In the last scenario, the garage form for the insured has garagekeepers coverage applicable to the theft of customers' personal property. The coverage form defines customers' personal property as personal property left in a customer's car, except for certain items that are specifically excluded. The customer is an employee of another business, and he left thousands of dollars of parts owned by his employer in his personal vehicle while it was in the insured's garage for repair. The parts were stolen and the question is whether they are considered the customer's personal property since the parts did not belong to the customer. What is your opinion?

Ohio Subscriber

The standard garage liability coverage form excludes property damage (and that includes loss of use) to property in the care, custody, or control of the insured. Coverage for this type of exposure is found in the garagekeepers coverage section of the policy. So, if the insured did not have garagekeepers coverage under these scenarios, none of the losses would be covered.

Assuming that the insured has garagekeepers coverage, employee theft is usually excluded. The theft exclusion prevents coverage for loss due to theft or conversion caused in any way by the named insured, employees, or shareholders. In the first scenario, an employee caused a loss by stealing property. The exclusion will not allow coverage for the loss, even for the innocent named insured.

In the second scenario, theft coverage is provided as long as there is forced entry into the auto or the building where the auto is stored. Forced entry into a fenced lot is not the same as forced entry into a building. If the policy had used the phrase “forced entry into the premises”, then this particular loss would be covered. But, the policy language has to be read as it is, and coverage in this instance requires forced entry into a building.

In the last scenario, the definition of customer's personal property appears to be very broad. It does not limit the personal property as belonging to that particular customer only, nor is there a distinction made between business personal property and an individual's personal property. The parts that were stolen were personal property and they were left in a customer's car, and that meets the definition in the policy. Therefore, the coverage for the theft is there.

There is one other point to make about coverage under the garagekeepers policy. The standard garagekeepers coverage is based on the liability of the insured. The insured has to be legally liable for the loss before coverage applies (unless the direct primary coverage option is purchased by the insured).