Read The Policy!

The Houston Division, Southern District issued an opinion on September 10, 2016, styled AXA Art America’s Corporation V. Public Storage that serves as a good example how a person has to read what they are signing.  AXA’s contract with Public Storage is similar to what happens in many insurance contracts.

AXA had almost $850,000 of art work stolen from a storage unit controlled by Public Storage.  AXA sued Public Storage for the loss and Public Storage moved to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

The lease agreement contains this section – “Use of Premises and Property and Compliance With Law,” which reads:

Occupant acknowledges and agrees that the Premises and the Property are not suitable for the storage of heirlooms or precious, invaluable or irreplaceable property such as, but not limited to … works of art ….

The lease also contains this “Insurance Release of Liability” clause:

ALL PERSONAL PROPERTY IS STORED BY OCCUPANT AT THE OCCUPANT’S SOLE RISK.  INSURANCE IS OCCUPANTS SOLE RESPONSIBILITY.  OCCUPANT UNDERSTANDS THAT OWNER WILL NOT INSURE OCCUPANT’S PERSONAL PROPERTY AND THAT OCCUPANT IS OBLIGATED UNDER THE TERMS OF THE LEASE/RENTAL AGREEMENT TO INSURE HIS OWN GOODS.  To the extent Occupant’s insurance lapses or Occupant does not obtain insurance coverage for the full value of the Occupant’s personal property stored in or on the Premises, Occupant agrees Occupant will personally assume all risk of loss.  Owner and Owner’s agents, affiliates, authorized representatives and employees (“Owner Agents”) will not be responsible for, and Occupant hereby releases Owner and Owner’s Agents from any responsibility for any loss, liability, claim, expense or damage to property that could have been insured …  Occupant waives any rights of recovery against Owner or Owner’s Agents for the Released Claims, and Occupant expressly agrees that the carrier of any insurance obtained by Occupant shall not be subrogated to any claim of Occupant’s against Owner or Owner’s Agents.

The agreement includes the following “Limitation of Owner’s Liability provision:

Owner and Owner’s Agents will have no responsibility to Occupant or any other person for any loss, liability, claim, expense, damage to property … from any cause … Occupant acknowledges that he understands and agrees to the provision of this paragraph …  Occupant agrees that Owner’s and Owner’s Agents’ total responsibility for any Loss from any cause whatsoever will not exceed a total of $5,000.

Finally, the lease agreement contains this “No Warranties; Entire Agreement” provision:

Owner hereby disclaims any implied or express warranties, guarantees or representations of the nature, condition, safety, or security of the Premises and the Property and Occupant hereby acknowledges that Occupant has inspected the Premises and the Property and hereby acknowledges and agrees that Owner does not represent or guarantee the safety or security of the Premises or the Property or any personal property stored therein, and this Lease/Rental agreement does not create any contractual obligation for Owner to increase or maintain such safety or security.

The relevance of this case, as it relates to insurance policies is realizing this contract contains provisions that take up one or at the most two pages of the contract.  Contrast this with a typical insurance contract that contains dozens, up to a hundred pages of provisions that limit or exclude coverages.  The bottom line is, a person has to know what that insurance contract says.