Federal judge: Dealerships, not insurers, liable for vehicles stolen with fake identities

Two Louisiana dealerships aren't entitled to coverage under their cyber policy for losses arising from the theft of five vehicles through identity fraud, a federal judge has ruled.

U.S. District Judge James Cain Jr. cleared two insurers of liability for claims made by Benoit Ford and Benoit Nissan in DeRidder, which contended they were victims of a criminal scheme.

The dealerships in 2020 developed a "touchless purchasing procedure" to alleviate the impact on salesroom visits during the COVID-19 pandemic. Would-be purchasers applied online for financing. After approval, the dealership and purchaser finished the other paperwork, including title and registration, electronically or by overnight mail, the decision said.

The dealerships assigned the sales contracts to lenders, and the buyers then arranged with a third party to have their vehicles transported.

The lenders later discovered that five vehicles — four new Ford and Nissan models and a used Land Rover — were purchased between August and October 2021 "through the buyers' use of either a fake or stolen identity, and no payments were forthcoming from the 'purchasers,' " Cain wrote in the Oct. 2 decision. The purchasers listed addresses in Massachusetts, Florida and Pennsylvania.

The stores reported the thefts to the Vernon Parish Sheriff's Office, and a list of the stolen vehicles was placed into the National Crime Information Center, according to the complaint.

"The vehicles were misappropriated or stolen in this manner as part of an organized outfit," the complaint alleged, and the "lenders later determined that the vehicles were stolen and that no payments would be made on the financing agreements." Thus, the lenders required the dealerships to reimburse them for the vehicles' purchase price.

The suit contended the insurers' refusal to pay violated the stores' cyber policy.

However, Cain disagreed, ruling the claims are not covered under the policy language and dismissed the case against North American Capacity Insurance Co. and Peleus Insurance Co. A third insurer had been cleared earlier.

Lawyers for the dealerships and the insurers didn't respond to questions from Automotive News.