YOUR LATEST NEWS & RESOURCES

We have compiled the latest news and resources related to the self storage industry in your state.
 

LEGAL UPDATE - SUMMER 2022
 

New Mexico Insurance Department Rules Protection Plan is Insurance. The New Mexico Office of Superintendent of Insurance (OSI) has issued a departmental hearing officer’s opinion that concludes that a protection plan program is insurance as defined by the state’s insurance code.  It also makes several recommendations to the Superintendent of Insurance concerning ending the sale of protection plans in the state, fines for the operators whose programs were under review, and other actions that the OSI should take against such protection plan programs.  The OSI examined the protection plan offered at two facilities in the state as part of an administrative action, and the order applies to the parties subject to the action.  However, the state’s storage operators who offer protection plans should review their protection plan program and consider if stopping the sale of protection plans in New Mexico is the prudent course of action.

The storage operators modeled their protection plan on those programs available in California and Kentucky where the courts had determined that protection plan programs were not insurance.  The hearing officer pointed out the danger of this approach in a footnote: “All calculations based on our experiences elsewhere fail in New Mexico.” And so, the self storage operators’ arguments that a protection plan was not insurance failed in New Mexico.  The hearing officer rejected the reasoning of both the California and Kentucky courts.

It should be noted that the hearing officer found that under New Mexico law, insurance is any contract whereby one party assumes the risk of another.  Such a broad reading of the law puts most rental agreements and other contractual indemnity provisions within the purview of the state’s insurance department.

The Superintendent’s final order put the self storage operators in a problematic situation.  They could either accept the Superintendent’s ruling that the protection plan was insurance and pay fines of $120,000 or consider additional appeals and face fines as high as $5 million dollars.  The storage operators opted for a quick settlement. 

One issue that was discussed in the hearing officer’s opinion was the “forced placement” of the protection plan.  Some facility operators require their customers to insure their stored property.  In this matter, if the tenant did not provide proof of insurance, they would be enrolled in the facility protection plan program.  The hearing officer concluded that there was insufficient evidence to establish a violation of the state’s Unfair Insurance Practices Act but that the Superintendent may pursue such claims in court.  This should be of concern to facilities that automatically enroll tenants who do not provide proof they have insurance in either protection plan or insurance programs.  One criticism of the programs offered in New Mexico, according to the hearing officer, was the lack of transparency.  At a minimum, any forced placement of insurance or protection plan must be clearly stated in the rental agreement and the protection plan or insurance documents, and the tenant must be clearly informed how to exit the facility insurance or protection plan program.  



January 2021

BUILDING CODES UPDATE

Changes to the International Building Code Affect Self Storage

With the support of its Code Committee, the Self Storage Association successfully pursued several key changes to the 2021 International Building Code. 

1. An exception has been added to IBC Section 2902.3.3 to permit an increase in the location (to greater than every other floor) and maximum distance of travel (to greater than 500 ft) for restrooms.  The location and travel distance must be approved by the code official.
2. The maximum allowable height of sprinklered facilities made of Type IIB materials (unprotected steel) and Type IIIB materials (noncombustible or fire-retardant-treated wood stud exterior walls and any interior construction) has been increased from 3 stories to 4 stories.  The Code continues to have total floor and building square footage limits. 
3. Pursuant to modified IBC Section 903.2.9, storage facilities are exempt from the automatic sprinkler system requirement if: (1) the total fire area is 12,000 sq. ft. or less; (2) the combined total fire areas are 24,000 sq. ft. or less; (3) the facility is no greater than one story above grade plane; and (4) all storage spaces are accessed directly from the exterior. 

These changes go into effect as they are adopted by local and state governments over the next several years.  Prior to the adoption on the local and state level, storage developers can request that the code official rely on the 2021 changes as acceptable alternative methods of construction pursuant to section 104.11 of the existing International Building Code.

Please email Joe Doherty with any questions or to receive supporting documentation for these changes.