Issue link: http://read.dmtmag.com/i/91455
Rental ("Understanding and Reducing Product Liability Claims" continued from page 35) limited liability company (many states also permit limited partnerships and limited liability partnerships) to limit your potential liability to the assets owned by your company rather than your personal assets. Corporate limited liability shields may be subject to attack in certain cases, however, particularly where fraud is alleged, corporate formalities have been ignored, and/or the company's assets have been "commingled" with that of the owner(s). The primary shortcoming, however, is that the company's assets are still exposed to all products liability judgments. (2.) Insurance. Adequate insurance, including "public liability" and "products completed operations coverage" can, subject to certain limitations (such as deductibles, policy limits and exclusions), cover a considerable portion of the costs of both defending these claims and paying the resulting judgments (if any). Maintaining sufficient Options to Manage Your Rental Risk BY JAYME BATES Due to the high cost of equipment ownership, many would-be equipment owners have become equip- ment renters, and many AED dealers are reporting increased rental revenues versus a year ago. However, there may still be money, and risk, left on the table if you're not currently offering some sort of rental equipment protection. There is an opportunity to increase profits through the rental department with a true value-added program. On the other hand, the needs of your rental business may be best met with a straight- forward approach. Here are a few options to consider: n Option 1: Do nothing. Not offering rental custom- waiver. Charging a fee for loss damage waiver increases rental revenue because it is sold in addition to rental fees. 36 | www.cedmag.com | Construction Equipment Distribution | November 2012 ers an equipment coverage program is an option. Simply require the customer to provide a certificate of insurance that lists your dealership as an additional insured/loss payee and holds the customer entirely responsible for damage to the rented equipment. With this option, you have the least amount of control over protection from a loss, and requesting a certificate of insurance from a customer is not likely to be viewed as a value-add. This is a very straightforward approach that is not designed to increase revenue through the rental department, but provides coverage for rented equipment. With this option, it is recommended to have someone with insurance expertise ensure the certificate is valid. n Option 2: Self-insure with a loss damage insurance is always recommended, with the caution, however, that it is becoming increasingly difficult to predict how much insurance might be required to cover products liability claims. (3.) Rental/Lease Contract. Use your rental/lease contract to limit or eliminate claims, transfer liability to other parties, and discourage potential litigants from filing suit against you in the first place. Clauses such as "waivers of claims," "assumptions of liability," "indemnity provisions," "liability limitations," "insurance requirements," "proper use" provisions, and perhaps most importantly with respect to strict liability claims, "acknowledgements of receipt of proper use and safety instructions and warnings" can often be used to cut off or limit various forms of liability. Do not, however, rely on any single provision to accomplish this, as states often refuse to honor "liability waivers" and "indemnity" provisions that would shift the burden for products liability (continued on page 55) The dealer only pays out when a loss occurs, so self-insur- ance can also increase profitability of a rental program. The down side is increased exposure to risk, large cash reserves required to cover any major losses, and increased demand for human resources or even staffing a licensed insurance provider to monitor and sell a self-insurance program. The cash required to sustain such a program could be utilized in other areas, and a self-insured claim on a policy with very limited coverage could result in an unhappy customer or even a lawsuit. n Option 3: Rental equipment protection or loss damage waiver through a licensed insurance carrier. Many equipment dealers are now choosing this option because it increases rental revenue, limits exposure to risk, and provides a great value to rental customers. In this situation, the dealer charges a damage fee to the rental customer, a portion of which is used to pay the insurance carrier, and the balance of which goes to the bottom line. Insuring equipment with a licensed carrier can simplify rentals and ensures compliance with neces- sary legal exposure. This is a great option for companies of all sizes and there are many coverage options to choose from. Shop around and choose the program that makes the most sense for your business. For instance some programs offer all-risk coverage where others only offer named perils. In a tough economy it is important to make sure your business offers a competitive program. JAYME BATES is the owner of Bates Insurance Group, an AED member firm. She can be reached at (877) 900-8729, jbates@ jtbatesgroup.com.