Direct Primary or Legal Liability Garagekeepers Coverage: Which is Right for Me?


Should I purchase Direct Primary coverage or excess coverage when buying Garagekeepers Liability insurance?


That’s a great question and often one that is frequently misunderstood. The simple answer is, it depends, but let’s look at the how and why for each option.

A Garage Keeper’s Legal Liability policy is intended to cover damage to an auto held in their care, custody, or control while it is on consignment for sale or you are servicing, repairing, parking, or installing equipment into the vehicle. Direct Primary Coverage provides coverage even if the loss is not the insured’s fault and is not legally liable. On the surface this seems relatively easy to understand.

Suppose I have a customer’s locked vehicle in my fenced and locked yard. There is adequate lighting in the yard and the vehicle alarm is armed. The electronics are ripped from the vehicle and there is $25,000 in lost equipment and damage.  Although I am clearly not negligent – and not legally liable – the claim is submitted to my insurance carrier.

With Direct Primary Coverage my customer – the owner of the vehicle – gets paid no matter whose fault it was. I have a happy customer again and my insurance paid for everything. That’s why I bought insurance, right? What could be better than this?

Well that’s great until renewal time, when we can assume that the insurance company will raise the Garage Liability premium by a substantial amount because of the claim. That $25,000 claim typically will continue to impact your premiums for three years. So were you really better off?

If you had purchased Legal Liability Coverage, the owner of the vehicle would have had to submit the claim to his own insurance company. Your insurance company would not pay anything on the claim – after all, it wasn’t your fault, you were not legally responsible for the damage – thereby saving you thousands in renewal premium increases.

Which is better? Like I said, it depends. If you service high-end autos or have repeat customers that represent a significant part of your business, than Direct Primary Coverage may be the best choice. But if you do business with thousands of different people and have no significant relationship with them, then Legal Liability Coverage may better suit you.

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Published in: on June 14, 2010 at 6:45 pm  Comments (2)  

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2 CommentsLeave a comment

  1. In a case where limits for this type of coverage are excedded, what is the best way to handle payment of the claim. For example, several high-end autos are destroyed and limits are $50k. What should the carrier’s role be in tendering these limits and apportioning the limited proceeds among the several claims?

    • The Carrier can adjust all the damage and then can either apportion the loss amongst the claims equally or pay selected claims until the limit is exhausted. Either way the difference will likely result in suit against the company and at that point the carriers responsibility will have ended as the limit on the policy has been paid. The company will then be responsible for legal defense. adjusting expenses and payment of claims. To avoid this, always review your limits carefully and buy enough coverage. Visit for more information.

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