It’s common for the fine print of a business insurance policy to include exclusions, including one about when you have “care, custody, and control” of someone else’s property. It is vital to understand the significance of that exclusion and how it can affect your policy’s coverage.

As a business owner, having insurance protects you against many scenarios so damages or losses to your company or your legal liabilities don’t put you out of business. For instance, coverages like commercial liability insurance, business interruption insurance, errors and omission (E&O) insurance or cyber liability insurance are all designed to help you recover quickly from an insurable loss, be it a fire, natural disaster, an allegation of professional negligence or a cyber-attack.

What is care, custody, and control in business insurance?

A care, custody, and control exclusion is noteworthy because it outlines what is not covered by your policy and applies to many types of insurance. Let’s dig deeper to get a better understanding of what this exclusion entails:

Understanding Care, Custody, and Control in a Business Insurance Policy

A care, custody, and control insurance exclusion is found in many policies – it removes compensation from a policyholder if property that does not belong to them is placed in their care and is damaged or destroyed. 

So, if a policyholder damages a customer’s property in their care, custody, and control, their insurance policy is unlikely to cover the damaged, destroyed, or lost property.

When Does a Care, Custody, and Control Exclusion Apply?

This type of exclusion applies if any one of the three terms is true:

  • Care is when you, as the policyholder, are responsible for overseeing the property for a set amount of time.
  • Custody means you have been placed in charge of the property.
  • Control means you have power and authority over the property.

This exclusion differs in every scenario – no specific definition or guideline would determine if compensation is owed or withheld. That means similar situations might have different outcomes when an insurance provider decides whether coverage applies based on numerous factors.

Here are a few examples of when care, custody, and control might come into play:

  • If you run an auto repair shop, drop a heavy wrench on a customer’s car, and dent the hood, your general insurance coverage may not cover that damage, but garage liability insurance might.
  • Your restaurant’s coat-check service loses a customer’s jacket or another item.
  • If your business damages a leased photocopier or other equipment you’ve leased.

How Does Care, Custody, and Control Affect General Liability Insurance?

A general liability insurance will cover you if you sell a skincare product to a client and they successfully sue you for bodily injury because they had a severe skin reaction. Or if you gouge your customer’s floors when delivering a couch to their home, and they sue you for property damage. However, if said couch was damaged while in your custody for reupholstering, your general liability insurance may not cover you.

There are options to purchase different coverages as part of an overall policy to account for any gaps in your protection because of a care, custody, and control exclusion. Speak to a licensed Zensurance broker to review your coverage to ensure you’re not exposed to such a risk.

Does a Care, Custody, and Control Exclusion Affect Commercial Property Insurance?

No. A care, custody, and control exclusion doesn’t apply to real property, including land, buildings, and permanently attached fixtures within those buildings or structures. 

How Does Business Insurance Help When You Have Care, Custody, and Control of a Customer’s Property?

Your business insurance works in tandem with specific insurance products that fill the gap left by exclusions geared toward your business’s nature. Many scenarios you encounter during business will benefit from general liability insurance and additional options that address care, custody, and control of other people’s property.

For example, a general contractor may require installation floater insurance to cover their property and materials while stored at a temporary site or in transit.

Or, if you start a dog walking business, you’ll want tailored insurance coverage that protects you from liability and includes an endorsement for “animal liability” called “damage to pets – care, custody, and control extension”.

With all insurance products, it’s important to understand what your policy covers and what it does not – including care, custody, and control exclusions. Adding the right options to your business insurance will mean you’re covered for both liability and the property of others that are your responsibility to protect.

– Updated December 15, 2023.

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About the Author: Ryan Insalaco

Ryan Insalaco is a licensed broker and Practice Lead, Digital Solutions with a background in medical malpractice insurance at Zensurance.