Differences Between Garage Liability and Garagekeepers Liability Insurance
While we will get into this subject in more detail later, think of the Garage Policy as a combination Business Auto Coverage form and Commercial General Liability Coverage form.
A typical garage business has an auto exposure (owned, non-owned and hired) as well as premises/operations, contractual and products/completed operations exposures.
Rather than writing two separate policies, the Garage policy allows you to combine the coverages into one form.
SECTION II – GARAGE LIABILITY
Section II of the Garage form covers two liability exposures: “Garage Operations” – Other Than Covered “Autos” (CGL exposures) and “Garage Operations” – Covered “Autos” (Auto exposure) for “bodily injury” and “property damage”(both exposures), and “covered pollution cost or expense” (auto exposure only).
The policy defines “garage operations” as the ownership, maintenance or use of locations for garage business and that portion of the roads or other accesses that adjoin these locations.
It includes the ownership, maintenance or use of covered autos (designated by coverage symbols) and all operations “necessary or incidental” to a garage business.
What is “necessary and incidental” to garage operations is often subject to discussion with the insurer.
For example, would a restaurant attached to a new car dealership be “necessary and incidental” to the service station?
The underwriter would probably feel that it is not and require a separate CGL for the restaurant exposure.
“Auto” is defined as a land motor vehicle, trailer or semitrailer. Unlike the CGL and Business Auto Coverage forms, the definition does not mention that the auto has to be designed for use on public roads, nor does it make reference to “mobile equipment”.
This makes the Garage policy definition of “auto” very broad indeed.
What is considered a covered auto is determined by the selection of a coverage designation symbol.
The Garage form also adds two additional symbols – symbols 30 and 31 – for exposures which are unique to garage operations.
Symbol 30 covers any customer’s auto left with the named insured for service, repair, storage or safekeeping.
This symbol would be used to “trigger” the garagekeepers coverage.
Symbol 31 covers dealers “autos” and “autos” held for sale by non-dealers or trailer dealers.
This is used for physical damage coverage.
Since the liability coverage part covers both CGL-type exposures and auto-type exposures, the policy includes two definitions of “who is an insured”.
“Insureds” for covered autos include the named insured, permissive users, and anyone liable for the acts of an insured.
“Insureds” do not include the owner of a borrowed or hired auto, employees while using employee owned vehicles, someone working in an auto business, dealer’s customers (unless they have no available insurance) or a partner while using a vehicle owned by the partner.
“Insureds” for the garage operations other than autos include the named insured, and the named insured’s partners, employees, directors or shareholders while acting within the scope of their duties.
This is much more restrictive than the CGL definition of “insured” because it does not include real estate managers, legal representatives, mobile equipment operators or newly acquired or formed organizations.
As was previously mentioned, the garage operations – other than auto coverage covers liability for “bodily injury” and “property damage”.
Unlike the CGL policy, it does not cover “personal injury” or “advertising injury”.
These coverages would have to be added by endorsement.
Excluded from coverage would be: expected or intended injury; contractual liability (except “insured contracts”); workers compensation; employee indemnification and employer’s liability; fellow employee; care, custody or control; leased autos (except autos rented to customers when servicing their vehicles); pollution; racing; watercraft or aircraft; defective products; work you performed; loss of use; products recall; war; and liquor liability.
The garage operations coverage – other than autos is subject to an accident limit and an annual policy aggregate limit.
Unlike the CGL, there is not a separate products/completed operations aggregate.
Because the garage liability coverage is not as broad as the CGL policy, it is recommended that the Broadened Coverage – Garages endorsement (CA 25 14) be added. T
his endorsement adds coverage for: personal and advertising injury; host liquor liability; fire legal liability; incidental medical malpractice; non-owned watercraft; spouses as insureds; coverage for newly acquired garage businesses (90 days); and limited worldwide liability coverage.
When added, these coverages become subject to the policy aggregate.
As previously mentioned, the Garage Operations – Auto coverage part covers “bodily injury”, “property damage” and “covered pollution cost or expense” arising out of the ownership, maintenance or use of a covered auto.
“Covered pollution cost or expense” would cover “bodily injury” or “property damage” caused by the leakage of fuels, lubricants, fluids, exhaust gases or other similar pollutants that are “needed for or result from the normal electrical, hydraulic or mechanical functioning” of the covered auto if the pollutants are released from an auto part designed to hold, store, receive or dispose of the pollutants.
For example, if a covered auto overturns as the result of an accident and gasoline from the gas tank leaks out, the policy would cover any resulting BI or PD.
Also covered would be third party liability if an insured causes another vehicle to discharge pollutants as the result of an accident.
The policy does exclude damage caused by pollutants which are being transported by the insured or which are being stored in the covered auto.
The other exclusions which apply to garage operations also apply to the auto exposure.
The auto coverage is subject to an accident limit which is separate from the garage operations accident limit.
The auto liability coverage is not subject to the aggregate
SECTION III – GARAGEKEEPERS COVERAGE
Garagekeepers coverage provides protection for damage to customer’s vehicles due to the insured’s legal liability.
Coverage options are comprehensive (anything other than collision or overturn), specified causes of loss (fire, lightning, or explosion; theft; or mischief or vandalism) and collision or overturn.
This coverage is needed because of the “care, custody or control” exclusion in the liability section of the policy.
It covers the insured’s “bailees” exposure.
Because the basic policy coverage is based on the “legal liability” of the insured for damage to customer’s vehicles, the customer must prove that the insured was negligent for the damages.
This can create a loss of goodwill if coverage is denied because it is determined that the insured is not negligent for the damage.
For this reason, two direct coverage options are available:
- direct excess and direct primary
- Both coverages apply without regard to liability
With direct excess, coverage applies in excess of the vehicle owner’s coverage.
With direct primary, the garage insured would share the loss with the auto owner’s insurer.
With Garagekeepers coverage, the insured must select a limit for each location.
At times, the exact limit needed can be difficult to determine.
One way to determine the limit is to consider the average value of the vehicles in the insured’s care times the average number of vehicles in the insured’s care at a given time.
For example, if the average value of customers vehicles is $20,000 and the average number of vehicles on hand is 10, a limit of $200,000 would be selected.
There is no “coinsurance-type” penalty for underinsurance, but care should be used in the selection of the limit because a catastrophic total loss (like a tornado) could leave the insured without adequate coverage.
Because Garagekeepers coverage is physical damage coverage, deductibles apply to covered losses.
For comprehensive or specified causes of loss coverages, loss by theft or by vandalism or malicious mischief is subject to a deductible for each auto and is also subject to a maximum deductible for all such loss in one event.
The collision deductible applies to each auto, regardless of the number of autos involved in the collision loss.
The maximum limit would be the location limit.
Garagekeepers coverage is subject to several exclusions.
Excluded are: contractual obligations; theft by an insured; defective parts; faulty work; loss to sound reproducing equipment (unless permanently installed); loss to tapes, records, etc.; loss to other sound receiving equipment (CB’s, mobile radios, telephones or scanning monitors unless installed in the dash or console) and radar detection equipment.
As you can see, the difference between garage liability coverage and garagekeepers coverage is the difference between liability insurance and physical damage insurance.
One covers the insured’s liability for operations and autos and the other covers damage to customer’s vehicles.
All garage risks need both coverages to properly insure their loss exposures.