There are numerous risks a self-storage operator assumes in running a facility, including damage to the facility itself, injury to a tenant or employee, or a tenant’s property could be damaged, stolen or even improperly sold. To protect themselves from these risks, facility operators can choose from a variety of insurance coverages.
Coverages include those that protect the value of physical buildings and other property improvements, liability and workers’ compensation insurance to address the risk of injuries, and customer’s goods legal liability to respond to claims by tenants when property is damaged by the negligence of the operator. There’s also sale and disposal insurance, which can protect an operator from claims by tenants alleging their property was wrongfully foreclosed. Essentially, there’s insurance for most every kind of risk that could occur within the context of self-storage.
The cost of the insurance depends on the size of the facility, history of its claims, maintenance of the facility, and level of deduction requested. For the most part, having sufficient insurance is a necessary part of any business. However, there are numerous things a self-storage operator can do to reduce his overall risk.
Maintenance and Records
To avoid potential claims of personal injury or property damage, a facility operator must do everything he can to regularly maintain his property. He might focus on maintaining roll-up doors to avoid injuries during operation, or create safety procedures to ensure driveways and walkways are properly salted in winter to avoid potential slips and falls. He should regularly check his roofs and gutters to avoid leaks and backups, and perform inspections to verify fire-safety systems are properly functioning.
Having a positive approach to maintenance the prevention of injuries and property damage will not only reduce the likelihood of such occurrences, but will impact the cost of liability insurance. It’s important facility operators keep written records of all maintenance work they perform. If necessary, these can be used to demonstrate in court that the operator acted in good faith in attempting to maintain his property. If a facility has a log chronicling regular inspections and repairs, this should be sufficient. It’s equally important to keep records of repairs by others, especially manufacturer repairs. These may become relevant if an injury arises from equipment or systems with product defects.
Operators should put facility safety procedures in writing and maintain a log of when these are accomplished. This will constitute significant evidence of the care taken to avoid injuries and damages at the facility.
A Solid Lease Agreement
Self-storage operators should focus on the terms of their lease agreements with tenants. Based on the laws of many states, it may be possible and appropriate for an operator to limit his liability exposure to tenants based on the terms and conditions of the facility’s lease. These “exculpatory” provisions can address not only the risk of loss or damage to a tenants’ stored property, but the tenants’ risk of personal injury on the premises.
In some states, courts will simply disregard these provisions completely as being against public policy (meaning the courts find the effort of a business owner to have customers release any of their rights as unfair), while other courts have found that as long as the release provisions are clear in writing and noticeable by the customer—large type and bold—such provisions would be appropriate. Language addressing a tenant’s waiver of loss or damage to his stored property might read something like this:
The Owner is not a warehouseman engaged in the business of storing goods for hire, and no bailment is created by this Agreement. The Owner exercises neither care, custody, nor control over the Occupant's stored property. All property stored within the Space or on the Property by the Occupant or located at the facility by anyone shall be stored at the Occupant's sole risk and the Occupant must take whatever steps he deems necessary to safeguard such property. The Owner and the Owner's employees and agents shall not be responsible or liable for any loss of or damage to any personal property stored in the Space or on the Property resulting from or arising out of the Occupant’s use of the Space or the Property from any cause whatsoever, including but not limited to, theft, mysterious disappearance, mold, mildew, vandalism, fire, smoke, water, flood, hurricanes, rain, tornadoes, explosions, rodents, insects, Acts of God, or the active or passive acts or omissions or negligence of the Owner, the Owner’s agents or employees.
Provide Tenant Insurance
Facility operators can contractually seek to “shift the risk” of insurance to their tenants. As a general rule, self-storage facilities are not accountable for the care, custody or control of the property stored by tenants. If an operator requires tenants to obtain insurance, then the chance of a tenant filing a claim against the operator is decreased because the tenant is more likely to file a claim with his own insurance company.