By Matt Schaller
Many self-storage tenant-insurance providers have created programs by patching together policy forms from the insurance carriers providing the coverage, going as far as taking a commercial-lines policy to make it fit personal-lines exposures. However, this creates potential pitfalls. One is a clause called other insurance. Nearly every insurance policy contains such a clause. This provision addresses the situation where an insured has multiple policies that insure the same risk.
This multi-policy problem arises in self-storage when a customer buys an insurance policy from an operator and he either has another policy covering the same risks and exposures, or at some point in the future purchases a policy that covers the same risks and exposures. This group includes homeowners, renters or business-owners policies.
When a loss arises in the storage unit, the other insurance clause comes into play. This will either deny coverage for the tenant, citing the other insurance as the primary, or severely limit recovery in the proportional share settlement of the loss with the other insurance in place. Neither of these situations is what the tenant is expecting. This can result in angry and confused customers at claim time.
During a time when self-storage operators are considering mandatory insurance programs, with high participation numbers to drive operational profitability, operators must also consider the following. With high numbers of insureds in the 65 percent to 75 percent range, the exposure to large losses will also increase.
Take a 400-unit facility with 70 percent tenant participation. When a fire or windstorm loss hits 280 units and incurs a $500,000-plus loss, the insurance carrier will enforce every policy provision, including the other insurance clause to ensure their losses are minimized. As long as the other insurance clause is in their tenant-insurance providers policy, operators should be concerned about how it will affect their customers in the event of a loss.
Matt Schaller is vice president of sales and client services for Storage Property Protection. He has 25 years of experience in the insurance industry, including global and regional brokerage experience, self-storage tenant insurance and property-protection expertise. Matt is a frequent speaker at the Inside Self Storage World Expo. To reach him, call 877.575.7774; e-mail mschaller@storagepropertyprotection.com ; visit www.storagepropertyprotection.com. On Twitter, look for @storproppro, and on Facebook, Storage Property Protection .