Garagekeepers Legal Liability and Direct Coverage

We have a tire and auto repair shop insured with a standard garage policy and garagekeepers coverage. The garagekeepers coverage is on a direct primary basis. Our insured sold tires, rims, and accessories to a customer for the customer's race car. The customer asked our insured as a favor to tow his race car to an alternate location. Our insured was not performing any work on the race car at the time but was doing this as customer relations and was not charging for the work. While the insured was using an insured vehicle to tow the race car, the trailer broke loose from the truck and the subsequent collision resulted in the race car sustaining $20,000 in damages.

The insurer declined coverage for the claim, saying that the claimant was not a customer at the time of loss and the insured was not engaged in operations necessary or incidental to a garage business. We disagree. We have provided proof that the race car owner bought products from our insured within sixty days of the loss and so, we think the owner can be considered a customer. Besides, our insured looked upon this operation as a goodwill gesture that might result in future business.