12.4 Garage Coverage Form and Garagekeepers

Garage Coverage Form and Garagekeepers

Auto dealers and service businesses face a hybrid exposure: they have auto liability (test drives, lot vehicles), general liability (premises, products, operations), and a unique exposure for customers' autos left in their care. ISO addresses this with the Garage Coverage Form (CA 00 05) for franchised/non-franchised auto dealers and the Auto Dealers Coverage Form (CA 00 25) in newer editions, plus Garagekeepers coverage for customer vehicles.

What the Garage / Auto Dealers form combines

The form bundles, in one policy:

• Covered autos liability — for the dealer's owned, hired, and nonowned autos (same symbol system)
• Garage operations 'other than covered autos' liability — essentially CGL-type premises/operations and products coverage for the garage business
• Physical damage on the dealer's own autos and inventory
• Garagekeepers coverage — for customers' autos in the dealer's care

This is why a dealer does not buy a separate CGL — the garage form's 'other than covered autos' insuring agreement performs that role.

Garagekeepers coverage triggers

Garagekeepers protects customers' autos left for storage, service, repair, or parking. It can be written on three bases:

Direct primary creates the most goodwill (pays even without negligence) and is the priciest. Legal liability is cheapest because it pays only on proven dealer fault.

Covered perils and limits

Garagekeepers covers customers' autos for comprehensive, specified causes of loss, and collision, like the BAP physical damage section. Limits are written per location with a deductible. A common structure is a per-location limit (the most payable for all customer autos at one site in one occurrence) plus a per-auto deductible on collision and a separate, sometimes smaller, deductible on comprehensive.

Exam trap: Garagekeepers does NOT cover the dealer's own inventory — that is the dealer's physical damage on covered autos. It is strictly for customers' property in the dealer's custody.

Worked numeric: per-location limit and deductibles

A shop carries Garagekeepers direct coverage with a $250,000 per-location limit, a $500 collision deductible per customer auto, and a $250 comprehensive deductible per auto. A fire (comprehensive peril) at the lot damages four customer cars: $40,000, $35,000, $28,000, and $22,000 = $125,000 gross.

Apply the comprehensive deductible per auto: 4 × $250 = $1,000. Net loss = $125,000 − $1,000 = $124,000, which is under the $250,000 per-location limit, so the insurer pays the full $124,000. Had losses exceeded $250,000, payment would cap at the per-location limit.

Garage operations 'other than covered autos'

The garage operations liability insuring agreement functions like a CGL for the dealership: it covers bodily injury and property damage arising from premises and operations (a customer slips in the showroom) and from products and completed work (a defective repair causes an accident later). It carries its own per-occurrence and aggregate-style structure, and excludes the auto exposures handled under covered-autos liability. This dual structure is why dealers rarely need a separate CGL policy.

Defense costs and key exclusions

Like other liability forms, garage defense costs are paid in addition to the limit. Important exclusions include damage to the dealer's own property, expected/intended injury, pollution, and the care, custody, or control exclusion under the operations coverage — which is precisely why Garagekeepers exists to handle customers' autos in the dealer's custody. A frequent trap: a customer auto damaged during a test drive by the dealer's employee may implicate covered-autos liability rather than Garagekeepers, depending on the circumstances of the loss.

Dealers' physical damage and reporting forms

The dealer's inventory of autos for sale is insured under the form's physical damage coverage, often on a monthly reporting basis because inventory fluctuates. The dealer reports values monthly; premium is adjusted to actual exposure. Under-reporting triggers a full-reporting (honesty) clause penalty: if the insured reports less than the true value, recovery is reduced in the proportion the reported value bears to the actual value — a coinsurance-style mechanic that exams test with worked percentages.

Worked numeric: reporting-form penalty

A dealer should have reported $2,000,000 in inventory on the last report but reported only $1,500,000. A fire then destroys $600,000 of inventory. The reporting penalty applies the ratio of reported to actual value: $1,500,000 / $2,000,000 = 75%. The insurer pays 75% of the $600,000 loss = $450,000 (less any deductible), leaving the dealer to absorb $150,000. This penalty is why accurate, timely monthly reporting is a critical compliance task for dealer accounts.

False reporting vs honest under-reporting

The honesty clause penalizes innocent under-reporting proportionally, as shown above. But deliberate false reports — knowingly understating values to cut premium — can void coverage entirely as a material misrepresentation, a harsher result than the proportional penalty. Producers should distinguish the two on exams: an honest mistake reduces the recovery by the reporting ratio, while intentional fraud can forfeit the claim. The lesson for dealer clients is that disciplined, accurate monthly reporting both controls premium and preserves full recovery.