By Tricia A. Adams
Whether you lease storage containers or modular units for residential or commercial use, your insurance exposures are different from those of a company that just sells these units. Where their exposure ends with the sale, yours for lease may be just beginning. Its critical to understand the fine points of your insurance coverage to make sure your business is protected.
General Liability
This is the biggest exposure faced by mobile-storage and modular-leasing companies. A standard general-liability policy covers bodily and property damage that arises from the operation of the named insured. Since storage companies retain ownership of the units but do not occupy them, the mobile-leasing companys general liability does not extend to third-party claims arising from the units.
Additionally, steps, stairs and entrances create a problem, as theyre not a normal part of the unit being provided and may in fact be installed after delivery. Of course, if a third party is injured in a leased unit, hes going to sue both the owner of the unit and the occupant. If the customer doesnt have sufficient limits to cover the claim, or no insurance at all, the legal responsibility will fall on the company that leased it. A master policy in the name of the leasing company that will extend to the lessee is the best way to cover that exposure.
Property Coverage
This type of insurance responds to the storage unit itself for damage by fire, lightning, hail, vandalism and other damage caused to the unit by perils specified in the policy. It carries a deductible per claim, which is the amount you must pay for each claim. The amount of coverage for the leasing company is based on the total value of mobile units leased. Units not on lease can also be covered under the same policy.
Some storage companies offer this coverage in house through a waiver built into their lease agreement. The problem with this is many insurance departments have taken the stance that if a customer pays for coverage under the waiver, its in fact insurance and requires an insurance license to sell. Violation of this insurance law can result in daily penalties against the leasing company and return of all funds paid by customers that can be deemed as premium. Check with your state insurance department before putting the waiver in place.
Contents Coverage
Contents coverage is not normally offered by commercial or mobile-storage companies, but there is an all-risk product available that will cover direct damage to the contents of the mobile-storage unit. Homeowners insurance will limit on- and off-premise limits and will usually require the unit be located within so many feet of the home to pick up the exposure.
Also, homeowner coverage usually pays a flat percentage of the dwelling value and will lump together the amount of coverage for all out buildings unless theyre scheduled separately. Furthermore, if the contents are damaged from a defect in the leased unit, the homeowners policy will not respond and will flip that unhappy customer right back to you.
Liability Coverage
Mobile-self storage companies that store containers off the customers premises also face liability issues. You have that unit in your care, custody and control either at your building or in a fenced lot. Regardless of the security you offer, should a loss occur on your property from fire, windstorm, hail, lightning, vandalism or theft, you have a degree of responsibility for the goods in storage.
Read your policy and be sure to advise your customer of goods you cannot cover in storage (such as flammables, hazardous materials, fine art, electronics, etc.). Your insurance company should be notified if any of these substances need to be covered so it can endorse your policy for special conditions. Your customers have a right to expect their goods will be safe in your care, and you have a legal responsibility when you remove the goods from their premises to ensure they remain safe.
If you deliver your own containers, you should have sufficient transit coverage to cover the goods in transit, including the contents if you remove them from the lessees premises. If you subcontract the transit, secure a certificate of insurance from the carrier you hire, naming you as additional insured on their transit policy to cover your interest in the unit being transported.
Tricia A. Adams is president of Allen Insurance Group as well as a senior underwriting manager. The company has been nationally recognized for servicing many niche markets for more than 60 years. The agency writes coverage in more than 48 states and Canada, and represents 200 reputable insurance companies. For more information, call 800.922.5536; e-mail [email protected]; visit www.allenins.com .
