CARE, CUSTODY, OR CONTROL

(April 2019)

INTRODUCTION

The Care, Custody, or Control exclusion in the Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Forms specifically excludes property damage to personal property in the insured's care, custody, or control. Its primary purpose is to keep the CGL Coverage Forms from covering first party claims. It is important to thoroughly understand the exclusion in order to properly advise insurance buyers and recommend coverages they need.

"CARE" DEFINED

Care is close attention to, watchful oversight, charge or supervision of, concern with, and attention to one's needs and those of others. In issues that involve negligence, the amount of care required under a given set of circumstances is in direct proportion to the apparent risk. As the level of danger increases, the level of caution required increases proportionately.

Black's Law Dictionary identifies and defines four types and degrees of care:

• Slight care is the kind of care that persons of ordinary prudence usually exercise about their own affairs that are of slight importance.
• Ordinary care is the degree of care that persons of ordinary care and prudence are accustomed to use and employ under the same or similar circumstances.
• Reasonable care is such a degree of care, precaution, or diligence as may fairly and properly be expected or required, having regard to the nature of the action or of the subject matter, and the circumstances surrounding the transaction.
• Great care is the kind of care that persons of ordinary prudence usually exercise about affairs of their own that are of great importance. It is that degree of care usually bestowed on the matter in hand by the most competent, prudent, and careful persons having to do with the particular subject.

"CUSTODY" DEFINED

Custody is the care and control of a thing. Black's Law Dictionary defines it as the keeping, guarding, care, watch, inspection, preservation, or security of a thing, carrying with it the idea of the thing being within the immediate personal care and control of the person who has custody of it.

The American Heritage College Dictionary defines it as the act or right of guarding, especially when such a right has been granted by a court. Webster's Seventh New Collegiate Dictionary defines custody to mean immediate charge and control exercised by a person or an authority.

In various court cases it has been defined as “immediate charge and control, and not the final, absolute control of ownership that implies responsibility to protect and preserve the thing in custody” and “The care and keeping of anything, as when an article is said to be in the custody of the court.”

"CONTROL" DEFINED

Control means to exercise restraining or directing influence over, or to regulate, restrain, dominate, curb, hold from action, overpower, counteract, or govern. Black's Law Dictionary defines it to mean power or authority to manage, direct, superintend, restrict, regulate, direct, govern, administer, or oversee.

The American Heritage College Dictionary defines it to mean to exercise authoritative or dominating influence over; to direct. Webster's Seventh New Collegiate Dictionary defines it to mean to direct influence over.

Related Court Case: Insured Could Not Rely On Narrow View of Care, Custody, or Control

HOW THE COMMERCIAL GENERAL LIABILITY COVERAGE FORMS EXCLUDE SITUATIONS THAT INVOLVE CARE, CUSTODY, OR CONTROL

General Liability Exclusion

The ISO CGL Coverage Forms exclude many types of property damage losses under Exclusion j. Damage to Property. Item (4) states that the insurance company does not pay for property damage to personal property in the insured's care, custody, or control. This exclusion is subject to two exceptions. It does not apply to property damage (other than damage by fire) to premises the named insured rents for seven or fewer consecutive days. It also does not apply to liability assumed under a sidetrack agreement.

Examples: Property in the insured's care, custody, and control that is excluded because of the exclusion:

• Customers' computers left with a computer service and repair operation for cleaning, service, or repair
• Photographic film and negatives of customers left with a photograph developing laboratory to develop photographs and prints
• Fur coats customers leave with a retail fur shop that also offers fur cleaning and storage facilities

Examples: Property in the insured’s care, custody, and control excepted from the exclusion:

• The television in the hotel room where the named insured stays for three nights
• Equipment the railroad owns left in the named insured’s yard next to the sidetrack

Intent of the exclusion

The exclusion's intent is to exclude items subject to some type of bailment. However, the insured may still be protected against liability for damage to other items on the premises not subject to bailment.

There are no ISO CGL endorsements that cover property of others in the insured’s care, custody, or control. However, some insurance companies have developed their own endorsements that eliminate or modify this portion of the exclusion.

CARE, CUSTODY, OR CONTROL COURT DECISIONS

The following court cases provide examples of how courts have applied the care, custody and control exclusion:

Care, Custody or Control Exclusion Held Applicable

Insured Could Not Rely On Narrow View of Care, Custody or Control

Physical Control of Property by Painting Contractors Negated Coverage

Rental Exclusion Did Not Apply To Tryout of Machine

Snow Scraper Smashes Shelby: Does CGL Pay?

HANDLING CARE, CUSTODY, OR CONTROL EXPOSURES

The ISO CGL coverage forms are not designed to provide first party coverage for property owners or those legally liable for such property. This property is better covered under either a commercial property or inland marine coverage form.

Related Articles:

CP 00 10–Building and Personal Property Coverage Form Analysis

AAIS Bailee Customers Floater Coverage–Dry Cleaners and Laundry Form

AAIS Miscellaneous Bailee-Processor Floater

ISO Bailees Customers Coverage Form

Other options to consider are:

• Waiver agreements in a lease or written separately. In these cases, the property owner waives its right of recovery against a tenant (and the tenant against the property owner) for any loss caused by specified perils against which both parties carry direct damage insurance. The respective property policies permit such agreements and are virtually standard in all policies that include commercial property conditions.
• Eliminate or modify the care, custody, or control exclusion by endorsement as to certain types of property when an insured specifically requests.
• Umbrella liability insurance that insures hazards that the underlying general liability coverage form does not cover. This includes care, custody, or control in addition to providing excess limits for hazards the underlying insurance covers.