Evictions and Auctions

Limiting your liability exposure, Part II

By David Wilhite

Sale-and-disposal legal-liability coverage is unique to the self-storage industry. Asmentioned in Part I of this article, sale-and-disposal legal-liability providesself-storage operators with protection against conversion: the act of wrongfully taking,selling, using or destroying the goods of another party. Such claims are made againstnegligent acts arising from the disposition or disposal of customers' property whenreclaiming space for which rental charges are delinquent or unpaid.

Due to the incredible diversity of goods commonly stored and the wide range of valuesof the property, the penalty for conversion can be extremely high. Not long ago, aself-storage operator was held liable for $250,000 in damages by a California court forthe wrongful sale of a customer's property. The court judged that the storage owner'snotice of intention of sale was defective, since the operator's newspaper ad did notinclude the delinquent tenant's name, which was required by state law. The court ruledthat the operator was in violation of negligence and conversion as a result of this error.

Most states give self-storage operators extraordinary leverage against delinquenttenants. Nearly every state has specific statutes that govern the sale-and-disposalprocess, as provided for in the Self-Storage Facility Act. However, if the procedures arenot precisely followed, or if there is an error in any step of the sale-and-disposalprocess, the self-storage operator leaves himself vulnerable to lawsuits claiming loss ordamage of stored goods. Therefore, if you are operating a facility in a state in which thestatute has been enacted, we recommend that you follow the Self-Storage Facility Actguidelines to the letter. If you are operating a facility in a state in which the statutehas not been enacted, we recommend that, with the help of a legal advisor, you include aclearly worded statement in your rental agreement that states that you are a landlordrenting space to tenants suitable for storage; that neither you nor your facility exertany care, control or custody over a tenant's property; and that responsibility for storedproperty remains vested with the tenant and not the landlord.

Sale-and-disposal legal-liability insurance is an important coverage that should beconsidered an essential part of every self-storage owner's business-insurance package.Although it is not normally available through regular insurance carriers and generallycannot be added to a standard business-owner's policy, the coverage can be secured throughinsurers specializing in the self-storage industry. Universal Insurance Facilities, Ltd.offers sale-and-disposal legal-liability coverage as part of its extensive self-storageinsurance program. Universal's insurance provides broad-form coverage against loss ordamage to your customer's personal property, and protects you against claims arising fromthe sale, removal, disposal or disposition of customers' property when reclaiming spacefor which rental or other charges are delinquent or unpaid. The coverage also provides fordefense and legal costs, even if a customer's suit is groundless or fraudulent.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc.Universal offers a complete package of coverages specifically designed to meet the needsof the self-storage industry, including loss of income, employee dishonesty, comprehensivebusiness liability, hazardous-contents removal and customer storage. For more information,contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (602)970-6240; Web: www.vpico.com/universal.