What Does Garagekeepers Insurance Cover?

Garagekeepers insurance is a specialized policy designed to protect businesses that work with customer vehicles. It covers damage or theft to customer vehicles while in the business’s care, custody, or control. This coverage differs from general liability or commercial auto insurance. Auto-related businesses like repair shops, service stations, auto body shops, emissions testing centers, and valet services often require this insurance.

Types of Losses Covered

Garagekeepers insurance covers specific perils affecting customer vehicles. Fire is a common type of loss covered, protecting against damage to vehicles while they are on the business premises or under its control.

Theft is another significant risk addressed by these policies, covering the loss of customer vehicles if they are stolen while in the insured business’s possession. Vandalism is also commonly included.

Collision coverage within a garagekeepers policy addresses damage resulting from an impact while a customer’s vehicle is being driven by the insured or an employee. This can occur during test drives, moving vehicles within the facility, or parking. Explosions are also covered if a customer’s vehicle is damaged on the premises.

Damage from natural disasters, such as hail and windstorms, is frequently included in garagekeepers policies. While flood damage can be a concern for many businesses, it is sometimes offered as an add-on or may require specific policy endorsements to be fully covered.

Vehicles and Circumstances Covered

Garagekeepers insurance specifically targets vehicles belonging to customers, distinguishing it from coverage for a business’s owned vehicles or inventory. This policy is not intended for vehicles that are part of a dealer’s open lot inventory, which typically falls under separate dealer’s physical damage coverage. Instead, it focuses solely on non-owned vehicles entrusted to the business.

A central concept to this coverage is “care, custody, or control.” This phrase defines the specific conditions under which a customer’s vehicle is covered. Examples include vehicles left at a repair shop for service, parked in a commercial garage, or being handled by a valet service. The moment a customer hands over their keys and the business assumes responsibility, the vehicle generally enters the business’s care, custody, or control.

Coverage can extend both on-premises and off-premises, depending on the policy terms. While vehicles are covered on the business property, some policies also provide protection when vehicles are moved off-premises, such as for a test drive or transport to another location for specialized work. Garagekeepers insurance provides financial protection if a customer’s vehicle is accidentally damaged while left in the care of the shop, whether it is being worked on or stored.

Coverage Basis and Common Exclusions

Garagekeepers insurance policies can be structured with different coverage bases, which significantly impact how claims are handled.

Legal Liability Basis

One common structure is the Legal Liability Basis, where the policy only pays for damages if the insured business is found legally negligent for the loss. For instance, if an employee’s carelessness leads to damage, this basis would cover the claim because the business is legally responsible. This means the business must be proven at fault for the damage to occur.

Direct Primary Basis

Alternatively, the Direct Primary Basis offers broader coverage, paying for damages regardless of whether the business is legally at fault. This option covers losses automatically, even if the cause of damage is beyond the business’s direct control or negligence. Within the Direct Primary Basis, options include Specified Causes of Loss, which covers only perils explicitly listed, such as fire, theft, and explosion. Comprehensive Coverage is a broader form, covering most types of direct physical loss, though it often excludes collision unless specifically added; Collision Coverage is an important addition to a direct primary policy, providing protection against damage from impacts. Opting for Direct Primary coverage can foster stronger customer goodwill, as it demonstrates a commitment to covering losses regardless of fault.

Common Exclusions

Despite its comprehensive nature, garagekeepers insurance includes several common exclusions. Faulty workmanship or defective parts are generally not covered, as these issues are typically addressed by a business’s general liability policy. Theft committed by employees or owners is also usually excluded, often requiring separate employee dishonesty or fidelity bonds for coverage.

Furthermore, customer’s personal property left inside the vehicle is typically not covered by a garagekeepers policy. Tools, equipment, or property not considered part of the vehicle itself are also excluded. Standard exclusions often include wear and tear, rust, and depreciation of the vehicle. Consequential losses, such as loss of use of the vehicle or loss of business for the customer, are also usually not covered under these policies. Understanding these exclusions is crucial for businesses to assess their overall risk exposure and consider additional coverages where necessary.