Garage Liability vs. Garagekeeper Liability: What Every Auto Shop Owner Must Know

Key Takeaways:

• In addition to standard business insurance coverage, auto-related businesses may need Garage Liability and Garagekeeper Liability to be fully protected, especially when customers leave their vehicles in the business’s care.
• Garage Liability and Garagekeeper Liability Insurance cover two different aspects of business insurance coverage, with one protecting the business and the other protecting the customers’ property. Both are necessary to be fully protected.
• Finding a solid business insurance agent with expertise in the automotive industry gives you an advocate and advisor on business and insurance-related issues.

So, you’re good with cars and want to open or expand a business that deals with some aspects of the automotive industry? Auto repair, car sales, towing service, body shop, tire shop, car wash—whatever the business, you will still need to have insurance to provide coverage for your assets as well as the vehicles belonging to your customers when they are left in your care.

From the first day of business, it’s important to maintain the right insurance coverage in case of unexpected liability where you could face risks or be exposed to financial or legal threats up to and including business closure or devastating personal financial loss.

Keep in mind, there are standard business insurance policies that are important for any business, e.g., commercial property insurance, workers’ compensation insurance, professional liability insurance (often called errors & omissions insurance), key person insurance, and so on. However, auto dealers and service shop owners need an extra layer of coverage that’s specific to a garage where customers’ property is stored.

Garage Liability vs. Garagekeeper Liability

Garage Liability and Garagekeeper Liability Insurance is often confused, but both are necessary. Let’s take a look at each type of insurance to explain the differences.

Garage Liability Insurance

• Scope of Coverage – Similar to General Liability Insurance, this type of insurance covers the risks associated with running your automotive garage business. This can include:
  • Bodily injury caused to a customer or someone else on your property and would include medical expenses, ambulance costs, and lost wages for the injured person. It does not include employees who are covered by Workers’ Compensation Insurance.
  • Property damage which can include damage from weather-related events, fires, or other damage to the business property.
  • Personal injury or reputational harm caused by libel or slander against you or your business and often includes social media
  • Advertising and marketing injury caused by copyright infringement, etc.
• Exclusions
  • Damage or theft of customers’ property or vehicle when left in the care of your business.
  • Employee work-related injuries or illnesses.
  • Mistakes made in a professional capacity, e.g., a vehicle repaired incorrectly causing significant damage to the engine.
• Examples of coverage – A customer slips and falls in your shop causing a broken or sprained limb, or accidental damage to a customer’s personal property.

Garagekeeper Liability Insurance

• Scope of Coverage – This type of insurance covers damage to a customer’s vehicle while you have custodial responsibility for either repair, restoration, or storage. This can include:
  • Vehicles that are parked or stored at your shop or on your property.
  • Vehicles that are being test driven.
  • Vehicles that are damaged by vandalism or collision.
  • Property damage due to careless staff.
  • Damage incurred by fire, flood, or unforeseen event while the vehicle is in your possession.
• Exclusions
  • Factory stereo equipment
  • CDs, DVDs, or other personnel property items
  • Personal items in the trunk or glove compartment
  • Phones, scanners, GPS systems, or other equipment that is not permanently mounted

What are the Benefits of Auto Shop Insurance Protection?

Now that we’ve talked about the difference between garage liability and garagekeeper liability coverage benefits, you can see that each type of insurance is extremely important. Without both types of insurance coverage, you are leaving a large gap in protection should you have an unexpected problem either with your business and property or with a customer’s vehicle.

As a business owner, we want to encourage you to look at the long-term value of having comprehensive insurance coverage. Here are four key reasons why both types of auto shop insurance coverage are crucial to your success:

1. Regulatory and Financial Compliance – Insurance coverage is often required by state or federal entities, as well as a major requirement when leasing or buying commercial property or borrowing money from lenders.
2. Professional Reputation with Customers – Your customers want to trust the people they do business with and having reputable insurance policies in place ensures your customers that their property is safe and protected while in your care.
3. Peace of Mind – Insurance provides one particularly important thing to all business owners—peace of mind. Knowing your business and what you are working hard to make successful is protected against a huge number of potential risks, problems, or issues is worth its weight in gold!
4. 365/24/7 Protection – A strong relationship with a good insurance agent not only protects you against potentially crippling lawsuits, unexpected property damage, and angry customers, but establishes a highly beneficial relationship with an advocate for your business.

Finding the Best Insurance for Auto Service Businesses

Now this is where you will really benefit from establishing a strong relationship with a seasoned insurance broker. Working with a knowledgeable and experienced agent, preferably one that specializes in the automotive industry, gives you the advantage of having an advocate who is well-versed in the unique risks associated with auto shops and related entities.

Here are three key factors to explore when working with a strong agent:

1. Do they have access to comprehensive insurance packages that can include garage liability and garagekeeper liability insurance? Be sure the agent or brokerage has experience with automotive coverage and can offer you the best price.
2. Can your agent offer bundles that include additional insurance policies, like commercial property insurance, workers’ compensation insurance, and commercial auto insurance if you have company vehicles?
3. Do they or their agency have strong customer reviews, and can they guarantee personalized claims services if you have a problem? Also, what is their average response rate following a claims request?

Types (or Sub-Categories) of Garagekeepers Liability Insurance

Garagekeepers Liability Insurance can be found having three different levels of coverage. Since this can impact your business, it’s important to understand the differences. Here is an explanation but be sure to discuss these differences with your insurance agent.

• Legal Liability Coverage – This is the most common type of Garagekeepers Liability Insurance found and only covers the loss when an employee damages a customer’s vehicle, either through mistake or negligence.

This type of coverage would protect your business if an employee had an accident while test driving a customer’s car or if someone forgot to engage the emergency brake and the vehicle rolled into another car.

• Direct Primary Coverage – This coverage ensures the customer’s car is protected regardless of who is at fault. As the owner, it allows you to take full responsibility for any car or truck left in your care while giving the customer reassurance that their property is protected when it is in your shop.

This ensures that if a car is damaged by hail or a thief breaks in and steals a customer’s truck, the business’s policy would cover all damages or losses instead of the customer having to file a claim under their own policy.

• Direct Excess Coverage – This type of coverage is far less common and can be significantly less expensive, but only pays in excess of any amounts collectible under the property owner’s policy.

That means that if a customer’s vehicle is destroyed in a freak tornado, the owner’s comprehensive coverage under their personal policy would kick in first, with the direct excess coverage able to help pay for damages after the standard policy benefits were exhausted. Needless to say, this option is not popular with the public who would be responsible for the bulk of the damages.

What You’ll Need to Provide Your Agent for a Quote

Like all insurance, requesting a quote requires providing your agent with enough information to obtain a competitive price offer or bid. This will include information on the type and size of your business, number of employees, the services offered, e.g., repair, paint and body, auto parts, services like car washing, etc., annual revenue, risks due to location, your deductible preferences, claims history, and more. All this information is then factored into your final quote.

To further impact your rates, you can also consider the size of your deductible (the higher your chosen deductible the lower your premium costs). Also ask about any discounts your agent may offer.

Here are some common business insurance discounts worth having:

• Claims Free Status – Many insurance providers offer discounts to customers who haven’t filed any claims.
• Loss-Prevention Programs – Discuss loss prevention with your insurance agent to see if your insurance company offers loss prevention training for owners or employees.
• Auto-Payments – Many insurance companies offer a 1.5% to 2% discount to pay upfront for the entire year or to use their auto-payment system.
• Group Memberships or Affiliations – You may be eligible for a discount because you have a membership or affiliation with a group like your local trade association or the chamber of commerce in your community.
• Facility Safety – Many companies take building safety and security into consideration, including the use of security and fire alarms, automatic sprinklers, and fire resistant materials used in construction or for cleaning and supplies.

How to Avoid Having to File a Claim

Once you find a great agent and garagekeeper liability insurance policy, it’s time to safeguard against having to actually use your coverage. Remember, keeping your customers’ property safe is essential to establishing a strong reputation in your community.

Here are some ways to keep your property, as well as your customers’ vehicles, safe:

• Install video surveillance equipment monitored 24/7 to deter theft. Drive-by security is also a worthwhile investment.
• Invest in great lighting indoors and out. Remember that most break-ins are motivated by opportunity—a well-lit facility keeps vandals and thieves away.
• If possible, keep all customer vehicles indoors or at least behind a tall security fence.
• Trust your employees. Take the time to make good hiring decisions with proper background checks and drug testing. It can pay for itself many times over by eliminating employee theft. It’s estimated that employee theft costs employers over $50B annually.
• Think preventive. Smoke detectors, fire extinguishers, sprinkler systems, and security systems are all great ways to keep your property and your customers’ vehicles safe.

To Sum Up

We’ve looked at the interconnectedness between garage liability insurance and garagekeeper liability insurance, as well as the ways that risk management and security/safety options can greatly enhance your auto shop’s business reputation and your peace of mind.

Bottom line: both types of insurance are crucial to any automotive business. A garage liability policy protects the business from all sorts of liability risks that they might encounter, while a garagekeeper liability policy protects the business’s customers and their vehicles.

To prioritize your business’s risk management and insurance coverage needs, it is important to establish a strong relationship with an experienced insurance agent that understands your business and its unique needs. Once you have that relationship, work with that agent to get the best possible price for your coverage, including discounts and deductible adjustments.

Contact einsurance.com to learn more about the full spectrum of business insurance, including garage liability and garagekeeper liability insurance.