Imagine this scenario:

You own a successful autobody and auto repair shop. At any point in time, you have 15-20 cars, trucks and/or vans in your building or on your fenced-in lot.  There’s been a rash of burglaries in the area, but you have an alarm system in place, so you aren’t too worried.

The unthinkable happens – the thieves disabled your alarm system, stole 6 high-end cars, destroyed others for parts, and left you with a Monday morning mess. It’s time to call your customers. 

Are you, as the business owner, liable, and is it your responsibility to reimburse your customers for their loss?

The answer is – maybe

Laws vary by state*, but in most cases, the Garage Owner is considered a Bailee and is not liable for the loss or damage of the property of others in their care, custody, and control UNLESS they are negligent.  Just having the cars in their possession doesn’t make them liable. 

When the car owner – or Bailor – turns their property over to the garage owner (Bailee) – the bailee is ONLY responsible to protect that property the way they would protect their own. So, if they’ve taken all the right precautions, they are not liable and the car owner would need to place a claim with their auto insurance for the loss. 

If the above is true – why do I need Garage Keepers’ Liability Insurance Coverage?
Answer:  Because negligence happens – it’s the human factor. 

What does Garage Keepers’ Liability insurance cover?**  Note all insurance policies and carriers are different – it’s important to review your coverage and risk with a licensed insurance agent. 

  • Legal Liability covers a mechanic’s negligence
    Your mechanic leaves the keys in the car – forgetting to follow procedure and put them in the lockbox and the customer’s car is stolen off the lot.  

    Your mechanic takes a customer’s car for a test drive and gets in an accident. The customer’s car was totaled. 
  • Direct PRIMARY Coverage
    The customer’s vehicle is protected, whether the damage or theft is due to negligence or not.  

    FYI: This coverage is a really GREAT selling point for your business!
  • Direct EXCESS Coverage
    This is the same as direct primary, but it only pays out above and beyond your CUSTOMER’s insurance allowance regardless of who is at fault.

What are some proactive things you can do to ensure your customer’s automobiles are safe and protected while under your care, custody, and control?

Processes & Procedures in place.  Make sure ALL employees understand the risks and the precautions that need to be taken with no exceptions.  Having written checklists in place and requiring sign-offs from management is a great safety measure.

  • Lockboxes for all keys.
  • Checks and Balances – Making sure the right service is done on the right car.  Imagine painting a car the wrong color or replacing a part that didn’t need replacing!
  • Require a Photo ID of customers. This may seem a bit over and above the call of duty but getting a copy of the customer’s ID when they drop the car off and requiring them to show it when they pick the car up eliminates the theft risk at the pickup!
  • Background checks for all drivers.  
  • Safety training for all employees.
  • Alarm systems & security lighting are in place. 
  • Gated lots for cars left outside.

Garage Keepers Liability Insurance Coverage is there to protect you and your customers’ automobiles while in your care, custody, and control and is a smart addition to your insurance portfolio if you own an autobody or mechanic repair shop.

At Power Risk Management, we offer free consultations to review your current coverages.  Give us a call at one of our convenient locations:

Chicago Office: 5343 W. Devon Avenue, Chicago, Illinois 60646 | 773-273-8777
Joliet Office: 310 N Hammes Avenue, Suite 302D, Joliet, Illinois 60435 | 815-605-4722
Bourbonnais Office: 1410 Argyle Ln N, Bourbonnais, IL 60914 | 815-348-7452
Denver Office: 1400 16th Street, Suite 400, Denver, Colorado 80202 | 720-779-1190

*The information within this document should not be construed as legal advice. 

** Garage Keepers Liability Coverage varies by state and insurance carrier – the information above is informational only and does NOT depict what your policy coverage entails or what you need for your business