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  • WisBar News
    September
    22
    2010

    Personal property covered by insurance despite "care, custody or control" provision

    Joe Forward
    Legal Writer

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    Sept. 22, 2010 – A Wisconsin appeals court recently held that an insurance policy provision that excluded coverage for personal property in the "care, custody, or control" of the insured excluded coverage of a house burned by fire, but not the personal property inside.

    Personal property covered by insurance despite “care, custody, or control” exclusion provision

    The president and owner of a construction company used the company to build his house. But since the company did not have "care, custody, or control" of the president's personal property inside, the insurance company could not escape coverage.

    By org jforward wisbar Joe Forward, Legal Writer, State Bar of Wisconsin

    Personal property covered by 
insurance despite care, custody, or control 
exclusion provision Sept. 22, 2010 – A Wisconsin appeals court recently held that an insurance policy provision that excluded coverage for personal property in the “care, custody, or control” of the insured precluded coverage of a house burned by fire, but not the personal property inside.

    James Accola, owner and president of Fontana Builder’s Inc. (Fontana), used his company as general contractor to build his own house. Accola moved in with his family before it was finished. When fire broke out and destroyed the house one night, Fontana still owned the house, but Accola legally occupied it under a temporary occupancy permit.

    Fontana carried an insurance policy with Westfield Insurance Co. The policy excluded coverage of property “owned” by Fontana. Since Fontana owned the house, the house was not covered. The policy also excluded coverage of personal property in Fontana’s “care, custody or control.”

    Accola claimed his personal property inside the house was covered because Fontana did not own the personal property, and it was not in Fontana’s “care, custody, or control.”

    In Accola v. Fontana Builder’s Inc., 2009AP2810 (Sept. 22, 2010), the appeals court ruled that summary judgment was not appropriate where Westfield could not show that the Accolas’ personal property was “necessary to the work being done by Fontana.”

    Two elements of care, custody, or control  

    Westfield argued the “care, custody, or control” exclusion provision was in place to avoid coverage in situations where an insured (here, Fontana) allows valuable property to be stored on its property while work continues. Fontana, Westfield argued, allowed Accola to store his valuable personal property on Fontana’s property when the house was not finished.

    Noting that “care, custody, or control” clauses are ambiguous, the court held that under Silverton Enters., Inc. v. General Cas. Co. of Wis., 143 Wis. 2d 661, 422 N.W.2d 154 (Ct. App. 1988), property is in the “care, custody, or control” of the insured if it is under the supervision of the insured and “it is a necessary element of the work involved.”

    Westfield argued that the “supervision” element of Silverton is automatically necessary to the work involved, and Accola, as owner and president of Fontana, had close supervision of his own personal property. The appeals court disagreed.

    “To state that because Accola had close supervision of his own personal property, the supervision ipso facto was necessary to the work being done subsumes the necessity element into the supervision element of the test,” the court wrote.

    Under Silverton, the court explained, “we cannot see how the Accolas’ personal property was necessary to the work involved in finishing – or, for that matter, building – their house.”

    However, the appeals court noted that Accola’s supervision of the property “may well be relevant to the merits of [a] potential negligence claim.” Allegedly, a Fontana employee caused the fire by leaving flammable rags in the house.

    The court also discussed Meiser v. Aetna Cas. & Sur. Co., 8 Wis. 2d 233, 98 N.W.2d 919 (1959). In Meiser, the court held that damaged windows were not in the “care, custody, or control” of a subcontractor who scratched them because they were not necessary for plastering walls.

    The court refused to inject a Meiser implication that the windows, damaged by the subcontracting wall plasterer, were in the “care, custody, or control” of the general contractor.

    “[T]here is a big difference between saying that the windows of a house are a necessary element of the work involved in building a house, and saying that the personal property of the future owner of a house is a necessary element of the work involved in finishing its construction,” the court wrote in a footnote.

    Finally, because Westfield failed to brief the issue, the appeals court did not consider a “hybrid corporate piercing the veil” issue presented by the possibility of treating Fontana and Accola, as its owner and president, as “one and the same” for purposes of “care, custody, or control.”

    The appeals court reversed the Walworth County Circuit Court’s summary judgment in favor of Westfield, and remanded for further proceedings.