12.4 Garage Coverage Form and Garagekeepers

Which Form Applies

Businesses that work on or sell autos have a hybrid exposure - they have a premises/operations liability like any business AND an auto liability like any fleet, plus they take physical custody of customers' vehicles.

• Auto Dealers Coverage Form (ISO CA 00 25) - for franchised and independent auto, motorcycle, trailer, and RV dealers. It is the current ISO form for dealers and folds in dealers' general liability, including products and completed operations from the sale of vehicles.
• Garage Coverage Form (CA 00 05) - for non-dealer auto businesses: repair shops, service stations, body shops, parking garages, valet operations, and storage garages.

The reason the industry uses a hybrid form is that a standard CGL excludes autos and a standard auto policy excludes premises and completed-operations exposures. Splitting the two would leave a coverage gap exactly where these businesses are most exposed, so the garage and dealers forms merge them.

Exam trap: dealers use the Auto Dealers form; the Garage form is for service/repair operations that are not dealers. A common distractor is to offer the BACF for a repair shop, but the BACF has no garagekeepers and does not blend in general liability, so it leaves a shop's biggest exposures uninsured.

Garage Liability - A Blended Coverage

The distinguishing feature of garage/dealers forms is that they combine auto liability and commercial general liability (CGL) into a single coverage:

A single per-accident limit typically applies, with covered-auto symbols (similar to the 21-31 series on the dealers form) designating which autos are insured for liability. Coverage for the dealer's premises, demonstration drives, and a salesperson's use of dealer plates all fall under this blended liability section.

Garagekeepers Coverage

Garagekeepers insures the insured's liability for physical damage to a CUSTOMER'S auto left in the insured's care for service, repair, storage, or parking. This is the bailee exposure - the customer owns the car, but the shop is responsible for it while it is on the premises. A parking garage, a valet operation, and a transmission shop all have this exposure even though none of them owns the vehicles.

Covered perils mirror physical damage: fire, theft, explosion, vandalism (Comprehensive/Specified Causes of Loss), and collision/overturn. It does NOT cover the dealer's own inventory - that is dealers' physical damage on owned autos. A common mistake is assuming garagekeepers covers the lot's for-sale vehicles; it covers customers' vehicles only.

The Three Garagekeepers Loss Bases

Garagekeepers can be written three ways, a heavily tested distinction:

• Legal Liability - cheapest; the insurer pays ONLY if the insured is legally liable (negligent) for damage to the customer's auto. If the shop is not at fault, no payment.
• Direct Primary - pays for damage to the customer's auto regardless of fault, as primary coverage. Acts like a true bailee comprehensive/collision.
• Direct Excess - pays regardless of fault, but excess over any other collectible insurance (such as the customer's own auto policy).

Direct primary and direct excess respond even when the insured is not negligent; legal liability does not.

Worked Example - Garagekeepers Basis

A hailstorm damages five customer cars parked at a repair shop. The shop took reasonable care, so it is not negligent.

• Legal Liability basis: the shop is not at fault, so garagekeepers pays nothing - the customers turn to their own comprehensive coverage.
• Direct Primary basis: garagekeepers pays the hail damage to the customer cars regardless of fault, subject to the limit and deductible.
• Direct Excess basis: garagekeepers pays only the amount above what the customers' own policies pay, so if a customer has full comprehensive coverage the garagekeepers form may pay little or nothing.

A related numeric: suppose the limit is $60,000 and five cars suffer $50,000 total hail damage. On direct primary the form pays the full $50,000 (within the $60,000 limit) minus any per-occurrence deductible. On legal liability it pays $0 because the shop was not negligent.

This is why a shop wanting to keep customers happy after no-fault losses buys direct primary, not legal liability. Legal liability is the cheapest because the insurer can deny most claims by proving the shop took reasonable care, while direct primary functions like a comprehensive-and-collision policy on every customer car in custody. The choice trades premium against goodwill and customer retention.

Garage Liability vs. Garagekeepers in One Line

Garage liability covers the dealer/repair shop's liability to third parties (a customer hurt on the lot, or by a dealer-driven car) and blends premises/operations with auto liability. Garagekeepers covers customers' autos in the insured's care, custody, or control — the shop's bailee exposure when a stored or in-for-repair car is damaged. "Customer's car burns in the repair bay" = Garagekeepers, not garage liability.

Direct vs. Legal-Liability Garagekeepers

A shop wanting to pay a customer's loss even when not negligent buys a direct (primary or excess) basis; the cheapest, fault-based option is legal liability.