Garage Automobile Insurance – the mystery of this special circumstance unraveled

Posted On February 15, 2024

Written by John Zehr, CIP, CCIB, CRM

Counsel – Zehr Insurance Brokers Limited

Due to the application of legal precident, Common Law, Contract Law or Statute Law, responsibility for loss or damage to a customer’s property has been placed upon the one who has been entrusted with such property. The response to this by the insurance industry is to provide insurance protection for what is unexpected.

One of these insurance forms is “Garage Automobile” insurance.

Zehr Garage insurance Program

Decoding Garage Auto Insurance: Zehr’s Specialized Coverage and Legal Insights

The term “Garage”, is used rather loosely and refers to automotive businesses who provide services to their customers and the general public at large. This can be anything from fuel service stations, towing operators, mechanical repair garages, body shops who perform fabrication, collision repair or paint and finish restoration services, glass replacement specialty shops, car sales dealers both new or used cars, car park or car storage operations and facilities, vehicle appraisers and more. Essentially, any business who’s services invovles the holding of non owned vehicles for the purpose of the services they perform can be referred to as a “garage” for the purposes of this writing.

At Zehr Insurane Brokers, we specialize in commercial and business insurance services such as Garage Auto Insurance. Our specialty in this sector has taken Zehr to have developed an exclusive to market garage auto product known as “Zehr Garage”. Unique to this niche speciality is that Zehr Garage is designed to provide coverage for specialty vehicle service providers who are in the collectible, antique and specialty sector. Zehr Insurance provides a collector car owners form known as Zehr Vintage CARS (collectible, antique, replica and specialty), and to complement that, Zehr Garage is for the businesses that support the collectible car hobby.

Shops such as collectbile car fabrication, body and paint shops, restoration shops, interior upolstry shops, mechanical build and service shops, vehicle storage facilities, collector car dealers and more.

Zehr Garage is not only setup to respond to business owners who run their garages, the policy format also provides flexibility and the additional feature of Agreed Value. While Agreed Value is common on owner’s collectible car insurance forms, it is unique on the garage insurance side.

When it comes to Garage Auto insurance responding to loss or damage to customers cars, it is important to understand legal liability. Where civil law holds a business who through the negligence of or contribution of, causes loss or damage to a customer’s vehicle, insurance can be in place to protect that garage operator for costs associated with such damages. The point that is so important to understand in this context is that it is the garage’s legal liability. The garage has had to be proven to have done a wrong to the vehicle owners vehicle.

It is easier to understand examples of contributory negligence on the part of the garage with this example:

A repair garage crashes a customer’s car during a test drive and is found to be responsible for the accident – example, is speeding, loses control and exits the roadway resulting in a collision

An example of where a garage would not have a legal liability for loss or damage to a customers car is where the garage is not negligent or contributory for such loss or damage, such as:

While a customer’s vehicle is inside the garage, a servere windstorm, hurricane or tornado destroys the garage and the custom’s car. This “act of God” as it could be referred to was not in the control of or negligence of the garage oparator.  

Depending on the type of garage operations, coverage can be provided for owned vehicles or it can be provided to only cover customers vehicles, thus owned vehicles are excluded. In such a case, owned vehicles would be covered under the standard owners car insurance form, the OP1. The Garage Auto policy in Ontario is known as the OP4.

A Case for Comprehensive Garage Automobile Insurance

As an example, consider a garage operator I will call Supreme Auto Services. Supreme providies services as a used car dealer, mechanical repair garage and automobile towing services. Supreme has a fleet of mobile service trucks, a couple of customer courtesy cars, the owner and his wife have both his business use truck and her personal private passenger car, 3 tow trucks that is 2 flat decks and one wrecker, and an inventory of used cars for sale. They also take in customers cars for sale on consigment.

Small business owner

Along with the traditional commerial business insurance they need for commercial liability insurance, building, equipment and stock (contents), business interruption and equipment breakdown coverage they need, which I will write about in another future blog, Surpreme Automotive Services is a prime candidate to carry a Garage Automobile Insurance Policy, the form which includes insurance for all owned vehicles.

Garage Policy Coverage

The garage policy covers both owned and non owned customer’s cars, and offers these features:

Primary automobile liability insurance for owned vehicles.

  • Just like someone who buys car insurance, the first section of the garage policy covers all owned vehicles for Supreme. Unlike standard car insurance policies, the owned vehicles are not scheduled, but rather they are covered on a blanket basis. Any vehicle registered to Supreme Auto Services is covered under this section for liability ariing out of the ownership use or operation of vehicles. Unique to garage auto insurance is that this section also covers Supreme’s legal liability for the operation of customer’s cars.
  • Standard accident benefits and uninsured motorist coverage, similar to an owner’s form OP1 is provided.
  • Collision damage to all owned vehicles is provided, subject to the stated deductible. Here again, vehicles are not scheduled but rather are simply all included.
  • Damages other than collision, comprehensive coverage is provided for owned vehicles, subject to the stated deductible. Again, vehicles for this section are not scheduled, but rather are covered according to a total insured value. This declared value is subject to an insurance to value formula as either an 80% co insurance provision or a monthly reporting premium adjustment provision. In the case of Supreme, in order to be fully covered on the co insurance form, they must add up the total actual cash value of their owned vehicles – that will include the principal’s service truck, the spouse’s principally driven business car, the fleet of service trucks and tow trucks and the owned inventory of vehicles for sale. For sake of demstration, that could easily be $750,000.
  • Loss or damage to customers cars. This section is broken out as collision to customers cars subject to a stated deductible and maximum value in any one accident. It also provides for specified perils such as fire and theft, including or not covering open lot theft, or can be expanded to provide a broader comprehensive to customers vehicles. It is essential to understand that this is a legal liability for customers cars insurance. It protects the legal liabilities of Supreme. It is a contingent coverage for insurance that a vehiicle owner, primarily, should provide for themselves.

Clarifying Car Owners’ Responsibilities

As we reflect on what we have learned so far, I often hear car owners say things like they have their car in a repair garage, body or restoration shop, and they don’t bother to have their car insured because they think the garage operator has it covered. This is not so as the owner is in the primary position to protect their own car absolutley, and the garage owner is only protecting their legal liability. 

This is not a determation of the garage insurance policy but rather circles back to my discussion about legal liability.

The garage insurance is setup to respond to that legal liability imposed by law, not to evade providing coverage to a customer’s car. If there is loss or damage to a customers car, the customer’s primary car insurer should respond to a claim. If the primary insurer can demonstrate contributoy negligence on the part of the garage operator, in turn they will seek recovery of the claims costs via the mechanism called subrogation. This may be seemless from the point of view of the vehicle owner.

Vintage Car owner sitting on his car

Closing Remarks: Demystifying Niche Garage Insurance and Legal Liability Success

Success as a specialty commercial insurance garage niche has developed as a combined result of insurers relutance to insure garages that specialize in ‘non daily driver” vehicles, that is what may be thought of simply as “old cars”, and Zehr’s success in the collector car space.

I hope this discussion of legal liability, garage operations and garage automobile insurance helps to demystify what can be a confusing for Garage Auto insurance.

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