Who is liable when a customer negligently causes an accident during a test drive: the customer who actually caused the accident, or the dealer who merely allowed the customer to test drive the car? Last month, a Colorado Court of Appeal answered this question, unanimously finding that the dealer was responsible for the damage caused by the customer’s negligence.

The case, American Family Mutual Insurance Company v. AN/CF Acquisition Corporation d/b/a Go Courtesy Ford, involved a woman who was test driving a vehicle with a representative from the car dealership; she negligently turned into oncoming traffic and hit a vehicle. The woman who was hit filed a negligence claim against the driver and the car dealership, alleging that the test drive represented a “joint venture.” The trial court ruled that the car dealer was not responsible for any damages, since the driver and the sales representative had different goals of buying versus selling the vehicle, and thus were not in a joint venture. However, the Court of Appeal reversed, holding the dealer liable.

The Court of Appeal ruled that, since the sales representative and prospective buyer had already negotiated and settled on a price of the vehicle, they had the common interest of having a safe test drive to conclude the transaction. Thus, the three judge panel concluded that the driver and sales representative had a common goal, and since they also had the right to control the vehicle, the two requirements to establish a joint venture were met. Thus, the court found the car dealership liable for the driver’s negligence during the test drive.

Although not all states have had an opportunity to rule on the issue, the touchstone principles of the Colorado decision were negotiated price and control over the route. When the price was negotiated before the test drive, and both the customer and the sales rep had input over the route to be taken, the Colorado court found a “joint venture” to have been created, establishing liability for the dealer. Thus, to avoid a finding a liability for a test driver’s negligence, dealers should instruct their sales representatives to not negotiate a price before a test drive, and avoid taking the driver on a pre-determined route.