Garagekeepers Legal Liability

[Rob]

As you probably know, garagekeepers legal liability provides coverage for the non-owned autos in an insured's care/custody/control for which they are legally liable.

So...if an auto detailer takes a car into custody, say, from a dealership, and while in his parking lot that car is presumably hit by someone else who then leaves and no one sees this, and then there is damage to the car, who is liable?

Since it can't be proven that the insured was liable, then it falls back on the dealership's insurance. But what if the dealership persists in claiming that the insured is at fault simply because he had care/custody/control and then sues?

[mrmreff]

The insured should turn in the claim and let their carrier defend them. They will have one of three types of gkll coverage (direct primary, direct excess, or legal liability). Direct primary coverage will pay for the vehicle if it's in the insured's ccc. Legal liability coverage will most likely not pay since the detailer was not legally liable for the damage to the vehicle solely because they had the keys. Of course the delaership wants to make their customer happy but doesn't want to pay the claim. I prefer to let the detailer report the claim and let the carrier deny it due to "no legal liability". This way the dealer will likely accept the response from the insurance company although they won't be happy about it.

[CATHIEA]

Had a similar situation on an account that was part of a book we purchased. Detail shop that worked only on police vehicles. prior agency had sold only "legal liability" - not sure if it was price or being unaware of the coverage differences - agent was deceased so we couldn't ask him.

Vehicle parked at insured's location over night - radio equipment stolen out of vehicle by unknowns. Claims adjuster determined that insured did everything in his power to secure the vehicle - therefore he was not "legally liable" - no payment was issued. Insured paid out of his pocket to keep the customer. (and no he did not file claim under the E&O policy).

Surprisingly the city never required direct primary coverage for this insured - however we automatically added it at renewal.

As customers, we assume (rightly or wrongly )the entity that is taking our vehicle is responsible but as agents, we need to protect both entities. I've lost accounts because we will not write anything but direct primary.

[foofin]

i have quoted a couple of garages lately. it would seem to me that would always want to put direct primary coverage onto the policy as opposed to legal. Is their any reason why legal would be superior coverage to direct primary?

[AlstonCPCU]

Direct Primary is broad and covers the loss. Legal only covers the loss if the insured is legally liable. The purpose of Direct Primary is to prevent the insured from having a loss of goodwill with a customer. If the insured's carrier proves the insured is not legally liable, of course the insured's insurance would not pay the claim but the customer may not be a customer anymore. Direct Primary takes the legally liable component out of the mix and allows the insured to take responsibility regardless, subject to exclusions of course.

[Rob]

Direct Primary is broad and covers the loss. Legal only covers the loss if the insured is legally liable. The purpose of Direct Primary is to prevent the insured from having a loss of goodwill with a customer. If the insured's carrier proves the insured is not legally liable, of course the insured's insurance would not pay the claim but the customer may not be a customer anymore. Direct Primary takes the legally liable component out of the mix and allows the insured to take responsibility regardless, subject to exclusions of course.

That's now I've always understood it. However a claims adjuster for a well known carrier told me differently and said direct primary isn't always going to pay 100%. In some cases it is shared with "other" insurance and that it does depend if there is other insurance in force. I didn't quite get that. I'm going to follow up with him and clarify.

[Forum Reader]

One coverage is not "better" than the other - it just depends on what the insured wants. The 3 options should be presented and explained and let the insured decide.

If the insured would want to take responsibility for all damages to customer cars while in his possession regardless of negligence (as good will) then he'll want to go the direct/primary route. It'll cost more and have more impact on his loss ratio.

If he wants to pay for only those things that are his fault (and "fault" is frequently arguable) then he'll want to go the legal liability route. It'll cost less but more customers may be unhappy.

[SFINS]

The other item to keep in mind is that if the insured is not legally liable for the damage, the insured could be still responsible for paying a deductible if the coverage is Direct Primary.

We have a garage risk that was test driving a customer's auto and was hit by a third party who was determined to be at fault. The third party did not have sufficient Property Damage limits on their policy to cover the damage to the customer's auto, so our insured's Direct Primary GKLL picked up the balance.

The insured had a $1,000 GKLL deductible which he was not happy about paying as he was not at fault.

Always best to disclose both options.

[memcom]

Why put the burden on the insured if he isn't legally liable? You are running up his insurance costs and exposing him to potential future placement problems if he incurrs claims. Why should he pay for a hail loss when the customers own insurance should respond? If it's a matter of customer relations, it might be better for him to be selective as to who gets paid. If its a stolen radio from a valuable customer for example, it might be less costly in the long run for him to just pay it out of his pocket. The purchasing decision should be his after you have really explaned the issues and the coverage variations. And I would add, don't mix up direct primary with direct excess.

[rasemariya]

Who pays for the home insurance when you let your house? I ask this question on behalf of my friend, who lives in Malaysia. He wants to know what the law in England will be in this case. My friend is gonna let his house to another, so that he can have some income. A question arises: They need to buy a home insurance in case there is an accident like fire. Apparently in Malaysia, a homeowner doesn't have to buy insurance for his house. So in this case, who should pay for the home insurance, the homeowner or the tenant? I mean, the rental period is 2 years, and the insurance, if paid, will cover for 2 years only.
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[Brenda H]

Well, I am not sure if the house is in the US or Maylasia. However, in the US, the person who owns the home needs to purchase dwelling and liability insurance to cover the house and include any contents that are left there. The tenant would need to purchase insurance for their belongings, which would also pick up some liability. This way everyone would be covered (for a US risk anyway).

[insuranceagency]

i have quoted a couple of garages lately. it would seem to me that would always want to put direct primary coverage onto the policy as opposed to legal.
Commercial Insurance

[glenndanapt]

Which form to offer the client can be dependent on several factors. The protection provided for the customers autos while residing in the shop is a variable along with the duration the cars usually stay there and the type of clientele. Although Direct Primary is the best way to go for many shops, the premium is usually 35% to 40% higher than the Legal Form. You need to determine whether the legal form will do. Risks that only have cars on the premises for a short time like Tire Stores and Smog Shops can usually suffice with legal. One post suggested that electronic devices would be covered under the Direct Primary form and not under legal, but under the current ISO form, these are excluded. Another suggested that Direct Primary would be the sole remedy where written. But subrogation is almost always employed where there is another policy to at least share the loss. You can find some descriptions at cresprograms.com