By Neal McConnico, United Servicers Insurance Service, neal@murphyinsure.com
The Care, Custody and Control Exclusion in Commercial General Liability Insurance is one of the most misunderstood terms today. It is the cause of many coverage disagreements and discrepancies. This exclusion eliminates coverage for damage to property in the insured’s care, custody or control. The cause for confusion is that the definition of each word (care, custody and control) can easily be misinterpreted in real world application. Typically, the word “care” is defined as property that is in “temporary charge” of the insured. “Custody” suggests “keeping or guarding;” in other words, the insured is accountable for the property. And the word “control” refers to power or authority to operate, direct or supervise the personal property. It is also important to understand that this exclusion pertains only to personal property and not property such as buildings and permanent fixtures. Most court cases have considered care, custody and control to mean actual possession or direct physical control of the property as opposed to actual ownership.
Now that you have a better understanding of what the Care, Custody and Control Exclusion is, do you know why it is important and how it affects you? Originally, it was thought that without the Care, Custody and Control Exclusion, that techinicians and servicemen would be careless with the property of others knowing that their claims would be paid by their insurance company. Therefore, the Care, Custody and Control exclusion became standard on all General Liability policies to protect the insurer. This may be problematic, especially to the service industry, in that it can infuriate a customer should their property become damaged while in your care. Under the Care, Custody and Control exclusion, your insurance carrier can deny a claim under this exclusion and should you not be able to afford to fix or replace the damaged property of your customer, you will mostly likely have an unsatisfied customer and could create an even bigger liability to you.
For example, the ice maker of a customer’s refrigerator/freeze stops working and you send a technician to repair the ice maker. In the process of fixing the ice maker, the technician tilts the refrigerator and dents both doors on the unit. Fixing the doors cost more than the refrigerator is worth and the customer wants the doors either fixed or the unit replaced. Under the Care, Custody and Control exclusion, your insurance will deny your claim and you will be solely and financially responsible for the replacement.
However, there are solutions to this problematic exclusion. Most insureds are not aware that for less than $200, you can ‘buy back” the Care, Custody and Control Exclusion and receive $10,000 worth of coverage for accidents such as the example given. If you are interested in learning more about this complicated aspect of your General Liability policy and possible solutions, you can contact Neal McConnico at United Servicers Insurance Service. He will be more than happy to answer any of your questions or provide you with guidance to help you avoid and claim disputes involving Care, Custody and Control.
Neal McConnico
United Servicers Insurance Service
800-237-0472 Ext. 289
neal@murphyinsure.com
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