Common Legal Issues In the Automotive Sector
One of the most important benefits of automobile ownership is freedom. However, this freedom comes with responsibility. In fact, many common legal issues accompany car ownership.
Here are some common legal issues that you might run into that relate to owning and driving a car:
Getting a Driver’s License
In many parts of the country, many teenagers forego getting a driver’s license when they turn 16. A few reasons a 16-year old might skip getting a driver’s license include:
- Cost: The cost of getting a driver’s license includes the application fee, the increase in premiums for the family’s auto insurance coverage, and, depending on the location, the tuition for a driver’s training course. For many young drivers, these costs exceed their earnings.
- Uninsurable: If a young driver has violations for driving without a driver’s license or DUI, insurance companies may refuse to insure the driver.
- No need: In major cities, many families do not own a car and rely on public transportation.
- Not ready: Some parents feel that their children are not prepared for the responsibility of driving or are physically unready to drive.
Of course, the primary reason to get a driver’s license is to avoid a few common legal issues like avoiding an unlicensed driving violation and having state-issued ID. Since ID is necessary for everything from cashing a check to getting a library card, having a driver’s license is useful even if you do not plan to drive.
Automotive insurance plans vary widely in both the coverage offered and the premiums charged. Some of the insurance terms you should be familiar with as you shop for auto insurance include:
- Insured: Each driver in the same house is usually required to be listed on the insurance policy. The main policyholder is the insured and the other drivers, such as a spouse or child, is an additional insured.
- At-fault insurance: An at-fault insurance state requires the insurance company for the driver found to be at fault for an accident to pay for the damages. Although at-fault insurance can help good drivers maintain low insurance premiums, disputes about fault after an accident can slow down claim payments.
- No-fault insurance: A no-fault insurance state requires each insurance company to pay for the damaged incurred by its insured regardless of who was at fault. The benefit of no-fault insurance is that claims can be paid more quickly because the insurance companies do not need to haggle over fault. Moreover, most no-fault insurance states allow an insured to opt out of no-fault coverage and pursue a personal injury claim against the other driver if the damages exceed a statutory amount.
- Liability coverage: Insurance coverage that pays for the injuries to another person if you cause an accident. This coverage is usually required under state law.
- Medpay coverage: Insurance coverage that pays for your injuries regardless of who causes an accident. This coverage is optional.
- Collision: Insurance coverage that pays to repair your vehicle after an accident, regardless of fault. Collision insurance will even cover damage to your vehicle for a single-vehicle accident, like running off the road or hitting a lamp post.
- Comprehensive: Insurance coverage that pays for any other loss or damage to your vehicle, such as animal collisions, theft, vandalism, fire, or natural disaster.
Two common legal issues that arise when dealing with insurance companies are that you or a driver in your home is uninsurable or a claim is denied after an accident.
A driver might be uninsurable if the driver is deemed to be high-risk due to a driver’s license suspension, a major accident, or a history of traffic violations. While you might be able to negotiate something with the insurance company, in many cases the only way to overcome denial of coverage is to wait a period of time, such as three years, before trying again.
A claim might be denied for a variety of reasons, but the most common is that the insurance policy does not provide coverage for the claim. An insurance policy is a contract between you and the insurance company. The policy outlines the coverage. If an accident does not fall squarely within the coverage, the insurance company is not contractually obligated to pay the claim.
For example, if your policy includes liability coverage of $30,000 and you cause an accident that causes someone an injury that requires $50,000 of medical treatment, the insurance company will pay up to $30,000 of the damages and you will remain on the hook for the remaining $20,000.
Buying a Used Car
When you buy used cars, you will almost always pay less than you would have paid for a new car.
However, you should be prepared for a few common legal issues including:
- As-is condition: You need to thoroughly inspect and test a used vehicle before you purchase it because it is usually sold in as-is condition. This means that if the car has a problem, the buyer — not the seller — is responsible for fixing it. To minimize your risks, you should consider having the vehicle inspected by a mechanic before buying it.
- Fraud: The main exception to “as-is condition” is if the seller took active measures to conceal the problem or lied about it. For example, if the seller altered the odometer, the seller might have committed criminal fraud. Criminal fraud can be punished with a fine and jail time, depending on the amount involved in the fraud. All told, fines, legal fees, and bail bonding services can cost a fraudster several thousand dollars.
- No manufacturer warranty: Most used cars are not subject to a manufacturer’s warranty. This means that if the car is defective, you will need to pay for repairs rather than receiving free warranty repairs. The only exception is if the vehicle is subject to a recall. If a vehicle is recalled, repairs are usually handled for free. However, the recall notice is usually sent to the original purchaser and you probably will not be notified of the recall as a subsequent owner.
- Title: Ownership of a vehicle is represented by the vehicle’s title. Buying a vehicle without the title is very dangerous because you could be buying a stolen vehicle or buying the vehicle from someone without authority to sell it. For example, a seller might be a relative of the owner who is selling the car because it was left on the seller’s property. If you buy a car without a title, you might lose the vehicle to the real owner, leaving you without a vehicle or the money you paid for it.
Buying a New Vehicle
Most new vehicles will avoid common legal issues involved in a car purchase. Dealers are usually well prepared with all the paperwork necessary to transfer ownership and arrange financing of the vehicle. However, this does not mean that problems will not arise in a few rare cases. Some common legal issues surrounding new vehicles include:
- Defective vehicles: A manufacturer is legally liable for injuries caused by vehicles that have a design defect, manufacturing defect, or warning defect. A design defect is a problem that is inherent in the vehicle, such as a vehicle that is too high for its wheel base so that it is prone to rollovers. A manufacturing defect is a problem that arose when the vehicle was made that renders the vehicle dangerous. For example, tires with treads that separate because they were not cured at the right temperature have a manufacturing defect. A warning defect occurs when the buyer is not warned of a known problem, like a hot surface under the hood.
- “Lemons”: A lemon is a new vehicle that has recurring or chronic problems that require auto repair services. Most states have lemon laws, although their terms vary. However, the purpose of a lemon law is to go beyond the manufacturer’s warranty and require the dealer to replace the lemon or refund the buyer’s money under certain circumstances.
- Buyer’s remorse: In most cases, a deal is a deal and you cannot return a new car after you sign a purchase agreement. However, under a few circumstances, a dealership might agree to cancel the contract and take the car back. One situation would be fraud. If the salesperson made misrepresentations during the sale and you can prove it, the dealer might prefer to cancel the sales contract than fight with you. Another situation is where your financing falls through. A dealer might prefer to cancel the deal than take a loss on the car when it has to be repossessed.
Financing a Car
Many buyers need financing to afford a car. Whether the financing comes from a bank or a dealership, financing is a loan that is enforced with a finance agreement. In a typical finance agreement, the vehicle that you purchase serves as the collateral on the loan. This means that a vehicle that is financed belongs to the lender until the loan is paid off. However, as long as the loan payments are current, the lender only holds onto the vehicle title and allows you to possess and use the vehicle.
This arrangement can give rise to a few common legal issues, including:
- Repossession: If you default on an auto loan, the lender is usually entitled to repossess the vehicle. In other words, since the lender is the legal owner of the vehicle, it is entitled to take possession of the vehicle if you breach the finance agreement. If you conceal the vehicle from the lender so it cannot be repossessed, you can be arrested in some states for fraud or theft. In most cases, losing the vehicle ends the collection efforts but hiding the vehicle exposes you to collection fees, jail, fines, and bail fees from bail bond agencies.
- Registration and title: When you register the vehicle, you will be required to identify the lien holder on the title. The title with the lien holder’s name will be held by the lien holder until the loan is completely paid. Only at that time will the lien holder mail the lien release and the title to you so you can re-title the vehicle in your name without the lien holder.
- Insurance: You will be required to insure the vehicle at your expense and name the lender — also called the lien holder — as the insurance beneficiary. This means that if you get into an accident and the car is damaged, the insurance company pays the lender rather than paying you. However, any insurance payments for injuries that you sustained will go to your personal injury lawyer so you can use them for your medical treatment and lost wages.
Potential Criminal Exposure
Although most of the common legal issues surrounding car ownership are civil issues, some situations can implicate criminal laws. For example:
- Stolen property: If you knowingly possess a vehicle you know to be stolen, most states can prosecute you for receipt of stolen property. If you participate in the theft, you can also be prosecuted for larceny. If you acquired the vehicle through violence or a threat of violence, you could be prosecuted for robbery. If the vehicle was acquired through the knowing use of false representations, you could be prosecuted for fraud. If you had to break into a garage or storage unit to steal the vehicle, that could constitute burglary.
- DUI: DUI charges can be very costly. Law enforcement will likely arrest you after a traffic stop if they believe you are intoxicated with drugs or alcohol. Your vehicle will likely be towed and impounded and your driver’s license will probably be suspended. So, in addition to jail and fines, you will probably need to pay for bail, a criminal defense lawyer, an impound and storage fee, and a fee to reinstate your driver’s license.
- Road rage: Accidents happen. However, if you deliberately cause an accident or act with recklessness, you could be arrested for assault or homicide, depending on the condition of the victim. This means that you might be sued by an auto accident lawyer and also prosecuted by the state, resulting in money damages, fines, and jail time.
Potential Civil Exposure
When you get into an auto accident, most states require the insurance companies to allocate fault and make payments in accordance with the allocation. So, for example, if you have $10,000 in damages and you were only 10% at fault for an accident, the other driver’s insurance company will typically be required to pay you $9,000.
However, under some circumstances, you will need a personal injury attorney to help you resolve a few common legal issues and receive compensation for your damages. A few of the common legal issues you might encounter in a personal injury claim include:
- Liability: Most personal injury cases involve negligence. Negligence just means that a driver failed to exercise reasonable care. For example, running a stop sign or speeding are examples of negligence.
- Damages: An insurance company might dispute that you were injured or the severity of your injury.
- Causation: An insurance company can deny a claim if your injury is a pre-existing condition or was caused by a sports mishap rather than the accident.
The U.S. has over 1.3 million lawyers. Most people will go through life without needing a lawyer. However, some common legal issues might arise when you buy and operate a car, including financing, insurance, and criminal issues.