Q
Our insured owns a commercial laundry business, but has no on-premises dry cleaning service. To accommodate his customers, the insured sends the customers' clothes that need to be dry cleaned to a local dry cleaning service. That dry cleaning plant was destroyed in a fire, which also destroyed clothes belonging to some customers of our insured. The insurer of the dry cleaning plant will not pay any bailee claims because arson is suspected.
The bailees customers policy of our insured covers loss to articles accepted by the insured for laundering and cleaning while on the premises of the insured or in the custody of its agents. The policy excludes loss or damage to goods while in the custody of other processors unless specifically endorsed on the policy. The insurer of our client is declining to pay for the damage to customers' clothes based on the exclusion since the dry cleaning plant was not listed. We believe that since the policy applies to goods in the custody of the insured's agents, there is coverage because the dry cleaning plant was an agent of the insured.
What is your opinion?
New York Subscriber
A
We agree with you that the dry cleaning plant was an agent of your insured. An agent is defined in Black's Law Dictionary as “a person authorized by another to act for or in place of him or one entrusted with another's business”, and the dry cleaner clearly fits that definition. And, if we were to simply go with the insuring agreement about covering losses to property in the custody of the insured's agents, there would be coverage under your insured's bailees' policy for the loss to customers' clothes. However, coverage granted by insuring agreements is limited by exclusions, and, in this case, the exclusion is quite clear—the “other processors” have to be specifically endorsed onto the bailees policy in order for coverage to be extended. In your instance, the dry cleaning plant could have been endorsed onto your insured's policy, but the insured, for whatever reason, did not have this done. Therefore, the exclusion applies and the bailees policy will not cover the loss to the customers' clothes.
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