13 INVESTIGATES: Storage Unit Insurance Follow Up - Alabamas13.com WVTM-TV Birmingham, AL

13 INVESTIGATES: Storage Unit Insurance Follow Up

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Earlier this month, Alabama's 13 told you how some self-storage places require their customers to buy insurance. The requirement has some renters riled up.

Since our first report, we've discovered one of the insurance companies we told you about has gotten into regulatory trouble in another state.

Plus, some self-storage operators here in Alabama are working to clear up the issue.

Not every storage place pushes insurance on their customers. "If the customer doesn't want to get insurance, it's their deal," Courtland Davis told Alabama's 13. Davis is managing partner at Birmingham-based Attic Plus. Davis says customers are adults and they're the ones who should decide whether they need insurance. "At the end of the day, we're a self-storage company," Davis told us. "We don't sell insurance."

In our initial report, we told you about iStorage. The Florida-based company has ten self-storage centers in Alabama. We explained a letter the company sent out warning customers they must have insurance. iStorage is selling a product the company admits it created: a property protection guarantee and warranty.

Bill Sager is executive vice president of the Alabama Association of Independent Insurance Agents. We showed Sager the letter from iStorage. He told us, "It just appears they are skirting an insurance issue."

Down in Montgomery, Mark Fowler with the Alabama Department of Insurance says they're continuing their investigation into iStorage's property protection guarantee and warranty.

Last week, the Alabama Self-Storage Association held its annual conference and trade show at the Barber Vintage Motor Sports Museum. Inside the expo, self-storage operators know the topic of required insurance is a hot button issue. "We in no way condone the requirement that tenants purchase their insurance," Brent Fields told us. He's executive director of the Alabama Self-Storage Association.

Fields sees the controversy coming mainly from big operators in the storage industry, not the local owners. "I just don't think we're in a position to force anything on a tenant," Fields said. "Self-storage is and probably always probably will be a store at your own risk business transaction."

Speaking of the big boys in the business: after our first report, a former employee of Public Storage in Birmingham told Alabama's 13 she filed a complaint with the state in 2011. To protect her identity, she filed it under the name Jane Doe. She told us she filed the complaint because she was worried she'd be guilty of selling insurance without a license.

Jane Doe offered up emails as proof Public Storage pressured employees to sell insurance. One email read, "Insurance is at 83%!!! Keep it up. Remember it is REQUIRED!!!"

Another had "We need to push the insurance sales." Still another: "WE MUST PUSH THE INSURANCE."

The emails show they came from then-district manager Patty Yeary. We talked with her. Yeary confirmed to Alabama's 13 that Public Storage, at least in the past, insisted employees aggressively push insurance.

"They did," Yeary told us. "We always had to meet goals. It's something they pushed."

Alabama's 13 reached out to Public Storage chief operating officer Shawn Weidmann. His response: "No comment on that because I don't have details of the situation."

Weidmann did say customers can get out of the insurance requirement by claiming they already have coverage.

As for Jane Doe's complaint, Alabama's insurance department took no action against Public Storage or their 3rd-party insurance provider.

Back at the expo, we asked, "Do self storage facilities even have an insurable interest in their customers' property?" Brent Fields answered, "I would say no."

Legally, an insurable interest means you must have some sort of ownership stake in property. Self-storage places certainly don't own your stuff. But, they do have a stake in keeping you from suing them if something happens to your property under their roof.

We asked, "Why do you think so may storage operators push insurance?" "I think it's more of a liability standpoint," Fields said. The more coverage a tenant has, the better off the owner-operator is in the long run."

In another development, an alabamas13.com user forwarded us a December 2013 order from the State of Michigan Department of Insurance and Financial Services. Click here to read the order.

Back in our first report, we explained how iStore -- no connection to iStorage -- uses a 3rd-party insurance agency called Bader Company.

We pointed out Bader has a license from Alabama's insurance department.

Michigan's department of insurance arranged a conference call for Alabama's 13 with their in-house attorney. We asked, "What did Bader do wrong in Michigan?" Attorney Elizabeth Bolden explained, Bader encouraged self-storage employees to sell insurance without insurance licenses. The order reads, "Bader used 'dishonest practices and demonstrated untrustworthiness and/or incompetence when it created and supplied forms to ssf (self-storage facility) owners'."

There's more.

Sharing commissions is called rebating. And insurance regulations prohibit the practice.

On its website, Bader claims, "Provide assurance to your customers and your bottom line."

How big of a bottom line? The Michigan order reveals Bader sold 101,316 "insurance" policies from March 2002 through January 2012. Michigan insurance regulators found Bader "collected $5,452,163.74 from tenants … "

Also, the order says, "Respondent rebated $2,411,922.78 in commission, service fees and/or other valuable consideration to its insureds, the ssf owners…"

That's nearly half the total take.

Bolden explained Michigan's investigation found Bader misrepresented its product. She said the company claimed to sell a tenants policy when Bader's offering was an inland marine insurance policy.

Michigan ordered Bader to stop violating its insurance regulations and to pay a penalty of $50,000.

We called Bader. Tim Parnell told us the policies Bader sells in Alabama are inland marine policies.

In a follow up call, when Alabama's 13 directly asked Parnell about Bader's trouble in Michigan, he clammed up telling us, "No comment."

The Michigan order points out Bader is an agency "appointed by Pennsylvania Manufacturers Association Insurance Company."

Alabama's 13 contacted that company, too. Their response: "PMA companies will not be commenting on this issue."

Bottom line: Michigan's insurance department tells Alabama's 13 self-storage employees in that state should have insurance licenses if they're going to sell insurance.

So, what does all this mean for Alabama?

Brent Fields says the Alabama Self-Storage Association is working on the problem. "We are considering offering legislation in the 2015 session that will allow owner-operators to obtain a limited license to sell," Fields explained. "Again, that's more of a liability reason that would actually give us a license to say you can sell it."

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