False Pretense Coverage

The garage form’s false pretense exclusion eliminates coverage under the physical damage section of the form for losses such as the insured selling an automobile and taking a worthless check, selling an automobile on credit because of impersonation or other fraudulent misrepresentation, delivering an automobile to the wrong party due to deceit, allowing a supposed customer to try a car and abscond with it, etc.

The false pretense endorsement negates the false pretense exclusion. Generally, it states that coverage applies to loss of covered automobiles that results from the insured’s being tricked out of a covered automobile. It also says there is coverage for loss to covered autos caused by the insured’s acquiring an automobile from someone who did not have legal title. If the insured got anything at all in the transaction -- an amount of cash, or a trade-in car -- this is to be taken into account in figuring the loss.

There are some requirements that must be met for coverage to apply under the first part (loss by trick or scheme) of the false pretense endorsement. The insured must have had legal title to the covered auto prior to the loss and the insured must make every effort to recover the covered auto when it is located. Just what constitutes making "every effort" is not stated, so that point is certainly open to a vigorous discussion between the insured and the insurer if a disagreement arises.