(October 2019)
Businesses that might be interested in purchasing this coverage include service stations, restaurants, and hotels with valet parking, parking lots, parking garages, airport parking lots, special event venues with valet parking, and car washes. The coverage can be purchased by any operation that attends, services, repairs, parks or stores non-owned automobiles. This endorsement is needed because automobile and general liability coverage forms exclude property damage coverage for automobiles in the named insured's care, custody, and control.
Related Court Case: Garage Keepers Coverage and Garage Liability Coverage Purposes Are Clarified By Court
Location Number
This refers to the location address where the named insured conducts its operations. It may or may not correspond to location numbers that apply to other coverage parts if included on a commercial package policy.
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Example: Wah Mee, Inc. has three restaurant locations, a warehouse, and five rental properties. The restaurant location numbers are 1, 7, and 9 on the commercial property location schedule because they were added over a period of years. However, they are locations 1, 2, and 3 on the Garagekeepers endorsement schedule because they are the only locations with a garagekeepers exposure (valet parking). |
Coverages
These may vary by location but all vehicles at a location must be insured for the same coverages. The three coverages available are Comprehensive, Specified Causes of Loss, and Collision. While choosing only one coverage is permitted, the most common selection is to cover both Comprehensive and Collision.
Limit of Insurance and Deductible
This section has spaces for a total limit, a deductible for each customer's auto, and a total loss deductible for Comprehensive or Specified Causes of Loss. There is no requirement to match any of the limits or deductibles. The Comprehensive and Specified Causes of Loss deductible can apply to theft or mischief or vandalism losses only or to all causes of loss. Either option selected is subject to a maximum deductible for all such loss in any one event. The Collision deductible applies to each auto and does not have a maximum.
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Example: Wah Mee, Inc., from the example above, has three locations that offer valet parking. Locations 1, 2, and 3 can hold up to 50, 30, and 20 cars respectively. Wah Mee's ownership estimates the average value of an auto in its custody is $30,000 and doesn’t believe that more than 10 vehicles would be damaged at any single location. As a result, it selects a $300,000 limit for each location. It selects Comprehensive and Collision coverages to obtain the most coverage. It also selects a $1,000 deductible for both Comprehensive and Collision, with a maximum Comprehensive deductible of $5,000. Locations Where You Conduct Garage Operations lists the three Wah Mee restaurant locations. Location 1 is the main location and the two remaining are locations 2 and 3. If there were more than three locations, they would need to be scheduled separately and the coverages and deductibles indicated. |
Direct Coverage Options
This is an important part of selecting coverage. This endorsement covers legal liability only unless a direct coverage option is selected. Changing coverage from legal liability to direct damage involves a significant change in coverage and premium. After selecting a direct coverage option, the named insured must decide whether it is on an excess or primary basis. The primary basis is more expensive because this coverage responds to a covered loss before any other available coverage that might apply. The excess option keeps the primary coverage on a legal liability basis but does not impose legal liability restrictions on an excess basis.
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Example: Wah Mee selects Direct Excess Insurance at location 1. A
moderate tornado destroys 10 cars. Because eight of them had physical damage
with their own carriers, Wah Mee’s coverage did not respond. The other two
vehicles did not have separate physical damage coverage and Wah Mee's
coverage responded to their losses because there was no other collectible
insurance. |
This section states that coverage applies only at locations on the endorsement schedule that have a limit of insurance and premium charge.
1. The insurance company pays amounts the insured is legally obligated to pay as damages because of loss or damage to a customer's auto or equipment left in its care. However, coverage applies only when the insured is attending, servicing, repairing, parking, or storing such autos or equipment in its garage operations. Three coverage options are available:
a. Comprehensive Coverage
This is damage from any cause except collision of a customer’s vehicle with another object or vehicle and overturn of a customer’s vehicle.
b. Specified Causes of Loss Coverage
This is damage to a customer’s vehicle caused by fire, lightning, explosion, theft, mischief, or vandalism.
c. Collision Coverage
This is damage from the collision of the customer’s vehicle with another object or vehicle or overturn of the customer’s vehicle.
2. The insurance company defends suits brought against any insured seeking damages insured under the coverage form. It may investigate and settle any claim it deems appropriate with or without the insured's permission or knowledge. However, the duty to defend ends when the limit of insurance is used up paying judgments and settlements.
3. Who Is an Insured
The named insured, its partners if the business is a partnership, its members if the business is a limited liability company, employees, directors, and shareholders acting within the scope of their duties are all insureds.
4. Coverage Extensions
The insurance company pays the following five supplementary payments on behalf of the insured in addition to the limits of insurance.
a. Expenses it incurs
b. The cost of bonds to release attachments but only for the amount of the bond that falls within the limit of insurance. This applies only when the bond is required in a suit brought against an insured that the insurance company defends.
c. Reasonable expenses the insured incurs at the insurance company's request. The actual loss of earnings for the time taken off from work, up to $250 a day, is one of the expenses.
d. All costs that are taxed against the insured in a suit brought against the insured that the insurance company defends. These costs do not include any attorney’s fees and expenses that are assessed by the court against the insured.
e. Interest on the total amount of a judgment that begins to accrue after the judgment is entered. This applies only to a suit the insurance company defends. The responsibility for the interest ends when the insurance company pays, offers to pay, or deposits in court the part of a judgment for which it is responsible.
Several important exclusions apply to the coverage this endorsement provides and it should be examined carefully. The first group identifies types of damages not covered. The second group identifies types of property or equipment not covered.
a. Contractual Obligations
There is no coverage if the insured agrees to accept responsibility for a loss under a contract or agreement, but this exclusion does not apply to liability the insured would have without having it in a contract or agreement.
b. Theft
Coverage does not apply if an employee, shareholder, or named insured is involved in the theft or conversion of a customer’s vehicle.
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Example: Wah Mee hired a great new valet who is well liked by all the customers. In fact, some even requested him because he was so careful with their cars and always made sure the cars were ready when the customers finished eating and left. Imagine everyone's surprise when he disappeared at the same time as a customer's Porsche. The insurance company denied coverage because the loss likely involved an employee's illegal conversion. |
c. Defective Parts
There is no coverage if a defective part or defective material causes a loss.
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Example: Wah Mee's owners purchased tarps to place over their customers’ vehicles during hailstorms. When a storm came up, the valets quickly put the tarps in place. The hail came and left, and the tarps were removed. While they protected the cars from the hail as planned, they left a glue-like substance on the vehicles that required special treatment to remove. The substantial cost to remove the substance was not covered because the damage was due to defective material. |
d. Faulty Work
Coverage does not apply to loss or damage caused by or resulting from faulty work the named insured performed. The definition of “work you performed” included work that is performed by others on the named insured’s behalf.
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Example: Wah Mee arranged for Will's Garage, a local service station, to provide oil changes for its customers' cars while the customers dined in the restaurant. Unfortunately, one of Will’s mechanics forgot to replace the oil plug on a car one day and the oil drained out while the vehicle was back at the lot. As you might imagine, the vehicle's engine froze up and was ruined when the attendant returned it to the customer. Coverage did not apply because Wah Mee arranged for the work to be performed. The good news is that the customer had full rights to pursue a claim against Will’s Garage. |
a. Sound equipment not permanently installed in the vehicle. This includes tape decks, compact disc players, and new types of sound reproducing equipment.
b. Media used to produce sound in any sound reproducing devices. This includes compact discs, cassettes, and new types of media.
c. Equipment that is not permanently installed and is designed to receive sound. Citizens’ band radios, two-way mobile radios, telephones, or scanning monitor receivers, including their antennas and any accessories unless permanently installed are all examples of such equipment.
d. Equipment that is designed or used to detect, locate, or jam radar or any other speed detection devices.
Note: CA 99 59–Garagekeepers Coverage–Customers' Sound Receiving Equipment covers this type of equipment and essentially deletes exclusion c.
Loss caused by any of the following is excluded, regardless of whether
they occur in a sequence of events that might otherwise be covered.
a. Declared or undeclared, civil and any other type of war
b. Military action by a military force or a government and any response to it
c. Rebellion, insurrection, power-grabs and revolution, including governmental actions to control them
This section has three paragraphs that explain how its insurance limits and deductibles apply.
1. The most paid for each loss at each location is the limit on the endorsement schedule for the location for the coverages provided. This limit applies regardless of the number of customer’s autos, insureds, claims, suits or premium paid. The deductibles that apply to the loss must be subtracted from the amount claimed prior to applying the limit cap.
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Example: A fire damages five autos at Wah Mee’s main location, resulting in $85,000 in damages. The $300,000 limit purchased is sufficient to cover this loss. Because Wah Mee had selected only a theft and vandalism deductible of $1,000, no deductible applies to this loss because it was due to fire. |
2. The deductible for Comprehensive or Specified Causes of Loss coverages on the endorsement schedule is the most deducted for all covered claims, losses, or damages in any single loss event.
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Example: If the loss above was from vandalism instead of fire and five cars were destroyed, the insured is subject to a $1,000 deductible capped at a maximum of $5,000. As a result, the $85,000 loss to five autos would have been reduced by $5,000, to $80,000. |
3. Depending on the nature of a given loss, the insurance company may have to settle a claim quickly for the entire amount, including the value of any deductibles that might apply. Doing so does not void the insured's responsibility to absorb the deductible. In these cases, the insured must reimburse the insurance company for the value of any deductible it paid.
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Example: Wah Mee's insurance company settles directly with each of the customers and pays out the entire $85,000. Wah Mee would then reimburse the amount of deductible for which it was responsible. |
This endorsement has five definitions that apply to Garagekeepers Coverage.
Any motorized vehicle, trailer, or semitrailer that meets the following criteria:
The vehicle is a customer auto even when:
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Example: The vehicles that were damaged at Wah Mee’s were owned by the following:
All vehicles are considered customer’s auto and covered for damage except for Fred’s vehicle because Fred receives the valet service free of charge. |
This is the actual accidental direct damage or loss as well as any resulting loss of use.
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Example: The insurance carrier settled the claims by paying for the needed repair or replacement plus reasonable rental car expense until the vehicle repairs were completed or the owner purchased a replacement vehicle. |
The business of selling, servicing, repairing, parking, or storing customer’s auto at a location that is owned, maintained or used for that purpose. The operations extend beyond the location to that portion of an access route (such as a road) that adjoins the location. Necessary and incidental operations that aid the performance of the garage operation are also considered garage operations.
This is work that the named insured does as well as any work done by others on the named insured’s behalf. Another important part of this definition is the providing or failing to provide proper warnings and instructions.
Note: This term is used in the faulty work exclusion. Coverage is excluded if the work is performed by the named insured or if it performed by someone else who is performing the work on behalf of the named insured.
The named insured should consider the following when determining limits and deductibles:
The insurance company has many underwriting issues to consider:
o Effective key control must be in place. Keys must be kept in a secure location that is away from regular foot traffic. The box or other secure enclosure should be kept locked with only certain employees having access to the keys.
o Premises security must be maintained by having limited access points that are secured when the location is not open for business.
o Employee background checks are very important
Fire potential must be evaluated based on the type of garage operations. Spray painting and welding operation must be conducted separate and at a distance from any stored customer’s auto. Many garagekeepers operations are parking exposures that are adjacent to other concerns. An evaluation of those exposure concerns is important because a fire at those could result in a significant long-term burn at the garage operation.
Wind and hail are a concern in any geographic location that is prone to such activity. Hail damage can destroy vehicles that are stored in the open. A large concentration of vehicles at a single location with no overhead protection is a significant concern.
Note: The Legal Liability Basis is the least expensive of the three options. The Direct Coverage–Primary Basis is the most expensive.