An Insured is In Possessory Control of Guests’ Property When it Fully Controls the Security Arrangements for the Property
Ritz-Carlton Hotel purchased an insurance policy from primary insurer, Zurich Insurance Company (“Zurich”) and excess insurer, Liberty Mutual Insurance Company (“Liberty Mutual”). Coverage A of the policy excluded property damage to personal property in the care, custody, or control of the insured. However, Coverage L of the same policy covered up to $250,000 for any property belonging to guests while the property is in the premise or possession of the insured. The Schauflers rented a room at Ritz-Carlton and left valuable money and jewelry in a safe inside their hotel room while they toured Chicago. When the Schauflers returned their valuable items were missing.
The Schauflers sued Ritz-Carlton for negligently failing to prevent unauthorized duplication of the room and safe keys. The insurers (Zurich, Liberty Mutual and the Ritz-Carlton) settled the claim with the Schauflers for $1 million, paying $250,000, $375,000 and $375,000 respectively. Liberty Mutual and the Ritz-Carlton then brought suit against Zurich to recover what they paid in the settlement. Zurich answered it had paid the applicable amount according to the insurance policy. The trial court ruled in favor of Zurich’s motion on the pleadings, finding that Zurich was liable only for $250,000 under property described Coverage L of the policy.
The key question is whether the property is covered under Coverage A or Coverage L. Similarly to a bailiff, an innkeeper has custody and control of guests’ property and assumes the duty to protect that property. The court held that the guests’ property falls in possessory control of Ritz-Carlton. Ritz-Carlton fully controlled the security arrangements for property left in the hotel room and the hotel controlled access to the room. Therefore, the policy could be reasonably construed to include the guest property under Coverage L. The court affirmed the trial court’s holding that the exclusion from Coverage A prevents coverage in this situation under Coverage A and that Zurich was only liable for property covered under Coverage L of the policy.
