Garages

Description of operations: Automotive garages offer a wide variety of mechanical services, from engine repair to tune-ups. The garage may be stand-alone or part of another business such as an automobile dealership or filling station. They may specialize in a specific type of automotive repair, such as transmissions or brakes, or may service other types of motorized vehicles such as snowmobiles or recreational vehicles. Some repair or rebuild parts such as brake drums, or custom-make old, difficult-to-replace parts. Operations may include gasoline or diesel fuel sales or retail sales of automobile accessories and tools. Normally, auto repair shops perform body work or painting only when incidental to other repairs.

Additional services can include towing, auto club affiliations, pickup and delivery of customers, and the loan or rental of replacement vehicles. Some will have a mobile unit to perform repairs to stranded vehicles or at the customer’s location.

Common Insurance Terms

Property exposure comes from flammables such as lubricants, oils, degreasers, and solvents used in the repair operations. They must be properly labeled, stored and separated. Aerosols and flammable additives contribute to the overall fire load. Welding is often a part of the operation and needs to be evaluated for proper handling of the tanks and gases, as well as adequate separation from the other operations with either a separate room or flash/welding curtains. Tires do not catch on fire quickly; however, when they do burn, the fire is difficult to put out and an oily smoke permeates the entire area. Theft is a concern because auto parts are considered to be target items. Appropriate security controls must be taken including alarms, lighting, and physical barriers prohibiting access to the premises after hours.

Crime exposures are from employee dishonesty and theft of money and securities either from holdup or safe burglary. Employee dishonesty is controlled through background checks, inventory monitoring, control of the cash register, disciplined controls and division of duties. Audits should be conducted at least annually. Theft of money and securities prevention requires controls of monies kept in the cash drawers and regular bank drops.

Inland marine exposures are from accounts receivable if the garage offers credit, computers to monitor inventory and for diagnostics, goods in transit if parts are delivered to customers, and valuable papers and records due to customers’ and vendors’ records. Backup copies of all records, including computer records, should be made and stored off premises.

Premises liability exposure comes from slips and falls due to public access to the premises. Customer waiting areas should be provided for customers waiting on repairs. Customers must not be permitted in the garage area. Floor coverings should be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked. Sufficient exits must be provided and be well marked, with backup lighting systems in case of power failure.

Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the premises is open after dark, there must be adequate lighting and appropriate security for the area. Cars in the parking lot present an attractive nuisance hazard. Chains may be required to prevent entrance after hours. 

Products liability exposure can be high due to the potential for an accident in the event that the vehicle is not properly repaired. There should be a check-off procedure in place prior to release of the vehicle to the customer to prevent its return with any vital functions not working properly. If the garage directly imports or reconditions items for resale, the exposure increases to the point of a manufacturer.

Environmental impairment exposures can be significant due to the disposal of used lubricants, oils, degreasers, solvents and batteries. Adequate procedures should be in place and must be followed to prevent any leakage or contamination. Contracts should be in place to dispose of all environmentally dangerous chemicals.

Automobile exposures are generally limited to owned vehicles being used for errands to pick up needed supplies. All employee drivers should have an appropriate driver’s license and their MVRs should be regularly checked. All vehicles must be regularly maintained with records retained. Towing presents a more serious exposure due to the potential for damage to the vehicles being towed. All tow truck drivers must be experienced in towing. Towing vehicles must be regularly checked, particularly the hoists and tow bars.

If vehicles are rented to customers, the dealership should keep a copy of the renter’s driver’s license and proof of insurance. The rental contract should identify permitted drivers and state that unlicensed or minor drivers are not permitted. It should also include a hold-harmless agreement in which renters agree to assume responsibility for the operation of the vehicle to limit the business’s exposure to only vicarious liability. If a collision damage waiver is offered, the customer’s signature is needed to document whether this was purchased or declined. The customer should also be required to sign a pre-inspection form to minimize disputes when the vehicle is returned with damages. Vehicles that are rented should be inspected and reconditioned before being rented again.

Garagekeepers exposure comes from damage that can occur to customers’ vehicles while in the repair shop’s care, custody and control. Access to these vehicles should be prevented. Keys to customers’ vehicles should be kept in a locked box, with proper identification required to prevent handing the customer’s car to the wrong owner. Lots must be well lighted with chains in place to prevent transport. Fences and other security also may be appropriate.

Workers compensation exposures are heavy. Brake turning, welding or other repair work must be handled only when appropriate safety equipment, especially eye protection, is available. Lifting of a vehicle by hoists, jacks, and other mechanical means can result in injury should the equipment malfunction. Hoists must be well maintained and procedures in place to prevent vehicles from falling. Workers can slip and fall, or incur back injuries, sprains, strains or hernias from lifting. If the shop sells batteries, leakage or spilling of battery acids can cause burns on contact with skin and respiratory problems when inhaled. Employees should be provided with safety equipment, trained on proper handling techniques, and have conveying devices available to assist with heavy lifting. Employees performing maintenance or repair work on customers’ vehicles should be properly trained.

Minimum recommended coverage

Business Personal Property, Business Income, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Goods In Transit, Valuable Papers and Records, General Liability, Employee Benefits, Environmental Impairment, Umbrella, Business Automobile Liability and Physical Damage, Hired and Nonownership Auto, Garagekeepers, Workers Compensation

Other coverages to consider

Building, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Computer Fraud, Forgery, Signs, Cyberliability, Employment-related Practices, Stop Gap Liability

Reprinted with permission from the Rough Note’s Company copyrighted content.