The self storage industry has technical, legal and financial aspects not found in any other business. The unique practices associated with a self storage facility make it necessary for a facility owner to have specialized insurance coverage. Insurance providers such as Universal Insurance can help you find the right and most affordable insurance program. While standard business owner’s policies provide coverage for building, business personal property and general liability, a self storage policy should offer coverages that help guard against issues and hazards that are self storage specific.

Owning a self storage facility has unique technical, legal and financial aspects that make it necessary to have specialized insurance coverage. While standard business owner’s policies provide coverage for building, business, personal property and general liability, a self storage policy should also offer coverages that help guard against issues and hazards that are self storage specific.

"Customers Goods Legal Liability" is a coverage that is specifically designed for self storage. It is intended to help guard against claims that happen in our industry. When you own a self storage facility you act as a landlord, not a warehouseman, because you never take possession of your tenants’ goods. You are not responsible for those goods since you are simply renting space. However, there are certain situations that can create legal liability on your part. For example, by providing a building in which to store goods you represent protection against the elements. If your customers’ property is damaged because you did not properly maintain the facility, he may feel you were negligent in honoring that representation. If you are found negligent, then you would be legally liable for damage to tenants’ property. By having a policy that includes customer’s goods legal liability insurance coverage this type of claim could be covered. It might also provide defense costs, even if a claim is found to be groundless, false or fraudulent.

"Sale & Disposal Liability coverage" provides protection against the act of wrongfully taking, selling, using or destroying the goods of another party. Sooner or later, every self storage owner will be faced with the unenviable task of evicting a tenant for failing to pay their rent, reclaiming the storage space and removing or disposing of the tenant’s property. Sale and disposal liability coverage helps to protect you against claims arising from the negligent sale, removal, disposal or disposition of customer’s property. The coverage further provides for defense and legal costs, even if a customer’s suit is groundless or fraudulent. Nearly every state has specific statutes governing the sale and disposal process. However, if the procedures are not followed exactly, even if there is only a small error, the self-storage operator is now vulnerable to lawsuits claiming loss of or damage to stored goods. Due to the incredible diversity of goods commonly stored, and the wide range of values of the property, the penalty for conversion can be extremely high.

"Sale and disposal liability coverage helps to protect you against claims arising from the negligent sale, removal, disposal or disposition of customer’s property"

The good news is that there are several effective steps you can take to minimize the risk of these types of claims. If you or your staff are involved in this process you must be aware of your state lien laws. Consult with an attorney about preparing a written procedure that outlines the exact steps for disposing of a delinquent tenant’s property. Always double check the spelling of names and addresses. Don’t make any changes to information on the rental agreement, such as correcting an obvious misspelling, unless accompanied by a signed change of address card. Remember to document, in photographs and writing, every step of the inventory and auction process. In a lawsuit, you will have to show proof that the disposal of the delinquent tenant’s goods conformed to the state statutes. And if there is any reason to question the sale of tenant’s goods, DON’T DO IT! Many owners prefer to allow tenants to retrieve their property at no charge, rather than go through the potential liability of an auction. Again, this coverage is industry specific and is not normally available through regular business insurance providers.

"Pollution Liability Coverage" is a standard exclusion on almost every policy. The risk of an uninsured pollution event at your facility is more of a possibility than you might think. Our industry is clandestine in its very nature; tenants store their property in your buildings. Pollution conditions are defined as “the discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, including but not limited to smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, medical waste and waste materials into or upon land, or any structure on land, the atmosphere or any watercourse or body of water, including groundwater, provided such conditions are not naturally present in the environment in the amounts or concentrations discovered.” Think about what might be stored that you are unaware of. Even the most long-term tenants could be leading you to a potential environmental nightmare. Cleaners, toner products, gasoline in lawn equipment and other items on the EPA’s Hazardous Materials List are probably in many of your units. If you have outdoor storage, what about the fuel tanks, the “grey water” and potential ground and water contamination? Have any large RVs parked on your property? If so, you have maybe a 55-gallon fuel tank along with 35 gallons of grey water and another 30 gallons of straight sewage adding up to 120 gallons of potential environmental damage in just one vehicle! If leaks develop, you may have some recourse against the customer, but only if you have a properly prepared RV and Boat storage agreement. Otherwise, be prepared to pay the entire cost of cleanup, which could completely drain your checkbook and life savings.

"Think about what might be stored that you are unaware of. Even the most long-term tenants could be leading you to a potential environmental nightmare."

Until the creation of Pollution Liability Underwriting for Self-Storage (PLUSS), obtaining an affordable insurance product for environmental pollutants had been difficult and cost prohibitive. PLUSS is a Risk Purchasing Group that was created to provide reasonably priced pollution liability coverage specifically designed for self-storage facilities. Here are some of the features:

  • Onsite cleanup of pollution
  • Legal liability for pollution
  • Legal expenses and defense
  • Business interruption for 30 days, with a $50,000 limit
  • Microbial matter protection of $50,000, with exclusions for third party coverage
  • $1 million coverage for each loss

Workers’ Compensation. Accidents happen! They occur even in the safest and cleanest work environment, which is why you must have insurance. Workers’ Compensation Insurance protects you, the employer, against lawsuits resulting from work related accidents, providing medical care and compensation for lost income to your employee(s). The coverage is designed to ensure that employees who are injured or disabled while on the job receive proper compensation, negating the need for lawsuits regardless of who is at fault. Dependent coverage for workers that are injured or even killed by work related accidents and illness is one of the many benefits of Workers’ Compensation coverage.

"Workers’ Compensation Insurance protects you, the employer, against lawsuits resulting from work related accidents"

Workers’ Compensation laws vary by state, and most states have some form of statute or requirement regarding coverage. Businesses that meet certain requirements must provide Workers’ Compensation for all employees or face fines and consequences. Remember, your General Liability coverage has exclusions relating to injury to anyone who should be covered under Workers’ Compensation. Therefore, this very important coverage must be considered a mandatory part of your insurance portfolio. The real question when considering your Workers’ Compensation Insurance comes in determining who qualifies as an “employee”. By definition, an employee is someone hired to perform services under the direction and control of another person or company, known as “the employer.” A rule of thumb is that an employer is any person or entity who gives direction to and exercises control over a worker.

Also, keep in mind that when you hire a licensed contractor or vendor you assume the work and materials will be of high quality and the workers involved will be competent. This is true in most cases. However, misfortune can happen to even the most reputable company. Accidents that result in property damage or injury to your clients, employees or the general public are known to occur. Hiring contractors that have proper insurance coverage is imperative to protect your business. Get references from past clients and request a certificate of General Liability and Workers’ Compensation Insurance. Remember, when hiring any employee(s), follow your state’s statutes and purchase adequate Workers’ Compensation Insurance to protect your business from staff-related injury or illness claims. When hiring licensed independent contractors or subcontractors, ensure they carry adequate insurance to reduce your liability in vendor exposure claims. Hiring friends and family may be less expensive in the short run. However, if they are injured or cause damage to your facility, it could become more costly and cause hard feelings. Be aware of the business aspects of running your facility in a professional manner.

When getting a quote or purchasing your Workers’ Compensation policy, most owners exclude themselves from the coverage. This is done for various reasons, but primarily because business owners would not turn in this type of claim against themselves. Since the premium is based on annual payroll and number of employees, eliminating the owner, lowers the premium. Most owners would prefer to use their own health care benefits for coverage in the event of an accident or injury, saving premium dollars. Be sure to include any friends and family working for you part time or even full time, as they should and will be considered employees. Workers’ Compensation is a very vital, reasonably priced product and should be purchased if you have one or more employees.

UIP VP Jenny Bortman authored this article.
UIP VP Jenny Bortman authored this article.

Jenny Bortman

Experienced Vice President at Universal Insurance Programs in Phoenix AZ.