Buying a car usually entails walking around a car dealership, spotting a car you potentially want to buy, and then test driving the car to see if satisfies what you are looking for in a vehicle. However, one aspect that you may not take into consideration, is what happens if you get into a car accident while driving the car dealership’s vehicle? Who is is liable? Who ultimately has to pay? This all depends on the insurance contract the car dealership has, and whether or not you, as the test driver of the vehicle that has been damaged, is insured. Oftentimes, there is a limiting provision commonly found in insurance contracts called a “garage policy”, it excludes customers of an automobile dealership unless the customer does not have liability insurance of his/her owner is statutorily uninsured. But what exactly does this mean?
A garage policy is a provision designed to limit coverage under certain circumstances. For instance, the recent case of Chretien v. Thomas, the Louisiana Second Circuit Court of Appeal explored garage policies in depth due to the existence of one in a service station’s insurance policy. The course of events in the Chretien case involved the defendant, Thomas, bringing in a vehicle for repair. He was provided with a vehicle to drive while his vehicle was being serviced. Significantly, the car being serviced was his girlfriends and was listed as a covered vehicle under a policy issued by Allstate Insurance Company. The service station lent the vehicle to Thomas in hopes his employer would purchase the vehicle. The service station was insured by Stonington Insurance Company, which had the infamous garage coverage provision included in the insurance agreement. The garage policy excluded coverage for customers of the service station IF the customer had other insurance available. Shortly after being provided the “loaner” vehicle, Thomas was involved in an accident with the Plaintiff, who sued Thomas, the service station, as well as both insurance companies, Stonington and Allstate. The dilemma the court faced was determining who is ultimately responsible for coverage, and for how much. Under the garage policy, one would assume that Thomas would be responsible, since the vehicle he brought in for service was covered by insurance, thus, preventing him from relying on the service station’s coverage. However, the issue is not so easily resolved.
Both insured parties have a burden to meet, and a burden to prove in order to avoid liability. When determining whether or not a policy affords coverage for an incident, it is the burden of the insured to prove the incident falls within the policy’s terms. On the other hand, the insurer bears the burden of proving the applicability of an exclusionary clause within a policy, such as the “garage policy” provision found in Stonington’s agreement with the service station. To begin with, an insurance policy is a contract, as such, the party’s intent is reflected by the words of the policy, this determines the extent of the policy’s coverage. When looking at the policy’s language, one cannot read too much into the words, phrases and words are to be construed using their plain, ordinary, and generally prevailing meaning. Thus, interpretation or paraphrasing is not encouraged when exploring insurance policies, to put it simply, just look to the four corners of the document, and to nothing else, in order to understand what the policy means.
Additionally, a purpose of a policy is to afford coverage. Thus, when analyzing insurance policies, they should be construed to effect and not to deny coverage. With the existence of the garage policy, the purpose of such provision is to narrow the insurer’s obligation, and unless this would be considered against public policy, such restrictions are allowed. The limiting provision in the commercial garage policy excludes customers of a car dealership (or service station as is the instant case) in its definition of an insured, unless the customer does not have liability insurance of his/her own or is statutorily underinsured. Putting this into perspective, if the insurance coverage did afford protection to every individual who test drove or were provided a “lender vehicle,” any accident that may occur would force the insurance company to be responsible, regardless of whether or not the test driver/borrower had their own coverage or not. This presumably, would be against public policy, affording test drivers an “upper hand” in avoiding responsibility through their own insurance companies and instead, relying on the dealership’s insurance company. Thus, one can see the logic in the garage policy provision included in many dealership and service station’s policy agreements.
However, the caveat in the Chretien case was the fact the designation of “customer” applied to Thomas and not the owner of the vehicle brought in for service. Thomas brought in his girlfriend’s vehicle, was listed on the billing for services, and paid for such services performed on the vehicle. As such, only individuals defined as “customers” may rely on the dealerships insurance coverage if they are in an accident in the “lender” vehicle. Thus, even though the vehicle brought in for service was insured under and through his girlfriend, Thomas himself was not insured or named on the insurance of the vehicle brought in for service. Thus, as a customer, who is not insured, he did not fall into the prevention of protection designed by the garage policy. Therefore, the court held that he was covered by the service station’s insurance, as he was a customer and he did not have insurance coverage.
Therefore, when you walk onto a car lot, searching for that “perfect car” to buy, be careful if you are allowed to test drive it. If you have insurance, any accident that may occur may be your insurance company’s responsibility and not the car dealership or service stations. Garage policies are designed to prevent car dealerships and service stations from incurring huge liability from customers; however, they may not escape liability if their customer is uninsured. This is an interesting note to take into consideration the next time you are behind the wheel of a lender vehicle or are test driving a potential new car.