Every year, self-storage operators face significant liability risks when conducting lien sales. Even a simple administrative error can result in substantial damages. In 2018, a storage facility in Arizona agreed to an $80,000 settlement after wrongfully auctioning a tenant’s belongings—despite the tenant having made timely payments for over eight years.¹ The initial insurance offer was just $10,000, highlighting how quickly damages can escalate and how limited standard coverage may be in these situations. These real-world scenarios underscore the need for robust Sale & Disposal Liability coverage to protect against the financial fallout from wrongful sales and procedural mistakes.

This isn't an isolated incident. A 2023 industry survey revealed that 47% of storage operators experienced at least one lien-related legal challenge during the 2020-2023 period, and wrongful sales are consistently ranked as some of the biggest self-storage legal challenges facing the industry.² While you're focused on managing occupancy rates and maintaining your facilities, there's significant legal exposure lurking in lien sales and property disposal, one of the most common activities in the storage business.

What Is Sale & Disposal Liability?

Most facility owners understand they need general liability insurance to protect against slip-and-fall accidents and basic premises liability. What many don't realize is that their standard commercial insurance often provides little or no protection during the lien sale process—precisely when they're most vulnerable to costly litigation. 

Sale & Disposal Liability coverage responds to claims and provides defense against lawsuits arising from the removal, disposal, or sale of customer property. This specialized coverage applies during lien sales, auction processes, and disposal of abandoned tenant belongings. Sale & Disposal Liability coverage typically is not included in standard Business Owner Policies (BOPs), as these policies often exclude industry-specific exposures that require specialized underwriting. This coverage is commonly available as an add-on through self-storage insurance specialists.³

According to the Self Storage Association, storage operators sell approximately 1% to 3% of leased spaces annually through lien sales⁴. While lien sales are clearly a regular part of business operations, many facilities may not carry adequate specialized insurance protection for this activity, creating a significant blind spot for facility owners.

The coverage applies during several critical moments:

• Auction processes where tenant property is sold to recover unpaid rent
• Disposal activities when items can't be sold or have no value
• Removal operations when clearing out units for re-rental
• Storage and handling of tenant property during the lien process

Claims Consequences

According to a recent industry report², wrongful sale claims can be some of the largest risks a storage operator can face. These claims can result in:

• Damages for the full value of the sold property
• Additional punitive damages in cases of gross negligence
• Legal fees and court costs
• Management time diverted to litigation

Recent Case Examples

Legal challenges in self-storage continue to evolve with changing regulations and enforcement priorities. While settlement amounts vary significantly, recent cases demonstrate that even routine administrative errors can result in liability exposure.

Individual Settlement Cases

Administrative Error Leading to Wrongful Sale


The 2018 Piccuta case in Arizona demonstrates how quickly damages can escalate beyond basic coverage limits. A storage facility agreed to an $80,000 settlement after wrongfully auctioning belongings of a tenant who had made timely payments for over eight years. The facility’s initial insurance offer was just $10,000, requiring the operator to pay an additional $70,000 out of pocket.¹

Historic Precedent Case

‍The landmark 1997 California case Gonzales v. Personal Storage demonstrates how even routine lien sales can expose operators to devastating financial liability. The jury awarded approximately $380,000, with $232,582 specifically for emotional distress damages. Additional attorney's fees and interest brought the total judgment to over $500,000. This case established important precedent for the types of damages storage operators can face, including significant emotional distress awards that extend far beyond the value of the auctioned property. ¹⁶

‍Regulatory Compliance Violations


Federal enforcement has intensified in recent years. In 2024, the Department of Justice reached a $130,000 consent decree with Morningstar Properties for auctioning belongings of three servicemembers without obtaining court orders required under the Servicemembers Civil Relief Act. The settlement included $80,000 in monetary relief for one servicemember, $5,000 each for two additional servicemembers, and a $40,000 civil penalty.⁵

Procedural Errors

A 2022 Ohio case involving American Self Storage highlights the risk of procedural failures. The facility auctioned a customer’s belongings despite a court-issued temporary restraining order specifically prohibiting the sale. The case involved breach of contract, negligence, and intentional infliction of emotional distress claims.⁶

Class Action Exposure


Major operators face substantial class action risk when procedural violations affect multiple customers. The 2017 Extra Space Storage class action settlement for $5.08 million covered 7,716 class members for improperly selling customers’ property after failing to provide proper notifications. Individual class members received $75 certificates, while attorney fees and administrative costs consumed a significant portion of the settlement. ⁷

Legal Defense Costs

Even when facilities believe they have followed proper procedures, defense costs can create significant financial pressure. Industry attorneys report that many settlements occur not because facilities are clearly liable, but because legal defense costs can quickly exceed settlement amounts. ⁸ With small claims courts increasingly requiring company defendants to have legal representation, the economic pressure to settle rather than defend has intensified.

Why General Liability Insurance Isn't Enough

Most storage facility owners carry general liability insurance, assuming it protects them during all business operations. Unfortunately, standard general liability policies contain a critical exclusion that leaves owners exposed during lien sales.

The "Care, Custody, or Control" exclusion in general liability policies specifically excludes coverage for property that is in your care, custody, or control. During a lien sale, tenant property is in your control—making this exclusion applicable.

Consider what happens during a typical lien process:

1. Tenant defaults - Property remains in your facility
2. Lien notice period - You now have responsibility for the property
3. Auction preparation - You're actively managing and organizing tenant belongings
4. Sale or disposal - You're making decisions about the tenant’s property

This gap in coverage creates a significant financial exposure that many owners don't discover until they're facing their first lawsuit. Legal defense costs in self-storage litigation frequently exceed the underlying claim amounts, creating strong economic pressure for operators to settle disputes early rather than fight them in court.⁸

Understanding Storage Facility Insurance Coverages

General Liability Insurance

Covers injuries and accidents occurring on the premises or arising from everyday business activities. 

• Covers slip-and-falls, premises accidents, basic business operations
• Contains "Care, Custody, or Control" exclusions that limit coverage for tenant property
• Does not cover lien sale activities

Care, Custody & Control Coverage

Provides protection for tenant property temporarily entrusted to the operator’s care during facility maintenance, repairs, or unit transfers

• Typically lower limits ($100,000 aggregate) for temporary situations
• Property is expected to be returned to tenant

Sale & Disposal Liability Coverage

Covers liability arising from the permanent removal, lien sale, auction, or disposal of tenant property when units are abandoned or rent is unpaid.

• Higher limits ($1 million per occurrence) due to irreversible actions
• Applies specifically to lien sales and abandoned property situations

Contract Protections: Helpful But Not Foolproof

Many storage facility owners include property value limitation clauses in their rental agreements, typically capping tenant belongings at $5,000⁸. While these clauses provide important protection, they're not absolute shields against liability. ⁹

Property Value Limitations Provide Legal Protection

Multiple states have enacted laws that specifically authorize self-storage operators to include property value limitations in rental agreements. ¹⁰ These statutory provisions typically require that value limitations be prominently displayed in rental agreements—often in bold type or underlined—to be legally enforceable.¹¹ When properly implemented under state law, these limitations establish the maximum value of stored property for legal purposes. ¹² 

‍

While these contractual limitations provide important risk management benefits, operators should work with legal counsel to ensure proper implementation, as requirements vary by state¹³ and courts will examine whether limitations were properly disclosed and comply with applicable state requirements.

What to Look for in Sale & Disposal Coverage

When evaluating Sale & Disposal Liability coverage, focus on these key features:

Coverage Limits: Sale & Disposal Liability coverages can range from $10,000 to $1,000,000 per occurrence depending on facility size, location, and risk profile. Operators should work with their insurance professionals to determine appropriate coverage levels based on their specific exposures.

Defense Costs Coverage: Policies handle legal defense costs differently. Ask your carrier to clarify how defense costs are handled so you understand your total exposure.

"Wrongful Sale" vs "Wrongful Disposal" Coverage: The policy should cover both:

• Wrongful Sale: Selling property through improper auction procedures or without proper authority
• Wrongful Disposal: Throwing away property that had value or should have been sold through proper channels

Industry Understanding: Work with insurers who understand self-storage operations and state lien laws, as standard commercial policies may not properly address the specific legal requirements involved in storage facility lien sales.

State Law Compliance Note: This article provides general information about insurance coverage and is not legal advice. Lien law requirements vary significantly by state. Always consult with legal counsel familiar with your state's specific requirements.

Building Complete Protection

With wrongful sales consistently making up some of the biggest legal challenges in the self-storage industry¹⁴,  Sale & Disposal Liability coverage represents a critical component of comprehensive risk management for storage facility owners. According to Inside Self Storage (2024): 

“Wrongful-sale lawsuits will likely always be your No. 1 self-storage legal challenge. Even when you do everything right, it won’t stop a tenant from filing a claim against you.”

With proper coverage, you can conduct lien sales with confidence, knowing that you're protected against both legitimate claims and frivolous lawsuits. 

Remember that this coverage works in conjunction with, not as a replacement for, your other insurance protections. 

General liability covers bodily injury and property damage claims arising from your business operations and premises, 

Care, Custody & Control covers tenant property damage that occurs while the property is temporarily in your direct physical possession for maintenance or repairs, and 

Sale & Disposal Liability addresses risk from the permanent removal or sale of tenant belongings.

At SafeLease, we understand the unique risks that storage owners face during the auction process, and we offer commercial insurance specifically designed for self-storage owners. Our policies include $1 million Sale & Disposal Liability coverage per occurrence and cover defense costs.

Skip the broker and save 15-20% on Facility Insurance. Get a quote at safelease.com

Sources:

1. Piccuta Law Firm, "$80,000 Settlement in Case Involving Wrongful Sale of Storage Unit", 2018, https://www.scottsdaleinjurylawyers.com/piccuta-reaches-80000-settlement-in-case-involving-wrongful-sale-of-storage-unit/
2. AI-Lean, "Self-Storage Lien Compliance Guide", 2023 https://ai-lean.com/resources/self-storage-lien-compliance-guide 
3. Self Storage Association, “Business Owner Policies: Breaking Down a BOP,” SSA Blog, 2019, https://www.selfstorage.org/Blog/ArticleID/179/Business-Owner-Policies-Breaking-Down-a-BOP
4. Self Storage Association, 2023, https://olis.oregonlegislature.gov/liz/2023R1/Downloads/PublicTestimonyDocument/94050 
5. United States v Morningstar Properties, 2024, https://www.justice.gov/crt/case/united-states-v-morningstar-properties-md-fla 
6. FindLaw, “Ohio Man's Belongings Auctioned by Storage Company Despite Court Order”, https://www.findlaw.com/legalblogs/law-and-life/ohio-mans-belongings-auctioned-by-storage-company-despite-court-order/ 
7. Bloomberg Law, “Storage Auction Settlement Approved for $5M” 2017, https://news.bloomberglaw.com/class-action/storage-auction-settlement-approved-for-5m
8. Radius Plus, The 'Cost' of Litigation, 2024, https://www.radiusplus.com/post/the-cost-of-litigation/ 
9. Gonzalez v. A-1 Self Storage, 350 N.J. Super. 403, 2000, https://www.casemine.com/judgement/us/59147e8fadd7b049344528e9
10. Ohio Revised Code, Section 5322.06 | Maximum value of stored property (current law), https://codes.ohio.gov/ohio-revised-code/section-5322.06
11. Minnesota Statute 514.975, 2024, https://www.revisor.mn.gov/statutes/cite/514.975
12. Self Storage Association, "Limitation of Value of Stored Property", 2017, https://www.selfstorage.org/Blog/ArticleID/32/Limitation-of-Value-of-Stored-Property
13. Modern Storage Media, “Updates To Self-Storage Laws By State”, 2024, https://www.modernstoragemedia.com/news/various-states-receive-or-set-to-receive-self-storage-law-updates 
14. Inside Self-Storage, "5 Enduring Legal Issues That Still Impact Self-Storage Operators Today", https://www.insideselfstorage.com/legal-issues/5-enduring-legal-issues-that-still-impact-self-storage-operators-today 
15. Modern Storage Media, "Sale and Disposal Insurance: The Last Line of Defense", https://www.modernstoragemedia.com/msm-exclusives/sale-and-disposal-insurance-the-last-line-of-defense 
16. Gonzales v. Personal Storage, Inc., 56 Cal. App. 4th 1189 (Cal. Ct. App. 1997) https://law.justia.com/cases/california/court-of-appeal/4th/56/464.html

This article provides general information about insurance coverage, is not legal advice, and should not be considered legal advice. Should you require legal advice on the issues raised by this article, please consult an attorney.

‍