In the insurance world, liability coverage is intended to protect an entity against claims alleging that a business or person was negligent or acted inappropriately, resulting in bodily injury or property damage. Self-storage seems to be a simple and straightforward industry: Facility owners do not take bailment of tenants’ goods, and the lease agreement provides a first line of defense. So why does a facility have so much liability exposure?
Although the foundation of the industry is straightforward, your self-storage operation has technical, legal and financial aspects not found in other businesses. You may have heard your insurance agent describe liability claims as having a “long tail,” meaning you might not find out about them until much later, even years after incidents occurred. Even still, the right insurance should alleviate your concerns. Let’s take a closer look at the six most critical liability exposures prevalent at self-storage facilities today and the coverages available to protect against them.
Business Liability Insurance
This is typically the basis of any business policy and is very broad coverage. It provides protection against lawsuits claiming someone was hurt or property was damaged on your premises. Also, there is coverage for personal-injury lawsuits involving libel, slander, physical eviction or false arrest of a third party.
Some other aspects it covers are advertising-injury lawsuits involving plagiarism of advertising copy, infringement of copyright, title or slogan, or false advertising. Some of these claims might not seem like bodily injury or property damages, but that’s how the courts have interpreted these scenarios.
If you’re found negligent, business liability insurance pays those sums you become legally obligated to pay. One of the most important components of this coverage is the legal defense provided. It’s alarming and surprising the types of claims that occur at self-storage facilities, such as:
- A tenant claims she was raped by the facility manager.
- A guest/tenant at the facility was bit by a dog on the property.
- A facility that didn’t do its research used the same exact phone name as another that was protected by a copyright.
- A pregnant woman slipped coming out of the bathroom.
The insurance company will defend your entity if there’s negligence or it settles on your behalf. The limit of liability is available for payment to the “injured party.” Not only is it essential to have this coverage, it’s important to have sufficient limits. You would be shocked to see how large these settlements are in this segment of the insurance industry. Many carriers will provide up to $5 million liability, and you can obtain additional limits by purchasing an umbrella policy that gives additional coverage over the basic.
Look for defense costs “outside the limit,” which means the limit you choose is available for settlements or judgments and legal defense is in addition to the limit. Many times legal defense is as much or more than the claims.
This is what we refer to in the insurance world as “goodwill” coverage. It’s a sublimit of the business liability coverage, providing typical limits from $5,000 to $25,000. The name of this coverage actually speaks for itself. Medical payments provide payment of medical expenses for bodily injury to others, regardless of liability. Consider the follow situations:
- Someone hurts himself at the facility.
- A door hits a tenant in the head.
- A tenant slips on ice.
- A kid trips inside one of the units.
These are just a few examples of injuries that could occur at a facility. In any of these cases or similar scenarios, the insurance company could decide to offer medical-payment reimbursement for the injury without determining negligence. Oftentimes just paying the medical costs could wrap up the claim without the need for attorneys and long legal battles. This is a coverage for which negligence is not necessary. It’s imperative you understand, however, that you cannot offer this coverage to the injured party. It’s a decision that’s always made by the insurance company.
Customer’s Goods Legal Liability
This coverage is specifically designed for self-storage. It’s intended to help guard against issues and hazards that only surface in our industry. When you own a facility, you act as a landlord, not a warehouseman, because you never take possession of tenants’ goods. You are not responsible for those goods, since you’re simply renting space. However, there are certain situations that can create legal liability on your part.
For example, by providing a building in which to store goods, you represent protection against the elements. If your customer’s property is damaged by water because you did not properly maintain your roof, he may feel you were negligent in honoring that representation.