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Vehicles in the hands of subcontractors

20 June 2017

We are often asked by clients about the cover operating when they send off a customer’s vehicle to a subcontractor. Who pays if the car gets damaged?

There are effectively three policies which could potentially come into play in this situation:

Customer’s insurance

We stress to owners that they should always keep their own policy in force even if the car is going into long term restoration with the largest or most reputable restorer or dealer. There could easily be a problem with that custodian’s insurance e.g an inadvertent breach of a policy warranty could invalidate their policy and leave them without cover. Apart from professional storage companies we find that few traders have a specific contract with their customers and in the event of damage to the car they could if they wish avoid liability if they have not been negligent and the customers policy would have to operate.

Motor trader’s insurance

The trader’s policy covers vehicles which they own or which are in their custody or control. Their own vehicles will have full cover as will their customer’s vehicles against loss or damage irrespective of whether they or any of their employees are responsible for the loss. Occasionally a trader, to save premium, will only cover their customer’s vehicles in the event of their or their employee’s negligence so any loss would fall back onto the owners insurance unless he could prove negligence on the part of the trader.

These two variants of cover apply to the All Risks or Premises part of the policy. The Road Risks part of the cover is never subject to negligence mainly because establishing negligence is well-nigh impossible in many road accident situations like roundabout collisions.

Sub-contractor’s insurance

The cover under the main contractor’s trade policy is extended whilst the vehicle is in the hands of a S/C so that if the customers car gets damaged the main contractor can claim under their policy. However most S/C will also work on their own account and will have a trade policy the same as the main contractors and will cover cars in their custody or control.

In practise if the car is damaged in the hands of the S/C it would be usual for the claim to be met under that policy. If their insurance was found to be deficient in some way or they wanted to fall back onto the defence that they were not negligent, the main contractor could claim under his trade policy. The main contractor, at the risk of upsetting their customer, could also adopt this posture and then the claim would have to be picked up by the final safety net, the owners insurance. This all sounds very messy and it should never get to this stage as one of the trade policies should pick up the loss.

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