Q

Our insured is an auto repair facility that performed work on an auto and then released the car to the owner upon presentation of a check for full payment of services rendered, but the check bounced. Our insured then legally repossessed the car. The owner subsequently paid all damages and then sued the insured alleging theft, collision-type damages and loss of use of the car.

The insurer is denying defense and coverage for this lawsuit based on the allegation of theft and its interpretation that the vehicle was not left in the insured's care, as required for coverage to apply. It is my contention that this was a legal repossession and so the allegation of theft is baseless. Regarding the phrase “left in the insured's care,” my contention is that since legal tender was not offered initially, at the point in time when the insured lawfully repossessed the vehicle, it became “left in the insured's care” until proper legal tender could be made.

Would the garagekeepers coverage apply in this situation?

Texas Subscriber

A

We agree with you about the theft allegation. There is an exclusion due to theft under the garagekeepers coverage, but since the insured legally repossessed the car, the insurer can not reasonably call this incident a theft. The question of coverage, then, depends on the meaning of “left in the insured's care.”

The insurer makes a good case for the car not being left in the insured's care since there was no hint on the part of the owner's voluntarily leaving the car with the insured. Usually, when you leave something in another's care, you do so voluntarily. On the other hand, the garagekeepers form does not define “left in the insured's care.” The dictionary defines “leave” as “to cause or allow to be or remain in a specified condition” and “to permit to be or remain subject to another's action or control.”

The insured can certainly make the case that, due to the bounced check, the owner, in effect, caused or permitted the car to be subject to the insured's action or control. The insured repaired the car and had a right to be paid for the service; that was agreed to by both the insured and the owner. By not paying the bill, the owner reneged on the agreement, leaving the insured with the right to repossess the car, to make it subject to his control until the bill was paid. The insured legally repossessed the car so the state obviously recognizes his right to subject the car to his control.

The bottom line is that there is enough ambiguity over the meaning of the phrase “left in the insured's care” to, at the very least, require the insurer to defend the insured in this lawsuit. And, if the lawsuit determines that the insured legally must pay for the loss to the car while the car was left in his care, there is no exclusion under garagekeepers coverage that would prevent such payment by the insurer. Further, for garagekeepers coverage, “loss” does include loss of use.