Walk your lot on a typical day and you’ll see why dealerships are among the most complex retail environments in Canada. You’ve got high-value inventory sitting in the open, customers moving freely through showrooms and service bays, employees operating equipment, and dozens of vehicles moving in and out daily—often driven by people with minimal documentation.
After working with automotive, truck, and powersports dealerships across the country, I can tell you: the biggest risks aren’t the obvious ones. It’s the “we thought that was covered” claims that do the real damage—especially when garage liability policies are outdated, fragmented, or incomplete.
Let’s walk through three of the most commonly overlooked dealership liability exposures, and how to reduce them before they become six-figure problems.
1. Test Drive & Courtesy Vehicle Liability
Test drives are a basic part of your daily operation—but your insurance program might not treat them that way.
We regularly review garage policies that don’t properly cover test drive scenarios, especially when:
- The driver isn’t an officially documented prospect
- The drive occurs outside standard business hours
- A sales rep allows a vehicle to leave the lot without full waiver protocols
- Staff or contractors drive for personal or off-record purposes
Courtesy vehicles (also known as loaners or service cars) are just as risky. If a service customer takes a courtesy vehicle and gets into an accident—will your policy respond, or will it point to exclusions?
Many insurers apply strict exclusions around permissive use, personal use, and off-lot incidents unless explicitly covered.
The solution? A tailored garage and liability program built around real-world dealership behaviour—not theory.
2. Slip-and-Fall Risk on Showroom and Lot
Canadian weather is unpredictable. Whether it’s ice in the parking lot, wet tile in the showroom, or gravel in a walkway, slip-and-fall liability is a rising source of litigation for retail dealerships.
Too many policies have premises liability limits and deductibles that haven’t been revisited in years. That’s a problem—especially if your deductible is set at $25,000+ to suppress premium cost. One injury claim from a customer, delivery contractor, or employee can quickly spiral past that threshold.
Key things to check immediately:
- Do you have updated site and surface risk assessments?
- Are snow removal logs or cleaning logs maintained?
- Is your insurer providing benchmark data on what similar-sized dealers in your area carry?
This is one of the areas where peer benchmarking can uncover liability blind spots you didn’t know existed.
Explore dealership-specific liability strategies here →
3. Employment Practices Liability: The Lawsuit You Don’t See Coming
Employment Practices Liability Insurance (EPLI) is one of the most underutilized coverages in dealership environments—and also one of the most important.
From wrongful termination to discrimination claims, the nature of modern employment law makes it risky to operate without an updated EPLI policy. It’s not just about big public cases or franchise groups. Even a small dealership with 15 employees can face five- or six-figure legal exposure from:
- A single toxic manager
- Mishandled terminations
- Unclear employee contracts or protocols
- Failure to accommodate medical or family leave issues
Too often, I see policies where the EPL sub-limit is buried in a package, has an outdated form, or lacks defence cost reimbursement.
A good dealership program will offer:
- A standalone EPL endorsement with meaningful limits
- Access to defence counsel experienced in employment matters
- Advice on internal HR documentation and recordkeeping
If you haven’t updated or reviewed your EPLI limits in the past 18 months, there’s a good chance they’re misaligned with your risk profile.
The Bigger Problem: Assumptions in Your Coverage
The real danger isn’t the gap—it’s the assumption that the gap doesn’t exist.
In many of the dealership risk audits we perform, we find that the biggest vulnerability is comfort. A policy that’s been auto-renewed for five years without a full walkthrough. A deductible that was negotiated when your sales volume was half of what it is today. A claims contact who doesn’t specialize in dealership business models.
If that sounds familiar, you’re not alone—and it’s exactly why we’ve built a program focused exclusively on dealership operations.
How to Get Proactive with Your Coverage
Here’s what I recommend for every owner-operator, GM, or controller overseeing insurance or risk:
- Run a liability checklist annually.
Start here: Dealer Liability Insurance Checklist → - Compare your limits, deductibles, and language to peer dealerships.
If your broker doesn’t offer benchmarking, it’s time to ask why. - Evaluate how claims are handled—not just if they’re covered.
When your back is against the wall, you want to deal with people who know your inventory, operations, and timelines—not someone reading off a PDF. - Know your exclusions inside out.
From personal use to off-lot claims, what’s not covered is just as important as what is.
Get Ahead of the Gap
Your customers rely on you for vehicle protection. You deserve the same for your business.
We’ve designed a dealership risk program to eliminate guesswork, uncover blind spots, and deliver real confidence across operations. If you’d like to review how your current program stacks up, let’s talk.
→ Book a 10-Minute Liability Consult
→ Explore the Dealership Liability Program
You’ve got enough keys to manage—your insurance shouldn’t be one of them.
