Who Pays When a Body Shop Employee Damages Another Vehicle?

• By: AnneMarie McPherson
• September 11, 2026

A body shop experienced a claim in which an employee backed a customer’s vehicle out of their garage and into another third-party auto, causing damage. The garage liability carrier is declining to pay for the third-party damage, saying the garage liability policy is excess for any non-owned vehicles. The Amendment of Other Insurance Provision says:

4. This insurance shall be, with respect to any auto to which this insurance applies:

a. Primary insurance for any auto owned by you;

b. Excess insurance over any other collectible insurance for any auto you did not own.

The carrier wants the customer’s personal auto policy to pay for the third-party damage because it would be the primary insurance.

The agency believes that, as it happened at the garage and was caused by an employee clearly doing garage operations and is the negligent party, the garage liability policy should pay. The agency also attempted to file the claim under the garage’s Symbol 1 auto policy, since it has the Employees as Insureds endorsement. Again, the carrier said this coverage would pay as excess with the customer’s PAP as primary.

Q: Should the body shop’s garage liability policy cover damage to a third-party auto?

Response 1: The damage to the third-party auto was clearly caused by the garage employee, who is an insured under the garage liability policy. With its Coverage A–Bodily Injury and Property Damage Insuring Agreement, the carrier promised to pay: “Those sums that you become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.” It sure sounds like the garage is legally responsible for the damages here.

The Other Insurance provision states: “If other valid and collectable insurance is available to the insured for a loss we cover under Coverage A or B of this policy, our obligations are limited as follows …”

What follows is language about primary insurance, excess insurance and the Amendment of Other Insurance Provision for non-owned vehicles that applies if—and only if—“collectible insurance” insurance is available to the insured.

What collectible insurance is available to the garage business and its employee under the PAP of the third-party vehicle’s owner? None. While the personal auto policy will include as an insured anyone using a covered vehicle, it will invariably specifically exclude anyone employed or otherwise engaged in the business of selling, repairing, servicing, storing or parking vehicles designed for use on public highways. That PAP exclusion clearly applies to this situation.

Since there is no other valid and collectible insurance available to the garage or its employee, the Other Insurance provision—and its amendment—has no bearing on this claim. The carrier should pay for the damage to the third-party auto.

Response 2: Typically, damage to a customer’s vehicle while in the care, custody or control of the body shop is covered under garagekeepers insurance, not garage liability or auto liability. I hope that garagekeepers is provided on a direct primary basis. Garagekeepers coverage also changes Section VII—General Conditions:

D. Under SECTION VII – GENERAL CONDITIONS, the following condition is added with respect to this coverage only:

REPLACEMENT AND REPAIRS AT ACTUAL COST

In the event of direct physical loss of or direct physical damage to an auto, farm implement, mobile equipment or watercraft to which GARAGEKEEPERS COVERAGE applies, you must, if we request:

1. Replace the covered property; or
2. Furnish the labor and materials necessary for repairs to such covered property.

We shall then pay you the actual cost for the replaced property or furnished labor and materials. All other policy terms and conditions apply.

That should take care of your problem.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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