When you have other people’s personal property in your possession, it may be unclear as to how that is insured. In commercial liability policies, there is a very clear exclusion known as the care, custody, and control exclusion. This means the personal property of others that happens to be in your possession cannot be covered as a liability claim should it be damaged. While the concept is similar for personal liability coverage, the fact that personal liability coverage is combined with personal property coverage in a single home insurance takes away some of the problems with the exclusions.
It may seem counterintuitive for the liability policy to exclude coverage for certain types property damage when the basic premise of a liability policy is to cover bodily injury and property damage to third parties. However, the liability policy views personal property in your possession as no longer being that of third parties. The manner in which you damage someone else’s property is generally accidental, and requires a degree of interaction between you and their property. However, when someone else’s property is in your possession, it would appear to be less accidental, as you have complete control over it. A common example would be power tools you borrow from a neighbor. If you lose or damage the tools, you are liable to your neighbor for the cost of repairs or replacement. However, because you have complete control over the use of the tools, the liability policy treats that as your own property, with damages somewhat less accidental in nature, and shifting the obligation for damages to your property policy.
As a result, property that is in your care, custody, or control can be considered your own personal property. Therefore, the liability policy does not wish to cover such items. This does not mean that you have no insurance for such losses. Instead, the coverage for these items is more appropriately found on the property coverage section of your home insurance policy. As an example, in the personal property coverage section of the policy, the insuring agreement usually states the policy covers personal property owned or used by the insured. The two words, “or used,” essentially grants coverage for anyone else’s property that you have the use of. This is a very broad coverage grant in your home insurance policy that negates any care, custody, and control exclusion on the personal liability coverage section.
The policy offers some additional coverage that must be triggered by the insured before it becomes effective. Personal property of others while it is in the insured’s residence (not necessarily being “used” by the insured) can also be covered, provided that the insured requests coverage. Therefore, if one of your friends wants to store some items temporarily at your home, those items can be covered by your policy, but you must first notify your insurance company. This is also a very broad coverage grant by the home insurance policy and can be of great benefit in day-to-day life.
One important thing to keep in mind is that this coverage is part of the personal property coverage on a home insurance policy and is subject to the purchased limits. If you contemplate having high-value items in your possession, you may need to increase your personal property limit regardless of where you live – Colorado Springs, Columbus, Dallas, Denver, Detroit. Additionally, if you purchase a personal umbrella policy, it will not extend coverage for personal property. The umbrella policy is a liability policy, and as discussed above, the liability coverage section excludes personal property of others while in your care, custody, or control.