Business-Liability Insurance

Why you should consider higher limits of liability

By David Wilhite

Business-liability insurance provides essential protection for everyself-storage-facility owner. Business liability protects you against bodily-injurylawsuits, such as a lawsuit claiming that someone slipped and fell due to wet or icyconditions on your premises, and property-damage lawsuits, i.e., a lawsuit claiming that agate crashed down on a car while on your premises. Business liability also providesimportant protection against lawsuits involving libel, slander, physical eviction or thefalse arrest of a third party, as well as advertising-injury lawsuits involvingplagiarism, copyright infringement and false advertising. (Note that while libel,plagiarism, etc., may not seem like bodily or property damages, that's how the courts haveinterpreted them).

The important point for you to remember about business liability is that if you arefound liable in a lawsuit, business-liability insurance will cover those sums that youbecome legally obligated to pay up to the limits of your policy. In short, it protectsyour business, your assets and your peace of mind. Therefore, since business-liabilityinsurance is one of the basic costs of doing business--and since you, as a smart consumer,want to invest your insurance dollars where they will do the most good--this month'scolumn will provide a brief overview of liability-limit options, and why you shouldconsider higher limits of protection.

It should come as no surprise that today's juries are routinely awarding tremendoussums of money in bodily-injury and property-damage lawsuits. More than 10 million civilcases are filed each year, resulting in hundreds of millions of dollars in jury awards.What is surprising is that a recent survey conducted by a major insurance company revealedthat many, if not most, business owners purchase liability limits that will not fullyindemnify them against the awards typically being handed down by today's juries.Obviously, this can be a very dangerous practice, especially in today's litigious climate.

If you think your current limits of liability are adequate, consider these three cases:Four years ago, a jury awarded a $1.95 million judgement to a delivery man who slipped andfell on cracked pavement while making his rounds to a business. Three years ago, a juryawarded $3.5 million to a man who sustained serious personal injury after falling in ahotel shower. And just two years ago, a jury awarded $22 million to a woman who went intoa coma after being struck on the head by a heavy toolbox that she pulled off a shelf in ahardware store.

These cases illustrate three important points: first, juries routinely award enormoussums of money in personal-injury cases; second, the liability limits you choose can spellthe difference between solvency and bankruptcy; and third, liability limits of $1 millionor more, which were considered adequate for many business owners just a few years, must nolonger be considered unusual or excessive.

Fortunately, business-liability insurance coverage is readily available forself-storage facility owners at reasonable rates. Increased liability limits can bepurchased in $1, $2 and $3 million limits for just hundreds of dollars extra per millionper year.

Assuming you've reviewed your business coverage and decided to increase your liabilitylimit, how do you go about estimating the amount of coverage you'll actually need? Someexperts recommend that you base your limits on multiples of your annual revenues. Anothermethod for determining adequate coverage limits is to ask your agent what kinds of claimshave been filed against storage facilities in the past and what the results were. You mayalso want to consult with a legal professional to find out the circumstances and kinds ofawards (in dollar amounts) that have been made in your state in the past few years forsimilar businesses. Base your limits accordingly. If you are on an extremely tight budget,evaluate how much you can afford to lose if a judgment is made against you, and make sureyour coverage protects you to at least that point.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc.Universal offers a complete package of coverages specifically designed to meet the needsof the self-storage industry, including loss of income, employee dishonesty, comprehensivebusiness liability, hazardous-contents removal and customer storage. For more information,contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (480)970-6240; www.vpico.com/universal.