Car dealerships, repair shops, service stations and other companies that work with automobiles have special insurance needs that aren't adequately addressed by the general liability policies available to most commercial customers. For that reason, the insurance industry has developed a type of coverage called "garage liability insurance." When paired with a related product, "garage keepers coverage," these policies offer auto businesses full protection.
Commercial General Liability
Most businesses need insurance coverage that will protect them in case they are found liable, or accused in court of being liable, for injury or financial harm to someone. A customer could trip and fall on the premises, or a defective product could hurt someone or burn down a house, or a competitor might sue over allegedly false advertising. Your business can purchase policies to cover the instances where its exposure is greatest, or you can get a commercial general liability, or CGL, policy which serves as a sort of blanket coverage for all instances of possible liability--except where specifically excluded.
CGL policies, however, do not cover liability associated with vehicles owned or operated by a business. If a customer breaks his leg in your store, CGL will cover it. But if your delivery van runs over someone in the street and breaks his leg, CGL won't cover it. To obtain liability coverage for your company's vehicles, you need a business auto policy. But these policies are geared toward companies for whom automobile use is incidental. They can have limits and exclusions that make them untenable for businesses, such as car dealerships, which have enormous fleets of autos that are regularly driven by non-employees.
Garage liability insurance is a specialized product for auto-focused enterprises that combines the general liability protection of a CGL policy with business auto liability coverage, eliminating areas of overlap. Garage liability policies are designed to be flexible to meet the needs of individual businesses--for example, a company could add coverage for loaner vehicles driven by customers whose own cars are being repaired or for personal vehicles used for company business.
Garage liability insurance has one major exclusion: It doesn't cover physical damage to customers' cars left in your care, such as for service, repair or storage. For example, if one of your employees is test-driving a customer's car to make sure that a repair has worked and he crashes it into another vehicle, your garage liability policy will cover your liability for damage to the other car but not the customer's. For coverage of damage to customers' vehicles, you need a separate policy called garage keepers insurance.
Most commercial insurance companies can sell you both a garage liability policy and a garage keepers policy. They may come bundled as a package deal, but they will be separate and distinct policies.
Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.