   |
INSURING MOBILE SELF–STORAGE
Specialized Coverage For A Unique Industry
By Glenn Drenkhahn
Although it appears a logical extension and is similar in purpose and scope to traditional self storage, mobile self storage presents some liability and insurance coverage issues that many do not anticipate. Don’t assume your current self storage carrier is capable of accommodating your needs, and don’t assume coverage is automatic.
Even though mobile self storage operators would like to maintain that they are only renting “space” (the container or vault), there is a debated Care Custody, and Control (CCC) issue: By having control of the vault, you have control of the contents inside and Customer Goods Legal Liability issues can become trickier. Of course, it can be argued that a traditional self storage facility also has “control” over units (the building), but structures do not move.
Containers are subject to transit exposure, (specifically covered under Cargo Coverage), including issues with loading and unloading and shuffling in the warehouse when moved by forklift. Hence, the type of coverage needed is similar to that for traditional movers that are insured under warehousemen’s legal liability insurance.
As a result, some mobile self storage operations are organizing themselves as public warehouses for the protection and flexibility of customer goods valuation by the pound. (The value generally equates to 20 to 60 cents per pound.) This is a tried and true concept defined by the Uniform Commercial Code. As may be expected, setting up a public warehouse does not come without costs, including legal expenses and required bonding. Other operations will limit liability by storage contract similar to traditional self storage with modifications to cover transit and handling damage due to improper packing by the customer. Much depends on how a given state may look at the relatively new concept of mobile self storage or the owner’s level of comfort as well as specific insurance requirements.
Although it is not a complete list of all coverages an operator may need, listed below are common coverage issues for mobile self storage operations:
Customer Goods Legal Liability
As discussed before, Customer Goods Legal Liability is similar to the primary component of Warehousemen’s Legal Liability Coverage for moving and storage operators. Though similar, warehousemen’s may be more appropriate in mobile operations at this time (despite the fact that the self storage form is probably better in some respects). This is because the current self storage carriers never considered “movable” space with its associated transit and handling issues. This coverage in self storage is an endorsement to the basic general liability policy and not written by itself.
Warehousemen’s Legal Liability
The amount of your legal liability as a warehouseman is determined as an aggregate limit of either maximum capacity or an average inventory of all goods stored at your largest warehouse location in the event of damage or destruction due to a negligent act on your part. This does not apply to acts of God or any other act in which the insured is not found legally liable.
The worst case is a catastrophic event such as fire or water damage due to negligence on the part of the facility staff or owner. A deductible, generally per occurrence and not per vault or customer and a maximum payout per occurrence as stated in the declared limit are common.
Sale And Disposal Liability
This type of coverage is very similar to Warehouse Lien Sale coverage in the moving and storage business. Limits of $15,000 to $2 million are available. The incidence and number of transactions in the traditional self storage business versus moving and storage is much higher due to the circumstances and customer type. The incidence in the mobile segment is reportedly lower (somewhere in between the two) due to the demographics of these customers. The self storage form can be endorsed up to the amount needed. In contrast, Warehouse Lien Sale on the warehousemen’s form is limited to a percentage of the liability limit stated, and it is not increasable. It may not be enough. Again, in self storage terms, this coverage is an endorsement only to the general liability.
General Liability
General Liability for containers while they are off premises needs to be considered. Although current operators have reported few incidents to date, loaded and empty containers pose a risk nonetheless. Current self storage policies generally do not anticipate this exposure.
Commercial Auto (Truckers)
Mobile self storage relies on pickup and delivery within a local radius. The industry generally uses flatbed straight trucks and some tractor-trailer units for larger capacity containers (two to five trucks per location). Typical vault size limits capacity to five to 10 units per truck. Interstate as well as intrastate filings can be required when the delivery area radius borders two or more states.
Moving Equipment
Mobile equipment (forklifts) are subject to collision and off-premises operations. They require either Inland Marine scheduled/blanket coverage or at the very least property away from premises coverage including transit. Containers are not always on premises or are in transit, and this requires special treatment.
Cargo Coverage And Required Filing
As discussed earlier, cargo coverage is needed either on the Warehousemen’s form or along with commercial auto coverage as Motor Truck Cargo. Motor carriers of cargo must show evidence of cargo liability to a minimum of $5000 per truck and $10,000 aggregate for any occurrence (same time and place), although your operational exposure may be more as defined below.
A BMC 32-Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability usually will be required for U.S. Department of Transportation filings on a BMC 34 Certificate of Insurance provided by the insurer. In addition, states may require similar filings. Be sure to check with your governing authority or seek proper legal counsel to determine the specific requirements. It is important to note that agents sometimes cite Transit Coverage for this need incorrectly.
Legal Liability As A Carrier
This is liability coverage for mobile self storage while customer goods are being transported on the truck. The exposure is simply calculated by a dollar amount of liability for each container (as defined by your contract or warehouse receipt) times the number of containers that can be loaded on a truck (e.g., five vaults on a flatbed @ $1200/vault = $6,000). Remember: $5,000 per truck and $10,000 aggregate is the minimum by law that must be carried.
Workers Compensation
Workers Compensation on the mobile self storage side is admittedly a lower hazard than moving and storage, since in most operations, employees are not handling or packing customers’ goods. They simply use forklifts to load and move the packed-by- owner vaults.
Class codes for local trucking and warehouse employees are common, and both can be an issue with your current insurance carrier as these are not in all company’s appetites, and rates are many times higher than the clerical and leasing managers classifications related to traditional operations. Any employee doing pickup and delivery or warehouse operations will be classified at a higher rate, even if they only work part-time.
In general, many operators are not addressing the most critical coverage issues—Customer Goods Legal Liability, Cargo, and Sale & Disposal Liability— because they feel confident that their contracts are sufficient or they don’t understand what they lack (until claim time).
Unfortunately, some operators are assuming they have coverage with their current insurance carriers. Others are okay with self-insuring but don’t consider the extreme cost of legal defense in a claim situation that would have been provided by proper coverage. Some are blind-sided by Workers Compensation, Motor Truck Cargo filings, and Auto coverage costs.
Check with your agent and your current carrier to determine coverage and options. If you are considering a franchise opportunity, ask what they may have available. Claim time is not the time to check on your policy.
Over the past seven years, I have found some carriers that are writing or have written mobile self storage clients depending on where located and the structure of the risk. As a general rule, however, traditional self storage insurers are comfortable with traditional operations, and moving and storage insurers with theirs. This relatively new concept of mobile self storage combines the risks of both, and although both types of insurers are evaluating “the other side of the fence,” current markets are limited. Nevertheless, insurance products are available for the independent operator.
Glenn Drenkhahn is an Independent Agent with Affiliated Insurance Specialists in Alton, Illinois.
|
|
|
