Understanding Auto Repair coverage

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P&C I Agent of IL
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Understanding Auto Repair coverage

Post by P&C I Agent of IL »

I am a new agent with limited knowledge and experiance in general (I passed the test and this is my second week). I was told by the Agency Principal to find and focus on a niche- based on my prior background I have selected Auto Repair shops- I have spent the last 10 years in auto repair and 3 of those were running the shop I was at. I figured this type of experience should help me get in and talk with them though no one in my office ever even quoted an auto shop. Therefore I am looking to understand whats the difference between garagekeers and garagekeepers legal liability as well as equipment breakdown and how it applies to an auto shop in addition to other types of coverage unique to this niche. I appreciate any help you can offer.
pita3333
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Re: Understanding Auto Repair coverage

Post by pita3333 »

Welcome to the industry!

I think what your principal meant to say was "garage liability" vrs "garage keepers legal liab" and he should have added "garage keepers direct primary".

Briefly, Garage liability is the "premises" liability for a shop (slip fall etc) with some extension to the road for road testing of customers vehicles.

Garage keepers legal/direct primary is for the damage to a customers vehicle while in care custody control of the shop. Legal liabilty means just what it says - only covers what the shop is legally liabile for. While Direct primary is broader (and more expensive) since it does not require the strict legal liability.

Example: Suppose your client has an occurrence where a vehicle is broken into and the airbag inflators stolen after hours (this is a huge exposure). Let's further add that the vehcile was behind a 12 foot fence/wall, all doors and gates were locked, and further the keys to the vehicle were in a locked lock box inside a locked office inside the locked building. In this example a legal liability form would not be required to pay a claim for damage and the owner of the vehicle would then have to look to their own physical damage policy for coverage. However, a direct primary policy likely would respond.

Back when I was doing quite a bit of garage coverage we saw this exact type of claim happen at least on a monthly basis. One of my clients (a body shop with a Lexus/Toyota contract) had a 12 foot block wall, wrought iron gates, heavy chain and locks and then "stacked' the cars....meaning parked them so close together that you could not even walk between them...just to prevent these types of situations. However, one morning they came in and saw that someone had hit ever vehicle...by breaking both windows and crawling from car to car!

Other things to look at: Deductibles on the garagekeepers - a per vehicle deductible can kill you! In the above example ... if you had a per veh ded and 5 vehs were affected...you had 5 deductibles! So watch for that.

This topic has been discussed in these forums before: viewtopic.php?f=2&t=1612

another link of use:

http://www.dealers-insurance.com/Garage ... epers.html

make sure you partner with a great market, my recollection is that this is mostly program business and in the non-admitted market ... but that is based on not current explorations.

You will likely find that many of your prospects may already be in the best programs...but might not be with agencies who truely understand how to cover them and have left gaps (like the ded and GKLL forms).

Good luck...
Michael Trouillon
Greater Los Angeles area

Consultant/Trainer agency automation system

Industry since 82

Past: Compliance Mgr master pol pgm, Ops Mgr, Marketing Mgr, Account Mgr
Phils
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Re: Understanding Auto Repair coverage

Post by Phils »

Having been in your position when I started, I immediately learned that most auto shops don't understand the "co-insurance" provisions of their policies.

I would see that they'd have $20,000 for business property although to replace everything in the shop would take more than $200,000. The shop owner's reasoning was that the building was alarmed and $20,000 would be the most a burglar would make off with before police arrived (that, as you know, is the value of one tool box with tools). And typically it'd be a metal building so they weren't so concerned with fire.

Once I educated them on coinsurance and explained that (in this example) they'd only get 10% of the $20,000 ($2,000) since they weren't insured to at least 80 or 90% (depends on company rules), it was the 'foot-in-the-door' that generated business.

Another difference in garagekeepers policies: for damage to a customer's car does the garage policy pay as primary, or is the shop's customer required to file a claim with their insurance with the garage insurance paying secondary and picking up anything not paid by the customer's insurance? When this is explained correctly most shops don't want a policy that pays secondary.

Others will add more, and more toward your questions, but I thought I'd point out some things I learned when transitioning from auto repair to insurance.

Phil
P&C I Agent of IL
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Re: Understanding Auto Repair coverage

Post by P&C I Agent of IL »

The answers that have been provided thus far has offered great insight. Thank you! Please keep 'em coming- I anxiously await the day I can return the favor and offer assistance to a new agent in my shoes or to any of you.
jimmyr1978
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Re: Understanding Auto Repair coverage

Post by jimmyr1978 »

Many shops also have associated tow operations, which can bring on a whole new set of challenges. Of course, you have the auto liability and physical damage for the tow trucks, but you need to make sure that the "on hook" coverage (a type of cargo policy) is sufficient for the vehicles they are towing. First, the limits must be sufficient, and I believe you should always err on the side of caution. If the owner says, "We only town small cars," but then they tow a brand new limited edition Lexus, they need $100,000 on hook coverage. Also, make sure that the cargo policy covers not only the vehicle in tow, but also the contents within the vehicle.

For example, I insure a repair shop that specializes in street equipment such as sweepers, trash trucks, etc. While most of their revenue is generated from the shop, they had a $50,000 on-hook limit. They then pointed to a piece of equipment they hauled in that was valued at $250,000! Could you imagine explaining to the owner that they are out $200k when they total that thing? That same piece of equipment had specialized electronics that would not normally be covered under cargo policies- Navigators offers a good program that covers the property of others while in tow.

P.S. When I first wrote the policy, they didn't even have GKLL coverage, nor did their agent of 7 years even know what it was. Astonishing, but you'll encounter this once in awhile. I wrote a Direct Primary policy with a capped $2500 deductible for them, and they actually saved money despite the added coverages. I then added a $2 million umbrella liability policy over the auto, gl and gkll because the owner had roughly $2 million in total net assets - so his assets are now covered in case of a catastrophic loss.

Best of luck to you! Picking a niche is going to do you wonders. Become the "Repair Shop Insurance Master" in a 100-mile radius, and you'll make a very good living.
FurriePrincess
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Re: Understanding Auto Repair coverage

Post by FurriePrincess »

Go sign up for a continuing ed class on garage liability, gkll, etc. Or find a local educational provider like IEA. Taking classes and attending seminars in specialty areas gives you the opportunity to learn from those that have been in the business and ask questions... In insurance the only dumb question is the one that wasn't asked.
Rlevine
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Re: Understanding Auto Repair coverage

Post by Rlevine »

You have great advice to review and absorb from the other posts. My recommendation is to meet with your markets. Be sure they write Garage risks before approaching these operations. There are carriers that offer specific endorsements that will differentiate you from your competition. Learn the coverages they offer, safety programs and how the carrier will audit the policy. This is a class of business that is not typically solicited by agents proactively. You can make a great career in the class of business.
mthand
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Re: Understanding Auto Repair coverage

Post by mthand »

I have a related question so I am not posting a new thread. I am also relatively new to the industry, not quite two years, and I am working on a small auto repair account. In questioning the insured, he told of a recent claim where someone dropped off their car before hours for service and left their keys in the key drop. They came back 15 minutes after the garage opened (his version) and claimed there was damage done to the vehicle while it was parked in the insureds lot. His company ended up paying out on the loss instead of fighting it. He was upset that the company paid what he felt was a fraudulent claim.

Does anyone know if this is a common problem or any advice I could offer to mitigate this problem? This is a small town and it is not uncommon to have a key drop and an open lot but I have not heard of this kind of, probable, fraud.
P&C I Agent of IL
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Re: Understanding Auto Repair coverage

Post by P&C I Agent of IL »

When I managed my auto shop this type of story would occasionally be passed around many of us simply installed a low cost camera system which helps to prove if the damage could have been done in the lot or not. Many systems of 4-6 cameras are more than sufficient for this and can be purchased for about $500, which will deter vandalism, theft and fraud. Most shops can install these systems themselves as the technical know how is minimal.
Phils
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Re: Understanding Auto Repair coverage

Post by Phils »

P&C I Agent of IL wrote:When I managed my auto shop this type of story would occasionally be passed around many of us simply installed a low cost camera system which helps to prove if the damage could have been done in the lot or not. Many systems of 4-6 cameras are more than sufficient for this and can be purchased for about $500, which will deter vandalism, theft and fraud. Most shops can install these systems themselves as the technical know how is minimal.
EXCELLENT suggestion.

Reminds me of that grandma that was tazered by the hwy patrol and was giving interviews freely UNTIL the in-car cam video was released.

Which is the reason I was wishing there was video of the Cambridge professor/ police officer confrontation. Or at least audio.

Phil
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