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Limitations of Liability

July 1, 1998

3 Min Read
Limitations of Liability

Limitations of Liability

By David Wilhite

Business liability provides essential protection for every self-storage operation. Thisimportant coverage protects you against lawsuits claiming that someone was hurt orproperty was damaged on your premises. (For example, a typical a bodily-injury lawsuitmight claim that a customer slipped and fell on ice or on a wet floor, while aproperty-damage claim would be a gate closing on a car.) Business liability also providesprotection against personal-injury lawsuits involving libel, slander, physical eviction orthe false arrest of a third party. And advertising-injury lawsuits involve plagiarism ofadvertising copy or layout, infringement of copyright, title or slogan, or falseadvertising. (These may not seem like bodily or property damages, but that's how thecourts have interpreted them).

The important thing to remember is, if you are found liable, business liability paysthose sums that you become legally obligated to pay. In short, business liability protectsyour business, your assets and your peace of mind.

Since we can assume that, as a responsible self-storage facility owner, you accept theneed for business-liability insurance as one of the basic costs of doing business and wantto invest your insurance dollars where they will do the most good, this month's columnwill focus on a brief discussion of limits of liability and why you should consider higherlimits of protection.

It should come as no surprise that today's juries are routinely awarding tremendoussums of money that seem to surpass all sense of proportion and common sense. Approximately14 million civil cases were filed in 1996, which resulted in jury awards totaling hundredsof millions of dollars in product liability and personal injury awards. What is surprisingis that a recent survey conducted by a major insurance company showed that the vastmajority of its customers knowingly purchase liability limits that would not fullyindemnify them against the awards being handed down by today's juries. This can be a verydangerous practice, especially in view of today's litigious climate.

If you believe your current limits of liability are adequate, consider the followingexamples: In one case, a jury awarded a $1.95 million judgment to a delivery man whotripped over an uncovered hole and injured his back. In a second case, there was a $3.5million award to a man who was scalded by hot water in a hotel shower, and in a third casethere was $22 million award for injuries sustained by a woman who was hit on the head by awooden box that fell off a shelf in a hardware store.

These examples serve to illustrate three important points: First, juries are routinelyawarding enormous sums in personal injury cases; second, the liability limits you choosecan spell the difference between solvency and bankruptcy; and third, liability limits of$1 million or more must no longer be considered unusual or excessive.

Fortunately, the news is not all bad. Increased liability limits are readily availablefor self-storage facilities in $1million, $2 million and $3 million limits. Plus, mostfacility owners can purchase an additional $500,000 coverage for just a few hundreddollars extra per year.

Assuming you've decided to increase your business-liability limit, how do you go aboutestimating the amount of coverage you'll actually need? Some experts say you should baseyour limits on multiples of your annual revenues, but that can be costly. The best methodI've found for determining coverage limits is to ask your agent what kinds of claims havebeen filed against similar businesses in the past and what the results were. You may alsowant to consult with a legal professional to find out what kinds of awards (in dollaramounts) have been made in your state in the past few years, and under what circumstances.Base your limits accordingly. If you are on an extremely tight budget, evaluate how muchyou can afford to lose, and make sure your coverage protects you to at least that point.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc.Universal offers a complete package of coverages specificially 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.

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