When your car breaks down, or you spill red wine on your nice work shirt, or perhaps your expensive watch stops working, you expect prompt and accurate repair work to whichever business you take your damaged item to.
But what if that business makes a mistake and damages your valuable possession, or a fire happens at their business? You would expect to be reimbursed!
Businesses will be able to use their insurance to reimburse you, but only if they have bailee’s insurance. Standard commercial property and general liability policies don’t cover customers’ personal property, especially if it’s being fixed or repaired.
Bailee's insurance covers businesses that have their customers’ personal property in their possession. But it can be confusing, and not all bailee’s insurance policies are created equal, which makes it critically important to discuss your insurance needs with a trusted independent insurance agent.
How Bailee's Insurance Works
A bailee is a person or business who has temporary control of a customer’s property. The insurance industry term for this temporary control is care, custody, or control, often abbreviated to CCC. Sometimes, bailee’s insurance is also referred to as CCC coverage.
If the customer’s property gets damaged while in the business’s care, custody, or control, the business could be at risk for a lawsuit. This is where bailee’s insurance comes in. Bailee's insurance is designed to pay for damage to a customer’s property and provides liability coverage if there is a lawsuit.
General liability insurance covers many things for a business, but it doesn’t cover other people’s personal property, which is why there is a separate coverage for this type of exposure.
Bailee's insurance is typically added to a commercial package policy, which includes both general liability and commercial property insurance. Commercial insurance companies won’t offer bailee's insurance without also insuring at least the general liability part of a business.
There are different types of bailee's insurance. Some bailee's insurance policies will only pay for a portion of the customer’s property loss, while others will pay for all of it.
The opposite of bailee’s insurance is a hold harmless agreement. This is a legally bound document that the customer agrees to that releases the person or business from any liability if their property is damaged while in their care, custody, or control.
Types of Businesses That May Need Bailee's Insurance
Any business that has their customers’ personal property in their possession, even temporarily, could benefit from bailee’s insurance. Some of most common types of businesses that buy bailee’s insurance include:
- Auto repair shops. Auto repair shops of all kinds have temporary control of their customers' cars. Bailee’s insurance for auto repair shops typically includes damage to customers' cars and may have a deductible, similar to standard auto insurance.
- Dry cleaners. Dry cleaning businesses may have well over $10,000 worth of customers’ clothes in their shop at any given time and need bailee's insurance to cover this exposure.
- Jewelry shops. Jewelry stores often repair or restore customers’ jewelry, which means they could have in the tens of thousands of dollars worth in their store at any given time. Bailee's insurance would cover damage to their jewelry.
- Restaurants with valet service. Even though valets only drive customers’ cars a very short distance to the parking lot, customers expect nothing to happen to their car and will fully expect the business to fix any damage to their vehicle. Bailee's insurance can pay for that damage and potential lawsuit.
- Banks. Safe deposit boxes count as holding customers’ personal property, which makes bailee's insurance important for banks. Money is typically not covered by bailee insurance, as your money in the bank is typically insured by the federal government for up to $100,000.
- Storage units. Not every storage unit business insures their customers’ personal property, but some do. In these situations, it’s not uncommon for the rental business to pass the cost of bailee’s insurance onto the customers.
There are other types of businesses that temporarily have their customers’ property in their care, custody, or control. These businesses will likely be able to add bailee’s insurance to their commercial insurance policy.
Why a Waiver Isn’t Enough Protection
It is not enough for your business to just require a customer to sign a waiver stating that you aren’t responsible for any damage to their property. These waivers may only stand up in court if the customers’ property is damaged by one of your employees. But if the customers’ property is damaged by fire, theft, water damage, or any other type of natural disaster, your business will still be held liable for the customers’ damaged property.
Waivers are often a first line of defense that mainly serves to deter customers from suing your business, but they rarely stand up in court.
Types of Bailee's Insurance Coverage
As with all types of insurance, there are various levels of coverage in different bailee’s insurance programs. Not every insurance company will have the right type of coverage for your business, which is why it’s so important to have a dedicated, local, independent insurance agent there to help you find the right coverage for your business.
- Unlimited bailee: This type of bailee's insurance is the most comprehensive, as it provides insurance without a limit. Without unlimited bailee’s coverage, you’ll need to provide a value for the maximum customers’ property at any one time. If you choose too low of a value or have an unusually valuable amount of customers’ property at a time of loss, you’ll be underinsured. Unlimited bailee’s coverage prevents this problem from ever happening, but may only be worth the extra premium for businesses that truly have fluctuating value of their customers’ property in their possession.
- Damage in process: This type of bailee coverage is usually automatically a part of bailee's insurance, but it’s worth mentioning that not all bailee's policies include it. Damage in process extends coverage to repairs if you or one of your employee’s damages the customers’ item during repair. Any type of repair shop or business that does repairs should make sure their bailee insurance includes this coverage.
- Mysterious disappearance: This covers your customers’ property if you lose it. Most standard bailee’s insurance forms will exclude this type of loss, but you can typically add it for extra premium. Losing your customers’ property seems unlikely but it does happen, especially with businesses such as dry cleaners. It’s quite common for a dry cleaning business to mix up clothes and return somebody else’s to you.
As with any insurance, you’ll want to be aware of the exclusions, or things not covered, in your bailee’s insurance form. And since insurance forms can be very difficult to understand, it’s likely a better use of your time to discuss this with a local independent insurance agent who knows the ins and outs of commercial insurance.
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Finding the Right Bailee's Insurance for Your Business
Bailee’s insurance is just one aspect of having comprehensive insurance coverage, but it’s a critical one if you have temporary care, custody, or control of customers’ personal property. Independent insurance agents from TrustedChoice.com are local and are experts at securing your business the right type of insurance coverage, including bailee’s coverage.
Having comprehensive and proper insurance coverage for your business doesn’t have to mean paying through the roof for insurance. Your local independent insurance agent will work with multiple companies to find the best priced insurance solution for your business. And if you have a claim, your agent will walk you through the process to help your business stay afloat and keep your customers happy. Find the nearest independent insurance agent to you and talk to them about whether your business has the right kind of bailee’s insurance.
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