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Safe Deposit and Premises Coverage Forms

Summary: The crime program of the Insurance Services Office (ISO) contains one endorsement used with lodging facility insureds to provide legal liability for guests’ property. Endorsement CR 04 11 03 00 combines the previous form K (CR 00 12 10 90 —guests’ property stored in an insured’s safe or vault) and the previous form L (CR 00 13 06 95 —guests’ property while on the premises or in the insured’s possession.) The agent indicates on the endorsement which coverage is needed by checking the appropriate box. This endorsement, when added to a commercial crime policy provides coverage for guests’ property. Any insured providing lodging facilities is eligible for this endorsement.

Topics Covered:Introduction Insuring agreements Employee theftExclusions Conditions Definitions

Introduction

The insurance professional with motel, hotel, resort, or nursing home owners as clients should be aware of this endorsement—what is and is not covered. (Although motel and hotel owners are the obvious examples, some nursing home/long-term care facilities are now offering short term vacation packages.) Additionally, the insurance professional with homeowners clients may be called upon to answer questions concerning coverage limitations for property in hotels. More and more people travel—for pleasure as well as for business—carrying various types of personal property with them.

Insuring Agreements

The first section adds the two insuring agreements to the commercial crime coverage forms. Both state that the insurer will pay as damages those sums the insured becomes “legally obligated to pay.” Agreement “a” covers guests’ property “in a safe deposit box inside the premises”; while agreement “b” covers the same property while it is “inside the premises or in” the named insured’s possession. The endorsement also promises to provide the insured with a defense if he or she is sued for refusal to pay for loss or damage to guests’ property.

Here is where the water becomes a bit muddy. The insurance professional should check specific state or local statutes regarding innkeepers liability. At one point innkeepers were held to be strictly liable—in other words, insurers—for all of a guest’s property while that guest was on the premises. In recognition that this was harsh, states enacted legislation that limited the amount of recovery, depending on the type of property (generally money and jewelry) and the circumstances of the loss, a guest could claim. However, generally the statutes limiting the amount a guest can claim do not apply to cases where the innkeeper is negligent. A common law duty does not relieve the innkeeper of tort liability. Statutes require that notices stating the amount of an innkeeper’s liability be prominently displayed; hence the notices, usually on the inside of a hotel room door, indicating that valuables must be placed inside the hotel safe or vault. Otherwise, should a piece of jewelry be stolen from a guest’s room there can be no recovery from the innkeeper’s insurance unless the innkeeper can be proven negligent. The homeowners client with unscheduled jewelry takes a risk indeed since homeowners policies have limitations for theft of jewelry.

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