How to Protect Your Auto Repair Business from Legal Issues

Every small business owner is fearful of running into legal trouble. If you own and operate your own automotive repair business, you know that getting sued (even if you are not at fault) can be extremely expensive.

However, every auto repair business runs the risk of getting into legal trouble. Many car owners have been burned before by a shady mechanic – or they know someone else who has.

If they sense that they have been overcharged or that your repair work is not up to par, they may pursue legal action. Some consumers will simply take any opportunity they can to make some money by suing for damages or other unwarranted claims.

Eliminating risk is important if you intend to run a profitable repair business – so you should be doing all that you can
to protect yourself from getting into legal trouble that could run your resources dry.

Here are a few key points to remember.

Check to See if the Car Is Still Under Warranty

First and foremost, you should always check to see if the vehicle you’ll be working on is still covered under the manufacturer or dealership warranty. If this is the case, the manufacturer or dealership is obligated to repair the customer’s car for free.

Additionally, there is a chance you might be asked to repair a persisting issue that stemmed from shoddy manufacturing. In this case, the customer may be eligible for benefits under the state’s lemon law. Unless your repair shop is certified by the manufacturer, any work you do on the car may void the warranty. This means the customer will have a much harder time filing a lemon claim with the manufacturer. And they might try to hold you accountable for not notifying them the vehicle was under warranty.

For this reason, it doesn’t hurt to have a basic understanding of lemon law. A common misconception is that lemon law only applies to new vehicles. There are a handful of states in which used vehicles can receive benefits.

For instance, in California, most used vehicles bought from a dealership come with a dealer warranty – which is typically good for three months. If a customer brings in a used vehicle that’s still covered, tell them to look into the state’s lemon law procedures or seek out a California lemon law lawyer.

You can never be too careful about protecting your auto shop. While it might be tempting to take the revenue and fix a car that’s under warranty, the smart move is to notify the client and instruct them to take proper action.

Know Your Rights as a Mechanic

Just because you receive a notice from a disgruntled customer that they will be filing a legal claim does not necessarily mean you should worry. If you know that you were within your legal rights as an auto repair business, the claim will never make it to court.

There are plenty of laws in place to protect consumers – but there are also some that protect repair business owners, too. It is recommended that you brush up on these laws so you can operate your business accordingly and avoid any questionable practices that could be grounds of legal trouble.

For instance, if a customer refuses to pay for your services, you have the right to obtain a mechanic’s lien against them and keep the vehicle at your shop until you receive payment. If the customer ignores the public notice, you can file for the title of the vehicle and do what you want with it – including selling it for a profit!

Invest in Insurance

Legal issues don’t just come from upset customers – they can also arise from internal issues or accidents. Mechanics are at a high risk of getting injured on the job. They have every right to sue their employer if the company is at fault for the accident.

In addition to ensuring that your repair shop is up to code and follows the proper procedures, you may also want to consider purchasing insurance. Many business owners will invest in liability insurance to protect themselves from being sued by an employee.

There are multiple types of liability policies available.

General liability generally covers employee injury lawsuits, but there are other policies available specifically for auto repair owners, such as:

  • Garage Keepers Liability: this protects you if a vehicle is stored on your property is stolen or vandalized.
  • Auto Repair Shop Crime Insurance: this protects the business owner if any crime occurs on the premises without your knowledge. For example, if an employee embezzles money or steals a customer’s vehicle, you as the business owner are not legally responsible for this crime.
  • Auto Repair Shop Workers’ Compensation: this insurance will provide medical care and income protection if an employee is injured on the job.

Keep Thorough Documentation

It is very important that you have documentation so you can prove you are within your legal rights - no matter what the situation. Be sure your staff is trained to properly document all price estimates given to customers – and the breakdown of each repair in terms of cost.

If you include hourly labor fees, you should also have a reliable system to keep track of hours. A sign-in sheet is probably not going to cut it. You may also want to invest in installing security cameras throughout your shop. This ensures you have an accurate timestamp for all events.


Going to court is not just a hassle. It can ruin your business and drain you of your financial resources, even if you win the case! Be sure you have a plan in place to protect yourself from these common legal issues so you can avoid these situations altogether.

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