When Do You Really Own a Vehicle?
Over the years that I’ve been active in the collector car hobby (and known to be an attorney), one of the most common issues I’ve been presented with is enthusiasts losing substantial sums of money when their uninsured vehicles were stolen or damaged shortly after they bought or (thought that they had) sold them.
I’ve seen numerous examples of this phenomenon: I know a gentleman who sold a Ferrari 308 GTB to a buyer a couple of towns away. The deal was that the seller would have the car shipped to the buyer, and the driver would hand over the title and pick up a certified check for the purchase price upon delivery. Upon the sale (i.e., making the deal), the seller removed his plates and cancelled his insurance. Of course, the car fell off the flatbed on the way to its new home. The buyer refused to take delivery (not surprisingly) and the seller was out the cost of repairs and the diminution in value. The towing company was arguably responsible, but their insurer denied the claim and took the position of “Sue us….we have attorneys on retainer for just this reason.”
I know of another case where the buyer of a car at auction had the car stolen from the auction company’s grounds almost immediately after the sale. In this case, the auction company took the position that the moment the gavel fell, the buyer owned the car and that he was responsible for paying for it whether or not it was stolen during his ownership. There are myriad other examples, and in many of these cases, the damaged party is uninsured and left (at best) with a claim against the shipper, auction company, etc., which will be expensive and time consuming to pursue if successful.
The key to avoiding these types of losses is to understand exactly at what point you begin to own a vehicle, and at what point you cease to own it (upon sale, etc.). Obviously you should insure a vehicle immediately upon owning it, and for the entire period that you own it, in case a loss occurs.
Generally, you begin to own a vehicle (and have an insurable interest in it) when you receive the title for the vehicle and take possession (constructive or actual) of it. That being said, there are other circumstances that can either cause title to pass or create an enforceable purchase contract (being the winning bidder at an auction, signing a buy/sell agreement), so it’s wise to purchase your insurance coverage from a company that will cover any vehicle you own from the moment you own it, even prior to notifying them, so long as you notify them in a specified time period and also to ensure that you do notify them as soon as is practicable after purchasing or contracting to purchase a vehicle. When in doubt, one should err on this side of notifying their carrier of a purchase too soon rather than too late.
The opposite is true upon sale. Even though you may have a binding contract for the sale, the vehicle should remain insured until it’s physically delivered to the buyer, the tile is physically passed to the buyer and the purchase funds have cleared. This will help protect the seller from a circumstance where the vehicle is damaged or stolen before the transaction is completed (falls off the truck during delivery, etc.).
I doubt there is any question in the mind of any enthusiast that it makes sense to be insured against loss for any collector vehicle they own. Losses are unpredictable, however, and they can (and do) occur immediately upon the commencement of ownership (and therefore risk of loss) or immediately before title passes to the new owner. It is therefore of paramount importance to ensure that insurance coverage is in place from the moment of purchase to the completion of sale.
Alex Leventhal is an attorney and car collector living in New York City. His early practice experience included the representation of new-car dealers and dealer groups engaged in complex transactions, as well as other merger and acquisition business. Alex currently owns a Ferrari Berlinetta Boxer 365 GT4 and a Dino 308 GT4, along with an Aston Martin V-8 Vantage and other European collector cars. He’s also director of the Aston Martin Club of North America.