Q

An agent of ours had a question regarding property of others in the insured's "care, custody and control" on the property portion of the businessowners policy (BOP). This provision covers business personal property of others that is in the insured's care, custody, or control and states that "this property is not covered for more than the amount for which you are liable, plus the cost of labor, materials or services furnished or arranged by you on personal property of others." One of the other insurers that the agent represents told him that there was coverage under this provision only if the insured was legally liable for the peril that caused the damage.

My interpretation of the clause is that the insurer would only pay an amount for which the insured is legally liable, but that payment would be made if loss was due to any of the covered causes of loss (and therefore coverage would not be dependent on finding that the insured was negligent).

Who is right?

Ohio Subscriber

A

You are correct. The coverage responds to the amount for which the insured is legally liable, irrespective of the insured's legal liability for the occurrence. Concepts relating to tort liability are foreign to property insurance and have no place in interpretation of property insurance provisions. Thus, businessowners property coverage is not determined by the insured's "guilt" or "innocence" as between, for example, a negligently caused fire and a wind storm.

Property of others for which the insured is legally liable may be property in the insured's possession under bailment. It may also be property that is subject to a simple, oral agreement (contract) between the owner and the insured making the insured responsible for its safe keeping. The coverage that pertains to this property is whatever protection has been purchased by way of the causes of loss form.