Garage Operations and Completed Operations Claim

Our insured is a business dedicated to the installation of radio, alarms, and similar electronic equipment in autos and boats. While the insured was installing a radio into an auto recently, damage was done to the auto's computer and the digital instrument panel. The damage was done while the insured was working on the vehicle, but the customer did not discover it until he came to the shop, paid the bill, and then tried to start the engine.

The insurer has denied the claim, arguing that the cause of loss was none of the causes of loss described in the garagekeepers section of the insured's garage policy. The insurer also denied coverage under the garage liability section of the policy, claiming that the damage was done while the insured had care, custody, and control of the vehicle.

Does the insured have any coverage for this property damage claim?

Puerto Rico Subscriber

At first, this may seem to be a case where the care, custody, or control exclusion would apply. But, the damage was not discovered by the claimant until after he had taken back his car. If the claimant was in the car, and had his keys in hand and was ready to start the car and drive off, the fact that he was still in the insured's shop did not mean that the insured had care, custody, or control of the car. Property damage occurs when the damage is discovered or manifests itself according to the majority opinion in courts today. This means that the property damage occurred when it was discovered by the claimant, not when the insured was working on the vehicle. So, the care, custody, or control exclusion in the garage liability section of the policy is not applicable to the claim.

The damage caused by the insured is a completed operations incident and there is no exclusion under the garage liability section of the policy to prevent coverage. The “work you performed” exclusion would mean that there is no coverage for the radio if that was also damaged since that is the work the insured was performing, but since the work performed was not on the computer or the instrument panel, the claim for property damage to these items is covered by the garage form.

Also, since the damage was discovered after the insured had relinquished custody of the vehicle, the point that no described cause of loss from the garagekeepers section of the policy was applicable is not relevant to coverage for the property damage.