Review Your Lemon Law Coverage
A recent case serves as a good reminder about the importance of reviewing your lemon law insurance policy. In R&B Auto Center, Inc v. Farmers Group,
Inc., 140 Cal. App. 4th 327 (4th Dist. 2006), R&B, a used car dealership, sued its insurer after the insurer sold it a Lemon Law policy that only covered new cars. R&B had specifically asked for coverage
that would extend to “title branded” vehicles. The Lemon Law generally applies to new cars only. However, a customer who purchases a used vehicle that has been “title branded” (repurchased by a
dealership because of a Lemon Law claim and then sold again as used) may also have a claim under the
Lemon Law. In R&B’s case, R&B had been sued by consumers who purchased a used title branded car from R&B.
As it turned out, the insurer refused to defend and indemnify R&B when it was sued under the Lemon Law. The policy the insurer sold the dealership did not cover “title branded” vehicles. Alarmingly, it seemed the agents who sold R&B the policy were not familiar with the coverage it provided. R&B was forced to defend itself in the suit and ultimately settled the Lemon Law case for almost $70,000. R&B then sued the insurer for negligence, intentional misrepresentation, breach of contract, reformation, bad faith, breach of fiduciary duty and
The R&B case demonstrates that understanding the scope of your policy coverage requires a detailed review of the written policy itself. R&B found out the hard way that dealerships should never simply rely upon the insurer’s assurances about what the policy covers.
One of the most captivating things about California is its cultural depth and diverse population. But this also creates a potential complication for negotiating and eventually documenting your sales with customers who speak English as a second language.
The State legislature determined, based upon 2000 U.S. Census figures, that a staggering 39% of California’s population speaks a language other than English in their homes. Because of this, the State has established protections for these consumers when they negotiate certain contracts in a language other than English. Contracts for the sale or lease of vehicles are included within these protections.
In short, the law requires that if your dealership “primarily” negotiates a lease or sale in Spanish, Chinese, Tagalog, Vietnamese, or Korean, then you must provide the consumer with a copy of the sales contract in that foreign language before the customer signs the English version. “Every term and condition” of that sales contract must be included in that translation. So, for example, if your salesperson negotiates a vehicle sale in Chinese, the customer must be provided with Chinese translations of every term and condition of the sales contract prior to signing the English version.
In fact, the dealership must provide the translation regardless of whether the customer even asks for it!
In addition, the law requires that if you negotiate the contract in a language other than English, that you post a notice in the negotiated language in the same place where the sales contract is executed. The notice must alert the customer to the fact that the dealership is required to provide the translated terms and conditions of the sales contract.
BMKG monitors the industry to see how dealerships are being targeted by attorneys who profit from bringing consumer fraud cases. One such law firm recently began advertising that the failure to provide these translations is a “common auto fraud issue.” In light o f t h i s h e i g h t e n e d s c r u t i n y , i t m a k e s
sense for you to work with your legal counsel to make sure your dealership has the proper translations available and the proper notices posted.
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