When you hear terms like “specialized services,” “custom homes” or “tailored clothing,” you probably think “expensive.” The good news is when it comes to self-storage insurance, specialized can actually be affordable. The daily tasks that are the norm for your storage business also create unique exposures for your operation, which is why you should consider specialized insurance to protect your asset.
Every business faces types of risk that are uncommon to other small businesses. Dry cleaners have different exposures than self-storage facilities, just like medical offices have different needs than tanning salons. If every business had the same insurance policy, it would be expensive and likely have major exclusions. There just doesn’t seem to be a way to fit all risks on a policy at a premium people can afford. An insurance program designed specifically for your business often provides more focused coverage and the most affordable premium.
First Line of Defense: Your Lease
Self-storage owners and operators act in a capacity similar to landlords. You don’t take possession of your tenants’ goods. Since there’s no bailment—care, custody and control—tenants store their property at their own risk. To that end, your lease agreement is your most important line of defense.
Your lease should clearly state that tenants are storing at their own risk and are responsible for insuring their stored property. It’s highly recommended to offer tenant insurance when the customer signs the contract. If the he declines to purchase tenant insurance, continually remind him of the importance of this coverage.
In addition, there are two specialized insurance coverages you, the operator, should consider carrying to protect your business: customers’ goods legal liability and sale and disposal.
Customers’ Goods Legal Liability Coverage
Even the best-managed facilities can suffer claims. As important as it is to have a carefully crafted lease, as an owner, you can still get sued for damage to goods stored at the property. This is where the first type of specialized coverages comes into play: customers’ goods legal liability (CGLL).
Here’s a prime example of why CGLL is crucial to have on your policy. If a customer’s property is damaged by water because you didn’t properly maintain your roof (or another maintenance issue), he may feel you were negligent, contact his lawyer, and file a suit against your facility. If you’re found legally liable for damage to a tenant’s property, your CGLL coverage might respond. It could also provide defense costs, even if a claim is found to be groundless, false or fraudulent. This coverage is well worth the premium just for legal defense alone.
Sale and Disposal Insurance
Sooner or later, every self-storage owner will be faced with the unenviable task of evicting a tenant for failure to pay his rent, reclaiming the storage space, and removing or disposing of the tenant’s property. This is where the second type of specialized coverage comes into play: sale and disposal legal liability. This coverage can provide protection against the act of wrongfully removing, selling or disposing of a customer’s property.
If state-specific lien laws are not exactly followed, self-storage operators are left vulnerable to potential claims. If you or your managers are involved in the sale and disposal process, you must be aware of your state’s law. Consult with an attorney about preparing a written procedure that outlines the exact steps for disposing of a delinquent tenant’s property, and read and follow all state statues.
Talk With Your Insurance Agent
While many business owners are looking for ways to save money, one place you shouldn’t skimp is your self-storage insurance. You have too much at stake to not consider all your insurance-coverage options. If a tenant sues your company for damages caused by your business, the cost of the lawsuit—including court and attorney fees, plus a possible settlement—could be astronomical if you don’t have liability insurance.
The specialty coverages mentioned above are not typically available through most traditional business-insurance carriers, but can be secured through insurers specializing in the self-storage industry. Your agent should be qualified to help you evaluate all the commercial coverages available in the market, and can recommend coverages specifically for your self-storage facility.
Randy Tipton is the owner of Universal Insurance Facilities Ltd., which has provided specialized insurance coverage to the self-storage industry for more than 12 years. Universal has clients in 49 states, with agents trained specifically in self-storage. For more information, call 800.844.2101; e-mail [email protected]; visit www.universalinsuranceltd.com.