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Editor’s note: Some of the most commonplace collision repair interactions with other businesses pose liability considerations a collision repairer might not have even considered. Find out some possible pitfalls and solutions in this guest column by Gerald O. Cecil, vice president of sales and marketing for garagekeeper’s carrier Arrowhead General Insurance Agency.
This analysis is presented here for educational purposes and not meant to provide formal legal or insurance advice. Auto body shop and other business owners should consult with qualified attorneys and their insurer on the best way to manage risks to their company.
By Gerald O. Cecil
As Roseanne Rosannadanna would say, “It’s always something.”
Managing risk and exposure at a collision repair operation involves many of the same challenges that exist for any business. However, given the unique nature of the personal-lines insurance relationships, the contract negotiation if a shop is a direct repair program affiliate, and the daily interaction with representatives of those insurers or other service providers, unusual situations may arise.
In this column, I have noted several areas of risk management and exposure control. Some, we at Arrowhead have addressed in the past with articles and/or guidance from Loss Prevention bulletins. Here, find some potential liability considerations related to business invitees, parts, subcontractors and “loaner” or rental cars.
Invitees on premises
Estimators or appraisers are invitees — but at a different level than customers. The appraiser or estimator is more like a contractor — a business invitee — that would come on site to perform work, which in fact is what they are doing. Whether an independent, subcontracted appraiser or insurance company employee, the collision shop owner should require certain evidence of coverage prior to allowing access.
We have seen claim activity in the area of business invitees where an injured employee of the contractor will allege that a problem on the premises causes an injury and is compensated twice—both under Workers Compensation and again under the shop owner’s General/Garage Liability Policy, and it is aggravating. However it is controllable. Many business owners forget to manage this exposure or do not have a process in the first place. They assume that whomever comes on to the premises as a business service provider or contractor is properly covered. That is not always true.
A service technician on premise to take care of the HVAC or material-disposal contractor picking up materials for disposal, prior to coming on-site, all need to provide a certificate of insurance, or COI, that notes their coverage and your status as additional insured. They also should have contractual liability coverage holding you harmless for any injury or damage they suffer on premise. The same documentation would be needed for those estimators or appraisers that come on premise to perform work — independents or personal-lines company claims folks.
Typically, all companies that engage business invitees have processes for such visitors, and the request is made once a year per contractor. The certificate is then held in file and updated annually. Generally, for those in commercial enterprises that routinely enter another businesses’ premises to perform work, no access is provided to the contractor until that certificate is provided with the proper coverage, additional insured status, hold harmless, etc.
And while that may seem over the top or too involved, unfortunately opportunities arise for an injured worker to essentially double-dip for injuries suffered alleging improper premises safety or controls—recovering from both the worker’s compensation carrier of his employer—and from the business owner, under the liability policy for injuries alleged to have been caused by unsafe conditions at the portion or part of the premises where they performed the work for the shop owner.
Liability from part failures
Regardless of whether parts sourced for repairs are new, remanufactured, used, aftermarket, etc., there are concerns about being left with a product liability claim due to failure of a part to properly perform. Given that the product is typically integrated into the work performed, it is difficult to discern if the resulting property damage or bodily injury was the part or the work performed to install. So to relieve that tension or possible tension and conflict that can occur should a claim arise, there is a process to engage upfront.
At the minimum, obtain a certificate of insurance that notes product liability coverage from the parts supplier, and ideally lists the shop owner as an additional named insured under the supplier liability policy. And, to cinch it up tight, be named an additional insured vendor, so that when a claim occurs alleging product failure, it can then be given right back through to the supplier.
Thus the shop owner or their insurance carrier is not involved at all. The claim is a pass through to the supplier with no need to defend. This is typically seen between manufacturer and distributor — but it’s worth asking for from your parts suppliers.
A collision repairer has exposure for mechanical, diagnostic or other work it sublets out. Be certain same rules as noted above apply to these relationships. Obtain a certificate of insurance from the subcontractor along with additional insured status, hold harmless, etc., before work is performed by the other party.
Even if coverage is provided in the commercial policy the collision shop has in place for subcontracted work, what better way to qualify the organization performing work on your behalf than to be assured they are properly insured or covered?
Too often, collision repairers make assumptions in this area that the personal auto insurance carriers that are paying for the temporary transportation you or a rental car agency provide to your mutual customer are providing the liability and physical damage coverage for those vehicles. That is an assumption you should not make.
It is very important to address the exposures involved in those transactions so that you are again kept away from claim activity involving liability or physical damage caused by the customer who is operating a vehicle you have provided from your own loaner stock or facilitated via a car rental company.
Your process should include a customer loaner or rental agreement — with primary coverage provided by the insurer of the customer whose vehicle is in your shop for repair.
That process should include the normal requirements, such as proof of insurance, driver license, and signed agreement noting who is responsible in the event of injury or damage. Likewise, your agreement with the car rental agency should keep your business out of the exposures that the customer has for operation of that vehicle that you have provided via arrangement with the car rental company.
You should not be providing coverage on a primary basis for liability or physical damage for the customer renting the car. If you agree to provide any coverage, it should be in excess of that provided by your customer’s insurer — as the vehicle you are renting or loaning to the customer is a temporary substitute vehicle typically covered under your customer’s personal auto policy. That’s unless you unknowingly or naively sign off on an agreement with the carrier or rental car company to become primary as you think you need to do so to keep the contract with them in place, but which you should rarely if ever do.
Gerald O. Cecil is vice president of sales and marketing for garagekeeper’s specialist Arrowhead General Insurance Agency, a corporate member of the Society of Collision Repair Specialists and a Collision Industry Conference Gold Pin sponsor. For additional information and guidance on a collision repair business’ insurance exposures, email him at firstname.lastname@example.org.
Gerald Cecil (Provided by Arrowhead)
Business invitees in one’s body shop can create liability issues. (BartCo/iStock)