Garagekeepers Coverage

Garagekeepers Coverage Helps Cover Liability to Cars Left in Possession of a Business

Garage Liability Insurance Coverage and Garagekeepers Coverage are two confusing types of insurance policies. If you as a business owner feel overwhelmed when trying to determine which is best for your business, you are not alone. These coverages are difficult to understand not only for most business owners looking to purchase the coverage, but also for many agents and customer service representatives who are looking to service and sell the policies. The main difference between garage liability and garagekeepers coverage is the difference between Liability Insurance and Physical Damage Insurance. Garage Liability Insurance covers the insured’s liability for operations and Garagekeepers Coverage covers damage to a customer’s vehicle. All businesses with garage risks need both coverages to properly insure their business. In this article we are going to examine the specifics of Garagekeepers Coverage.

Car Mechanic working under the hood.

What Exactly is Garagekeepers Coverage

According to the International Risk Management Institute, Garagekeepers coverage is, “Coverage provided under a garage policy for auto and trailer dealers, particularly those dealers that maintain a service department or body shop, for liability exposures with respect to damage to a customer’s auto or auto equipment that has been left in the dealer’s care for service or repair”.  In layman’s terms this type of insurance is similar to a form of bailee liability where the purpose of the policy is to protect the client’s car, truck, or motorcycle while it is in the possession of the business. Policies differ from carrier to carrier, but a normal policy covers damages related to fire, theft, vandalism, or collision.

Car mechanis working on the frame of a car near a wheel.

3 Parts of Garagekeepers Coverage

There are three main parts to this coverage that a business owner should speak with their agent about when adding this policy to their Business Owner’s Package. Those three parts are legal liability, direct primary, and direct excess. Legal Liability covers mechanic’s negligence. If damage is cause to a vehicle while in possession of the business, your business is covered. Two prime examples of this type of liability are when a mechanic damages a car while working on it or driving the car around the property. The other time this liability arises is when an employee forgets to lock the vehicle overnight and there is theft or vandalism as a result. Direct Primary means the client’s vehicle is protected regardless of whether the damage is due to negligence, theft not attributed to negligence, or damage due to extreme weather. Direct Excess is a type of coverage that is similar to “direct primary” coverage, but the difference is Direct Excess is paid only in excess of any amount collectible if the insured is not held legally liable. Like Direct Primary, Direct Excess protects a client’s vehicle regardless of fault.

Car Racing Mechanics preparing for a race.

Common Exclusions to Garagekeepers Coverage

Some common exclusions to a traditional Garagekeepers Coverage include: damage or theft of stereo equipment, loss of CD’s left in the backseat of a vehicle, loss of cellphones, scanners, or mobile radios, loss or damage to radar detection devices, defective parts installed on a vehicle, and even faulty work done by a mechanic.

Auto Repair

5 Insurance Coverages every Auto Repair Business Should Have

Auto Repair Shops offer a wide variety of mechanical services. These services may include from engine repair and tune-ups. Some businesses specialize in a specific type of sales and repair, like tires, transmissions or brakes. Normally, auto repair shops do not specialize in body work or painting operations. These services are typically performed by specialized professionals. Some operations include the retail sales of automobile parts and tools. Some repair shops are a part of a gasoline or diesel fuel sales operation, or part of an automobile dealership. Each type of operation has its own unique risks and its own unique insurance needs. Here are 5 coverages every auto repair shop owner should strongly consider, in order to properly protect their business.

Auto Repair Shop

 

✓ General Liability Insurance
✓ Garage Keepers Liability
✓ Commercial Auto
✓ Hired and Non-Owned Auto
✓ Workers Compensation Insurance

General Liability

General Liability Exposure can come in many different forms. Like many industries the risk begins with slips, tips and falls by third parties on your premises. This risk starts primarily due to public access to the businesses facility. Risks also arise from having cars parked overnight in the parking lot of the facility.  These areas should be well lit and an ongoing relationship with local law enforcement is advisable.

Garage Keepers Liability

Garage Keepers Liability is usually worded as, “a form of bailee liability designed to cover damage to autos belonging to others while in the insured’s care”. In layman’s terms this is an insurance policy for the liability a business might face related to cars that are stored at their facility for multiple days.  These are other peoples cars that your business is performing a service on that is not able to be completed in one day.

Commercial Auto

Commercial Auto Insurance is needed if your business owns its own vehicles and employees use the vehicle for business purposes. If you own and operate vehicles at your business, it is important to properly train all people who are going to be operating the vehicles. Collecting and documenting these employees motor vehicle records is recommended. Both the training program you have in place and the vehicle records you collect need to be well documented for when you quote new coverage and when a claim arises.

Hired and Non-Owned Auto

Hired and Non-Owned Auto Risks mainly arrive from employees running errands for the business.  If you have employees partaking in these types of activities, all drivers should have valid licenses and their motor vehicle registrations regularly checked. Have these records documented can help you independent insurance agent save you when quoting coverage.

Workers Compensation

Workers Compensation Insurance risks can be significant for auto repair shops. Employees are at risk when performing brake tuning, welding or other repair work. These activities should take place only with appropriate safety equipment. Lifting of a vehicle by hoists, jacks, and other mechanical means can result in injury should the equipment malfunction. Lifting by non-mechanical means can result in back injury, sprains, strains or hernias. Having a documented policy in place for how employees are supposed to do these activities is crucial to prevent injured employees.

Auto Repair Shop Insurance Information at My Insurance Question.

Here are the most common commercial insurance classification codes for auto repair shops.  

SIC Business Insurance Codes:

  • 7533: Automotive Exhaust Repair Shops
  • 7538: General Automotive Repair Shops
  • 7532: Body, Paint and Upholstery Repair

NAICS Liability Classifications:

  • 811111: General Automotive Repair
  • 811112: Automotive Exhaust System Repair
  • 811113: Automotive Transmission Repair
  • 811118: Other Automotive Mechanical and Electrical Repair and Maintenance
  • 811121: Automotive Body, Paint and Interior Repair and Maintenance
  • 811122: Automotive Glass Replacement Shops
  • 811198: All Other Automotive Repair and Maintenance

Business ISO General Liability:

  • 10072: Automotive—Quick Lube
  • 10073: Auto Sales, Repair and Service
  • 10075: Automotive Repair Shop—Self Service

Common Workers Compensation Class Codes:

  • 8380: Auto Repair
  • 8393: Auto Body Repair or Paint Shop
  • 9516: Auto Shop—Radio and Equipment

Here is a great video about Auto Repair Shops and Workers Compensation Insurance  from our partners at Employers.

 

Auto Repair Shops

Direct Primary vs Legal Liability for Auto Repair Shops

The difference between Garage Liability Coverage and Garagekeepers Coverage is the difference between liability insurance and physical damage insurance. The first (liability insurance) covers the insured’s liability for operations, autos, and the second (physical damage insurance) covers damage to customer’s vehicles at auto repair shops. All garage risks need both coverages to properly insure their loss exposures.

Auto Repair Shops

A Garage Keeper’s Legal Liability policy is intended to cover damage to an auto held in their care, custody, or control while it is on consignment for sale or you are servicing, repairing, parking, or installing equipment into the vehicle. Direct Primary Coverage provides coverage even if the loss is not the insured’s fault and is not legally liable. On the surface, this seems relatively easy to understand.

For Example, a customer’s locked vehicle is in a fenced and locked yard. There is adequate lighting in the yard and the vehicle alarm is armed. The electronics are ripped from the vehicle and there is $25,000 in lost equipment and damage.  Although you are clearly not negligent – and not legally liable – the claim is submitted to my insurance carrier.

With Direct Primary Coverage, the customer – the owner of the vehicle – is paid no matter whose fault it was. You have a happy customer again and your insurance paid for everything. Well that is great until renewal time, when we can assume that the insurance company will raise the Garage Liability premium by a substantial amount because of the claim. That $25,000 claim typically will continue to affect your premiums for three years.

If you had purchased Legal Liability Coverage, the owner of the vehicle would have had to submit the claim to his own insurance company. Your insurance company would not pay anything on the claim – after all, it was not your fault, you were not legally responsible for the damage – thereby saving you thousands in renewal premium increases.

What is the best option to take? If you have repeat customers that represent a significant part of your business, than Direct Primary Coverage may be the best choice. However, if you do business with thousands of different people and have no significant relationship with them, then Legal Liability Coverage may better suit you.

To recap. Garagekeepers insurance refers to coverage for the cars left in your care, custody or control. Direct primary garagekeepers pays for the loss whether you are legally obligated to do so or not and legal liability garagekeepers only pays out if you are legally responsible for the loss. As a result, direct primary garagekeepers coverage is usually more expensive than legal liability garagekeepers coverage. Both of these options have their positives and negatives. Talk it over with your insurance agent and then make a decision on what you feel is the best for your business. Think long-term vs short term on the cost of the policy. Once you take cost out it will help you determine which is actually the best option.