Property and Casualty Insurance Practice Exam

In the context of general liability, what does the term "care and custody" refer to?

1. Property owned by the insured

2. Property that the insured is temporarily responsible for

3. Property stored in a warehouse

4. Any property under the insured’s possession

The correct answer is: Property that the insured is temporarily responsible for

The term "care and custody" in the context of general liability insurance specifically refers to property that the insured is temporarily responsible for but does not own. This includes situations where the insured has taken possession of someone else's property, either through custodial responsibilities, repair services, or similar arrangements. Understanding this term is crucial for determining coverage under general liability policies, as liability for damage to property in the insured's care and custody may be limited. In many cases, general liability insurance would not cover losses related to property that the insured has in their care, as the liability extends primarily to damages resulting from their negligence towards other people's property, not their own. In contrast, property owned by the insured and property stored in a warehouse typically fall under different forms of coverage, such as property insurance or specific endorsements not related to care and custody. Additionally, the concept of possession alone encompasses a broader category that includes owned property, which doesn't capture the nuanced context implied by "care and custody." Thus, recognizing that the term specifically pertains to property temporarily entrusted or for which the insured holds responsibility helps clarify its importance in the realm of liability insurance.