By David Wilhite
It should come as no surprise that the big insurance news for 1999 was Hurricane Floyd, which caused untold millions of dollars of losses in storm-related damages (the damage total is still being assessed at the time of this writing). However, despite the destructive nature of the storm, 1999 ranks as one of the better years for the least number of insurance claims filed by self-storage facility owners. From an industry viewpoint, this is a strong indicator that owners are becoming increasingly aware of the hazards their operations are exposed to and are taking successful measures to guard themselves against risk.
As we enter the new millennium, it can be valuable to take a look at the types of claims that facility owners most commonly reported in 1999 in order to help you assess your own risk of loss for the coming year. As you will see, many of the types of claims filed were at least partially preventable, and there are a variety of measures that you can implement immediately and at little or no cost that can help reduce your risk of exposure.
Flood Damage to Buildings/ Premises: Flood damage from Hurricane Floyd, as well as various severe thunderstorms, accounted for the largest percentage of claims filed by self-storage facility owners in 1999. Many of these claims were covered by the optional insurance offered by the National Flood Insurance Program. The NFIP can provide affordable flood insurance for facility owners, even if your operation is located within the boundaries of a flood plain. The maximum amount of flood coverage currently available through the NFIP is $250,000, although it may not be necessary to purchase the maximum amount. If you are located outside a high-risk area, you can purchase partial coverage and receive an ACV (actual cash value) payout for damages up to the purchase amount. Excess Flood Protection, which is available up to twice the regular limit, is also available if you have a lot of equity in your buildings and property.
Wind Damage to Buildings/ Premises: Gusting winds from Hurricane Floyd caused significant damage to facility roofs, outdoor signs, etc. To help avoid a claim, take immediate preventative measures to secure your facility as soon as a hurricane warning has been issued. Begin by boarding up windows or securing them with storm shutters, and brace all exterior doors shut. Secure any loose objects surrounding the area, such as trash cans, signs, etc., so that they do not become flying missiles. Remember, also, that in addition to protecting your business from hurricane- and wind-induced damage, a complete insurance package should also include loss-of-business-income coverage and extra-expense coverage to protect your finances in the event of a loss. Your best bet is to purchase property coverage on a special form basis, which also protects against hail, smoke, explosion and other perils, unless the policy specifically excludes them.
Lightning-Induced Power Surges: Several self-storage owners across the country reported computer and equipment damage due to lightning-induced electrical power surges. Some of these losses could have been avoided had surge protectors been in use. Also known as lightning barriers, surge protectors provide protection against electrical storms by instantaneously clamping down on power surges and diverting them harmlessly to the ground. Even in cases where no outright equipment failure may occur, the life of electronic equipment can be significantly reduced following a lightning surge, and surge protectors can significantly extend that life. Remember that damage from surges may not only result in equipment repair and replacement, but also in the loss of income, which can far exceed the cost of protection devices.
Loss of Business Income: Last but not least, Hurricane Floyd was responsible for a large percentage of claims for loss of income. Business-interruption insurance (specifically loss-of-income coverage and extra-expense coverage) is designed to minimize your risk in the event of a covered cause of loss. Keep in mind that loss-of-income and extra-expense coverages are limited to the actual length of time required to rebuild, repair or replace your damaged buildings or business personal property--in other words, the amount of financial loss is determined by the length of time it takes to get your facility back in business. Note also that for loss-of-income coverage to kick in, the suspension of your business operations must be caused by direct loss or damage as a result of a covered cause of loss; it does not cover a loss of income due to such causes as loss of power or forced evacuation.
David Wilhite is the marketing manager of Universal Insurance Facilities Inc. Universal offers a complete package of coverages specifically 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 (480) 970-6240; www.vpico.com/universal.