At a car repair shop, a customer's car is wrecked during a test drive. At an IT workshop, a laptop brought in for repair falls off a shelf. At a furniture storage warehouse, a water leak ruins the furniture a client has stored there while their home is being renovated. At a dry cleaner's, a customer's coat is ruined in the machine. All four companies have liability insurance, and without an add-on clause all four typically receive the same rejection: damage to third-party property taken over by the insured is excluded. As a broker, what I see is that this is one of the most common and most bitter insurance experiences of SMEs, because precisely the risk for which the company took out the policy in the first place remains uncovered. This article is about the logic of the exclusion and the add-on covers available for it; the property insurance side of the workshop's own machinery and stock is a separate topic.
- Hungarian general and activity-based liability insurance conditions typically exclude damage to third-party property that the insured has taken over for safekeeping, processing, working on, repair, hire or loan – precisely the everyday risk of a repair shop, a dry cleaner or a warehouse.
- The exclusion can be lifted with a separate add-on: a third-party property (property held for safekeeping) clause, a working-on clause, or garage and workshop liability cover for motor repairers – with a sublimit, a deductible and security requirements, and typically still not extending to the direct object of the service.
- The liability itself does not depend on insurance: under the Hungarian Civil Code (Ptk.), the company is responsible for keeping and returning an item it has taken over, and the conditions for being relieved of liability for breach of contract are strict – an uncovered loss is paid by the company out of its own pocket.
Why does liability insurance exclude property taken over?
General and activity-based liability insurance is built on non-contractual damage caused to third parties: a visitor slips, a mechanic drops a tool on a neighbour's car, water left running seeps through to the neighbour below. Hungarian policy conditions – with wording that varies from insurer to insurer but very similar content – typically exclude damage to third-party property that the insured has taken over for safekeeping, processing, working on, repair, hire, loan or use, or that is in its possession on any other legal basis. The reason is not malice but risk logic: what the company takes over is under its own control, the likelihood and size of a loss depend on how the company operates, and the dispute is typically about contractual performance (was it repaired properly, was it kept properly), not about a chance accident. The same logic excludes the direct object of the service: a badly fitted part, a botched paint job or a ruined haircut is defective performance, not a liability insurance loss. The compass in the article property loss or liability loss points here to a third category: someone else's property under your own control – this falls within the scope of neither basic policy.
The liability still lies with the company
The exclusion does not mean that the company is not liable – only that the insurer does not pay. Under the rules of the Hungarian Civil Code (Ptk.) on deposit contracts, anyone who takes over an item for safekeeping is obliged to keep it safe and return it when the contract ends; and careful handling and return of an item taken over for repair or processing is part of performing the contract for work. Under Section 6:142 of the Civil Code, the obligor is relieved of liability for damage caused by breach of contract only if it proves that the breach was caused by a circumstance outside its control that was unforeseeable at the time the contract was concluded, and that it could not have been expected to avoid the circumstance or avert the damage – a water leak, a dropped laptop or a burglary at the premises rarely falls within this. In practice there are two routes: the customer's own insurance (casco, i.e. comprehensive motor insurance; home insurance; the client's property insurance) pays for the loss, and the insurer then reclaims the amount paid from the company; or the customer claims the loss directly from the company. In both cases the company pays – out of its own pocket if it has no cover for it. The article on leased or own equipment describes the reverse case, where the company's own property is with someone else; together, the two articles map out the asset boundaries.
What add-on covers are available?
On the Hungarian market, the exclusion can be lifted with a clause or an add-on cover, under different names and with different content from insurer to insurer. The third-party property or property held for safekeeping clause pays for damage to items taken over from customers and in the insured's possession – typically with a separate sublimit, its own deductible and security requirements for the storage location (a locked room, an alarm, and for theft the level of protection described in the policy conditions). The working-on or processing clause covers damage to someone else's property while it is being worked on – but typically still excludes the direct object of the service (the part or surface on which the work was being done): the car, yes; the brake disc being replaced, no. Garage and workshop liability insurance for motor repairers is an add-on tailored to this trade: it pays for damage to vehicles taken over for repair, servicing or inspection arising from operational causes – fire, an accident during a test drive, an incident at the premises – with a sum insured per site, and for theft only if the site security prescribed in the conditions (fence, locks, guarding) is in place. For warehousing and logistics companies, warehouse keeper's liability cover is the comparable solution; for dry cleaners and textile service providers, cover for garments taken over; and for IT service providers, a customer equipment clause. What they have in common is that the sum insured has to match the actual value of the items taken over: next to the value of a service yard with ten cars or a warehouse full of furniture, a token sublimit proves insufficient when a loss occurs. The overview of professional and activity-based liability places this family of covers on the map.
What even the add-on does not pay for
The insurer pays only for what is an insured event under your contract, and the add-ons have exclusions of their own. Hungarian policy conditions typically do not pay for damage to the direct object of the service (defective performance); for damage resulting from wear and tear or from a defect that already existed when the item was taken over; for theft if the protection prescribed in the conditions was missing or the item was in an unattended place during opening hours; or for valuables and cash left in the item taken over; and whether test drives, transport and work away from the premises are included varies from insurer to insurer. Documenting the handover is therefore not mere administration but part of your cover: a job sheet or handover report on the item's condition, its existing damage and the objects left in it, with photos – without this, the dispute with the insurer and with the customer will be about what was already wrong to begin with. Among the common reasons for rejection is an undisclosed activity: if the company appears in the policy as “retail” but carries out repairs, storage or processing, there will be no cover for items taken over even if the clause could in principle have been purchased.
What should you do now?
List what kinds of other people's property your company takes over in its day-to-day work, what value it holds at any one time, and where it is stored: these three pieces of information determine which add-on and what sum insured you need. Take out your liability insurance conditions and find the exclusion for property taken over, held for safekeeping or worked on – and whether your policy includes a clause covering it. Look at your handover practice: is there a job sheet, a condition report, photos, a rule for keys and valuables? Check the security of your storage against the level prescribed in the conditions. If you contact me with this information, I request quotes for the add-on cover and prepare the comparison of the offers; in a claim that gets stuck or disputed, I help where I can – the decision, and answering to your customer, remain yours.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) – Section 6:142 on liability for damage caused by breach of contract; rules on deposit contracts and contracts for work
- QBE Atlasz – Garage and workshop liability insurance for motor repairers, supplementary conditions (2004 conditions no longer on sale – cited only as an example of wording on covering vehicles taken over for repair and excluding the direct object of the service)
- Allianz Cégem Vállalkozásbiztosítás (business insurance) – insurance information and conditions (AHE-43600/5, from 28 August 2025) – example of current terms
