12.4 Garage Coverage Form and Garagekeepers

Auto dealers and the Auto Dealers Coverage Form

Businesses in the auto business - franchised and used-car dealers, service stations, repair shops, body shops, parking operations - have exposures the standard Business Auto form does not handle well, because their inventory of vehicles changes daily and they take custody of customers' cars. ISO addresses this with the Auto Dealers Coverage Form (CA 00 25), which replaced the older Garage Coverage Form (CA 00 05). Many state exams still reference the concepts under the traditional name 'garage coverage', so know both.

The form bundles four major coverages a dealer needs:

• Covered Autos Liability (including products and completed-operations exposure unique to dealers)
• General Liability (premises and operations - effectively a CGL built into the auto form)
• Garagekeepers Coverage (for customers' autos left in the dealer's care)
• Physical Damage, including Dealers' Physical Damage / false pretense for the dealer's own inventory

The false pretense coverage is a dealer-specific feature worth knowing: it responds when someone uses a trick, scheme, or false pretense to acquire an auto from the dealer - for example, paying with a worthless check and driving off - or voluntarily parts the dealer from the vehicle. Ordinary theft coverage would not always respond to a voluntary transfer induced by fraud, so this provision closes a gap unique to selling vehicles.

Garagekeepers coverage and its three options

Garagekeepers coverage protects a garage business against liability for damage to a customer's auto left in its care, custody, or control. It is essentially bailee coverage for autos. The exam tests the three coverage options, which differ by when the insurer pays:

Garagekeepers covers the perils of fire/explosion, theft, riot/civil commotion, vandalism, and collision/upset (collision is usually an option). It is subject to a deductible that may differ for collision versus other perils.

A critical garagekeepers detail: the coverage is excess over the customer's own insurance by default under the legal-liability and direct-excess options, while the direct-primary option makes the garage's coverage primary. The garage business chooses the option based on customer expectations - a high-end repair shop that promises to protect customers' vehicles regardless of fault will buy direct primary, while a shop that only wants to cover its own negligence buys the cheaper legal-liability option. The deductible structure (often a per-auto collision deductible and a separate deductible for other perils) is also tested.

A garagekeepers worked example and traps

Worked example: A customer leaves a $25,000 car for service. A storm causes a tree to fall on it - $9,000 damage. The garage was not negligent. The garagekeepers deductible is $250 per auto for non-collision losses.

• Legal liability option: garage was not at fault, so the insurer pays the customer nothing under the garage's policy (the customer turns to their own comp coverage).
• Direct primary option: the insurer pays regardless of fault: $9,000 - $250 = $8,750.
• Direct excess option: pays only above the customer's own coverage; if the customer has comp with a $500 deductible paying $8,500, the garage's direct-excess responds only to the gap.

Traps: Garagekeepers covers the customer's auto, not the dealer's inventory (that is dealers' physical damage). And the dealer's own employees driving customer cars are insureds for liability but the auto-business exclusion in a standard Business Auto policy is exactly why a dealer needs the Auto Dealers form instead.

Garagekeepers' Three Coverage Options and the C-C-C Test

Garagekeepers coverage protects a business (repair shop, parking garage, valet) for damage to customers' autos in its care, custody, or control — the classic bailee exposure the CGL excludes via the care-custody-control exclusion. The exam tests the three coverage triggers:

• Legal liability — pays only if the garage is legally liable (negligent) for the damage. Cheapest; the customer must prove fault.
• Direct primary — pays for covered damage regardless of fault, primary over the customer's own coverage.
• Direct excess — pays regardless of fault but excess over the customer's collision/OTC.

The Auto Dealers Coverage Form (CA 00 25) replaced the older Garage Coverage Form for dealers and bundles dealer liability, garagekeepers, and dealers' physical damage (false pretense, etc.). A dealer's owned inventory is covered under physical damage, while customers' cars left for service need garagekeepers — confusing the two is the form's signature trap.

Dealers' Physical Damage and the False-Pretense Recap

The Auto Dealers Coverage Form insures a dealer's owned inventory ("autos held for sale") under dealers' physical damage, which can add false pretense coverage (loss when the dealer is tricked into voluntarily parting with a vehicle, e.g., a bad check or fraudulent title). This is distinct from garagekeepers, which covers customers' vehicles left for service, parking, or storage.

The recurring exam separation: a thief stealing a car off the dealer's lot is a dealers' physical-damage loss; a customer's car damaged while in the shop for repair is a garagekeepers loss; and the legal-liability versus direct-coverage choice decides whether fault must be proven before the garagekeepers coverage pays.