The unique nature of the self-storage industry makes it necessary to look into specialized insurance coverages. While standard business policies provide coverage for building, business personal property and general liability, a self-storage policy should include coverages that guard against risks specific to our business. Following are some key coverages, steps to mitigate claims, and advice on how to handle a claim if it occurs.
Customers Goods Legal Liability
Customers Goods Legal Liability (CGLL) is intended to help guard against claims related to self-storage tenants’ belongings. Owning a storage facility creates a relationship similar to that of a landlord and tenant rather than a warehouseman and depositor because the operator never takes possession of the customer’s goods. The main objective is to simply rent space.
However, there are certain situations that can create legal liability for the facility. For example, if a customer’s property is damaged because the operator failed to properly maintain the grounds or structures, the tenant may believe the business was negligent. If the facility is found responsible, it would give rise to a claim. A policy that includes CGLL insurance could provide coverage for this type of claim up to the limit. It could also provide necessary defense costs, even if a claim is found to be groundless, false or fraudulent.
Sale and Disposal Liability
Sale and Disposal Liability (SDL) coverage provides protection against the wrongful seizure, sale, use or destruction of another party’s goods. At some point, almost every self-storage operator will be faced with the unenviable task of evicting a tenant, reclaiming the space, and removing or disposing of the tenant’s property. SDL coverage helps to protect the facility against claims arising from the negligent sale, removal, disposal or disposition of a customer’s property.
The coverage also provides for legal costs. Most states have specific statutes governing the sale and disposal process, but if the procedures aren’t followed exactly (even if there’s only a small error), the facility owner is vulnerable to a potential lawsuit. Due to the incredible diversity of goods stored and the wide range of value of the property, the penalty for conversion can be extremely high. To minimize claims:
- Be aware of your state lien laws.
- Contact a specialized attorney about preparing written procedures that outline the exact steps for disposing of a delinquent tenant’s property.
- Always double check the spelling of names and addresses.
- Don’t make any changes to information on the rental agreement, even if it’s just to correct an obvious misspelling, without getting a signed change-of-address card from the tenant.
- Remember to document, in photographs and writing, every step of the inventory and auction process. In a lawsuit, you’ll have to show proof that the disposal of the delinquent tenant’s goods conformed to the state statutes.
- If there’s any reason to question the sale of a tenant’s goods, don’t hold the sale! Many owners prefer to let tenants to retrieve their property at no charge rather than go through the potential liability of an auction.
Handling a Claim
The above mentioned exposures are industry-specific, so make sure you have an insurance policy that includes CGLL and SLD coverage. Bear in mind that self-storage operators are also vulnerable to claims that can occur at most other businesses. Hopefully, you never need to file a claim, but it’s important to know what to do, just in case. Below are some suggestions for handling an incident that results in an insurance claim.
Even before there are any issues, you should have a basic understanding of the insurance policy in place. It also helps to have a good working relationship with an insurance agent. Insurance policies are a type of contract in which there are promises made. The insured must pay a premium in exchange for the insurer (insurance company) to provide certain coverages. The insurance policy is all about transferring risk.
It’s not the storage owner’s job to settle a claim before reporting it to the insurance company. Attempting to settle a claim without reporting it could create a breach in contract. If a loss occurs, report the claim to the insurance company without delay.
When a claim occurs, remain calm and take the necessary steps to ensure everyone is safe and secure. Call 911 if necessary. Once the facility and staff are safe, contact the agent who handles your facility insurance. Even if you don’t think an incident will turn into a claim, report it as an “incident only” in the event a claim does manifest.
To avoid an uncovered claim, submit all information as soon as practical. You’ll need to provide the following to the insurance agent or claims department:
- Contact information
- Legal entity name
- Incident location
- Incident and/or police report
- A detailed description of the incident
Next, make temporary repairs and take any other necessary steps to protect the facility from further damage. Save all receipts, as these will need to be submitted to the insurance carrier. Finally, get a timeline of when the adjuster will be in touch and review your deductibles.
Keep in mind the person who takes your information probably isn’t the one who’ll determine if or how the claim will be paid. The claims adjuster will determine coverage. The truth is, insurance isn’t black and white, and it’s nearly impossible to list all the circumstances that may cause a claim. It’s the insurance company’s ultimate responsibility to determine if the loss is covered.
Having the right insurance policy in place won’t prevent bad things from happening at your self-storage facility, but it’ll help to minimize your loss in the event you need to file a claim. Including industry-specific coverages in your policy and being prepared to handle incidents as they occur will help you better manage your overall risk.
Randy Tipton is the owner of Universal Insurance, which has created and provided specialized insurance coverages to the self-storage industry for more than 20 years. She is a seasoned industry professional with more than 30 years of experience in insurance underwriting, marketing and management. Randy attends self-storage tradeshows, holds insurance seminars and speaks with facility owners nationwide. Viewed as a leading industry insurance expert, she is often called on for advice regarding coverage options. For more information, call 800.844.2101; e-mail [email protected]; visit www.universalinsuranceltd.com.
