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October 13, 2016  

 Q&A of the Week
Care Custody or Control of Stolen Property from Hotel Parking Lot

Our insured operates a hotel. Two patrons had parked their motorcycles in the parking lot and had gone inside. The saddle bags were stolen off of their motorcycles, which contained their personal property. Insured does not have surveillance or security working in the parking lot. Would I be able to apply exclusion j(4) Damage to Personal Property in Your Care Custody or Control?

ANSWER: The care, custody, or control exclusion would not be applicable in this situation. The care, custody, or control exclusion excludes coverage for damage done while the property was in the care, custody, or control of the insured. Just because a vehicle is parked in the parking lot of the insured does not mean that it is in the care, custody, or control of the insured, as the vehicle driver still possesses the key and the title and responsibility of the vehicle. The insured may be liable for negligently allowing a robber on the premises of the hotel due to inadequate security (a lack of surveillance or security personnel as mentioned), which resulted in the theft. If a case is brought, the defense of the insured should be provided, and coverage for liability should apply if the insured is found to be negligent.
 Litigation Watch
Additional Insured and a Certificate of Insurance

The insurer filed a declaratory judgment action seeking a declaration that it had no defense or indemnification duties in an underlying action involving its insured. This case is Arch Insurance Company v. Stone Mountain Access Systems, Inc., 2016 WL 3671466.

Arch issued a general liability policy to Walsh Group during which time, Walsh leased scaffolding equipment from Stone Mountain Access Systems. Hansen, an employee of Walsh, suffered injuries after scaffolding equipment collapsed during a construction job, and he filed a lawsuit against Stone.

Walsh had a general liability policy with Arch and this policy had an additional insured endorsement attached that was titled "Additional Insured—Lessor of Leased Equipment—Automatic Status When Required In Lease Agreement With You". Walsh did enter into a written lease agreement with Stone for the use of the scaffolding equipment before the accident that injured Hansen.

After Hansen sued Stone, Stone's insurer tendered the defense to Arch. Arch denied coverage, asserting that Stone did not qualify as an additional insured because there was no written agreement or contract between Stone and Walsh adding Stone as an additional insured as required by the policy. Arch then filed this declaratory judgment action.

As noted, Arch said there was no coverage for Stone because there was no written agreement adding Stone as an additional insured. Stone responded that there was a written agreement that included a condition requiring Walsh to provide Stone with proof of general liability insurance naming Stone as an additional insured. Stone said that Walsh understood this and sent certificates of insured to Stone on a regular basis throughout the years. The United States District Court for the Northern District of Illinois noted that one certificate names Arch as the insurer and Walsh as the insured and that apparently, the certificate refers to the policy.

The court said that even if the certificate describing the policy does not extend coverage to Stone as an additional insured, it is plausible that a written agreement exists that properly adds Stone as an additional insured considering that the policy does have an additional insured endorsement attached to it. Moreover, the court found that Arch presented no evidence establishing that no such written agreement exists. Accordingly, the court denied Arch's motion for summary judgment.

Editor's Note: The U.S. District Court noted that while usually a certificate of insurance does not confer rights on the certificate holder by qualifying the holder as an additional insured, in this instance, the certificate clearly referred to the policy that had the additional insured endorsement attached. So, the motion by the insurer for summary judgment on the basis that the certificate of insurance did not explicitly add Stone as an additional insured was denied.
 Fraud of the Week
Staged Crashes – Pennsylvania
AMOUNT: $5 Million

A Pennsylvania man who is known to be a mob sidekick pulled off a staggering insurance con with two former Pennsylvania mob bosses. The defendant owned an auto repair shop and would have his accomplices damage vehicles and then adorn the vehicles with frozen animal parts—deer, geese, and dog—and deer blood at the claimed crash scenes. The accomplices would then take professional-style photographs of the crash scene. The story was often that the vehicles had collided with the animals. Other descriptions of falsified accidents involved flying rocks, concrete, and fruit cartons, leading to more inflated claims. The defendant coached drivers to tell the insurance company that he hit a deer instead of admitting he wrecked into another car, so his insurance rates would not go up after the insurer had paid.
The defendant also employed corrupt tow truck drivers to track down and damage vehicles owned by his own customers, who would return to him for their repairs, and he would inflate the work he did for the insurers. The defendant also had a few police officers working for him who would falsify police reports in exchange for discounted repairs for their personal vehicles.
The defendant correctly believed that a rival body shop owner was secretly testifying against him and hired two hit-men for $40,000 to shoot the other owner and his son in the head. He later called off the hits and redirected them to murder his daughter's boyfriend. They were unsuccessful.
The defendant also successfully corrupted a supervisor at the city's vehicle fleet operation, landing a big repair job and overcharging the city at least $400,000 for repair work.
The corrupt domain collapsed in on itself, as it had become too big to sustain. Over forty accomplices were arrested, and most of them plead guilty. The defendant is now serving twenty plus years for the attempt at his daughter's boyfriend's life and plead no contest to the insurance plots and the hired hits for his rival. He will spend years in prison for his crimes.
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