Every garage owner, and anyone who ever takes their car to a mechanic or body shop, needs to be aware of how their insurance is structured as it relates to their customer’s cars. A Customer’s Car is an automobile not belonging to the garage which is in the garage’s custody for care or service. It could be my car in for an inspection, or it could be a dealer’s car in for an oil change.
The owner of the car expects the garage to exercise caution while they are in possession of the car. But sometimes things happen we don’t expect or cannot anticipate.
There are three common ways a Garage Insurance Policy can insure Customer’s Cars; Legal Liability, Direct Primary and Direct Excess.
I’ll start with the easier one to explain, Direct Primary. Under this form the customer’s car is protected by the garage policy regardless of negligence on behalf of the garage or its employees. If the garage finishes work and test drives the car, only to have an accident, the garage policy will respond. If the car is parked in the lot and a tree falls on it, it is protected. If a flood damages the car, it is protected. If it is stolen from the lot, or from the inside of the garage, it is protected. There is no need to prove negligence on the part of the garage or its employees. If their policy indicates that Customer’s Cars are insured on a Direct Primary basis, the customer’s car is protected regardless, unless the loss is excluded.
Legal Liability – Under this form, negligence must exist, either on the part of the garage or its employees. Typically, if an accident is caused by a garage employee there is negligence. But what about floods, or falling trees, or hail, or even theft? There would have to be negligence on the part of the garage or its employees for the garage policy to respond. If no negligence can be found, the car owner’s insurance policy will respond to the damage. Is the garage negligent if a tree falls on a car? Maybe if the garage parked the car under a tree that was known to be rotten. Otherwise, it’s possible there is no negligence. Is the garage negligent if the car is stolen? Maybe, maybe not. It might depend on whether the keys were left in the car or locked in the garage. What about flood? Can a garage be found negligent if a flash flood destroys your car? Can a garage be found negligent if a hail storm puts hundreds of dents in your car’s hood? It’s quite possible the garage policy will not respond to some of these scenarios because no negligence exists on the part of the garage.
Direct Primary coverage is typically more expensive because it responds more readily.
A third type of coverage would be Direct Excess. This is similar to Direct Primary in that it responds regardless of negligence, but only after the car owner’s auto insurance policy responds.
This blog is not intended to determine which type of coverage is right for your business. It’s simply to make you aware of your options. However, it would be a good idea to know which option you are providing your customers.