Restoration Insurance: Rekeying New Locks

We came across a strange claim involving a restoration contractor we felt was worth sharing: a restoration contractor was working at an apartment building. One of the employees had a master key set that went to several apartments at the complex. One afternoon, when he left for lunch and accidentally left the keys on his ladder, the keys had been stolen when he returned. When he reported the loss, the apartment complex had to replace all 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 a scenario above. Part of the issue is because there is no actual 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 general liability policy would pay to have all of the door locks replaced.

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

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