My Employee Totaled a Customer’s Car — What Now?

When you run an auto shop, there are a million things you plan for. But one thing that always hits harder than expected? When your own employee totals a customer’s vehicle on a test drive.

A recent post from a California shop owner highlighted exactly that nightmare: an employee took a fully customized car out for a test run and wrapped it around a pole. The car wasn’t just damaged—it was totaled. And while the shop had Garagekeepers coverage with a $100,000 limit, panic still set in. Sound familiar?

Here’s our take, from the standpoint of a commercial insurance agency in California that sees this more often than you’d think.

First: Yes, You’re (Probably) Covered

If you truly have Garagekeepers coverage with comprehensive and collision, and the customer’s car was in your “care, custody, and control” at the time of the loss, you’re likely fine from a liability standpoint.

This type of policy is built for exactly this scenario—accidents that happen while the vehicle is under your shop’s control.

But here’s the reality check:

Coverage doesn’t mean convenience. Claims like this are messy, emotional, and time-consuming—especially when you're dealing with a heavily customized car.

The Custom Work Dilemma

The shop owner in the post estimated over $40,000 in aftermarket accessories on a car with a $20,000 blue book value. That's where things get tricky.

A commercial adjuster chimed in with a brutal truth:

“The custom work... is not going to add value to the vehicle, and depending on the car, would probably make it worth less than a stock version.”

From an insurance standpoint, unless every modification is well-documented with invoices, appraisals, and proof it was disclosed to the insurer, there’s no guarantee those extras will be covered at full value.

Lesson here:

If you routinely service high-end or modified vehicles, talk to your agent about Garagekeepers coverage that includes customization clauses or higher limits. Most base policies will not reflect the true market value of a highly modified vehicle.

You Also Might Owe the City

Another Reddit comment pointed out something too many overlook:

“You'll also be responsible for damage to the pole. City/state/utility company property ain't cheap.”

That’s a separate liability, usually handled under Garage Liability or General Liability, not Garagekeepers. If your employee damaged public property, you're potentially on the hook for tens of thousands depending on what was hit (a sign, a power pole, etc.).

Be Ready for the Customer Fallout

Even if insurance cuts a check, that doesn’t mean your customer is happy. They're emotionally and financially attached to the vehicle—and now it’s gone.

“Be prepared to deal with their ire,” warned one commenter.

You didn’t just lose a vehicle—you probably lost a customer. And the bigger risk? A reputational hit. This is where having crisis communication steps and goodwill gestures in place matters just as much as insurance coverage.

Know Who Gets the Check

Here’s a question the shop owner asked:

“Do I get the check to give to the customer, or does the insurance company pay them directly?”

Answer: Typically, the insurance company pays the vehicle owner directly. You’ll likely get invoiced for your deductible afterward.

What Happens to the Totaled Car?

If your shop is still holding the totaled vehicle, your insurer may ask you to dispose of it—or sell it for salvage. Until then, it’s your responsibility. Your agent should help coordinate this process, but don’t let it sit. The longer it’s there, the more it’s in your way and the more legal liability you may carry.

Why This All Comes Back to Your Agent

“You're stressed out because you don’t fully understand your coverage.”

That Reddit comment says it all.

This shop owner didn’t have time to review their policy until it was already too late. That’s why we tell every business owner the same thing:

• Schedule annual coverage reviews with your agent
• Get second opinions from other agents to uncover gaps
• Know your policy limits, exclusions, and deductibles
• Ask about worst-case scenarios—like this one

Related News: Car Repair Costs Are Surging

According to a recent report by CCC Intelligent Solutions, average repair costs in California rose more than 9% last year, and custom or electric vehicles often exceed insurance limits due to parts shortages and labor costs.

If you're working on specialty vehicles, your standard coverage may no longer be enough. Talk to your agent about increasing your Garagekeepers limit, adding Garage Liability, or exploring Umbrella coverage if you do high-risk work.

No Fluff... Just Facts

• Yes, insurance helps, but it won’t stop the stress if you don’t understand what’s covered.
• Customized cars bring valuation headaches. Document everything or risk a loss.
• Liability doesn’t stop at the car. Public property damage is a whole other beast.
• Policy limits matter. $100K may not cut it in 2025.
• You need an agent who breaks it down clearly—before it’s too late.

Need help reviewing your Garagekeepers or Garage Liability policy in California?

We’re Farmers Insurance-Young Douglas, and we specialize in coverage for auto shops just like yours.

Let’s make sure you’re actually covered before it costs you.