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Claims and Motor Vehicle Dealer Bonds




Recently, we have been receiving an increasingly higher number of inquiries regarding Motor Vehicle Dealers and Claims. Most have been questions about what exactly triggers a claim or what can be considered a valid claim. The following is a quick look at the different types of claims on these bonds, and what you need to know to protect your business and yourself from claims.

First let’s talk about what needs to be in place is order to file a claim. If a person wishes to file a claim, proof of a written contract between the claimant and the dealer must be shown.

Types of a valid contract would be, but not limited to:

  1. Bill of Sale
  2. Dealer agreement with an Auction House for a “promise to pay upon tender of good title”
  3. Cash deposit on a specific vehicle for a specific price
  4. Contract where a title is promised for payment
  5. Draft issued by Dealer

 Now there are many ways a dealer could default on any of the above mention contracts, but most statutes are also written in a way so general that almost anyone can file a claim simply because they were part of a chain of purchasers.

Example: A dealer tampers with an odometer and then sells that vehicle at an auction to another dealer. That dealer then sells the vehicle to a consumer who discovers the tampering. That consumer can file a claim on the original dealers bond that tampered with the odometer. It is important to note that there have been times where a claim has been paid even when the original dealer was no longer in business.

Other ways that a contract could end in default and subsequently a claim:

  1. Failure to honor a draft
  2. Failure to provide a vehicle or title as per the contract
  3. Dishonored check that was payment for a contract
  4. Failure to disclose a significant fact
  5. Odometer tampering
  6. Failure to follow a contractual promise

 It is important to understand that just about anyone who feels they were wronged financially due to negligence or fraud by the dealer can attempt to make a claim. While the sureties will do everything to defend you in a claim, if the bond does pay any claim, you as the dealer will have to repay all monies paid out. Another important thing to keep in mind, once a claim is paid it can become far more difficult to hold the bond, or renew in the future. Oftentimes if a renewal is possible, it is at considerable more expense than the previous issued bond rate.

It is with this in mind that we advise all persons acting as a motor vehicle dealer to do their best to avoid any dealings that could potentially result in a claim, and really go the extra mile to correct any problems with the injured party before a claim is made.

Should you have any questions regarding any information provided here, or questions about obtaining a dealer bond, please do not hesitate to contact our office anytime.




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