Storage operators often think theyre running safe and secure operations based on the systems and controls they put in place to improve themfor example, security equipment and safety regulations. What they dont realize is they may still be missing key techniques to reduce their exposure and protect their business. They should also know that risk management can often assist insurance underwriters in accepting self-storage as an insurable asset, which helps minimize premiums.
There are many exposures that contribute to a facilitys potential liability or loss. This article discusses some of those risks from the insurance perspective. It also suggests practices that can mitigate them.
Surveillance
Did you know that when you proclaim use of 24-hour surveillance cameras to tenants, you are essentially claiming to have a person watching the facility on a monitor at all hours of the day and night? Lets say an event such as a theft occurs that results in loss to a tenant. You could be found legally liable because you did not actually have someone watching the surveillance monitor, ready to contact the proper authorities. Think about this when addressing video surveillance in your rental agreement, advertising and other print materials. Your insurance company will certainly think about it in its evaluation of your business.
At the same time, video cameras can protect your facility from potential liability and property damage and are a worthwhile investment. Pay careful attention to the type of system you purchase. Is it closed-circuit? Does it digitally record to a computer hard drive? How long do you keep recordings? Where is the data stored? Do you keep backups at an alternate location such as a corporate or home office? Your insurance company will ask questions like these to properly evaluate the controls you use and your level of financial risk.
Lighting
Lighting is an important risk-management factor because it adds a level of security to a site, helping to prevent accidents and criminal activity. Facilities should always be well-lit, especially at night, and particularly if a site is open after business hours. Always make sure your lights are in proper working order. Replace burnt-out bulbs and make necessary repairs as quickly as possible. You want to avoid liability for customer safety at all costs, and lighting is one simple solution.
Fencing and Gates
Perimeter fencing and security gates have become an increasingly important factor in managing risk. Fencing should be at least 8 feet tall and, in most cases, include additional protection such as barbed wire to prevent entry by intruders. Choose your fence carefully. Chain link has been the traditional material of choice, but as more criminals have find ways to penetrate it, wrought iron or concrete fencing has become increasingly preferred.
Losses sometimes occur as the result of piggy backing, which is when an authorized individual drives into the property immediately behind a legitimate tenant who opens the gate. To prevent this, use an electronic access system. You can use keypad or card entry, or even require tenants to sign in and out at the office. Your insurance company will ask about fencing and other security equipment in its evaluation.
Fire Protection
Central alarms are key to protecting your facility from fire. Even just a few minutes can significantly change the amount of property damage caused. Fortunately, the cost to implement an alarm system is minimal when compared to potential devastation. Aside from the price of physical damage, you must factor in the business you could lose through business interruption.
Most facilities have full sprinkler systems, which must be inspected at least once a year. Always check a units sprinkler head when a tenant vacates to ensure it hasnt been damaged and isnt leaking. Also check water flow regularly. This is a particular concern in regions of extreme cold, because frozen water can cause the system to malfunction and create leaks; and most insurance policies exclude these damages. A well-planned annual inspection will save you from potential losses.
Tenant-Created Hazards
Lets face it: You dont always know what tenants are storing in their units or who is accessing the space. Customers sometimes store illicit substances or use their units for illegal activities. Others may want to run legitimate businesses out of their space, but you must still set some guidelines for them to follow.
Does your rental agreement clearly indicate which items and activities are restricted? This is essentially important because hazardous or flammable materials can cause property damage, injury and environmental issues. In addition to a properly worded lease, conduct regular walk-through inspections of the site, documenting the types of items you see stored and reporting any suspicious activity to local authorities.
As this industry experiences vulnerability to more and more exposures, every operator needs a detailed risk-management plan. It should be a mandatory aspect of your business and adhered to by all ownership and facility personnel. Youll not only protect your valuable asset, youll generate added value for the customers you serve.
Mike Gong is a property-and-casualty insurance professional for Arthur J. Gallagher Risk Management Services, which has provided a full range of insurance solutions to the self-storage industry since 1990. The company is the fourth-largest insurance broker in the world, maintaining more than 250 offices throughout the United States. For more information, call 800.568.0833.
