Protecting a Self-Storage Business From Property Loss and Liability Exposure: Insurance Coverage Limits and Exclusions
|Copyright 2014 by Virgo Publishing.|
|Posted on: 06/04/2012|
By Kay Schaefer
Would you buy insurance for your self-storage operation that doesn’t protect your business? There are many different insurance products available for business owners, but they’re not all the same. Products differ in what they cover, what’s excluded, what optional coverages are available, etc. Here are some key items to help you a find a policy that protects your self-storage business from property loss and liability exposure.
The first and most important step for you as a self-storage owner is to share your business details with your insurance agent. By knowing your operation well, he can help you choose the most suitable product and insurance company from the many options available. Your agent is the expert who knows insurance companies, the products they offer, and how well they will service you if you have a claim. In other words, the better your agent knows your business, the better he can help you in protecting it.
Over time, your self-storage operation may change. You might add a new building or service, or outsource some services. You’ll need to inform your agent of these changes to ensure your insurance provides protection for these new exposures. In addition, your policy may need to be endorsed (changed) to add or modify coverage and limits. Even if the policy doesn’t need a change, discussing your operation with your agent will ensure your policy continues to provide the most suitable protection for your business.
For example, let's say you decide to add another building to your storage site. You have building materials on site during construction, and a new building at the end of the process. Your insurance policy probably provides a blanket limit covering all your owned structures and business personal property. However, because of the addition, your property limit is likely not adequate.
You and your insurance agent should consider what limit is needed to cover all your property, which might include buildings, materials under construction, security systems, maintenance equipment, lighting, fences, office equipment, manager’s apartment furnishings, signs, golf carts and any other business property.
Let's say the wind blows some shingles off your roof. Do you perform regular maintenance and inspections of your property? Most insurance policies will exclude wear and tear that causes deterioration. If you’ve performed inspections and maintenance, your insurance company probably won’t hesitate to pay for the damage. But if your roof is simply worn out, this could be your responsibility to repair.
Every insurance policy has exclusions. It’s important to know what exclusions apply to your property under your insurance contract and discuss any you’re concerned about with your agent. For example, most package policies providing property and liability don’t cover loss to your property due to earthquake, flood or pollution.
However, an optional coverage or another policy might be available for purchase. Discuss with your agent whether you should obtain insurance coverage for these exposures or “self-insure,” meaning you’ll bear the cost of any loss.
Loss of Income
If you experience a significant loss, such as a fire, you could also experience a loss of income due to your inability to rent units or resume normal operation. Review your policy to ensure your limit for loss of income is sufficient for your business. Here are two important questions to ask: How long will it take to get permits and rebuild, and what will you do if tenants must vacate the undamaged portion of the building while it’s repaired?
In many areas, there are ordinances or laws that may delay or add costs to your repair or rebuild. A partial loss to a building could even require the teardown of the remainder of the building, or the addition of a fire-sprinkler system that wasn’t previously part of the building. How will your insurance respond, and what will you be responsible for paying? Again, your agent will be a great resource to help you with these questions.
One source of liability for self-storage owners that’s moving up on the industry’s radar is the need for compliance with the Americans With Disabilities Act (ADA). Title III of the ADA of 1990 prohibits private entities from discriminating against individuals with disabilities by maintaining places of business that are not physically accessible.
The application of this federal law to storage facilities is not new. Special consideration for access by disabled persons has been important in consideration for all new construction and renovations since 1993. New Title III ADA regulations issued in July 2010, which became effective in January 2012, have increased the responsibility of self-storage owners and their exposure to litigation.
It’s especially important for storage operators to be aware of ADA requirements and take appropriate measures to bring their facilities into compliance. Lawsuits brought by individuals or public-interest groups for failure to comply are not covered by a self-storage owner's liability-insurance package.
In addition to examining your ADA exposure, consider your liability exposure during renovations, repairs, maintenance or new construction on your premises. To help determine if you have adequate limits when hiring contractors, ask what limits of liability they carry in their insurance policies. You should also obtain certificates of insurance from any workers at your site. This will verify their insurance. Your agent might also recommend some changes that you require from their insurance, such as increased liability limits or naming you as an additional insured.
Another consideration is the insurance required if you offer vehicle storage or other types of services such as wine or records storage. You may also rent space to other businesses. What is the nature of their operation, and does it affect your business liability? Discussing these issues with your agent will ensure your policy and insurance carrier are covering you for these additional exposures.
In addition to the above, you must consider other business coverage, such coverage for tenant's stored goods. Do you require that all tenants have their own insurance? Your customers may rely on their homeowner’s insurance to provide protection for their stored property, which may not be adequate.
Outside your rental agreement, you can add a service to assist tenants with protection, or you may have storage-insurance resources available for them at your site. But what if a tenants comes to you after a loss? Is your limit for customers' goods legal liability adequate? Consider what could cause an occurrence and how many units could be affected.
You should also consider your business lien practices. What limit do you carry for sale and disposal liability? You know that once your tenant’s goods have been sold they become priceless. Many claims presented by tenants after a lien sale are due to a mistake made during the lien process. You should review the deductible with your insurance agent and make sure you have adequate limits.
Maximizing your insurance coverage takes work on your part. A regular review of your operation with your insurance agent will ensure your policy coverage is up to date with your business and keeps you aware of things not covered by the insurance contract—items you may be responsible for if a loss occurs.
To protect your business with the most suitable insurance, work closely with your agent to consider all aspects of your business, and understand how your policy coverage, limits and exclusions protect your self-storage operation.
Kay Schaefer is the senior underwriter for Deans & Homer, an insurance managing underwriter providing specialized coverage for the self-storage industry since 1974. Schaefer has more than 30 years of experience writing unique insurance coverage. For more information, call 800.847.9999; visit www.deanshomer.com.