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September 2021

Auto manufacturer semiconductor chip shortages and bailment agreements

At Encova, we’re committed to offering customized solutions to policyholders who face unique situations. Currently, the automotive industry is facing a shortage of semiconductor chips, which are widely used in manufacturing vehicles. This shortage and its proposed solution introduce unique challenges and coverage needs for your dealer policyholders.

Chip shortages are expected through late 2022 and into 2023, and as a result, manufacturers are running out of space to store fully assembled vehicles that are still missing chips. Encova has unique solutions to offer you and your dealer policyholders who need additional coverage because of a new bailment agreement.

Through Ford Motor Company’s bailment agreement, select authorized Ford and Lincoln dealers are storing some manufacturer-owned vehicles on the dealers’ lots. Ford will retain ownership of these vehicles until the dealership installs the semiconductor chips. At that time, the title may be transferred to the dealership and the vehicle will be eligible for sale. Other manufacturers are in the process of exploring similar solutions.

Contact your commercial lines underwriter with questions about additional coverage for dealers; we can ensure coverage is in place that meets the terms of the agreement.