Legal Definitions - bailee policy

A bailee policy is a specific type of insurance coverage designed to protect businesses or individuals who temporarily possess or hold property belonging to others. This policy safeguards the bailee against financial losses if the customer's property is damaged, lost, or stolen while it is under their care, custody, or control. The party temporarily holding the property is known as the "bailee," and the owner of the property is referred to as the "bailor."

Here are some examples to illustrate how a bailee policy works:

• Example 1: Auto Repair Shop
  Imagine an auto repair shop that has several customer vehicles parked on its lot awaiting service. One night, a sudden and severe hailstorm unexpectedly damages the exteriors of these cars. The repair shop's standard property insurance might cover damage to its own building and equipment, but it wouldn't cover the customers' vehicles. A bailee policy, however, would cover the costs to repair the damage to the customers' cars, protecting the repair shop (the bailee) from having to pay for those repairs out of pocket. This demonstrates the policy covering damage to property (cars) held by the repair shop for its owners (customers).

• Example 2: Dry Cleaning Service
  Consider a dry cleaning business that accepts customers' clothing for cleaning and pressing. While a customer's expensive suit is hanging in the shop, a plumbing leak occurs overnight, causing significant water damage to the suit and several other garments. The dry cleaner (the bailee) is responsible for the items in their care. A bailee policy would cover the cost of replacing the damaged clothing for the customers, ensuring the dry cleaner can compensate their clients without suffering a major financial setback. This illustrates the policy protecting the dry cleaner from liability for property (clothing) belonging to others (customers) while in their temporary possession.

• Example 3: Furniture Moving and Storage Company
  A moving and storage company is hired to transport a client's household furniture and temporarily store it in their warehouse before final delivery to a new home. While the furniture is in storage, a fire breaks out in a neighboring unit and spreads, causing smoke and heat damage to the client's antique dining table and sofa. The moving company's standard business insurance might cover damage to its own warehouse, but not the client's belongings. A bailee policy would compensate the client for the damage to their furniture, covering the moving company (the bailee) for the loss of property entrusted to them by the client (the bailor). This shows the policy covering damage to property held by the moving company for its client.