Care, Custody & Control
To The Editor:
Thanks to Bruce Hillman for his June 30 "FC&S Answer" column (see "To Care And Control–Or Not," page 21). Someone finally got it right! I have argued the care-and-control coverage issue literally hundreds of times over the past 15 years on the over-2000 carpet cleaners and janitors that we insure. I have heard every lame argument in the book from insurers who simply don't want to pay care, custody and control claims regardless of what the policy says. The long and short of it is (with respect to the 2001 and later forms):
Employees are not insureds with respect to personal property damage in the care, custody or control of the named insured, employees, partners or members. Therefore, if the employee is liable for damage, then the company doesn't have to pay to indemnify the employee.
However, if the employer (the named insured) is liable for damage done by the employee, partner or member, the company does have to pay because the J4 exclusion [of the 2001 CGL form] ONLY applies to property in the care, custody or control of insureds.
The prior forms provided the same coverage–they just did it in a different way. The 1986 form provided the coverage by removing employees, partners and members from the exclusion. It said that there was no coverage for "Personal Property in YOUR care, custody or control." It defined "YOUR" as the Named Insured shown in the declarations.
Regardless of how simple this is, when insurers don't want to pay such claims, it has been my experience that they will try ANYTHING to avoid paying, including the following lame reasonings that various adjusters have presented to me:
Vicarious Liability. Adjusters have argued with me that the personal property in the physical control of employees was in the VICARIOUS control of the named insured. There is no such insurance principal as VICARIOUS control. There is a legal principal of Vicarious Liability, but it has no application to changing the interpretation of insurance policy language to extend the meaning of an exclusion to include others in addition to those specified in the exclusion.
That employees are insureds, therefore they are included within the meaning of "YOUR."
That an entire house or building and everything in it are in the control of an employer because an employee is on the premises to do cleaning, and that such is the case even though the owner of the premises is using the premises at the time, and there is no contract placing such premises in the control of the cleaning contractor.
I have even had insurers rely upon aberrant court decisions, even when they are widely recognized as wrong.
Sadly, I don't believe Mr. Hillman's fine column, even though carefully reasoned and rational, will change very much, because when insurers don't want to pay a claim, they will find some reasoning to deny coverage, whether valid or not.
Thomas E. Nelson
President
Hallmark Insurance Associates Inc.
Fresno, Calif.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 4, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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