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Business liability insurance


Bailees’ liability insurance

Bailees’ liability insurance provides coverage for the damage or destruction of insured property while under the custody or control of a bailee.

A bailee is a person or organisation that has temporary possession of someone else's personal property and is being compensated to do so. This could include a dry cleaner, parking valet, jewellers, repairers, storage company etc.

Bailees’ insurance covers the risk of legal liability if the goods you’re storing on behalf of others are lost or damaged.

Who needs bailees’ liability insurance?

If your business regularly takes possession of customer property – known as ‘holding it in bailment’, then the business is responsible for returning the property in the same condition as it was received.  Any type of company that regularly stores, repairs or refurbishes customer property should consider adding bailee's liability insurance to their package of business-related insurance coverages.

Common types of businesses that hold property in bailment include:

  • Warehouses and distribution centres
  • Coolstores 
  • Self-storage operators
  • Catteries or kennels
  • Musical instrument shops
  • Jewellers
  • Computer repair shops
  • Mobile phone repair shop
  • Tailors and cobblers
  • Banks with safe deposit boxes
  • Mechanics
  • Restoration companies
  • Any valet services
  • Couriers

What does bailees’ liability insurance cover?

Bailees' insurance provides coverage for property that is on, or in transit to and from, the bailee's premises. Events and perils covered in such policies include:

  • Fire
  • Lightning
  • Theft
  • Explosion
  • Flood
  • Earthquake
  • Damage or destruction

Other types of business insurance you may hold, won’t cover you from costs arising from damage to or loss of a customer's property.

Some liability insurance policies may cover the business if the insured item is damaged due to the owner or employee's negligence, but other events, such as fire, extreme weather or burglary, are exempted from general liability and contents insurance policies.

Help with your insurance 

If you are unsure if you need bailee insurance, get in touch with a Gallagher insurance broker. They can advise you on the protection you would need to cover your obligations regarding the risk of accidental loss to a client's property in your care at your premises. In the event of a claim, we will work with you to get a resolution.

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Music store

A professional cellist had just retired and needed to realise some of the value held in her three cellos. She gave one of them to a well-known music shop that specialised in classic instruments and they promised to promote its availability to their clientele and secure a sale for her. No money passed hands but there was a verbal agreement that the shop owner would receive a commission upon a successful sale. Three weeks later the shop was broken into and a number of items were stolen, including the cello. The courts concluded that commission meant the shop owner was a ‘bailee for reward’ and his failure to properly secure his premises constituted a lack of reasonable care. The shop owner’s bailees' liability policy stepped up to his defence paying for all legal costs plus the entire sum he was found liable for.