In Gen. Sec. Indem. Co. of Ariz. A/S/O Terryville Chevrolet, LLC v. Felix F. Callari, Inc., 2024 Conn. Super. LEXIS 2344 (Connecticut Superior Court, 2024), discussed dealership errors in a subrogation action following the theft of a 2019 BMW M850I. The plaintiff, General Security Indemnity Company of Arizona, sued to recover on its payment on the stolen vehicle because of the dealership’s negligence in issuing the replacement key without properly verifying identity as the owner of the vehicle.
On May 6, 2020, a “thief” secured a replacement key from BMW of Darien, a dealership owned by Felix Callari, Inc. At some point, after hours, the 2019 BMW M850i was driven off the insurance company’s insured’s parking lot and never seen again.
Apparently, BMW of Darien issued a replacement key without verifying identification or proof of ownership. The critical analysis was whether BMW of North America (BMW NA) also had a duty to ensure that BMW of Darien adhered to key replacement policies.
The trial court has allowed the lawsuit to proceed and will determine the dealership liability, manufacturer replacement key standards, and manufacturer oversight responsibilities.
The Subrogation Action Explained
In this Connecticut lawsuit, the plaintiff is an insurance company that is pursuing a subrogation action against BMW of Darien. A subrogation action allows the insurer to recover losses it has paid to its insured–Terryville Chevrolet. Since BMW of Darien allegedly did not properly verify the identity of the individual requesting the replacement key, the plaintiff claims that BMW of Darien’s negligence directly contributed to the vehicle’s theft.
BMW NA’s Role and the Question of Oversight
A secondary issue in this lawsuit is also whether BMW NA, as the franchisor, shares and has responsibility to oversee and ensure that its dealerships followed the prescribed security policies for replacement key issuance. BMW NA provided its authorized dealerships with procedures for handling key replacement requests as well as required verification of the requester’s ownership or authorization.
The court’s denial of BMW NA’s motion for summary judgment reflects a willingness to further examine BMW NA’s potential responsibility for how it instructed and supervised the dealerships’ adherence for verification of key replacement requests.
Key Legal Question: Duty of Care
The trial court will answer whether BMW NA owed a duty of care to protect third parties from the dealerships’ negligent acts. In this lawsuit, that duty of care would involve establishing comprehensive training and compliance checks for dealerships on issuing replacement keys. Without those safeguards, dealerships like BMW of Darien may inadvertently facilitate thefts by failing to confirm that replacement keys are issued only to verified owners.
If BMW NA’s policies were not effectively implemented or communicated, the trial court may also impose liability upon the manufacturer for ensuring the public’s safety by minimizing risks associated with proper replacement key issuance.
Industry-Wide Standards for Replacement Key Issuance
The lawsuit highlights the broader standards in the automotive industry for handling key replacement requests. Given the high value and advanced technology embedded in modern vehicles, replacement keys represent a critical security component. Industry standards typically require:
- Proof of Identification – The requester must show government-issued ID.
- Proof of Ownership – Documentation proving ownership, such as registration or insurance documents.
- Verification Process – A review of the customer’s identity and ownership by a manager and a second staff member.
In lawsuits where these standards are not met, dealerships will face liability for negligent procedures when a vehicle is later stolen.
Comparison with Other Relevant Lawsuits
This Connecticut lawsuit aligns with several others where dealerships were found liable due to inadequate verification processes in high-value transactions:
- Smith v. Ford Motor Co. (2020) – In this lawsuit, a dealership failed to verify the identity of an individual requesting a high-value part, resulting in theft of the vehicle. The court found that Ford Motor Company had partial liability for improper oversight.
- Jones v. Lexus Dealership of Dallas (2018) – The dealership issued a duplicate key without verifying the requester’s ownership, resulting in a similar theft. Toyota and Lexus amended its verification procedures for duplicate key issuance.
The outcomes of these lawsuits suggest a trend toward heightened liability for dealerships and franchisors when their policies contribute to vehicle theft.
Court’s Reasoning Behind Moving the Lawsuit to Trial
The trial court’s denial of summary judgment suggests it found sufficient grounds for examining the evidence on BMW NA’s supervisory role over its dealerships. The jury instructions may include additional factors for the jury to consider:
- BMW NA’s Training Programs – Were the policies on key replacement clear and comprehensive? Were BMW of Darien’s staff adequately trained to follow these protocols?
- Policy Implementation – Did BMW NA have mechanisms to ensure dealerships complied with key replacement policies? If not, was this a contributing factor to the theft?
- Foreseeability of Harm – Was it foreseeable that failing to enforce these policies could lead to a theft?
Broader Security Concerns for Dealerships
The lawsuit also serves as a cautionary note for dealerships to rigorously verify identity and ownership before issuing any replacement keys. With car theft remaining a widespread issue, and stolen vehicles often being linked to other criminal activities, dealerships play a critical role in preventing such incidents by strictly following security protocols.
In recent years, increased integration of digital technology in vehicles has also raised new concerns. Key fobs for high-end models like the BMW M850I often contain encoded information that can be used to access personal data stored in the vehicle’s infotainment system. In such lawsuits, the theft goes beyond financial loss, potentially exposing vehicle owners to identity theft or privacy breaches.
Future Implications for the Automotive Industry
If BMW NA is found responsible for failing to supervise its dealerships, the lawsuit may drive other automotive manufacturers to strengthen their dealership oversight programs. Some possible outcomes include:
- Enhanced Training Programs – Manufacturers might implement more rigorous training to ensure dealerships can identify potential fraud.
- Stricter Compliance Checks – Franchisors could conduct regular audits to verify dealerships’ adherence to key issuance policies.
- Implementation of Digital Tracking – Increased use of technology, such as digital tracking or electronic approval systems, could streamline the verification process and add a layer of security.
Conclusion
The ongoing Gen. Sec. Indem. Co. of Ariz. A/S/O Terryville Chevrolet, LLC v. Felix F. Callari, Inc. lawsuit underscores the importance of rigorous dealership oversight in protecting vehicle security. As this lawsuit unfolds, it will not only determine whether BMW NA can be held liable but may also influence broader legal standards within the automotive industry. Should the court find in favor of the plaintiff, it could signal a shift toward heightened accountability for franchisors, pushing the industry to adopt more robust security measures and ensuring dealerships follow best practices to prevent similar incidents in the future.
This lawsuit serves as a reminder that clear, enforceable policies—and accountability for implementing them—are essential in protecting dealerships, manufacturers, and consumers alike from preventable losses. For dealerships, this lawsuit raises awareness of potential dealership errors & omissions liabilities, emphasizing the need for stringent compliance with verification processes to mitigate risks and safeguard assets effectively.
Author
Mike Simkus
Attorney/Founder, FS CORPS