Restoration Insurance: Rekeying New Locks

We just came across a strange claim involving a restoration contractor we felt was worth sharing: a restoration contractor was working at an apartment building, and one employee had a master key set that went to several apartments at the complex. One afternoon, he left for lunch and accidentally left the keys on his ladder; when he returned, the keys had been stolen. When he reported the loss, the apartment complex had to replace all of the locks that the stolen keys could access.

So the question is whether or not a general liability policy will provide coverage for a claim like the scenario above. Part of the issue is that there is no physical damage to the locks. However, most people don’t realize that the definition of property damage within a general liability policy includes loss of use of tangible property that is not physically injured. So a standard public liability policy would pay to replace all the door locks.

The next part in question would be the payment for replacement keys for all new locks. In the scenario above, general liability would most likely not provide compensation for the new keys. A public liability policy has an exclusion for personal property in the care, custody, and control of the insured. Since the keys were in the possession of the restoration employee, the policy would not provide coverage.

Please keep in mind that every insurance policy is different. It would be best to talk to your agent about your policy, its endorsements, and exclusions to ensure your company would be covered by the scenario above.