Dry cleaners, computer repair shops, parking valets, jewelers, and auto body shops
have more in common than you might think — at least from a risk standpoint. They
all take responsibility for property they do not own while performing a service.
Along with taking possession of property not owned comes the risk of damage or destruction
while the property is under the care, custody, and control of another. To obtain
protection from this risk, these types of business owners acquire Bailee’s Customer’s
Coverage.
What is Bailee’s Customer’s Coverage?
Bailee’s customer’s coverage is insurance protection against legal liability resulting
from destruction or damage of a bailor’s (customer or client) property while under
the temporary possession of a bailee (business service provider).
In other words, the bailee is the organization or individual that takes temporary
custody of someone else’s property, while a bailor is the customer entrusting the
bailee with her property. A bailee is tasked with the same responsibility of care
as he would if it was his own property. The coverage becomes effective as soon as
the bailee issues a receipt to the bailor for the property.
Examples:
- An automobile bodyshop owner would be the bailee, and the car owner would be thebailor.
- A dry cleaning owner would be the bailee, and the customer who is having clothescleaned is the bailor.
- A computer repair shop owner is the bailee, and the computer owner is the bailor.
For instance, if a dress is damaged while under a dry cleaner’s control, bailee’s
customers insurance will pay for the damages.
This type of insurance coverage includes property that is on the bailee’s premises
or is in transit to or from. Numerous covered perils are typically included in bailee’s
customers insurance, include fire, explosion, flood, earthquake, lightening, burglary,
theft, robbery, collision, or destruction or damage resulting from transportation.
Coverage commonly excludes damage to property as a result of insects or vermin.
As is often the case, many bailees incorrectly think that their standard business
insurance coverage will protect their customer’s property while they perform a service
and while it’s under their control. However, this is not correct. Most general liability
policies have exclusions for property of others in their custody, care, or control.
Further, property insurance isn’t intended to cover property you do not own. In
most cases, protection for bailees is excluded from general policies, which is why
a separate bailee’s customer coverage policy is so important.
While some businesses try to protect themselves from liability for property of others
by having their customers sign disclaimers of liability, hold harmless agreements
or waiver of subrogation contracts, there is a distinction between bailment and
contract law. And contracts have seen courts overturn them because a bailee cannot
simply contract away her legal liabilities.
That said, if your business is involved in bailment situations like the ones described
above, consider purchasing bailee’s customer’s coverage insurance to protect your
risk of financial loss.
