By Toby Struewing
A self-storage facility’s insurance needs are different from those of many other businesses. While the basic commercial insurance coverage for property and general liability is still important, several specific options highlight the unique requirements of the storage industry.
One key distinguishing characteristic is the storage professional has a responsibility for customers’ goods and property being stored within his building(s). Facilities that store other peoples’ belongings need specialized insurance solutions tailored to their situation. Here’s a list of coverage options every self-storage operator should consider and ultimately purchase.
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 protect you against legal actions and pay damages up to policy limits and subject to policy terms, as long as you’re in compliance with lien laws applicable in your 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 designed for related but not identical industries. At the time of this writing, there are steps being taken to remedy the situation, and there’s hope to see more specific lien laws in coming years. This has been an ongoing pursuit of the Canadian Self Storage Association, but Canada-wide legislation is still years away, given that it has to be passed in each province/territory individually.
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 follow in the event of delinquency should be addressed completely in the rental agreement. It’s critical these procedures are followed to the letter to avoid being taken to court. If charges are laid, the odds of winning a court battle greatly improve.
Assuming you’ve purchased sale and disposal legal liability and followed the terms and conditions of the policy, legal costs and damages will be paid by the insurance company up to the policy limits. Limits ranging from $10,000 to $250,000 are common for this coverage.
Operators’ Legal Liability
Another key coverage for self-storage professionals is operators’ legal liability. This insurance defends and protects operators from claims for goods that are lost or damaged while in storage. For example, a tenant may have valuable goods or property that has gone missing so they initiate a lawsuit against your facility.