Businesses that Benefit from Bailee Insurance Coverage
A bailment is a legal relationship between two people, the bailor, who turns over possession of personal property to the bailee, who’s generally someone in the business of repairing, restoring, or otherwise fixing the item(s) in question. Under this agreement, the bailee is under duty to return identical property to the bailor having done the necessary work, or informing the bailor that he or she was unable to complete the task.
Bailee insurance coverage comes into play when an item given over for services is lost or damaged and the bailee needs to make reparations. For example, if a customer drops off clothes that need cleaning to a dry cleaner and those same clothes are somehow damaged or cannot be found, the dry cleaners will be deemed responsible for the lost or damaged goods.
Why the need for Bailee Insurance coverage?
One of the conditions in a commercial property policy is that there is no insurance under the policy for the benefit of others who may have their property entrusted to you. For instance, if you have equipment at a vendor for repair and it is damaged, it is not likely you’ll be able to seek recovery under their commercial property policy. Your insurance company could settle with you, and using the rights of subrogation, proceed against the guilty party for reimbursement.
Liability of bailees
Other types of businesses, other than a dry cleaner, having bailment exposures would include jewelers and electronic repair businesses. When a bailment involves the transfer of property where no compensation is involved, it is referred to as a “gratuitous bailment.” For example, temporarily storing property belonging to your customers in a neighboring store or warehouse for any number of reasons, if the bailment is for the mutual benefit of both parties, the bailee is referred to as a “bailee for hire” or this is considered a commercial bailment agreement.
The degree of care required in a commercial bailment requires the bailee to use only the degree of care that an ordinarily prudent person would use in handling his or her own property. Due to this standard, the bailee’s liability is generally limited to loss or damage that results from the bailee’s negligence, so if the bailor’s property were destroyed in a fire, the bailee would not be liable for damage unless the bailee’s negligence were the cause of the fire.