Self Storage, Mini Warehouse, Public Storage: Does a Homeowners Policy Cover Personal Property Stored in a Rental Warehouse? – Claims Magazine

ISSUE

The insured suffered loss to personal property that was being stored in a unit at a self-storage warehouse. The warehouse management company leases the unit to the insured under a written lease for a specified term. The insured seeks coverage under her homeowners policy (ISO HO 00 03 04 91), which provides in part as follows:

The issue raised is whether or not the property is covered. Specifically, does any exclusion or limitation in the policy apply to property stored at an offsite warehouse?

Although offsite storage of personal property seemingly presents a special risk that should require a separate policy or endorsement, the homeowners policy provides coverage. No exclusion or limitation in the homeowners policy applies to property by virtue of the property being stored in an off premises self-storage unit, mini warehouse, or public storage facility. Note, however, that other exclusions or limitations might apply (i.e. the exclusion for motor vehicles or the limitation for business property could apply depending upon the type of property in the storage facility).

The homeowners policy provides coverage for personal property stored at a self-storage warehouse despite the fact that the risk exposure for the property seems much greater than that for property maintained at the insured home. Consider the risk factors from an underwriting standpoint.

Loss history for the storage facility is unknown and could be traditionally poor. Building construction and age are unknown. Supervision of the property is unknown, and unlike the insured home, the warehouse may be unoccupied and have no guard or security system. Next, the type of property stored in neighboring self-storage units is unknown and could be extremely hazardous (i.e., neighboring unit could contain dynamite). Further, fire department availability and water supply for fire fighting might be insufficient. The neighborhood could be high risk for arson, vandalism, theft, or other covered peril. Finally, values of property at the facility are unknown, but could be quite high.

The aforementioned risk factors have not escaped underwriters. Some manuscript forms limit coverage for personal property to property that is "at the residence premises." Similarly, older homeowners forms limit coverage of personal property to "unscheduled personal property usual or incidental to the occupancy of the premises as a dwelling and owned or used by an insured, while on the described premises." Under these forms, insurers extend coverage to property away from the residence premises, but limit the amount of loss recoverable to ten percent of the personal property limit or a minimum dollar limit, such as $1,000.

Nonetheless, most forms now, including the homeowners policy here, expressly provide coverage for personal property owned or used by an "insured" while it is anywhere in the world. Consequently, underwriters apparently intend to provide coverage for personal property of an insured even though the property may be temporarily or permanently located away from the residence premises, including property at self-storage warehouses.

Although the homeowners policy provides worldwide coverage for personal property, the form limits or excludes coverage for certain off-premises losses. However, none of the exclusions or limitations in the policy likely operates to reduce coverage for property stored in an off-premises self-storage unit, mini warehouse, or public storage facility.

Two provisions that appear potentially relevant to self-storage warehouse losses include (1) a reduced limit of coverage for property usually located at a residence other than the residence premises, and (2) an exclusion for theft from an "other residence" of an insured, unless the insured is temporarily living there. The pertinent language is as follows.

However, a self-storage unit would not normally qualify as a "residence" of an insured. A "residence" is a "[p]lace where one actually lives or has his home; a person's dwelling place or place of habitation." Black's Law Dictionary 1308 (6th ed. 1990). Therefore, neither the 10% Coverage C limit for "personal property usually located at an 'insured's' residence other than the 'residence premises,'" nor the theft exclusion for "[p]roperty while at any other residence . . . rented to, or occupied by an 'insured'" likely applies to property at a self-storage warehouse.

At least one court reached this same conclusion. In Burns v. Barton County Mut. Ins. Co., No. CV698-57AC (Circuit Court of Wright County, MO, January 4, 1999), the trial court found that a homeowners policy covered tools stored in a rental storage facility. The court concluded that the 10% Coverage C limit did not apply because the storage facility was not a residential-type premises.

Even though the form does not reduce coverage simply because property was in a self-storage warehouse, other exclusions or limitations could be applicable. For example, the special limit for business property is lower for property away from the residence premises than for property on the residence premises. Additionally, theft coverage for watercraft and trailers is eliminated when the property is away from the residence premises. Consequently, the applicability of other limitations or exclusions should be considered.

a. Property while at any other residence owned by, rented to, or occupied by an "insured," except while an "insured" is temporarily living there.

This peril does not include loss caused by theft that occurs off the "residence premises" of:

Theft, . . .

. . .

Our limit of liability for personal property usually located at an "insured's" residence, other than the "residence premises," is 10% of the limit of liability for Coverage C, or $1000, whichever is greater.

Limitations and Exclusions, Generally Inapplicable

Coverage Despite Higher Risk

ANALYSIS

We cover personal property owned or used by an "insured" while it is anywhere in the world.