Texas Dealer November 2019

Insurance and the

Independent Dealer in this issue:

– Michael W. Dunagan on Applying Total-Loss Insurance Proceeds to Reduce Customer’s Balance – Dealer Test Drives:Should a Salesman Really Ride Along?

– Cyber-Attack! 60% of Small Businesses Do Not Recover – Ride Share and Insurance – Collateral Protection Insurance Coverage Explained – Garage Keepers Coverage: Misconceptions Answered

2019 TIADA Board of Directors PRESIDENT Robert Beck/Stop N’Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 PRESIDENT ELECT Mark Jones/Mike Carlson Motor Company 264 Exchange Burleson, TX 76028 CHAIRMAN OF THE BOARD Juan Sabillón/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 SECRETARY Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 TREASURER Eddie Hale/Neighborhood Autos 1717 US 287 Decatur, TX 76234 ICE PRESIDENT, WEST TEXAS V (REGION 1) Brad Kalivoda/Fiesta Motors 2599 74th Street Lubbock, TX 79423 ICE PRESIDENT, FORT WORTH V (REGION 2) Chad Lancaster/Chacon Autos 11800 E. Northwest Hwy Dallas, TX 75218

Vo l u m e X I X / I s s u e 11 / N o v e m b e r 2 019

TexasDealer contents

4 Officers’ Message

by Ryan Winkelmann, TIADA Secretary

9 Legal Corner: Applying Total-Loss Insurance Proceeds to Reduce Customer’s Balance

by Michael W. Dunagan

15 CYBER-RISK: 60% of Small Businesses Do Not Recover After a Cyber-Attack

by Ann Mullen-Martin

17 Board of Directors Meeting Minutes 19 Collateral Protection Insurance: What is it and How Does it Work?

by WJ “Bill” Murphy

23 Named Driver Insurance Laws in 2020

by Christopher Bean

ICE PRESIDENT, DALLAS V (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas, TX 75237

25 Dealer Test Drive Discussion: State of the Law Today

ICE PRESIDENT, HOUSTON V (REGION 4) Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365

28 TIADA Auction Directory 2019 31 Garage Keepers Coverage — Misconceptions Answered

ICE PRESIDENT, CENTRAL TEXAS V (REGION 5) Greg Phea/Austin Rising Fast 8024 IH 35 North Austin, TX 78753 ICE PRESIDENT, SOUTH TEXAS V (REGION 6) Jose Engler/Irving Motor Corp 211 Braniff Dr. San Antonio, TX 78216 ICE PRESIDENT AT LARGE V Robert Blankenship/Texas Auto Center 6809 N IH-35 Austin, TX 78744 ICE PRESIDENT AT LARGE V Armando Villarreal/McAllen Auto Sales 4215 S. 23rd Street McAllen, TX 78503

TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am – 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org

by Erik Wilson

by Vincent Stazzone

33 New Members 34 TIADA Scholarship Application 35 What if My Customer Drives for Uber or Lyft?

by Christopher Bean

43 TIADA Member Application 44 Local Chapters 46 Behind the Wheel

by Jeff Martin

Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.

Editor: Christopher Bean

Magazine Ad Sales: Patty Huber, 512-310-9795

officers’ message

by Ryan

Winkelmann

Stop Looking Back and Move Forward

BJ’s Autohaus (Houston) TIADA SECRETARY

I

recently made a deal with myself. I agreed to stop looking back and to start focusing more on moving forward in my business, personal development and family life. I’ve noticed that in the past few years, I’ve been more focused on what hasn’t turned out to my expectation rather than what I could be doing differently to improve my circumstances in nearly all three.

With that recent awareness, came the new deal.

Former TIADA President, Janette Winkelmann (who happens to also be my mom), was recently battling breast cancer, and after several bouts with chemo, radiation, surgery and side effects, it looks as though she has won the battle, but is continuing treatment at this time. Reflecting back at my personal dilemmas and the aforementioned deal, vs. what my mom has been undergoing recently, I started to question my personal discontent of the situations that brought on the deal with myself, and what I could do to once again breath life into those areas of my life.

My business

I’ve had the taste of better financial times in this business, and have not been content for some time now with my current state of affairs. While really searching for, and getting to the bottom of what was within my power to change these circumstances, I first remembered what (cont’d on pg. 6)

...from Tony Robbins, “It’s not who we fail to hire that destroys our business, it’s who we fail to fire that destroys our business.”

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Officers' Message (cont’d from pg. 4)

my wife said to me during the downturn. She said she was happy where we were, and just wanted to see me happy again. Hearing only the negative for so many conversations, finally prompted her to ask “what if things don’t change?” I wasn’t prepared for that question. It did however get me thinking differently.

What if things don’t change? Will I live in this never ending quest, pursuing something that I once had or better? Could I be content or happy exactly where I am right now? I started to think of my achievements thus far in all three categories of the deal. I started to consider how some people surrounding me, both personally and professionally, would love to be exactly where I am right now. I started to learn to appreciate what was right in front of me, vs. focusing to heavily on my pursuit of something more.

One thing I knew for sure; there were a few things within my control that were adding to my stress level in my business, thus causing an extreme amount of discontent. In previous articles and conversations over the years, I’ve foolishly prided myself on how loyal my employees were, and how I was once able to operate a very successful, and sustainable business with just half of the employees other businesses needed of a similar size. Was it loyalty, or complacency? When your business starts EPI-TIADAhalf Nov2019.pdf

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10/13/19

to decline, the latter makes itself extremely clear. You start to ask yourself, would I hire this person tomorrow?

What value are they bringing to the business currently? I mean, showing up on time and not stealing from me has been great all these years, but is it enough execute their objectives to help repair and grow the company, or just what you’d expect of anyone you ever chose to hire?

I’ll cut this paragraph short. We’ve heard it said so many ways. The one that impacted me the most recently came from Tony Robbins, “It’s not who we fail to hire that destroys our business, it’s who we fail to fire that destroys our business.” I laid off a collector I had for over 20 years, and a mechanic I had for 30 years. As predicted from 100% of people I’ve confided in who have done the same, my business once again started to grow.

I have an old friend who once told me when you set a goal, you don’t start feeling better when you achieve the goal; you start feeling better when you take the first steps towards that goal. He was right, and I’m once again content with my business, exactly where I am right now.

And I’m enjoying the new low pressure approach to achieving new goals in my business, one at a time.

Personal Development

While my wife was pregnant with our now 2 ½ year old daughters, she gained about 25 lbs during the

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pregnancy. I was right there by her side, all 30 lbs I gained as well.

About 2-1/2 weeks after giving birth she was back to her normal weight, and there I was two years later 30 lbs heavier than I needed to be.

Caught up and dredging though the whirlwind of urgent matters at work and personal development, and rarely taking time to focus and execute on the more important goals with either. I started back on a moderate workout schedule and eating much better. I’m down 20 lbs and counting. I’ve noticed that my areas of discontent were actually connected more than I thought.

When the first started improving, the others seemed to get pulled along with minimal effort.

I started paying more attention to my surroundings, and areas where I could even be of service to someone else outside of what I’m currently doing. My step-son received a notice from school that Career Day was coming, and all parents who wanted to participate and talk about their careers during the school function should sign up. I did. And I’m looking forward to educating them on how to buy a used car and own a business, while improving the image of used car dealers among the younger generation. These are just a couple of things I’ve done recently pertaining to the deal.

Wednesday be Family Night. We don’t watch TV, or use our phones for 2-3 hours, and instead play a board game, cook dinner together, work on a project together etc. This has been a great experience for us, and I’m looking forward to continuing past 2019.

With the New Year upon us, I felt the time was right to mention a few things I’ve adapted to and changed in a positive way over the past year, in hopes that someone

reading this might consider something they can do in a similar way. It is so easy to get caught up in the urgency of day to day matters, while under appreciating and sometimes ignoring the more important things in life. Learning to be content and appreciating what you have, I’ve found to be equally important as striving to gain what you don’t have.

I’m wishing you a rewarding and prosperous 2020!

Family Life

As much as I miss coming home to a house where it looked exactly the same as when I left, organized, clean and uncluttered, those aren’t the days I’ve been living. Between shoes being kicked off and backpacks being left wherever they fall from the teenagers, my toddler relocating items from room to room all over the house, it has been an adjustment to say the least. Thanks to my brother’s advice, I’ve learned to pick my battles, and just focus on what I can realistically expect in this role.

As part of my New Year resolution for this year, I requested that every November 2019

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e c n a r u s n I

n o ti he t c e y t . b o m r u a P o r l t to y prog a r e t e la gh

Col

u th o f r o b ors t n inve

TM

“We have a lot to be Thankful For, they are called Texas Dealers! Happy Thanksgiving and remember,

INSURANCE MATTERS!!!”

“CP Insurance Associates has been providing Texas Dealers a Custom CPI Program for over 20 years!

Now is the time for your dealership to take control of your Property Insurance and be prepared for 2020!”

“The CPIA Team is proud to be a Business Partner with TIADA. Now we want to partner with your Dealership and help you protect your collateral!

CPI is insurance that the customer can’t cancel!”

Call:

Bill Murphy (512-799-2886)

Bob Burke (800-366-0036)

Matt Ruckel Taylor Smith (214-529-7624) (601-540-3178)

Insurance Associates TM

“Your Collateral Protection Solution”

(800-366-0036 )

legal corner

Applying Total-Loss Insurance Proceeds to Reduce Customer’s Balance Dealer Question: My Buy-Here-Pay-Here customer wrecked his car and it was declared a total loss by the insurance company.

My customer wants to keep the salvage and have it repaired. Of course, this would reduce the insurance settlement amount since the salvage value would be deducted. I am concerned about having a rebuilt vehicle with a salvage title as my collateral. Can I insist that we take the full settlement and apply it to the balance?

Answer: Under the terms of most motor vehicle retail installment contracts, the lien holder has the option of applying insurance proceeds on a totaled vehicle to the balance owed.

However, if the customer and the insurance company refuse to cooperate, there may be some practical issues in enforcing this contract right.

One of the reasons that alternative insurance products (such as single-interest coverage, collateralprotection insurance, and even debt cancellation agreements) have become more attractive to BHPH dealers and other lien holders is the difficulty of dealing with the uncooperative customer and an often-hostile insurance adjustor in resolving a damage claim.

Many BHPH customers feel that if they are paying the premium for insurance coverage, they ought to walk away with some money in their pocket when a claim is paid.

Also, the thought of losing a car and still owing money on it is not November 2019

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something the average person feels comfortable with.

In reality, most total-loss situations result in insurance proceeds falling short of the balance owed on the account.

The combination of smaller down payments paid by subprime customers and the motivation of some insurance adjustors to justify the lowest possible pay-out make for more upside-down car debt.

Another dynamic at work in this situation is that so many vehicles are declared to be total losses by the insurance adjustors. With low values placed on wrecked vehicles, and increasing costs for parts and labor, it’s not uncommon for the costs of repair to exceed the values which are applied.

It’s not surprising then that sub-prime debtors are inclined to look for creative ways to use the insurance proceeds for something other than just reducing the debt. The debtors may feel that they are better off applying insurance proceeds to fix their sources of transportation while they continue to make car payments. In fact, many BHPH dealers will try

by Michael

Dunagan

W.

TIADA GENERAL COUNSEL

The debtors may feel that they are better off applying insurance proceeds to fix their sources of transpor tation while they continue to make car payments.

In fact, many BHPH dealers will tr y to put the customer in another vehicle, especially if the customer has proven to be a regular payer. to put the customer in another vehicle, especially if the customer has proven to be a regular payer.

Another motivation in the customer-retains-salvage scenario is the title certificate issue. Typically, when a vehicle is categorized as a total loss (the cost of repair exceeds value) the title certificate is supposed to be submitted to the Motor 9

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Some insurance companies will issue a check solely payable to the losspayee lien holder if the vehicle has been repossessed and the lien holder submits a statement to the insurance company attesting to that fact. Obviously, this procedure should be sought by a creditor who wishes to stay in control of the situation.

Vehicle Division with a salvage certificate issued in return.

Usually, where a total loss is paid by the insurance company, it takes the salvage and the title certificate (with the lien released) and resells the salvage at a salvage pool or other salvage outlet, with the blue title going to the state.

By reducing the settlement by the value of the salvage, and letting the insured keep the salvage, the backend process is simplified for the insurance company.

For a lien holder, however, the prospect of ending up with a rebuilt unit (which may not have been properly repaired) with a salvage title, is not an attractive situation. Thus, the car creditor probably sees application of the insurance proceeds without a reduction for retained salvage as a better alternative.

Typical of the language that often appears on motor vehicle retail installment contracts is this: PHYSICAL DAMAGE INSURANCE PROCEEDS: I (in this case “I” is the debtor) must use physical damage insurance proceeds to repair the motor vehicle, unless you agree otherwise in writing. However, if the motor vehicle is a total loss, I must use the insurance proceeds to pay what I owe you.

Even with the contractual right to apply the proceeds from a total loss to the balance, there may be some obstacles. For instance, most insurance companies do not

want to get involved in a dispute between their insured (the debtor) and the loss-payee (the lien holder).

Under the insurance contract, the company is required to include the loss-payee on the settlement check (assuming the creditor is listed as a loss payee on the policy). Often, the check with both names listed as payee is sent to the debtor.

If the debtor endorses the check and delivers it to the lien holder there’s usually no problem. But what if the debtor refuses to endorse the check and give it to the lien holder?

The resulting impasse can usually only be resolved by reaching some type of compromise agreement or filing a lawsuit to have a court sort out the issues.

Some insurance companies will issue a check solely payable to the T e x a s

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loss-payee lien holder if the vehicle has been repossessed and the lien holder submits a statement to the insurance company attesting to that fact. Obviously, this procedure should be sought by a creditor who wishes to stay in control of the situation.

Another practical problem that we see repeated on numerous occasions is the creative debtor that forges the lien holder’s endorsement on the check and cashes it. We’ve even seen cases where the debtor went to the trouble to have a rubber stamp made with the apparent endorsement of the car creditor. In these cases, we’ve usually been able to get the bank or other institution to pay our lien holder client under a law that makes a party responsible that pays

The fact of the matter is that the carrier is required by the terms of the proper tydamage insurance policy to make any payment checks co-payable to the named loss payee. out over a forged endorsement.

There are some property-damage insurance carriers that routinely issue settlement checks made payable solely to the named insured (especially if the amount falls below

a certain amount), ignoring the rights of the loss payee. It is not unusual for an adjustor to inform the lien holder that the law does not require the inclusion of the loss payee on the check. The fact of the matter is that the carrier is required by the terms of the propertydamage insurance policy to make any payment checks co-payable to the named loss payee. The failure or refusal to do so can result in the carrier having to pay a second time if the named insured cashes such a check without repairing the vehicle or using the proceeds to pay down the indebtedness. And, because the failure to protect the lien holder is a breach of the lien holder’s contract rights in the policy, the lien holder who has to sue is entitled to attorney’s fees.

Liability insurance carriers are also required to include registered lien holders on settlement checks that are attributed to property

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damage of collateralized vehicles.

Many adjustors choose not to include lien holders in settlement negotiations or include lien holders as payees on settlement checks. Again, the registered lien holder has a cause of action against the carrier when the exclusion from the check results in the funds not being used to repair the vehicle or pay down the indebtedness.

Another problem that arises frequently in accident/insurance claims situations is the interjection of towing and storage fees.

That is, while the lien holder is dealing with its customer and the insurance company, storage charges on a vehicle being held by a storage facility (and in some cases, a body shop) are climbing daily. We’ve seen cases where, when the storage charges exceeded the value of the salvage,

the insurance company refused to pay the storage and deducted the salvage value from the settlement offer.

Our recommendation to our car creditor clients is to take control of the collateral as quickly as possible. Having possession and control makes it easier to prevent unnecessary storage charges, the possibility of unauthorized work that might lead to a mechanic’s lien claim, and problems with submitting a statement of repossession to the insurance company, if needed.

Finally, all steps taken by a car creditor in this process must be taken in good faith and without unreasonably jeopardizing the debtor’s position. The Uniform Commercial Code requires secured creditors to be commercially reasonable in dealing with repossession and the disposition of repossessed collateral.

Conclusion:

A vehicle lien holder has the authority under most motor vehicle retail installment contracts to apply the proceeds of a total-loss insurance claim to the balance of the account.

But actually collecting the proceeds may involve more work than just receiving and depositing a check. Just as car creditors must diligently monitor that insurance protecting the collateral is in place, they must also attempt to stay in control of the adjustment and payment procedures on the back end to be able to minimize losses from accident situations.

Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 40 years. He has written a number of books and hundreds of articles for trade journals and law reviews. His clientele includes dealers, banks, finance companies, auto auctions and credit unions.

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feature

CYBER-RISK: 60% of Small Businesses Do Not Recover After a Cyber-Attack

by Ann Mullen-Martin

President, Mullen Insurance Agency Inc

I

t seems as if every day there is a story on the TV news or in the newspaper or circulating on social media about the latest cyber breach. For years, when the victim was some huge corporation, as smaller business owners, we tended to yawn and thank our lucky stars our operations were not so vulnerable.

That was yesterday! Today, the size of a business is no longer a

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yardstick we can use to measure our exposure to Cyber Losses. The common threats to which you as an independent auto dealer are exposed are much the same as those haunting the large corporations.

The fact is most data breaches involve an employee mistake: A lost mobile device

A lost laptop or paper records

Accidentally sent emails

A costly error such as opening

an unauthorized email containing malware Employee negligence and/or errors are among the top three contributors to lost/stolen data.

As Independent Automobile Dealers regardless of size you may retain physical or electronic records of employees or other third parties; those records may include Social Security numbers, drivers’ 15

license information, tax ID numbers, banking information, email or home addresses and the list goes on. If your records include this sort of personal information, they are subject to State and Federal privacy and data breach notification laws. As owner of the data, your business is responsible for protecting it.

When a business suffers a security breach, the expenses originate from many sources: Investigation of the source of the breach

A virus caused loss to the business’ elec tronic data, which will likely require the hiring of an IT expert to remove the virus and research the damaged records.

A hacker could make an extortion demand

or require a ransom payment in return for not releasing information he obtained.

A Malware infection may slow down and/or

stop computer systems, inhibiting auto sales.

A hacker or rogue employee can cause van dalism or malicious mischief to a web site creating the expense of investigation and repair of damage.

Discussing CyberLiability with your insurance agent could mean your business would be among the 40% of small businesses that recover from a cyber-attack.

If personal or confidential files are breached,

there is the cost to notify the affected parties.

Intellectual property may be stolen affecting

the business's day-to-day, as well as future business activities.

Computer fraud including theft of money, se curities and other tangible property.

The cost to rebuild data bases.

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The sum total of the foregoing is: Loss of income, reputation and brand is the typical result of a cyber-attack and we are all subject to it. CyberLiability insurance is not included in a garage or general liability policy. In fact, both contracts are virtually useless in protecting an insured against cyber liability exposures. Some GL and Garage policies provide limited coverage by endorsements, but too many of these ‘add-on’ protections are more window-dressing than safeguards.

The good news is insurance protection is available for some, if not all, of the cyber exposures that your specific business faces. There are a number of stand-alone cyber liability contracts that can be designed to meet your business’ unique vulnerabilities. Premiums depend upon the coverage your business requires.

Discussing Cyber-Liability with your insurance agent could mean your business would be among the 40% of small businesses that recover from a cyber-attack.

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board of directors meeting minutes October 21, 2019 Aloft Hotel | Austin, TX

compiled by Texas Dealer staff

At its meeting on October 21, 2019, TIADA took the following actions: President Robert Beck called the meeting to order at 12:58 p.m. Members in attendance were Robert Beck, Armando Villarreal, Greg Phea, Greg Reine, Brad Kalivoda, Mark Jones, Juan Sabillon, Robert Blankenship, Eddie Hale, Ryan Winkelmann, Chad Lancaster, Vicki Davis and Jose Engler

Minutes of the Last Meeting

Legislative Update

Chris Bean provided an update on legislative matters and rule implementation.

TIADA 2019-2020 Conference

Jeff Martin provided updated final attendance and survey information from 2019 Conference and plans for the upcoming 2020 and 2021 Conferences.

Minutes from prior board meeting presented by Secretary Ryan Winkelmann for review and approval. Motion by Bob Blankenship. Second by Vicki Davis. Motion carries.

Associate Membership

Treasurer’s Report

Class Action Affinity Program

Treasurer Eddie Hale provided a review of the association’s current balances, financial statements, and reserve accounts. Executive Director, Jeff Martin provided background on possible modification to the current reserve policy and investment fund to provide for education training. Bob Blankenship recommended the matter tabled until 2020 to better project income. Motion by Ryan Winkelmann. Second by Juan Sabillon. Motion carries.

President’s Report

Robert Beck provided recommendations for 2020 TIADA Committee Chairs and Members. There are five committees. Mark Jones provided a brief update on the NIADA Leadership Conference in Washington, DC. Other TIADA board members who traveled to the conference included Robert Blankenship and Eddie Hale.

Executive Session

No action was taken during executive session.

Executive Director Report

Jeff Martin discussed efforts to implement Town Hall Meetings for areas in 2020 without local chapters. Jeff Martin also discussed the proposed IDEA Program.

Pre-licensing Education

Teresa Orkun provided an update on development of the TIADA pre-licensing education program.

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Patty Huber presented updates on associate members, affinity partners, and top sponsors Chris Bean provided background on possible affinity partner. TIADA staff may elect to proceed as possible affinity with limitations on notices to members.

2020 Budget

Eddie Hale presented the 2020 Budget for review.

NIADA CPO and TIADA CPO

Robert Beck appointed an ad hoc CPO committee: Eddie Hale, Chair; Greg Phea; Greg Reine; Chad Lancaster; Bob Blankenship; Armando Villarreal, and Mark Jones. Staff Liasion, Jeff Martin. Charge: To gather information on a Texas CPO program and report back to the Board in January.

Old Business None

New Business None

Motion to adjourn at 5:25:

Motion by Greg Phea. Second by Greg Heine. Carries.

Respectfully submitted, Ryan Winkelmann, TIADA Secretary A complete copy of any reports referenced in this document and more detailed notes from the meeting are on file at the TIADA office and available upon request.

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feature

Collateral Protection Insurance What is it and How Does it Work?

by WJ “Bill” Murphy

A

CP Insurance Associates

s the auto insurance marketplace in Texas continues to evolve, many independent auto dealers that finance vehicle as “lienholders” and their customers have experienced challenges in the auto insurance marketplace such as higher premiums, limited coverage policies, higher deductibles, vague exclusions, and low or no claim settlements. All Dealers have different customer / drivers with diverse driving records and credit histories.

Unfortunately, this risk pool poses significant hurdles for both the customer and the dealer when it comes to insurance premium cost and scope of coverage.

What is the lienholder’s objective when it comes to making sure the collateral he or she finances is protected? The simple answer is that the lienholder wants to be sure that if the vehicle is involved in an accident there will be adequate funds available to repair the vehicle. Since it is not uncommon for many personal auto policies to be cancelled prior to policy expiration, what are the options for the lienholder? One option that some dealers are utilizing is Collateral Protection Insurance (CPI).

An alternative to requiring a customer to purchase a full coverage insurance personal auto policy, the lienholder instead may elect to have their customer purchase Collateral Protection Insurance (CPI) on that particular vehicle. Collateral Protection Insurance (CPI) is property insurance that protects the physical damage done to the vehicle. Collateral Protection Insurance replaces a customer’s individual requirement to maintain full coverage or comprehensive

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property insurance. This property insurance works in part with the retail installment contract, which is used to sell a vehicle to a customer. The only insurance that the seller/lienholder requires is property insurance. CPI does NOT include or substitute liability insurance, which is a State of Texas requirement for

an individual driving a vehicle on the roads of Texas.

Make sure your customers maintain valid liability insurance. Liability insurance must be purchased by the borrower separately at the borrower’s expense.

The borrower will be responsible for paying the premium for CPI coverage. The retail installment contract, which the borrower signs when they purchase and finance the vehicle, provides that the lienholder be granted the authority to acquire Collateral Protection Insurance if the borrower fails to keep the vehicle insured. Because the customer is going to make their payment for the CPI insurance at the same time they 19

make their car payment at the dealership, the customer and the dealer place more importance on both of these payments being made on time. The CPI Premium is a fixed payment for the term of the loan.

Here are some of the underwriting criteria that are important to a dealer: How long has the dealer been in the BHPH business; sales volume; vehicle cost; customer driving history; the vehicle and the marketplace will help determine the premium to be charged. Each CPI provider has their own underwriting criteria. Dealers need to ensure the provider he or she is working with is properly licensed by the Texas Department of Insurance.

CPI premiums are often significantly a lower monthly cost to the borrower than traditional property insurance as the risk is priced through the dealer and not the driver. Besides being able

to reduce the cost of property insurance for the borrower, CPI also helps both the lienholder and the buyer when the vehicle is involved in an accident. Since the lienholder is the insured, only the lienholder can cancel the policy. CPI may also eliminate many of the letters dealers get from insurance companies that often state the insurance on your vehicles has lapsed due to nonpayment, and the cancellation date of two weeks ago.

Since the insured on a CPI policy is the lienholder, the dealer is better able to oversee the repairs to the vehicle and make sure the work is done to the lienholder’s standards. Ask the provider for examples of how claims are filed and adjusted. Get the criteria in writing.

WJ “Bill� Murphy, CP Insurance Associates can be reached via email at murphy.wjm@gmail.com or by phone at 512-799-2886.

Congratulations on your 75th anniversary!

we are proud members of tiada.

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SALES

REDITOR SELLER/C : ADDRESS ZIP: CITY, ST,

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TIADA-InsAd_r1.indd 1

10/30/19 8:55 AM

feature

Named Driver Insurance Laws in 2020

by Christopher Bean

TIADA Director of Dealer Compliance

A

s many of you may know, the 86th Texas Legislature passed House Bill 259, (Rep. Ed Thompson) which prevents the use of named driver insurance policies. House Bill 259 prohibits insurers from delivering, issuing for delivery, or renewing named driver policies on or after January 1, 2020. The prohibition does not apply to operators’ policies, as

bulletins/2019/B-0010-19.html. The Bulletin clarifies changes to the Texas Insurance Code in that an insurer may continue to write and renew named driver policies that comply with current laws and rules as late as December 31, 2019. This means “regardless of the policy term, a named driver policy written on or before December 31, 2019, may continue in force for the length

defined in Texas Transportation Code Section 601.077 (ex. usually an SR-22). A named driver policy may not be renewed in 2020, but some named driver policies may be in effect after January 1, 2020 if in force before the deadline.

On September 16, 2019 the Texas Department of Insurance issued Bulletin B-0010-19 which can be found at the following link: https://www.tdi.texas.gov/

of its term, but may not be renewed at any time on or after January 1, 2020. No insurer should have any named driver policies in force after December 31, 2020.”

Texas Department of Insurance clarified that “Insurers must provide policyholders with appropriate and timely notice of nonrenewal. HB 259 does not excuse the insurer from the notice requirements in Texas Insurance Code Section 551.105.”

November 2019

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The Department provided the following FAQs:

After January 1, 2020, may an insurer send named driver policyholders a “renewal offer” for a different policy?

No, insurers may not send named driver policyholders a renewal because under HB 259 named driver policies may not be renewed on or after January 1, 2020.

Insurers may state in a nonrenewal notice that due to HB 259 the named driver policy is no longer available, and the insurer may simultaneously offer a new policy that complies with HB 259.

If a named driver policy has not reached its 12-month anniversary on or after January 1, 2020, may an insurer continue to renew it until the 12-month anniversary, as contemplated in Texas Insurance Code Section 551.106(b)?

No. HB 259 prohibits an insurer from renewing a named driver policy on or after January 1, 2020, even if it has not reached the 12-month anniversary of the original effective date of the named driver policy.

How much notice must an insurer give to policyholders and lienholders?

An insurer must give 30 days’ notice of nonrenewal under Texas Insurance Code Section 551.105.

May an insurer offer named driver policyholders a new policy with a nonrenewal notice?

Yes, insurers may offer a new policy together with the notice of nonrenewal. Insurers may tell a policyholder that the named driver policy cannot be renewed at the end of its term because HB 259 prohibits renewing them.

Instead of a notice of nonrenewal, may an insurer send a notice of material change under Texas Insurance Code Section 551.1055?

No, an insurer may not send a notice of material change to expand or broaden coverage under a named driver policy, because a “material change,” as defined in Texas Insurance Code Section 551.1055(a), does not include an expansion of coverage. The definition of a “material change” includes reductions of coverage, changes in conditions of coverage, or changes in the duties of the insured. Instead, an insurer may choose to transition its named driver policies to automobile policies that comply with HB 259 by sending a new policy offer with a notice of nonrenewal.

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T e x a s

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November 2019

feature

Dealer Test Drive Discussion: State of the Law Today

by Erik Wilson Attorney at Law

T

he question is, should a dealer have a salesman in the vehicle while a customer goes on a test drive?

Somewhat interestingly, the current landscape on this issue appears to be one that favors not having a salesperson for the dealership in the vehicle while the vehicle is being test driven. But how can that be?

This seems at the very least, counter intuitive to what a dealer would want considering the circumstances, right?

It would only make sense to have one of your employees in the vehicle to supervise the test drive and talk about the vehicles strong points while trying to help advance the sale... right?

Not necessarily. In fact having the salesperson in the vehicle opens up the dealer to more liability than they would otherwise have if the vehicle was driven solo by the customer. This is because Texas courts, as well as many of the courts of other states, have made it clear that liability will be imposed where the dealer or its agent had “specific control over the injury-causing activity to impose vicarious liability” see Ely v. General Motors Corp., 927 S.W.2d 774 (Tex. App., 1996). That’s fancy legal speak for if you have someone that works for you in the car when an accident happens then it will be assumed that they had something to do with the accident. If there’s no salesperson in the vehicle, how can the dealer be said to have had any control over what happened on the test drive?

This outcome makes logical sense because a reasonable person would make expectations that your salesman is trained to give these test drives and/or would do everything in their power to make sure that the vehicle and customer were safe on that drive. But how often is that actually true? Many independent dealers don’t offer or have any formalized test drive training for their sales people.

Consequently, most sales people are focused on trying to

November 2019

T e x a s

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Many independent dealers don’t offer or have any formalized test drive training for their salespeople. Consequently, most sales people are focused on tr ying to sell the vehicle while on the drive and only consider safety once something star ts to go wrong.

25

sell the vehicle while on the drive and only consider safety once something starts to go wrong. Therefore, the salesperson simply being in the vehicle at the time of the test drive may impose a legal responsibility or duty that would not otherwise exists but for that salesperson being along for the ride. This liability of the salesperson may then be attached to the dealership through the agency theory of the law. Meaning the employer may be responsible for the actions of the employee while the employee is executing his or her job duties.

Unfortunately, the reality is that at some point on the test drive your salesperson will likely be a distraction to your customer’s driving. The reality is that your salesperson is far more likely focused on trying to read the customer and navigate that customers subtle tells for their potential purchase of the car versus cautiously monitoring the customer’s driving habits he or she is exhibiting during the test drive. This can obviously lead to disastrous outcomes depending on the situation and the driver of the vehicle.

Unfortunately, the reality is that at some point on the test drive your sales person will likely be a distraction to your customer’s driving. ...This can obviously lead to disastrous outcomes depending on the situation and the driver of the vehicle.

635 Fritz Dr. Ste 210 Coppell, TX 75019 469-637-0150

How to protect your dealership

Jason Goodman, the CEO for 500 Below Cars, recently told me that this issue, “has directly impacted our ongoing operations to the point where we have considered placing dash cams in our vehicles during test drives”.

Under the current state of the law a dealer has multiple options for protecting their dealership during test drives. First, and 26

always most important, is to make sure your business is operating under some sort of protected Texas business entity such as an LLC. Do not run your business under a D.B.A. unless you want to subject yourself to potential personal liability. Secondly, decide whether or not you want salesmen on test drives.

If you decide you want a salesman on test drives, then you will need to plan accordingly. To address this issue your dealership will need to have, at the minimum, the proper insurance and garage policies in place, guidelines for salesmen to follow, as well as potentially having indemnification agreements with customers to protect your business in the case of an accident. A competent attorney can help you put all these items into place and you should not hesitate to contact one to ensure your business and collateral are well protected.

Erik Wilson, Esq. Erik Wilson and Associates 2245 Texas Drive, Suite 300 Sugar Land, TX 77479 Office: (281) 566-2535 T e x a s

D e a l e r

November 2019

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28

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TEXAS LONE STAR AUTO AUCTION

AMERICA’S AA DALLAS

www.tlsaa.com 2205 Country Club Drive Carrollton, TX 75006 214.483.3597, Fax 214.483.3814 GM: Patrick Stevens Tuesday, 1:00 p.m. / Thursday, 2:00 p.m. $AVE : $200

IAA DALLAS*

El Paso

www.americasautoauction.com 219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 GM: Ruben Figueroa Tuesday, 1:00 p.m. / Thursday, 1:00 p.m. $AVE : $200 www.iaai.com 204 Mars Road, Wilmer, TX 75172 972.525.6401, Fax 972.525.6403 GM: Joshua Boyd Wednesday, 9:00 a.m. $AVE : up to $200 Sell Fee

EL PASO INDEPENDENT AUTO AUCTION www.epiaa.com 7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 GM: Luke Pidgeon Wednesday, 10:00 a.m. $AVE : $200 T e x a s

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IAA EL PASO*

www.iaai.com 14651 Gateway Blvd. W, El Paso, TX 79927 915.852.2489, Fax 915.852.2235 GM: Jorge Resendez Friday, 10:30 a.m. $AVE : up to $200 Sell Fee

MANHEIM EL PASO

www.manheim.com 485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 GM: JD Guerrero Thursday, 10:00 a.m. $AVE : $100

IAA HOUSTON*

Midland Odessa

IAA HOUSTON NORTH*

www.iaai.com 701 W. 81st Street, Odessa, TX 79764 432.550.7277, Fax 432.366.8725 GM: Christopher Rogers Thursday, 11:00 a.m. $AVE : up to $200 Sell Fee

www.iaai.com 2535 West. Mt. Houston, Houston, TX 77038 281.847.4700, Fax 281.847.4799 GM: Alvin Banks Wednesday, 9:00 a.m. $AVE : up to $200 Sell Fee www.iaai.com 16602 East Hardy Rd., Houston-North, TX 77032 281.443.1300, Fax 281.443.4433 GM: Christina Nieves Thursday, 9:00 a.m. $AVE : up to $200 Sell Fee

MANHEIM HOUSTON

Harlingen/McAllen IAA MCALLEN*

www.iaai.com 900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 GM: Ydalia Sandoval Tuesday, 9:00 a.m. $AVE : up to $200 Sell Fee

BIG VALLEY AUTO AUCTION**

www.bigvalleyaa.com 4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 GM: Lisa Franz Thursday, 9:30 a.m. $AVE : $200

www.manheim.com 14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 GM: Brian Walker Tuesday, 9:00 a.m. / Thursday 6:30 p.m. $AVE : $100

MANHEIM TEXAS HOBBY

www.manheim.com 8215 Kopman Road, Houston, TX 77061 713.649.8233, Fax 713.640.6330 GM: Darren Slack Thursday, 9:00 a.m. $AVE : $100

Longview

ALLIANCE AUTO AUCTION LONGVIEW

Houston

ADESA HOUSTON

www.adesa.com 4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 GM: Michael Schenks Wednesday, 9:00 a.m. $AVE : $200

AMERICA’S AA HOUSTON

www.americasautoauction.com 1826 Almeda Genoa Rd, Houston, TX 77047 281.819.3600, Fax 281.819.3601 GM: John Swofford Thursday, 2:00 p.m. $AVE : $200

AMERICA’S AA NORTH HOUSTON www.americasautoauction.com 1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 GM: Buddy Cheney Monday, 6:30 p.m. $AVE : $200

www.allianceautoauction.com 6000 East Loop 281, Longview, TX 75602 903.212.2955, Fax 903.212.2556 GM: Chris Barille Friday, 10:00 a.m. $AVE : $200

IAA LONGVIEW*

www.iaai.com 5577 Highway 80 East, Longview, TX 75605 903.553.9248, Fax 903.553.0210 GM: David Cooper Thursday, 9:00 a.m. $AVE : up to $200 Sell Fee

Lubbock

IAA LUBBOCK*

www.iaai.com 5311 N. CR 2000, Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 GM: Lori Davee Tuesday, 9:00 a.m. $AVE : up to $200 Sell Fee

AUTONATION AUTO AUCTION - HOUSTON TEXAS LONE STAR AUTO AUCTION** www.autonationautoauction.com 608 W. Mitchell Road, Houston, TX 77037 822.905.2622, Fax 281.506.3866 GM: Mike Green Thursday, 6:00 p.m. $AVE : $200

HOUSTON AUTO AUCTION

www.houstonautoauction.com 2000 Cavalcade, Houston, TX 77009 713.644.5566, Fax 713.644.0889 GM: Tim Bowers Tuesday, 1:00 p.m. $AVE : $200

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www.lsaalubbock.com 2706 E. Slaton Road., Lubbock, TX 79404 806.745.6606 Wednesday, 9:30 a.m $AVE : $75/Quarterly

Lufkin

LUFKIN DEALERS AUTO AUCTION

www.lufkindealers.com 2109 N. John Reddit Dr., Lufkin, TX 75904 936.632.4299, Fax 936.632.4218 GM: Wayne Cook Thursday, 6:00 p.m. $AVE : $200

IAA PERMIAN BASIN*

ONLINE

ACV AUCTIONS**

www.acvauctions.com 800.553.4070 $AVE : $250

San Antonio

ADESA SAN ANTONIO

www.adesa.com 200 S. Callaghan Rd San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 GM: Clifton Sprenger Thursday, 10:00 a.m. $AVE : $200

IAA SAN ANTONIO*

www.iaai.com 11275 S. Zarzamora San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 GM: Brian Sell Monday, 9:00 a.m. $AVE : up to $200 Sell Fee

MANHEIM SAN ANTONIO**

www.manheim.com 2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 GM: Mike Browning Wednesday, 9:00 a.m. $AVE : $100

SAN ANTONIO AUTO AUCTION**

www.sanantonioautoauction.com 13510 Toepperwein Rd. San Antonio, TX 78233 210.298.5477 GM: Brandon Walston Tuesday, 10:00 a.m. / Thursday, 1:30 p.m. $AVE : $200

Tyler

GREATER TYLER AUTO AUCTION www.greatertyleraa.com 11654 Hwy 64W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 GM: Wayne Cook Tuesday, 5:00 p.m. $AVE : $200

Waco

ALLIANCE AUTO AUCTION WACO

www.allianceautoauction.com 15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 GM: Carmen Robinson (Sales Manager) Friday, 10:00 a.m. $AVE : $200

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feature

Garage Keepers Coverage — Misconceptions Answered

by Vincent Stazzone

Williams and Stazzone Insurance Agency

G

arage Keepers coverage, also known as Storage Location Insurance in Texas, is often misunderstood by dealers and even by many insurance agents. Below I have highlighted the five most common misconceptions we hear from your fellow car dealers.

Misconception #1: Garage Liability and Garage Keepers are the same thing.

This of course is not true. Garage Liability is the term that applies to the type of policy that a car dealer purchases and more specifically applies to the liability exposures associated with your business. Garage Keepers (aka Storage Location), on the other hand, provides coverage to non-owned autos (i.e. provides coverage to your customers car) left in your care, custody, or control. The November 2019

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coverage is typically Comprehensive and Collision covering the physical damage to the car.

Misconception #2: Only dealers that do service/repair work or do consignment sales need Garage Keepers coverage.

Many dealers may have Garage Keepers exposure.

Do you take cars in on trade? Do you test drive those cars prior to valuing the trade? If the answer is yes, then you need Garage Keepers coverage in the event you wreck the car during the test drive, as an example.

Misconception #3: Coverage should always be written on a Direct Primary basis.

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Be careful what you ask for. Garage Keepers Direct Primary will pay for damage to the auto regardless of fault. This could include all possible causes of loss (wind, hail, flood, theft, collision, vandalism, etc.).

Think through how a claim on your loss record would impact the future cost or even the availability of your business insurance. Generally speaking, the proper way to write this coverage is on a legal liability basis.

Meaning you have coverage for when you or your employee make a mistake (i.e. when you are legally liable).

Note: Direct Primary doesn’t always include weather perils (wind/hail/flood). The trend is to exclude this, check with your Texas insurance agent.

Misconception #5: Garage Keepers Storage Location will cover customers’ cars while on my tow truck, flat bed, or tow dolly.

Misconception #4: Customers’ belongings left inside the customer’s car is covered under Garage Keepers coverage.

Misconception #6: My biggest Garage Keepers exposure is the value of the single most expensive non-owned auto left in my care, custody, or control.

Generally speaking, Customers Goods is a separate coverage. Customer Goods coverage may enhance and complement Garage Keepers coverage and helps provide seamless protection of your client’s vehicle and their belongings. Not all insurance companies offer this coverage.

This can be complicated and the answer depends on your specific policy. You very well may need what is called On Hook coverage (also referred to as Garage Keepers Legal Liability in Texas). Be careful when you are hauling or moving non-owned cars as part of your business!

The largest exposure a dealer has for Garage Keepers, even written on a Legal Liability basis, are cars kept inside the building, warehouse, showroom, or service bays. Think about it — three non-owned cars inside a service bay overnight are all destroyed

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www.WSins.com 32

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by a fire. Another recent example is a dealer unit parked on the lot caught on fire and the fire spread to several customers units parked on the lot at the time.

Misconception #7: Garage Keepers Legal Liability is too expensive.

Garage Keepers Legal Liability is priced lower than you would expect. All the more reason to include the coverage on your insurance policy and to make sure you pick a limit that protects you properly.

Keep in mind that you need to pick a limit for each location as Garage Keepers coverage is typically not blanketed.

Vincent Stazzone Williams and Stazzone Insurance Agency Questions can be directed towards 800-868-1235 and info@wsins.com.

Please Welcome Our Newest TIADA Members DEALER MEMBERS A Better Bid TX LLC Alex Miles . . . . . . . . . . . . . . . . . 16699 Collins Ave, Sunny Isles Beach, FL 33160 ACL Motors Michael Lapp . . . . . . . . . . . . . . . . . . . . . 2407 S Congress Ave, Ste E112, Austin, TX 78704 Best Deal Auto Sales - Branch Guillermo Munoz . . . . . . . . . . 6498 Alameda Ave, El Paso, TX 79905 Best Deal Auto Sales - Main Guillermo Munoz . . . . . . . . . . . . 6915 Alameda Ave, El Paso, TX 79915 Blakestone LLC, DBA Diamond Automotive Group Michael Stone . . . . . . . . . . 2507 SW Loop 410, San Antonio, TX 78227 Brothers Auto Sales Ervey Balderas . . . . . . . . . . . . . . . . . . . . . 2482 Indio Hwy, Eagle Pass, TX 11111 CARRAC Albertha Lewis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7400 Harwin, Ste. 284, Houston, TX 77036 Dallas Auto Center, Inc. Arman Khach . . . . . . . . 3211 Commander Dr. Ste 120, Carrollton, TX 75006 DAN Motors Perla Schwartzman . . . . . . . . . . . . . . . . . . . . . 707 W. Holdebrand, San Antonio, TX 78212 DC Auto Alejandro Sanchez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 US Hwy 183 S., Austin, TX 78741 Dealermart LLC Eduardo Hernandez-Ares . . . . . . . 2633 S. Padre Island Dr., Corpus Christi, TX 78415 Gardea Auto Group Corp Ricardo Gardea . . . . . . . . . . . . . . . . 6975 Alameda Ave, El Paso, TX 79915 Henson Automotive Group, LLC Richard Henson . . . . . . . . . . . . . . . . . PO Box 787, Gilmer, TX 75644 JM Auto Import LLC Juan Arias . . . . . . . . . . . . . . . . . . . . . 5623 Babcock Rd., San Antonio, TX 78240 Juicy Motors Denise Jones . . . . . . . . . . . . . . . . . . . . 2744 S. Padre Island Dr, Corpus Christi, TX 78415 Kike Auto Sales Enrique Castillo . . . . . . . . . . . . . . . . . . . . . . . . . . 8500 Lava Hill Rd, Austin, TX 78744 MEMAS Enterprises / Frankie’s Auto Repair & Sales Frank Markantonis . . . . . . . . 2004 Sul Ross St., Houston, TX 77098 Mendoza Auto Sales Gerardo Mendoza . . . . . . . . . . 2905 E Business Highway 83, Donna, TX 78537 Mozo Auto Alonzo Simmons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9305 Caliente Dr, McKinney, TX 75072 Mud Town Motors LLC Jamison McCormack . . . . . . . . . . . . . . . . . . . 1311 N. Main, Temple, TX 76501 Prestige Cars of Texas Fred Hajivandt . . . . . . . . . . . . . . 13044 Nacogdoches, San Antonio, TX 78217 R & L Auto Sales Eremlinda Paz . . . . . . . . . . . . . . . . . . . . . . . . . . P.O. Box 599, San Benito, TX 78586 RA Auto Group Alex Chavira . . . . . . . . . . . . . . . . . . . . . . . . . . 6900 Gateway Blvd E., El Paso, TX 79915 RG Auto Sales Rafael Gonzalez . . . . . . . . . . . . . . . . . . . . . . . . . . . 1391 Main St, Eagle Pass, TX 78852 RightDrive Jonathan Welsh . . . . . . . . . . . . . . . . . . . . . . . . . . 7348 Alameda Avenue, El Paso, TX 79915 Thorpe Logistic Carriers, LLC Michael Thorpe . . . . . . 11112 Highway 290 West, Brenham, TX 77833 Tristan Auto Sales Adolfo Tristan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7198 Alameda, El Paso, TX 79915 Trust Motor Company Jalal Harmouch . . . . . . . . . . . . . . . . . . 9501 Telephone Rd, Houston, TX 77075

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ATTENTION STUDENTS!!!

$1,000

Marvin Norwood Scholarship DEADLINE

May 11, 2020 {Applications and/or any required documents received after May 11, 2020 will NOT be accepted.} Criteria and Guidelines 1. Each applicant must be entering or currently enrolled in an accredited college or a trade school. Proof of enrollment must be included with this application.

Date: Name:

DOB:

Address: City:

State:

Zip:

Email: (You will received email confirmation of receipt.)

Telephone Number: High School Last Attended:

2. Each applicant must provide a letter from their TIADA member sponsor that includes the sponsor’s address and phone number.

Address:

3. Each applicant must complete the application form.

Date of Graduation:

4. A copy of high school transcripts is required for applicants who are college freshmen. If applicant is currently enrolled, provide college transcripts with official university imprint.

Other High Schools Attended (Names and Addresses):

5. Provide a detailed description of participation in any academic, honorary, civic or extracurricular activities in college. In addition, a detailed description of high school activities is required from college freshmen along with a college acceptance letter.

6. Compose an essay of no more than two typed, double-spaced 8 ½” x 11” pages. The essay should discuss the applicant’s relationship with their TIADA scholarship sponsor, current education goals and future aspirations as it relates to the applicant’s subject/training area.

7. Provide at least two (but no more than three) letters of recommendation, no older than one year, from college/high school faculty, employers or other appropriate sources (not related).

34

SCHOLARSHIP APPLICATION

City:

State:

Zip:

Dates of Attendance:

College(s) you are attending or plan to attend for admission:

Parents Name(s): TIADA Member Name (Sponsor): TIADA Member Company Name: TIADA Member Address: City:

State:

Zip:

Sponsor Signature Should you have any questions, please contact TIADA at 512.244.6060. Please return the completed application with all required documents to: TIADA Attention: Scholarship Applications 9951 Anderson Mill Rd. Suite 101, Austin, TX 78750

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feature

What if My Customer Drives for Uber or Lyft?

by Christopher Bean

TIADA Director of Dealer Compliance

I

ndependent dealers, especially buy-here pay-here dealers and related finance companies continue to struggle with protecting their collateral when customers elect to drive for Uber and Lyft. The two primary areas of concern are insurance claims (denials) and wear and tear (miles). Changes in technology for Transportation Network Companies (TNC), such as Uber and Lyft, often outpaces applicable laws and regulations. It is important for independent dealers to review their forms and procedures.

It used to be that most personal automobile policies would exclude coverage and deny claims for any vehicle used by a customer for “commercial use.” You’ve probably noted language in an auto policy using the following; “Public or Livery Conveyance Use — the transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service. This coverage is excluded under the personal auto policy (PAP).” The

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exclusions usually also include language prohibiting operation as a taxi or limousine. Generally, a taxi service, limousine, or delivery service would need a business auto policy (BAP).

Most retail installment contracts preclude the use of a related vehicle for commercial use.

It is important to review your contract exclusions and update where necessary. Something similar to the following may provide clarity on the subject; Commercial Use “I agree not to use the motor vehicle for transporting persons for a fee, or as a taxi, or in conjunction with a ride-sharing service such as Uber or Lyft, or similar transportation service.” Please note that it is unclear if an independent dealer can confirm TNC use and whether they can repossess a vehicle being used for Uber and Lyft purposes.

So, what about the personal automobile policy? As noted above, most auto policies generally exclude claims 35

The new state law requires TNC drivers to have 50/100/25 coverage when the app is on and they aren’t giving a ride and $1 million in coverage held by the TNC (i.e.

Uber or Lyft) when they are giving a ride. for damage to property unless the policy contains a “Rideshare Endorsement.” Texas changed personal auto policy coverage amounts with new policy endorsements for drivers operating for Uber and Lyft. Texas state law now requires Uber and Lyft drivers to obtain additional more liability insurance. As of January 1, 2016, Transportation Network 36

Companies (TNCs) and their drivers must have the additional insurance coverage in place when a ride hailing app is on, even if no one else is in the car.

The basic minimum liability coverage for Texas drivers is 30/60/25. The new state law requires TNC drivers to have 50/100/25 coverage when the app is on and they aren’t giving a ride and $1 million in coverage held by the TNC (i.e. Uber or Lyft) when they are giving a ride. See Texas Insurance Code 1954.051 and 1951.053.

Wait, $1 million dollars? That’s a lot of money. While dealers should always undertake steps to ensure that a customer’s insurance policy and coverage is in place, there may some possible steps for recovery for property damage if a claim is denied or a policy has lapsed for a customer

that is in an accident while operating a vehicle for Uber or Lyft. Part of the terms of service to operate for a Transportation Network Company is that valid 50/100/25 insurance coverage is in place. In fact, the TNC’s insurance is now considered “primary.”

However, there is a new stop gap in the customer’s insurance lapses and is involved in an accident. Texas Insurance Code Section 1954.054; “LAPSE OF OR INSUFFICIENT COVERAGE. “If an insurance policy maintained by a transportation network company driver under this subchapter has lapsed or does not provide the coverage required by this subchapter, the transportation network company shall provide the coverage required by this subchapter beginning with the first dollar of a claim against the driver.”

Can a dealer file a claim against a Transportation Network Company under Insurance Code 1954.054?

That is an interesting question for lienholders. The key question will hinge on whether the TNC “app” was on at the time of the accident, whether the driver was on the way to pick up a fare, and whether a rider was in the vehicle. With the everexpanding reach of Transportation Network Companies such as Uber and Lyft, this is likely to be a growing concern for auto dealers. Simply reviewing a customer’s insurance policy or declarations page might not be enough. Lienholders and secured parties should continue to evaluate their exposure to this expanding market.

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Contact us at the TIADA office at 512.244.6060 independent automobile or email ustexas if you need assistance. dealers association

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When ordering online, login with your TIADA username and password to receive the discounted rate. All prices include shipping. Orders are shipped in 3-5 business days. texas independent automobile dealers association

Attorney Michael W. Dunagan is the author of the two must-have books for every Buy-Here, Pay-Here dealer in Texas. Mr. Dunagan has been General Counsel to TIADA for over 40 years.

His law firm specializes in the representation of independent Texas car dealers.

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TIADA texas independent automobile dealers association

Become a TIADA Member Business Name: ____________________________________________ Select one:

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Contact Person: ____________________________________________ Address: __________________________________________________ City: _________________________________________ State: _______ Zip: __________________ County: _____________________________ E-mail address: _____________________________________________ Business Phone: _______________________ Fax: ________________________ Cell Phone: ___________________________________________ Dealer P Number: ___________________________________________

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Membership Dues: $499 New Member

Good through 12/31/2020.

Pay full amount today and receive the rest of 2019 for free.

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good through 12/31/2019.

Dues include NIADA and local chapter membership where applicable.

Who referred you to TIADA? __________________________________ Mailing Address (if different from above): __________________________________________________________ City: _________________________ State: _______ Zip: ___________

PLEASE INDICATE PAYMENT METHOD: Check or Money Order payable to TIADA Check # __________ Credit Card Card Number: __________________________________________________ Sec.Code: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Expiration Date: ____________ Monthly Payments - $41.58 per month Via Credit Card (Please enter card information above) Via Bank Draft (Authorization Agreement required - contact state office)

Mail or Fax Application To: TIADA Membership Services, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750 FAX 512.244.6218

www.txiada.org

512.244.6060

Dues are not deductible as charitable contributions for income tax purposes but may be deductible as miscellaneous itemized deductions, subject to IRS restrictions. It is estimated that 20 percent of your dues dollars is used for lobbying activities and is therefore not deductible.

November 2019

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43

Local Chapters resource guide

CORPUS CHRISTI G.R. Moore The Car Shack (dates announced at www.txiada.org)

EL PASO Ricardo Gardea Cars Plus Meeting – 3rd Friday (Monthly)

FORT WORTH Chris Templin Auto Land Meeting – 4th Thursday of Jan–May and Sep–Oct

HOUSTON Rudy Roudbari Sarco Enterprise Meeting – 2nd Tuesday (Monthly)

The TIADA Website: www.txiada.org Members can log in with their username/password and access our Dealer Member Director y, Legislative Action Center, Compliance Consultation Ser vice and much more. Register for all upcoming TIADA events online through the Calendar of Events, access our online membership application, find contact information for all our Local Chapters, and access many additional resources through our Knowledge Base.

Texas Department of Motor Vehicles 888.368.4689 www.txdmv.gov

Office of Consumer Credit Commissioner 800.538.1579 www.occc.state.tx.us

SAN ANTONIO

Texas Comptroller

Jose Engler Irving Motors Corp (dates announced at www.txiada.org)

NIADA

VICTORIA Dennis Schroller Victoria Autos Direct Meeting – 1st Monday (Monthly)

800.252.1382 www.window.state.tx.us 800.682.3837 www.niada.com

REPOSSESSIONS American Recovery Association 972.755.4755 www.repo.org or contact TIADA state office

FORMS Burrell Printing 800.252.9154 www.burrellprinting.com

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November 2019

behind the wheel

by Jeff

Martin TIADA EXECUTIVE DIRECTOR

‘Tis the Season

O

k, I will confess, it’s not my favorite time of the year but there is a lot I enjoy about this time of the year. Of course, I am talking about campaign season for our elected officials.

In one year, we will have the opportunity to go to the polls and vote for elected officials who will lead our country, state and counties for the next two, three and four years depending on the office they are running for. Sure, I am like everyone else. I get tired of the political advertising and the fundraising events but what I do enjoy is the genuine conversations you can have during this time. Most elected officials see this as a time to reconnect with you their constituent and it’s incumbent on you to take advantage of this time and visit with the candidates running for office.

Are you going to get a few minutes with the candidates running for president of the United States? Probably not.

But will the candidates running for state senate, state representative, county judge, commissioner, sheriff, constable or tax assessor-collector spend some time getting to know you? You bet!

I would even argue that the candidates running for local offices will have more impact on your business and our industry than the president anyway. These local candidates are interested in knowing more about you and your business so they can better represent you.

If you are not sure how to start this conversation, give me a call. I would be happy to help introduce you.

Thanks to Vicki Davis, Christina and Juan Sabillón for taking the time to meet the Montgomery County TaxAssessor Tammy McRae last month. Are you next?

...the candidates running for local offices will have more impact on your business and our industry than the president [of the United States].

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T e x a s

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November 2019

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