WASHINGTON (Oct. 5, 2001) — Late last July, Cassidy Tire & Service, a 14-store, 87-year-old independent tire dealership in Chicago, settled a lawsuit for an estimated $3 million.
It's rare that any tire dealer has to face liability on that level, industry experts agreed. But the Cassidy case does point out how a tire dealer can be trapped in litigation for minor—or even nonexistent—errors in judgment.
Along with the fear of litigation also comes the problem of exorbitant or unobtainable insurance policies, the experts said. Although the problem predates any fears of litigation, tire dealers are finding the current litigation picture is helping to make insurance both costly and more difficult to find.
Cassidy Tire was sued—along with Ford Motor Co., Michelin North America Inc. and Packey Webb Ford of Wheaton, Ill.—by Nabil Boury in a case that began with a 1992 auto accident. Another car collided with Mr. Boury's 1992 Ford Explorer on Chicago's Eisenhower Expressway, causing the Explorer to roll over. All four passengers were thrown from the vehicle. Mr. Boury's 13-year-old daughter Reena was killed, as was Suzanne Leder, her 14-year-old friend.
A short time before the accident, Mr. Boury replaced the original equipment tires on his Explorer with Michelin P235/75R15 all-season radials. These tires—according to Richard F. Burke Jr., Mr. Boury's attorney—were “expressly discouraged” by Ford for use on the Explorer.
The main thrust of the case was the allegedly faulty design of the Explorer, and no tire defect was ever alleged in the suit. Nevertheless, Cassidy Tire and Packey Webb were accused of negligence for ignoring Ford's warnings about the tires, as was Michelin for not adequately disseminating the warnings.
Cassidy Tire ended up paying nearly 15 percent of the total settlement of $22 million, and six times as much as the $500,000 Michelin was forced to pay. Officials of Cassidy Tire declined comment for this story, as did their attorney.
Cases such as the one against Cassidy Tire are a sharp reminder to tire dealers what they're up against in a court of law, said Marvin Bozarth, executive director of the Louisville, Ky.-based International Tire & Rubber Association (ITRA).
“When you're the last person to touch the tire, that's a big problem,” he said. “When you're a dealer, you're supposed to be the expert. You're supposed to know whether it's the right size and type of tire for the vehicle, what the proper inflation is, and if the vehicle manufacturer has any warnings about which tires not to use. But I haven't seen anything saying that you're not supposed to put P235 all-season Michelins on a Ford Explorer.
“The dealer, unfortunately, still has the responsibility to know not only what the tire manufacturer recommends, but also what the vehicle manufacturer recommends.”
And this can be a problem when the tire maker and vehicle maker contradict each other, such as in the recommended inflation for the Firestone tires that were OE on Ford Explorers. “The poor dealer is the man in the middle,” Mr. Bozarth said.
There's also the fear of missing a cut or other blemish on a tire during inspection or while installing another tire, he added.
“That's why you seldom see dealers offer complete safety inspections any more,” he said. “You virtually have to dismantle the vehicle and take the tires off the axle.”
Problems with insurance for dealers predate the litigation threat, said Philip Muller of Affiliated Agency Inc., Plainview, N.Y. Mr. Muller, who has had his own insurance agency since 1983, specializes in all forms of insurance for tire dealers.
“Since last year, even prior to problems with major tire manufacturers, insurance has become progressively more difficult and expensive to obtain for the tire dealer industry as a class,” he said.
Like many other industries, the insurance industry has cycles it divides into “hard” and “soft” markets, according to Mr. Muller. “The eight years or so prior to 2000, we evidenced a soft market, meaning that the dealer class found insurance companies competing for business with stable or increased pricing,” he said.
“Since auto- and rubber-related commodity businesses are a relatively higher underwriting risk, coupled with the current hardening market, the industry is finding either higher (policy) renewal prices or is faced with having to replace coverage with different carriers,” he said. But insurance is still available to tire dealers, with other insurers willing “to pick up the ball,” he added.
The current economic situation will cause the market to harden further, he said.
But one source is skeptical that dealers face much litigation threat.
“I'm not aware of any rash of lawsuits against tire dealers,” said Jeff Tenenbaum, attorney with the law firm of Venable, Baetjer, Howard & Civiletti, who represents the Tire Association of North America on a number of issues. “I'm not aware of dealers being either sued separately or being named as co-defendants.”
Personal injury suits mostly allege negligence either of manufacture or practice, he said.
“The principal allegation against (Bridgestone/Firestone Inc.) is that the tires were defectively manufactured,” he said. “The principal allegation against Ford is that the Explorer is prone to rollovers. But it's very difficult for anyone to say a tire dealer was negligent in placing a Firestone tire on an Explorer before there was ever a recall.”
The Cassidy case, he added, appears to be a unique situation where the dealer failed to follow the tire maker's recommendations.
Told of the cancellation or increased cost of insurance policies for tire dealers, Mr. Tenenbaum said that is fairly typical of insurance firms.
“What the insurance industry seems to be doing is anticipating litigation,” he said. “They get scared easily, and try to minimize their risk. A lot of trade associations are being priced out of the event cancellation insurance market after the tragedy at the World Trade Center.”