10.5 Auto Dealers Coverage and Garagekeepers Insurance
Key Takeaways
- The ISO Auto Dealers Coverage Form (CA 00 25) replaced the garage coverage form and packages auto liability, general liability, dealers physical damage and garagekeepers into one contract for franchised and independent dealers.
- Non-dealer service risks such as repair shops, service stations, parking garages and storage facilities are written on the business auto form with a garagekeepers endorsement rather than on the dealers form.
- Garagekeepers coverage insures the operator's exposure for damage to customers' autos left in its care, custody or control, which both the CGL and the business auto liability form exclude.
- Garagekeepers may be written on a legal liability basis, a direct primary basis or a direct excess basis, and the three differ in whether the customer must prove the operator's negligence.
- Dealers physical damage is normally written on a monthly reporting form so the limit tracks a constantly changing inventory, and an underreported month is penalized by the reporting condition.
Quick Answer: A business that sells, services, repairs, parks or stores vehicles has an exposure no ordinary policy will cover: the customer's car in its custody. The Auto Dealers Coverage Form (CA 00 25) packages auto liability, general liability, dealers physical damage on a reporting basis, and garagekeepers for franchised and independent dealers. Non-dealer service risks buy the business auto form plus a garagekeepers endorsement. Garagekeepers is written on a legal liability, direct primary or direct excess basis, and only the legal liability version makes the customer prove the operator's negligence.
Every other policy an adjuster reads pushes this exposure away. The CGL excludes damage to personal property in the insured's care, custody or control. The Business Auto Coverage Form excludes anyone using a covered auto while working in a business of selling, servicing, repairing, parking or storing autos. That is not an oversight: those risks are supposed to be written on a dealers or garage program.
The Auto Dealers Coverage Form
ISO's Auto Dealers Coverage Form (CA 00 25) superseded the old garage coverage form for dealer risks. It is a package written for franchised new-car dealers, used-car dealers, trailer and motorcycle dealers, and similar operations, and it contains four coverage sections.
1. Covered Autos Liability
Pays sums the insured legally must pay as damages because of bodily injury or property damage caused by an accident and resulting from garage operations involving the ownership, maintenance or use of covered autos. Defense is provided in addition to the limit.
Dealers-specific covered autos symbols replace the familiar business auto table:
| Symbol | Means |
|---|---|
| 21 | Any auto |
| 22 | Owned autos only |
| 23 | Owned private passenger autos only |
| 24 | Owned autos other than private passenger autos only |
| 25 | Owned autos subject to no-fault |
| 26 | Owned autos subject to a compulsory uninsured motorists law |
| 27 | Specifically described autos |
| 28 | Hired autos only |
| 29 | Non-owned autos used in the auto dealer business |
| 30 | Autos left with the insured for service, repair, storage or safekeeping (the garagekeepers symbol) |
| 31 | Any auto for physical damage, dealers' autos and autos held for sale |
2. General Liability
Covers bodily injury and property damage arising out of garage operations other than the ownership, maintenance or use of covered autos — the customer who slips in the showroom, the products and completed operations exposure from a repair, and personal and advertising injury. This is why a dealer does not also need a separate CGL.
3. Auto Dealers Physical Damage
Covers the dealer's own autos and, critically, autos held for sale. Because inventory turns constantly, this section is normally written on a monthly reporting form: the dealer reports the value of inventory at each location each month and the premium follows the reports. If the dealer underreports, the full reporting condition reduces the recovery in the same proportion the reported value bears to the actual value — the reporting equivalent of a coinsurance penalty. A false-pretense coverage option addresses the classic dealer loss of a vehicle voluntarily handed over to a buyer with a worthless check or a fraudulent identity.
4. Garagekeepers
See below. In the dealers form this is written using symbol 30.
Garagekeepers Coverage
Garagekeepers insures the operator's exposure for loss to a customer's auto left in the insured's care, custody or control for service, repair, storage or safekeeping. Non-dealer risks — repair shops, service stations, body shops, parking garages, valet operators, car washes, storage lots, towing operators — buy the business auto form with a garagekeepers endorsement.
Coverage is written for the same causes of loss as auto physical damage: comprehensive or specified causes of loss, and collision. It applies while the customer's auto is in the insured's custody at the described locations.
The Three Bases of Garagekeepers Coverage
This is the most heavily tested distinction in the subject.
| Basis | Who Must Prove What | Practical Effect |
|---|---|---|
| Legal Liability | The customer must establish the insured's legal liability — usually negligence — before the insurer pays anything | Cheapest. A hailstorm that damages twenty customer cars on the lot pays nothing, because the shop was not negligent |
| Direct Primary | The insurer pays for covered damage to the customer's auto regardless of the insured's legal liability, and pays first, ahead of the customer's own policy | Most protective of the customer relationship. The hail loss is paid. Where the insured is liable, the deductible may be waived or reduced |
| Direct Excess | The insurer pays regardless of legal liability, but only excess over the customer's own collision or comprehensive coverage | Middle ground. The customer's own carrier pays first; the garagekeepers policy picks up the deductible and any shortfall |
Exam Trap: Hail on the Lot
The classic examination scenario is a hailstorm or a tree falling on customer vehicles parked at a repair shop, with no negligence by the shop. Under legal liability garagekeepers there is no payment — the shop is not liable. Under direct primary the losses are paid outright. Under direct excess the customers' own policies respond first and garagekeepers pays the balance. Read the declarations before telling a shop owner what its policy does.
What Garagekeepers Does Not Cover
- The insured's own autos — those are covered under the dealers physical damage or business auto physical damage section.
- Property inside the customer's auto, such as tools, luggage or aftermarket sound equipment not permanently installed.
- Faulty work. The cost to redo the insured's own defective repair is excluded, though resulting damage to other parts of the vehicle is generally covered.
- Theft by the insured's employees, which requires crime coverage such as employee dishonesty.
- Contractual assumption of liability beyond what the law imposes.
Related Exposures a Florida Adjuster Should Check
- Towing and repossession operators need on-hook or cargo coverage for the vehicle being towed; garagekeepers may not reach a vehicle in tow.
- Valet parking conducted by a restaurant or hotel is a garage exposure sitting inside a hospitality risk; the CGL will not reach the damaged customer vehicle.
- Drive-away and transport operations require specific coverage for vehicles driven or hauled under their own program.
- Florida no-fault applies. A dealer's covered autos are motor vehicles required to be registered in Florida, so PIP and property damage liability must be maintained, and dealer tags and loaner vehicles remain subject to Chapter 627's no-fault provisions and to the dangerous instrumentality doctrine, under which the dealer as owner is vicariously liable for a permissive user's negligent operation, subject to the statutory caps in F.S. § 324.021(9)(b).
An independent repair shop carries garagekeepers coverage on a legal liability basis. A severe hailstorm damages eleven customer vehicles parked in the shop's lot overnight. The shop did nothing wrong and had no reason to move the cars. How does the garagekeepers coverage respond?
Why can a service station that repairs customers' vehicles not rely on its Commercial General Liability policy and its Business Auto Coverage Form to insure damage to a customer's car being road-tested by a mechanic?