Six Must-Have Insurance Coverages for Every Self-Storage Operation

By Randy Tipton Comments
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If you are found legally liable for damage to tenant property, your customer’s goods legal liability insurance coverage will probably pay the claim. It might also provide defense costs, even if a claim is found to be groundless, false or fraudulent. Most of these coverages also include coverage for damage done to customers good stored in the open. This coverage is not normally available in the standard insurance market and usually cannot be added to the basic business owners’ insurance policy.

Sale and Disposal Liability

This coverage provides protection against conversion—the act of wrongfully taking, selling, using or destroying the goods of another party.  Sooner or later, every self-storage owner will be faced with the unenviable task of evicting a tenant for failing to pay his rent, reclaiming the storage space, and removing or disposing of the tenant’s property.  This coverage helps protect you against claims arising from the negligent sale, removal, disposal or disposition of customer’s property when reclaiming space for which rental or other charges are delinquent or unpaid. The coverage further provides for defense and legal costs, even if a customer’s suit is groundless or fraudulent.

Nearly every state has specific statues governing the sale and disposal process. However, if the procedures are not followed to the letter, or if there is an error in any step of the process, self-storage operators are left vulnerable to lawsuits claiming loss or damage to stored goods. Due to the incredible diversity of goods commonly stored and the wide range of values of the property, the penalty for conversion can be extremely high.

In a lawsuit, you will have to show proof that the disposal of the delinquent tenant’s goods conformed to the state statues. If there’s any reason to question the sale of a tenant’s goods, don’t do it! Many owners prefer to allow tenants to retrieve their property at no charge, rather than go through the potential liability of an auction. Again, this coverage is industry-specific and not normally available through regular business-insurance providers.

Pollution Liability Coverage

Pollution liability coverage is a standard excluded coverage in almost every policy. The risk of an uninsured pollution event at your facility is more of a possibility than you might think. Our industry is clandestine in its very nature. Tenants store their “stuff” in your buildings. Think about what might be stored—gasoline, cleaners, toner products, toxic materials, etc.

If you have outdoor storage, what about fuel tanks, “greywater,” and potential ground and water contamination? Have any large RVs parked on your property? If so, you have maybe a 55-gallon fuel tank along with 35 gallons of greywater and another 30 gallons of straight sewage—adding up to 120 gallons of potential environmental damage in just one vehicle!

If leaks develop, you may have some recourse against the customer, but only if you have a properly prepared RV- and boat-storage agreement. Otherwise, be prepared to suck up the full cost of a cleanup, which could completely drain your checkbook and life savings.

Even your most long-term tenants could be leading you to a potential environmental nightmare. Cleaners and toner products, gasoline in lawn equipment, and other items on the EPA’s hazardous-materials list are probably in many of your units. Pollution liability coverage would cover the onsite cleanup, protect you from any legal liability for the pollution, and provide funds if day-to-day operations were interrupted.

Employment Practices Liability Insurance

Employment practices liability insurance (EPLI) is a vital part of your insurance portfolio. Many aspects of your employer/employee relationship could lead to an EPLI claim, from the initial employment interview to termination of employment and everything in between. These everyday roles can put you at risk. Employees are one of your most valuable assets but can also quickly become your greatest exposure.

Over the past decade, the number of lawsuits from employees and potential employees has skyrocketed. These employment-related claims can result in huge settlements. The financial strain could have a crippling affect on any business.

ELPI is designed to protect your business from such losses. In fact, insurance experts agree that because these types of claims are becoming so common, every business, even if you only have one employee, needs EPLI coverage. Fortunately, the cost of acquiring ELPI is very affordable. The product can be customized to fit your self-storage facility’s needs and should be included in your insurance strategy for complete protection of your business.

Having the right insurance coverages is imperative to the success of every self-storage operation. Some of the specialty coverages mentioned above are not typically available through most traditional business-insurance carriers, so you may need to consult with insurers specializing in the self-storage industry. Your agent can help you evaluate all the commercial coverages available in the market, and recommend coverages specifically for your facility.

Randy Tipton is the owner of Universal Insurance Facilities Ltd., which has provided specialized insurance coverage to the self-storage industry for more than 12 years. Universal has clients in 49 states, with agents trained specifically in self-storage. For more information, call 800.844.2101; e-mail randyt@univins.com; visit www.universalinsuranceltd.com.

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