Understand your shop liability

March 27, 2015
What an insurer will or will not pay for has no bearing on your legal responsibility to safely and properly repair a vehicle.

I was teaching a class in California recently, and a shop owner shared a story with me. He said a customer brought a car into the shop with obvious damage to two wheels and tires. The tires were damaged to the extent that the shop owner knew the tire cords – the metal or synthetic strands used on the inner lining of tires to give them strength –  could potentially be stressed or broken. When that happens, the air pressure in the tires can further deteriorate the cords and lead to a bubble on the outside of the tire – or worse yet, a blow out.

So the shop contacted the insurance company who agreed to pay only for the new wheels, not replacement tires. The shop explained the situation to the customer, saying it’s impossible to know how badly the interior structure of the tires was damaged. But the customer couldn’t afford two new tires, so had the shop leave the damaged tires on the car.

The shop wisely had the customer sign a hold-harmless agreement, noting that it recommended the replacement of the tires but the customer declined. According to the shop, several days after picking up the vehicle, the customer had a blow out of one of those tires and was badly injured when the car rolled over.

When the accident investigation found the cause was the tire, the shop was named in a lawsuit brought by the customer. The shop’s hold-harmless agreement protected it, but the insurance company ended up settling for a large sum of money.

Now I should say that I haven’t researched this story to validate whether it’s true or not. But whether it is or not is inconsequential to the point I’m using this story to illustrate. My point is this: When someone brings their vehicle to your shop and signs a repair authorization, that’s a contract between you and that customer. Who is paying for the repairs doesn’t impact that contract you have with that customer.

Too often I see shops try to use what an insurance company will or won’t pay for as an excuse for doing incomplete or improper repairs. They forget they have a contract with the customer that has nothing to do with what they negotiate with any insurer. The shop still has the liability related to fixing that vehicle properly – and I think some shops don’t take that liability seriously enough.

Most of the automakers have documentation about the welder and the types and sizes of welds you should use to install a replacement quarter panel, for example. When I ask in a class how many people believe they should repair the vehicle based on that OEM documentation, every hand goes up.

But then I ask how many have installed a used quarter panel on a vehicle. Usually at least half the hands in the room go up. But if you drill out the spot welds on that used quarter panel, you are going to have to use larger spot welds to cover that hole when attaching it to the vehicle. Is that a safe and proper repair? Or could that not alter the strength of that portion of the vehicle – which in turn could affect airbag deployment timing? So is that really a safe and proper repair? I would argue that it absolutely is not.

I’m not an attorney. I don’t know how much a hold-harmless agreement signed by a customer will really protect you. It’s something you should definitely discuss with your business attorney or insurance company.

But I do know your contract is always between you and your customer. If neither an insurer nor that customer is willing to pay for something that you know should be done to the vehicle as part of a safe and proper repair, that alone in no way relieves you from liability for not doing it.

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About the Author

Mike Anderson

Mike Anderson, a former shop owner, operates CollisionAdvice.com, a training and consulting firm. He's also a facilitator for DuPont Performance Services' Business Council 20-groups.

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