Public Storage shuffles lawyers in class-action case

Al Harris
March 17, 2015

A new law firm has taken over the defense of self-storage REIT Public Storage in its pending class-action lawsuit over tenant insurance, following the abrupt withdrawal of its previous counsel.

The departure of Newport Trial Group, a Southern California law firm, from the case comes on the heels of a volley of allegations that both plaintiffs’ and defendant’s counsel engaged in misconduct regarding depositions.

Attorneys for primary plaintiffs Colin Bowe and Brian Morgan previously had filed a motion seeking to disqualify Newport Trial Group but withdrew the motion after the law firm voluntarily removed itself — days before a scheduled hearing on the motion. Scott Cosgrove of South Florida law firm León Cosgrove and David Buckner of South Florida law firm Grossman Roth represent Bowe and Morgan.

It seems to me that the bee in the bonnet of the plaintiffs is that Public Storage runs their program very efficiently and makes a lot of money doing it.
— Self-storage attorney Jeffrey Greenberger

Bowe filed the lawsuit against Public Storage in April 2014. He alleges the country’s largest self-storage operator misled consumers about the profitability of its tenant insurance program. Under this program, tenants can buy insurance to cover their stored belongings.

Now, after Newport Trial Group’s exit, David Ackerman of South Florida law firm Ackerman Link & Sartory represents Public Storage in this case. Shortly after taking the reins, Ackerman filed a motion for summary judgment in favor of the self-storage REIT, arguing that the plaintiffs have failed to produce evidence that Public Storage engaged in improper business practices.

The case is set to go to trial May 4.

Squabble over depositions

Ron Havner

Ron Havner is chairman, president and CEO of Public Storage.

The squabble over depositions began in December, when Public Storage attorneys sought to sanction the plaintiff’s counsel for “abusive misconduct” when taking depositions of two witnesses. Attorneys for Bowe and Morgan responded with the motion to disqualify Newport Trial Group, alleging that the law firm offered a Public Storage customer and potential class-action plaintiff a financial incentive to support the defense.

According to the motion, the potential plaintiff was asked to state in writing that he was completely satisfied with his experience with Public Storage, despite having complained previously that the company had overcharged him. The prospective plaintiff later stopped cooperating with the defense when the credit to his Public Storage bill was less than what he thought he was owed.

In a separate motion, plaintiffs’ attorneys accused Public Storage’s lawyers of coaching witnesses during a deposition.

Insurance at issue

insurance policy

In 2013, Public Storage collected $85 million in premiums from tenant insurance.

In the original complaint, filed in U.S. District Court in Miami, FL, plaintiff Bowe claimed that Public Storage misled consumers who bought tenant insurance because the REIT failed to disclose that it profits from the insurance premiums.

The class-action suit seeks to include Public Storage customers who bought tenant insurance and collect restitution from Public Storage for the premiums it collected. In 2013, the company collected nearly $85 million in insurance premiums, turning a net profit of more than $67 million.

“They tell consumers [the premium] is a pass-through cost and they will play no role in the insurance of the consumer’s goods,” plaintiffs’ attorney Scott Cosgrove told The SpareFoot Storage Beat in May. “Meanwhile, they are taking an enormous chunk, if not all of it, and we think it is a deception.”

The defense

Judge holding gavel in courtroom

The case against Public Storage is set to go to trial in May.

In its recent motion for summary judgment, Public Storage stands by its tenant insurance program.

“It is not a crime, a tort, a breach of contract or any other sort of actionable wrong for a business to refrain from telling consumers how proceeds of a sale will be distributed among business partners,” the motion states.

The motion also maintains that Public Storage does not force customers to buy tenant insurance. Customers can obtain their own coverage, including homeowner’s or renter’s policies. It also says that state insurance regulators oversee Public Storage’s insurance program and that the REIT holds the required insurance licenses.

Public Storage’s tenant insurance is underwritten by the New Hampshire Insurance Co. Since 2008, Public Storage has collected premiums paid by customers and transferred them to its insurance broker. The broker then returns 75 percent of the premiums to Public Storage as an administrative fee.

As of January 2015, that broker is PSCC Inc., a subsidiary of Public Storage. Before then, Public Storage used a third-party broker. The broker is considered a reinsurer, as it has an agreement with New Hampshire Insurance to share some of the risk in paying certain claims.

Outsider’s view

Jeffrey Greenberger

So far, self-storage attorney Jeffrey Greenberger doesn’t think the plaintiffs have a compelling case.

Jeffrey Greenberger, a Cincinnati, OH, attorney specializing in self-storage law, says he has yet to come across any compelling arguments from the plaintiffs in this case.

“As far as I know, there have been no allegations made that someone put [the plaintiffs] in screws and forced them to buy this insurance over another insurance,” said Greenberger, who isn’t involved in the case. “It seems to me that the bee in the bonnet of the plaintiffs is that Public Storage runs their program very efficiently and makes a lot of money doing it.”

Also, Greenberger doesn’t see any evidence that Public Storage violated insurance regulations. Over the past several years, Greenberger said, the Self Storage Association has successfully lobbied for state laws clarifying the legality of self-storage operators selling tenant insurance.

For the most part, Greenberger said, Public Storage isn’t handling the sale of tenant insurance policies any differently than other large or small self-storage operators. Typical industry practice is for facility employees to sell insurance policies and collect the premiums, turn the premiums over to the reinsurer and receive an administrative fee.

“The issue here is that Public Storage has the biggest numbers, so it appears shocking,” Greenberger said.

Inside Public Storage


To support their case, plaintiffs’ attorneys have raised concerns about internal Public Storage emails.

The plaintiffs recently filed a brief in support of the argument that the self-storage operator misrepresented its involvement in the tenant insurance program; the brief included documents produced by Public Storage.

The documents show that policy pricing, claim payments and other key matters were handled by upper-level executives at Public Storage — in particular, Chairman, President and CEO Ron Havner. The suit alleges that Public Storage acted as an insurance company while not being recognized or regulated as such. By minimizing its role to consumers, the plaintiffs argue, Public Storage engaged in unfair and deceptive practices.

Among those documents is an email exchange from September 2013 indicating that Havner and other executives discussed the results of a test that eliminated a $2,000-limit policy at $9 a month and replaced it with a $3,000-limit policy at $11 a month. The company performed the test in Arizona and Florida and found that while the number of new policies dropped by 2 percent, total premiums rose by more than 19 percent.

Another email exchange from November 2014 had Havner replying to news of a Public Storage facility in Ferguson, MO, being set ablaze during riots. “Our property is burning. Don’t expect much to remain. Pay claims generously like hurricanes,” Havner wrote.

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