Sale-and-Disposal Legal-Liability Coverage

Sale-and-Disposal Legal-Liability Coverage

By David Wilhite

Sale-and-disposallegal-liability is an important coverage specific to the self-storage industry. Itprovides protection against conversion: the act of wrongfully taking, selling, using ordestroying the goods of another party. Nearly every state has specific statutes governingthe sale-and-disposal process, as provided for in the States Self Service Storage FacilityAct. However, if the procedures are not followed to the letter, or if there is an error inany step of the sale-and-disposal process, self-storage operators are left vulnerable tolawsuits claiming loss or damage of stored goods. Due to the incredible diversity of goodscommonly stored and the wide range of values of the property, the penalty for conversioncan be extremely high.

Sooner or later, every self-storage owner will be faced with the unenviable task ofevicting a tenant for failing to pay his rent, reclaiming the storage space and removingor disposing of the tenant's property. Fortunately, most states give self-storageoperators extraordinary leverage against delinquent tenants. Nearly every state hasspecific statutes to govern this process. If the procedure is not followed correctly, anoperator leaves himself vulnerable to lawsuits claiming loss or damage of stored goods.Even when the process is handled correctly, it is not uncommon for a disgruntled tenant tofile a claim against the operator charging negligence in the removal or disposition ofstored property.

For example, a self-storage operator was recently held liable for $250,000 in damagesby a California court for the wrongful sale of a customer's property. The court judgedthat the storage owner's notice of intention of sale was defective, since the operator'snewspaper ad did not include the delinquent tenant's name, which was required by statelaw. The court ruled that the operator was in violation of negligence and conversion as aresult of this error.

It isimportant to remember that many sale-and-disposal lawsuits are the result of trivialerrors, such as reversing the numbers on an address. The chance of an error occurring iscompounded by the fact that most state statutes generally require that several letters ofnotification be mailed to tenants with delinquent accounts, and that the self-storageoperator publish a legal notice in a general circulation newspaper in the judicialdistrict where the sale will be held. There are, of course, many variations by state onthese procedures, and each must be followed to the letter to minimize the likelihood of alawsuit. It pays to be careful! Judging by several recent jury awards, a trend appears tobe developing in which storage operators who make minor violations of state statutes canbe held liable for large punitive and emotional damages far in excess of the actual valueof a tenant's stored items.

The good news is that there are several effective steps you can take to minimize therisk of sale-and-disposal lawsuits. If you or your staff are involved in thesale-and-disposal process, you must be aware of lien law. Consult with an attorney aboutpreparing a written procedure that outlines the exact steps for disposing of a delinquenttenant's property. Read and follow all state statutes. Always double-check names andaddresses, and don't make any changes to information on the rental agreement, such ascorrecting an obvious misspelling, unless accompanied by a signed change-of-address card.Document, in photographs and writing, every step of the inventory and auction process. Ina lawsuit, you will have to show proof that the disposal of the delinquent tenant's goodsconformed to state statues. And if there is any reason to question the sale and disposalof a tenant's goods--don't. Many owners prefer to let tenants retrieve their property atno charge, rather than go through the potential liability of an auction (it is certainlypreferable to defending yourself in a lawsuit). Last but not least, be absolutely certainyou have adequate insurance coverage.

When shoppingfor sale-and-disposal legal-liability insurance, be aware that this industry-specificcoverage is not normally available through regular business insurance carriers andgenerally cannot be added to a standard business owner's policy. However, the coverage canbe secured through insurers specializing in the self-storage industry. No matter how largeor small your self-storage facility may be, securing adequate coverage is essential forprotecting your business and your peace of mind.

To better help you protect your business, Universal Insurance Facilities Ltd. offerssale-and-disposal legal-liability coverage as part of its extensive self-storage insuranceprogram. Universal's coverage helps protect you against claims arising from the negligentsale, removal, disposal or disposition of customers' property when reclaiming space forwhich rental or other charges are delinquent or unpaid. The coverage further provides fordefense and legal costs, even if a customer's suit is groundless or fraudulent. Inaddition to loss-of-income and extra-expense coverages,

Universal offers a comprehensive package of coverages specifically designed to meetthe unique needs of the self-storage industry. For more information, or to get a quick,no-obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101;fax (480) 970-6240; e-mail [email protected]; www.vpico.com/universal.