Insurance is an excellent investment for your business, but it can become costly if you do not do your homework. Your self-storage operation has technical, legal and financial aspects not found in other businesses. Since your storage facility is unique, you will want coverage designed to meet your special needs. There are specialists who cater to the industry with the resources to provide you tailored coverages at affordable prices.
Self-storage owners should consider an insurance specialist that can provide a business owner’s policy tailored to the industry. While most standard policies provide coverage for your building, business personal property and business liability, a self-storage policy typically offers coverage to help guard against issues and hazards that only surface in self-storage.
Customers’ Goods Legal Liability
Customers’ goods legal liability is one such coverage. When you own a self-storage facility, you act as a landlord, not a warehouseman, because you never take possession of your tenants’ goods. You are not responsible for those goods, since you are simply renting space. However, there are certain situations that can create legal liability on your part. For example, by providing a building in which to store goods, you represent protection against the elements. If customers’ property is damaged by water because you did not properly maintain your roof, he may feel you were somehow negligent in honoring that representation. If you are found legally liable for damage to tenants’ property, your customers’ goods legal liability insurance coverage will probably pay the claim. It might also provide defense costs, even if a claim is found to be groundless, false or fraudulent. It also includes coverage for damage done to customers’ goods stored in the open. This coverage is not normally available in the standard insurance market and usually cannot be added to the business owner’s package policy. It is available only through self-storage insurance.
Sale and Disposal Legal Liability
Sooner or later, every self-storage owner will be faced with the unenviable task of evicting a tenant for failing to pay his rent, reclaiming the storage space and removing or disposing of the tenant’s property. Sale and disposal legal liability coverage provides protection against conversion: the act of wrongfully taking, selling, using or destroying the goods of another party.
Nearly every state has specific statutes governing the sale and disposal process. However, if the procedures are not followed to the letter, or if there is an error in any step of the process, self-storage operators are left vulnerable to lawsuits claiming loss of or damage to stored goods. Due to the incredible diversity of goods commonly stored and the wide range of values of the property, the penalty for conversion can be extremely high.
The good news is that there are several effective steps you can take to minimize the risk of sale and disposal lawsuits. If you or your staff are involved in the sale and disposal process you must be aware of lien law. Consult with an attorney about preparing a written procedure that outlines the exact steps for disposing of a delinquent tenant’s property. Read and follow all state statutes to the letter. Always double check names and addresses, and don’t make any changes to information on the rental agreement, such as correcting an obvious misspelling, unless accompanied by a signed change of address card. Document, in photographs and writing, every step of the inventory and auction process. In a lawsuit, you will have to show proof that the disposal of the delinquent tenant’s goods conformed to state statues. And if there is any reason to question the sale and disposal of a tenant’s goods – don’t. Many owners prefer to let tenants retrieve their property at no charge, rather than go through the potential liability of an auction (it is certainly preferable to defending yourself in a law-suit). Last but not least, be absolutely certain you have adequate insurance coverage.
When shopping for sale and disposal legal liability insurance, be aware that this industry specific coverage is not normally available through regular business insurance carriers and generally cannot be added to a standard business owners policy. However, the coverage can be secured through insurers specializing in the selfstorage industry. To better help you protect your business, Universal Insurance Facilities, Ltd. offers sale and disposal legal liability coverage as part of their extensive self-storage insurance program.
Universal’s coverage helps to protect you against claims arising from the negligent sale, removal, disposal or disposition of customers’ property when reclaiming space for which rental or other charges are delinquent or unpaid. The coverage further provides for defense and legal costs, even if a customer’s suit is groundless or fraudulent. Best of all, the cost is quite reasonable for the peace of mind and protection you receive.
Business Liability Insurance
Business liability insurance provides protection against lawsuits claiming someone was hurt or property was damaged on your premises. It provides protection against personal injury lawsuits involving libel, slander, physical eviction or false arrest of a third party. It also protects against advertising injury lawsuits involving plagiarism of advertising copy or layout; infringement of copyright, title or slogan; or false advertising. These may not seem like bodily or property damages, but that is how the courts have interpreted them. If you are found liable, business liability insurance pays those sums you become legally obligated to pay.
Business Interruption Insurance
Every self-storage owner needs to protect his income against business interruptions. If you should sustain a direct physical loss from a fire or other covered cause, chances are good you will also suffer an indirect loss of income. Indirect losses refer to the lost profits and the fixed expenses that continue from month to month, whether or not your facility is operating. You are also likely to incur extra expenses as you attempt to resume your normal business operations.
Business interruption insurance, also referred to as “business income” and “extra expense” insurance, is designed to reduce your risk in the event of a loss. It protects you against reduced income and increased expenses that result from damage to your buildings or business personal property. It allows you to retain key employees by maintaining their salaries and benefits. In addition, it encourages prompt settlement of building and business personal property losses. It helps you to retain your tenants and can restore you to the same position you were in before the loss occurred.
Business interruption insurance is usually included in most business owners’ policies as a standard endorsement. However, when you consider business interruption losses can easily exceed direct damage losses, the importance of this coverage becomes clear.
Choosing a Company
When it is time for you to purchase a policy, you will want to work with a quality insurance company with a strong financial rating. The rating indicates the company’s financial ability to pay out future claims and benefits. You can research a company or agency’s financial rating through organizations such as A.M. Best, which provide an independent opinion of a company’s strength based on a series of financial evaluations.
If you are new to the industry, you can contact your state self-storage association for insurance information and referrals. The national Self Storage Association is a great resource if your state does not have its own organization. Also, refer to industry trade magazines; they will more than likely have information regarding insurance programs. Most self-storage insurance specialists will work with your local agent.