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By Jim Clemmensen
In your self-storage business, you no doubt have a provision in your lease which represents the basis for tenant release and indemnification. Simply put, your tenant agrees to indemnify and hold harmless the lessor (your self-storage facility) from any damages related to storage.
“Indemnity” is the shifting of the entire liability for any wrongdoing onto the shoulders of another party. Due to the severity of such a concept, courts strictly construe any indemnity provision, such as the ones commonly found in self-storage rental agreements, to be sure the parties who contracted for such liability shifting (your tenant and the self-storage facility) understood the consequences.
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This provision of your lease is critically important. A properly worded indemnity notice to your tenant should include wording to the effect that your tenant releases you and your agents from liability for loss or damage to property stored in or transported to or from the tenant’s rented space regardless of who owns such property and regardless of how the loss or damage is caused. Furthermore it may state that lessor (the self-storage facility) is not a bailee and has no safekeeping duties for tenants’ property at any time under any circumstances. It may also offer protection for the facility by stating “tenant will indemnify and hold lessor harmless from all claims, damages, government fines, lawsuits and lawsuit costs relating to loss or damage to property stored in or transported to or from tenant’s space regardless of cause.”
All of this protective contractual wording is subject to review by courts and judges in the event of a lawsuit against a self-storage facility. In some jurisdictions, such as Texas, the Supreme Court has established standards for indemnification provisions to be upheld. Specifically, the court requires “that the indemnification provision must be conspicuous and specifically state that the purpose of the contract is that a party intends to indemnify the other for its own negligence.” In the case of
Texas law, if the self-storage contract fails to be conspicuous (such as in bold print or red print, etc.) and specifically state that the signing party (your tenant) agrees to indemnify you, the self-storage operator, for its own negligence, the court will not uphold it.
As mentioned above, the concept of indemnity is viewed as severe, so anything you can do to make the indemnity provision in your lease agreement conspicuous will be of value. The following actions are highly recommended:
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Use bold print or red print to make the indemnity provision in your lease agreement stand out.
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Be sure the indemnity provision of your contract is separate and distinct from other provisions of your contract thus making it conspicuous.
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Require tenants to specifically initial any areas dealing with indemnity. Having a place for the tenant’s initial and a witness initial from you or your facility manager would also be of value to clearly demonstrate that your rental contract did indeed make the indemnity areas conspicuous.
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Have your attorney review your rental agreement to determine if the language you currently use would meet the heightened Texas Supreme Court standard and any heightened standards your state may have adopted or might adopt in the future.
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If your contract contains the necessary specific indemnity language, and that wording is conspicuous, it is likely that your state courts would find the indemnity language enforceable.
Jim Clemmensen is head of the Claims Division for Phoenix-based MiniCo, Inc. MiniCo provides industry-leading specialty insurance programs for self-storage businesses including property and casualty insurance and tenant insurance programs. For more information, please visit www.MiniCo.com.
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