By David Wilhite
Business liability provides essential protection for every self-storage operation. This important coverage protects you against lawsuits claiming that someone was hurt or property was damaged on your premises. (For example, a typical a bodily-injury lawsuit might claim that a customer slipped and fell on ice or on a wet floor, while a property-damage claim would be a gate closing on a car.) Business liability also provides protection against personal-injury lawsuits involving libel, slander, physical eviction or the false arrest of a third party. And advertising-injury lawsuits involve 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's how the courts have interpreted them).
The important thing to remember is, if you are found liable, business liability pays those sums that you become legally obligated to pay. In short, business liability protects your business, your assets and your peace of mind.
Since we can assume that, as a responsible self-storage facility owner, you accept the need for business-liability insurance as one of the basic costs of doing business and want to invest your insurance dollars where they will do the most good, this month's column will focus on a brief discussion of limits of liability 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 that seem to surpass all sense of proportion and common sense. Approximately 14 million civil cases were filed in 1996, which resulted in jury awards totaling hundreds of millions of dollars in product liability and personal injury awards. What is surprising is that a recent survey conducted by a major insurance company showed that the vast majority of its customers knowingly purchase liability limits that would not fully indemnify them against the awards being handed down by today's juries. This can be a very dangerous practice, especially in view of today's litigious climate.
If you believe your current limits of liability are adequate, consider the following examples: In one case, a jury awarded a $1.95 million judgment to a delivery man who tripped over an uncovered hole and injured his back. In a second case, there was a $3.5 million award to a man who was scalded by hot water in a hotel shower, and in a third case there was $22 million award for injuries sustained by a woman who was hit on the head by a wooden box that fell off a shelf in a hardware store.
These examples serve to illustrate three important points: First, juries are routinely awarding enormous sums 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 must no longer be considered unusual or excessive.
Fortunately, the news is not all bad. Increased liability limits are readily available for self-storage facilities in $1million, $2 million and $3 million limits. Plus, most facility owners can purchase an additional $500,000 coverage for just a few hundred dollars extra per year.
Assuming you've decided to increase your business-liability limit, how do you go about estimating the amount of coverage you'll actually need? Some experts say you should base your limits on multiples of your annual revenues, but that can be costly. The best method I've found for determining coverage limits is to ask your agent what kinds of claims have been filed against similar businesses 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, and under what circumstances. Base your limits accordingly. If you are on an extremely tight budget, evaluate how much you can afford to lose, and make sure your 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 specificially designed to meet the needs of the self-storage industry, including loss of income, employee dishonesty, comprehensive business liability, hazardous-contents removal and customer storage. For more information, contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (602) 970-6240; Web: www.vpico.com/universal.