It's a scenario no one who operates a garage wants to envision. An employee spills a flammable liquid or gasoline in the garage. A spark from an employee welding nearby ignites the liquid, burning a vehicle also in your garage. To make matters worse, a customer is injured vacating the building and a laptop and some golf clubs in the truck are destroyed.
What has been created is a liability perfect storm.
So now the question arises: Have you considered the difference between garage-keepers coverage and garage liability insurance, and if what you have is going to quell this liability storm?
While many may consider these policies to perform the same task, there is actually a big difference. But no matter the difference, in order to consider your business properly covered with garage insurance, it's crucial to have both policies.
So, what are the differences? According to the International Risk Management Institute, garage liability insurance is defined as: "insurance covering the legal liability of franchised and non-franchised automobile, truck, truck-tractor, motorcycle, recreational vehicle, and trailer dealers for claims of bodily injury and property damage arising out of business operations."
This is the general liability policy that would respond to the claims associated with the injured customer. But, the general liability policy excludes coverage pertaining to any personal property that is in your care, custody, or control. It does not matter whether this personal property is a vehicle or golf clubs owned by you or someone else.
On the other hand, it is the garage-keepers liability that covers the legal liability for vehicles in your care, custody and control. While a customer's vehicle is sitting in your shop, there is no telling what might happen to it. Garage-keepers coverage protects the customer's vehicle while you are keeping it on location for parking, storing or performing service. It will also provide protection for damages by fire, theft, collision or vandalism. But the catch is that the garage owner must have some degree of negligence associated with the claim.
Assume that in the aforementioned example it was lightning that ignited the fire. Since that is not the fault of the shop owner, generally they would not be liable for the loss and the policy would not pay even though the vehicle is in their care. While at first glance this may seem unfortunate in that the garage owner is perceived to fend for themselves, remember, that the garage owner is not legally liable and therefore cannot be held liable in court.
But whereas the source of the fire in this example rests with the negligence of the employee due to the flammable liquid spill, the resulting damage to the vehicle is covered by the garage-keepers policy.
Okay, but what about the contents of the vehicle? The contents are not covered by the general liability because of the care, custody and control exclusion. It is also not covered by the garage-ekeepers policy because personal property is not a vehicle, and that's all that a garage-keepers policy covers; vehicles.
So how would the golf clubs and laptop have been covered? Simply through an endorsement to the policy which adds coverage for a customer's personal property while in the care of the shop owner.
Running a repair shop, valet service or garage isn't easy. The last thing you need is a claim that goes uncovered. So before you accept those keys, or fix that car, be sure that your coverage is in good repair.
Robert Mucci of Wolpert Insurance Agency, Inc. in Worcester, Mass., is a Certified Insurance Councilor, Accredited Advisor in Insurance, a MA Licensed Insurance Advisor, a Certified Master Workers Compensation Advisor and a former Certified Public Accountant with PWC and Bain & Company, Inc. He has more than 25 years experience in the insurance industry specializing in commercial risk strategies. For additional information he can be reached at 508-459-4760 and [email protected].