Last week, I heard from an agent whose customer had an almost six-figure claim for damage to personal property in a self-storage warehouse. The insurer offered 10% of the HO policy’s Coverage C limit, saying “It is clear from the language that any personal property that would normally be kept in the insured’s home, but is not there when the loss occurs, would be subject to 10% of the personal property limit.”
This assertion appears to limit coverage not only to property in a self-storage warehouse, but anywhere other than IN the insured’s home. Despite pleas from the agent that the carrier did not understand the coverage, the insurer would not back off their settlement. So, the insured filed suit and the insurer then promptly offered to pay the full amount of the loss. At this point, the bad faith claim continues.
The HO form involved was NOT the 2011 edition of the ISO HO 00 03 form which includes the following insuring agreement for Coverage C – Personal Property:
Self-storage Facilities
Our limit of liability for personal property owned or used by an “insured” and located in a self-storage facility is 10% of the limit of liability for Coverage C, or $1,000, whichever is greater. However, this limitation does not apply to personal property:
(1) Moved from the “residence premises” because it is:
(a) Being repaired, renovated or rebuilt; and
(b) Not fit to live in or store property in; or
(2) Usually located in an “insured’s” residence, other than the “residence premises”.
This provision is not in prior HO 00 03 editions such as the policy in force in this claim. ISO’s regulatory filing memorandum for their 2011 countrywide forms revision included the following explanation:
The current ISO Homeowners Program provides coverage for “personal property owned or used by an ‘insured’ while it is anywhere in the world”. The program generally includes a 10% limit of liability for Coverage C personal property (or $1,000, whichever is higher) “usually located” at an insured’s residence other than the insured’s residence premises, but the related provision does not expressly address property in a self-storage facility.
In order to address the increase in risk resulting from personal property located in self-storage facilities, we are revising Section I – Property Coverages in the base Homeowners policies (except for HO 00 08) to expressly limit personal property located in self-storage facilities to 10% of the Coverage C limit (or $1,000, whichever is greater), as follows….
This is a reduction in coverage.
New optional endorsement HO 06 14, Increased Amount Of Insurance For Personal Property Located In A Self-Storage Facility, provides for increased limits of coverage for insureds who wish to increase the 10% limit of liability for Coverage C personal property located at a self-storage facility.
© Insurance Services Office, Inc., 2010
The fact that ISO considers this a reduction in coverage confirms that there was no such limitation prior to the 2011 edition for personal property in a self-storage facility. In fact, a simple reading of the policy language in prior editions would support that contention.
Did the adjuster/insurer intentionally limit coverage knowing such limitation was not supported by the policy language? Will the bad faith claim be successful? The likely answer to both questions is “No” and bad faith suits are REALLY hard to win because the standard of conduct and proof required almost necessitate a mind reader.
But there might be a case for regulatory action for gross ignorance and incompetence if the jurisdiction has statutes or regulations governing such conduct. For example, this is from the state of Florida:
626.611 Grounds for compulsory refusal, suspension, or revocation of agent’s, title agency’s, adjuster’s, customer representative’s, service representative’s, or managing general agent’s license or appointment. The department shall deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, title agency, adjuster, customer representative, service representative, or managing general agent, and it shall suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist:
(8) Demonstrated lack of reasonably adequate knowledge and technical competence to engage in the transaction authorized by the license or appointment.
I have no idea if this provision in Florida law has ever been invoked. I have my doubts. But, if not, why even have such a law if it’s not enforced?
Photo by Scott Meyers Self Storage Investing 
Bill Wilson
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