The neighborhood auto repair shop or local gas station might seem to be an easy risk to insure. But there are a few misunderstood coverages that agents and brokers should know about, says one California broker specializing in the auto services industry.
“Any of your auto repair — general auto repair, auto body, transmission repair — all of that fits into a nice little box and you can write them on a business owners policy pretty easily,” says Earl VanBuskirk Jr., assistant vice president and small business sales manager, Heffernan Insurance Brokers based in Walnut Creek, Calif.
However in Van Buskirk’s view, one important coverage that insureds and their agents often misunderstand is garagekeepers liability. Many shop owners, especially newer shop owners, confuse garage liability coverage with garagekeepers liability coverage.
“Shop owners think they are one in the same and they are very different,” VanBuskirk says. “Garage liability is really the liability that arises out of your work, bodily injury and/or property damage arising out of your work. Garagekeepers is a separate coverage that covers the damage to the vehicle.”
Garagekeepers is more like automobile coverage and protects shop owners while vehicles are in the care, custody and control of the shop.
“Garagekeepers is where we usually find the least sufficient coverage,” he says. Insureds don’t understand how to calculate the right amount of coverage and often brokers don’t accurately figure out how much garagekeepers insureds should carry, according to VanBuskirk.
“We look at a lot of policies where shops might have five bays and they might keep 10-15 cars at any one given time, yet they’ve got $60,000 in comp and collision coverage for vehicles in their care, custody and control,” he says. “If something happens, a big catastrophic event like a fire, they’re not going to have nearly enough limits to cover all of the vehicles that were damaged in the fire.”
While garagekeepers is not a required coverage to operate, it’s a critical coverage, he says. “I’ve seen plenty of times where folks don’t carry it.”
Mobile auto repair businesses are at risk as well. “With mobile repair guys, the guys that fix windshields, their mindset says, ‘I don’t have a garage so why do I need garagekeepers?’ But again, it’s while the vehicle is in your care, custody or control.”
For example, if a mobile repair business services cars at auto dealerships, there’s a need for garagekeepers. “If something happens to those vehicles while they are in your care, custody or control, you need garagekeepers. Especially, if you test drive them,” he says.
Most auto repair shops fit nicely into a business owners policy (BOP) in the standard market. VanBuskirk says the exception might be a shop that works on high performance vehicles or heavy vehicles, which may need coverage through the excess and surplus (E&S) market.
Heffernan, which has served as the preferred broker for the Automatic Transmission Rebuilders Association (ATRA) for the past 11 years, writes risks on a national level. “We are one of a handful of agents who have access to an MGA program through Markel,” he says.
VanBuskirk, who has specialized in the auto services segment for 11 years, says the best thing about working in this market is the customer.
“Shop owners are very loyal because it’s a loyalty business. They make money the same way I do: by referral,” he says. “Pricing in this segment is so competitive. Everybody knows what everybody else is charging. At the end of the day, I might only be able to save someone $150 so it’s not that compelling.”
What keeps his customers happy is the value he brings to the table. “It’s what else can I offer.”