March 1, 2001

4 Min Read
Inside Self-Storage Magazine 03/2001: Customers' Goods Legal Liability

 

Customers' Goods Legal Liability

By David Wilhite

The self-storage industry has undergone a series of tremendous changes overthe past two decades, evolving from a core group of small, mom-and-popfacilities to a large, powerful organization of professional business people.The rapid growth of the industry has further created a variety of challengingnew issues with which we must now come to terms.

When the self-storage industry was young, so were its buildings. Facilityowners had secure new roofs that did not leak, factory-fresh doors that properlysealed their units, and a much lower incidence of crime than today. Thisenvironment was very attractive to insurance companies, several of whichdeveloped products specifically for the industry. These specialty insurersprovided better coverage than what was generally available at the time, and manyoffered significantly reduced premiums for substantial savings.

During the '80s, when the self-storage industry was reaching a new level ofactivity, so to were its insurance exposures. Due to various challenges we wereexperiencing at the time--primarily the recession--building maintenance andrepair was deferred in many facilities, increasing the potential for damage tocustomers' stored goods. In addition, the criminal element discovered thatself-storage facilities were ideal places to conduct their activities. Thesedevelopments caused insurance-claims activity to increase dramatically incertain areas, and helped give rise to specialized insurance coverages, such ascustomers' goods legal liability, to help facility owners protect themselves.

Customers' goods legal liability is a very important coverage unique to ourindustry. The basic premise of self-storage is that we act as landlords, notwarehousemen; we never take possession of our tenants' goods. Therefore, we arenot responsible for those goods since we are simply renting space. However,there are certain situations that can create legal liability on your part fordamage to your customers' goods. For example, by providing a building to storegoods, we represent protection against the elements. If a customers' goods aredamaged by water or fire, he may feel you were somehow negligent in honoringthat representation.

If you are found legally liable for damage to tenants' property, yourcustomers' goods legal liability insurance coverage will probably pay the claim.Just as important, it provides defense costs even if a claim is found to begroundless, false or fraudulent. It also includes coverage for damage done tocustomers' goods stored in the open, should you be found legally liable for thatdamage. This coverage is not normally available in the standard insurance marketand cannot normally be added to the standard business-owner's package policy. Itis available only through specialty markets for self-storage insurance.

With the recession well behind us, most facility owners have gotten theirdeferred maintenance schedules under control. This new emphasis on routinemaintenance is helping to contain losses in the area of our customers' goods.Aside from a complete re-roofing of your facility, there are many new productsavailable for sealing aging roofs. There are also companies that sellmaintenance products, such as unit door threshold seals, that providecost-effective alternatives to more expensive repairs. And facility operatorshave kept busy implementing new ideas of their own to help contain losses, suchas providing pallets in each storage locker. The pallets keep their customers'belongings a few inches off the floor, helping to keep them dry in the event ofsurface-water accumulation.

Security is also a major concern, and a tremendous number of vendors are inthe business of providing various types of security equipment. A growing numberof facilities today are equipped with door alarms, computer-controlled entrygates and high-tech surveillance equipment. These products, accompanied by agood resident manager, help control crime.

Sad to say, the days are long gone when we can rent a unit to new customersand turn our back on their activities in our facilities. Many operatorsroutinely photograph customers and some even obtain their fingerprints. This mayseem a little drastic, but it has become a necessary practice in some areas.Some operators argue this type of intrusion will chase off customers; however,if it is done in a manner that expresses concern for their property, very fewhonest people will mind the extra care taken for their security. The customer itdoes chase off just might be a criminal, and lost revenue on a criminal isreally money in the bank.

New construction and proper maintenance of our buildings, combined withhands-on management and attention to security are creating safer and more secureplaces for customers to store their goods--good news indeed for those of us whowish to keep our insurance costs at an affordable level.

In addition to loss-of-income and extra-expense coverages, UniversalInsurance Facilities Ltd. offers a complete package of coverages specificallydesigned to meet the needs of the self-storage industry. For more information,or to get a quick, no-obligation quote, write P.O. Box 40079, Phoenix, AZ85067-0079; phone 800.844.2101; fax 480.970.6240; e-mail [email protected];www.vpico.com/universal.

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