Limiting Liability: A Bridge Too Far

By Carlos Kaslow

Limiting Liability: A Bridge Too Far
As a general rule, self-storage operators can limit their liability for property damage and bodily injury in the rental agreement. When properly drafted, a release of liability is enforceable and ends litigation over loss or damage to tenant-stored property without trial. However, judges will occasionally refuse to enforce a release of liability based on its inapplicability to the plaintiff’s claim or allegations that the defendant’s conduct was grossly negligent, reckless, or intentional. Some storage operators include a provision along the following lines in their rental agreement to limit their damages when the release of liability is ineffective:

LIMITATION OF OWNER’S DAMAGES. If Owner is deemed liable for loss of or damage to Occupant’s stored property for any reason, the Occupant agrees that Owner’s liability will be limited to an amount equal to three months’ rent or $1,000, whichever is less.

California operators should refrain from including such a limitation in their rental agreement. The California Supreme Court recently ruled that such a provision was void as against public policy. The Court concluded that such a broad limitation on damages could insulate a defendant from liability for reckless or intentional conduct. California law allows parties to release or limit their liability for negligence, but does not allow parties to limit liability for more blameworthy conduct.

The California Supreme Court ruling is not unusual. Most states will enforce a contractual limitation of liability or damages for negligence, but not for reckless or intentional conduct. Storage operators may not be able to limit their liability or damages for certain conduct, but they do have a defense to claims for property damage that is very broad in scope. A storage operator can limit the value of the property that a tenant may store in the rented space.

Self-storage rental agreements typically limit the value of stored property to $5,000 without the Owner’s written permission to store property with a high value. Such a limitation is not a limit of liability or on damages; it is a condition of use of the storage space. An occupant who stores property with a value more than the contractual limit is in breach of the rental agreement. It is unfair for a contract party to benefit from a material breach.

The right to include a limitation on the value of the occupant’s stored property in the rental agreement is now statutory in most states, including California. Unless the occupant is granted permission to store property with a higher value, the tenant’s property is deemed not to exceed the value stated in the rental agreement. It will be a rare trial judge who will not enforce such a value limitation when the legislature has authorized it.