Garagekeepers Coverage: What Auto Insurance Covers if Your Car is Damaged at the Dealership or Repair Shop

Finding a dealership or auto repair facility that does high quality repairs at a good price can be difficult enough, but developing a relationship of complete trust is even more of a challenge.

Auto dealers, body repair shops, auto painting shops, detailers, service stations, storage garages and parking lots all are businesses wherein commercial general liability and business auto liability insurance are heavily intertwined. For this reason these businesses are insured by a “Garage Coverage Form."

What is most unique about this insurance is the “garagekeepers coverage."  It is coverage which applies to vehicles left with the business, by a customer, while it is being serviced or stored by the employees of the business.

In most cases you will never know that an adverse event involving your vehicle has occurred while in the care, custody and control of a shop or garage.  As you can imagine, it is not in the best interests of the business in question, to advertise its lack of caution or accidental mishap. There are times though when it is in the best interests of the shop or garage to notify you.

If you should be in this situation, how insurance applies to the loss will vary, depending on which of two options in coverage, the business has to protect it.

1.    Garagekeepers Direct Excess Insurance will pay for damages to your vehicle that the business bears no legal liability for, in excess of any other collectible insurance.  This means that you must report the loss to your own insurance carrier and have them pay for the damages. Your deductible will be reimbursed by the business’s garagekeepers insurance.  If the business is legally liable coverage applies on a primary basis.

2.    Garagekeepers Direct Primary Insurance will pay for any damages incurred while your vehicle is in the custody of the business. This means that you do not have to involve your own insurance carrier in the claim or repair of damages. The insurance for the business will be first in line to respond on your behalf.

To illustrate the difference between the handling of a claim between these two different types of insurance, here is an example:

You leave your vehicle with a shop for repair. The shop has limited indoor parking and moves your vehicle to curbside parking in the course of repair. While it is parked on the street a careless motorist damages the entire left side of the vehicle while driving down the street.  The employees of the shop clearly are not legally liable in this case. Your vehicle was parked properly and was unattended at the time of the crash.

If the shop is insured under coverage option number 1, you will be notified of the accident and must report it to your own insurance carrier. It will be considered a no fault loss since your vehicle was unattended, but you will need to be actively involved in the claim process and repair since your vehicle’s insurance policy is primary. You may be required to pay your deductible up front and then request reimbursement from the shop’s garagekeepers direct excess insurance.  If the shop is insured under coverage option 2, you may not even be notified that a crash has occurred. The shop’s garagekeepers direct primary insurance will handle the claim and damage repair, and you will not be asked for a deductible. The shop will pay any deductible that applies to the loss.

The main reason that a shop would chose coverage option number 2 is to maintain their reputation and goodwill in their interactions with customers.  Coverage option number 1 comes at a substantially lower premium, and cost saving is the only reason why a business would carry this type of coverage.

If an accident, for which the employees of the shop are legally liable, occurs, it does not matter which garagekeepers insurance option the shop has selected, the business’s insurance policy will respond to the claim on a primary basis. To illustrate an example of this scenario, imagine the following:

You take your vehicle to the shop and in the course of the repair it is moved to curbside parking, but when the shop’s employee parks your vehicle he is in a big hurry and leaves it parked with the front end jutting into the roadway, beyond the parking space’s limit line. An operator of a vehicle driving down the street does not observe the position of your vehicle until it is too late, because a bus is blocking his view.  In this case the employee of the shop has some liability for the crash and the garagekeepers insurance coverage will respond on a primary basis, because it does not matter which option the shop has chosen when there is legal liability on the shop’s part.

Should there be a total loss of your vehicle while in the care, custody and control of the business(such as in the case of a natural disaster), the garagekeepers coverage option which applies can make a substantial difference in the handling of the claim and attendant loss of use.

When you take your vehicle anywhere for repair, service or storage, there is no way that you can know what the insurance provisions of the business’s policy state.  Be aware however that if a loss should occur, how much involvement and cost is required on your part, is contingent upon the coverage option the business selected when deciding on its garagekeepers insurance.

My recommendation in dealing with a business is to always explore its reputation, unless you have direct personal knowledge about the owners and/or employees. Doing this will not protect you from every adverse possibility, but it will give you peace of mind and prevent you from putting your trust in those who do not wish to earn a coveted relationship with the consumer.