Guides
Care, custody and control: why the CGL won't pay for property you hold
The CGL excludes damage to property in your care, custody or control. Who gets caught, where courts disagree, and which policies fill the gap.
The care, custody or control exclusion in a commercial general liability policy removes coverage for damage to personal property that is in the insured's care, custody or control. If a customer's car burns in your garage, a customer's garments are lost at your cleaners or a rented crane is dropped on your job, the CGL generally will not pay. A different policy, usually a bailee, garagekeepers, warehouse legal liability or inland marine form, has to.
Business owners are often surprised by this at claim time, because the CGL feels like the policy that covers "damage I cause." It covers damage you cause to other people's property that is not in your hands. Property you hold is a different risk, priced and insured differently.
Where the exclusion sits
In the ISO CGL (CG 00 01), the wording lives in Coverage A exclusion j, "Damage to Property." Most readers fixate on one paragraph, but all six matter.
| Paragraph | What it excludes | Typical impact |
|---|---|---|
| j(1) | Property you own, rent or occupy | Your own building, and rented space and equipment |
| j(2) | Premises you sell, give away or abandon, if the damage arises out of any part of them | Ex-owner liability |
| j(3) | Property loaned to you | Borrowed tools and equipment |
| j(4) | Personal property in the care, custody or control of the insured | Customers' goods, vehicles, animals, equipment |
| j(5) | That particular part of real property where you or your subcontractors are working, if the damage arises out of that work | The wall you are cutting into |
| j(6) | That particular part of any property that must be restored, repaired or replaced because your work was done incorrectly | Redoing defective work |
The 04 13 edition, as we read it, has several give-backs. Paragraphs (1), (3) and (4) do not apply to damage, other than by fire, to premises rented to you for seven or fewer consecutive days. Separately, the form says exclusions c through n do not apply to fire damage to premises while rented to you or temporarily occupied by you with the owner's permission, and a separate Damage to Premises Rented to You limit applies; see insurance requirements in commercial leases. Paragraph (6) does not apply to damage within the products-completed operations hazard. Policies differ and manuscript forms vary, so confirm the wording on your own form. The business owner's policy liability section uses similar language. For the wider list of exclusions, see CGL exclusions: what a general liability policy does not cover.
What "care, custody or control" means
The words are not defined in the form, and that is where disputes start. IRMI notes that in some cases courts have required physical possession of the property, while in others, any party with a legal obligation to exercise care over property has been deemed to have it in its care, custody or control. The broader reading reaches further than most insureds expect.
Some practical rules of thumb that underwriters and adjusters use:
- You have it in your hands or on your premises for service. A car left for repair, a ring left for sizing, a dog in a kennel run. The exclusion usually applies.
- The property is merely near your work. A neighbor's fence your excavator knocks over while digging next door is usually not in your care, custody or control, and is the type of loss the CGL is for.
- You are working on or in it. Paragraphs j(5) and j(6) cover the particular part you are working on. Damage that spreads to other parts of the property is generally treated differently.
- Property stored with you. A bailee, such as a warehouse, has custody of what it stores. If the owner also keeps keys or access, courts may look at who had actual control.
Courts in different states have drawn the lines differently, and results often turn on details such as who held the keys, who could move the property, and what the contract said. A coverage attorney, not a form number, answers those questions.
Who gets caught
| Business | Property in its hands | Usual gap-filler |
|---|---|---|
| Auto repair shop insurance, dealers, parking and valet operators | Customers' vehicles | Garagekeepers coverage; see garage liability and garagekeepers coverage |
| Cleaners, tailors, laundromats, repair shops | Customers' garments, devices, goods | Bailee's customers coverage; see bailee coverage: insuring customers' property in your care |
| Storage and warehouse operators | Stored goods | Warehouse legal liability; see warehouse legal liability insurance: covering customers' stored goods |
| Moving company insurance and trucking | Goods in transit | Motor truck cargo; see motor truck cargo insurance: how it works and where it stops |
| Pet business insurance | Animals, which the law treats as property | Bailee-type or care-custody-control coverage for animals |
| Contractors | Equipment they rent; materials they install | Equipment and installation floaters; see contractor's equipment insurance: covering tools, machinery and rentals |
| Tenants | Rented space | Fire legal liability limit, higher limits if the lease requires; see insurance requirements in commercial leases |
Two worked examples
The repair shop. Say a small shop is working on a customer's truck when a space heater ignites a rag pile and the fire destroys the truck and two others waiting in the lot (hypothetical). The CGL's exclusion j(4) applies because each vehicle was in the shop's care, custody or control. The shop's garagekeepers policy, written on a legal liability basis with a per-vehicle and aggregate limit, is the cover that responds. If there is no garagekeepers policy, the shop pays.
The plumber. A plumber replaces a water heater and a failed connection floods the hallway floor and the kitchen cabinets (hypothetical). The cost to redo the plumber's own work is excluded, by j(6) while the job is under way and by the "your work" exclusion once it is complete; see products and completed operations coverage. Water damage to floors and cabinets elsewhere in the house is, in many cases, covered property damage. Insurers sometimes argue that the "particular part" being worked on extends beyond the pipe, and that line is what the dispute usually turns on.
Property policies are not the same cover
A commercial property policy can respond to loss of other people's goods too. The ISO building and personal property form includes personal property of others in your care, custody or control as part of business personal property, and a separate extension for personal effects and property of others carries its own sublimit, so check the declarations for whether a limit is shown. But that coverage pays only for the covered causes of loss in that policy, subject to its exclusions and limits. It is not legal liability coverage. If the owner sues you for negligence, a bailee policy is the right fit. See inland marine insurance for tools, equipment and goods in transit for floaters, which fill many of these gaps.
How to close the gap
- List what you hold. Walk the shop, the yard and the truck. Note customers' property, rented equipment, items stored for others, items in transit and property you work on.
- Estimate the maximum value at one time. The highest exposure is usually the busiest day, not the average.
- Read your contracts. Leases, rental agreements and customer work orders often say who insures what. Disclaimers and "at owner's risk" signs do not always defeat a negligence claim, so ask counsel before relying on them.
- Buy the specific coverage. Garagekeepers, bailee's customers, warehouse legal liability, cargo, installation or rented-equipment floaters. Compare limits per item and per location, deductibles, and exclusions for theft, mysterious disappearance and employee dishonesty.
- Ask about a buy-back. Some carriers will add limited care, custody or control coverage to the CGL by endorsement, usually with a low sublimit and a higher deductible; whether yours does is a quote question.
- Report claims to every carrier. If a loss involves property you hold, notify your property, inland marine and liability insurers together. A denial under one policy may be the cue to look at another. The What business insurance do I need? can help find the right pieces.
Key takeaways
- The CGL's exclusion j(4) removes damage to personal property in the insured's care, custody or control, so it does not pay for customers' goods, vehicles or animals in your hands.
- Paragraphs j(1), j(3), j(5) and j(6) add property you own or rent, property loaned to you, and the particular part of property you are working on or did incorrectly.
- Courts differ on whether control means physical possession or a legal duty of care, so results depend on the facts and the state.
- Garagekeepers, bailee, warehouse legal liability, cargo and floater policies fill the gap, and each has its own limits and exclusions.
- Identify what you hold before a loss, and match each exposure to a policy that names it.