Limiting Liability in the Mobile-Storage Business: Legal Issues, Rental Agreements and Insurance

By Scott Zucker Comments
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One of the other important provisions unique to mobile storage is the occasional need to “repossess” the container if the rent isn’t paid. An operator wants to avoid the risk of liability if he’s required to enter the customer’s property to recover the container. An example of that provision for the rental agreement is:

Right of Repossession: Upon default, Company reserves the right, without prior notice, to the repossession to the Container and all Property stored therein. Customer acknowledges by this Agreement its prior consent to entry by Company and its agents to the Customer’s property for the purpose of said repossession without the need for court order. Customer hereby waives claims for trespass and/or conversion arising from the repossession of the Container.

There are numerous other provisions that are part of a strong mobile-storage lease. Business operators should pay careful attention to their costs associated with multiple pickups and deliveries and the distance they're willing to travel to perform the service. If there are added costs, they need to be included in the lease agreement so they can be appropriately charged to the customer if incurred.

Proper Insurance

One of the essential requirements in a mobile-storage lease is clarifying what happens to the container itself. Is the container dropped at a location for use by a tenant until picked up at the end of the lease term? Is it dropped and picked up to be returned to a warehouse where access is limited, or dropped and picked up and returned to a self-storage facility? The type of service provided is essential in clarifying the potential liability the operator may have in running the business and, therefore, the type of insurance needed.

Unless the operator leaves the container at the customer’s home or business, the container is generally picked up from the customer's location, placed on a truck, and returned to a warehouse, where it is stored with all of the company's other containers. At some point, the operator puts the box back on the truck and returns it to the customer.

While the box is on the truck, the operator has arguably taken “care, custody and control” of the rented container. Inherent with that is bailment liability, such as if the box is damaged while being placed on the truck, during transit or when it’s being unloaded. Similarly, if the box is placed in the operator’s warehouse where the customer doesn’t have access, there is again care, custody and control or bailment.

So, does that “care, custody and control” matter under the law? The answer is yes. Due to the bailment obligation, the operator must carry specialized insurance that covers the stored property during its transportation and storage at the warehouse. The type of insurance is different from customers’ goods legal liability insurance, common in the self-storage industry. Since the operator is taking care, custody or control of the goods, he needs cargo coverage as well as property, casualty and liability coverage. Having the right insurance is key to protecting the operator from risks that are not otherwise considered.

Mobile-storage is a dynamic business that has revolutionized the service of moving and storage. Some issues relating to mobile storage have not been settled, but operators can avoid certain liabilities by starting with a strong agreement and having the right insurance. After that, it’s all about service to the customer.

Scott Zucker is a partner in the law firm of Weissmann & Zucker, P.C. in Atlanta, where he specializes in business litigation with an emphasis on real estate, landlord-tenant and construction law. He’s a frequent lecturer at self-storage events and the author of Legal Topics in Self-Storage: A Sourcebook for Owners and Managers. He’s also a partner in the Self-Storage Legal Network, a subscription-based legal service for self-storage owners and managers. He can be reached at 404.364.4626; e-mail scott@wzlegal.com.

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