Protect Yourself When Selling Used Vehicles

Scenario: That car you sold six months ago is involved in an accident and the parties involved are making claims against you. Are you liable?

Maybe. Did you notify the state Department of Motor Vehicles of the sale and file a "Release of Liability?"

California law imposes liability upon the owners of a motor vehicle where the operator of said vehicle was responsible for death, injury or property damage. This legal responsibility is imposed upon the registered owner of the vehicle separate from the legal responsibility of the driver, who may have caused the accident.

When selling or trading your car a reputable automotive dealer, usually won't have to worry about proper paperwork being filed, but if you're handling everything from one private party to another, there are important steps to take.

To transfer ownership of a vehicle in California, the state vehicle code requires the seller to endorse and deliver the certificate of ownership, commonly referred to as the "pink slip," and the registration card to the buyer.

In addition to these normal requirements, the vehicle code also requires either the buyer or the seller to notify the Department of Motor Vehicles of the sale within 10 days in order for the transfer to take place.

While this obligation can be fulfilled by either the buyer or the seller, in order to fully protect yourself if you're the seller, you should deliver the release of liability to the DMV.

Vehicle code Section 17150 imposes on the owner of the vehicle legal responsibility for death, injury, or property damage resulting from the negligent wrongful act of the driver of that vehicle.

If the DMV shows that you own a vehicle that is involved in an accident caused by the operator of your car, you face potential liability of $15,000 per person and $30,000 per incident. Given the seriousness of the potential legal exposure you would face as the "registered owner" of a vehicle, relying on the person to whom you just sold your car to properly notify the DMV of the title transfer is a bit risky — and simply not in your best interests.

Filing the release of liability form with DMV is absolutely crucial in order to protect you from liability, because under state law, if the operator of a vehicle that you own causes an accident, you will face liability solely because you were the registered owner of that vehicle.

Simply selling the vehicle does not get you off the hook.

While vehicle owners can obtain automobile liability insurance to protect themselves if their vehicle is involved in an accident, usually after the sale of the car the seller no longer carries insurance on that car. You can easily see why it is so important to immediately notify the DMV of the sale to avoid any legal liability in the event the new owner piles up your old car.

In addition to liability imposed upon the owner of the car, if that owner has committed an independent act of negligence, he or she can be found liable for damages above the $15,000/$30,000 figure, which is required under the state Financial Responsibility Law.

If you are planning to sell your car, pickup, motorcycle or truck, be sure to comply with the state law — you can pick up a release of liability form from any DMV office, or from any Auto Club of Southern California office.

After the fact, I have rarely known a client who fully understands why he or she may be liable to an injured person hit by a car that they "think" they have sold.

Obviously, if you find yourself in this unpleasant situation, there may be other facts, which your attorney may be able to use to limit or keep you from being legally liable. But the best advice in these situations is to use the proper steps when you sell a motor vehicle.

James A. Testa is senior partner of the San Marcos-based law firm of Testa & Associates, LLP, and can be reached at 760-891-0490