“Garage liability insurance” is a type of coverage carried by companies that handle customer vehicles. It’s a policy that is carried in addition to commercial general liability, and it differs from “garage-keeper’s insurance.”
It may in some instances provide coverage for individuals who have very recently purchased a vehicle or those who have taken it out for a test-drive. It’s generally extended to:
- Car dealerships
- Repair shops
- Tow truck driver services
- Service stations
The reason this coverage is necessary is because standard commercial general liability coverage usually won’t cover damage to vehicles – or bodily injury to individuals – when those vehicles don’t belong to the insured party. Garage liability insurance coverage provides gap coverage to shop owners where they might otherwise have to pay out-of-pocket.
In the recent case of Universal Underwriters Ins. Co. v. Winton, the question was whether an auto dealership with a garage liability policy was liable to cover a collective $16 million judgment in favor of the estates of two passengers killed in a car accident, along with two survivors. Plaintiffs argued that either that dealership insurer was liable or else two other insurers that covered a second dealership.
As it turned out, according to the ruling by justices with the U.S. Court of Appeals for the Tenth Circuit, none of them were liable – but only because the liability policy of the at-fault driver had already covered the state statutory minimum of $50,000. Otherwise, the garage liability policy would have stepped in to cover that amount.
Here’s what happened:
One dealership “M” transferred a vehicle to another dealership “H” one day in November 2007. That same day, dealership “H” had given the car to a 48-year-old woman in Oklahoma. Just two days after receiving that car, the woman was driving a group of young people – between the ages of 17 and 23 – after a night at a local nightclub. Driver reportedly lost control of the vehicle. Five people, including the driver, were killed and two others were seriously injured.
Plaintiffs – two of those injured and estates of two of those killed – sued estate of decedent driver. A settlement was reached whereby surviving plaintiffs would receive $3 million each and plaintiffs for estates of decedents would receive $5 million each. Decedent driver’s insurance company paid $50,000 of that, which was the policy limit, set at the statutory minimum for that state.
Soon after, insurers of the two dealership sued the victims, seeking a declaratory judgment that would assert they were not liable to cover the remaining portion of damages. Plaintiffs argued that one or the other dealerships still owned the vehicle at the time of the crash. “H” had garage liability and umbrella coverage, while “M” had two policies that offered bodily injury coverage of up to $15 million.
Trial court sided with insurers. “M” didn’t own the vehicle at the time of the crash and thus was not liable. And “H,” while it might have been responsible for that statutory minimum $50,000 under the terms of the garage liability policy, that would have only been in the event decedent’s personal insurance had not covered that. But since it had, the terms of the policy was unambigous that no more would be covered.
Our Charlotte car accident attorneys see this case as a good example of why it’s wise to carry underinsured motorist (UIM) coverage. This is coverage that applies when an at-fault driver’s insurance company doesn’t cover the full extent of one’s damages. In a case like this, it would be applicable to the passengers of the vehicle, even though they were not driving.
Contact the Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.
Universal Underwriters Ins. Co. v. Winton, April 8, 2016, U.S. Court of Appeals for the Tenth Circuit
More Blog Entries:
$32M to Family of Woman Killed in Storefront Crash, April 6, 2016, Charlotte Car Accident Lawyer Blog