If you’re thinking about selling your motorhome on consignment, be sure to ask questions about insurance coverage.
By Todd Moning
Motorhome owners might assume that if they use an RV dealer to sell their coach on consignment, it’s still insured under their current policy. Or, they might think the consigning dealer has umbrella coverage that applies to all vehicles on the sales lot.
RV owners who make those assumptions may put themselves at financial risk. Just ask FMCA member Fred O’Byrne, F291147. He decided to consign his 1999 Foretravel U320 with Tennessee RV in Knoxville. After signing the consignment agreement, he called his agent at Twin Peaks Insurance, which offers policies from National Interstate, among others, to discontinue a portion of his full-timer coverage. It was merely a cost-saving measure; why pay for unnecessary coverage while the coach is consigned at the dealership and not used as a residence?
But the Twin Peaks agent told him that physical damage to his motorhome (from fire, hail, lightning, vandalism, falling objects, etc.) would not be covered when the coach is not under his personal control.
If he wanted to sell the motorhome while it sat on his own property, though, it would be covered. “If there is a claim that happens on the dealer’s lot and it’s consigned, my insurance company will deny the claim due to an exclusion in my policy,” Mr. O’Byrne said.
Mr. O’Byrne then learned that the dealer’s insurance covers only the vehicles it owns — the ones it buys outright or accepts on trade-in.
“What I’m finding out is a lot of the dealers are not aware that RV owners’ policies don’t cover it. I would think the dealership ought to be able to advise me, ‘Look, check with your insurance company because your policy probably does not cover it.’ ”
Can Anybody Help?
Mr. O’Byrne started calling other insurance companies around the country, figuring someone must offer coverage for consigned RVs. “There’s nothing else out there,” he said. “Every single insurance agency that I talked to said that every company they represented had that exclusion in their policy.”
He said he was stunned when he found out about this insurance quandary, and he suspects many others aren’t aware of the consignment exclusion, either. “Unless they have actually told their insurance agent that their unit is consigned, they actually don’t even know they’re not covered. It’s in the fine print in the policy, and if you’ve had the unit for seven or eight years, and you read your policy seven or eight years ago, the likelihood of remembering that is kind of slim. It didn’t mean much to you at the time because you weren’t planning to sell it.”
Insurance Folks Weigh In
Jack Ingle is business development manager for Aon Recreation Insurance, a specialty RV insurance agency. He said his firm does not have any affiliate companies that will insure consigned vehicles. Yet, the topic of insurance for consigned vehicles has surfaced many times during his 25-year career. “I’ve asked companies for an endorsement that could be added to policies for a charge for owners who want to sell their coach this way, and I’ve had absolutely zero luck,” he said.
“When you consign the RV to somebody else, it’s not in your care, custody, or control,” he said. “It’s in the other person’s care, custody, or control. Anyone could get in it and have a wreck and the insurance company would be on the hook.”
It would be difficult for a dealer to insure a consigned RV, he said. “You cannot insure something you do not own. If you could, in the event of a claim, the insurance company would write him [dealer] a check for something he didn’t own, so he’d gain from a loss. That goes against the principle of insurance, which states ‘you cannot gain from a loss.'”
The bottom line: If a consigned coach becomes damaged, the lending institution or the motorhome owner (if the owner holds the title) is still going to want money, Mr. Ingle said. “It is a problem, and my guess is that there are a lot of people who are consigning and do not know about this exclusion in their policy.”
Amanda Manning, an insurance agent with the Miller Insurance Agency, agreed. “A consigned RV is out of the care, custody, and control of the insured,” she said. “But a lot of people don’t look at their own policy jacket to see what exclusions are in there. Unless they call and we tell them, they really don’t know.”
Lori VanderWall, an agent with Thum Insurance Agency L.L.C., said the consignment exclusion often is referred to in policy guides under “dealer possession for sale.” “If a customer is selling a coach personally, we don’t have any trouble covering it,” she said, “but as soon as it’s on a dealer’s lot, it’s not covered. Maybe there are some carriers who don’t have the exclusion written into their policy. All the carriers whom we work with do have that.”
“Many RVers probably assume their vehicle is covered while on a dealer’s sales lot,” Ms. VanderWall said. “A lot of dealers will add the consigned vehicle right to their dealer lot insurance policy. Probably the best thing for RV owners to do would be to confirm with the dealer.”
PPL Motor Homes in Houston, Texas, has specialized in RV consignment since 1972. Company officials indicate that they sell at least 1,200 consigned RVs per year and generally have approximately 230 consigned RVs available for sale on any given day on their 15-acre consignment lot.
“We ask sellers to verify with their own insurance carrier if they have a provision that excludes coverage while they are on a sales lot or consignment lot,” said Sharon Ball, who handles insurance services for PPL. “Because the vehicle is on consignment, they’re still the titled owner and they still have the insurable interest.”
Not all insurance companies exclude, though, she said. “We always ask them to contact their agent and verify, because we have no idea what policy they have or who their carrier is.”
San Jose, California-based Family RV advises consignors to keep their insurance current. The company’s Web site states: “Family RV is insured and will do our best to protect your RV, but your insurance is necessary to cover your RV while it is on our lot.”
San Juan RV in San Juan Capistrano, California, also has an RV consignment program. When a consigned RV is test-driven, the dealership’s insurance will cover it, said Paul Kellick, manager. But when it’s parked on the dealership lot, the owner is responsible for insurance.
Until Insurance Is Available …
In late May, Fred O’Byrne scheduled his motorhome for service at the Knoxville dealership, rather than leave it on the consignment lot, uninsured.
Convinced that consigned motorhomes are an untapped market for insurers, Mr. O’Byrne suggested that insurance companies offer an insurance rider and charge an extra premium. “I’ve talked with dealers’ insurance agents, and they were going to look into the possibility of offering a rider the dealer could sell.”
Mr. Ingle also recognizes the need for this type of insurance. “I don’t know any insurance carriers who cover consigned RVs,” he said. “And we’ve researched it. If I knew, I could sure place a lot of insurance with them.”
Here’s Mr. Ingle’s advice to RVers interested in consigning: “I would check with your carrier and if they do cover consigned RVs, fine. If they don’t, I don’t know how to get around it. You become your own insurance company at that point in time. The trouble is, if you have a lien against your RV and you have a loss, you still have to pay the bank. And that’s a big problem.”
Mr. O’Byrne said his lender, GE Money Bank, advises customers to sell the RV themselves, unless they can find a dealership that offers insurance services specific to RVs on consignment lots. “All the dealers I talked with said their insurance does not cover it on their lot, and they expect the owner to maintain insurance,” he said.
RV owners who don’t want to sell their unit themselves can trade it in and have the value applied to their new purchase. In that case, the dealer takes title of the vehicle and can insure it, of course.
Another alternative is online consignment, offered by dealers such as MotorHomes USA. You maintain your insurance because the RV stays in your “care, custody, and control.”
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After this story was written, Fred O’Byrne reported that the dealer’s insurance agent came up with a solution. “They were willing to add physical damage coverage for my coach to the dealer’s policy, and bill it separately so the dealer could rebill me. The rate was set at $0.35 per $100 monthly; for a coach valued at $100,000, it amounted to $350 per month. Fortunately, I was able to sell the coach,” he said.
RV Consignment Basics
If you choose to sell your motorhome on consignment, you won’t have to answer phone inquiries, set up appointments to show the coach, or worry about buyers obtaining financing. The goal of most consignment dealers, as well as RV owners, is to sell the vehicle quickly and at a fair price.
In addition to attracting foot traffic on a sales lot, a consignment dealer can …
- Expose your motorhome to potential buyers through advertising, direct mail, Web sites, and e-mail. Some dealers market to a large customer base and claim to have an existing buyer for your particular coach.
- Establish a fair market price for your RV
- Handle the paperwork to get your RV paid off
- Accept trade-ins or pay immediate cash for your RV
- Arrange RV financing for buyers
For a fee, dealers also may offer an RV mechanical check, cleaning, and detailing.
Duration and commission
The typical consignment period is between 30 and 90 days. The dealer may charge a set commission, such as 10 percent of the selling price. Or, the commission may be based on the value of the motorhome and the final selling price. Some dealers might charge a one-time setup fee as well.
PPL Motor Homes in Houston, Texas, charges a 10 percent commission, due once the RV is sold. The minimum commission is $1,475 for diesel pushers, motorhomes, and van conversions.
The insurance factor
RV consignment dealerships are often visible from major freeways. Lots may be fenced, paved, and well lit. Some may have surveillance cameras or conduct random security checks at night.
Despite safety and security measures, a consigned coach still can be damaged by fire, vandalism, falling objects, inclement weather, or in a traffic accident during a test drive. Therefore, before signing a consignment agreement, ask your insurance agent whether your RV will be covered while it’s consigned on a dealer’s lot. Chances are it will not. Your policy probably contains a consignment coverage exclusion. So, don’t make assumptions. Talk with the dealer, talk with your insurance agent, and be sure you understand the risks.