12.4 Garage Coverage Form and Garagekeepers

The Garage Coverage Form

Auto dealers, repair shops, service stations, and parking operations have a blended exposure — they have both an auto-business liability exposure (driving customers' and dealer-owned vehicles) and a premises/operations exposure (the showroom, lot, and service bays). The ISO Garage Coverage Form (CA 00 05) bundles these into one form. For franchised new-car and motorcycle dealers, the equivalent program is often the Auto Dealers Coverage Form (CA 00 25), which has largely modernized and replaced the older Garage form for dealers.

What the Garage Form Combines

The Garage form provides, in a single contract:

• Garage liability (auto) — BI/PD arising from garage operations and the use of covered autos, using the familiar covered-auto symbol system.
• Garage liability (other than auto / general liability) — premises and operations exposure equivalent to a CGL, including products and completed operations for the garage business.
• Garagekeepers coverage — for damage to customers' autos left in the insured's care, custody, or control.

Dealers also use dealers' physical damage (on the dealer's own inventory), often written on a reporting basis tied to monthly inventory values.

Garagekeepers Coverage

Garagekeepers protects the garage against liability for damage to a customer's vehicle while it is in the garage's care, custody, or control for service, repair, storage, or parking. It is written on one of three bases:

• Legal Liability — pays only when the garage is legally liable (negligent) for the damage. Cheapest.
• Direct Primary — pays for covered damage to the customer's auto regardless of the garage's fault, on a primary basis (ahead of the customer's own insurance).
• Direct Excess — pays regardless of fault but only excess over the customer's own collision/comprehensive coverage.

A classic exam distinction: under Legal Liability, if hail destroys a customer's car and the garage was not negligent, the garage pays nothing — the customer's own insurer responds.

A Worked Garagekeepers Deductible Example

Garagekeepers physical damage carries deductibles that often differ by peril. Suppose a repair shop has Direct Primary garagekeepers with a $250 collision and $100 comprehensive deductible per customer auto, subject to a $2,500 maximum deductible per occurrence (a common form provision).

A fire (a comprehensive peril) damages 5 customer vehicles, each with $4,000 of damage.

• Per-auto deductible application = 5 × $100 = $500.
• $500 is below the $2,500 per-occurrence cap, so the full $500 is deducted.
• Insurer pays (5 × $4,000) − $500 = $20,000 − $500 = $19,500.

Garagekeepers Coverage and Its Three Bases

Auto businesses hold customers' vehicles in their care, custody, or control, an exposure the CGL excludes. Garagekeepers coverage (within the Garage or the newer Auto Dealers form, CA 00 25) insures the dealer/repairer for damage to customers' autos in its custody. It is written on one of three bases the exam tests:

Garage Operations: Auto vs. Premises Hazard

The Garage/Auto Dealers form blends two liability exposures: the auto hazard (driving customers' and dealer autos) and the premises-operations hazard (the showroom, lot, and repair operations). It thus replaces both a business auto policy and a CGL for the dealership. Dealers' physical damage (often "open lot" coverage with false-pretense and other named perils) insures the dealer's own inventory of autos held for sale.

Worked Garagekeepers Scenario

A customer leaves a car for repair; a hailstorm damages it on the lot, and the shop was not negligent. Under a legal liability basis the shop owes nothing (not liable), so garagekeepers pays nothing and the customer turns to their own comprehensive coverage. Under a direct primary basis the shop's policy pays for the hail damage regardless of fault. The exam toggles fault and the coverage basis to test whether candidates know that only the direct bases pay when the garage is blameless — the practical reason shops buy direct rather than legal-liability garagekeepers.

Dealers' Physical Damage and False Pretense

Auto dealers insure their inventory held for sale through dealers' physical damage (often "reporting" or open-lot coverage) because the BACF physical-damage section is geared to scheduled vehicles, not a fluctuating lot. A distinctive named peril here is false pretense — loss when the dealer is tricked into voluntarily parting with a vehicle by fraud, a trick, or a bad check — which ordinary theft coverage may exclude because the dealer handed the car over willingly.

Knowing that dealers need separate inventory coverage and that false-pretense is a specially named peril distinguishes the Auto Dealers form from a standard commercial-auto policy.

Garagekeepers Exclusions and Limits

Garagekeepers coverage carries exclusions the exam highlights: it generally does not cover theft by the insured's employees, faulty work the garage performed, or contractual liability the garage assumed beyond its legal duty. Limits apply per location, and a deductible usually applies to the direct (regardless-of-fault) bases. Because employee dishonesty is excluded, a dealership exposed to theft by its own staff needs a separate crime/employee dishonesty policy — a coverage-gap pairing the exam frequently presents to test whether candidates route employee theft to crime coverage rather than garagekeepers.