There is an enormous industry in North American involved with equipment rentals, and the 12,000-plus companies offering these services provide both heavy equipment and light tools to consumers who find it more cost effective to rent rather than purchase them. Generally speaking, the kinds of equipment being rented fall into three major categories: special event equipment (tents, furniture, party inflatables), general tools (rototillers, chainsaws, floor care equipment), and industrial or construction equipment (backhoes, air compressors, and scaffolding).
Since these rentals often involve heavy equipment, there is a potential for the renter to be injured while using them, especially those with limited experience using such equipment. Even lighter tools like floor buffers can be a hazard to someone who has either never used one, or has very little proper exposure to them. Whatever the reason, the possibility of injury is present every single time a renter contracts with a company for temporary use of equipment. This makes it absolutely essential that the rental company protect itself against any kind of liability, because even one successful lawsuit by an injured renter can mean financial disaster to your company.
Equipment Rental Insurance
There are many different scenarios which can arise in the equipment rental business which require the rental company to have coverage for those specific instances. To be fully protected, a rental company should have sufficient insurance and risk management coverage to protect itself, as well as a uniform contract which incorporates legal language that transfers as much responsibility as possible to the renter. The contract language should be arrived at in consultation with a knowledgeable lawyer, while the insurance and risk management aspects need to be coordinated with an insurance agent well-versed in the equipment rental business.
Inland Marine Insurance
This is commonly referred to as ‘floater’ insurance, and it provides coverage for your equipment, whether it is on your business site or at the renter’s location, and is effective regardless of who is actually operating the equipment. Typical inland marine coverage is a kind of blanket protection, which covers any equipment loss and requires you to pay an agreed upon deductible amount for each occurrence of loss.
General Liability Insurance
As a rule of thumb, all bodily injury and property damages which may happen as a consequence of equipment operations are covered by general liability. This specifically aims at providing the kind of coverage needed when equipment is being used by a renter, and problems arise as a result.
The goal of legal language in the rental contract should be to shift responsibility to the equipment user in the event of any mishap occurring as a direct result of its operation. This means loss of equipment, any damage which might occur to it, and any liability claims which might apply. To the greatest extent possible, responsibility for all these eventualities should be transferred to the renter, since they are the party requesting and operating the equipment you provide to them.
Coverage For All Eventualities
When the customer is unwilling to assume the responsibility specified in the contract language, it is incumbent upon the rental company to disallow the transaction for the sake of self-protection. When the renter is unable to satisfy the terms of the stated language, e.g. paying for the breakage of a chainsaw, you as a rental company must have coverage which can recover the cost of the equipment.
The bottom line is that even when your contract with a client transfers all responsibility to that client, you have to protect your company from unanticipated situations. There are scenarios beyond the typical which could place your company in the unpleasant position of having to be defended in court against the claim of a renter. For instance, while the renter is still in possession of your chainsaw, he might lend it to a neighbor, who then injures his hand during operation. This might be just barely outside the language of your rental contract, and subject to legal interpretation against you.
The solution to this and all similar scenarios is to work with an insurance agent who understands the nuances and pitfalls of the equipment rental industry, and knows what to include in your coverage so you will be protected against anything that might arise during the course of your normal business. Make sure your company is protected by working with the insurance brokers at Allied Insurance. As an Allied client, your rental equipment business will have all its bases covered with complete protection to minimize your company’s risk. Discover what we can do for you and contact Allied today!
*Allied does not deem this blog entry as a complete and thorough listing or overview of the above topic, and does not recommend it be primarily relied on. It only highlights some common issues and resolutions. For a thorough overview, please contact Allied’s Risk Engineering Division.