December 1, 2000

4 Min Read
Why You Should Consider Higher Limits of Liability


Why You Should Consider Higher Limits of Liability

By David Wilhite

A recent survey conducted by a major insurance company revealed that many,if not most, business owners purchase liability limits that will not fullyindemnify them against the awards typically being handed down by today's juries.

Business-liabilityinsurance provides essential protection for every self-storage facility owner.Business liability protects you against bodily-injury lawsuits--for example, alawsuit claiming that someone slipped and fell due to wet or icy conditions onyour premises. It also protects against property-damage lawsuits, such as oneclaiming that a security gate crashed down on a car while on your premises.Business liability also provides important protection against lawsuits involvinglibel, slander, physical eviction or the false arrest of a third party; andadvertising injury lawsuits involving plagiarism, copyright infringement andfalse advertising. (Note that while libel, plagiarism, etc., may not seem likebodily or property damages, that's how the courts have interpreted them.)

The important point for you to remember about business liability is that ifyou are found liable in a lawsuit, business-liability insurance will cover thosesums that you become legally obligated to pay up to the limits of your policy.In short, it protects your business, your assets and your peace of mind.Therefore, since business-liability insurance is one of the basic costs of doingbusiness--and since you, as a smart consumer, want to invest your insurancedollars where they will do the most good--this month's column will provide abrief overview of liability-limit options, and why you should consider higherlimits of protection.

It should come as no surprise that today's juries are routinely awardingtremendous sums of money in bodily-injury and property-damage lawsuits. Morethan 10 million civil cases are filed each year, resulting in hundreds ofmillions of dollars in jury awards. What is surprising is that a recent surveyconducted by a major insurance company revealed that many, if not most, businessowners purchase liability limits that will not fully indemnify them against theawards typically being handed down by today's juries. Obviously, this can be avery dangerous practice, especially in today's litigious climate.

If you think your current limits of liability are adequate, consider thesethree cases: Five years ago, a jury awarded a $1.95 million judgment to adelivery man who slipped and fell on cracked pavement while making his rounds toa business. Four years ago, a jury awarded $3.5 million award to a man whosustained serious personal injury after falling in a hotel shower. And justthree years ago, a jury awarded $22 million to a woman who went into a comaafter being struck on the head by a heavy toolbox that she pulled off a shelf ina hardware store.

These cases illustrate three important points: First, juries routinely awardenormous sums of money in personal-injury cases; second, the liability limitsyou choose can spell the difference between solvency and bankruptcy; and third,liability limits of $1 million or more--which, just a few years ago, wasconsidered adequate for many business owners--must no longer be consideredunusual or excessive.

Fortunately, business-liability insurance coverage is readily available forself-storage owners at reasonable rates. Increased liability limits can bepurchased in $1 million, $2 million and $3 million limits for just hundreds ofdollars per million extra per year.

Assuming you've reviewed your business coverage and decided to increase yourliability limit, how do you go about estimating the amount of coverage you'llactually need? Some experts recommend that you base your limits on multiples ofyour annual revenues. Another method for determining adequate coverage limits isto ask your agent what kinds of claims have been filed against storagefacilities in the past and what the results were. You may also want to consultwith a legal professional to find out what kinds of awards (in dollar amounts)have been made in your state in the past few years for similar businesses, andunder what circumstances. Base your limits accordingly. If you are on anextremely tight budget, evaluate how much you can afford to lose if a judgmentis made against you, and make sure your coverage protects you to at least thatpoint.

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

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];

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