12.4 Garage Coverage Form and Garagekeepers

The Garage Coverage Form

Auto dealers, repair shops, service stations, parking facilities, and storage garages have a hybrid exposure: they own and use autos like any business AND they have autos of others in their care, custody, or control. ISO addresses this with two forms:

• Garage Coverage Form (CA 00 05) — the package form for auto dealers, combining auto liability, general liability (premises/operations and products-completed operations), garagekeepers, and physical damage.
• Auto Dealers Coverage Form (CA 00 25) — the modernized successor that broadened dealer coverage; on exams either may appear.

The Garage form is unique because it folds commercial general liability-type exposures (a customer slipping in the showroom) together with auto liability (a salesperson on a test drive) into one form, with covered-auto symbols similar to the BACF.

Why a Dealer Needs a Hybrid Form

A franchised auto dealer's day generates three distinct loss types in one location: an injury caused while a salesperson drives a customer on a test drive (auto liability), a customer tripping in the parts department (premises liability / operations), and hail damaging the inventory and customer cars on the lot (physical damage / garagekeepers).

Buying separate BACF, CGL, and inland-marine policies would create overlap and gaps. The Garage form integrates them, using auto symbols for the auto exposures and CGL-style coverage for the premises exposures. That is why exam writers describe it as a packaged dealer solution rather than a monoline form, and why a non-dealer repair shop is often placed on the Garage form as well for the same blended exposure.

Garagekeepers Coverage

Garagekeepers insures the garage's liability for physical damage to customers' autos left in its care, custody, or control — the bailment exposure. It is written on one of three bases that the candidate must distinguish:

Trap: Legal Liability is cheapest because the customer must prove the garage's negligence. Direct Primary is broadest — the garage's policy pays even if the garage was not at fault and pays before the customer's policy. Many dealers buy Direct Primary for customer goodwill.

Note that garagekeepers responds only while the customer's auto is in the garage's care, custody, or control — typically once keys are handed over for service or parking. Damage to a customer's car the garage never accepted (e.g., still in the public street) is not a garagekeepers loss. The coverage is also a physical-damage coverage on the bailed auto; bodily injury arising from a covered auto in the dealer's operations is handled by the auto-liability side of the Garage form, not garagekeepers.

Garagekeepers Worked Example

A repair shop carries Garagekeepers – Direct Primary with a $500 collision/$250 comprehensive deductible and a $60,000 limit per location. A hailstorm (a comprehensive peril) damages eight customer cars in the lot, totaling $22,000 in damage.

Because the basis is Direct Primary, the shop's policy pays even though the shop was not negligent for a hailstorm — and pays before the car owners' personal auto comprehensive coverage. Under a Legal Liability basis, the shop would owe nothing for an act of God it did not cause, leaving customers to file on their own policies.

Dealer Physical Damage and the False Pretense Trap

A dealer's own inventory (autos held for sale) is insured under the dealer's physical damage / open-lot coverage, not garagekeepers — garagekeepers is reserved for customers' autos. Two coverage points are heavily tested.

First, false pretense coverage (often a sublimit or add-back) responds when someone tricks the dealer into voluntarily parting with a vehicle, such as a buyer passing a worthless check or a fraudulent title transfer; without it, the standard theft definition may not apply because the dealer handed the car over willingly.

Second, dealer physical-damage limits are frequently written as a per-location limit subject to coinsurance, so under-reporting inventory values can trigger a coinsurance penalty at claim time.

Why Auto Businesses Need a Special Form

Car dealers, repair shops, service stations, and parking operations have a blended exposure - liability (operations and the autos they sell/service), garagekeepers (customers' autos in their care), and physical damage on their own and dealer inventory. The Garage Coverage Form (CA 00 05) and the Auto Dealers Coverage Form (CA 00 25) combine these into one contract.

Garage Liability vs. Garagekeepers

This is the key distinction: garage liability is third-party liability for operations and owned autos, while garagekeepers is essentially a bailee coverage for customers' vehicles being serviced, stored, or parked.

Three Garagekeepers Coverage Options

Garagekeepers can be written three ways, and the exam expects the candidate to rank them:

1. Legal liability - pays only when the insured is legally liable for the customer's auto damage.
2. Direct primary - pays for damage to the customer's auto regardless of fault, primary to the customer's own coverage.
3. Direct excess - pays regardless of fault but excess over the customer's own collision/comprehensive.

Dealers' Physical Damage and the "Garage" Distinctions

Auto dealers add dealers' physical damage (often a reporting-form covering fluctuating inventory) and false-pretense coverage (loss when a vehicle is acquired or sold through fraud or trickery). The Garage/Auto Dealers form also distinguishes "customers" as insureds in limited circumstances and handles the "autos you own" versus "covered autos you have for sale" split.

A frequent application item asks whether a customer's car damaged in a test drive is paid under garage liability (third-party) or garagekeepers (the customer's own auto in the dealer's care) - the answer turns on whose property was damaged and who was at fault.