Question:
The client is a franchise motor vehicle dealer which includes own workshop. They were contracted to carry out a factory recall repair on a tractor which required removal of the motor by the insured and the contracting out to a third-party specialist to work on the motor. Upon return of the motor it failed pre-install running in, was sent back to be fixed, second time around again failed and on the third
occassion the manufacturer intervened to supervise and oversee the repair. Third time lucky you might say.
The client has sustained considerable costs for their work but as they were contracted to carry out the repair and the damage has occurred whilst entrusted to them are obligated not to pass on those extra costs to their customer/manufacturer.
The third-party workshop is denying liability through their insurer. The client's insurer, NZI, seeing as the client says they were not to blame, do not consider them to be legally liable even though in this case there are likely subrogation rights, and are using this exclusion to support this decision.
It is our opinion that the client would be liable to their customer under common law and that even if there was a contract it should have no effect in these circumstances.
Your expert opinion would be appreciated in this matter. Thank you.
Reply: Crossley Gates
As I understand it, your client’s customer was entitled to a free manufacturer’s recall and repair. As this was provided free to the customer, it is hard to see how the customer is out of pocket, entitling it to hold your client liable for anything.
If anyone is out of pocket it is your client, which has presumably incurred the extra expense of the multiple attempts by the party it contracted to carry out the necessary repairs to the engine.
You client does not appear to be facing an allegation of liability from anyone and the liability assumed by agreement exclusion appears to be irrelevant.
