When Public Storage Is Burglarized, Not All Insurance Is Created Equal
SAN FRANCISCO (KPIX 5) -- Thousands of people use public storage to store their belongings. But what happens when there is a burglary? Lots of people are complaining that the insurance they bought wasn't worth the piece of paper it was written on.
In an undercover visit to a Public Storage location in Oakland we recorded an employee making his pitch. Insurance is required. It's an option, offered at the counter along with a lock.
Debra Ambers bought both when she rented a unit. Two years later, a shock.
"I could not get in," said Ambers. "I had a brand spanking new door, and a panel lock. I was like what happened?"
The lock she purchased was gone, her unit ransacked, with many items missing.
"My washer and dryer was missing, my whole complete bedroom set, some blue crystal from Venezuela that my great great uncle gave me when I was married," she said.
But when she submitted her claim through her Orange Door Storage Insurance policy, she was denied.
The Better Business Bureau has received hundreds of complaints about Public Storage this year, many about insurance.
And KPIX 5 has received complaints as far back as 2010, from customers like Ana Leon.
"It was about $12,000 worth of items that were gone," said Leon. Even though Leon's police report said "an unknown suspect forced open the master lock," her claim was also denied.
So what's going on? One clue may be in a class action lawsuit settled in Florida last year. It alleged that the insurance Public Storage offers is not from a separate company, but from subsidiaries of public storage itself. The lawsuit says it is Public Storage that runs the insurance program, sets rates and approves or denies claims. And it says Public Storage keeps most of the profit.
Attorney Scott Cosgrove says his clients didn't know they were buying a policy that he says was a hidden profit center for Public Storage. "It was this grand circle where the premium would start with Public Storage, and end up going back to Public Storage," said Cosgrove.
According to the lawsuit the company's insurance "program" uses a "fronting" insurance company, that transfers customer premiums to a wholly owned subsidiary of Public Storage in Hawaii, which then transfers most of the money back to public storage in the form of a kickback called an "access fee. "The margins of the insurance product that was sold at public storage were in excess of 70 percent to 80 percent or more," said Cosgrove.
According to the Public Storage annual report, the company made $84 million dollars from tenant insurance in 2015 alone. And we obtained this internal email from the company's CFO to its CEO stating "Remember, it is nice to sell locks and boxes, but the real money is made in the tenant insurance."
In a statement Public Storage says the court found "no issue about public storage not paying claims" and denies it "pushes the Orange Door product on its customers."
But when we went in undercover the employee we talked to made it sound like Orange Door insurance was the only option.
We showed the video to Nancy Kincaid with the California Department of Insurance. We asked her if it would be legal for employees to push a product that the company is profiting from. "The law does not allow them to advise a consumer or act in a way that is transacting insurance," she said.
And after reviewing our video? "He was making that product appear like it was the more attractive selection, which is not allowed," said Kincaid.
Meanwhile Debra has come up with new evidence. On her last visit to her unit she found her missing lock. "You can see where it was just cut," she said.
She hopes the new evidence will convince Orange Door insurance to pay her claim.
Bottom line: Shop around.
Public Storage "can" require you to have insurance, but it "cannot" require you to buy the insurance it offers at its counters. If you have homeowners or renters insurance you are probably already covered and won't have to spend another dime.
You can also shop around for stand-alone policies, and save yourself some money.
And if you have a complaint, be sure to call the California Department of Insurance hotline at 800-927-4357, or go to http://www.insurance.ca.gov/
