What Happens If a Customer's Car Is Damaged in Your Workshop?

When you accept a customer's vehicle for service or repair, the law treats you as a bailee - someone who has taken temporary possession of property belonging to another person with an obligation to take reasonable care of it. That duty of care does not require you to guarantee the vehicle against all harm, but it does require you to take reasonable steps to protect it while it is in your hands.

If a customer's vehicle is damaged while in your possession and the damage results from something within your control or arising from your business activities, you are likely to have a legal liability to the owner. The question then shifts from whether you are responsible to how the cost of that liability is met.

Garage keeper's liability insurance is the cover designed specifically for this situation. It responds to your legal liability for damage, loss or theft of customer vehicles while they are in your care, custody or control. It is not the same as public liability, and a workshop holding only public liability will find it does not extend to this scenario.

Understanding the range of events that can cause damage to a customer vehicle on your premises is useful because it shows how many different paths lead to the same kind of claim.

When a customer vehicle is damaged in your workshop, your actions in the immediate aftermath can affect how smoothly the claim is handled. The practical steps are consistent across most situations.

Do not move or dispose of anything involved in the incident until you have documented it thoroughly. Take photographs of the damage, the vehicle's position, and the surrounding area. Note the time, the circumstances, and who was present. Preserve any physical evidence related to how the damage occurred, such as a hoist arm or a hydraulic component that may have failed.

Notify your insurer or broker as soon as reasonably possible after the event. Most policies require prompt notification, and delaying can create complications in the claims process. Being open with the customer about what happened and that you are managing it through your insurer is generally a better approach than attempting to manage the situation informally.

The time to think about the limit on your garage keeper's policy is before a claim, not during one. The limit represents the maximum the policy will pay for a single event, and in a scenario where multiple vehicles are damaged simultaneously, such as a fire sweeping through the workshop, the total claim can be significant.

A common starting point is to think about the maximum number of vehicles you might hold at any one time and the realistic value range of those vehicles. A workshop that holds eight to ten vehicles overnight, including some late-model European vehicles or utilities, needs a limit that reflects the worst realistic scenario rather than an assumed average.

We can help you think through the right limit for your operation based on how you actually work and the types of vehicles you regularly hold. Contact us to review your garage keeper's cover before a claim makes it urgent.

A workshop that does not hold garage keeper's liability cover when a customer vehicle is damaged on the premises faces the claim directly. If the customer pursues their loss through the courts or AFCA, the workshop owner is personally exposed to the cost of the repair or replacement, as well as the legal costs of defending the matter.

For a sole trader, that exposure can be significant. For an incorporated business, the personal liability protection of the corporate structure does not necessarily shield the director from obligations to a customer whose property was in the business's care. Getting cover in place before a claim is far less costly than managing one without it.