Self-storage facilities are different from many other businesses in their insurance needs. While the basic commercial insurance coverage for property and general liability is still important, several specific options highlight the unique requirements of self-storage.
One key distinguishing characteristic of this industry is the storage professional has a responsibility for customers’ goods and property as opposed to his own merchandise. Facilities that store other peoples’ property need specialized insurance solutions tailored to their situation. Here’s a short list of coverages every facility operator should consider.
Sale and Disposal Legal Liability
This coverage provides protection if a tenant defaults on rent and you need to dispose of his stored property. There could be a dispute if the tenant claims the goods were disposed of improperly—or if the wrong property was removed. This coverage will defend you against legal actions and pay damages (up to policy limits) as long as you are in compliance with lien laws applicable in your state or province.
Unlike in the United States, there’s a significant problem in Canada in that most provinces/territories have yet to establish appropriate lien-law legislation specific to the self-storage industry. As a result, facility operators are left to interpret other acts that are designed for related but not identical industries. At the time of this writing, there are steps being taken to remedy this situation in Canada, and we hope to see more specific lien laws for self-storage in coming years.
For risk-management and loss-reduction purposes, self-storage professionals should work closely with their insurance broker and lawyer to review their local lien laws and ensure the contract wording in their rental agreements is clear and consistent.
Also, there needs to be a standard internal procedure regarding notification and process of pending sales. Ideally, the procedure to be followed in the event of delinquency should be addressed completely in the rental agreement.