Garage Liability protects auto dealerships, service, collision and repair shops (or any similar operations) for liabilities arising from their operations.
Garage coverage is a hybrid of General Liability and Business Auto. It insures against loss to owned and non-owned autos, but also bodily injury and property damage on premises or while in owned or non-owned autos.
In other words, if you damage your customer’s auto or if your work results in harm to them or their auto, you’re covered. Also, if you cause harm to someone else while driving your customer’s auto, you’re covered.
Additionally, Garage policies can be written either as Division I or Division II coverage, depending on the type of risks. Division I policies are written and rated for Auto Dealerships, while Division II is appropriate for those engaged in repair or storage of autos, but not in sale of autos.
Its main coverage parts consist of: Covered Autos, Liability, Garagekeepers, and Physical Damage.
Similar to the BAP, this section assigns symbols based on coverage type. Be sure you review your insurance application before signing to ensure the proper symbols are applied and don’t hesitate to ask your agent for help. Also, similar to the BAP, this section allows for liability coverage of trailers less than 2,000 lbs.
Coverage for damages related to “bodily injury” or “property damage” caused by an “accident” and resulting from “garage operations” for non-covered and covered autos. Insurer retains right and duty to defend against any “suit” seeking damages for bodily injury or property damage. Pollution coverage applies for covered autos if resulting from an “accident” during “garage operations” and only if there is concurrently resulting bodily injury or property damage.
This section is actually broken into two main parts: Covered Autos and Other than Covered Autos. The Covered Autos section is nearly identical to the Business Auto form and the Other Than Covered Autos section is nearly identical to the Commercial General Liability form.
Who Is An Insured section includes you, your employees, partners and “permissive users” (other than customers, who must provide coverage under their own auto policies). The actual description is complicated, but there is little to gain discussing all the fine details here (they are spelled out in the Coverage Form).
Suffice it to say you, your employees and partners have coverage or can endorse proper coverage while operating covered and non-covered autos during your garage business. Your customers are NOT covered under a Division II policy, so if you are engaged in the sale of autos, you will require a Division I policy.
Coverage for damages to customer’s auto or equipment left in the insured’s care while attending, servicing, repairing, parking or storing it.
Coverage applies to similar physical damage terms including Collision, Comprehensive or Specified Causes of Loss.
This section of the coverage form mirrors the Physical Damage section of the Business Auto Policy.
Garage: Common Coverage Gaps
The same restriction for “on premises” pollution exclusions apply, but it’s noted here because some garage operations possess higher than usual risks for pollution due to the nature of operations (e.g. Oil Service shops or Fuel Stations).
Whether imposed under a Service Agreement or not, the Garage policy does not ever provide coverage for faulty work. Resulting damage from faulty work is covered, but the work itself is never covered. This is considered to be a matter of doing quality work and the insurer does not want to be exposed to this risk.
The only possible insurance solutions to this gap would be to purchase some kind of warranty policy, but the cost would likely not be worth it. Typically, we consider this risk to be more of a general operational risk management issue that can be resolved by proper employee training and good processes.
Besides, good work is central to your success anyway since consistently faulty work will put you out of business.
Division I vs II
If you are engaged in the sale of autos (i.e. Auto Dealership), then your policy should be Division I, otherwise you will be missing some important coverage – namely, under Who Is An Insured, your customers are only covered under a Division I policy.