Florida Statute 320.27 sets out the requirements for motor vehicle dealers to operate in the State of Florida, including the requirement that dealers obtain and maintain a surety bond as a form of financial protection for consumers. This bond helps ensure that the dealer fulfills its obligations, including title transfers, payment of taxes and fees, and any other legal requirements related to the sale of motor vehicles. Importantly, though, sureties have a right to seek money paid to a consumer back from the dealer… and if it isn’t paid, the bond may not only be cancelled but it may prevent the dealer from getting another bond. End result could quite likely be the loss of licensure. Therefore, it’s important for dealers to know what a surety claim really means.
If a claim is made against the surety bond, a dealer can generally expect the following to occur:
- Consumer Files a Claim: A claim against the surety bond can be initiated by a consumer who has suffered financial harm due to the actions or omissions of the motor vehicle dealer. The claim is typically made when the dealer fails to meet its contractual obligations or engages in fraudulent activities. An attorney is not required to make a claim, but many attorneys within Florida practice solely in this area of consumer practice.
- Surety Bond Investigation: Once a claim is filed, the surety company, which issued the bond, will investigate to assess the validity of the claim. The surety will review the details of the claim, including relevant documents and evidence provided by the consumer. Note: if a dealer gets notice from a consumer of a complaint, hiding it from the surety company is not to proper way to go – this only adds to the problem. Sureties will involve the dealers in their investigation and the dealers can provide evidence against the claim. Similarly, Consumers will provide evidence supporting their claim.
- Compensation to the Consumer: If the surety determines that the claim is valid, they will provide financial compensation to the consumer, up to the maximum coverage amount specified in the bond. The compensation is intended to reimburse the consumer for the financial losses suffered due to the dealer's actions.
- Lawsuit – if compensation is denied, the consumer may choose to file a lawsuit. In many cases, a lawsuit will be filed against the surety AND the dealer. Dealers should tread carefully. Assuming the bond performed its own legal obligations to investigate, the most it will be liable to pay is the $25,000 bond amount (or if multiple complaints, what is left on the bond). This means that you could be left to foot the rest of a claim if you ignore the lawsuit. If you get served with a lawsuit, see an attorney immediately and notify your surety.
- Surety's Right of Subrogation (i.e. right to get repaid by the dealer): After compensating the consumer, the surety company may exercise its right of subrogation, which allows it to pursue legal action against the dealer to recover the amount paid to the consumer. The surety seeks reimbursement from the dealer for the funds paid out under the bond.
- Dealer's Obligation to Repay: The motor vehicle dealer is legally obligated to repay the surety for the amount paid out as a result of the claim. Failure to repay the surety can have serious consequences for the dealer, including potential legal action and loss of licensure.
The specific processes and requirements related to claims against surety bonds for motor vehicle dealers in Florida can vary. Statute 320.27 is more complicated than it seems, and a misstep can mean major problems. In general, if you are faced with a consumer claim, it is not something to ignore – even if you disagree. It's advisable for dealers to consult with an attorney and/or contact the Florida Department of Highway Safety and Motor Vehicles (DHSMV) for detailed information and guidance regarding proper licensure requirements and information on what to do in their particular situation.