David W Scott posed the first question:
“I saw recently a packaged Business Owners Policy for an auto paint and body shop which had been endorsed with garagekeepers coverage, but did not say anywhere the $1M/$2 M liability on the policy would also extend to the employees driving the vehicles in/out and around the shop. Is there a garage liability endorsement that should be added to the coverage page?”
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Ann Mullen
I’m pleased to announce we have begun to receive e-mail feedback from this column.
David W Scott posed the first question:
“I saw recently a packaged Business Owners Policy for an auto paint and body shop which had been endorsed with garagekeepers coverage, but did not say anywhere the $1M/$2 M liability on the policy would also extend to the employees driving the vehicles in/out and around the shop. Is there a garage liability endorsement that should be added to the coverage page?”
Insurance is my business. In fact, I’ve written insurance for over thirty years for members of the Texas Automobile Industry, and even a slow-learner can pick up some tips in that length of time! I’m going to share an important one with you today.
David, since most Texas admitted markets joined the rest of the world and are now using ISO and General Liability forms, the waters are a bit murky for those of us who cut our teeth on the old Texas Garage Form. Add the fact that many companies utilize manuscript forms to customize their particular policy, and it becomes necessary to look at the policy in question to give a definitive answer to almost any garage liability question.
What indorsements should be added?
However, that said, my experience has been the liability coverage on a GL policy should be extended to employees driving customer vehicles via the following ISO policy endorsements:
CG7559 – Garagekeepers coverage to provide the physical damage liability for cars in the care, custody and control of the insured. (The coverage level may be Direct Primary, Direct Excess or Legal Liability..)
CG2268 – Operation of Customers Autos on a Particular Premises for the primary liability limits to extend to damage caused while driving customers’ vehicles (other than to the customers’ vehicles which is provided by the GKL endorsement) and/or
MSAS06 – Hired and Non-Owned Auto for the same purpose.
I would be suspect of any GL policy written for a non-dealer operation that did not include either the above endorsements or reasonable manuscript facsimiles.
Do not hesitate to contact me. I’m eager to receive your feedback, questions and comments. If you have specific subjects or insurance concerns you would like to see discussed here, please let me know. [email protected] or www.mulleninsurance.com.
If you’d like additional information on insurance for your business or you’d like to request a quote, please visit https://mulleinsurance.com/#Insurance-quote or give us a call at 972-681-6297.
Ann Mullen-Martin
President
MULLEN INSURANCE AGENCY, INC
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]]>Seriously, I suggest you get it out for just a minute to read the Item One section, Named Insured, on the Garage Declarations page. It’s so easy to skip over this section but it's vitally important for your business.
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Ann Mullen
When was the last time you took a close look at your garage liability policy? Well, that’s too long ago!
Seriously, I suggest you get it out for just a minute to read the Item One section, Named Insured, on the Garage Declarations page. It’s so easy to skip over this section. After all, your agent knows who you are and what you’re trying to protect.
Too often, even though the agent may know, the Policy Issue Department may make an error. In other cases, the agent may fail to ask all the necessary questions to ascertain exactly who the named insured should be.
If you don’t present any claims during a policy term, no repercussions will result from an improper named insured listing. However, if you have claim, the first place the company goes in determining their response is to Item One, Named Insured.
Who Should be Listed as the Named Insured on a Garage Liability Policy?
All entities with common ownership should be listed as named insured on the Declarations. If there are too many, “etal” can be added with a corresponding endorsement to list the additional names. Entities in which the primary named insured does not own a majority interest can be added as additional insured by endorsement.
The first named insured is the only one authorized to request cancellation of the policy and the insurance company can satisfy the cancellation notice requirement by addressing it only to the first name insured, at the last known mailing address.
Only the first named insured (or the authorized representative) can request changes in the policy. Only the first named insured is responsible for payment of the premium and return premium checks will be made out to the first named insured.
Can an Inaccurate Named Insured Hurt Your Business?
Hypothetically: You own 100% of ABC Autos Inc and DEF Auto Repair, Inc. Both can be written under one policy contract to include both Hazard One and Hazard Two exposures. The premium costs can be carved out to accommodate any accounting scenarios posed by combining the two entities.
Sometimes it is advantageous to combine the coverage under one contract, and sometimes it isn’t. It’s your agent’s responsibility to compare the various approaches to solving the insurance needs to allow you to make an informed choice. The agent’s hands are tied UNLESS you are fully upfront regarding your business exposures.
Remember the old adage: Full disclosure to your attorney, your CPA and your insurance agent is always the best policy.
Once a decision is made, make sure all insured entities are listed on the Declarations page in the order you choose. If you operate as a corporation, you want to consider adding your name as “Individually Named Insured.” Partnerships should reflect the names of all partners, and sole proprietors should have their names as well as their business names listed.
“Named Insured” is one line of your garage policy, but it is the beginning of any claims experience you have.
As always, I appreciate the opportunity of discussing insurance coverages with you. Please call, e-mail or fax to me your insurance questions and concerns. I hope this article along with the others I publish will provide some light to the darker corners of insurance. [email protected]
If you’d like additional information on insurance for your business including garage insurance or you’d like to request a quote for your business, please visit http://6j7.222.myftpupload.com/garage-insurance/ or give us a call at 972-681-6297.
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]]>The post Loaner Cars or Temporary Vehicles – Changes in Texas Insurance Law appeared first on Mullen Insurance Agency.
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Ann Mullen
I have been asked on more than one occasion: “Why is Mullen Agency such an avid TIADA supporter?” My answer is always the same, “Because they work hard for the Texas Independent Auto Dealer industry in providing education and behind the scenes in working toward a fairer business atmosphere for dealers.”
An example of their success is the change in the Texas Insurance Code Chapter 1952. If you have ever lent a car or provided a loaner vehicle and the borrower had an at-fault accident, you have likely experienced the liability headaches associated with the practice. Even if you haven’t had personal experience with the perils involved, a knowledgeable garage insurance agent has mentioned them to you on multiple occasions.
Some garage insurance policies exclude coverage for losses due to loaner vehicles provided by independent auto dealers and, in some cases, repair shops. Others require the dealer to have iron-clad, acceptable, lease agreements in place to protect both the dealer and the insurance carrier. If an insurance company discovers a dealer is routinely lending vehicles, a common response is either immediate coverage restrictive endorsements, policy cancellation or non-renewal.
The risk to the carrier is, of course, unknown exposure. The ‘borrower’ or ‘over-night’ test drivers’ driving record is unavailable to the insurance company and there is no guarantee that only that driver will operate the vehicle. My experience includes too many claims where an unknown driver wrecked the car, had no effective insurance in place and the dealer is left to pick up the pieces because he still owns the car.
Even if the borrower were driving the vehicle and had some sort of personal auto insurance, the responsible party remained unclear. Under the non-amended insurance code, too much room was left for discussion in determining the liability coverage, i.e. primary, excess or none at all. Add to that cloudy field the restrictive personal auto insurance policies now issued in Texas and we have a recipe for an insurance claim nightmare..
Should Independent Auto Dealers Have Loaner Cars?
Before I go any further, let me say, “I do not endorse or encourage loaner cars or over-night test drives for independent auto dealers. In the rare circumstance that may happen, the dealer should have an ironclad lease agreement to protect himself. Additionally, the dealer needs to speak with his/her agent to be sure there is a complete understanding of the risk under their specific insurance contract.”
However, it is not only loaned and/or borrowed vehicles that fall into the area of whose insurance is responsible in the event of an at-fault accident. Routine test drives also pose a possible costly conflict when determining who pays the bill. That is, they did until recently!
TIADA supported legislation during the 86th Legislature to assist dealers in limiting their insurance exposure when they verify that their customers have personal auto insurance before allowing them to drive dealer-owned vehicles. With the changes in Texas Insurance Law mandated with the passage of SB 1737, the climate has been modified and improved for Texas Independent Auto Dealers. The new provisions to the Texas Insurance Code, Chapter 1952, require that a Texas personal auto policy provide the primary liability coverage for a temporary – substitute vehicle used during the policy term.
When Does the New Insurance Law Take Effect?
Although the law is broadly effective September 1, 2019, the internal requirements are such that amending of in-force personal auto policies is not required. Additionally, any policy issued between September 1, 2019 and December 31, 2019 may, but is not required to, include the temporary vehicle coverage until it renewal date. For instance, an annual auto policy purchased in November, 2019, may or may not include the additional protection; when that policy is renewed in November, 2020 it must include the temporary vehicle coverage. Every personal auto policy written and/or renewed as of January 1, 2020, must include the new protection as outlined below:
- The named insured in the personal auto contract; and
- Any resident relative of the insured and licensed operator residing in the household except for an individual who is not covered on a named driver policy.
- The contract’s liability limits must be available for this required coverage.
Texas Insurance Code Ann…1952.060 includes the following language: A temporary vehicle includes a vehicle that is loaned or provided to an insured by an automobile repair facility for the insured’s use while the insured’s vehicle is at the facility for service, repair, maintenance, or damage or to obtain an estimate and is: A. In the lawful possession of the insured or resident relative of the insured; B. Not owned by the insured, any resident relative of the insurance, or any other person residing in the insured’s household; and C. Operated by or in the possession of the insured or resident relative of the insured until the vehicle is returned to the repair facility.
A word of caution: In spite of the new law, dealers must remember every time a dealer-owned vehicle is driven, the dealer’s business is exposed to loss. It doesn’t matter whether the dealer is the driver, an employee, a customer, a family member or an acquaintance, the car is titled to the dealership and the business always takes the bulk of the risk.
Know your protection, verify every driver’s license and insurance coverage and be pro-active in protecting yourself and your business. Garage policies provide coverage for uninsured customers while test-driving up to the state mandatory limits of $85,000 CSL. It is important that you carry the liability limits necessary to protect your assets and be up-front with your insurance agent as to your business practices.
If you have specific subjects or insurance concerns you want highlighted or discussed here, please let me know at [email protected]
If you’d like additional information on insurance for your business including garage insurance or would like to request a quote for your business, please visit http://6j7.222.myftpupload.com/#Insurance-quote or give us a call at 972-681-6297.
If you found this article helpful, feel free to share it with others using the buttons below for social media, email or to print a copy.
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]]>The post Garage Keepers Liability (GKL) – What is It? appeared first on Mullen Insurance Agency.
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Ann Mullen
I originally published this article as part of a newsletter for the Houston Independent Automobile Dealers Association (HIADA). Minor updates have been made to the article to fit the format of this blog. I hope you enjoy the article and find it helpful! ~ Ann
A couple of days ago, a new dealer came into our office in search of a bond and insurance for his business. Once he had his bond in hand, he sat down to talk with an underwriter, and I overheard a conversation that went something like this.
“Hey, Ray. I need some garagekeepers.”
“Garagekeepers? What’s going to be your business? Are you selling cars? Repairing cars? Or both?”
“Oh, just selling them in the beginning. Probably won’t have more than ten or so on my lot at any one time.”
“Okay. So, will you ever have in your care, custody and control autos owned by your customers?”
“Only if I’m trying out something to buy.”
“Then it’s not garagekeepers that you need. Garagekeepers coverage is an endorsement to provide physical damage protection for your customers’ vehicles while in your care, custody and control.”
“Are you sure?”
Ray laughed and I moved on down the hall, but that conversation has stayed on my mind. Garagekeepers, GKL, is a confusing coverage and not only to the new dealers.
What is Garage Keepers Liability Insurance?
It is a liability endorsement providing physical damage protection for non-owned vehicles. To add to the confusion, it comes in three varieties:
- Legal
- Direct Excess
- Direct Primary
We’ll talk about the differences later, but first, let’s discuss who needs to purchase the protection.
Repair shops, service stations that provide inspections, oil changes, etc and non-self-service car washes are among those first in line, but not the only ones there.
Independent auto dealers who do minor repairs for vehicles they have sold should also purchase GKL.
If you have a storage lot, you need GKL to protect the cars left in your care. Running an auction? GKL is a necessity.
Public parking places should have the GKL endorsement attached to their garage policy.
In short, if your business involves non-owned vehicles left in your care, custody and control or towed by your wrecker, the physical damage liability protection needed is available via a GKL endorsement.
What Options are Available for Garage Keepers Liability Insurance?
Now that we know who should purchase a garagekeepers endorsement, it’s time to talk about the options available.
Once it’s determined the coverage is appropriate to your situation, a discussion as to level of protection is in order.
Legal Liability Protection
GKL purchased on a legal liability basis provides coverage only if you are legally liable for the loss suffered.
For example, if you forgot to lock the gate and the customer’s car is stolen, the insurance will respond to the loss. However, if you locked the gate and the thief cut the lock to steal the car, no coverage is provided because you were not negligent in the loss.
A tornado tears through the location and destroys all the vehicles under your care, custody and control. No coverage because there is no negligence on your part.
Naturally, this is the least expensive level of coverage and the one often purchased by auctions or by those closely counting their insurance dollars.
I do not always recommend legal liability GKL because the dollars initially saved may result in many more lost in customer dissatisfaction in the event of a claim. However, GKLL is becoming more the norm and it’s important to thoroughly explore your specific situation when making a decision.
Direct Excess Protection
The intermediate level of protection is GKL Direct Excess. Negligence and legal liability do not play a role in claims presented under this endorsement.
It applies to any loss the customer suffers after other available insurance has responded to the claim. In other words, if your customer has physical damage coverage on his vehicle, that insurance would pay first.
The direct excess option could be used to cover the customer’s deductible or to pay for a substitute vehicle while the customer’s auto is being repaired. In the event there is no underlying insurance on the damaged car, the direct excess becomes primary.
Sometimes not noted, even by some claims people, is the policy provision guaranteeing the election of the direct excess option will never provide less coverage than that provided by the legal liability option. This means, if the insured is negligent, the GKL will pay the full amount of the claim, subject to deductible, without consideration for the customer’s own insurance.
Direct Primary Protection
The final, and most expensive level of GKL coverage, is direct primary. The insurance policy will respond to any covered peril loss to the customer’s auto without regard to the insured’s negligence or the customer’s own insurance. This final option costs more up-front but may be the least expensive in the long run.
If you have more than one location, it’s important to designate at which location GKL coverage is required. A separate limit of insurance must be listed for each location. If you are carrying this coverage now, I encourage you to check your policy to be sure the right limits are listed at the right location. Reviewing that info at the time a claim is presented is too late.
The last item I want to talk about today is perils covered. The choices are: comprehensive, specified causes of loss and collision. The real decision is in choosing between the first two, as collision is normally part of the package.
Comprehensive coverage includes loss from any cause except the covered auto’s collision with another object or the covered auto’s overturn; those losses are collision losses.
Specified perils provide protection only for losses caused by: fire, lightning, explosion, theft, mischief or vandalism. Specified perils exclude “acts of God” such as wind, hail, earthquake and flood. I always recommend comp because it includes those perils and all other risks of loss not excluded. If you carry GKL, check your policy now.
Space prevents us from discussing several GKL areas including deductibles, how to determine a proper limit, whether or not co-insurance applies, and insuring auto equipment. We’ll save those topics for another day.
In the meantime, do not hesitate to contact me. I’m eager to receive your feedback, questions and comments. If you have specific subjects or insurance concerns you want highlighted or discussed here, please let me know at [email protected]
If you’d like additional information on garage insurance or would like to request a quote for your business, please visit http://6j7.222.myftpupload.com/garage-insurance/ or give us a call at 972-681-6297.
We also have an article on the Named Insured which is arguably the most important line on your garage insurance policy.
If you found this article helpful, feel free to share it with others using the buttons below for social media, email or to print a copy.
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