The need can be satisfied by purchasing garagekeepers coverage found in the auto dealership coverage form, CA 00 25.

Topics covered:

Need for garagekeepers liability coverage

Garagekeepers declarations—covered autos

Insuring agreement—perils

Defense

Insureds—extensions

Exclusions

Limits—deductibles

Other insurance

Need for Garagekeepers Liability Coverage

Most customers have automobile comp or collision, usually both, on their own cars. Their insurance will respond to damage wherever the car is located and regardless of who may be responsible for it. However, when a customer's car is damaged or destroyed while at the insured's garage, the customer is more than likely to expect the garage operator to restore it. It is a matter of maintaining customer good will, the same as it is in other "bailee for mutual benefit" establishments like dry cleaners, watch and jewelry repairers, appliance repair shops, and so on.

Another imperative is also at work in the garagekeepers scenario. It is keyed directly to the earlier comment about most customers having insurance on their own cars.  As the insurers of those customer's cars are well aware of the obligations of a "bailee" and not at all reluctant to approach a garage owner for recovery of loss to an auto while in the care of the garage, garagekeepers legal liability insurance (GKLL) is usually a standard component of the insuring program of auto dealerships operations with bailment exposures.

Insureds should be cautioned that the standard GKLL coverage responds only when the insured is found to be legally liable for damages—or when defense costs have to be undertaken to disprove the legal liability charge. If the insured wants, the standard GKLL agreement can be amended to provide direct physical damage coverage on customers' automobiles, either as primary or excess.  When this is done, the interplay of the direct coverage owned by the customer and that of the garage can be confusing.  The "other insurance problem" is discussed at the end of this article.

Note that endorsement CA 99 37 10 13 is available for adding garagekeepers coverage to policies with other forms of commercial auto liability coverage; business auto and motor carrier. See Business Auto Endorsements for more information on this endorsement.

Garagekeepers Declarations—Covered Autos

Subject to separate, per location limits, garagekeepers insurance covers liability for damage to covered automobiles. Coverage is provided for causes of loss as selected on the declarations: comprehensive, specified perils and/or collision.

Covered automobiles are designated under the garagekeepers insurance section of the declarations by use of symbol "30." That symbol relates to "autos left with you for service, repair, storage or safekeeping." Note that the definition of "auto" on the auto dealers coverage form includes land motor vehicles of any description, trailers or semitrailers. Nevertheless, farm implements or mobile equipment dealers should be insured for their bailee-type exposure under an equipment dealers floater. See Equipment Dealers Coverage.

The auto dealers coverage form, under symbol 30, holds that customers include employees of the named insured and members of employees' households; so there is coverage for the autos of employees and others as long as they are in the role of customers, i.e., paying for the services performed on their autos. If an employee of the insured garagekeeper is repairing his own auto for free, just using the insured's premises, and that auto is damaged, the garagekeepers coverage will not respond to the loss.

Automobiles in the insured's custody for the specified purposes of servicing, storing, parking, repairing, or attending within the concept of garage type operations are covered regardless of location (within territorial confines). As is explained later, garagekeepers limits relate specifically to location, but coverage is not affected by the circumstances of the site of the accident.

Since the specified causes of loss are listed with no further definitions, they are subject to the broadest reasonable interpretation the insured can apply to them (consistent with the exclusions set out in the form). For example, pilferage of parts from an automobile can be seen as theft—subject, however, to a deductible provision and exclusions discussed below.

Comprehensive insurance applies to loss from any cause except collision. However, collision of an automobile following its theft is commonly treated as a comprehensive loss because theft is the proximate cause of the collision damage.

Collision of the automobile with a bird or animal, or with a missile or falling object is treated as a collision loss. Note that the physical damage portion of CA 00 25 form includes a separate agreement placing such losses—along with glass breakage—under comprehensive. The absence of a similar agreement in the garagekeepers provisions clearly points to the drafters' intent to place such incidents under garagekeepers collision protection.

Insuring Agreement—Perils

A. Coverage

1.We 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 attending, servicing, repairing, parking or storing it in your "auto dealer operations" under:

a.Comprehensive Coverage. From any cause except:

(1)The "customer's auto's" collision with another object; or

(2)The "customer's auto's" overturn.

b.Specified Causes of Loss Coverage. Caused by:

(1)Fire, lightning or explosion;

(2)Theft; or

(3)Mischief or vandalism.

c.Collision Coverage. Caused by:

(1)The "customer's auto's" collision with another object; or

(2)The "customer's auto's" overturn.

Analysis

The garagekeepers coverage applies to both automobiles and to automobile equipment while the insured is" attending, servicing, repairing, parking, or storing" it in the course of the named insured's auto dealer operations.

The wording of the agreement lends itself to a broad interpretation in some respects. For example, coverage applies to an auto or auto equipment that is "left" in the insured's care. The word "left" as defined in Webster's desk dictionary means "to permit to be or remain subject to another's action or control." Because there is no implication that the customer must physically withdraw or depart from the scene in order to relinquish control, GKLL coverage applies if a customer remains on the insured's premises while the car is being repaired. Moreover, this definition of "left" can resolve any question of what happens if the GKLL insured turns the customer's car over to another shop for work (an antique auto restorer hires a specialty shop do the interior work, for instance). GKLL covers the insured for damage inflicted by the restoration shop just as if the vehicle were in the GKLL insured's own shop.

The insuring agreement's use of the word "attending," ("to look after: to take charge of") a customer's auto can certainly apply to a towing situation. The insured is looking after, or taking charge of an auto in one facet of garage operations in that circumstance. In addition, the customer has "left" the car in the control of the insured while it is being towed.

The phrase "we will pay all sums . . . as damages for loss," leaves itself open to the broadest interpretations. For instance, if a covered auto is stolen while in the insured's care, the policy can be made to respond not only for the worth of the vehicle, but also for whatever loss of use claim the customer can sustain.

Defense