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Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New Car

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  • 05-31-2015, 11:29 AM
    DanM
    Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New Car
    Hello, my question involves a consumer law issue in the State of Texas.
    I am in Houston and I bought a new car 2015 on Memorial day and it got flooded 30-45 min after I left the dealership. The dealership had copies of my insurance policy and they were aware that I had only liability on the old car that I used for the trade-in. I asked about it and I was told by the finance manager that I had a grace period of 24 hours to do the changes to a full coverage. Texas laws only require liability, however any lender (the new car was financed through Chase) requires the buyer to have full coverage. I have spoken with several people that work in other well-known dealerships and insurance agencies and everybody is surprised that this dealership allowed the buyer to leave with the new car without full coverage and lied about a 24 hour grace period to get it. No one expected an accident and I left the dealership around 9pm, started driving home and the car got flooded. I was never required to change from liability to full coverage before leaving the dealership, as it should had happened. The contract required full coverage and the manager implied that I had it at that moment I was leaving (grace period of 24 hours). The new car has been towed back to the dealership, the dealership has the down-payment-20% of the value of the new car, and the trade-in.

    I have been told that I should not have any contractual obligation with the dealership because even if the contract was signed, it was never culminated because the buyer didn’t fulfill the full coverage requirement and the contract was made under fall assumptions. Could I sue the dealership for legal liability (intentional tort or breach of contract)) and negligence? Do you know of any case similar and any ideas of what should I ask from the dealership in regards compensation? I want to be free from that contract, get the down payment back and the value of the trade-in or the old car. I am aware that if I don’t have a car that I could trade-in next time I buy a new car, the taxes will be higher, so I will be in a disadvantage and I should be able to get back the old car or be compensated for all of that.

    Thanks a lot for any help and guidance with this case!!
  • 05-31-2015, 11:59 AM
    Mr. Knowitall
    Re: Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New
    Quote:

    Quoting DanM
    View Post
    I asked about it and I was told by the finance manager that I had a grace period of 24 hours to do the changes to a full coverage.

    That statement could mean a number of things. For example, it could mean that your insurance company would cover you under your existing policy, as long as you made a timely report of the purchase; or it could mean that under your loan contract your lender would not deem you to be in breach of contract as long as you obtained full coverage within 24 hours.

    Does the finance manager recall making the statement? If so, what is his explanation of what he meant?
    Quote:

    Quoting DanM
    I was never required to change from liability to full coverage before leaving the dealership, as it should had happened.

    The dealership knew that you had the minimum level of insurance required by law. I'm not aware of anything that would require them to ensure that you obtained any additional insurance, even if your loan contract required you to purchase additional insurance.
    Quote:

    Quoting DanM
    The contract required full coverage and the manager implied that I had it at that moment I was leaving (grace period of 24 hours).

    There's an enormous difference between stating something and implying something. When you rely on inference, you substantially increase the chance of a misunderstanding or miscommunication.
    Quote:

    Quoting DanM
    I have been told that I should not have any contractual obligation with the dealership because even if the contract was signed, it was never culminated because the buyer didn’t fulfill the full coverage requirement and the contract was made under fall assumptions.

    If you heard this from your lawyer, who has fully reviewed the contracts and facts of the case, then it's reasonable to work with your lawyer to try to resolve the matter. If you heard this from your buddy, your neighbor, a random stranger... as would appear to be the case... it isn't a helpful analysis.

    The biggest problem with seeking rescission, even if we assume a basis for rescission, is that when the contract is unwound the parties are to be restored inasmuch as possible to their original position. You can't do that without repairing the car.

    If you can clarify what the manager said, and what he admits to having said (ideally in writing, to limit later denials), that could be helpful in analyzing a potential legal claim.
  • 05-31-2015, 12:31 PM
    adjusterjack
    Re: Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New
    Quote:

    Quoting DanM
    View Post
    The dealership had copies of my insurance policy and they were aware that I had only liability on the old car that I used for the trade-in.

    The reality of your car insurance is that you had automatic coverage for a newly acquired vehicle the moment you acquired the vehicle BUT only for the same coverages as the vehicle already on the policy.

    Here is a word for word quote from a Texas auto insurance policy:


    “Your covered auto” means:
    1. Any vehicle shown in the Declarations;
    2. I. Any of the following types of vehicles on the date you became the owner:
    a. a private passenger auto; or
    b. a utility type vehicle, with a G.V.W. of 25,000 lbs. or less, of the pickup body, sedan delivery,
    panel truck, van type and multi-use type, not used for the delivery or transportation of goods,
    materials or supplies other than samples; unless, (1) the delivery of goods, materials or supplies
    is not the primary usage of the vehicle, or (2) used for farming or ranching.
    II. This provision (G.2) applies only if you:
    a. acquire the vehicle during the policy period; and
    b. notify us within 30 days after you become the owner.
    If the vehicle you acquire replaces one shown in the Declarations, it will have the same coverage as the vehicle it replaced. You must notify us of a replacement vehicle within 30 days only if you wish to add or continue Coverage for Damage to Your Auto.


    Therefore you do not have coverage for the flood damage.

    Whether or not you can rescind your purchase or have any recourse against the dealer depends on what's written in the purchase contract and the loan agreement and NOT on what you were "told."

    My highly educated guess is that, ultimately, you will be stuck with the car and have to pay for the repairs yourself.
  • 06-04-2015, 04:40 PM
    Who'sThatGuy
    Re: Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New
    I was told (from the village idiot "I give credit to Mr.K for this term") that in order for a vehicle to leave a dealership that vehicle "must" have the proper coverage (full coverage) in order to leave the dealers property. Weather are not that is a contract between the bank and the dealer, or state law, I don't know.

    But OP should check with the finance company and see what is in the contract between the dealer and the finance company.

    If the dealer were to make sure that the vehicle had the proper coverage before leaving its property and failed to do so, then maybe the finance company will reverse the loan. That will still leave the dealer with the 20% deposit and the trade in, but it will relieve OP of a huge hit on his credit rating if he decided to stop paying the loan.

    If the finance company reversed the loan, then OP could sue the dealership under the term that it breached a contract with the finance company which in return left OP with a loss.
  • 06-05-2015, 07:48 AM
    Mr. Knowitall
    Re: Dealership Misled Car Buyer About Having 24 Hours to Obtain Full Coverage for New
    Even if we presuppose such a contractual duty, which almost certainly does not exist, the bank would have to convince the dealership to return the payment for the car, which isn't at all likely to be successful, or sue the dealership for the money, which would put off any resolution into the relatively distant future.
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