Why You Should Consider Higher Limits of Liability

By David Wilhite

A recent survey conducted by a major insurance company revealed that many, if not most, business owners purchase liability limits that will not fully indemnify them against the awards typically being handed down by today's juries.

Business-liability insurance provides essential protection for every self-storage facility owner. Business liability protects you against bodily-injury lawsuits--for example, a lawsuit claiming that someone slipped and fell due to wet or icy conditions on your premises. It also protects against property-damage lawsuits, such as one claiming that a security gate crashed down on a car while on your premises. Business liability also provides important protection against lawsuits involving libel, slander, physical eviction or the false arrest of a third party; and advertising injury lawsuits involving plagiarism, copyright infringement and false advertising. (Note that while libel, plagiarism, etc., may not seem like bodily or property damages, that's how the courts have interpreted them.)

The important point for you to remember about business liability is that if you are found liable in a lawsuit, business-liability insurance will cover those sums that you become legally obligated to pay up to the limits of your policy. In short, it protects your business, your assets and your peace of mind. Therefore, since business-liability insurance 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's column will provide a brief overview of liability-limit options, and why you should consider higher limits of protection.

It should come as no surprise that today's juries are routinely awarding tremendous sums of money in bodily-injury and property-damage lawsuits. More than 10 million civil cases 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 revealed that many, if not most, business owners purchase liability limits that will not fully indemnify 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: Five years ago, a jury awarded a $1.95 million judgment to a delivery man who slipped and fell on cracked pavement while making his rounds to a business. Four years ago, a jury awarded $3.5 million award to a man who sustained serious personal injury after falling in a hotel shower. And just three years ago, a jury awarded $22 million to a woman who went into a coma after being struck on the head by a heavy toolbox that she pulled off a shelf in a hardware store.

These cases illustrate three important points: First, juries routinely award enormous sums of money in personal-injury cases; second, the liability limits you choose can spell the difference between solvency and bankruptcy; and third, liability limits of $1 million or more--which, just a few years ago, was considered adequate for many business owners--must no longer be considered unusual or excessive.

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

Assuming you've reviewed your business coverage and decided to increase your liability limit, how do you go about estimating the amount of coverage you'll actually need? Some experts recommend that you base your limits on multiples of your annual revenues. Another method for determining adequate coverage limits is to ask your agent what kinds of claims have been filed against storage facilities in the past and what the results were. You may also want to consult with a legal professional to find out what kinds of awards (in dollar amounts) have been made in your state in the past few years for similar businesses, and under what circumstances. 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 sure your coverage protects you to at least that point.

Remember, no matter how large or small your self-storage facility may be, securing adequate coverage is essential for protecting your business and your peace of mind.

In addition to loss-of-income and extra-expense coverages, Universal Insurance Facilities Ltd. offers a complete package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (480) 970-6240; e-mail uif@vpico.com; www.vpico.com/universal.