CGL Or Garage Form For Garage Owners? An insured that operates a garage usually buys a garage coverage form in order to cover liability risk exposures.
Some may wonder, though, if these liability exposures can be insured against simply by using a commercial general liability coverage form instead.
After all, both the CGL form and the garage policy agree to pay the sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage.
However, there are significant differences between the two coverage forms that an insured should be aware of before he or she purchases insurance.
The first difference to point out is the classification of businesses for which the two policies are written.
A CGL form can be used to cover the liability exposures of manufacturing or processing businesses as well as service and contracting businesses, mercantile operations, office buildings, and apartments. A garage policy is more limited in scope, applying to auto repair shops, service stations and auto dealerships. It is true that a garage business may sell items like a retail store, but the main focus for the garage is garage operations–not manufacturing, mercantile or office liability risks.
Turning to the actual coverages offered by the two forms, a standard CGL form offers liability coverage for premises and operations, products and completed operations, personal and advertising injury, fire legal liability, and medical payments coverage. The standard garage form applies to garage operations and liability arising out of the ownership, maintenance or use of covered autos.
The CGL form does offer certain limited coverage for nonowned autos, but does not apply to liability due to autos owned or operated by any insured. And operating autos is part and parcel of the service station or automobile service garage business.
The garage form provides physical damage coverage to covered autos–a property-type coverage, whereas the CGL form offers no such insurance. The garage form also offers coverage for damage to someones property while it is in the care or custody of the insured through garagekeepers insurance; the CGL form excludes property damage to personal property in the care, custody or control of the insured.
Now, both the CGL form and the garage policy may alter their coverages through the use of endorsements. However, the basic forms provide notable differences in their insuring agreements.
The exclusions sections of the two forms also offer some differences. The garage form specifically excludes coverage for bodily injury to any person arising out of any employment-related practices, such as coercion, defamation, harassment and discrimination. The CGL form is silent on this point.
Both forms exclude coverage for property damage to the work performed by the named insured. However, while the CGL form makes an exception for work performed by a subcontractor, the garage policy does not do so.
The liquor liability exclusion on the CGL form allows for host liquor liability coverage for the insured, but the garage form makes no such exception.
And finally, the watercraft exclusion on the garage form offers one exception, while the CGL form has several exceptions. This gives the CGL forms insured more coverage in this particular area of liability exposure.
The "who is an insured" clauses on the two policies are another area of difference. The garage form makes the point that it offers coverage for the ownership and use of autos by discussing who is an insured for covered autos. The CGL form does not.
On the other hand, the CGL form permits insured status for trustees, volunteers and spouses of partners, while the garage policy does not mention these individuals.
And of particular interest is the fact that the garage policy, unlike the CGL form, does not discuss the status of legal representatives of the deceased named insured, or newly acquired or formed organizations. Presumably, those in the garage business have need of legal representatives and sometimes acquire or form new businesses, but the garage policy does not recognize this.
Both the garage policy and the CGL form have conditions included as part of the insurance contracts, but the garage policy conditions seem stricter than those on the CGL form. For example, while both policies list the duties of the insured in the event of an accident, claim or lawsuit, only the garage policy emphatically declares that there is no duty to provide coverage unless there has been full compliance with the duties. The CGL form may imply this reaction, but the form does not expressly inform the insured.
Another example is the misrepresentation condition. The garage policy states that the coverage form is void in any case of fraud or misrepresentation of material fact by the named insured at any time. The CGL form calls on the insured to agree that his statements are accurate and complete, and states that the policy has been issued in reliance on the named insureds representations. However, there is no specific provision making the contract void due to the insureds lack of candor.
Under the conditions sections of the policies, the CGL form distinguishes itself from the garage policy with a discussion of the nonrenewal of the coverage. The garage policy does not address the subject.
The definitions on the CGL form and the garage policy represent another area that points out the different natures of the two insurance policies.
The garage form defines an auto as "a land motor vehicle, trailer or semitrailer. The CGL form has the same definition, but adds the sentence that an auto "does not include mobile equipment." This addition, plus the defining of mobile equipment on the CGL form, shows that liability from the ownership and use of mobile equipment is meant to be covered under the CGL form and not the garage form.
So, if a garage business has a forklift, a riding lawn mower or a removable snowplow, and a liability claim arises due to the use of these items, the insured may have a problem upon presenting the claim to the garage insurer.
As a way to distinguish the coverage character of the garage policy, the definition of an insured contract on the garage policy includes that part of any contract pertaining to the rental or lease of an auto. The CGL form, due to its auto exclusion, does not have this clause.
But another part of the insured contract definition is more telling on this point. The garage policy says that an insured contract includes that part of any contract pertaining to the named insureds garage business. The CGL form does not so limit the definition. The CGL form makes reference to the named insureds business, whatever that business may be.
The definition of product also shows the different coverage designs of the garage policy and the CGL form. On the garage policy, products include goods or products made or sold by the named insured in a garage business. The CGL form defines a product as any goods or products manufactured, sold, handled, distributed or disposed of by the named insured.
Clearly, the scope of the CGL forms definition is broader than the garage policys definition, and takes into account the fact that a CGL form can be used for multiple classifications of business.
Clearly, an insured in the garage business should be informed of all these differences to help him choose the proper coverage for his business liability exposures.
David D. Thamann is managing editor
of the FC&S Bulletins, published by the National Underwriter Company in Erlanger, Ky. The FC&S editors welcome comment and questions and may be reached by fax at 859-692-2293 or via e-mail at FCS@NUCO.COM
Reproduced from National Underwriter Edition, February 10, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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