Key Points when Considering Garage Keepers Insurance

What is Garage Keepers Insurance?

To make an informed decision about purchasing insurance for a car dealership, garage, or auto repair shop; first you need to know exactly what Garage Keepers Insurance is. Garage Keepers Insurance is designed to protect a garage business for loss to a customer’s auto when it is left in the care and supervision of the business. Think of this as protection for auto repair shops, garages, and car dealerships looking to block more risk when it comes to attending, servicing, repairing or storing autos in their garages or on their premises. Here are three aspects to consider when determining whether to buy this coverage and if so, what limits you need.

Car, Mechanic, Automobile, Service, Repair, Auto

The Differences Between Garage Keepers and Garage Liability?

A Garage Liability Insurance is a specific type of insurance policy. A Garage Keepers Policy protects clients against damage to a customer’s vehicle including fire, theft, extreme weather, and vandalism. This policy, however, does not cover damage that occurs from things like faulty workmanship, parts or out-of-date warranties. The policy covers garage and auto body shops for both bodily injury and property damage. This type of a liability insurance policy is designed to protect incidents that involve ownership, maintenance, or use of locations for garage business operations.  Some carriers offer the ability to extend liability for cardealerships to cover all autos on a car lot. This would include both cars to be sold and cars having maintenance performed.

Don’t forget to ask about Limits, Deductibles and a few other details

During the buying process, every business owner must decide what type of deductible and the limit they are comfortable with. This decision will determine what the business pays for annual premium and how much the insurance carrier will pay out in the event of a claim. Two things to be aware of when deciding on this coverage is if the policy is Comprehensive or if the policy has Specified Causes of Loss. Comprehensive coverage covers the damage to a customers auto from any cause. Often there are a few exceptions that commonly include  the auto’s collision with another object or the auto’s overturn. A garage keepers liability policy that is the specified causes of loss are cheaper compared to comprehensive policies, but they do not cover damages cause dby fire, lightning, or explosion; theft; or mischief or vandalism.

Coverage for these policies can be sold with two deductibles. One applies to each vehicle and the other applies to each event. Having an extended conversation with your insurance agent is a great way to determine if you need this policy and if so where your limit should be. The size of a businesses facility, the revenue of your business, and how many vehicles the business commonly has in possession will all determine the amount of liability needed by any particular business.

Car, Mechanic, Automobile, Mechanical

What Types of Liability are Covered?

There are three main types of liability covered by a Garage Keepers Policy. Those three types of liability are

  • Legal Liability
  • Direct Primary
  • Direct Excess

Legal Liability

Legal Liability is the most common form of liability that cuases a business to file a claim on a Garage Keepers Liability Policy. This typoe of claim deals with damage to a clients claim because of negligence by the insured. An example of this is when a mechanic is involved in an accident while test driving a vehicle.

Direct Primary

DIrect Primary Liability covers the customers vehicle regardless of liability. When a loss occurs that is not the fault of the insured (the business), this type of liability kicks in to cover the loss. Weather related damage and theft are the two most frequent reasons for this type of claim.

Direct Excess

Direct Excess is very similar to direct primary, but only pays in excess of any other collectible insurance. This type of policy is much cheaper to secure, but does come with the business taking on an additional portion of the losses when a large claim occurs.

Motor, Metal, Vehicle, Machine, Part

Exclusions to Consider

Before pulling the trigger on any insurance policy, a business owner needs to have a full undertanding of the exclusions involved with any policy they are purchasing. Common included exclusions for a Garage Keepers Insurance Policy include: theft by an employee, defective parts, faulty work, mobile radios, scanners, radar detectors, CD players, speakers or any equipment not permanently installed in the vehicle.

 

What is OSHA and how does it impact Workers Compensation?

OSHA stands for the Occupational Safety and Health Administration. This government organization is part of the United States Department of Labor. It is the department within the government in charge of the safety and health of workers in the workplace. If you have employees in your business, you need to know about regulations. Any business with one or more employees must comply with OSHA regulations. Here is some information about the history and the three main aspects of the organization.

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OSHA was created in 1970 as part of the OSHA Act. This act created to ensure safe and healthful working conditions, as well as to to preserve human capital throughout the workforce of the United States. One primary aspect the training and education of OSHA focuses on is accident prevention. Prior to this act, there were no laws in place to specifically address safety and health in the workplace. Congress created this act in response to workplace accidents amounting to 14,000 worker deaths annually. Since its inception, OSHA has cut the work-fatality rate by more than half. There are three tactics the organization uses to improve workplace safety throughout the United States:  Education, Training and Enforcement.

Hse, Osha, Health, Safety, Cleaning

Education

One aspect of OSHA that far too many businesses do not realize is their focus on Education and Training. The OSHA Training Institute (OTI) Education Center Program was created in 1992 as a response to a growing number of requests for training from private sector personnel and Federal personnel from other agencies increased throughout the 1980’s. The two most popular courses currently include the #500 Trainer Course in Occupational Safety and Health Standards for the Construction Industry and #501 Trainer Course in Occupational Safety and Health Standards for General Industry. Additional courses include topics such as Hazardous Materials, Machine Guarding, Ergonomics, Confined Space, Excavation, Electrical Standards and Fall Arrest Systems.

Training

OSHA is most known for enforcement and instituting fines, but arguably the most important part of OSHA is Employee Training. As part of its duty to keep the workforce safe and productive, OSHA requires all businesses to create an emergency action plan and take steps to set up a training program to train all employees in all aspects of the OSHA plan. What must be included in this plan is how to deal with hazardous substances, blood-borne pathogens, emergency situations, and what to do if an inspector comes to your workplace.

Enforcement

In addition to education and training, OSHA is tasked with enforcement. This is what the organization is most known for. Officials can issue fines ranging into the tens of thousands of dollars for violations, and they can refer violators for criminal prosecution if they deem such action is warranted. Any business with employees must comply with regulations. If your small business had 10 or fewer employees during the last year, you don’t have to file an injury or illness reports, but you still must comply with all other regulations. It is the responsibility of the business owner to ensure their business and all employees are trained to be in compliance with OSHA Regulations.

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California Workers Comp Rates 2020 are Declining 5.7%

Marking 5 Consecutive Years of Continuing Declines

California Workers Comp Rates 2020 are going to cost the business community less. This is because in August of 2019, the Workers’ Compensation Insurance Rating Bureau (WCIRB) voted to lower Workers Comp Pure Premium Rates by an average of 5.7% below the rates of 2019. In 2019 Rates were down 23.5 percent compared to what businesses paid in 2018.  This year marks the fifth year of declines and the ninth consecutive biannual decrease dating all the way back to 2015. These decreases mark a total decline of approximately 44 percent.

Golden Gate Bridge, Usa, America, Bridge

What is contributing to Declining California Workers Compensation Rates in 2020?

As of  Jan. 1, 2020 advisory pure premium rates are $1.58 per $100 of payroll. This represents a significant decline of 5.7% compared to California Workers Comp Rates 2019. These declines are continuing because of continued downward loss development, claim settlements accelerating, declining pharmaceutical costs, as well as a decline in the number of filed liens. When this many factors are improving, insurance carriers are able to pass some of those savings on to the businesses purchasing coverage.

California Forest, Nature, Tree, Landscape, Redwood

What is limiting the declines from being larger?

California still suffers from the most expensive workers comp rates in the entire country. There are numerous reasons rates remain high despite multiple years of declining premium. In the filing, the WCIRB also noted that factors such as increases in cumulative trauma claims, rising claim severities and continued high levels of allocated loss adjustment expenses are moderating the pure premium rate declines and warrant continued monitoring.

Point Arena Lighthouse, Light, Pacific Ocean, California

Information about Inclusions and Exclusions for California Workers Comp

In the state of California, all employers are required to purchase workers comp regardless of the number of employees. Sole Proprietors are not automatically included for coverage and are not required to carry coverage on themselves. SOle Proprietors are allowed to be included if they so choose by using the Acord 130 application. Partners are automatically included for coverage and are not allowed to be exempt. Corporate Officers, who are the sole shareholder, are excluded from coverage. LLC Members who work within the business are included for coverage unless the elect to be covered using the Acord 130 form.

Payroll Requirements for California Business Owners in 2020

The Payroll Requirements for Sole Proprietors who decide to include themselves for coverage is a minimum payroll amount of $52,000 and a maximum of $133,900 for rating purposes (As of 01/01/2019). Partners, Officers and LLC Members who are included for coverage must utilize a minimum payroll of $52,000 and a maximum of $133,900 for the purpose of rating workers comp premium (As of 01/01/2018).

 

Joisted Masonry (5022)

Joisted Masonry is a part of NCCI Class Code 5022. Joisted Masonry is also one of six building construction categories established by Insurance Services Office, Inc. (ISO). These six categories are part of the Commercial Lines Manual (CLM) and is designed for the purpose of developing rates for insuring commercial property bas upon the likelihood of damage by fire. The CLM description of Joisted Masonry (5022) Construction is considered a building with exterior walls of masonry or fire-resistive construction equipment rated for not less than one hour and with combustible floors and roofs.

 

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This classification includes worked done on exterior walls with combustible floor and roof. The types of materials used in these walls include adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or other similar materials. The code associated with Joisted Masonry (5022) Construction ranks a facility 1-6 based upon how fire resistant the facility is that the business is located or is working on.

Joisted Masonry, Exterior walls, floors, and roof of masonry or fire-resistive materials.

ISO Class 1 is Called Frame. 

Exterior walls of wood, brick veneer, stone veneer, wood ironclad, or stucco on wood. (Construction Code 1)

ISO Class 2 is Called Joisted Masonry (5022).

Exterior walls of masonry material (adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or similar materials) with combustible floor and roof.

ISO Class 3 is Called Non Combustible

Exterior walls, floor, and supports made of metal, asbestos, gypsum, or other noncombustible materials.

ISO Class 4 is Called Masonry Non Combustible. 

Same as joisted masonry except that the floors and roof are of metal or other noncombustible materials.

ISO Class 5 is Called Modified or Semi Fire Resistive.

Exterior walls, floors, and roof of masonry or fire-resistive material with a fire resistance rating of at least 1 hour but less than 2 hours.

ISO Class 6 is Called Fire Resistive. 

Exterior walls, floors, and roof of masonry or fire-resistive materials with a fire resistance rating of at least 2 hours.*

How a Business Benefits from a Modified Hammer Clause

Full and Modified Hammer Clauses help take emotion out of the decision to settle a lawsuit. 

In many industries, the reputation of a person or business is paramount. When a business faces a lawsuit, some business owners value their reputation more then they value the cost to settling a lawsuit. Insurance carriers have decades of historical data that allow them to fairly accurately predict how much a lawsuit will cost to fight. In most cases, it is more cost effective to settle for a certain amount as opposed to fighting a claim in the court of law. When a business owner decides to fight a lawsuit, a Hammer Clause is in place to force the business to take on some or all of the costs associated with fighting the lawsuit. The Hammer Clause deals with the additional costs on top of the settlement offered. These clauses are offered in two ways: Full and Modified. A Modified Hammer Clause is the most common form of Hammer Clause because it gives the business owners options, but requires the business to take on some of the risk.

Hammer, Nails, Wood, Board, Tool, Work, Construction

A Full Hammer Clause is put in place to force a business to settle for the recommended amount or take on the full costs in addition to the recommended settlement. When a Modified Hammer Clause is in place the insurance carrier agrees to split the amount of the additional costs with the insured. This is the amount in addition to the recommended settlement plus defense costs. Modified Hammer Clauses are most often offerred in one of two ways. Those two ways are coinsurance percentages of 50/50 and 70/30. This represents the amount the insurance carrier is willing to pay to fight a laawsuit instead of settling. If the Modified Hammer Clause is 70/30 the insurer pays 70 percent of the additional costs, but the business is responsible for 30 percent of the additional costs. The total amount an insurance carrier will pay is limited to the limits of the policy. It will not cover the entire amount of the lawsuit. This is a major reason why Hammer Clauses are in place. To force or encourage a business owner to settle for a well-calculated amount and take emotion out of the decision.