The Property form will cover: “Property of others that is in your care, custody, or control; but this property is not covered for more than the amount for which you are legally liable, plus the cost of labor, materials, or services furnished by you on personal property of others.”

Determining whether or not the insured has care, custody or control over the property in question depends on the facts. If the insured does not have access to the locker (example: via key), we would agree with the statement from claims that there is no care custody and control over the possessions, so long as the contract between the insured and the tenant that specifically states that the insured is not responsible for any damage to the tenant's goods. No care, custody, or control means no coverage.

If the insured does have a key or another way to access the locker in question, then the property of the tenant would be in the insureds care, custody and control and under the Property form, coverage for the tenant's property would be covered to the amount the insured is legally liable.

The $2,500 limit in the Property form is for loss or damage by theft and applies in 3 categories: (1) furs, (2) jewelry, and (3) patterns, dies, molds, and forms. (Unless the $2,500 is the limit listed in the declarations for Personal Property of Others?)

The property form also states that the insurer will determine the value of Covered Property as actual cash value, and that ”payment for loss of or damage to personal property of others will only be for the account of the owners of the property. We may adjust losses with the owners of lost or damage property if other than you.”

“If we pay the owners, such payments will satisfy your claims against us for the owners' property. We will not pay the owners more than their financial interest in the covered property.”

This would suggest that the insurer would deal directly with the tenants and would pay the financial interest in the covered property to the tenants.

The Liability form has an exclusion for personal property that is in the care, custody, or control of the insured. So according to the Liability form, if the insured has a key or other way to access the property, they are in the care, custody, or control of the personal property and there is no coverage, while if there is no other access to the property then it would not be in their care, custody or control and thus the exclusion would not apply.

See also: A look at replacement cost value vs. actual cash value

A hairy situation

Question: Our insured cuts hair. There is a claim against the insured alleging that the insured cut the customer's hairpiece while performing a haircut. The hairpiece was attached to the customer's head during the haircut. So, the question is: since the claim is that the insured cut the hairpiece during the haircut, did the insured have care, custody, or control of the hairpiece? Does that exclusion apply to the property damage claim?

— Connecticut Subscriber

Answer: This is an interesting scenario, but considering that the hairpiece was still on the customer's head at the time of the damage, the customer actually had the care, custody, and control of the hairpiece. The insured may have been performing operations on the hairpiece, but he did not have care, custody, or control of it. The insured did not have actual and exclusive possession of the property when the damage occurred and the applicability of the care, custody, or control exclusion depends on this point.

An care, custody, or control exclusion is common in liability insurance policies. It eliminates coverage with respect to property damage when that property was not in the insured's care. (Photo: iStock)

Does care, custody or control apply to hotel parking lot?

Question: Our insured operates a hotel. Two patrons parked their motorcycles in the parking lot, then went inside. The saddle bags were subsequently stolen off of their motorcycles, which contained their personal property. Insured does not have surveillance or security working in the parking lot. Would I be able to apply exclusion j(4) Damage to Personal Property in Your Care Custody or Control?

— Indiana Subscriber

Answer: The care, custody, or control exclusion would not be applicable in this situation. The care, custody, or control exclusion excludes coverage for damage done while the property was in the care, custody, or control of the insured. Just because a vehicle is parked in the parking lot of the insured does not mean that it is in the care, custody, or control of the insured, as the vehicle driver still possesses the key and the title and responsibility of the vehicle. The insured may be liable for negligently allowing a robber on the premises of the hotel due to inadequate security (a lack of surveillance or security personnel as mentioned), which resulted in the theft. If a case is brought, the defense of the insured should be provided, and coverage for liability should apply if the insured is found to be negligent.

See also: Today's hospitality guests want new experiences and technology

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Locked, unattended vehicle theft

Question: An insured contractor parked his truck at a friend's business. The vehicle was broken into and tools and materials were stolen. We have a CP 00 10 with a tool and installation endorsement. The company is paying for the tools but is denying coverage for the materials because (1) they weren't at a job site or temporary storage location at which the insured has an insurable interest; (2)not in the insureds care, custody, or control; or (3)not in transit. I disagree and contend that not only were they in the insureds care, custody and control, but they could also be considered “in transit.” Am I correct in my thinking?

— Pennsylvania Subscriber

Answer: Courts have held that items in a locked, unattended vehicle can still be considered to be in the insured's care, custody, or control. The materials could also be considered in transit. The determination may come down to if the materials were indeed locked in a parked vehicle as opposed to lying in the open in the back of a truck, and the length of time the truck was parked at the friend's business. We see a difference between a brief stop en route to the job site and parking the car at the friend's business overnight or for days. A court may or may not see this is as “in transit.”

See also: America's 10 most stolen vehicles

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Property damage resulting from a business vehicle

Question: We have a claim under a commercial auto policy involving an insured who parks his commercial vehicle in another man's garage. The owner of the garage rents one of the three bays to the insured. Our insured has his own key to his bay's garage door and comes and goes as he pleases. Unfortunately, one day the insured did not get the door raised high enough and his vehicle collided with the bottom of the garage door.

After an investigation, the adjuster denied coverage based on the care, custody, or control exclusion in the auto policy. The insured claims this is a covered loss since the garage is stationary and not being transported. The exclusion does refer to property damage to property transported by the insured or in the insured's care, custody, or control, but we think the insured is overlooking the word “or” in the exclusion. Do you think the exclusion is not applicable in this instance?

— Connecticut Subscriber

Answer: It is not relevant that the garage is stationary. The exclusion refers to property either owned or transported by the insured, or to property in the insured's care, custody, or control. If the words were connected by the word “and,” the insured might have a case; however, the exclusion is not worded that way. The exclusion pertains to property damage to property in the insured's care, custody, or control as a separate item apart from the other two parts of the exclusion. The title of the exclusion is care, custody, or control, and in this situation as described, the insured had the care, custody, and control of the property that he damaged. The exclusion applies to the claim.

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit the National Underwriter website, or contact the editors via Twitter: @FCSbulletins.

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