12.4 Garage Coverage Form and Garagekeepers

Why a separate Garage form exists

A business in the vehicle trade — a franchised or used-car dealer, a repair garage, a service station, a body shop, or a parking facility — has two layered exposures that the ordinary Business Auto form cannot handle:

1. Auto exposures from driving customers' and dealer-owned vehicles, and
2. Premises and operations exposures like a service bay where a lift collapses on a customer.

The Garage Coverage Form (CA 00 05) solves this by combining auto liability and general (premises/operations) liability in a single contract, so the dealer does not have to coordinate separate auto and CGL policies for overlapping exposures.

For non-dealer service risks — repair shops, body shops, service stations, and parking facilities — ISO also offers the Auto Dealers Coverage Form (CA 00 25) for franchised and used-car dealers specifically, while smaller service operations may use the garage form. The unifying idea is that any business handling customers' vehicles needs a form that contemplates both the driving exposure and the bailee exposure in one place, which the personal and ordinary business auto forms do not.

Garage liability coverage

Garage liability pays damages the insured is legally obligated to pay for bodily injury or property damage arising out of garage operations, including the ownership, maintenance, or use of covered autos. "Garage operations" embraces both the auto work and the ordinary business operations on the premises.

The form uses covered-auto symbols, but a special Symbol 31 is used for owned autos and a Symbol 8 style designation for autos the dealer does not own. Coverage is typically written with a combined single limit, and exclusions remove expected losses such as damage to the insured's own property and certain products/work product claims that belong on dealer-specific forms.

The garage form distinguishes between garage operations – covered autos (the auto exposure) and garage operations – other than covered autos (the premises and operations exposure that behaves like general liability). A test customer crash on a dealer plate is the auto side; a falling display sign that injures a shopper in the showroom is the other-than-auto side. Because both live in one form, the dealer avoids the gap that can open when a loss falls in the seam between a separate auto policy and a separate CGL. Expect a question that asks which side of garage liability responds to a given fact pattern.

Garagekeepers coverage

Garagekeepers insures the garage's legal liability for damage to a customer's auto while it is in the garage's care, custody, or control for service, repair, storage, or parking. This is the classic bailee exposure: a customer drops off a car, it is stolen or burns, and the customer demands payment.

Garagekeepers can be written on three bases, and the exam loves the distinction:

Trap: under the legal-liability basis, if the customer's car is damaged by a peril the garage did not cause (e.g., a flood with no negligence), the garage owes nothing and the customer must look to their own policy.

Garagekeepers covers four named perils unless broadened: fire and explosion, theft, riot and civil commotion, and vandalism, plus comprehensive and collision if those are selected.

A practical reason a garage buys direct primary rather than legal liability is customer goodwill — paying for a customer's car even when the shop is blameless keeps the relationship, whereas a strict legal-liability stance sends the customer back to their own carrier and often costs the shop the account. Direct excess is the middle ground: the shop's coverage pays the customer's deductible and anything above the customer's own limits, but only after the customer's policy is tapped.

Garagekeepers carries its own deductible, often applied per auto, and a single occurrence that damages several customers' cars (a fire sweeping a storage lot) can stack multiple deductibles or be subject to a maximum-per-occurrence cap depending on the form. Read whether the deductible is per-auto or per-occurrence before answering a multi-vehicle Garagekeepers question.

Dealers' own inventory

Garagekeepers protects customers' autos; it does not insure the dealer's own inventory. Dealers cover their stock through Dealers Physical Damage / Garage Physical Damage coverage, often written on a monthly reporting form so the premium tracks fluctuating inventory values.

False pretense coverage is a notable add-on: it pays when the dealer is tricked into voluntarily parting with a vehicle — for example, accepting a bad check or releasing a car to a buyer who used fraudulent identification. Ordinary theft coverage would not respond because the dealer voluntarily handed over the auto, so false-pretense wording is required to fill that gap.

Dealers physical damage is commonly written subject to a coinsurance-style reporting condition: the dealer reports inventory values each month and the premium adjusts. If the dealer under-reports values and then suffers a loss, recovery is reduced in proportion to the under-reporting — a penalty that works much like coinsurance on a commercial property policy. Accurate, timely value reports are therefore essential to a full recovery, a point the exam likes to test alongside the false-pretense distinction.