Understanding Garage Liability Coverage: Common Pitfalls and How to Avoid Them
Coastal Brokers Insurance Services, Inc.
Providing markets & services for insurance brokers who specialize in hard-to-place risks.
Garage liability insurance is essential for businesses in the automotive industry – from car dealerships and repair shops to service stations. Retail insurance agents need to be well-versed in the nuances of garage liability to help their clients avoid coverage gaps that could expose them to significant financial risks.?
Read on to explore common pitfalls in garage liability coverage and learn practical tips to ensure comprehensive protection for garage operations.
What Is Garage Liability Insurance?
Garage liability insurance is designed to protect businesses that work with customer vehicles. It covers third-party bodily injury and property damage claims that arise from the insured’s business operations.?
For example, garage liability insurance would respond to cover claims if a customer is injured on the premises or if an employee accidentally damages a customer’s vehicle. However, it does not cover damage to the vehicles in the business’s care, custody, or control – that requires a separate coverage called garagekeepers insurance. More on that below.?
5 Common Obstacles in Garage Liability Coverage
While garage liability insurance is a critical part of an overall risk management plan, there are several common scenarios that retail agents should help their clients avoid:
1. Confusing Garage Liability with Garagekeepers Insurance
One of the biggest misunderstandings is the assumption that garage liability covers customer vehicles. In reality, standard garage liability insurance only covers liability for injuries or property damage resulting from business operations. It does not cover damage to customers' vehicles while in the business’s possession.
How to avoid this pitfall:
Ensure that your clients also have garagekeepers insurance, which covers physical damage to customer vehicles in the care, custody, or control of the garage. This is especially important for businesses that frequently store or drive customer vehicles, such as repair shops or dealerships offering valet services.
2. Inadequate Limits for Liability Coverage
Another common pitfall is not carrying enough liability coverage to address the potential financial risks associated with garage operations. Businesses in the automotive industry can face large claims, particularly if an accident causes significant injury or extensive property damage.
How to avoid this pitfall:
Work with your clients to assess their liability exposure and recommend limits that match the potential severity of claims. For example, a dealership or autobody shop handling high-value vehicles or operating in a high-traffic area should carry higher limits to cover catastrophic events.
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3. Overlooking Employee-Related Exposures
Many garage operations rely heavily on employees who drive customer vehicles or operate heavy equipment. The business could be held liable if an employee causes injury or property damage while performing job duties. However, standard garage liability coverage may have gaps when it comes to employee actions, especially in cases involving negligent driving.
How to avoid this pitfall:
Discuss adding employee dishonesty or hired/non-owned auto coverage, which can help protect the business from liability related to employee actions. This additional coverage ensures the company is protected, even if an employee is found responsible for a severe accident.
4. Neglecting to Include Completed Operations Coverage
Many garages perform work on customer autos that could lead to a claim after the vehicle has left the premises. If a customer experiences a mechanical failure or another issue caused by faulty repairs, the business could be held liable, even after the service is completed.
How to avoid this pitfall:
Make sure your client’s policy includes completed operations coverage. This coverage protects the business from liability related to completed work, such as repair jobs or part installations that fail and cause damage or injury after the customer has taken the vehicle home.
5. Not Accounting for Customer Property Beyond Vehicles
While garage liability insurance focuses on vehicle damage or injury, it’s important to remember that customers often leave personal property inside their vehicles or may bring other items to the garage. A customer's property, such as electronics or other valuables inside their vehicle, may not be automatically covered under the standard garage liability policy.
How to avoid this pitfall:
Consider adding an endorsement that covers customer property left inside vehicles or on the premises. This can be crucial for protecting the business from claims related to lost or damaged personal items.
Ensuring Comprehensive Coverage for Garage Operations
To provide robust protection for garage clients, retail agents should take a holistic approach to their insurance strategy, ensuring that multiple aspects of liability are accounted for:
Garage liability insurance plays a vital role in protecting businesses in the automotive industry, but several common pitfalls can leave businesses vulnerable if not appropriately addressed. By understanding the nuances of garage liability coverage, including potential gaps like customer vehicle damage, employee actions, and completed operations, retail agents can help their clients avoid costly mistakes.?
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