By Glenn Drenkhahn

Though it may appear a logical extension of traditional self-storage and very similar in purpose and scope, mobile self-storage presents some liability and insurance coverage issues many operators do not anticipate. In addition, don’t assume your current self-storage insurance carrier is capable of accommodating your needs and don't assume coverage is automatic.

Mobile self-storage operations have grown rapidly over the past several years in all regions of the country. A weather-safe vault is delivered, packed by the customer, then picked up for storage in a climate-controlled warehouse. When needed, the units are returned or forwarded to a new location for unloading. The “empties” then are picked up. Clients can even arrange to stop by the facility to move contents in or out with prior notice. The operator simply brings the vault into a secure gated area allowing access to the vault then returns it to storage after everyone is clear of the area. Like traditional self-storage, the customer provides the lock to secure the vault. This, in concept, sounds like a logical extension of any self-storage operation, but differences in operations and several coverage issues are evident.

Even though self-storage operators maintain they are only renting “space” (the vault), there is a debated care, custody and control (CCC) issue: By maintaining control of the vault or “space,” the operators have control of the contents inside. As a result, customers goods legal liability issues can become more critical. Though they also have “control” over traditional self-storage units (the buildings), structures arguably do not move. Vaults are subject to transit exposure, which is specifically covered under cargo coverage, as well as issues with loading and unloading and shuffling in the warehouse by forklift. These exposures are very similar to those faced by traditional movers insured under warehousemen’s legal liability insurance.

As a result of these issues, some mobile self-storage operations are organizing themselves as public warehouses for the protection and flexibility of customer goods with valuation by the pound (from 20-60 cents per pound). This is a tried and true concept defined by the Uniform Commercial Code and is time tested. As may be expected, setting up a public warehouse does not come without cost such as legal expenses and required bonding. Other operations limit liability by utilizing a storage contract similar to those used in 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 and the facility owner’s level of comfort as well as specific insurance requirements.

Common Coverage Issues

	Customers Goods Legal Liability. As previously mentioned, this coverage is similar to the primary component of warehousemen’s legal liability coverage for moving and storage operators. Though the coverages are similar, warehousemen’s legal liability coverage is more appropriate for mobile self-storage operations at this time although the self-storage coverage is probably better in some respects. The current self-storage insurance carriers never considered “movable” space with associated transit and handling issues. For self-storage operations, this coverage is written as an endorsement to the basic general liability policy, NOT as a stand-alone coverage.
	Sale and Disposal Legal Liability. This is very similar to warehouse lien sale coverage in the moving and storage industry. Limits of $15,000 to $2,000,000 are generally available. The incidence and number of lien sale transactions in the self-storage business versus moving and storage is much higher due to the circumstances and customer type for each industry. The incidence of lien sales in the mobile self-storage segment is reportedly lower (somewhere in between self-storage and moving and storage) due to the demographics of this customer. The self-storage form of the coverage can be endorsed up to whatever limit is needed. Warehouse lien sale coverage on the warehousemen’s legal liability form is limited to a percentage of the liability limit stated and cannot be increased, which may not be sufficient for a self-storage/mobile self-storage operation. Like customers goods legal liability, this coverage is written as an endorsement to the general liability policy for self-storage operations.
	General Liability. General liability for containers off premises needs to be considered. Though current operators indicate no real incidents to date, loaded and empty containers pose a risk nonetheless. Again, current self-storage policies generally do not anticipate this exposure.
	Commercial Auto (Truckers). Mobile self-storage relies on pickup and delivery in a local radius. Self-storage facilities generally use flatbed straight trucks and some tractor-trailer units for larger capacity (two to five trucks per location). Typical vault size limits capacity to five to ten units per truck. Interstate as well as intrastate filings may be required when the radius borders two or more states.
	Moving Equipment. Moving equipment (vaults, forklifts, etc.) is 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. Vaults are not always on premises or are in transit and require special treatment.
	Cargo Coverage. As discussed earlier, cargo coverage (a very broad term in this business) is needed either on the warehousemen’s form Part B or as part of the commercial auto (in the form of motor truck cargo when warehousemen’s coverage is not written). This may be required for local and perhaps federal filings as a motor carrier of cargo depending on the area of operation, if state lines are crossed, etc. These requirements vary in every region, and it is wise to check before operations begin. Transit coverage is often offered here, but only cargo coverage applies to non-owned customer goods “in transit” on an insured owned/leased vehicle. Once delivered to the storage facility, the customers goods legal liability (self-storage form, if agreed to by the insurer) or the warehousemen’s legal liability Part A is responsibility for coverage.
	Workers Compensation. Workers compensation for a mobile self-storage operation is admittedly a lower hazard than that for a moving and storage operation as the employee is not handling or packing household goods (such as heavy furniture and bulky items). They simply use forklifts to load and move the packed-by-owner vaults. Class codes for local trucking and warehouse employees are common. However, both can be an issue with your current insurance carrier as not all companies have an appetite for these exposures and rates are many times higher than those for the clerical and leasing managers classifications related to traditional self-storage operations. Any employee performing pickup and delivery or warehouse operations will be classified higher even if the activity is only part time.

In general, many operators are not addressing the most critical coverage issues – customers goods legal liability, cargo coverage, and sale and disposal legal liability – because they feel confident their contract is sufficient or they don't understand what coverage they lack (until they have to file a claim). Some are assuming coverage with their current insurance carrier. Others are okay with self-insuring but probably have not considered the extreme cost of legal defense in a claim situation, which would have been provided if they had secured the proper coverage.  Many are blind-sided by the workers compensation 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 that company may have available in terms of insurance coverage. Claim time is not the time to check your policy.

Over the past six years, I have found some carriers that are writing or have written mobile self-storage clients depending on where the business is located and the structure of the risk. In essence, the traditional self-storage insurers are comfortable insuring traditional operations, and moving and storage insurers are comfortable with their specialty. This relatively new concept of mobile self-storage combines risks of both industries, and, though both sides are evaluating “the other side of the fence,” none is jumping over as yet…but I’m working on it.

Glenn Drenkhahn is an account executive for Affiliated Insurance Specialists, Inc., in Alton, Ill. With over 16 years of experience in the insurance industry and a bachelor of science degree in engineering, Glenn specializes in construction and automotive risks as well as traditional self-storage and mobile self-storage businesses. For more information, you may contact Glenn at glenn@affiliatedinsurance.net.