Commercial parking lots and valet: Who pays for auto damage?

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Question: We have a golf course client that purchased Garagekeepers Coverage (CA 99 37 10 13) with direct, primary Comprehensive. The reason for buying the coverage was to cover cars in the club's valet parking lot, but there's nothing in the policy or the form to distinguish between valet parking and any other kind. The club has one big parking lot with a portion marked off for “Valet Parking Only,” but there's no barriers or fences to separate one kind of parking from another.

A member of the club parked his own car in the non-valet portion of the lot and thieves stripped it of a $3,000 sound system. The insurance company refuses to pay the claim because the member parked it himself. It's our contention that customers' autos covered by the policy are not restricted to those parked by the valet service. Further, since it's all one big parking lot, and the entire location is included in the “Address Where You Conduct Garage Operations,” the claim should be paid, subject to the deductible, of course.

— Pennsylvania Subscriber

Answer: The Garagekeepers coverage policy states “this endorsement provides only those coverages for the location shown in the schedule.” The policy states that the company “will pay all sums the 'insured' legally must pay as damages for 'loss' to a 'customer's auto' or 'customer's auto' equipment left in the 'insured's' care while the 'insured' is… parking… it in your “garage operations.”

Comprehensive coverage covers the perils listed as Specified Causes of Loss as well as all other risks of loss that are not otherwise excluded. Theft is mentioned as a Specified Cause of Loss, so it is covered under Comprehensive coverage. The loss in this case was caused by theft of the customers personal property while he was parking on a location named in the declarations.

There is an exclusion for Theft, but only if the “loss” was due to theft or conversion caused in any way by an insured. As far as we know, the loss in question was not due to theft or conversion caused by an insured.

Exclusion 2 states that there is no coverage for tape decks or other sound-reproducing equipment unless permanently installed in a “customer's auto.” The stolen property was indeed sound-reproducing equipment permanently installed in a customer's auto, so this exclusion does not apply to the situation at hand.

Despite the fact that there were two different sections of the same parking lot, the declarations page had only one address listed as the Address Where You Conduct Garage Operations, and according to our facts, no portion of the policy specified that the coverage only applied to one section of the parking lot located at the listed address.

This loss should be covered under the garagekeepers policy.

Garagekeepers coverage for theft of auto, personal possessions

Question: Our insured is a parking garage/valet operation. Last month, a valet attendant parked a customer's car, and inadvertently left the keys in the car with the window opened. The car was stolen. The car was a family van and was loaded with the personal belongings of the van owner. There is no question that our insured is liable for the loss, but we have questions about the coverage under the terms of the garagekeepers policy.

The van is a recent model year van and the owner was still making payments on the van with about two years left on the payment schedule. The actual cash value of the van is less than the outstanding amount due to the finance company. So, is the claimant entitled to the balance of the car loan or just the value of the van? Will the policy pay for a deposit on a new car for the claimant? And will the policy pay for the loss of the personal possessions that were in the van?

There is also one other issue. The insurer notified the claimant that it was going to stop paying for her use of a rental car even though the claim has not yet been settled. Is that proper?

— Arizona Subscriber

Answer: Since this claim is covered by a garagekeepers (GKLL) liability policy, you have to see what the insuring agreement and other clauses have to say about paying for a loss.

The insuring agreement says that the insurer will pay all sums that the insured legally must pay as damages for loss to a customer's auto or the auto equipment. So, what the insurer will pay depends on what the insured is held legally liable for and in accordance with the language of the policy. As to what the insured is legally liable for, we cannot answer since that is a legal question. But, even if the insured is legally liable for everything that the customer lost, this does not mean there is coverage under the GKLL policy for everything claimed. The insuring agreement applies to loss to the customer's car and its equipment. And the policy defines a loss as direct and accidental loss and for GKLL purposes, any resulting loss of use.

This means that if the insured is held liable for the loss, the GKLL policy will pay for the loss of the car and the most that this will be, as noted in the limits of insurance clause, is the GKLL coverage limit of insurance shown in the declarations, minus the applicable deductible. So, you need to check the GKLL policy to see what limits the insured has; if he has a $25,000 limit, that is the most that the insurer will pay; if he has less than that amount, that is the limit that will be paid. And, losses are usually paid based on the actual cash value (ACV) at the time of loss. Unless the GKLL policy in this instance says something different, the insurer will pay for the lost van on an ACV basis up to the limit of GKLL insurance.

The GKLL insurer will pay for the loss of the van on an ACV basis up to the limit of GKLL insurance. However, the insurer will not pay for the deposit on a new car for the claimant since that is not a direct and accidental loss to a customer's auto. Loss under the GKLL coverage includes loss of use, so the insurer has to pay for loss of use, or car rental payments, for the customer, but these payments do not go on forever. The rental payments can possibly be limited by the policy language and you need to check that policy to see what it allows for loss of use payments; but, if no limits are shown, the amount is usually what is deemed necessary and reasonable. As for the personal items in the car at the time of loss, those are not covered by the GKLL policy. Coverage applies to loss to the auto or its equipment and not to personal items owned by the customer but having nothing to do with the auto itself.

Garagekeepers coverage for a stolen auto

Question: Our insured is covered by a garagekeepers policy. He was conducting a state inspection on a car, performing an emissions test for which the engine had to be running. At this point an unknown person jumped into the vehicle and stole it. The insurance company is denying liability because the adjuster does not feel that our insured is legally liable. The adjuster stated “what could the insured have done to prevent the theft?”

What is your opinion of this coverage question?

— Pennsylvania Subscriber

Answer: Garagekeepers legal liability coverage is based on the insured's being legally liable for loss to a covered auto. The adjuster is wrong to assume that the insured is not legally liable in this case. Whether there is legal liability is a question of law that should be settled in a court, so unless the adjuster is an attorney familiar with the law in Pennsylvania , he should not be making legal interpretations. A case for legal liability can be based on a bailment situation. The loss of the car was direct and accidental. If the insured had comprehensive coverage or specified causes of loss coverage under his garagekeepers form, there is no exclusion that would apply. The garagekeepers form was written to cover such a loss as happened here.

As for the coverage question, what the insured could have done to prevent the theft is not the point. The insured had the car in his care at the time of loss.

Garagekeepers coverage and valet parking

Question: The insured maintains valet parking for customers. The weather was hot, so the valet driver lowered the window on the customer's car, without the customer's consent. The window would not go back up when the car was returned to the customer, likely due to age/wear and tear of the power window.

The insured has direct primary coverage under a garagekeepers endorsement, so I believe coverage would apply; however, my supervisor feels this is not owed due to age/wear and tear exclusion. What is your opinion?

— Ohio Subscriber

As for the coverage question, what the insured could have done to prevent the theft is not the point. The insured had the car in his care at the time of loss.

Additional coverage insights from the FC&S Editors:

Interpreting Functional Replacement Cost (FRC) insurance

Here's why fighting crime causes uninsured property damage

Is insurance coverage on when the power goes off?

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