Is Your Mechanic Insured?

Service and repair shops are not perfect. Sometimes they make mistakes or have lapses in judgment that can damage a customer’s vehicle.

Consider this situation. A very nice, low-mileage red/tan Ferrari 512 TR was purchased for around $100,000. The new owner had an independent Ferrari shop perform a major service on it (timing belts, etc.) before he had it shipped to his home. On his first drive with the car, he heard terrible noises coming from the engine compartment, like someone putting a coffee can full of bolts onto a paint mixing machine. He found out that one of the cams was not turning, which allowed the pistons and valves to slam into one another. The repair estimate from his local Ferrari dealer was around $30,000.

The TR owner did not want to ship his vehicle back out of state to the mechanic who butchered it the first time, so he commissioned the dealer to do the work. He then asked the independent shop, whose mechanic’s error destroyed the engine, to pay for it. The independent shop refused, made it clear that they did not have any insurance coverage for such damages, then declared bankruptcy rather than pay for the repairs. The TR owner got stuck with the $30,000 bill.

Before you entrust a vehicle to a mechanic, be sure he or she has a “garage liability” policy in place that will indemnify you should your vehicle be damaged due to the mechanic’s negligence. If the mechanic has this type of an insurance policy, he will not be driven into bankruptcy if an error is made on the car, and you will not be left to bear the repair costs out of your own pocket. If the mechanic does not have such a policy in force (and it is surprising how many don’t), either seek another shop, or at least make sure that the shop in question is not likely to run from the debt that could be created from the worst-case scenario.

For example, it is unlikely that a high-end Ferrari repair facility that has been in business for decades, even if uninsured, would close up to avoid paying the $30,000 TR repair bill. A one-man independent shop might not survive that kind of expense.

Make sure that your shop has the proper insurance in place, or the resources to pay the bills, should an accident happen. Then, at the most, the damage repair will be inconvenient, rather than destructive to your pocketbook.

Alexander Leventhal is a car collector and attorney in New York, whose columns appear frequently in Sports Car Market magazine. His comments here are not a substitute for consultation with an attorney.