Select RV insurance companies are now offering motorhome owners the option of purchasing coverage for their vehicle while it is in the dealer’s care as a result of a consignment agreement.
Legislative Updates
By Todd Moning, Web Editor
November 2009
Last year, an article on FMCA.com and in Family Motor Coaching magazine (“A Caveat For Consignment Sellers,” August 2008) reported that typical RV insurance policies contain an exclusion pertaining to motorhomes placed on a consignment lot. The exclusion essentially removes physical damage coverage from the policy. If a consigned motorhome becomes damaged or destroyed by fire, vandalism, theft, storm, or a collision, the policyholder would be in danger of having his or her claim denied.
Now, National Interstate Insurance Company and Recreation Insurance Specialists LLC offer policies that accept losses occurring while a motorhome is on consignment or held for sale by a third party.
National Interstate
National Interstate, a commercial member of FMCA since 1997, offers a consignment coverage endorsement through independent insurance agencies in 27 states.
National Interstate’s consignment physical damage endorsement provides comprehensive and collision coverage while the motorhome is consigned to a dealer.
Collision coverage provides physical damage coverage for losses incurred while the motorhome is in motion, such as hitting another vehicle during a test drive. Comprehensive coverage provides physical damage coverage in the event of such losses as storm damage, fire, vandalism, theft, and falling tree limbs while the motorhome is on a consignment lot.
Existing National Interstate customers can add this coverage as an endorsement to their policy by contacting their insurance agent, according to Jason Sinkovitz, business development manager for National Interstate. “If someone is not a National Interstate RV policyholder, they can buy a National Interstate RV policy and add the consignment endorsement immediately.”
An agent appointed by National Interstate can provide a quote for the consignment endorsement. For a list of agents, visit www.nationalinterstate.com/products/spl/rv/#agents or call (800) 929-1500.
National Interstate offers a five percent policy discount to FMCA members in most states.
Blue Sky
Recreation Insurance Specialists LLC, also an FMCA commercial member, has been offering consignment coverage for about a year in its Blue Sky RV Insurance program, according to Eric Raudins, chief operating officer.
The cost is based on 10 percent of the comprehensive and collision premium of an annual policy. Based on average motorhome values, Blue Sky consignment coverage would cost approximately $40 for six months of coverage, Mr. Raudins said.
Policyholders can cancel the coverage as soon as the vehicle is sold.
“The nice thing about the Blue Sky RV consignment coverage is that you only pay for what you use,” Mr. Raudins said. “So once you purchase a Blue Sky policy and elect consignment coverage, it’s as simple as removing the coverage and receiving a pro-rata return of premium once the unit is sold.”
Blue Sky policies with the consignment option are available in 32 states. They are underwritten by Companion Property and Casualty Insurance Company and are written in the state in which the RV is registered.
Blue Sky RV Insurance provides a five percent discount to FMCA members. Call (866) 484-BLUE (2583) to find an agent, or visit www.BlueSkyRVInsurance.com for more information.
State availability
Not all RV insurance coverages are available in all states, and coverages can vary from state to state.
National Interstate policies also are based on the registration state of the vehicle, not necessarily the state of the consignment dealer. For example, a motorhome registered in Ohio (one of the states where coverage is available) and placed on a consignment lot in Virginia (not one of the states) is eligible for the consignment endorsement. But a motorhome registered in Virginia and placed on a consignment lot in Ohio is not eligible.
Growing need
National Interstate has been aware of the growing market need for consignment coverage by RV owners, Mr. Sinkovitz said. “We had been talking to some of our agency partners about it. When FMCA’s article came out, it really increased the urgency to actually get something to the market.”
National Interstate contacted more than 800 members of the national RV Dealers Association (RVDA) and found that about 91 percent of the respondents have consignment programs. “In today’s economic climate, more RV dealerships are embracing consignment as a source of inventory and revenue,” Mr. Sinkovitz said. “And more RV owners are utilizing consignment dealerships as a way to sell their RVs.”
He estimates there are thousands of consigned RVs currently at risk, because they do not have this coverage. “The insurance industry hasn’t done a great job of educating the dealers, so dealers are not able to coach these people and let them know that their [physical damage] insurance may be voided if they consign. If there was a catastrophic storm or a fire or anything that came through, the losses could be pretty substantial.”
Blue Sky also recognized the need to provide consignment coverage based upon the standard exclusions of most insurance policies. “There is typically an exclusion in most policies when an RV is placed in the care, custody, and control of somebody else for the purposes of being sold or leased,” Mr. Raudins said. “The dealers’ insurance will not ordinarily cover the coach because they do not take ownership of it, so they don’t have an insurable interest in it.”
Mr. Raudins said he has noticed an increase in the number of consigned RVs during the economic downturn, but he said consignment coverage has always been a legitimate need. “Even when the economy is doing well, there are people who want to put them on consignment. And you’re sort of playing Russian roulette if you do it with your typical RV or auto policy and don’t understand policy exclusions that may be invoked if there is a loss.”
Informing motorhomers
Jack Ingle is business development manager for PoliSeek (formerly Aon Recreation Insurance), which sells National Interstate policies. After many years in the insurance business, he said he’s pleased to be able to offer consignment coverage to RV owners.
“It’s definitely a good thing,” he said.” We need to get the word out so the people know it’s available.” Mr. Ingle spreads the word at his insurance seminars; he recently presented one at FMCA’s Bowling Green, Ohio, convention in July 2009. “One gentleman in my seminar had an $800,000 coach on consignment, and he wasn’t aware of the insurance implications. He found out about it at the seminar.”
Mr. Ingle emphasizes that consignment coverage is not included in existing policies. Policyholders must choose to add it. In the past when he has visited dealerships, he said dealers didn’t know about this gap in coverage. “They were just telling consignors to leave their regular insurance in force. Some dealers know about it and explain it to their customers, while other dealers feel it’s not their problem. So, we have to get the word out there.”
What Is Consignment?
Many dealerships sell motorhomes on consignment on behalf of motorhome owners. The motorhome owner and the dealer typically enter into a contractual relationship where the dealership has a period of time to sell the unit. The most common contract length is 90 days. When the contract expires, the two parties either part ways or enter into a new contract.
Even though the dealer has possession of the vehicle, the motorhome owner retains the vehicle’s title until the unit is sold.
Motorhomes under consignment are seldom, if ever, covered under the dealership’s insurance policy. The motorhome owner is exposed to losses because RV insurance policies are likely to consider consignment as an excluded usage.