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A bailee is a person or a company that temporarily takes possession of someone else's property for a specific purpose under a mutual agreement.

What is Bailee in Insurance?

In the context of insurance, a bailee refers to an entity that has temporary custody of another person’s property, with the responsibility to return it in good condition after the purpose for which it was entrusted is fulfilled. This relationship is crucial because it involves trust and legal responsibilities.

Example: Imagine a dry cleaning business that takes in customers’ clothes for cleaning. The dry cleaner acts as the bailee, taking care of the clothes (bailee’s property) until they can be returned in clean condition to the owner.

Key Components of Bailees

  • Custody and Control: The bailee must have actual physical control or the ability to control the property. This is essential for the bailee’s role to be established.
  • Consent: The transfer of the property to the bailee must be consensual. Both parties agree on the purpose and duration of the custody.

  • Return of Property: The agreement should stipulate that the property will be returned to the bailor or handled as agreed upon completion of the purpose for which it was entrusted.

Types of Bailee Cover

Repair Services

This includes entities that take possession of property for the purpose of performing repairs, such as automotive repair shops or electronics service centers.

Storage Facilities

Companies that offer storage solutions, where individuals or businesses can store their personal or commercial property temporarily.

Transportation Services

Businesses that are responsible for transporting goods from one location to another, such as logistics and courier companies.

Service Providers

Examples include dry cleaners or valet services that temporarily hold onto personal items as part of their service delivery.

How Insurance Covers Bailees

Insurance for bailees is designed to protect against the risks associated with having custody of someone else’s property. This includes coverage for loss or damage to the property while it is under the bailee’s control. The insurance might cover various risks, including theft, fire, or accidental damage. Policies are tailored according to the type of service the bailee provides and the nature of the items in their custody.