Garage Liability Section III - Archive

Garage Liability Section III—Archived Article

November 2002

Garagekeepers Legal Liability Insurance

Summary: An owner or operator of an automobile repair shop, storage garage, or parking lot who keeps customers’ automobiles for storage or repair and makes a charge is a “bailee for hire.” A bailee for hire receives personal property of others (“bailors”) and the bailee is then compensated for caring for it.  As both parties hope to benefit from this arrangement in the garage, the bailment might also be aptly termed a “bailment for mutual benefit.” No matter what the bailment is called, it is well established that the owner or operator of a garage can be held legally liable (regardless of signs to the contrary posted throughout the premises) for loss or damage caused by failure to exercise the care required of a bailee. Once the bailee relationship is established, the bailee must exercise ordinary or due care to safeguard the property and may be called upon later to prove that this care was afforded. Because garage liability insurance excludes coverage for damage to property of others in the care of the insured, including garage customers’ property, a need for separate coverage of this significant exposure is readily apparent. The need can be satisfied by purchasing garagekeepers coverage (section III of the garage coverage form).

Topics coveredNeed for garagekeepers liability coverage

Garagekeepers declarations—covered autos

Insuring agreement—perils

Defense

Insureds—extensions

Exclusions

Limits—deductibles

Other insurance

Need for Garagekeepers Liability Coverage

Most customers have automobile comp or collision, usually both, on their own cars. Their insurance will respond to damage wherever the car is located and regardless of who may be responsible for it. However, when a customer’s car is damaged or destroyed while at the repair garage, service station, or parking lot, the customer is more than likely to expect the garage operator to restore it. It is a matter of maintaining customer good will the same as it is in other “bailee for mutual benefit” establishments like dry cleaners, watch and jewelry repairers, appliance repair shops, and so on.