Garage Liability Insurance

What it is

Garage liability insurance is a specialty business liability policy for companies in the automotive industry. Typical buyers include auto dealerships, repair and customization shops, service stations, parking facilities, and tow‑truck operators. The policy protects against third‑party bodily injury and property damage arising from the insured’s automotive operations.

How it works

• Garage liability sits alongside a business’s general liability (GL) coverage to address garage‑specific exposures that a standard GL policy may exclude.
• It covers injuries to customers or other third parties that occur on the business premises or result from the business’s operations, up to the policy limits.
• Policies often include an employee dishonesty provision to cover theft or vandalism of customer vehicles committed by an employee.
• For an additional premium, autos used in the business (e.g., courtesy vans, parts delivery trucks) can be added to the policy.

Typical coverages included

• Bodily injury liability for customers and third parties.
• Property damage liability caused by garage operations.
• Liability arising from parts or products sold and from faulty parts installed on a customer’s vehicle (subject to policy terms).
• Employee dishonesty coverage for theft or vandalism by staff.

Common exclusions and limitations

• Damage to the policyholder’s own tools, building, inventory, or business property.
• Damage to customers’ vehicles while on the premises for service is not covered by garage liability—this is typically covered by garage‑keepers insurance (see below).
• Vandalism of or theft from a customer’s vehicle, and weather‑related damage (e.g., hail), are generally excluded from garage liability.
• Policies set maximum liability limits and may include aggregate limits per claim or per policy year. Always confirm specific limits and sublimits.

Garage liability vs. garage‑keepers insurance

• Garage liability: Covers third‑party bodily injury and property damage resulting from business operations.
• Garage‑keepers: A separate policy that covers physical damage to customers’ vehicles while in the care, custody, or control of the business (including during storage, test drives, and overnight). It commonly covers theft and vandalism of customers’ cars.
• Businesses that store or service customers’ vehicles should consider both types of coverage; multiple locations typically require separate coverage or proper endorsements for each site.

Related business insurance products

Consider these complementary policies to address other common risks:

• Commercial General Liability (CGL): May cover premises and finished‑product liability; garage liability fills industry‑specific gaps.
• Property insurance: Covers buildings, equipment, inventory, and signage for fire, theft, and many weather events (flood and earthquake usually require separate endorsements).
• Business interruption: Reimburses lost income and operating expenses when a covered event forces a temporary closure.
• Workers’ compensation: Mandatory in most jurisdictions; covers employee medical care, lost wages, and death benefits for workplace injuries.
• Employment Practices Liability (EPLI): Protects against claims of harassment, discrimination, and wrongful termination.
• Professional liability: For negligence claims arising from professional services or advice.

Policy features and contractual issues

• Additional insureds: Contracts with other businesses (e.g., car‑washing vendors or leasing partners) may require naming those parties as additional insureds on the garage liability policy.
• Schedule autos and endorsements: Make sure autos used in the business are properly scheduled or added to ensure coverage for business‑use vehicles.
• Sublimits and exclusions: Review policy wording for sublimits (e.g., for employee theft or product liability) and specific exclusions that could leave gaps.

Buying tips and checklist

• Confirm the policy supplements rather than replaces your general liability coverage.
• Verify limits and aggregate ceilings; compare per‑occurrence and annual aggregate limits to your potential exposure.
• Ask whether employee dishonesty and auto use endorsements are included or available.
• If you keep or store customer vehicles, purchase garage‑keepers insurance separately.
• Ensure each physical location is covered and that any leased or contracted partners are added as additional insureds if required.
• Review exclusions and consider endorsements or separate policies (e.g., property flood/quake, comprehensive garage‑keepers) to close gaps.
• Work with an agent experienced in automotive industry risks to tailor coverage to your operations.

Key takeaways

Garage liability insurance is a targeted liability policy for automotive businesses that fills gaps left by standard commercial general liability. It protects against third‑party bodily injury and property damage from garage operations but does not cover damage to customers’ vehicles in the care of the business—garage‑keepers insurance is needed for that exposure. Carefully review limits, exclusions, endorsements, and the need for complementary coverages to ensure adequate protection.