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What to Do When Your Self-Storage Business Gets Sued: A Crash Course

By Scott Zucker Comments
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Getting sued is somewhat analogous to having a car accident. Sometimes, no matter how hard you try to drive safely, there's a chance you'll get rear-ended by the other guy.

Under today's legal system, even if a self-storage business does everything right, it can still be sued. Facility owners face potential disputes with their employees and vendors. They also risk premises liability claims like personal injury. But most commonly, they face claims from tenants alleging wrongful sales or damage or loss to stored property.

Unfortunately, having a good lease or following the proper procedures for foreclosure and sale won’t prevent you from being sued. Litigation has exploded in this country, and self-storage facilities, with their steady cash flow and large insurance protection, are big targets. Owners should expect to eventually face a legal situation. That said, the following is a crash course on what happens in a lawsuit and some things to think about as you travel down the bumpy road of litigation.

1. Notify Your Insurance Company

Upon service of a lawsuit, one of the first things you should do is notify your insurance company. If you fail do so, the company may be able to refuse coverage based on lack of notice. It’s prudent to always notify your insurer.

If your carrier has any questions whether the claim is covered under its policy, it’ll likely issue a "reservation of rights." This means the company will assume the obligation of defending you in the lawsuit but reserve its right to later determine whether the claim is actually covered. It will then assign the lawsuit to a firm in your area. You may also request that your own lawyer (if your business has one) represent the facility on behalf of the insurance company.

2. Gather the File

It’s your obligation as the owner to maintain all records concerning operation of your storage facility. If the lawsuit relates to a tenant loss or damage claim, you’ll need to assemble the tenant's file and all pertinent documents. If the claim relates to a personal injury, you should have a copy of the incident report, any photographs taken, police reports or any other documents relating to the incident.

All of this information, as well as names and addresses of individuals who have knowledge of the matter, should be provided to the lawyer handling your case. Remember, your attorney can only defend you to the extent that he is given complete information.

3. File an Answer

Once the case has been assigned to a lawyer, it’s his obligation to file an Answer to the Complaint. If you aren’t insured and don’t have an attorney, then you’re the one obligated to file. In either case, it’s imperative that a timely answer be filed. If neither you nor a lawyer file the answer, you’ll be in default. In other words, the court will presume you’re admitting the allegations of the complaint, and a judgment will be entered against you.

If it’s appropriate, your lawyer will seek to dismiss the complaint at the time the answer is filed based on specific legal defenses, including lack of jurisdiction, lack of venue over the facility, or other technical defenses that allow the case to be dismissed without a further showing. Unfortunately, many of these defenses can be cured by the plaintiff. Many times, even if the case is originally dismissed, it can later be refiled.

4. Discovery

After the answer is filed and before trial, there’s a phase of the proceedings called “discovery.” Discovery is when each party is entitled to ask questions of the other party to learn all of the information possible about their position in the case. It can take the form of interrogatories (written questions to the other side), requests for documents or depositions.

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