Insurance Considerations for Auto Body Repair Shops
Auto body repair shops offer a range of services for vehicle maintenance and repair, specializing in collision repair and
automobile restoration. Common tasks include structural repair, bodywork, painting, upholstery work, realignment, custom
fabrication, welding, and rust and corrosion repair. Auto body repair shops may also provide performance upgrades and
comprehensive wheel and tire services. Work on vehicle interiors may also be completed in some shops, and other locations
may offer custom paint work and service for classic and antique cars.
Auto body repair shops are typically privately owned, although many are independent franchises or affiliates of regional or
national chains. Most locations are single-story buildings with a reception area, offices, restrooms, storerooms, an employee
lounge and a parts receiving area. The essential area of the operation, where vehicle repairs take place, is called the shop area.
It generally includes one or more hydraulic lifts, frame-straightening machines, paint booths and drying chambers.
Auto body repair shop owners have many risks to consider, including property concerns, employee safety issues, business
interruptions and liability exposures. As such, it’s crucial that they secure proper insurance to cover themselves, their
operations and their employees and customers. Keep reading for an outline of common exposures in the auto body repair shop
industry and associated coverage considerations.
Common Exposures
Here’s a breakdown of key exposures auto body repair shops may face in their operations:
Property
Auto body repair shops encounter multiple property risks. Technicians utilize welding equipment and work with and store flammable materials (e.g., paints and solvents) that pose significant fire hazards. Additionally, these operations may be attractive targets for theft and vandalism because they typically have high-value tools and equipment on-site as well as customer vehicles. Furthermore, auto body repair shops may be vulnerable to natural disasters, including floods, wildfires and earthquakes. These risks could lead to major losses and leave these businesses with significant recovery expenses.
Liability
If third parties (e.g., customers, suppliers or passersby) experience injuries or property damage on an auto body repair shop’s premises or as a result of their operations, these businesses could be held liable. For example, a customer may sue an auto body repair shop if they slip and fall on a wet floor in the reception area. Additionally, auto body repair shop owners could face completed operations losses if customers allege any finished projects injured them or were otherwise faulty. Furthermore, if a customer’s vehicle sustains damage while in the shop’s care, custody or control, the businesses may be responsible for fixing it.
Equipment breakdown
Auto body repair shops rely on a wide range of equipment in their operations. If critical equipment (e.g., air conditioners, electrical panels) fails due to unpredictable and sudden events (e.g., power surges, short circuits), these businesses may face significant repair or replacement costs. They may also lose business income due to the equipment being inoperative.
Occupational safety
Job-related injuries and illnesses can happen, even if precautions are in place to protect employees. Common occupational ailments from auto body repair shop employment include musculoskeletal disorders from working in awkward positions; burns and shocks from malfunctioning equipment; cuts and abrasions associated with using tools; slips and falls; skin damage, burns, respiratory issues and other illnesses from handling hazardous chemicals and materials (e.g., flammable or combustible materials; paint products, thinners, adhesives, lead and asbestos); impact injuries; and electric shock or electrocution from working with electrical equipment. If their employees get injured or become ill due to their job, auto body repair shop owners could be held responsible for the costs of their workers’ medical bills, treatment expenses and lost wages.
Environmental
Auto body shops often work with paints and other chemicals with hazardous components that damage the environment and water supply if they are improperly used, stored or disposed of. Additionally, machinery utilized in shop operations (e.g., hydraulic lifts) contains toxic fluids that could leak. Air quality issues may also arise due to improper workplace ventilation. Auto body repair shops may be liable for injuries and property damage caused by these pollutants and for costs necessary to clean up following an environmental contamination incident.
Business interruptions
Auto body repair shops may face business interruptions for many reasons. Supply chain issues may make procuring necessary equipment difficult, equipment can break down, natural disasters can destroy property and cyberattacks may disable networks. These instances can lead to significantly reduced revenue, and business closures may lead to reputational damage and a loss of client trust.
Coverage Considerations
To help address their exposures and potential losses, auto body repair shop owners should consider the following types of coverage:
Commercial property Insurance can help cover the resulting repair or replacement costs if an auto body repair shop’s property (e.g., building, office area, storage space, tools and equipment) is damaged or destroyed by a covered event or if it is stolen.
Crime Insurance can provide coverage for business-related crimes (e.g., fraud, forgery or embezzlement) committed by employees or third parties.
General liability Insurance can cover costs if an auto body repair shop is held liable for injuries, harm or damage to a third party or their property. Completed operations coverage can be included in a general liability insurance policy to provide coverage if the faulty completion of a project results in third-party injuries or property damage.
Garagekeepers liability Insurance offers financial protection for customers’ vehicles if they are damaged by a covered event while in the auto body repair shop.
Environmental liability Insurance can help pay for injuries, property damage and cleanup costs if an auto body repair shop is responsible for the release or escape of environmental pollutants.
Workers’ Compensation can help pay for hospital bills, medical costs and lost wages if an employee suffers a workrelated injury or illness.
Equipment breakdown Insurance can provide financial assistance to repair or replace equipment that breaks down (e.g., air conditioners, electrical systems or boilers) due to a covered peril (e.g., power surge, short circuit or motor burnout).
Employment Practices Liability Insurance can assist with the costs associated with employee lawsuits alleging workplace discrimination or harassment, wrongful termination or discipline, or failure to employ or promote.
Business Interruption Insurance can be useful if a covered event (e.g., fire) forces an auto body repair shop to close temporarily. In these cases, this insurance can help pay for ongoing expenses (e.g., mortgage/rent, wages and utilities).
Commercial Auto Coverage may provide financial protection in the event that auto repair shop-owned vehicles are damaged or stolen or in an accident.
Inland Marine Insurance offers coverage for an auto body repair shop’s moveable property as it is transported or stored off-site. Employee tool coverage for technicians’ tools stored on-site and valuable papers and records coverage for important documents may also be beneficial inland marine coverages.
Umbrella Coverage can be essential if a claim exceeds the limits of an auto body repair shop’s primary liability policies (e.g., commercial auto and general liability insurance). This coverage can increase those limits and broaden existing policy coverage.
In conclusion, having the right insurance coverage is essential for the long-term success and security of auto body repair shops. It not only protects your business from unforeseen risks but also ensures that you're equipped to handle potential liabilities, property damage, and legal challenges. By carefully evaluating your coverage needs, working with a trusted insurance provider, and staying informed about industry-specific requirements, you can safeguard your shop's operations, employees, and reputation. Taking these proactive steps will give you peace of mind, allowing you to focus on providing quality service to your customers while securing the future of your business.
If you're looking for personalized insurance solutions for your auto body repair shop, consider reaching out to Carlson Insurance Group today. Our team of experts can help you find the coverage that best fits your unique needs. Contact us for a consultation and protect your business with confidence.
