What it means
General liability insurance is designed to pay for harm you cause to other people and their property as a bystander, not for property you had taken charge of. The care, custody, or control exclusion draws that line by removing cover for third party property in your possession, under your supervision or being worked on by you.
The exclusion exists because property you hold is a property risk rather than a liability risk. Insurers price those separately, since the chance of damaging goods you handle every day is far higher and far more predictable than the chance of injuring a passer-by.
The gap is filled by named cover bought for the purpose. Bailee cover for goods held for customers, an installation floater for materials on site, a property of others endorsement, and garage keepers cover for vehicles are the common forms, each with its own limit and deductible.
Contracts make the gap bigger than most managers expect. Storage, haulage, repair and fit-out agreements routinely promise to indemnify the client for loss or damage to their property, and signing that clause creates an obligation the general liability policy will not meet.
Disputes usually turn on how much control there really was. Exclusive possession of an item in your own workshop is clearly caught, while brushing past a client's furniture while working in their office usually is not, and the wording of each policy and the facts of each claim decide the borderline cases.
For a finance team the practical step is to put a number on the maximum value of other people's property held at any one time, site by site. That figure, compared with the limits actually purchased, states the uninsured exposure in dollars rather than in insurance language.
In practice
Real-world examples.
Example
A computer repair business is sued after a power surge destroys 30 customer laptops in its workshop. Its general liability insurer declines the claim because the machines were in the business's custody, and the cost falls on the company until a bailee policy is put in place for the following year.
Example
A building contractor damages owner-supplied stone worktops while fitting them in a client's kitchen. The worktops were in the contractor's control at the moment of damage, so the liability policy does not respond, and the loss is met from an installation floater bought at the start of the project.
Example
A valet parking operator at a hotel scratches two guest cars in one week. Guest vehicles sit squarely within its care, custody and control, so cover comes from a garage keepers policy with a $1,000 deductible per vehicle rather than from general liability.
Formula
Calculation
Uninsured exposure = peak value of third party property in your possession - limit of the care, custody and control cover purchased
An industrial repair workshop holds up to $450,000 of customer equipment at peak, and its general liability policy excludes damage to that equipment. The business has bought a property of others endorsement with a $200,000 limit, so the uninsured exposure is 450,000 - 200,000 = $250,000. Raising the limit to $500,000 is quoted at an extra $3,200 a year, which is 3,200 / 250,000 = 1.28% of the exposure it removes, and the directors accept that as the cheaper side of the trade.Case study
Seen in the real world.
Talbot Precision Services is an illustrative, fictional engineering firm that refurbishes industrial pumps for water utilities.
Talbot's standard contract promised to make good any loss or damage to customer units while on its premises, and the sales team had signed that clause for years without reading the insurance consequence. The firm's broker had placed a general liability policy with a $2,000,000 limit, which the directors believed covered everything, but it carried the usual care, custody, or control exclusion.
A sprinkler failure soaked 14 customer pumps awaiting collection, with a replacement value of about $380,000. The liability insurer declined, Talbot's own property policy covered only its own assets, and the firm met the claim from reserves. In this illustrative case the fix was unglamorous: a bailee policy with a $500,000 limit for roughly $6,000 a year, and a contract review so that promises made in sales matched the cover bought in finance.
Watch out
Common mistakes.
- Believing a large general liability limit covers customer property on your premises, when the exclusion removes that class of loss entirely.
- Signing a contract that promises to indemnify a client for damage to their property without checking that a matching policy exists.
- Insuring only the average value of goods held rather than the peak value, which leaves the busiest weeks of the year uncovered.
Questions
People also ask.
What counts as care, custody, or control?
In broad terms, property you have taken possession of, are storing, are transporting or are working on directly, though each policy wording and each set of facts decides the borderline cases.
Which policy covers customer goods in a warehouse?
Bailee or warehouse legal liability cover, bought separately from general liability and carrying its own limit, deductible and list of insured perils.
Does the exclusion apply if the damage was accidental?
Yes, because the exclusion turns on whose property it was and who held it, not on whether the damage was deliberate or careless.
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