What Does Garage Liability Insurance Cover?

Garage liability insurance is a specialized policy for automotive service businesses, including auto repair shops, car dealerships, and parking garages. It protects these businesses from financial liabilities arising from daily operations, safeguarding against claims of bodily injury or property damage to third parties.

This policy offers protection beyond standard general liability, addressing unique garage risks. It covers medical expenses, property repairs, and legal fees if a third party is harmed due to the garage’s operations or on its premises.

Understanding Covered Perils

A standard garage liability insurance policy protects against several types of incidents and damages. This coverage addresses risks unique to automotive businesses.

Bodily injury coverage

Bodily injury coverage addresses physical harm sustained by third parties on garage premises or from garage operations. For example, if a customer slips on spilled oil and is injured, the policy helps cover medical expenses and related legal costs.

Property damage coverage

Property damage coverage applies to damage of third-party property, excluding customer vehicles in the garage’s care. For instance, if a mechanic damages a neighboring building or a customer’s personal item, the policy covers repair or replacement costs.

Premises liability

Premises liability is covered within bodily injury and property damage, addressing incidents on the business’s property. This includes accidents like a visitor tripping over equipment or a delivery person being injured by a falling object. The policy helps manage financial consequences if the business is responsible.

Operations liability

Operations liability covers incidents from ongoing business activities, on or off premises. For example, if a mechanic test-driving a customer’s vehicle causes an accident, the policy covers resulting property damage and bodily injury to the third party.

Products and completed operations liability

Products and completed operations liability covers incidents occurring after a product is sold or service completed. If injury or property damage results from a product defect or faulty workmanship, this coverage applies. For example, a faulty repair causing a vehicle malfunction after the customer leaves the shop.

Common Policy Exclusions

While garage liability insurance offers broad protection, it is essential to understand its limitations. These exclusions highlight the need for other specialized policies to ensure comprehensive coverage for an automotive business.

Damage to customer vehicles

Damage to customer vehicles is a significant exclusion from a standard garage liability policy. If a customer’s vehicle is damaged while it is in the care, custody, or control of the garage, such as during repairs, storage, or a test drive, this type of loss is not covered. This specific risk requires a separate policy known as garagekeepers insurance, which directly addresses these exposures.

Injuries to employees

Injuries to employees are also excluded from garage liability coverage. If a garage employee sustains an injury while on the job, their medical expenses and lost wages are typically covered by workers’ compensation insurance. This distinction ensures that employee-related occupational hazards are addressed through the appropriate state-mandated coverage.

Damage caused by or to vehicles owned by the garage

Damage caused by or to vehicles owned by the garage itself, such as tow trucks, parts delivery vans, or loaner cars, is generally not covered. These vehicles require a separate business auto insurance policy to provide coverage for accidents, theft, or damage. Garage liability focuses on third-party claims arising from operations, not the physical damage or liability associated with the business’s own fleet.

Punitive damages

Punitive damages, which are awarded to punish a defendant for egregious conduct rather than to compensate for losses, are often excluded from liability policies. Insurance policies generally cover compensatory damages but may not extend to punitive awards, depending on jurisdiction and policy language. This means a business could be directly responsible for such payments.

Intentional acts

Intentional acts are universally excluded from insurance coverage. If an individual associated with the garage intentionally causes harm or damage, the policy will not provide coverage for the resulting claims. Insurance is designed to cover accidental occurrences and unforeseen events, not deliberate misconduct.

Pollution liability

Pollution liability, including environmental contamination and cleanup costs, is typically excluded from standard garage liability policies. These risks often require specialized environmental impairment liability insurance. The costs associated with spills, leaks, or other pollution incidents can be substantial and are generally beyond the scope of general business liability.

Other Essential Insurance for Garages

Beyond garage liability, automotive businesses typically require a suite of other insurance policies to adequately protect against the diverse risks they face. Each policy addresses specific exposures that garage liability does not cover, forming a comprehensive risk management strategy. Understanding these additional coverages is crucial for a robust insurance program.

Garagekeepers insurance

Garagekeepers insurance specifically covers damage to customers’ vehicles while they are in the care, custody, or control of the garage. This policy protects against perils like fire, theft, vandalism, and collision that might occur while a customer’s car is on the premises for service or storage. Unlike garage liability, which focuses on third-party bodily injury and property damage, garagekeepers insurance directly addresses the responsibility for client vehicles.

Business auto insurance

Business auto insurance is necessary for vehicles owned, leased, or operated by the garage itself. This includes tow trucks, service vans, or any vehicles used for business purposes, such as transporting parts or providing shuttle services. This policy covers liability for accidents involving these vehicles, as well as physical damage to the business’s own fleet.

Workers’ compensation insurance

Workers’ compensation insurance is mandated in most states and provides coverage for employees who suffer work-related injuries or illnesses. This policy helps cover medical treatment, rehabilitation, and a portion of lost wages for injured workers. It also protects the employer from direct lawsuits related to employee injuries.

Commercial property insurance

Commercial property insurance safeguards the physical assets of the garage business. This includes the garage building itself, tools, equipment, machinery, inventory, and office contents. It provides financial protection against losses due to perils such as fire, theft, vandalism, and certain natural disasters.

Umbrella liability insurance

Umbrella liability insurance offers an additional layer of liability protection above the limits of primary policies like garage liability and business auto. If a catastrophic claim exceeds the limits of the underlying policies, the umbrella policy can provide extended coverage. This helps protect the business from potentially devastating financial losses from large lawsuits.