We insure a bowling alley that leases space to an individual that owns and operates a pro-shop. The pro-shop is a separate entity from the bowling alley. Our insured building suffered a total fire loss with the cause deemed as undetermined. There was no negligence on the part of our insured. The Pro-Shop owner did not carry his own insurance and is looking for coverage under Personal Property of Others in our care custody or control. Our insured had a key to the leased space, but only to access mechanicals that directly serviced the insured building. Our insured had nothing to do with any business activity related to the pro-shop. Although our insured had a key to the pro-shop, does that necessarily mean the pro-shop merchandise and equipment are under our care custody or control and would Property of Others coverage even apply to this situation?

Michigan Subscriber

A determination of whether property is in the care, custody, or control of the insured will always be very fact-specific, and may vary depending on jurisdiction. Generally speaking however, the care, custody or control exclusion applies only in those situations where the insured has actual care, custody, or control of the property. Typically, some sort of bailee-bailor relationship will need to exist for the exclusion to apply.

Courts have held that where the insured leases locked storage space to a third party, he or she does not have care, custody, and control over the property of the third party within that leased space. This was because the insured had no proprietary interest in and derived no monetary benefit from the stored property (even if the insured did receive benefit from lease of space itself).

Similarly, in the situation you describe of a tenant's business property, the landlord has no interest in that property. That the tenant can remove his property at any time without contacting the landlord and that the landlord receives no compensation for allowing the tenant to store their property further demonstrates why the exclusion would not apply here.

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