"Who Owns the Car When the Customer Drives Off the Lot? "
By Thomas B. Hudson
Sometimes “who owns the car?” can be a critical question. One of those times is when a customer buys a car from a dealership and promptly has an accident resulting in injuries to himself or herself and to other parties. Who's on the hook? Or, more accurately, whose insurer is on the hook?
Wayne Chandler bought an Acura Integra from J.D. Byrider, signing a retail sales contract and a Kentucky application for title and registration on the car. Chandler presented the dealer with proof of insurance on his current vehicle. The insurance policy was issued by T.I.G. Insurance Company.
Byrider gave Chandler possession of the Acura even though it had yet to receive the actual title on the vehicle from the previous owner. Byrider received the Acura title on January 30, 1997 and presented the title transfer documents to the county clerk on February 4. On January 22, one day after he bought the car, Chandler was involved in an accident while driving the vehicle.
T.I.G. later filed a declaratory judgment action, arguing that it had no liability to the injured party in the other car because Chandler failed to add the Acura to his policy within 30 days of his purchase, as required by his policy. T.I.G. also argued that Byrider, not Chandler, was the owner of the vehicle at the time of the accident.
The trial court initially ruled that Chandler was the owner of the vehicle for insurance liability purposes, but then it reversed itself and found that Byrider was the owner of the vehicle. The intermediate appellate court affirmed the trial court's judgment that Byrider owned the car at the time of the accident. In this decision, the Supreme Court of Kentucky reversed the lower courts, finding that Chandler owned the car at the time of the accident. The Kentucky high court observed that both lower courts failed to take into account a 1994 revision to KRS 186A.220. The 1994 revision changed the statute to read as follows:
When he assigns the vehicle to a purchaser for use, he shall deliver the properly assigned certificate of title, and a properly executed vehicle transaction record, to such purchaser, who shall make application for registration and a certificate of title thereon. The dealer may, with the consent of the purchaser, deliver the assigned certificate of title, and the executed vehicle transaction record of a new or used vehicle, directly to the county clerk, and on behalf of the purchaser, make application for registration and a certificate of title. In so doing, the dealer shall require from the purchaser proof of insurance as mandated by KRS 304.39-080 before delivering possession of the vehicle. (emphasis by court).
The revised statute created an exception to the general statutory scheme that makes the title holder the owner of a vehicle for insurance purposes, the court said, but, the car dealer can only take advantage of the exception by making sure the buyer has valid, current insurance coverage. Pursuant to the revised statute and the fact that Byrider verified Chandler's insurance, the Kentucky high court determined that Chandler was the owner of the vehicle for purposes of liability insurance at the time of the accident. The court remanded the case to the trial court with instructions to reinstate the summary judgment in favor of Byrider.
The lesson here? Well, first, you should be informed and have knowledge of your state's laws governing “who owns the car?” Talk with you lawyer about it; talk with your insurance agent too. Then, as it appears Byrider did in this case, train your personnel to rigorously follow whatever procedures – such as checking for insurance – may be necessary in your state to complete the transfer of ownership of the car for insurance purposes. Auto Acceptance Corporation v. T.I.G. Insurance Company , 2002 WL 31663298 (Ky. November 21, 2002).
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For more information about Thomas Hudson and Spot Delivery® go to www.spotdelivery.com
or contact: tbhudson@hudco.com
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