Recently, luxury car companies like BMW, Cadillac, Mercedes-Benz and Volvo are promoting a “subscription” service as opposed to a purchase or lease. The basic concept is that you subscribe to the car brand and have access to select what vehicle you want, and for how long. For example, you have a sedan for everyday use, but if you want the large SUV for a vacation, you simply let the company know and switch out for a period of time, and then go back to the sedan or whatever other model may be available.
The concept seems to be gaining steam with the higher end lines in the industry, but many industry experts speculate this idea will funnel its way down to the more standard car manufacturers. Aside from being able to repeatedly switch vehicles, part of the allure of a subscription is that it covers about everything. For instance, Cadillac offers a monthly subscription at $1,800/month for access to any vehicle and up to 18 vehicle changes a year. While that might appear high, that price also includes maintenance, registration and most notably auto insurance that covers the vehicle. Unlike a lease where you personally maintain the insurance on the vehicle, with a subscription, the dealer obtains the policy on your behalf. With the rates of insurance being added into the overall cost, the idea of subscriptions isn’t as costly as it might first appear.
So why is a lawyer writing a blog about automobile subscription services? Two reasons: 1) Do you know what you are really getting when you sign on the dotted line, and 2) how good is the insurance coverage that comes with the car?
As with any contract, reading the fine print is important. While many purchase, financing and lease contracts are boilerplate documents, subscription agreements are new and the language has not been vetted to see if the consumer has adequate protection. Contracts between various subscription services can be vastly different with various charges or restrictions. The consumer, therefore, has to know about things like limits on switching vehicles, mileage charges, service requirements, initial fees, etc. Like any other time you sign a contract, make sure you know exactly what you are getting into first and remember to ask questions and get anything ambiguous in writing.
The more complicated issue, from a legal perspective, is auto insurance. Our initial inquiries into the coverages provided with a subscription included full tort benefits, uninsured/underinsured motorist coverage and the basics one would expect from a standard personal auto policy with significant levels of coverage. But not all companies are the same, and it is incredibly important that prior to entering into any subscription service that the levels of coverage are confirmed by the insurance company itself. Even then, many questions remain unanswered.
Who is really the insured – you or the car company? Can you upgrade or change the insurance on a subscription? How would a subscription policy work in conjunction with other auto policies in the home? Are waivers on one policy potentially valid for another? Would an accident on a subscription policy cover other drivers not named on the policy? If you are in an accident and get sued, what control do you have over who represents you in court? The answer is we don’t know, but history suggests that if an insurance company can try to get out protecting you to save money, it will. All of these questions lead to the same ultimate conclusion which is if you have a dispute with the subscription insurance, no one really knows how it will play out in the legal system.
Considering that all kinds of basic auto insurance issues have been playing out in Pennsylvania Courts for decades, it is only fair to assume that subscription insurance services will need to go through the same legal process – and of course, at a pace much slower than the industry will evolve. So if a subscription service makes sense for you and fits your budget, is it worth the risk of the unknown as it pertains to insurance? The only truly safe solution is make sure you have your own umbrella policy above and beyond whatever coverage may be provided, using that cost as part of your equation in whether subscription services work for you.
Feel free to contact our firm for further information.