legal corner
What is Negligent Entrustment and When is A Dealer Liable for Accidents Caused by His Buyer? Dealer Question: I’ve received a demand letter from an attorney who represents an individual who was injured in an accident with one of my customers. My customer did not have liability insurance and the attorney claims I have liability because: (1) I am lien holder on the title; (2) I failed to ensure that my customer had liability insurance before delivering the vehicle, and (3) I negligently entrusted a vehicle to my customer who was a bad driver. My questions: (1) What is negligent entrustment; (2) Do I have a duty to see that my buyers have liability insurance before they drive away, and (3) If they don’t have liability insurance, do I have liability for accidents they cause? First, some background.
At one time, dealers were obligated to present proof of liability insurance for their customers at the time of title transfer. While that law was in place, dealers were constantly struggling with their customers to bring in proof that they had liability coverage, and in many cases, missed the deadline for making timely transfer. This problem was resolved when TIADA and the Texas Automobile Dealers Association convinced the Texas Legislature to drop the proof-of-liability-at-title-transfer requirement on dealer transfers. But there are some folks out there who still think that selling dealers have the responsibility to see that their May 2021
T e x a s
D e a l e r
buyers have liability insurance, or should otherwise be responsible for the accidents the customers cause. No one questions the goal of universal liability coverage for drivers. All drivers should have liability insurance and the law requires it. How it should be enforced and who should bear the burden for enforcing it are other questions. Dealers should always notify their customers in writing that they are required by state law to have liability insurance. But the reality is that there will always be people driving on the state’s roads and highways who don’t have current liability coverage. It is thus necessary to examine the law of liability and see how it applies to a motor vehicle seller and/or lien holder. Generally, to be liable for an accident, a person must breach some duty to the injured party. For example, a driver of a vehicle has a duty to maintain control of his vehicle so that he can avoid striking a vehicle in front of him. If he causes an accident by driving too fast, by not keeping a proper watch out, by not braking soon enough, or by violating some traffic law, he has breached that duty, or put another way, has been negligent.
by Michael
Dunagan
W.
TIADA GENERAL COUNSEL
In order to be negligent in the ordinary sense, a person must be driving the vehicle. Unless the selling dealer or one of his employees was driving the vehicle when the accident occurred, the dealer wouldn’t be negligent in breaching a duty to drive safely. In order to be negligent in the ordinary sense, a person must be driving the vehicle. Unless the selling dealer or one of his employees was driving the vehicle when the accident occurred, the dealer wouldn’t be negligent in breaching a duty to drive safely. So, in a situation where the driver of a vehicle who causes an accident is insolvent and uninsured, an attempt is often made by the victim (and the 13
