You buy a new car and bring it home, only to discover that it was damaged at the dealership. Does your car insurance policy cover this damage, or must the dealer pay for it? What happens if your car is damaged while it is waiting for work to be done at the dealership? Is this the dealer’s responsibility or is it your auto insurance company’s problem? What if someone at the dealership wrecks your car while test driving it? Whose insurance company must pay? Read on to discover the answer to these and other questions about dealer liability.

Your car is damaged before you pick it up from the dealership

Technically, you own your car from the moment you sign the papers; however, if the car is still in the dealer’s possession and it is damaged before you take delivery, in most states the dealer is responsible for payment of any damages to the vehicle. Another possibility is that the dealer may be liable no matter whose insurance company is involved, because the dealer sold you the car under the assumption that it is in certain repair before you pick it up. If the car is not in good shape, the dealer may have a contract problem in addition to the accident question.

Your car is damaged at the dealership when you leave it for repairs

Imagine that a mechanic is backing your car into a bay and accidentally hits a concrete wall, causing severe damage to your fender. Even though you have insurance coverage, it would be up to the dealer to pay for these repairs. This is because in most states the person who caused the damage to a car is liable for the repairs to that car, even if the other person has insurance. In no-fault states, you would probably still be covered because you were not operating the car at the time of the accident, so the dealer’s insurance would still have to pay for the damages.

You wreck your car on the dealership’s property

If you are driving your car and drive into one of the dealer’s cars, a building, or some other object, it is your responsibility to pay for your damage unless you can show that the dealer knowingly created a hazardous condition that should have been foreseen. In most circumstances, you will be responsible for any damages you cause, and this means that unless you have collision coverage on your car, you will be paying for these repairs out of pocket. Your property damage liability insurance will pay for the repairs to any of the dealer’s cars or structures you damage.

There are exceptions to these general rules, of course

Sometimes car insurance companies will do what is called a fifty-fifty split, or a 50/50. This usually occurs when someone like a dealer has auto insurance coverage for damage but there is a question of whose fault the accident is. This might be the case if, for example, you were told by a mechanic to back your car into an area and as he was directing you something happened and you backed into a wall instead. It might be the fault of the company’s employee for telling you to back your car up, or it might be your fault for failure to back correctly. In this case, the insurance company might ask for a 50/50 claim so that both companies bear half the responsibility for the accident.

To be sure that you have the right coverage for any incident, talk to your insurance agent about your current coverage. For example, if you do not have collision coverage, you are not protected against any damage you do to your car in an at-fault accident. Collision coverage pays for damage to your vehicle; your liability coverage pays only for damage to another person’s vehicle. Of course, if the other person or the dealership is at fault, then their insurance should cover your damage.

There are also cases where the at-fault person or company does not have insurance coverage. This type of situation is covered under your comprehensive or uninsured motorist coverage, depending on your state and your insurance company’s policy. In these cases, your insurance company will pay for your damage then pursue payment from the at-fault party. Most car dealerships will have insurance, but just to be sure it is not a bad idea to discuss what type of coverage the dealership has before leaving your car on the lot. Any dealership that cannot provide insurance information is one you should not be patronizing.