Submitted to Investment Real Estate by Maureen A. Lee at Xercor Insurance Services LLC
On October 24, 2018, Governor Tom Wolf, the Governor of Pennsylvania, signed into law House Bill Number 504 which allows self storage operators to offer or sell self service storage insurance in Pennsylvania through obtaining a limited lines insurance license. The passage of this bill is a giant victory for both the national Self Storage Association (SSA) and the Pennsylvania Self Storage Association (PASSA) because it faced heavy opposition by the Independent Agents and the Department of Insurance (DOI) for five years. After working with the Independent Agents and the DOI explaining the purpose and benefits of the limited lines, going through a full vote in the House and the Senate, it was finally passed.
Crucial to the passage of the limited lines bill was Alyssa Quill, Vice President and Managing Partner of Storage Asset Management (and President of the PASSA) and Mike Rhoads, President of StorSmart. They both attended countless meetings with Department of Insurance representatives and others to get this law passed. Helping them along the way was Joe Doherty, Senior Vice President, Legal and Legislative Counsel of the SSA who helped carry this legislation across the line. This latest bill is now the thirtieth insurance-related bill passed – twenty-eight limited lines and two exemptions to producer licenses.
Why limited lines self service storage legislation?
The insurance industry is highly regulated by fifty-one (including District of Columbia) jurisdictions or Departments of Insurance. Though the state DOIs have worked to model the insurance statutes so that insurance is regulated similarly across the country, there are some differences. To clarify ambiguity in the insurance statutes regarding a self storage operator’s ability to offer or sell insurance at the point of lease, the SSA and state associations have worked to pass limited lines legislation. Limited lines allows for the selling of insurance but in a limited capacity. Other examples of limited lines insurance licenses are portable electronics, pet or travel insurance. For self storage operators, a limited lines insurance license allows for the operator to offer or sell insurance in connection with or incidental to the rental of a self storage space.
With the new law, an operator currently offering tenant insurance will now need to obtain a license. The Department of Insurance intends to have the application process ready by the end of 2018. As part of the application process, the operator will need to provide a list of all Pennsylvania facilities offering insurance. Other requirements for a licensed operator will be to maintain a register of employees offering insurance on a form to be provided by the Department of Insurance, make brochures or other written material disclosing certain criteria (provided by the tenant insurance program administrator) readily available, and provide training to the employees to name a few. Operators should contact their tenant insurance administrator with any questions about the licensing process and requirements.
What does the PA limited lines self service law mean for the self storage tenant?
The self storage facility is not responsible for the tenant’s personal belongings while in the storage unit. In many cases, the tenant may be in transition from one place to another and doesn’t have Homeowners’ or Renters’ insurance, so an operator can provide affordable, convenient coverage at the point of lease for any losses that may incur to the tenant’s property while in storage. If the tenant does have Homeowner’s or Renters’ insurance and a loss occurs, they don’t have to file that claim with their Homeowners’ or Renters’ insurance company and potentially pay a higher deductible or experience an increase in their premiums. Depending on the tenant insurance program being offered to the self storage tenant, the coverage available – like flood, vermin (or rodent) and mold/mildew – are typically not covered in Homeowners’ or Renters’ insurance policies.
Most importantly for the tenant and the operator, the self storage insurance programs are legitimized because it provides both parties a formalized process to handle any disputes regarding the denial or payment of a claim – through the complaint process with the Department of Insurance. The complaint process allows the tenant to ask for assistance with a claim dispute and the insurance administrator an opportunity to respond to the tenant’s complaint. This process typically excludes the self storage operator from the dispute because it is between the tenant insurance administrator and the self storage tenant.
About the author:
Maureen A. Lee is President & COO of Xercor Insurance Services LLC located in Indianapolis, Indiana. Prior to Xercor, she worked at Bader Company before leaving to start her own consulting company, M.A. Lee Consulting, Inc., where she worked on compliance issues within the self storage industry. She is a former member of the board of directors of the national Self Storage Association. Currently, she serves on the SSA Foundation Board of Governors and Chairs the Best Practices Committee. She has assisted the SSA in drafting limited lines legislation and has testified before various state legislatures supporting limited lines legislation. She graduated with a B.A. in History from Butler University in Indianapolis, Indiana.