Care, Custody or Control

The query was simple and direct: "The exclusion says 'care, custody and control.' Why three words, if they were not individually important? So what do they each mean?"

The responses were multiple and varied. Some felt the terms were interchangeable. Others argued that courts generally considered the three words to apply as a single term rather than three separate concepts. Court cases were cited, conflicts in decisions noted and forms language quoted.

While the discussion was varied and interesting, one of the weaknesses of online forums is that many otherwise qualified respondents only give brief, opinionated answers. Perhaps this is a mechanical issue, born of the fact no one wants to write a complete treatise on the 3-in. keyboard provided by their smart phone. Or perhaps they really aren't interested in overall context, just a quick strike to nail the issue and move on. A shining exception was IIABA Virtual University Chief guru Bill Wilson, who provided a lengthy excerpt from one of his VU articles on the issue.

And that is going to be critical if we are to find in these new digital hangouts the replacement for the conference and seminar networking of the past. While a quick answer to a specific question is always appreciated, the essence of learning is to put that answer in a context where we not only gain one answer, but reference points to determine future answers. Nothing wrong with giving a man a fish, but far better if he also learns how to catch his own.

Better yet, from a risk management point of view, context also opens the doors to opportunities often left undiscovered when pursuing a laser-like focus on a single query.

How might our "care, custody and control" query be taken from a quite precise yet single-purpose answer to a contextual discussion of broad opportunity? Clearly not in 140 characters or less. Luckily for us, not only does this magazine have more space, but in this case we can even continue the discussion into another monthly issue! Which is exactly what we shall do.

This month, let's focus upon the question. Next month, the context.

Grasshopper, let the journey begin.

First, as some LinkedIn respondents pointed out, the original query misquotes the CGL language. Without that realization, any response is dead from the outset. Here is the actual wording from the current ISO CGL, exclusion j.(4), which excludes damage to: "Personal property in the care, custody or control of the insured…"

Related: Read "Care, Custody or Control Exclusion."

Note the wording is not "care, custody and control" but rather "care, custody or control." Vast difference there, English students. If the word were "and," the clear intent would be for the three words to be considered as a single phrase, since all three must be true for the exclusion to apply. Meat Loaf may have sung, "Two out of three ain't bad," but if you put "and" in there, it's the Three Musketeers—all for one and one for all.

But ISO clearly appreciates the classics, favoring Meat Loaf over Dumas by choosing "or." So as actually written in the form, the exclusion will apply if any one of the three terms are true.

To go back to our original query, this leads to a conclusion that the three words are "individually important," and that is why all three are used. As to what each means, we follow the forms analysis guideline that says any term not specifically defined by the policy (and these are not) is to be interpreted by its common dictionary usage and meaning. So a quick trip to the online Merriam-Webster dictionary gives us the following applicable definitions:

1. Care: charge, supervision
2. Custody: safekeeping
3. Control: to have power over.

While there is clearly some possible overlap among the terms, thus explaining the court decisions that treated them as a single concept, there also is room for separating each and its impact on a given scenario.

For example, anyone who has babysat for a rambunctious child can vouch for the fact that while I may have that child in my care and custody, control may prove all too theoretical, short of applying physical restraints. Parents of teenagers no doubt have similar realizations.

As to insurance, consider an event often encountered in my past days in Florida when wooden homes plus humidity meant termite problems. A common tactic in the War of the Wood was "tenting" dwellings most subject to termite attack. Basically, the occupants moved out for up to several days. A pest control firm then put a huge "tent" over the house, sealing it before pumping the building full of poisonous gas. Note that the house would have been locked by the tenants, but the windows left open to allow the gas to circulate freely. Typically the pest control firm's employees never entered the dwelling.

Here are the facts for our example: Everything proceeded as above. Workers from the firm checked the tenting regularly during the process, mainly to be certain the fumigation was going according to plan. After enough time had passed, the tent and equipment were removed, the house allowed to air out and the tenants returned.

Upon unlocking the doors and reentering the home, the tenants discovered that personal items were now missing from the home. Naturally they turned to the pest control firm for compensation, and the firm turned to its liability insurer, which denied the claim under the c,c,c exclusion. Using the current wording, let's consider that denial, using our dictionary definitions.

1. Care: Do you think the personal property inside the house was in the "charge" or under the "supervision" of the firm? Clearly the house itself was, but the contents?
2. Custody: No doubt the dwelling was in the firm's custody, but if the firm never entered the dwelling, would you say the contents of the house were in the "safekeeping" of the pest control company?
3. Control: Did the pest control firm have any power over the contents when their activity was confined to the exterior?

My response to "care" is a qualified "yes." While I'm not sure I'd consider the firm in "charge" of the contents, clearly at least some "supervision" could be inferred from the presence of the workers tasked with watching over the building. This point may turn on a question of fact pertaining to how closely the firm actually supervised the house during the tenting: Was it 24/7 surveillance or just regular checks?

As to "custody," while the firm could clearly argue the contents were not its problem, as all its work dealt with the exterior of the dwelling, there is little doubt the tenants would feel they had left all of their property, inside and out, in the "safekeeping" of the pest control folks. In court, this may turn on any contractual language the firm employed specifically disclaiming any responsibility for the contents.

I'd argue "control" is the weakest carrier argument of the three. The key may be whether the court decides control over the exterior automatically means control over the interior as well. According to the facts as given, the firm never entered the house, never touched the contents. The very fact the personal property disappeared without the knowledge of the firm, and its clear failure to prevent the entry of whoever did take the property, implies a lack of "power over" the contents.

Regardless of how you feel over the merits of any one of the terms clearly applying to this claim, here is where "and" versus "or" comes home to roost. If the insurer had to prove all three terms applied to exercise the exclusion, just the existence of sufficient doubt over "control" or one of the other terms leads to the entire exclusion being inapplicable and the claim should be paid.

Alternatively, the fact the terms are subject to differing interpretation and argument even among regular practitioners of the insurance arts could form the basis of a legal argument for "ambiguity," and the carrier again pays the claim. But as the form is actually worded, the carrier need only show one of the terms clearly applicable to support its denial. In my estimation, the carrier's strongest argument exists for custody, with care a close second. Whether a court would ultimately agree is subject to possible contractual details, implied or expressed understandings between the tenants and pest control firm and specific circumstances surrounding the court proceedings beyond our discussion. But the exclusion, its wording and how or where that wording may apply is clear.

If Mary Poppins is correct that "well begun is half done," then our journey has yet some distance to travel. While we may have addressed application of the c,c,c exclusion to a specific case, its context and the resulting exciting possibilities for minimizing, modifying or eliminating its effect on a given insured await.

On to the merry month of May!