Three basic questions we never think to ask:
- Who is responsible for damage, or theft, while my car is being restored?
- What sort of insurance does this restoration shop have to protect me against financial loss?
- What type of insurance should I have on my car while it’s in the shop being restored?
Restoration shops buy insurance to protect themselves. They do not buy insurance to protect you. The restoration shop pays for the insurance policy and they are the one that has to be made financially whole. The insurance company that carries the shop’s policy is not going to be your advocate. Who, then, is going to speak for you if your car is destroyed while in the restoration shop?
Adam Boca, of the National Corvette Museum Insurance Agency, suggests that you take a look around the restoration facility and practice your basic addition skills. If one of the ten cars in the shop is a $1.5 million Ferrari then does the shop have enough insurance to cover the other nine vehicles in the case of a fire, earthquake or flood?
Jim Grundy, of Grundy Insurance, goes on to point out that “most garage policies have a limit per vehicle and an overall limit per loss but you can pretty much expect that if you’re in a shop dealing with Ferraris, Porsches and other high dollar restorations, the shop doesn’t carry enough insurance for the value of the vehicles in their shop. Maybe the shop carries $10,000,000 in total coverage but they have $15,000,000 worth of cars in the shop when the fire takes place.”
Most shops will not tell you to check your insurance policy before you ship your car to them. Most restoration shops will not tell you that they are underinsured. Actually they may not even be fully aware of it themselves.
Garage Keepers and Garage Liability
Garage Keepers Liability insurance was created to provide coverage for the property of others while in the care, custody and control of the shop. Since it is normal for people to leave their car with the restoration shop over a long period of time, insurance is needed to protect the car owner from loss while restoration is taking place. Most restoration shops purchase garage keepers liability insurance but some do not. Also, many restoration shops that do purchase this coverage only buy partial coverage.
If a fire, or some other type of disaster, happens while your car is in the restoration shop, and the shop failed to purchase the proper coverage, your personal automobile policy might respond under the physical damage section of your policy. Yes, the restoration shop can be sued for the damage but there is a good chance that if they failed to buy insurance to begin with it is more than likely that they don’t have enough money on hand to replace your car.
Hagerty Commercial Lines Specialist Michael Dorman explains: “During the time of loss, if your vehicle is in the care, custody, or control of another party such as a restoration shop, your claims representative can work with the shop in question to coordinate any possible shared claims responsibility.” That assumes that you kept the insurance on your car while it was being restored.
If you have your collector car insured and there is an incident your first call should be to your own insurance agent to get the claims process started. Let your insurance company work with the shop’s carrier on your behalf. Your insurance company should be your advocate in the case of a loss.
Direct Primary Coverage
Grundy Insurance is the largest insurer of restoration shops and custom car builders. They almost exclusively provide Direct Primary Coverage to the shops they insure. Jim Grundy points out though that in some states this type of coverage is not available. Also, since there is an additional charge for Direct Primary over Garage Keepers Legal Liability, some shops just don’t buy it.
So, what’s the difference between Direct Primary and Garage Keepers Liability? A Direct Primary policy covers vehicles in the care, custody and control of the shop regardless of the cause of loss. Garage Keepers Liability only responds if the garage is negligent.
If the garage burns down because a hot weld starts a fire after everyone has gone home, the shop’s insurance will pay out because in this scenario it’s assumed that the shop is negligent.
If lightning (or a tornado or earthquake) strikes the building and the garage is destroyed, the standard garage policy does not pay because lightning (or other natural disaster) is not the fault of the garage.
A Direct Primary policy would pay in either case – up to the policy limit. Most garages insured by standard carriers do not have Direct Primary coverage simply because insurance companies only offer it upon request and local agents may not understand the difference between the two forms of coverage.
You are well within your rights to ask your restoration shop for a Certificate of Insurance. Do not be embarrassed. Producing a Certificate of Insurance does not cost the restoration shop anything. All it takes, usually, is one call from the restoration shop to the insurance agent. This certificate will provide you with:
- Evidence of insurance
- The limits on the policy (does the shop have enough coverage?)
- Notification rights if the policy is cancelled
Don’t ever assume that your restorer has the appropriate coverage. It’s always best to have your own insurance coverage on your collector car while it’s being restored. At the very least you will then have an advocate for your financial loss.
As your car is being restored, the amount of money you have invested in this car increases. This means the value of car is higher than when you had it shipped to the restoration company. You not only need to keep detailed financial records but you need to periodically review the value of the car with your insurance agent. In the era of the $200,000 restoration, this is just being fiscally responsible.
National Corvette Museum Insurance
350 Corvette Drive
Bowling Green, KY 42101
400 Horsham Rd, Suite 150
Horsham PA 19044
Hagerty Insurance Agency, LLC
P.O. Box 1303
Traverse City, MI 49685-1303