The past two columns have dealt with garage insurance. Those articles provided some ideas to consider when setting up a garage program and discussed some of the exclusions or limitations of the garage form. This article will address some of the ways to amend coverage by the use of garage endorsements. All of the endorsements or coverages that will be referred to will be based on Insurance Services Office (ISO) garage forms, and the examples provided are actual loss situations that have occurred.
False pretense
During the 1980s a customer came into an auto dealership in northeastern Iowa. The customer decided to buy a late model van and wrote out a $23,000 check for it. While the customer was there, the dealership did not do any checking on the customer. It was not until after the man and the van were gone that they investigated whether the check was any good. It wasn't. The automobile dealership had voluntarily parted with title to a $23,000 van for a piece of paper.
Upon reporting the loss to its insurer, the dealership was told that it did not have any coverage for this type of a loss.
The loss would have been covered if false pretense coverage had been added to the dealership's garage insurance program. False pretense is a coverage that has been available for more than 40 years. However, not all insurance agents who write garages know that this coverage can or should be added to an insured's program.
Broad form products coverage
A used automobile was sold by an automobile dealership. The law required that prior to selling it, the dealership check several features of the car including the brakes. Checking the brakes required removing the wheels and then putting them back on the car.
About a week after the automobile was sold, one of its wheels fell off. The car was being driven slowly at the time so the driver was not injured. However, the automobile sustained extensive damage to its underside.
The claim for damage to the insured's product was not covered. (There would have been coverage for damage done to other property or for injury to people.) When denying the claim, the adjuster cited the clause in the garage policy that states there is no coverage for damage to a product sold by the insured auto dealership.
This coverage could have been provided by an endorsement titled, Broad Form Products Coverage. Had this endorsement been attached to the insured's garage policy, there would have been coverage for the above-mentioned loss.
Dealers driveaway collision coverage
The service manager at a Midwest auto dealership was furnished a vehicle by the dealership. She and her family took the vehicle on a trip to Florida to see Disney World. While going through Tennessee, she had an accident with the vehicle. The claim was presented to the insurer for the auto dealership. This collision loss was paid by the dealer's insurer.
However, this same auto dealership had a collision loss involving one of its employees which was not covered. The employee was traveling to another dealership to swap vehicles. After he had traveled about 65 miles, he had an accident. Coverage for liability, uninsured motorist, underinsured motorist and comprehensive was provided by the insurer. However, there was no collision coverage as the car was more than 50 miles from the dealership.
The driveaway collision exclusion applies only to vehicles that are being bought, sold or delivered. So for the employee using a garage-owned vehicle on vacation, this exclusion did not apply.
Collision coverage for vehicles driven more than 50 miles from the dealership (dealer trades and taking cars to or from an auto auction are common examples) can be provided by adding a Dealers Driveaway Collision Coverage Endorsement.
Broadened coverage--garages
A wide variety of losses can be covered by the Broadened Coverages--Garages endorsement. Here are a few examples:
* A garage customer whose car had been in the shop for repairs returned to the service area to tell the service representative that the car still was not operating correctly. During the course of their discussion the service representative became very angry and called the customer some very bad names. Several other customers in the service area heard this conversation.
Several days later the dealership received lawsuit papers. The customer was suing for slander based upon what the service representative had said. Shortly after submitting the claim to its insurer, the dealership was informed that it did not have coverage for slander.
* The same auto dealership had a summer outing for employees at which soda and alcoholic beverages were served. After drinking too much at the picnic, an employee had an auto accident and injured some people. A claim based on liquor liability was presented by the injured parties. Again the dealership was told it had no coverage as the garage form did not provide coverage for host liquor liability.
* Another dealer rented a building to use for its body shop. One day the exhaust fan in the body shop was not working, but the workers continued to spray paint anyway. A lot of paint vapor was in the air and when one of the workers lit a torch, it triggered a small explosion and a good-sized fire. The body shop building owner's insurer presented a claim against the dealership for the fire damage. The dealership's insurer told them that the garage form had no coverage for fire legal liability.
* Yet another example involved an injury to a worker. A short circuit in an electrical cord resulted in a worker's being knocked unconscious. The man was not breathing and his heart had stopped. A coworker administered CPR (cardiac pulmonary resuscitation). The hand of the person giving CPR slipped off of the breastbone and pressed just below the breastbone. He did this only once but it was enough to cause some internal injuries to the person who was unconscious. The rescue squad arrived and the injured person lived. After recovering, the person who received the CPR sued for the injury caused by the CPR administrator.
After submitting the claim to its insurer, the dealership learned that it did not have coverage for incidental medical malpractice.
These examples demonstrate that a garage policy does not cover a number of losses that are automatically covered by a commercial general liability contract. My recommendation is that an endorsement, Broadened Coverage-Garages be added to every garage contract. This form provides coverage for personal injury, advertising injury, host liquor liability, fire legal liability, incidental medical malpractice, non-owned watercraft, additional persons insured, automatic coverage for new entities, and limited worldwide liability coverage. *