in appropriate sprays or specialized liquids to place around the lot. A pest control partner may be valuable resource.

Keep Your Hoods Up
Keeping vehicle hoods up for extended periods of time (even overnight if possible) prevents prolonged dark places where rodents tend to nest. If you consider an overnight stint, be sure your lot has the appropriate security systems in place. Or better yet, move your vehicles to inside storage on a routine or rotating basis.

Include a Rodent Disclaimer at Point of Sale
When you sell a vehicle that has soy-based wiring or other products that have been known to attract pests, include a rodent notice to the consumer. Consider using our sample product warning disclosure form (written by the attorney for the Alabama Automotive Dealer’s Association) that you can customize for your dealership available for download here, or work with your attorney, trade association or broker to help you create a disclaimer with the appropriate language.

Understanding Dealer and Consumer Warranties

There is potential warranty protection for vehicles that may be damaged.

According to the Alabama Automotive Dealer’s Association’s legal counsel Jeff Ingram, Esq. of Galese & Ingram, “If the vehicle is still in the manufacturer’s warranty period, the manufacturer should pay to repair any damage. Even beyond that warranty period, the selection of materials is the responsibility of the manufacturer.”

In Alabama, for instance there is another layer of protection, called the Alabama’s Motor Vehicle Franchise Act. Ingram suggests that under this Act, “the manufacturer would have a duty to defend and indemnify the dealership.”

“Either way, the primary way to protect the dealership should be to pass back to the manufacturer and get reimbursed for making a warranty repair.”

Most dealers should not be placing any dealer warranties on the vehicle.

According to Ingram, “For additional protection, if the dealer does issue a dealer warranty, additional language may need to be added into the warranty document that would exclude these types of damages. There could also be a separate document prepared to specifically disclaim any damage from rodents.”

Download Our Disclaimer
for Rodent Damage

Dealers using the right combination of insurance and loss control have the best chance of protecting their inventory and profit. For more information about our how our dealer specialists can help you, contact us at dealer@valentgroup.com.

Mat Pope and Paul Elliott lead Valent Group’s automobile dealer practice and work with dealers’ business insurance and employee benefits needs. Valent Group has offices in Mobile, Birmingham and Huntsville and is a subsidiary of EBSCO Industries. Learn more at valentgroup.com/dealers/auto.