12.4 Garage Coverage Form and Garagekeepers

The Garage Coverage Form

Auto dealers, repair shops, service stations, parking facilities, and body shops have hybrid exposures — they sell or service autos AND keep customers' autos in their care. The Garage Coverage Form (CA 00 05) packages these into one contract combining garage liability, garagekeepers, and auto physical damage on dealers' inventory. ISO also offers a parallel Auto Dealers Coverage Form (CA 00 25), a more comprehensive successor designed for franchised and independent dealers; the garage form remains common for non-dealer service risks such as repair shops and parking lots.

Garage liability covers BI and PD arising from garage operations, including both the auto exposure (test drives, vehicle deliveries, customer pickups) and the premises/operations and products-completed-operations exposure that a separate CGL would otherwise cover for a non-auto business.

This dual nature is the reason a garage risk cannot simply buy a BAP plus a CGL — the operations overlap, and the garage form is engineered to avoid the gaps and disputes that splitting them would create. A key exclusion: garage liability does NOT cover damage to a customer's auto in the insured's care — that bailee exposure is precisely what garagekeepers is for, which is why both appear on the same form.

Garagekeepers Coverage

Garagekeepers covers physical damage to a customer's auto left in the insured's care, custody, or control for service, repair, or storage. It is written on one of three bases:

Trap: On a legal liability basis the shop pays nothing if a customer's car is damaged by a peril the shop is NOT negligent for (e.g., a tornado), whereas direct (primary or excess) pays regardless of the garage's fault.

Garagekeepers Worked Example

A repair shop carries Garagekeepers Direct Primary, $100,000 limit, $500 deductible per auto. A fire destroys three customer cars in the shop valued at $18,000, $22,000, and $30,000 (total $70,000).

• Total loss $70,000 is under the $100,000 limit — no limit reduction.
• Deductible applies per auto: 3 × $500 = $1,500 retained.
• Insurer pays $70,000 − $1,500 = $68,500.

On a legal liability basis, if the fire were ruled accidental and the shop not negligent, the shop would owe the customers nothing and the insurer would pay $0 — illustrating why service businesses prefer the direct basis to maintain customer goodwill.

Garagekeepers limits are written per location, not per auto, even though deductibles usually apply per auto. If a single event damages many vehicles, the per-location limit is the ceiling on the insurer's total payment, while each damaged auto carries its own deductible. An exam question may give a loss that exceeds the per-location limit to test whether you cap the recovery; another may give many small losses to test the per-auto deductible math.

Dealers' Physical Damage and the False Pretense Peril

For franchised and independent dealers, the garage and auto dealers forms insure the dealer's owned autos held for sale (inventory) against physical damage, often with a reporting form that adjusts premium to fluctuating inventory value.

Two named perils that frequently appear on the exam are the false pretense coverage — loss when someone tricks the dealer out of a vehicle by fraud, trick, or scheme, or buys it with a bad check — and coverage for autos damaged on the lot by collision, comprehensive, or specified causes of loss. These dealer-only coverages do not exist on the basic BAP, which is one more reason auto-related businesses must use the garage or auto dealers form rather than a standard business auto policy.

Direct Primary vs. Direct Excess

The choice between the two direct bases turns on the customer's own insurance. Direct Primary pays first, before the customer's auto policy responds — best for customer relations but most expensive. Direct Excess pays only after the customer's own physical-damage coverage is exhausted, making it cheaper while still protecting customers who are uninsured or underinsured. On the exam, watch for the word 'regardless of fault' (signals a direct basis) versus 'only if legally liable' (signals the legal liability basis).

The Garage Coverage Form and Who Needs It

The Garage Coverage Form is designed for auto dealers and businesses in the auto trade (sales, service, repair, parking, storage) because their exposure blends general liability, auto liability, and care-custody-and-control of customers' vehicles in ways the BACF and CGL alone do not address. It provides garage operations liability (covering both premises/operations and auto exposures on one form) and is the proper vehicle for a dealership whose risk spans the showroom floor, test drives, and the service bay.

Garagekeepers Coverage and Its Three Options

Garagekeepers coverage protects the garage's liability for damage to customers' autos left in its care, custody, or control, the exposure the CGL's care-custody-control exclusion strips out. It is offered on three bases the exam tests: legal liability (pays only when the garage is legally liable for the damage), direct primary (pays for covered damage regardless of the garage's fault, primary over the customer's own coverage), and direct excess (pays regardless of fault but excess over the customer's own insurance). Selecting the right basis for a fact pattern is the key skill.

Dealers Versus Non-Dealers and Physical Damage

For franchised and non-franchised dealers, physical damage on the dealer's inventory is written under a Dealers' physical damage section with reporting provisions reflecting fluctuating stock values. Non-dealer garage risks (repair shops, parking facilities, service stations) use the garage form without the dealer inventory features. Distinguishing the dealer's owned-inventory exposure (insured under dealers physical damage) from the customers'-autos exposure (insured under garagekeepers) prevents the common mix-up between the two coverages.