Entrustment exclusion applies to real property, such as fixtures, when entrusted to another.

Before the court was Lexington's motion for summary judgment. Lexington issued a commercial policy to the plaintiff that contained an exclusion for loss or damage caused by misappropriation, secretion, conversion, fraud, infidelity or any dishonest act or omission on the part of the insured or other party of interest or others to whom the property may be entrusted. Plaintiff's president gave an individual/former employee permission to scavenge metal from the warehouse and provided keys and unsupervised access to the warehouse. The former employee removed metal wiring and fixtures as well as 66 radiators. Following a dispute regarding the radiators, the plaintiff filed a notice of loss with Lexington. After conducting an investigation, Lexington denied coverage based upon the entrustment exclusion. The district court granted Lexington's motion for summary judgment, and the Third Circuit affirmed, finding that the entrustment exclusion applied to building fixtures and personal property and nothing in the policy language indicated that the exclusion would not apply to real property, including fixtures, entrusted to another.

Case Law Alert - 3rd Qtr 2012