Self-Storage Insurance Trends and Must-Have Coverages for 2014

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It’s also wise to review your rental agreement with your attorney. Rather than asking tenants to provide a copy of an insurance-declarations page for a policy they may cancel without notifying you, consider modifying your agreement to include language that requires tenants to assert that insurance is in force to cover the items stored.

Trend: Customers Seeking Higher Amounts for Damaged Items and Wrongful-Lien Sales

There are two specialized insurance coverages every self-storage facility should obtain: customer goods legal liability coverage and sale and disposal liability coverage. In the past few years, judgments in these types of cases have increased, with self-storage operations facing increasingly costly verdicts. These two coverages with appropriate limits are an excellent first line of defense in the event of a claim or lawsuit.

Customer goods legal liability provides coverage against loss or damage to customers’ personal property for which the self-storage business may be legally liable. Sale and disposal liability coverage protects the operation against liability claims by customers for loss to their stored property due to its sale, removal or disposal as a result of a lien sale or other covered cause of loss.

One factor influencing these high-dollar verdicts is the issue of value limits in the rental agreement. It’s important to review your rental agreement with your attorney to ensure it clearly defines the maximum dollar limit of goods that may be stored in the space to be rented. The value stated may limit a claim judgment in some jurisdictions. In addition, this value limit needs to be communicated to the customer during the leasing process to help protect the business from claims that the tenant was unaware of the contract limitations.

Trend: Unusual Claims Leading to Costly Losses

Have you heard the one about the guy who kept pet snakes in a self-storage unit? One winter night, he turned on some heat lamps to keep them warm and soon discovered his actions had caused a fire that destroyed the building and killed his pets. If you own a self-storage business, this type of loss can happen to you. (And, yes, that is a true story.)

Besides the odd, and possibly hazardous, assortment of items tenants may choose to store at your facility, the ongoing challenges of the economy have resulted in an increase in claims involving people and animals living in self-storage spaces. In these types of situations, the potential for costly claims and lawsuits dramatically increases.

Start by scheduling a coverage review with your insurance agent. In particular, make sure your policy includes adequate limits for property and liability coverage. You also may wish to consider an umbrella policy, which provides additional protection over and above the primary liability section of your commercial insurance coverage in the event of a disastrous claim against you. It’s also a good idea to apply basic risk-management strategies to limit exposure to these types of situations such as multiple daily site inspections, making timely repairs to walkways and stairs, and installing additional lighting and security cameras.

Industry trends rise and fall, but protecting your business with the appropriate insurance coverage is an ongoing process. Schedule an annual coverage review with your insurance agent. He’ll be able to analyze your current coverage and make recommendations for changes to your policy that can protect your self-storage business from costly exposures, claims and lawsuits.

Keith McConnell is vice president of business development for Phoenix-based MiniCo Insurance Agency LLC. The company provides specialty-insurance programs for self-storage businesses in Canada and the United States. For more information, call 800.528.1056; visit www.minico.com.

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