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Loss Control Tips For Car Dealerships

Operating a car dealership carries numerous challenges. After all, car dealership owners are responsible for providing customers with high-quality vehicles and promoting a positive work environment for their employees. What’s more, car dealership operations carry multiple liability, employee safety and property risks—all of which could lead to costly damages.

That’s why it’s critical to work with a specialist motor trade insurer and have proper loss control measures in place. This resource explains key risks car dealership owners must address and provides helpful strategies they can use to avoid possible claims.

Premises and General Operations Liability

The nature of car dealership operations poses various liability concerns.

First, having customers on the premises while potentially dangerous tasks are performed (e.g. hot work, the use of specialised tools and the movement of vehicles) could lead to serious hazards and subsequent injuries.

Second, selling vehicles to customers and providing maintenance or repair services for these vehicles could leave the dealership responsible in the event any customer experiences damages behind the wheel.

To minimise liability exposures, car dealership owners should follow these precautions:

Utilise signage to keep customers out of restricted locations on the property, such as areas where vehicle maintenance and repairs occur. Have customers stay in a designated waiting area when visiting the premises.
Keep all outdoor vehicle areas in good condition through regular inspections and maintenance. Make it a priority to repair cracks and potholes immediately, as these issues can cause tripping hazards and damage vehicles.
Consider a contract with a qualified, reputable snow and ice removal company to properly maintain outdoor vehicle areas throughout the winter.
Ensure customers are always accompanied by a trusted and competent employee (e.g. a salesperson) when walking through the outdoor vehicle forecourt.
Establish effective security measures for protecting all customer data (e.g. contact details, payment information and credit reports). Only allow employees to access this data on an as-needed basis.
Develop a courtesy car policy that outlines who is permitted to receive such a vehicle, how the vehicle can be used, and which party is responsible for any vehicle damages (if applicable)

As with any employer, car dealership owners must protect their employees from illnesses and injuries on the job. Especially in the scope of car dealership operations, safeguarding employees from common occupational hazards (eg flammable materials, dangerous chemicals, heavy equipment and moving vehicles) is vital to prevent potential incidents. As such, car dealership owners should implement these employee safety procedures:

Provide employees with adequate training before permitting them to accompany customers on vehicle test drives. In particular, employees should follow thorough protocols to help familiarise customers with their associated vehicles prior to test drives.
Require employees to select appropriate footwear for their specific job tasks. Employees who primarily work in outdoor vehicle forecourts should make sure they utilise slip-resistant, steel-toed boots. This footwear will help protect them from potential hazards in adverse weather conditions (eg rain, ice and snow).
Maintain Safety Data Sheets for any chemicals stored on the property. Make sure all chemicals are properly stored and accurately labelled. Educate employees on chemical hazards and best practices for preventing such hazards.
Evaluate workplace operations to determine employees’ personal protective equipment (PPE) needs. Specifically, if any vehicle maintenance or repair procedures are conducted on the property, employees may require various PPE—including safety glasses, gloves, face shields and specialised welding equipment.
Develop an effective respiratory protection programme for any employees who engage in car body operations on the property—namely, vehicle painting and spraying. This programme should include proper respirator selection processes, safety training requirements, fit testing measures and medical evaluations.
Ensure all vehicle lifts on the property are inspected regularly. Have damaged lifts taken out of service immediately to avoid related safety hazards.

Car Liability and Theft

Because car dealerships keep large quantities of vehicles on-site and permit both employees and customers to operate these vehicles, car liability and theft exposures are significant.

Losses stemming from vehicle-related accidents or theft can be financially devastating and lead to severe reputational damages.

To mitigate these exposures, car dealerships should uphold these protocols:

Adopt a policy that prohibits employees from using their mobile phones behind the wheel. This policy should also bar the use of hands-free devices, as this technology can still divert drivers’ attention from the road.
Require each customer to present a valid driver’s licence before permitting them to engage in a vehicle test drive. Equip vehicles with adequate dealership trade licence plates prior to test drives.
Make sure any employees responsible for conducting vehicle test drives possess acceptable driving records. Specifically, it’s important to check their driving licence information upon recruitment and annually thereafter.
Establish proper key control procedures for all vehicles. Only a few trusted employees should be given access to vehicle keys.
Equip all vehicle display ramps with anti-theft edges to deter potential criminals. These edges should measure at least 1 foot (3 metres) tall.
Arrange vehicles for sale in a way that will protect the most valuable cars from being stolen. High-value vehicles should be surrounded by other cars to make it more difficult for them to be moved.

Dealership Property Damage

Car dealerships face various property exposures—especially as they relate to fire and structural damage. Whether it stems from inadequate maintenance procedures or a lack of prevention protocols, property damage can cause significant interruptions and is often accompanied by costly repairs or replacements.

With this in mind, car dealership owners should consider these steps to limit property damage risks:

Install and maintain an appropriate fire detection system on the property.
Store a sufficient number of Class ABC fire extinguishers throughout the premises. Keep these extinguishers readily accessible and in good condition. Educate employees on proper fire extinguisher use.
Have adequate measures in place for storing and disposing of any oily rags used during vehicle maintenance and repair procedures. Because these rags can self-combust, they need to be stored in a metal, fire-resistant container with a self-closing lid. Consider a contract with a trusted and experienced professional to safely dispose of these rags in a timely manner after use.
Require any vehicle painting and spraying operations to be performed in a properly designed spray booth. This booth must be compliant with all applicable Fire Protection Association standards and any Health and Safety Executive (HSE) regulations. The booth should be equipped with explosion-proof wiring and lighting, allow for proper ventilation and possess adequate fire suppression features.
Train employees on how to safely clean up and dispose of flammable liquids. Instruct employees to perform these tasks promptly to minimise fire risks.
Designate areas where hot work (eg welding, torch cutting and grinding) can be safely conducted (if applicable). Such areas must be free of any combustible or flammable materials. Establish an effective hot work programme to reduce potential fire hazards when these tasks cannot be performed in designated areas.

Learn More

It’s vital for car dealership owners to utilise effective risk management measures to mitigate costly insurance claims and legal action. Doing so can offer many advantages—including greater customer satisfaction, fewer liability concerns, a safer work environment and a lowered potential for property damage.

While this resource outlines a range of loss control strategies, car dealership owners don’t have to navigate their risk management programmes alone. Working with a specialist motor trade insurance professional and risk management company can make all the difference.