Customers' Goods Legal Liability
By David Wilhite
The self-storage industry has undergone a series of tremendous changes over the past two decades, evolving from a core group of small, mom-and-pop facilities to a large, powerful organization of professional business people. The rapid growth of the industry has further created a variety of challenging new issues with which we must now come to terms.
When the self-storage industry was young, so were its buildings. Facility owners had secure new roofs that did not leak, factory-fresh doors that properly sealed their units, and a much lower incidence of crime than today. This environment was very attractive to insurance companies, several of which developed products specifically for the industry. These specialty insurers provided better coverage than what was generally available at the time, and many offered significantly reduced premiums for substantial savings.
During the '80s, when the self-storage industry was reaching a new level of activity, so to were its insurance exposures. Due to various challenges we were experiencing at the time--primarily the recession--building maintenance and repair was deferred in many facilities, increasing the potential for damage to customers' stored goods. In addition, the criminal element discovered that self-storage facilities were ideal places to conduct their activities. These developments caused insurance-claims activity to increase dramatically in certain areas, and helped give rise to specialized insurance coverages, such as customers' goods legal liability, to help facility owners protect themselves.
Customers' goods legal liability is a very important coverage unique to our industry. The basic premise of self-storage is that we act as landlords, not warehousemen; we never take possession of our tenants' goods. Therefore, we are not responsible for those goods since we are simply renting space. However, there are certain situations that can create legal liability on your part for damage to your customers' goods. For example, by providing a building to store goods, we represent protection against the elements. If a customers' goods are damaged by water or fire, he may feel you were somehow negligent in honoring that representation.
If you are found legally liable for damage to tenants' property, your customers' goods legal liability insurance coverage will probably pay the claim. Just as important, it provides defense costs even if a claim is found to be groundless, false or fraudulent. It also includes coverage for damage done to customers' goods stored in the open, should you be found legally liable for that damage. This coverage is not normally available in the standard insurance market and cannot normally be added to the standard business-owner's package policy. It is available only through specialty markets for self-storage insurance.
With the recession well behind us, most facility owners have gotten their deferred maintenance schedules under control. This new emphasis on routine maintenance is helping to contain losses in the area of our customers' goods. Aside from a complete re-roofing of your facility, there are many new products available for sealing aging roofs. There are also companies that sell maintenance products, such as unit door threshold seals, that provide cost-effective alternatives to more expensive repairs. And facility operators have kept busy implementing new ideas of their own to help contain losses, such as providing pallets in each storage locker. The pallets keep their customers' belongings a few inches off the floor, helping to keep them dry in the event of surface-water accumulation.
Security is also a major concern, and a tremendous number of vendors are in the business of providing various types of security equipment. A growing number of facilities today are equipped with door alarms, computer-controlled entry gates and high-tech surveillance equipment. These products, accompanied by a good resident manager, help control crime.
Sad to say, the days are long gone when we can rent a unit to new customers and turn our back on their activities in our facilities. Many operators routinely photograph customers and some even obtain their fingerprints. This may seem a little drastic, but it has become a necessary practice in some areas. Some operators argue this type of intrusion will chase off customers; however, if it is done in a manner that expresses concern for their property, very few honest people will mind the extra care taken for their security. The customer it does chase off just might be a criminal, and lost revenue on a criminal is really money in the bank.
New construction and proper maintenance of our buildings, combined with hands-on management and attention to security are creating safer and more secure places for customers to store their goods--good news indeed for those of us who wish to keep our insurance costs at an affordable level.
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 firstname.lastname@example.org; www.vpico.com/universal.