STORAGE FACILITY INSURANCE
Insuring Your Facility
One of the most difficult and confusing tasks associated with running a profitable self-storage facility has always been the need to secure proper insurance coverage. Unlike many other commercial ventures that consider insurance a simple cost of doing business, the multiple property and liability exposures specific to the self-storage industry place an uncommon emphasis on the need to secure comprehensive coverage to meet unexpected hazards.
In addition to protecting your buildings and equipment against common hazards such as fire, flood, wind, vandalism, etc., you must also insure the safety of your tenants’ property. You need to guard against liability suits filed by tenants who have been injured while on your premises, and property damage to tenants’ property such as a gate closing on a vehicle. Furthermore, due to the physical nature of a storage facility, you must secure protection for your income against business interruptions that occur after a loss.
There are many other important coverages of which you must be aware, such as the need for workers’ compensation, as required by common law.
An overview of the major coverages that you need to secure adequate business insurance for your self-storage operation are:
Owning and operating a storage facility comes with plenty of accountability. Even if you operate with the utmost care and provide the best service, a tenant can find you at fault for a personal loss. Business liability provides coverage for bodily injury and property damage that occurs on your premises and protects your facility in the event of a related lawsuit. It will usually cover damages from the suit as well as legal fees.
Depending on your needs, liability insurance can be purchased in many forms. Additional coverage available in a self-storage business policy includes:
- Sale and Disposal This coverage provides broad-form coverage to protect you against negligent acts that arise from the sale, removal or disposal of customers’ property when reclaiming space for which rental or other charges are delinquent or unpaid.
- Customers’ GoodsThis provides coverage against loss or damage to your customers’ personal property, if you are legally liable. It might also provide defense and legal costs, even if the suit is groundless or fraudulent.
This coverage protects your property from direct physical loss or damage. It includes replacement costs on buildings and business/personal property with no coinsurance.
Loss of Income
This coverage protects your income from direct physical loss or damage to business property. Protection against business interruption and extra expenses are also provided under this coverage.
Sale and Disposal Legal Liability
This coverage provides broad-form coverage to protect you against negligent acts that arise from the sale, removal or disposal of customers’ property when reclaiming space for which rental or other charges are delinquent or unpaid.
Customers’ Goods Legal Liability
This coverage provides broad-form coverage against loss or damage to your customers’ personal property, if you are legally liable. It also provides defense and legal costs even if the suit is groundless or fraudulent
Self-storage insurance, like most commercial policies, does not include flood insurance; and many facility owners don’t realize their standard business policy doesn’t protect them until it’s too late. As a matter of fact, only a small portion of businesses exposed to the risk of flood damage are insured.
It is easy and inexpensive to protect yourself against flood through the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. The NFIP divides risk areas into three basic groups: low, medium and high. Less than one-third of all reported flood claims come from high-risk areas, and more than one-quarter come from low-risk areas. That’s why most business-insurance experts strongly recommend flood insurance, even if you are at low risk.
In nearly all 50 states, you are required to cover your employees under workers’ compensation. If, for example, you fail to warn employees of any existing danger, under both common and workers’ compensation laws, you can be held liable for damage suits brought on by an employee. Therefore, this very important coverage must be considered a mandatory part of your self-storage insurance package.
Choosing the Insurance Company That’s Right for You
As a responsible self-storage facility owner, you know that securing the right insurance coverages can help reduce your operating risks and protect your assets. That’s why you’ve taken the time to evaluate your exposures and worked with your agent or broker to choose the coverages you need to protect yourself in the event of a loss- especially a catastrophic loss. But if you want to get the best insurance protection, you need to do more than just choose the right coverages- you also need to choose the right insurance company.
Why is it important to choose the right insurance company? Because if you don’t, you won’t know how a particular company’s going to perform until you have a loss- and by then it may be too late. You don’t want to discover after a disaster that your carrier has a history of poor claims handling, or that it’s financial standing is in jeopardy. And there are other advantages to choosing the right insurance company that can save you money and get you the specialized coverages you need to better protect your facility
Bundlers Insurance Brokers has specialized knowledge of the self-storage industry, as well as a commitment to stay ahead of industry changes through education and training. In order to protect your assets, Bundlers Insurance Brokers will also be able to recommend measures that will help you safeguard against losses as well as provide you with the coverages you need to protect your facility.
Some insurance companies have developed specialized coverages for the self-storage industry that not only provide superior protection but can actually contribute to lower premiums. A company that is very familiar with current construction costs, or that has in-depth knowledge of the latest keyless security systems, for example, can more realistically handle any claims you may have as well as provide you with the proper coverage in the first place.
Understanding and Controlling Your Business Liability Losses
Business liability insurance is designed to protect you against claims that someone was hurt, or property was damaged, on your premises And as every self-storage facility owner knows, recognizing and controlling liability exposures is a prime concern in today’s litigious society. Having coverage in place is not enough. Today’s courts are getting tough on business owners who allow hazardous conditions to exist, and judging by the awards juries sometimes hand out, no amount of protection may be enough.
Reduce Potential Liabilities
The best way to limit your liability in advance is by identifying and eliminating (or at least minimizing) potential risks. Take a walk around your facility and play “What if…” where you try to imagine what can go wrong, and what you can do to safeguard against those situations occurring. For example, you may discover a glaring hazard, such as a large pothole outside of one of your storage units, that needs to be blocked off and covered. Or you may chance upon a less obvious risk, such as a worn or curled floor mat, which was intended to prevent slips and falls but may actually cause them.
Remember that a potentially dangerous situation can be created in an instant by a careless employee in the normal course of his or her work; for example, by leaving a wet floor unattended for a few moments while mopping up. Courts can and will hold management responsible for the actions of their employees in these situations. Once again, a pro-active response is the key; in this case, by advising third parties of a specific risk by posting a “Caution! Slippery When Wet” sign in the area being cleaned.
There are several other important procedures for reducing liabilities that can help prevent lawsuits, including conducting accident training sessions with your employees; conducting regular quality-control measures of your facilities and equipment; and keeping documented records of preventive maintenance. Be sure to hire competent employees and regularly monitor their performance. If you are not at the facility on a daily basis, make a practice to drop by periodically without notice in order to spot unforeseen risks.
A Note On Preventing Slips and Falls
Since slips and falls account for the vast majority of liability claims, it pays to be extra careful about preventing them. Slippery floors from rain and snow are the leading cause of tenant falls. You can reduce your liability substantially when you take reasonable and prudent care to prevent accidents. Begin by keeping floors dry. In bad weather, put up “caution” signs when the floor is wet; install non-skid moisture-absorbing carpet or mats; and keep a mop and bucket handy to control runoff.
What to Do When an Accident Occurs
No matter how carefully laid your plans may be, accidents can and do occur. If someone on your premises should suffer an injury, take immediate action by first calling an ambulance for the injured person, then document all known facts surrounding the accident in order to accurately reconstruct the events in case of a lawsuit. For safety’s sake, be sure to get all of the following information in writing:
- Name, address and phone number of injured party;
- Date and time of the accident;
- Name of employee(s) on duty and name(s) of any witnesses;
- Details about what caused the accident; (i.e., was it caused by the customer or by a pre-existing hazardous condition?)
- Information about when the site was last cleaned and inspected for hazards.
- It’s also a good idea to take a picture or video footage of the site where the accident occurred, and to try to get a written statement from the injured party, if possible. And if a trip to the hospital is necessary, call an ambulance- don’t use a personal or company vehicle. You may expose yourself to a whole new set of liabilities that are much better avoided.
What to Do in the Event of a Claim
In the event of an accident, notify your insurance company immediately. Give Bundlers Insurance Brokers all your information outlined above. If you are hit with a lawsuit, the number and nature of available defenses depends upon the specifics of the individual suit. In an injury-related action, the underlying claims must be analyzed to determine available defense; while in negligence cases, the owner may be able to assert the claimant’s degree of fault, which could reduce or even eliminate his right to recover damages. Assuming the circumstance is covered, your insurance company will come to your defense.
Evictions and Auctions: Limiting Your Liability Exposure
Self-storage is a rental business, and the facility operator acts as a landlord, not a warehouseman. Unfortunately, sooner or later, every owner will be faced with the task of having to evict tenants for failure to pay rent and reclaim the storage space by removing or disposing of the tenants’ property. The most common way to do this is to place a lien against the property and hold an auction.
In general, most states give self-storage operators extraordinary leverage against delinquent tenants. However, if the procedures are not followed to the letter, or if there is an error in any step of the sale-and-disposal process, an operator leaves himself vulnerable to lawsuits claiming loss or damage of stored goods. Even when the process is handled correctly, it is not uncommon for a disgruntled tenant to file a claim charging negligence.
Sale-and-disposal legal-liability insurance is a must-have coverage for all self-storage owners. It provides protection against conversion: the act of wrongfully taking, selling, using or destroying the goods of another party. Due to the diversity of goods stored and the wide range of values of the property, the penalty for conversion can be extremely high.
If there is any reason to question the sale and disposal of a tenant’s goods, don’t hold the auction. Many owners prefer to let tenants retrieve their property at no charge rather than face potential liability. Be absolutely certain you have adequate insurance coverage. Sale and disposal is not normally available through regular business-insurance carriers and generally cannot be added to a standard business-owners policy. However, the coverage can be secured through insurers specializing in the self-storage industry.
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