Customer’s Agreement to Self-Insure and Release for Water Damage Effectively Precludes Liability of Storage Container Company

In Kanovsky v. At Your Door Self Storage (No. B297338; filed 11/25/19), a California appeals court held that a waiver of liability and agreement to self-insure in a storage container contract barred coverage for water damage to goods stored in the container.

In Kanovsky, plaintiffs contracted for portable storage containers when moving. They loaded their washing machine into one of the containers without checking whether it was fully drained. They locked the containers and reopened them four years later to discover water damage to the contents. They sued the storage company, alleging causes of action for breach of contract; tortious breach of covenant; negligence; and violation of the Consumer Legal Remedies Act, Civil Code section 1750. The storage company’s insurer intervened and moved for summary judgment, which was granted.

The appeals court affirmed. The storage company’s contract contained a release of liability stating that personal property was stored “at the customer’s sole risk” and the owners “shall not be liable for any damage or loss,” including water damage. Further, the contract stated that the containers were not waterproof, and again that the storage company was not liable for water damage. The contract attached an addendum further stating that the owner was “a landlord renting space, is not a warehouseman, and does not take custody of my property.” The addendum went on with an acknowledgement that the owner: “2. Is not responsible for loss or damage to my property; 3. Does not provide insurance on my property for me; and 4. Requires that I provide my own insurance coverage or be ‘Self-Insured’ (personally assume risk of loss or damage).”

The addendum had a “choice of insurance options” provision stating that the customer had been provided a brochure explaining the available options. These were: “Customer Storage Insurance From Deans & Homer”; “From my own Insurance Agent”; or “Be ‘Self-Insured.’” Beside signing the entirety of the contract, plaintiffs had initialed the third option, “Be Self-Insured,” and the appeals court agreed that this was effective to preclude all liability on the part of the storage company.

The court stated that: “Contracts can allocate risk. When they do, they determine who will insure against the risk, if insurance there is to be. The contract in this case allocated risk. It specified that the company was not responsible for water damage, and that customers storing property with it did so at their own risk. The contract offered insurance options to the customer. The customers here declined this insurance, instead opting for self-insurance. Sure enough, water did damage the property. The customers sued the company, demanding to be paid for their losses. The trial court rejected this suit. We affirm, because one may not contract to accept risk, decide to be self-insured, and then retroactively demand to be paid by the other side after there is a loss.”

The Kanovsky court went on: “Allowing parties to allocate risk for mutual benefit has advantages. Sometimes people may store relatively durable things like gravel or bricks that resist damage. Those people may prefer to avoid the cost of insurance to get the cheapest possible storage rate. Other situations will differ. It is a big wide world out there. A one-size-fits-all policy about risk allocation denies parties the ability to tailor the deal to their individual circumstances. Yet that is the result the Kanovskys demand: one-size-fits-all, by always making the company bear the risk.”

The Kanovsky court rejected an effort to distinguish cases upholding storage contract liability limitations on the ground that those involved fixed warehouses, not storage containers. (Citing Cregg v. Ministor Ventures (1983) 148 Cal.App.3d 1107; and Sackett v. Public Storage Management (1990) 222 Cal.App.3d 1088.) Calling that “a distinction without a difference,” the Kanovsky court stated that the plaintiff had “no effective response” to “the sound legal authority.”

The Kanovsky court then proceeded to reject application of two statutes, the Self Service Storage Act, Business and Professions Code section 21701.1, and the Household Goods Carrier Act, which begins at section 5101 of the Public Utilities Code. With regard to the former, Business and Professions Code section 21701.1, the Kanovsky court said that the statute, which contains a list of requirements for self-storage facilities that utilize individual storage containers, creates no private right of action, did not invalidate or affect the contract, and was solely relevant to determine whether an activity is subject to regulation by the Public Utilities Commission.

Regarding the latter statute, the Household Goods Carrier Act, which basically controls moving companies, the Kanovsky court said that “this statute too lacks a private right of action.” The Kanovsky court then summarily dismissed any argument based on the Consumer Legal Remedies Act, which begins with section 1750 of the Civil Code, stating that the plaintiffs’ argument amounted to “an unsupported and incorrect assertion that Self Stor acted unconscionably by specifying it was not liable for water damage.”

This document is intended to provide you with information about insurance law related developments. The contents of this document are not intended to provide specific legal advice. If you have questions about the contents of this alert, please contact the authors. This communication may be considered advertising in some jurisdictions.

November 26, 2019