Equipment rental? Remember about insurance

If you have cars and/or trailers sitting in a parking lot and you want to get money to help pay off those debts by leasing them to a third party company or independent owner, you would be wise to contact your insurance provider first. To be clear, I am not talking here about vehicle/fleet owners using purchase agreements with drivers, rather equipment rental agreements with independent companies or individuals responsible for operating the equipment.

Take the example of one of my clients. He has one truck, and when he started the business, he had one trailer. When that first trailer experienced mechanical problems, there was an unexpectedly long wait time for necessary equipment repairs. To minimize the loss of money, the customer decided to buy a second cart and remove the first cart from the process. A few months later, the trailer had received the repairs it needed — the owner contacted me and wanted to put the trailer back in for the original repairs.

He told me that he was renting the trailer out to other people, and wanted the trailer to be insured while it was in someone else’s hands.

I was responsible for informing them that if they loaned any equipment to a third party, the rental equipment would not be covered while it was in the “care, custody and control” of that third party. In addition, all the insurance companies I have (10-plus) won’t give me the coverage they want. Insurance that covers our rental equipment is hard to come by.

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The best insurance advice I’ve ever received came from a book writer. It is especially important if we want to guarantee equipment that we lend to third parties. He said: “Usually, you can get insurance for anything if price is not a factor.

Bottom line is if/if we find an insurance company that will finance the equipment we want to lease, it just depends on how much the cost will be affordable for most car owners and especially for independent or small car owners. ships.

Why? Borrowing equipment has a very high interest rate. Rented vehicles and trailers are more likely to be damaged, stolen, abandoned or vandalized compared to equipment that we use ourselves or equipment that we hire drivers to operate for us.

Because of this, the insurance companies that I represent (which includes most of the insurance companies that provide insurance for owners and small trucking companies in the United States) do not offer any coverage for rental equipment in this way. Or, depending on the insurance company, they just offer it less spread. In particular, support can be provided only when the equipment we rent is available not under rent and is in “cand, protection and control.”

The only thing that happens is if you don’t have the correct insurance when you rent the equipment to someone else and you file a claim for loss, the claim may be denied. The best way to illustrate this is to use a few fictional but realistic scenarios.

Lease agreement in both cases: John Doe of John Doe Trucking has signed a one-year lease with you for a 2022 dry van. According to the rental agreement, John Doe provides you with a certificate of insurance that provides proof of physical damage up to $50,000 to the “non-owned trailer” that is in his “care, supervision and control.”

Scenario One: It’s three months to one year, John Doe, unannounced and unbeknownst to you, is returning the trailer to you when it’s not working. When you return to work the next business day you get the cart. To your dismay, you see that the cart is at the top. This means, the top of the wagon hit the bridge and was badly damaged. You contact John Doe and he denies returning the van after it was damaged. Then you contact the insurance company for John Doe’s certificate of insurance and file a claim. John Doe’s insurance adjuster informs you that John Doe removed a trailer that he did not own eight months ago. Because there is no provision for a non-owned trailer, your claim has been denied.

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Second Events: Six months into the loan term, John Doe defaulted on his loan. You try to contact John Doe but his number doesn’t work, the information you sent him via registered mail is bounced, and emails to him bounce back to you. You check the FMCSA and find that his company John Doe Trucking is “unauthorized.” You contact your local police department and report the trailer stolen, and contact the insurance company for John Doe’s certificate of insurance to file a claim. John Doe’s insurance policy adjuster informs you that John Doe’s insurance was canceled two months ago. Since John Doe does not have current insurance, your claim is denied.

After exhausting your efforts with John Doe’s insurance company to recover your losses from the above, you file a claim with your insurance company. While your insurance company collects and investigates the claims, the adjuster finds that the equipment claimed was/were leased to John Doe Trucking and was in the “care, control and supervision” of the company at the time. it made him say that he lost. Your auto insurance policy (as most do) excludes coverage for any of your rental equipment. Because the trailer was/was a rental and in the “care, custody and control” of John Doe, the claim could be dismissed.

Moral of the story? If you are already renting equipment and have not disclosed it to your insurance provider, I encourage you to contact them today. And be very careful with who you do business with when renting equipment.

If you have any insurance related questions for the author of this Overdrive Extra column, longtime freelance owner and insurance agent W. Joel Baker, leave a comment with any question or contact Baker directly. through his website.

Find information about the ins and outs of insurance, among many topics, in Excessive driving/ATBS-generated “Friends in Business” A guide for new and established owners, the complete guide to running a small trucking business. Click here to download the new 2022 edition of Partners in Business for free.