Going green through the use of environmentally friendly practices, materials and technologies is the theme of business today. Paul Nutcher, a director for the Central Florida Chapter of the U.S. Green Building Council, wrote in the July issue of Inside Self-Storage about change in Florida from voluntary to mandatory enactment of green or sustainable building. Recently, San Francisco Mayor Gavin Newsom signed into law strict green building codes for new construction and renovations of existing buildings.
Unfortunately, these law or code changes could result in the most significant gap in property insurance for owners of existing self-storage facilities. They may lack proper insurance coverage for the enforcement of building ordinances or laws affecting repair or reconstruction of property. These gaps in coverage cause most people to see red rather than green.
Adopting New Standards
Building codes regulate construction standards and specifications primarily to protect people from dangers of fire and building collapse. Adoption of green or sustainable building standards affect construction costs through building material specifications and mandating the efficiency of systems that draw on the use of water and energy resources. The Americans With Disabilities Act of 1990 also added standards for new construction and alterations of existing buildings to accommodate people with disabilities.
Although the self-storage industry is rather young, a substantial part of its infrastructure dates back more than 30 years when construction standards were much different than current building codes. While many older facilities have been renovated over time, most remodeling focuses on maintaining the marketability of a facility. These improvements may not include building-code upgrades often required in the event of substantial building repair.
Evaluate Your Existing Policy
As a self-storage facility owner, you likely purchased property insurance to cover any substantial repairs or to replace your buildings in the event of a fire, wind storm or other similarly devastating causes of loss.
Most insurance agents and companies estimate the proper dollar amount to repair or replace the existing structures with like kind and quality based on good information about your facility, including size, construction type and special features. This process should also include loss of income during the time required to repair, rebuild or restore your business to your previous income- producing level. Loss of income coverage is often written in conjunction with the building insurance.
Insuring for Code Changes
Proper evaluation of the cost to rebuild your existing property is particularly important if your policy includes a co-insurance clause. This clause reduces the amount of payment for repair or replacement of a partial loss unless your insurance limit is equal to at least 80 percent of the replacement cost of the insured property at the time of the loss.