Car-storage facilities offer a desirable service, but not without liability concerns

I received an invitation the other day to attend the grand opening celebration of a new car-storage facility in my area.
It looked great on the website, an attractive facility with a clubhouse for members and a variety of automotive events scheduled to create opportunities to drive your cars. There were photos of a lot of impressive-looking enthusiast cars, and guests mingling around them during what looked like a fun party. Rates were low enough to be an economical option.
I am fortunate to have my own garage to house my modest collection, so I am not in the market for any additional storage. But this got me thinking about the legal implications of such an arrangement.

Things can (and will) go wrong

Let’s start by identifying the various ways that you can suffer a loss when you store your car in such a facility. (Note that we are talking about the type where you lease individual spaces, not the garage condos, which are a different animal.) Primarily, this would include your car being crashed, damaged, vandalized, stolen or destroyed in a casualty. You can be careful, and everyone else may be equally careful, but it’s just human nature and the luck of the draw. Sometime, somewhere, something will go wrong.

Most obvious — and likely — is that someone damages your car by driving into it. Every time a car is moved, there is a risk that it will bump into another car. That can be due to driver error, or it could be a stuck throttle or malfunctioning brakes. The risk is probably lower when the facility requires that its personnel be the ones to move the cars, but that may not always be practical.

There is also a risk of people getting too close to the cars and scratching them (or worse). Storage customers will want to bring their friends to the facility for a tour and show them all the cool cars: “You should see this Ferrari Daytona Spider parked over there.”

When the facility hosts a party, everyone will be walking around and looking at all the cars. It’s easy to foresee someone scratching a car with a belt buckle. Or even sitting on a fender to have their picture taken, with a dent as the result.

Many of these facilities park the cars two or three cars deep. If your car is in the front, it is easiest to get to, but it will need to be moved every time one of the cars parked behind it needs to get out. That not only risks damage, but it can be hard on your engine. We all know that most engine wear occurs during start-up.

Theft, loss and casualty

If thieves can steal a bunch of priceless art objects from the Louvre, don’t you think they can outwit whatever security system the storage facility is using? And gaining entry could be easier as customers can bring others into the facility.

Fire is also a serious consideration. You not only have building systems that can start a fire, but you also have the cars stored in the facility that can be triggers as well. The cars all have gasoline in their tanks, and many old cars have various fluid leaks, contributing to an environment that can be extremely combustible, spreading a fire throughout the facility.

There are also other potential casualties to consider, caused by earthquakes, tornadoes, hurricanes and flooding. Even seemingly minor weather events such as thunderstorms or hail can compromise storage buildings, leading to damage to your car.

Facility liability

When something goes wrong, is the storage facility liable? As a practical matter, the answer is more likely to be “no” than “yes.” Under the law, the facility is liable only if they are shown to be negligent. That is, did they fail to do something they were legally required to do, and did that cause your loss?

When another owner or one of their visitors damages your car, the facility is not the cause of the damage, and it is generally not going to be liable. It doesn’t matter that it happened when no one was around and you can’t establish who caused the damage — that does not make the facility liable.

There are exceptions, though. The facility might allow me to park my F-350 pickup in a tight space between two Lamborghinis or allow an obviously inebriated owner to pull their car out. Or the key to your car may be given to someone who claims to be you but doesn’t have appropriate identification. These are all examples of situations where the facility personnel did not directly cause the damage to your car, but they somehow allowed someone else to cause it.

But even those examples aren’t rock solid. Any savvy facility operator is going to use a storage contract that includes a variety of liability limitations.

Most likely, the contract will limit the facility’s liability to errors involving gross negligence. Ordinary negligence just requires a failure to do something one should have done — essentially, a mistake. Gross negligence requires more: lack of any care, recklessness, total disregard for doing the right thing, etc. Proving this can be extremely difficult, especially when the actual cause of the damage is hard to establish.

Security measures are typically covered in such disclaimers. The facility may do their utmost to impress you with its state-of-the-art security systems. But as comforting as that may be, the contract may very well provide that the facility makes no promises that their security measures will actually work or will be effective to deter theft or damage.

Insurance issues

A storage facility will typically carry what is called a garage keeper’s policy. That policy will cover any damage to your car that is the fault of the storage facility. But “fault” is the operative word here.

To recover under the garage keeper’s policy, you must first establish that the facility caused the damage. That can be tough when something just went bump in the night and no one knows how it happened. Without proof of causation, there is no claim.

You also have to establish that the facility failed to do something it was legally required to do. Expect the garage keeper’s carrier to give close scrutiny to the storage agreement. If the contract limits the facility’s liability, as already described, the insurance carrier is going to use that to deny the claim.

Also, consider that the facility’s policy may have low coverage limits which aren’t enough to cover your loss. If there are multiple damaged cars, the coverage limit is usually cumulative.
Paul Morrissette, President of Chubb Insurance Solutions Agency, which generally manages Chubb’s collector car policies, advises that the “quality of the usual garage keeper’s policy is all over the map.” Further, “It is unrealistic for a consumer to try to assess the quality of that coverage. And, even if you review the facility’s policy and approve it, it might get replaced by something lesser the next week.”

Use your own coverage

Morrissette’s advice is to make a claim on your own policy. Your insurance company will take care of fixing your car, and it will chase after the facility if it decides the facility was at fault. Your carrier won’t penalize you for the claim if it was someone else’s fault, just the same as if you get rear-ended while stopped at a traffic light.

Still, many collectors are leery of even mentioning the matter to their insurance carrier. On occasion, they insist on chasing after the facility and leaving their insurance out of the matter. That can be a tough row to hoe, and Morrissette strongly recommends against it.

The garage keeper’s insurer’s adjusters are skilled at resisting claims, and you may have a tough time getting them to accept responsibility. You may have to hire an attorney to represent you to have a fighting chance, and you won’t recover your attorney fees. That will reduce the net amount of whatever recovery you might obtain.

But there is a more worrying point here. Fighting with the facility’s insurance carrier takes time. If it doesn’t work out and you go back to your insurance carrier, it may tell you it is too late. Every insurance policy requires you to timely report all claims, and if you don’t, your carrier may be able to deny coverage.

Morrissette recommends reporting the claim right away even if you’re determined to chase after the facility. You can ask your carrier to keep your claim in suspense without charging you while you do this. If you later come back to your carrier, it will then resume the claim-review process.

Another consideration is that storing your collector car in a commercial storage facility can affect your insurance premiums and perhaps your ability to get coverage at all. Insurance pricing is based upon an assumption of the car always being under the control of an owner who can limit access to it and safeguard the car. When that level of owner control vanishes, the risk generally increases. That may cause your carrier to increase your premium to reflect the enhanced risk, or even to deny coverage altogether. And, if you avoid disclosure of the storage situation and a claim later arises, the storage situation will come to light in a more unfavorable manner.

Morrissette gives sage advice here: “Always check with your carrier first.”

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