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The Need for Customers' Goods Legal Liability

April 1, 2000

4 Min Read
The Need for Customers' Goods Legal Liability

The Need for Customers' Goods Legal Liability

By David Wilhite

If there is one absolute truism in the self-storage industry it is that you, as afacility owner, do not take possession of your customers' property; you act as a landlordand not a warehousemen. That is why you have a carefully-worded contract that clearlyspells out that you are not responsible for any damage to your tenants' stored goods--youdon't take care, custody or control of their possessions. However, certain situations cancreate a legal liability on your part for loss or damage to your tenants' goods that youneed to guard against--which brings us to the topic of this month's column: customers'goods legal liability insurance.

Customers' goods legal liability is an important coverage unique to the self-storageindustry. It provides coverage against loss of, or damage to, your customers' personalproperty if you are found to be negligent (note that "negligent" is a euphemismfor "legally liable," which will be explained shortly, and not a moral judgementagainst you). Customers' goods legal liability also provides for defense and legal costs,even if the lawsuit is found to be groundless or fraudulent.

Let's look at an example of how this coverage works. Suppose high winds from atremendous storm rips the roof off of one of your storage units. Assuming you haveadequate business owner's insurance coverage in place, you would be insured against thedamage to the building if wind is a covered cause of loss. Let's further assume that, as aprudent facility owner, you have a signed contract on file with your tenant that clearlystates you are not responsible for any damage that might occur to his stored goods, andthat he should either provide his own insurance or be personally responsible for any loss.So far, so good--you've taken steps necessary to protect yourself against litigation anddon't have any cause to worry at this time.

Now let's assume that, as soon as the storm passes, you immediately call an emergencydamage-repair service to cover the damaged roof until permanent repairs can be made.However, before they can arrive, the rain and wind return in force, further damaging yourtenants' stored goods. At any point, the tenant can file a claim that you are"negligent" (i.e., legally liable) even though you had no control over thesituation (which can be considered an act of God). You might be deemed negligent, eventhough you immediately acted in a prudent manner to protect your tenants' stored goods. Insuch a situation, the value of having
adequate customers' goods legal liability cannot be overestimated, as courts are awardinghigher monetary judgements than ever in such cases.

It is important to remember that this coverage protects you, not only against damage toyour tenants' stored goods for which you are determined to be legally liable, but alsoagainst the legal expenses that inevitably arise, even if a lawsuit is found to be withoutmerit. In many instances, just one or two legal consultations will cost more than theannual premium. The good news is that the cost of customers goods legal liability coverageis quite reasonable--ranging from $300-$1,000 a year for $500,000 coverage.

Speaking of coverage limits, it is a good idea to consider securing an adequate amountto protect yourself against claims of negligence. Consider how much you can afford to loseshould a judgement be held against you and protect yourself accordingly. And, of course,you should always take preventative measures to protect yourself against litigation in thefirst place.

Five Steps to Help Protect Yourself Against Claims of Negligence

  1. Keep a signed lease contract on file between you and your tenant. This is the single most important tool you have for protecting yourself against claims and negligence. Its importance cannot be overemphasized.

  2. Use a lease that contains language providing for the maximum dollar value of goods that a tenant may store on your premises. Such language may help limit your liability in cases where a judgement is held against you. We recommend that you consult with a legal advisor you can trust when drawing up such language.

  3. Offer customer-storage insurance (CSI) to your tenants. There are precedent-setting court cases in which the self-storage operator was found to be not liable for damage to a customer's goods because CSI was made available. This coverage can be secured through various sources and should be made available to every tenant.

  4. Keep a signed statement that property is stored at tenant's sole risk on file. Such statements are usually furnished as lease addendums and are supplied with the application for customer-storage insurance. A signed lease addendum is an important tool for limiting your liability in cases that claim loss or damage due to negligence.

  5. Implement a regular program of preventative maintenance. For example, you might consider having the roof of your storage facility inspected once or twice each year by a licensed roofing contractor to alert you to the potential for problems or damage.

Remember, no matter how large or small your self-storage facility may be, securingadequate coverage is essential for protecting your business and your peace of mind.

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 (480)970-6240; www.vpico.com/universal.

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