Do Car Dealerships Have to Ensure a Potential Buyer Has Auto Insurance?

Author: Patrick J. Babin


In this matter an injured driver and passenger filed a negligence suit against a driver who caused an accident and against a car dealership from which the driver purchased the vehicle because the dealership failed to ensure, as required under Motor Vehicle Safety Responsibility Law, that the driver had liability insurance at time of purchase. The trial court granted summary judgment for the dealership, dismissing the suit. The court of appeal reversed and the Supreme Court of Louisiana granted certiorari to review the issue.

The court of appeal reversed noting that the purpose of the statute in question was “to protect those injured by the fault of another driver.” The court of appeal further held: “although the statute states that the rules regarding documentation do not apply to licensed new or used car dealers, it provides that when dealers seek registration of vehicles on behalf of buyers, they may use affidavits to show compliance with the statutory requirements. If a dealer seeks registration, it must see to it that the requirements of the statute are met whether by affidavits or other means.”

The Supreme Court noted that the plain language of the statute imposes a duty on the Department of Public Safety to adopt a rule requiring documentation of proof of insurance in order to register an automobile, but the provisions of the statute “shall not apply to new and used automobile dealers.” Further, the statute in question exempts automobile dealers from the documentation of insurance requirements. The only proof of liability insurance required of car dealerships by law consists of the customer signing a form affirming that he or she has insurance and that they will maintain insurance in accordance with the law. If the Department of Public Safety has failed to make specific rules requiring car buyers to validate their proof of insurance, it is the fault of the Department of Public Safety and not the automobile dealers.

The Supreme Court held that the proof of compliance provision of the Motor Vehicle Safety Responsibility Law does not impose a duty upon automobile dealers to ensure that their customers abide by automobile liability insurance requirements. The court of appeals decision was reversed and the district court judgment was reinstated.


Hodges v. Taylor, 101 So.3d 445, 2012-1581 (La. 11/2/12)