The operator of a landscaping and excavating business requested that the insured, the self-employed operator of a welding business, perform welding repairs on the bucket of a self-propelled loading machine. As the welder worked out of his home and did not have shop facilities, he went to a construction site where the machine was located in a field. While using a blow torch to remove old weld on a crack on the loader where the bucket was mounted into the machine, smoke poured from underneath and the loader was quickly destroyed by fire.

The welder requested coverage from his general liability insurer when the excavator sued him as a result of the fire loss that was incurred. The insurer denied coverage by virtue of the familiar CGL exclusion for ". . . . property damage to property (including elevators) in the care, custody or control of anyone we protect or over which anyone we protect is exercising physical control. . . ." The insured sued the insurer and its agent, seeking enforcement of coverage under the policy.

The crux of the matter was the meaning of "care, custody or control." From the evidence, the court determined that the insured did not have custody or control of the loader. It was undisputed that the son of the machine owner, who worked in the excavating business with his father, retained the keys to the loading machine, showed the defect requiring repair to the welder, and stood at his side during the entire but brief time that he worked. In effect, the excavator "never delivered the loader to plaintiff under contract or otherwise, never relinquished custody of the loader and never relinquished control over the loader."

However, the court said that "only one of the three criteria must be present before the clause operates to deny coverage." It found that the loader was in the "care" of the insured during his work. It was under his supervision while he was working. Citing precedent, if the loading machine were incidental to property upon which he were working, the exclusion would not apply. Such was not the case. Supervision of the property damaged was essential for the work involved.

Supervision and care of the damaged property having been established, the court rendered judgment in favor of the insurance company and its agent and against the insured. The exclusion was found applicable.

(BELTZ, Plaintiff v. ERIE INSURANCE EXCHANGE ET AL., Defendants. Pennsylvania Court of Common Pleas of Lehigh County. No. 88-C-2680. March 28, 1991. CCH 1991-92 Fire and Casualty Cases, Paragraph 3281.)