In our view, self-service storage boxes may expose your bank to the risk of losses due to unauthorized entry of the boxes and theft of the contents. Additionally, we believe that your bank’s risk exposure depends on the language of your rental agreement and other factors (such as insurance coverage) — not whether the boxes are considered “safe deposit boxes.”

The Illinois Supreme Court has held that language in a bank’s safe deposit box rental agreement “disclaim[ing] liability for any loss whatsoever” was unenforceable due to conflicting language in the rental agreement requiring the bank to “exercise ordinary care to prevent unauthorized persons from accessing the box.” We believe that the same principles of contract interpretation would apply to your bank’s self-service storage box rental agreement, which we recommend carefully reviewing with your bank counsel to ensure it does not contain any conflicting language similar to the language quoted above.

The question of whether a court would treat your self-service storage boxes as safe deposit boxes does not have a clear answer — but we do not believe that this question is necessarily relevant to an analysis of the potential risks of these boxes. The Illinois Supreme Court did not define “safe deposit box” in the case discussed above, and we are not aware of other cases addressing whether self-service storage boxes should be treated a safe deposit boxes. However, there is a definition of “safe deposit box” in the Illinois Revised Uniform Unclaimed Property Act administrative rules for purposes of reporting unclaimed property held in such a box: “any safe, vault, safekeeping repository, agency, or collateral deposit box.” It is possible that a self-service storage box may be deemed to be a “safekeeping repository” or a “collateral deposit box” subject to treatment as a safe deposit box, at least for unclaimed property purposes.

Additionally, we agree that the risks of these self-service storage boxes merit an examination of your bank’s insurance coverage. A 2006 article on self-service storage boxes points out that “locksmith tools are now available on-line, and with these tools safe deposit boxes can be opened in a matter of seconds without a key” and advises that “[f]inancial institutions should never implement [self-service storage boxes] without obtaining adequate liability coverage.”

For resources related to our guidance, please see:

• Illinois RUUPA Administrative Rules, 74 Ill. Adm. Code 760.10 (“‘Safe Deposit Box’ – includes any safe, vault, safekeeping repository, agency, or collateral deposit box.”)

• Jewelers Mutual Insurance Co. v. Firstar Bank Illinois, 820 N.E.2d 411, 415–16 (2004) (“We believe that paragraph one of the lease agreement is ambiguous and that its two sentences are conflicting. In the first sentence, defendant disclaims liability for any loss whatsoever. In the second sentence, defendant assumes one particular liability. It must exercise ordinary care to prevent unauthorized persons from accessing the box. . . . Whatever the meaning of the exculpatory clause, it clearly cannot be applied to a situation in which defendant is alleged to have breached its duty to exercise ordinary care to prevent unauthorized persons from opening the box. This is a specific duty that defendant assumed in the contract, and it formed the heart of the parties’ agreement. A party cannot promise to act in a certain manner in one portion of a contract and then exculpate itself from liability for breach of that very promise in another part of the contract. . . . Here, plaintiffs have received nothing in return for their rental fee if they cannot hold defendant to its contractual obligation to exercise ordinary care to prevent unauthorized persons from accessing their safety deposit boxes.”)

• Jewelers Mutual Insurance Co. v. Firstar Bank Illinois, 820 N.E.2d 411, 416–17 (2004) (“In this contract, in exchange for plaintiff's rental fee, defendant assumed the obligation to exercise ordinary care to prevent unauthorized access to the safety deposit box. Having assumed this duty, defendant cannot exculpate itself from liability for a breach of that duty. Accepting defendant's argument would mean that, if defendant routinely breached these safety deposit box rental agreements by handing the keys to anyone who came in off the street and asked for them, it would have no liability to its customers except to give them their rental fee back. It is safe to assume that, if defendant explained the agreement this way in the contract, defendant would not have many safety deposit box customers.”)

• David P. McGuinn, “Risks Abound in Self-Service Box Industry” (February 15, 2006) (“A very large nationwide insurance company has recently notified their agents and financial clients that liability insurance coverage will not be provided if self-service boxes are offered without a secure vault for protection. Financial institutions should never implement this concept without obtaining adequate liability coverage. The tragic outcome of even one disappearance claim could be very significant.”)

• David P. McGuinn, Risks Abound in Self-Service Box Industry (February 15, 2006) (“Now, without the need for tedious vault access procedures, box renters could stroll into the ‘atrium lobby’ any time, day or night, seven days a week with only their single box key as security. Unfortunately, locksmith tools are now available on-line, and with these tools safe deposit boxes can be opened in a matter of seconds without a key. It would seem that now thieves can also enjoy the convenience of this 24-7 self-service concept. If these exiting box renters knew this, I do not think any of them would entrust their most valued possessions to a system this vulnerable.”)