Analysis brought to you by the expertsat FC&S Online, the unquestioned authority oninsurance coverage interpretation and analysis for the P&Cindustry. To find out more — or to have YOUR coverage questionanswered — visit the National Underwriter website, orcontact the editors viaTwitter: @FCSbulletins.

Question: We have a self-storagefacility insured under an unendorsed ISO BOP form BP 00 02 01/87and BP 00 06 01/87. The facility mixed up the storage unit numbersand inadvertently sold off the stored property of the wrong renter.That renter is suing for sold & discarded merchandise of$20,000. Underwriting contends thatLiability does not extend due to the Care, Custody & Controlexclusion in the Liability form. Further, the Property of Others inthe Property form limits coverage to $2,500. Claims says they arehandling it as Liability due to negligence as the insured does nothave ccc, but only has access to the units for emergency or failureto pay rent. Further they do not feel that the $2,500 Propertylimit applies to a 3rd party claim. Your opinion would beappreciated.

— Kentucky Subscriber

Answer: This would be considered propertydamage, defined as loss of use of tangible property,caused by an occurrence, (an accident) which this certainlywas.

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

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

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

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

The property form also states that the insurerwill determine the value of Covered Property as actualcash value, and that ”payment for loss of or damageto personal property of others will only be for the account of theowners of the property. We may adjust losses with the owners oflost or damage property if other than you.”

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

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

The Liability form has an exclusion for personal property thatis in the care, custody, or control of the insured. So according tothe Liability form, if the insured has a key or other way to accessthe property, they are in the care, custody, or control of thepersonal property and there is no coverage, while if there is noother 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 cashvalue

A hairy situation

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

— ConnecticutSubscriber

Answer: This is an interesting scenario, butconsidering that the hairpiece was still on the customer's head atthe time of the damage, the customer actually had the care,custody, and control of the hairpiece. The insured may have beenperforming operations on the hairpiece, but he did not have care,custody, or control of it. The insured did not have actual andexclusive possession of the property when the damage occurred andthe applicability of the care, custody, or control exclusiondepends on this point.

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

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

Question: Our insured operates a hotel. Two patronsparked their motorcycles in the parking lot, then wentinside. The saddle bags were subsequently stolen off of theirmotorcycles, which contained their personal property. Insured doesnot have surveillance or security working in the parking lot. WouldI be able to apply exclusion j(4) Damage to Personal Property inYour Care Custody or Control?

— Indiana Subscriber

Answer: The care, custody, or control exclusionwould not be applicable in this situation. The care, custody, orcontrol exclusion excludes coverage for damage done while theproperty was in the care, custody, or control of the insured. Justbecause a vehicle is parked in the parking lot of the insured doesnot mean that it is in the care, custody, or control of theinsured, as the vehicle driver still possesses the key and thetitle and responsibility of the vehicle. The insured may be liablefor negligently allowing a robber on the premises of the hotel dueto inadequate security (a lack of surveillance or securitypersonnel as mentioned), which resulted in the theft. If a case isbrought, the defense of the insured should be provided, andcoverage for liability should apply if the insured is found to benegligent.

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Locked, unattended vehicle theft

Question: An insured contractor parked his truck at afriend's business. The vehicle was broken into and tools andmaterials were stolen. We have a CP 00 10 with a tool andinstallation endorsement. The company is paying for the tools butis denying coverage for the materials because (1) they weren't at ajob site or temporary storage location at which the insured has aninsurable interest; (2)not in the insureds care, custody, orcontrol; or (3)not in transit. I disagree and contend that not onlywere they in the insureds care, custody and control, but they couldalso be considered “in transit.” Am I correct in mythinking?

— PennsylvaniaSubscriber

Answer: Courts have held that items in alocked, unattended vehicle can still be considered to be in theinsured's care, custody, or control. The materials could also beconsidered in transit. The determination may come down to if thematerials were indeed locked in a parked vehicle as opposed tolying in the open in the back of a truck, and the length of timethe truck was parked at the friend's business. We see a differencebetween a brief stop en route to the job site and parking the carat the friend's business overnight or for days. A court may or maynot see this is as “in transit.”

See also: America's 10 most stolen vehicles

Property damage resulting from a business vehicle

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

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

— ConnecticutSubscriber

Answer: It is not relevant that the garage isstationary. The exclusion refers to property either owned ortransported 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 wordedthat way. The exclusion pertains to property damage to property inthe insured's care, custody, or control as a separate item apartfrom the other two parts of the exclusion. The title of theexclusion is care, custody, or control, and in this situation asdescribed, the insured had the care, custody, and control of theproperty that he damaged. The exclusion applies to the claim.

Analysis brought to you by the expertsat FC&S Online, the unquestioned authority oninsurance coverage interpretation and analysis for the P&Cindustry. To find out more — or to have YOUR coverage questionanswered — visit the National Underwriter website, orcontact the editors viaTwitter: @FCSbulletins.

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