Market Segments Division—Self-Storage Facilities Program

(February 2023)

Collapsible Index

Eligibility

MS SF DS–Self-Storage Facilities Supplemental Schedule

MS SF 01–Self-Storage Facilities Analysis

I. Modifications To CP 00 10–Building And Personal Property Coverage Form

II. Modifications To CP 10 30–Causes Of Loss–Special Form

III. Changes To The Commercial General Liability Coverage Part

IV. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

The Self-Storage Facilities Program is an enhancement of the Commercial Package Policy. Any package written under the market segment division must be assembled according to the rules for all Market Segment policies.

This article will discuss items specific to the Self-Storage Facilities Program, including the eligibility, supplemental schedule, MS SF 01–Self-Storage Facilities, and its endorsements. In addition, underwriting and rating are discussed.

This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.

ELIGIBILITY

The only eligible classification for this coverage is the Warehouse – mini-warehouses - 18991 General Liability Classification. An operation remains eligible even if other classes are used in the rating of the exposure. There is no criterion that the Warehouse – mini-warehouse class even be the primary classification. However, each company may establish its own criteria with different qualifications. No classification is listed as ineligible.

MS SF DS–SELF-STORAGE FACILITIES SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that must appear on a Supplemental Schedule for the Self-Storage Facilities Program.

Changes in Limits

This section's only purpose is to increase insurance limits. If no limit is entered, the limits shown in the MS SF 01 apply. Any limit changes are effective on a per location basis. This allows protection for one or two locations to be increased without affecting the remaining locations.

A list of specific coverages appears in this section. Space is available for entering an “other” coverage along with its limit of insurance.

The coverages are:

Money and Securities
Computer Fraud
Money Orders and Counterfeit Money
Forgery or Alteration
Outdoor Signs
Employee Dishonesty
Personal Effects and Property of Others
Valuable Papers & Records
Property Off-premises
Customers’ Property Legal Liability
Other (Specify)

Note: According to the coverage form, whatever limit is entered is a replacement (not an additional) limit. If an insured wants $5,000 in coverage and the existing limit is $2,500, a limit of $5,000 must simply be entered on the schedule to get the desired level of coverage.

Hired and Non-Owned Auto Liability Insurance

If coverage is desired, a box must be checked for the coverage and MS SF 04–Self Storage Facilities-Hired Auto and Non-Owned Liability Insurance attached. The limits can be entered on this Supplemental Schedule or on the schedule that is included in the MS SF 01 form. Separate insurance limits apply for these two coverages.

Loss or Damage to Customers’ Autos (Legal Liability) Section

The insured has only one option regarding coverage for loss or damage to customers’ autos - Legal Liability Coverage for Loss or Damage to Customers’ Autos using endorsement MS SF 03. Limits and deductibles are entered by premises. The items that must be entered are:

Per event limit of insurance
Per customer's auto deductible for loss by theft, vandalism or mischief
Maximum deductible per occurrence for loss by theft, vandalism or mischief
Per customer’s auto for deductible for loss by collision

Forms Applicable

The final section of the Supplemental Schedule allows for a listing of specific endorsements by premises.

MS SF 01–SELF-STORAGE FACILITIES ANALYSIS

The opening paragraph of the Self-Storage Facilities endorsement clarifies which coverage forms and the property causes of loss forms are being modified by this endorsement. They are:

CP 00 10–Building and Personal Property Coverage Form
CP 10 30–Causes of Loss-Special Form
CG 00 01 or CG 00 02–Commercial General Liability Coverage Parts

The Self-Storage Facilities endorsement is not a complete coverage part. It must be attached to a package containing all three forms named above. If all three forms are not a part of the policy, the Self-Storage Facilities Program endorsement cannot apply.

When the Self-Storage Facilities endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply as they normally would, except those modified by the Self-Storage Facilities endorsement.

I. Modifications to CP 00 10– Building and Personal Property Coverage Form

A. Additional Coverages Changes

1. Money and Securities

Coverage is added for direct loss by theft, disappearance, or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured. The automatic amount of $5,000 applies when the covered property is either in the described premises or at a bank, while the $2,500 applies when the covered property is anywhere else. Either or both limits can be increased by an entry on the Supplemental Schedule.

The following three types of loss are excluded:

· Losses that result from errors or omissions in accounting or arithmetic

· Losses that occur because the property was voluntarily given out in an exchange or purchase

· Any loss of covered property that is contained within any money-operated device (such as a vending machine). This exclusion does not apply if the device has a continuous reading instrument that records all amounts that are deposited or stored in the device that is covered.

Occurrence is defined under this segment as any loss that involves a single act or a series of related acts by one or more individuals. The named insured is required to keep records of all money and securities to verify any loss.

Note: The automatic amount of $5,000 on premises or at a bank and $2,500 anywhere else can be increased by indicating the new limit on the Supplemental Schedule. Because this is a split limit and the entry on the supplemental schedule is for a single limit, be careful in the description in order to prevent confusion.

2. Fire Extinguisher Systems Expense (07 13 change)

Up to $5,000 is available in any one occurrence to pay the cost of recharging or replacing fire extinguishing equipment and systems. Coverage applies only if the discharge is within 100 feet of a described building or within 100 feet of the premises. The greater of the two distances is used to determine if coverage applies. In addition, if the covered property is damaged due to an accidental discharge, it is covered but subject to the same expense.

Note: No deductible applies to this supplemental coverage, and there is no coverage if the system is discharged during testing or installation.

3. Reward Payment

This coverage consists of two categories of rewards. In the first category, up to $5,000 is available for information that leads to the arrest and conviction of any party that commits a crime resulting in a covered property loss. The coverage limit is also subject to the actual cash value of the damaged property at the time of the loss or the amount it takes to repair or replace the property, or however the value of the property has been determined by policy conditions. In other words, the policy would not pay $4,000 for information related to a crime that caused a $1,500 loss.

The second category of reward payment applies to the return of stolen property and is also for a maximum of $5,000. The reward amounts shown are the most that are available for any one occurrence. Should more than one source provide information or return stolen property, payment is made to the one that acts first.

Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, who voluntarily provides information that leads to a conviction or leads to the stolen property will receive the reward. However, that person cannot be any of the following:

The named insured
Family members of the named insured
Employees
Family members of employees
Employees of law enforcement agencies
Employees of a business engaged in property protection
Any person having custody of the covered property at the time the theft was committed
Any person involved in the crime

The reward is not paid until there is a conviction or the property is returned.

4. Computer Fraud

When the named insured’s property or money and securities is transferred by fraudulent methods using a computer, there is coverage for up to $25,000. The transfer must move property or money and securities from inside an insured premises or bank to a person or place outside the insured premises or bank. This limit can be increased on the Supplemental Schedule.

5. Money Orders and Counterfeit Money

If the named insured, in good faith, provides services or hands over money or merchandise to another party who pays with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $5,000, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank. Counterfeit money is also restricted to only money accepted during the course of business.

6. Forgery or Alteration

Loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent, or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.

If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.

The $2,500 limit is the most that will be paid under this coverage for a single loss. The amount may be exhausted by the loss itself, defense of a suit or a combination. The limit can be increased on the Supplemental Schedule.

7. Outdoor Signs

Direct damage to outdoor signs that are owned or under the control of the named insured is covered. This coverage supersedes any other coverage provided for signs elsewhere in the policy.

The any one-occurrence limit is $5,000. This limit can be increased in the declarations.

8. Employee Dishonesty

Coverage of up to $25,000 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The limit of $25,000 can be increased by entering (and paying for) a higher limit in the declarations.

The employee may be working alone in committing the dishonest act(s), or the employee may collude with other persons. However, if any of those other persons include the named insured, partner, member, or manager of the named insured, there is no coverage.

Coverage is also provided for loss or damage to money and securities or other property of a customer caused by a theft committed by an identified employee of the named insured, who is acting alone or in collusion with others. The customer must own the property, be holding the property for another or be legally liable for the property. All settlements involving customer property loss are between the named insured and the insurance company. The customer cannot present the claim independently.

There is no coverage for any indirect loss attributable to the employee dishonesty, such as a business income loss, any costs to establish the existence or the amount of a loss or any legal liabilities. Legal expenses are not covered.

Example: Woody, the night attendant at Serve Yourself Storage Facility, came up with a great idea. If a unit had not been visited in over 24 months, he would enter the storage unit, remove any valuable items, and sell them over the internet. The first items were small, but when he wasn’t caught, he started ramping up his efforts. One day a customer notifies Serve Yourself Storage Facility that an item he placed in his storage unit is for sale on the internet and demands a full investigation. Woody’s activities are discovered, and coverage is provided for up to $25,000 for all customer property stolen.

An inventory computation and/or profit and loss statement cannot be the sole proof that a loss has occurred or be the sole method of establishing the value of the loss. In other words, there must be tangible evidence that a dishonest act occurred, and there must be a way to calculate the amount of that loss accurately. If the insured (or any partner, officer, trustee, member, manager or director of the insured) discovers that an employee was previously involved in a dishonest act, there is no coverage for any acts of that party. It doesn’t matter whether the incident occurred before or after the insured hired the employee—coverage ceases. The termination takes effect the moment the party's prior act is discovered. There are no exceptions to this exclusion (unless the insurer is willing to write a manuscript endorsement to document an exception).

The $25,000 limit (or higher if purchased) is the total amount available to respond to a single occurrence.

The dishonest act or event must happen during the policy period to be covered.

The limit of insurance is not cumulative from year to year, so the limit shown is the maximum that will be paid for any one occurrence of a dishonest act or event, regardless of how many years the policy has been in force or how much premium has been paid.

The act or event that causes a loss must have not only occurred during the policy period but must also be discovered no later than one year from the end of the policy period. There is an important exception. If the insured suffers a loss that would have been eligible under a previous policy but was not discovered until after the one-year limitation expired, there may be coverage. However, the old loss would have to meet two criteria.

First, this policy must be the replacement for the one in force when the loss actually occurred.

Second, the loss would have to involve a loss that is eligible under this policy provision. In addition, any payment made is subject to the current policy term's insurance limit (unless the prior term's limit was lower).

Possible Exclusion Ambiguity

There is an exclusion that may be confusing. It states that loss or damage due to a dishonest act performed by the named insured and any partner, member, officer, manager, director, or trustee is ineligible for coverage. Up to this point, the exclusion is very similar to exclusions in the Commercial Crime Form. However, the exclusion also bars loss for dishonest or criminal acts by authorized representatives and by anyone to whom the named insured has entrusted property. This part of the exclusion may be problematic. Doesn’t the named insured entrust items to employees as part of their duties? Aren’t employees authorized representatives? This wording is NOT used in the Commercial Crime policy and could cause confusion after a loss.

9. Ordinance or Law – Equipment Coverage

This coverage was inspired by the dynamism surrounding environmental laws. Federal, state and community standards may require changes in equipment when it is replaced for any reason. If so, this coverage pays for the upgrade but only if the equipment’s valuation is on replacement cost and the item is being replaced due to a covered cause of loss.

If refrigeration equipment is damaged this coverage pays three additional costs:

Mandatory refrigeration reclamation
Retrofitting of CFC-type equipment so that it uses non-CPC refrigerant to meet Clean Air Act requirements
Recharge of the system with non-CFC refrigerant.

The ordinance coverage is paid only if the equipment is actually repaired or replaced. The total payment cannot exceed the limit of insurance on the declarations.

This coverage does not pay for costs related to pollutant enforcement. In addition, if the named insured had an order to comply with an ordinance or law prior to the loss and failed to comply, there will be no payment for that previously neglected upgrade under this Additional Coverage.

Coverage applies per piece of equipment.

When the equipment is actually repaired or replaced, the payment is the lesser of:

Actual amount spent to repair or replace (repair cost cannot exceed the cost to actually replace) – this includes the cost to upgrade to the ordinance or law.
Limit on the Declarations for covered buildings or business personal property.

Coinsurance does not apply to this Additional Coverage.

Example: Amish Lockers provides refrigeration units where local Amish farmers store their meat. A windstorm destroys three of the units. New units must comply with the most recent EPA requirements, so their cost is 25% higher than the true replacement cost. This 25% increase is covered because of this Ordinance or Law – Equipment coverage.

10. Artificially Generated Electrical Current

This coverage is applicable only to computers. When artificially generated electrical current damages or destroys the named insured's computers the company will pay, but only if one of the following applies:

An occurrence that causes the loss or damage takes place within 1000 feet of a described premises
Power surge, interruption of power, blackout, or brownout is due to an occurrence that took place within 1000 feet of the premises

Any loss payment is subject to the deductibles in the policy and the limit on the Declarations that applies to this (computer) equipment.

B. Coverage Extensions changes

1. Newly Acquired or Constructed Property

The only change is for computers. Coverage at newly acquired or constructed property in the CP 00 10 ends at the earliest of when the policy expires, thirty days after the property is acquired or when the values are reported to the insurance company.

This coverage extension adds one additional time of coverage ending, but it applies only to computers. When ‘specific insurance’ is purchased at the newly acquired premises, coverage ends. The other times also continue to apply to computers.

Note: This extra item is confusing because it doesn’t say that coverage specific to computers is purchased but instead says only ‘specific insurance.’ This confusion could be an ambiguity to the benefit of the insured.

2. Personal Effects and Property of Others

The limit is increased to $5,000 and can be further increased on the Supplemental Schedule. This extension does not include coverage for property of customers. Property of customers is protected in this form’s Liability Enhancement section.

3. Valuable Papers and Records (Other than Electronic Data)

Enhancements to the valuable papers and records coverage include an increase in the insurance limit to $10,000 for on-premises loss or damage and $5,000 for off-premises loss. The limit can be increased on the Supplemental Schedule.

The Self-Storage Facilities Program enhancement provides for more than just the cost to research and replace; it also covers direct physical loss or damage to the valuable papers and records owned by or in the insured’s care, custody or control, as long as the damage or loss involves an eligible peril.

There is no coverage for any valuable papers that are owned by customers and stored at the self-storage facility.

The damage or loss must be due to a specified cause of loss (as defined in the Cause of Loss – Special Form) or due to collapse. Ineligible property includes items that are used or held as samples, are held for delivery after the sale, and items that are in storage away from any premises designated in the declarations.

Also included, up to the business personal property limit, is the cost of blank material and the labor necessary to transcribe the records, if available.

Note: The ISO Inland Marine Valuable Papers Form provides coverage under a special form (all risks of damage except where excluded) basis. Moving an insured from the Inland Marine form to this form will cause a reduction of coverage, so this endorsement should not be considered a direct replacement for the ISO Valuable Papers Inland Marine Coverage Form.

AAIS Valuable Papers and Records Coverage Form

ISO Valuable Papers and Records Coverage Form

4. Property Off-Premises

The Self-Storage Facilities Program enhances the property off-premises extension by adding protection for computers while they are in transit.

Example: Yourstuf Unitbarn is insured under a commercial package policy modified with MS SF 01–Self Storage Facilities form. Yourstuf has just opened a new location, but the office supply store delivered the new office's computer to the home office location. The home office manager tells an employee to load the computer equipment in a Yourstuf pickup and take it to the new location. The new equipment is destroyed when the Yourstuf pickup is in a collision on the way to the new location. This loss would be covered (subject to the property's insurance limit).

5. Outdoor Property

The Self-Storage Facilities Program provides coverage for outdoor property for the following causes of loss, which are:

Fire
Lightning
Explosion
Riot or civil commotion
Aircraft

Limits applied are based on the type of outdoor property.

Fences and retaining walls are covered for up to $25,000 in a single occurrence, provided they are not part of the building.
Outdoor radio and television, satellite or other antennas are covered up to $3,000 in a single occurrence. The coverage extends to masts, towers and lead-in and support wiring that are part of the covered items.
Trees, shrubs, and plants are covered for up to $5,000 for any one occurrence, but there is a maximum of $500 for any one tree, shrub, or plant. Trees, shrubs, and plants that are considered stock or that are part of a vegetated roof are not part of this extension because they are covered as personal property. The $5,000 limit must also cover any debris removal associated with the loss.

The expense to remove property of others consisting of trees, shrubs, and plants debris is covered under this item. The property of others cannot belong to the owner of the building when the named insured is a tenant.

Note: No limit is mentioned with the expense to remove property of others item although there is reference to the terms and conditions of the rest of extension. There could be an ambiguity as to what limit, if any, applies.

6. Accounts Receivable

The limit of insurance for the business personal property may be extended to include loss or damage caused by eligible perils to accounts receivable for:

· The amounts an insured is owed from customers but is unable to collect

· Interest charges on loans the insured has had to obtain to offset collections while the insurer was settling the claims payment process

· Any additional collection expenses that were made necessary by the loss or damage

· Other reasonable expenses incurred to re-establish accounts receivable records

The maximum amount of coverage available is $5,000 for on-premises loss or damage and up to $1,500 for off-premises loss.

Note: If higher limits are needed, consider using one of the following forms because the coverage is designed just for this exposure.

AAIS Accounts Receivable Coverage

Accounts Receivable Coverage

II. Modification to CP 10 30–Causes of Loss-Special Form

Several exclusions and limitations found in the Causes of Loss—Special Form are modified for some of the additional coverages and coverage extensions. The modifications are as follows:

A. Mechanical Breakdown

The mechanical breakdown exclusion does not apply to computers.

B. Dampness, Dryness, Changes in Temperature, Marring or Scratching

The only change in the dampness, dryness, changes in temperature, marring or scratching exclusion subparts is the dampness or dryness of the atmosphere portion.

An exception is added so that when an air conditioning system that is used with the computer is damaged by a covered cause of loss, the resulting damage to a computer because of any dampness or dryness is covered.

C. Additional Exclusions for Computer Coverage Only:

1. The following exclusions apply to computer coverage. Loss or damage due to any of the following is excluded regardless of other concurrently or sequentially occurring causes of loss.

Note: The reason these extra exclusions are needed is because MS SF 01 includes coverage for mechanical breakdown of computers that is not provided by the CP 10 30.

a. Errors or Omission

There is no coverage for damage or loss due to errors or omissions in processing, recording, or storing information on computers. Any resulting fire or explosion is covered when it is due to an eligible peril.

b. Electrical Disturbance

There is no coverage for damage caused by electronic or magnetic injury, disturbance, or erasure of electronic recordings unless it is a loss due directly to lightning.

c. Computer-Related Losses

There is no coverage for any loss or damage that is caused by or results from the failure, malfunction, or inadequacy of any of the following (regardless of who owns the property) because they cannot correctly recognize, process, distinguish, interpret, or accept dates or times:

Micro-processors and any other computer hardware
Software
Operating system software
Networks used by computers
Equipment that is computer related or electronic and associated components
Any other products that depend on the items listed immediately above in any manner.

Note: Regarding this exclusion, it does not matter whether these items belong to an insured or to other parties.

d. Computer Advice or Consultation

Any of the following provided by the named insured or for the named insured is not covered when used to determine, test, or rectify potential or actual problems described in exclusion c. above.

Advice
Consultation
Design
Evaluation
Inspection
Maintenance
Repair
Replacement
Supervision

2. When Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation excluded above result in a specified cause of loss or elevator collision, that resultant loss is covered. However, there is no payment to repair, replace, or modify any item listed in exclusion c. above.

The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.

D. Employee Dishonesty

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Employee Dishonesty Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War, and Military Action, in addition to specific exclusions discussed in the Employee Dishonesty Additional Coverage in this endorsement.

E. Outdoor Signs

Most of the exclusions in the Cause of Loss–Special Form do not apply to the Outdoor Sign Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War, Military Action, Wear and Tear, Rust and Mechanical Breakdown.

F. Valuable Papers and Records and Accounts Receivable

The only exclusions that apply to Valuable Papers and Records and Accounts Receivable are:

· Governmental action

· Nuclear hazard

· War and military action

· Computer-related losses

· Computer advice or consultation

· Continuous or repeated seepage or leakage of water—14 days or more

· Water, other liquids, powder or molten material that leak or flow from plumbing, heating, air conditioning or other equipment caused by or resulting from freezing

· The anti-concurrent causation exclusions

Note: This item is very ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapse while accounts receivable coverage is subject to the CP 10 30 causes of loss. Remember that under the Valuable Papers Coverage Extension only specified causes of loss and collapse are considered covered causes of loss. Combining the two coverages under this same modification would suggest that the two are covered for the same causes of loss when they are not.

G. Accounts Receivables

· The following exclusions apply in addition to the exclusions described in F. above: Loss involving alteration, falsification, concealment, or destruction of accounts receivable records if these actions were meant to conceal another action such as giving, taking, or withholding money, securities or other property.

· Loss due to errors or omission in a covered operation's bookkeeping, accounting or billing functions.

· Loss that is only found due to an audit or inventory. There must be some other outside evidence.

III. Changes to the Commercial General Liability Coverage Part

A, Two New Coverages Are Added For Self-Storage Facilities

CUSTOMERS’ PROPERTY LEGAL LIABILITY COVERAGE

This is a separate Coverage Part with its own Insuring Agreement and Exclusions.

1. Insuring Agreement

The coverage applies to any legal liability the named insured owes for damage to customers’ property while that property is held in the storage facility. The damage must occur during the policy term and within the coverage territory. As with other liability insuring agreements, the insurance company has the right and duty to defend and investigate but is under no obligation if the occurrence is not eligible for coverage. All duty to defend ends when the limit is exhausted by payments. The limit of insurance is $100,000 per occurrence and there is a $250 per occurrence deductible.

Example: Store Your Stuff decides to eliminate its alarm system to reduce costs. Immediately after that decision, five different break-ins occurred. Those unit-owners sued Store Your Stuff because it was its decision that placed their items in danger. Store Your Stuff has coverage for the defense of the suit and potential damages up to $100,000.

2. Exclusions (07 13 changes)

The following exclusions apply to this coverage part:

· Damage to land motor vehicle, trailer, or semi-trailer that is stored by the customers at the premises.

· Damages the named insured assumed by contract. However, if the assumed liability involves a type of loss that would normally qualify for policy coverage, the form's protection still applies.

· Intentional property damage by the named insured, employees (employed, leased or temporary), directors, trustees, or authorized representatives.

· Dishonest actions that are criminal and committed by the named insured, employees (employed, leased, or temporary), directors, trustees, or authorized representatives. Theft is one of such actions.

· Theft by a person the named insured entrusts with the property. This person may or may not be acting in collusion with others. (07 13 addition)

· Any liability that is due to the sale and disposal of customer property.

· In order to prevent a duplication of coverage, if the loss is covered under the commercial property coverage part, there is no coverage under this coverage part.

Example: Examination of surveillance tapes proves that employees were behind the break-ins at Store Your Stuff, so all coverage was denied.

3. Supplementary Payments

The supplementary payments section in the CGL coverage part applies to this coverage part.

4. Conditions

This conditions change was added in the 05 08 edition but seems out of place in the 07 13 edition. It refers to lock-out sale and disposal, but those terms are not used in this particular coverage part. As a matter of fact, liability due to the sale and disposal of customer property is specifically excluded. It appears to be here in error which is a problem for the insurance company because of the ambiguity it presents.

The following replaces the Duties in the Event of Occurrence, Offense, Claim, or Suit Condition:

· If a lock-out or disposal claim or suit is actually presented, the named insured must record all of the information and provide the information to the insurance company as soon practicable. The written notice must be sent to the insurance company as soon as practicable.

· The named insured and other insureds who may be involved must send the insurance company all legal papers, authorize the insurance company to obtain information, cooperate with the insurance company, and assist in enforcing rights.

· No one, including the named insured, can agree to make any payment unless they make it voluntarily. They cannot act on behalf of the insurance company.

SALE AND DISPOSAL LIABILITY COVERAGE

This is a separate Coverage Part with its own Insuring Agreement and Exclusions.

1. Insuring Agreement

All storage facilities must deal with situations where customers stop paying for their storage units or use their units in violation of the terms of the agreement. When the named insured exercises its rights to lock out customers or to dispose of customer property, lawsuits can happen. This coverage pays the sums that the named insured becomes legally obligated to pay to the customer because of acts or omissions involving the sale of customer property or when customers are locked out of their storage units. As with other liability insuring agreements, the insurance company has the right and duty to defend and investigate but is under no obligation if there is no coverage. Any act or error must occur within the policy term and in the coverage territory. All duty to defend ends when the limit is exhausted by payments.

Example: Property Prison, Inc. has a strict policy, reserving the right to confiscate any property after two monthly storage fee payments are delinquent. The owner of Property Prison was sued by a customer who was upset because her clarinet and musical accessories were sold. Property Prison's insurer, who wrote a Market Segment - Self Storage Facilities form for the company, agreed to defend against the suit. In its investigation, the insurer found that the property was sold to recoup storage fees that were unpaid for five months. The customer lost the suit, so no payment was made, but the insurance carrier bore the cost of defense.

The limit of insurance is $25,000 annual aggregate.

2. Exclusions

There are only two exclusions under this coverage part:

Liability because of assumptions of liability in a contract except for that liability that would have been in place without the contract
Liability due to dishonest acts by the named insured, employees or other persons entrusted with the client’s property

3. Supplementary Payments

The supplementary payments section in the CGL coverage part applies to this coverage part.

4. Conditions

Duties In the Event of Claim or Suit as a Result of a Lock-Out or Sale of Customers’ Property replaces the Duties in the Event of Occurrence, Offense, Claim, or Suit Condition as follows:

If a claim or suit is actually presented, the named insured must record all of the information and provide the information to the insurance company as soon practicable. The written notice must be sent to the insurance company as soon as practicable.
The named insured and other insureds who may be involved must send the insurance company all legal papers, authorize the insurance company to obtain information, cooperate with the insurance company, and assist in enforcing rights.
No one, including the named insured, can agree to make any payment unless they make it voluntarily. They cannot act on behalf of the insurance company.

IV. Definitions

Thirteen definitions are added:

Computer is a programmable electronic device used to work with data. While the definition does apply to peripheral equipment and to related air conditioning and fire suppression systems, it doesn’t apply to data or media.

Counterfeit money is imitation money meant to deceive.

Customer is any person or organization who rents, leases, or occupies a space in the named insured self-storage facility.

Employee is a defined term only for Money and Securities and Employee Dishonesty coverages. (07 13 changes)

Employee is expanded beyond the full-time employee of a business. There are seven different categories that qualify as employees:

a. An actual person (not a corporation) who is paid by the named insured and is under the control of the named insured with respect to performing his or her duties. The person remains an employee for 30 days after termination, but only if termination is not related to dishonest actions.

b. A person who is a substitute for an employee or is hired for short temporary work is considered an employee while under the control of the named insured except when caring for property off-premises.

c. A person leased to the named insured that is not a person described in a. or b. above. There must be a contract and a labor-leasing firm involved.

d. A consultant for the named insured but only if that consultant was formerly an employee, director, partner, member, trustee, or manager.

e. A guest student or intern but only while acting as a student or providing services for the named insured. There is no coverage for loss of property off premises.

f. Any employee of an entity that merged with the named insured or was acquired by it prior to the policy effective date.

g. Managers, directors or trustees when acting as employees or while on a task-oriented board.

An employee does not include independent contractors or similar type individuals unless specifically described in the list above.

Forgery is when one person signs another person’s name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.

Lock-out is when a customer is denied access to his or her property or the space being rented, leased, or occupied by that customer.

Manager is any director in a limited liability company.

Member is an owner of a limited liability company.

Money includes all currency, coins, and banknotes with a face value and in current circulation, plus money orders, travelers’ checks and similar items that are held for sale to the public.

Occurrence, as defined here, applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money, it means either one or more related acts or events by one or more persons or one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses involving one or more instruments caused by any person or in which that person was involved. Under Employee Dishonesty, it means all losses that result from a single act or series of acts caused by one or more employees.

Sale and Disposal Operations are actions taken by the named insured to empty the storage space of a non-paying customer and prepare it for another customer.

Securities are evidence of debt such as stock certificates, bonds, contracts, tokens, stamps, credit card evidence that can be used to collect from the credit card company and other items that represent money but are not money.

Theft, as defined here, applies to only Employee Dishonesty within customers’ property coverage. It is the taking of property illegally from a customer so that the customer is deprived of it and its usefulness.

ENDORSEMENTS

The forms and endorsements developed for the Market Segments series of programs carry the designation MS.

Only two specific endorsements are available to modify the coverage provided under the self-storage facilities program. However, it is important to remember that all of the endorsements available under the Property and General Liability Coverage Parts are available under this division.

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements and Their Uses

MS SF 03–Self-Storage Facilities-Loss or Damage to Customers' Autos (Legal Liability Coverage)

This endorsement provides coverage on a legal liability basis for damage to autos (and their equipment) that is left with the named insured either on the described premises or temporarily away from the premises. In other words, the form provides valet parking coverage.

It pays only for damage that occurs on the covered premises when the named insured bears legal responsibility for the damage. The Covered Cause of loss is any loss or damage, provided the named insured is found legally liable. However, there is no coverage for incidents involving:

· Any agreement between the named insured and the customer stating that the named insured will take the primary responsibility for damage to the customer’s auto left with the named insured.

· Loss or damage from theft or conversion caused by the named insured, partners, executive officers, or employees.

Because this is liability coverage, the Supplementary Payments should apply. Rather than make reference back to the Supplementary payments in the CGL, the endorsement lists the payments the company will make in addition to the coverage available under the policy's limit of insurance and it does include defense costs.

A per event limit on the supplemental schedule is the most paid at a particular premises regardless of the number of cars involved in the incident. The deductibles shown on the Supplemental Schedule apply to:

Loss or damage to customers’ vehicles from theft, vandalism or mischief
Loss or damage from collision

Auto is defined as a land motor vehicle, trailer, or semitrailer.

MS SF 04–Self-Storage Facilities-Hired Auto and Non-Owned Auto Liability Insurance

This endorsement amends the General Liability Coverage Part to provide coverage on a basis similar to commercial auto coverage. Hired auto coverage applies to bodily injury and property damage that arises from the maintenance or use of a hired auto by the named insured or any employee of the named insured. Non-Owned Auto Liability applies to bodily injury or property damage that arises from any person using a non-owned auto in the course of the named insured’s business.

Note: Non-owned coverage is designed to protect the named insured, not the owner or driver of the vehicle.

UNDERWRITING CONSIDERATIONS

Any program offered by an individual insurer will have its own set of eligibility guidelines. If the program is a generic or standard program, such as ISO’s Market Segments Programs, it normally has a set of qualifying criteria. Because there may be differences between the two sources of eligibility criteria, it is important for the insurance professional to be thoroughly familiar with the applicable new business and renewal qualifications.

The following review of the underlying and eligibility requirements for the Self-Storage Facilities Program is for the ISO generic program.

Specific Self-Storage Facilities Operations

The only eligible classification for this coverage is the Warehouse – mini-warehouses - 18991 General Liability Classification. However, an operation with exposures subject to additional classes remains eligible for coverage under this program. It isn't even required that the Warehouse – mini-warehouse class be the primary classification. However, each company may establish its own more restrictive criteria.

Underwriting this classification must revolve around the security controls of the facility. Customers and customers’ property are supposed to be protected. This means that customers must be kept safe as they travel into the facility at whatever times such visits are permitted. A 24-hour facility would have the heaviest exposure due to nighttime visits. In those cases, lighting and security cameras would be a must.

Attended facilities are preferred, but some unattended rural facilities could be acceptable with limited hours and police patrols.

Careful attention should be paid to contracts and rules on types of property that can be stored. Storage of all types of vehicles (due to gasoline fumes) and any type of flammable liquids should be of particular concern.

COVERAGE ISSUES

Commercial Property Coverages

Many of the issues related to the underwriting of commercial property insurance, such as construction, occupancy, physical characteristics, types of rates and so forth, are discussed in great detail under the commercial property section.

Commercial General Liability Coverages

Many of the issues related to the underwriting of commercial general liability insurance, such as claims-made versus occurrence coverage, limits, deductibles, endorsements, and so forth, are discussed in detail under the commercial general liability section.

Property Enhancements

Several property enhancements are added to the commercial property coverages via this Market Segment endorsement. Any increase in exposure presented by added coverages should be identified. Once identified, they should be carefully evaluated to determine if they are those contemplated by the program's coverages and rating structure. Some of the property enhancements with the most significant underwriting concerns involve several types of outdoor property, including fences, outdoor antennas, trees, shrubs and plants and outdoor signs.

Electronic data processing equipment and electronic media and records have been added via the enhancement endorsement. Theft is a major exposure, along with hostile fire. All media should be backed-up, and copies stored off-premises in a safe location. Mechanical breakdown is included, so the electrical system, including wiring, circuit breakers, and amperage, connecting to the electronic data equipment should be checked to reduce the potential for loss. Surge protection devices should be installed.

Accounts receivables are covered up to the stated limits and conditions. The insured should have adequate back-ups and copies stored off-premises in a safe location. The same is true of valuable papers and records.

Crime and Dishonesty Enhancements

The Self-Storage Facilities Program endorsements add coverage for money and securities, money orders and counterfeit paper currency, forgery and alteration and employee dishonesty.

The insured should be evaluated for crime protection devices, including the type of devices used and how they are maintained. The evaluation should include alarms, locks, lighting, fencing, guards, or other security measures.

Sound hiring procedures, background checks, and internal controls are necessary to minimize employee dishonesty losses.

Procedures should be implemented and reviewed regularly to monitor and reduce the potential for crime and dishonesty losses.

Liability Enhancements

Two coverages that are needed by self-storage facilities are added to the liability section.

Customers’ Property Legal Liability

This coverage applies only to a facility’s legal responsibility for goods that belong to its customers. This is a major exposure due to the high volume of goods in the care, custody, and control of the named insured. In addition, the named insured does not truly know what is stored in any of the storage units. The named insured should have a contract that spells out the exact rights, duties, and responsibilities of each party to the contract. There should be strict rules on storing flammable liquids, firearms, explosives, and similar items that could cause fires or explosions. In addition, there should be restrictions on jewelry, furs, and similar items to reduce the theft potential.

Sale or Disposal Liability losses can be prevented by clearly notifying customers when storage units will be locked and when the items will be sold. To prevent mistakes, the facility must strictly follow a procedure for contacting the unit renter before taking any action. These procedures should include the number of days, the method of contact, and the number of contacts. Documentation must be held for each sale and disposal in case the owner returns to claim the property. Since mistakes can occur in notifying one owner and then disposing of a different owner’s property in error, there must be a check and balance system to guarantee that the unit and the owner match.

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated in accordance with the Commercial Lines Manual for the specific coverage part.

The MS SF 01 has a number of enhancements, and those must be priced. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in other parts of the policy.