Consumers Prevail in Dispute with Storage Facility (NJ)

Limitation of liability and indemnification provisions in contract are critical to many business to limit their exposure to risk. However, many states have passed anti-indemnity legislation that prohibits or limits a party’s ability to enforce such provisions, often to protect unsuspecting consumers who later found they agreed to much more than they bargained for.

In Martinez – Santiago v. Public Storage, a class action suit was filed on behalf of nearly twenty 20,000 New Jersey consumers who leased a storage unit from Public Storage, a popular storage unit facility. This action originally stemmed from a personal injury negligence matter where the plaintiff leased a storage unit at the company’s facility. In February 2012, Santiago’s boyfriend, Orlando Colon who was listed as an “alternate contact” on the lease form, suffered spinal injuries after he slipped and fell on a patch of ice while visiting the storage unit. Colon filed a negligence suit against Public Storage, who in turned filed a third-party complaint for indemnification against Santiago pursuant to the indemnificaiton terms of her lease contract. In February 2013, a default judgment was entered against Santiago. Nearly eight months later, she retained counsel and sought to vacate the default judgment and file a third party answer and class-action counterclaim. Before the court could rule on Santiago’s motion to vacate the default judgment, Public Storage settled with Colon and voluntarily dismissed its third-party claim against Santiago.

On December 3, 2013, Santiago brought the class action lawsuit against Public Storage in the Superior Court of New Jersey, Camden County, for the company’s alleged violation of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and the New Jersey Consumer Fraud Act (“CFA”) (collectively, “Acts”). Santiago asserted that Public Storage violated the aforementioned Acts by including unenforceable exculpatory and indemnification provisions in the company’s lease contracts, as well as putting a one year time limit on the consumer’s ability to challenge any such provisions in the lease contract.

In regards to the exculpatory provision in the lease contract that required consumers to hold Public Storage harmless for injuries or damage to property for any reason, including the company’s own negligence, the court ruled that Public storage has a legal duty to maintain its premises for business invitees and businesses are in the best position to maintain their premises for the safe use of customers.

As to the indemnity provision, the Court found that the broad language required consumers to indemnify Public Storage even for its own negligence, which is prohibited in New Jersey unless the contract provides for such in unequivocal terms. Because the lease contract did not provide for indemnification for Public Storage’s own negligence in unequivocal terms, the court found it unenforceable.

Thanks to Sheri Flannery for her contribution to this post.  For more information, please write to Mike Bono.