September 11 Aftermath: Attacks Spark Safe Deposit Lawsuits

by David McGuinn

The events that followed September 11 have significantly impacted the safe deposit industry nationwide. Since the attacks on the World Trade Center, one unfortunate New York bank has been confronted with some very difficult challenges and tough decisions.

Vault Damaged
There were 2500 safe deposit boxes located in the second floor vault within the 5 World Trade Center building. Though badly burned and damaged by the attack, the building was left standing. The bank quickly reassured worried renters that, despite the devastation, they would be able to recover their box contents.

Wrong!
Three months later, the bank reversed its position and notified renters that the boxes had been so severely damaged that they were not salvageable! Renters learned that the building would be demolished and these boxes, along with their contents, would be disposed of in a Staten Island landfill, along with other Trade Center rubble. Days later, the banks also announced that it had "miraculously" managed to recover from this same ravaged building cash totaling hundreds of thousands of dollars.

Litigation Almost Immediate
Several renters promptly initiated a class action lawsuit in a last-ditch effort to recover their property. During the litigation process, the bank's safe deposit lease agreement was reviewed. The agreement states, "...The contents of your safe deposit box may not be fully protected against loss under the insurance coverage maintained by the bank." Understandably, these renters interpreted this clause to mean that the bank provided some degree of insurance protection. Since this was obviously not the case, the bank was subsequently accused of misleading these consumers. There has been no decision by the courts yet on the bank's liability, as the case is pending.

Confusion Nationwide
All financial institutions zealously attempt to assure consumers that all of their deposits are insured up to $100,000. It is incumbent upon your institution to guard against claims that suggest in any way that this protection extends to safe deposit box contents. At the very least, make sure your agreement has a very clear statement that says, "No insurance coverage of any kind is provided by the financial institution to cover safe deposit box contents." Every renter should get a copy of this lease, which they signed. As added protection to you, consider posting a "No Insurance" sign that clearly states that obtaining insurance protection is the renter's responsibility. And never use words such as "fireproof", "waterproof", "bombproof", or "burglarproof" either in your conversation or on your marketing brochures!

Editor's Note: We felt this message important enough to include an additional checklist David created on the website version of this article. For additional information, go to http://www.bankersonline.com/operations/safe911.html.

David P. McGuinn is President of Safe Deposit Specialists, Houston, Texas. He is a former banker, and is often referred to nationwide as the safe deposit GURU. His Safe Deposit Policy and Procedures Handbook is now the accepted standard in the financial industry. David has been answering questions and writing for the HOTLINE for 12 years, and is also a GURU for the BankersOnline at www.bankersonline.com.

Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 2, 2/02