Self-storage facilities are different from many other businesses in their insurance needs. While the basic commercial insurance coverage for property and general liability is still important, several specific options highlight the unique requirements of self-storage.
One key distinguishing characteristic of this industry is the storage professional has a responsibility for customers’ goods and property as opposed to his own merchandise. Facilities that store other peoples’ property need specialized insurance solutions tailored to their situation. Here’s a short list of coverages every facility operator should consider.
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 defend you against legal actions and pay damages (up to policy limits) as long as you are in compliance with lien laws applicable in your state or 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 that are designed for related but not identical industries. At the time of this writing, there are steps being taken to remedy this situation in Canada, and we hope to see more specific lien laws for self-storage in coming years.
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 be followed in the event of delinquency should be addressed completely in the rental agreement.
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 and initiates a lawsuit against your facility.
One particularly popular issue is water damage to contents that the tenant feels was the fault of the business. This coverage will provide legal-defense costs and damages for legal liability up to policy limits.
One good way to mitigate this risk is to actively educate and inform renters about tenant insurance. This broad form coverage allows tenants to cover their own property and goods for most losses at affordable rates and low deductibles. It’s an excellent way to avoid disputes and legal actions regarding liability for damaged or lost property.
Tenant Contents Abandonment
A third specialty coverage is tenant contents abandonment. This insurance is designed to handle proper removal and disposal of environmentally sensitive or dangerous substances deserted by a tenant. Again, this coverage will provide costs associated with removal and disposal up to the policy limits.
To reduce this risk, self-storage professionals should have standardized rental agreement language that prohibits storage of flammable, combustible, corrosive, toxic, unstable, explosive or poisonous materials. The agreement should also restrict activities of a hazardous nature, such as welding or woodworking.
Finding the Right Coverages
While these specialized insurance coverages are vital to self-storage facilities, owners should also consider comprehensive property, liability and crime-protection coverage tailored to their facility’s specific needs. Issues like crime, personal injury of tenants on site, and fire and water damage also need to be addressed through a comprehensive risk-management and loss-reduction program. This kind of program should be one of the value-added factors your insurance broker provides.
In fact, self-storage professionals should consider several factors when looking for the right insurance partner for their unique needs. These include:
- Qualified assistance in evaluating exposures facing operators
- Advice on how best to manage risks from both physical facilities and through contracts
- A simplified underwriting process for securing quotes for coverage
- Broad coverages, competitive rates and low deductibles
- Services tenants can access to obtain insurance coverage on their unit contents
- Access to risk-control services to assist in mitigating physical risks on site
- Industry experience and expertise
Your self-storage facility is unique in its possibilities and risks. Your insurance solution should reflect that uniqueness and respond with a clear understanding of your exposures and specialized coverage that fully protects your facility.
Toby Struewing, a commercial account executive for Cowan Insurance Group, is a specialist in Canadian self-storage business insurance. To reach him, e-mail [email protected].