With any insurance policy, wording is key. Every policy has definitions of key terms so the insured and the insurer have a clear understanding of what is meant by certain terms. Lately the editors have received a number of questions surrounding terms or concepts that do not have a definition in the auto dealers policy language. This can make the policy language confusing, so that coverage or lack of coverage is not totally clear.

 False pretenses is one of those terms. False pretenses is an exclusion that appears in the Auto Dealers Coverage form CA 00 25, and it is not a defined term. The concept is described as loss to a covered auto that results from someone causing the insured to voluntarily part with an auto by trick or scheme or under false pretenses, or from a seller without legal title to the vehicle. Voluntarily parting with an auto is easily understood; the insured lets the auto out of his custody willingly and not under any sort of coercion or duress. Trick or scheme or false pretense is where it gets confusing. As always with policy language that is not defined, we turn to the dictionary to define these terms. Merriam Webster Online defines trick as a crafty procedure or practice meant to deceive or defraud. A scheme is defined as a plan or program of action, especially a craft or secret one. False pretense must be broken apart as it is a phrase. False is defined as not genuine, or intentionally untrue, adjusted or made so as to deceive, and pretense is defined as a claim made or implied, especially one not supported by fact; professed rather than real intention or purpose; an inadequate or insincere attempt to attain a certain condition or quality. Therefore, a false pretense is a claim presented as true that is deliberately untrue, and is meant to deceive. False pretenses are how the person gets the insured to voluntarily let go of property without realizing that they're being taken.

 One example of voluntary parting is if an individual asked to take a vehicle for a test drive and the dealer allowed the potential buyer to drive the vehicle off the lot, but the buyer never returned. The thief pretended to be a legitimate buyer interested in the vehicle, but took off with it. Likewise, someone presents a bad check and does not rectify the situation, false pretenses again. Other examples are people claiming to take a used vehicle to a mechanic for inspection and never returning it, an employee taking vehicles off the lot to wash them who sells them on the side and pockets the money or someone trading in a vehicle without a good title for a vehicle with a good title. Because of the nature of car sales, particularly used cars, false pretenses is a serious risk and therefore excluded on the Auto Dealers Coverage Form. Dealers should take certain steps to ensure that their vehicles are protected, payments are verified as legitimate, titles are verified, and that buyers who want to test drive vehicles have a salesman in the vehicle with them. Coverage for false pretenses can be purchased as an endorsement.