Injuries, and even incidents of death, continue to climb as recalls are an ever-escalating problem. As a result, litigators are paying attention and salivating at the prospect of big payouts from both OEMs and dealers. Do you have a target on your back?
In 2010, Brooke Melton was driving her 2005 Chevrolet Cobalt when it stalled while she was driving. Her father took it to the dealership to get fixed but only three days later it happened again. This time, Brooke’s car spun out, hydroplaned, hit an oncoming vehicle and rolled off the road into a creek 15 feet below, where sadly she died. The accident was blamed on GM’s ignition switch flaw.
In 2014, while driving a used 2002 Honda Accord recently purchased from a local dealership, Carlos Solis was involved in a low-speed collision. Sadly, the vehicle was sold to Carlos with an open Takata airbag recall. The vehicle was only slightly banged up, with damage to a bumper and driver’s side headlight. However, the collision was enough to set off the airbags in the vehicle and, while both Solis and the passenger were wearing seatbelts, when the vehicle came to a stop, Carlos’ brother noticed that Carlos was bleeding profusely from his neck. Carlos died in the arms of his brother at the accident location.
In 2016, a 17-year-old girl was driving a 2002 Honda Accord and, in a similar situation, was involved in a low-speed collision. Unfortunately, the collision was enough to set off her airbag which shoot shrapnel into her neck. She collapsed outside her car and bled to death at the scene.
What do these stories have in common? These families are all suing the parts manufacturers, OEMs AND the dealerships where these vehicles were purchased. And that’s not all — the family of the 17-year-old girl is suing EVERYONE that inspected the car since the recall was issued.
Yes, this is an awfully gruesome way to start an article. But it got your attention, right? The sad fact is these stories are only a small sampling of accidents that happened in vehicles with outstanding recalls. The lawsuits which followed sought to hold not just the parts manufacturer responsible, but also the OEM and the selling dealership.
For example, after more than ten deaths and over 100 injuries, the personal injury lawyers are circling with advertisements and dedicated websites reaching out to anyone injured by recalled airbags.
Is your dealership a sitting duck? As of June 2016, only eight million of the 70 million vehicles affected by the Takata recall had been repaired, according to Fortune.com. And don’t think that the Takata recalls are limited to Honda vehicles, because they are not. In fact, many manufacturers that acquired and installed Takata airbags are STILL installing these defective airbags. The logic is that, while these vehicles will have to be recalled in approximately seven years, there is currently a lack of supply of airbags from other sources, so this seemed like a valid solution. The justification? Vehicles with new airbags – even though they are faulty – have relatively little risk other than the fact that the risk increases with age. And, naturally, ceasing auto manufacturing for lack of an adequate safe airbag alternative would certainly devastate our economy.
Furthermore, the GM ignition switch recall and Takata airbag crisis are only two of many recall initiatives that are out there. Just because someone hasn’t been killed or seriously injured due to a certain recall, doesn’t mean it can’t happen and that your dealership is protected from litigation.
I think one key problem is a skewed perspective that this is purely a parts manufacturer and/or OEM problem. The fact is that this is a serious problem for EVERYONE. These deaths and injuries aren’t simply a manufacturer problem. This is clearly evident by the fact that most of families involved in the injuries and deaths are also pointing fingers at the dealerships responsible for selling and/or servicing these vehicles, with accusations of negligence.
While federal law requires that no new vehicle can be sold with an open recall, dealers still sell used vehicles with open recalls (including Takata). I can assure you that you are not protected by the mere fact that these defective airbags were made by Takata, or that the manufacturer installed them. In fact, I expect personal injury attorneys to converge on repair shops, UBER/LYFT, lube shops, independent pre-owned dealers and online listing services, (AutoTrader, Cars.com, etc.), essentially wherever there are deep pockets.
Politicians are paying attention and the NHTSA is very clear in its dissatisfaction with compliances percentages and the speed of repair completion.
This has now also spread to rental car agencies, which were recently impacted when the FAST Act law was put in place preventing rental car agencies from renting out vehicles with open recalls. With new cars and rental cars prohibited, it’s only a matter of time before used car sales will be prevented with any existing recalls.
Recalls are everywhere and consumers are agitated. When they do get injured, or even worse, death occurs, an army of personal injury attorneys is ready and waiting — actively soliciting legal services to get justice for these individuals and their families. And the entities they are looking to extract that justice from – in the form of monetary compensation – includes dealerships.
So how do you protect yourself in such an environment? It’s very simple. Go above and beyond to prevent the sale of ANY vehicle with an open recall to any customer, including wholesale vehicles. Think about that family suing every company that ever inspected their vehicle. If you wholesale a vehicle which ends up on another lot, then gets sold to a consumer who gets injured or killed, you could very easily be on the list of defendants when that lawsuit is filed.
In our litigious society fueled by personal injury attorneys promising justice in the form of monetary compensation, Takata and the OEMs of the world may be able to weather the storm and come out on the other side. Chances are good, however, that not many dealerships could take the financial blow that a large lawsuit judgment could bring.
Manufacturers are already warning dealers that they will not be responsible and will not assist the dealership in the event of any such lawsuit and have advised their franchised dealers not to sell these vehicles. So, dealerships who normally could rely on manufacturer support might just find themselves all alone. And all alone is expensive.
Many dealers assume that they are immune to a wrongful death or injury lawsuit simply because federal law prohibiting the sale of a recalled vehicle encompasses new car sales and excludes pre-owned vehicles. However, as any personal injury attorney can attest to, it is the
legal concept of “negligence” that is the basis for a suit. Regardless of the law, a skilled attorney would stand before a sympathetic jury to argue forcibly that the dealer, within a matter of minutes, could have uncovered a vehicle’s recall status prior to selling the vehicle to his or her client. Remaining within the letter of the law does not make you immune to a claim of negligence. You can own a pit bull legally, but you would be held negligent and liable if that dog escaped your yard and mauled a jogger. You don’t want to be the dealer on the opposite side of the argument. As the recall crisis grows, juries will become more sympathetic to consumer claims, forcing most insurance companies to settle claims out of court long before they ever test a sizeable jury award.
Consider analyzing the risks you are taking by continuing to sell vehicles with open recalls. Is this an expensive initiative to implement? Sure. Sitting on inventory waiting for parts to complete recall work can sting. However, the question isn’t whether it would financially affect the dealership, but rather is the risk of a large judgment one that you are willing and financially able to survive, versus another month’s interest on a floor plan.
Ask yourself what is the right thing to do for your customers and for your local community. You, your family and your employees and their families are also included in this, regardless of whether or not their personal vehicles have open recalls. 72 million other vehicles do and they are being driven right next to yours!
Recalls are going to be around for a long time and, regardless of whether your store is actively pursuing this work or not, it will be coming to your dealership. Therefore, it is very important to take this issue seriously and train your staff so that they are ready to handle these types of customers. By neglecting this segment of your customers, or not treating them appropriately, you risk losing customers and are creating potential liabilities for your dealership.
Risk mitigation is nothing new. Insurance agencies use complex algorithms to ensure that, in the long run, they collect more premiums than they pay out in claims. Take a lesson from them and do everything you can to shield your dealership from a recall-based lawsuit
Do the right thing and help your community to be safe. You will find that, even in the event of an unexpected lawsuit, just as in a compliance audit, the more due diligence you have done and the more consistent those efforts have been, the more likely you are to be let off the hook. And right now, the sharks are circling.
Join me in my session “On the Front Lines of the Consumer Recall Process” at the 22nd Digital Dealer Conference & Expo, where you’ll learn how to protect existing customers, win back lost customers, and find new ones with comprehensive recall management.
Author: Chris Miller
Chris Miller is President of Recall Masters, a leading provider of automotive recall news, data, training, and communications. Privately held and based in the San Francisco Bay area, the company is dedicated to helping automakers and their dealers expedite the repair of recalled vehicles and make the roadways safer for everyone. Christopher has more than 17 years of experience building software to automate marketing communications. He has worked with marquee brands including HSBC/Household Automotive, Washington Mutual, Residential Pacific Mortgage, ServiceMagic, Monumental Life Insurance, Mercedes Benz USA, BMW/Mini North America, Volvo North America, JP Morgan Chase, Wells Fargo, Moxy Solutions, and Costco Automotive Group.