Quick Tip for Insureds that hire equipment
It has been a common practice for a great many years for the hirer of equipment to require the hiree (the person hiring the equipment) to provide an indemnity for loss or damage to the equipment.
Over time this has been extended to require insurance to be taken out for the full replacement value of the equipment. This can and does cause problems for some clients.
First the insurance cover held by the hirer needs to provide cover for property that the Insured has assumed responsibilty for prior to the damage. This is not a problem for a policy such as an Australia ISR Policy or a good quality business pack wording.
Secondly the loss has to be covered by the policy. For example, the transit cover provided by a property damage policy may not respond due to the limited cover if any provided by the property policy.
Thirdly, in some cases policy deductibles may exceed the value of the item.
By requiring the Insured to take out insurance for full replacement value situations arise where the machine hired out is near the end of its useful life and the Insured feels aggreviated that they are being called upon to payout not the market value but full replacement cost.
With liability policies it must be remembered that such policies may have a exclusion in respect of liabilities created by contract where other than for the contract the Insured would not be held legally liable.
Contract Works policies need to be checked to ensure that suitable cover is in place to protect the exposure created by any hire agreement signed by the Insured.
It is clear that the hire companies, like car hire companies, see insurance as a revenue stream for their business and are looking at two things. One, transferring the risk for loss or damage to the equipment and any liability exposure to the hirer. Secondly, they are doing more and more to disuade the hirer to rely on their own insurance and to purchase loss or damage waiver insurance.
It is not so much the frequent hirer of equipment that gets caught with the contractual obligations of a hire agreement, but rather than infrequent hirer and that is where most of businesses fall.
I attach a sample hire agreement from Kennards and an advice letter (although it is claimed not to be an advice letter) from Coates Hire that may assist you in your understanding.
Disclaimer: This post has been prepared as a guide and is not intended to exhaustive. While
the utmost care has been taken in the preparation of the article, it should not be used or relied upon as a substitute for detailed advice or as a basis for making a business, financial or insurance decision.