An employee from a janitorial service insured mistakenly threw out a bag of hard drives while cleaning a property. The loss is approximately $33,000.

The adjustor is denying coverage because the insured’s ISO commercial general liability policy has an exclusion which precludes coverage for personal property in the care, custody or control of the insured. The insured does have an endorsement that provides $2,500 in coverage for personal property with a $500 deductible.

Q: Did the insured have care, custody or control just by being there to clean the premises and throw away trash?

Response 1: If the employee put them in the trash, it would seem the employee had control of the property. Therefore, the exclusion would apply. That being said, there may be $2,500 coverage under the insured’s endorsement.

Response 2: This sounds like an unfortunate mistake while your insured’s employee was on a customer’s premises. It doesn’t sound to me as if the hard drives were, explicitly or not, in that employee’s care, custody or control.

Among many other discussions found online, see an article from Insureon for a definition of care, custody or control. 

Response 3: I would reach out to your errors & omissions carrier and your own legal counsel. Did you discuss a janitorial bond with your insured with a signed rejection of coverage? From a market perspective, I am not sure limits such as this are available in the marketplace. Does the client have any back-up systems to help mitigate this loss from an off-site third party?

Was this bag of disposables anywhere near where trash would normally have been placed by an employee of the named insured? Did the bag have other items that one could reasonably presume was trash? Is there any video surveillance of the area to assist you in determining if this was a mistake by an employee?

Response 4: When a thing is picked up and thrown in the trash, was that thing under the control of the person who threw it? I think so, and that means I agree with the adjuster. 

This is a well-known exposure for janitorial firms, so you need to secure specialized coverage for it. Most adjusters will rule the way yours did, so you need to arrange coverage for this exposure outside of the standard ISO CGL. 

Response 5: The key phrase is “the insured.” While there is arguably no coverage for the insured who threw the property away, there could be a valid claim against another insured for negligence in training or supervision.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.