Form CR 04 11: Guests' Property
1. What the form is
The CR 04 11 Guests' Property endorsement is a commercial crime insurance form designed to add an Insuring Agreement to cover loss of or damage to the property of an insured's guests. This coverage applies while the guests' property is on the named insured's premises, in the named insured's possession, or in a safe deposit box on the named insured's premises. Essentially, this endorsement protects businesses that have legal liability for their guests' belongings. The endorsement allows the insured to select coverage for guests' property in safe deposit boxes and/or inside the premises, with corresponding limits and deductibles. It's important to note that the insurance is for the benefit of the named insured only; guests do not have direct rights under this endorsement and claims must be brought by the named insured.
2. Classes of business it applies to
This endorsement is primarily designed for businesses in the hospitality industry or any business that takes temporary custody of guest or customer property. Real-world examples include:
- Hotels and Motels: This is the most common application, covering guest belongings in rooms, in hotel safes, or while in the hotel's possession (e.g., luggage held by concierge).
- Hospitals and Nursing Homes: These facilities may use this endorsement to cover patient property.
- Restaurants and Clubs: Businesses offering coat checks or temporary storage for patrons' belongings.
- Other businesses providing safe deposit boxes for customers: Any business, other than a financial institution, that offers safe deposit boxes for customer use might also utilize this endorsement.
3. Special considerations
There are several important points to consider when using the CR 04 11 endorsement:
- Legal Liability Basis: Coverage typically applies to the insured's legal liability for damage to guests' property.
- Defense Costs: The endorsement may provide for the defense of the insured if sued for refusal to pay for loss or damage to guests' property, with these defense costs often being in addition to the policy limit.
- Exclusions: The endorsement modifies some standard crime policy exclusions but also adds specific ones. For example, it may remove exclusions related to theft by employees or certain representatives. However, it often adds exclusions for losses due to fire or liability assumed under contract, unless there's a prior written agreement with the guest regarding property inside the premises.
- Benefit of Insured Only: As mentioned, the coverage is for the named insured. Guests cannot directly file claims under this endorsement.
- Distinction from Bailee Coverage: While similar in concept to bailee's customers insurance (which covers customer property in the insured's care, custody, or control), this crime endorsement specifically addresses the theft or damage exposure related to guests' property within the context of a commercial crime policy.
Real-world example: A hotel guest claims their expensive jewelry was stolen from their room. If the hotel has the CR 04 11 endorsement, they can file a claim with their insurer, subject to the policy terms and limits, to cover their legal liability for the guest's loss. However, if the loss was due to a fire, it might be excluded under this specific endorsement.
4. Key information for agents and underwriters
Agents and underwriters should focus on the following when dealing with the CR 04 11:
- Risk Assessment:
- Evaluate the type and value of guest property typically on the premises. A luxury hotel will have a different risk profile than a budget motel.
- Assess the security measures in place: surveillance, safes in rooms, procedures for handling guest valuables, and security of safe deposit box areas.
- Review the insured's loss history related to guest property.
- Pricing and Limits:
- The rate is often based on the predominant activity of the insured.
- Limits and deductibles should be selected based on the potential exposure. The insured can choose separate limits for property in safe deposit boxes versus property elsewhere on the premises.
- Consider if the standard limits offered are adequate or if higher limits are necessary, especially for establishments catering to a wealthy clientele.
- Coverage Gaps:
- Ensure the insured understands the exclusions, particularly the fire exclusion and the contractual liability exclusion.
- This endorsement covers the insured's legal liability. It is not a "no-fault" coverage for any and all guest property loss.
- Consider if other coverages, like a commercial property policy or a separate bailee's policy, are needed to address gaps. For instance, property damage from causes other than those covered by the crime form (e.g., accidental damage by hotel staff) might need different coverage.
- Underwriting Guidelines:
- Verify the insured's procedures for managing guest property, including logs for items placed in safe deposit boxes and training for staff.
- Innkeeper's liability laws vary by state and can affect the insured's legal obligations and therefore the potential exposure under this endorsement. Underwriters should be aware of these local regulations.
- The definition of "guest" and "premises" should be clearly understood in the context of the policy.
Real-world example for underwriters: When underwriting a hotel, an underwriter would examine the quality of their in-room safes, the security protocols for their main safe deposit area, staff background check procedures, and any history of guest theft claims. They would also consider if the limits requested by the hotel are reasonable given the average value of property their clientele might bring. If the hotel frequently hosts events with high-value items (e.g., jewelry shows), this would significantly increase the risk profile.