By Michael Rice Services such as truck and trailer rentals, sales of boxes and moving supplies, and even the provision of free moving trucks with equipment for your customers can all enhance your bottom line. However, providing these services through service agreements and contracts with vendors (often called “ancillary agreements”) is not without risk.

Some, but by no means all, of the potentially unforeseen risks to consider in examining your contract include potential liability arising from day-to-day business practices including the following:
	Providing instructions to customers regarding the proper method to hook trailers to vehicles
	Ensuring that all warning notices and devices, such as lights, are attached to the trailers and in operating order
	Making customers aware of the weight limitations and power requirements of vehicles towing such units
	Evaluating the driving abilities of the persons to whom you are renting the units
	Documenting the age, maintenance, upkeep and condition of the units themselves

Regarding that last item, the age and maintenance of the unit, please be aware that the service contractor providing the trailers is under no obligation to provide you with the newest or best units. You may be the customer selected to receive the not-so-good units. Therefore, we suggest you carefully inspect each unit you have been provided to ensure they are in good physical condition. You might also ask the vendor to provide the complete repair/service history for your review. Finally, consider asking for replacement equipment from the vendor if the units are unusually old, have high mileage, or are in poor condition.

Lawsuits have become increasingly commonplace for business people in all types of industries. When it comes to providing rental trucks and trailers at your self-storage facility, there are a multitude of avenues for legal attack in the event that one of these rental units is involved in some sort of accident. The potential for claims increases even more if the accident results from a condition beyond the renter’s control, such as a defect in the unit, failure on the facility’s part to provide accurate instructions for attaching a trailer to a towing vehicle, or any one of a multitude of liability theories.

In most cases a lawsuit will be aimed at everyone who had any sort of contact with the unit involved, including the facility who rented the unit to the person operating it. In these circumstances, your contract with the rental company may determine whether you will be able to transfer your defense and indemnity for such claims to the rental agency with whom you are contracted. However, the rental company may not agree to defend you in the event of a lawsuit and may not agree to pay any judgments ordered by a court. This is especially true if you exercised any control over the device involved in the accident, you altered the device in any way, or you did any sort of maintenance on the device including any failure on your part to inspect, notice, and point out a defect or a maintenance item to your service contractor for them to repair.

In these instances, it is in the best interest of the service contractor and its insurance carrier to retain as many “partners” in litigation as possible (i.e., the self-storage facility) in order to dilute their exposure to liability and damages. Unfortunately for self-storage business owners, it is relatively easy to assert allegations of maintenance failure, inspection deficiencies, or improper or negligent entrustment, training and supervision of the use of the equipment by the self-storage facility, which means the facility owner would be forced to disprove such allegations in legal proceedings.

Facility-Owned Equipment
Okay, so what if you don’t use a service contractor? What if you own the truck and trailer that you provide free to your customers? In that case, it is imperative that you maintain an insurance policy on the vehicle, ensure that the vehicle and the moving equipment are in perfect working order every time you let a customer use them, and maintain a paper trail to prove your proper maintenance practices. In addition, drivers who use your vehicles should be carefully scrutinized. We strongly recommend that you have the customer sign a contract for the use of the truck and that you have said contract prepared by competent legal counsel. At a minimum, you should take the following steps:

	Make a copy of the renter’s driver’s license and the declarations page of their personal auto insurance policy
	Obtain written acknowledgement by them that they feel they are qualified and able to control your vehicle while it is in their possession
	Obtain an acknowledgement that a designated driver and only a designated driver will operate your vehicle.

Like insurance policies and other contracts, your service agreements may or may not serve to protect you from every contingency that arises. The civil judicial system is overloaded by plaintiffs and their attorneys who are well-versed in maximizing your exposure to claims arising from circumstances described above. The point is that once you are embroiled in a civil lawsuit and faced with an array of allegations made by the plaintiff’s attorney, it can be extremely difficult and costly to extricate yourself.

Ancillary agreements are fine tools for providing diverse services to your customers and maximizing your income, but such agreements, as you can see, are fraught with opportunities that may lead to a morass of legal entanglements and litigation. You must consider more than simply whether you want to provide such services. You need to carefully consider many factors including:

	The reputation and business practices of the service contractor you select.
	The risks to your business associated with such contracts
	Your ability to manage the equipment and paperwork associated with providing the services

Above all, in order to obtain the most airtight contract you can possibly have, you should always have proposals concerning contracts reviewed by competent counsel who knows your business and the risks associated with such contracts and who can negotiate contract provisions that will best benefit you.

Should these comments discourage you from entering into such agreements? Not at all. The point is that you need to be fully informed of all the pitfalls and risks associated with doing business in this manner. Take every possible step to protect yourself and your business by carefully scrutinizing all proposals and contracts, obtaining the best legal counsel that you can find, and consulting with your insurance agent to discuss the various insurance products available to protect you and your self-storage business.

Michael Rice is Manager of Claims for Phoenix-based MiniCo, Inc. MiniCo provides industry-leading specialty programs for self-storage businesses including property and casualty insurance and tenant insurance programs. For more information please visit www.MiniCo.com or call 800-528-1056.