The Do's and Don'ts of Insurance Claims

June 1, 2000
Plain-clothed attorneys walk through your rental yard and survey damaged equipment. Insurance adjusters pretending to represent your company ask your

Plain-clothed attorneys walk through your rental yard and survey damaged equipment. Insurance adjusters pretending to represent your company ask your employees about a faulty lift involved in an accident just days earlier. Unlikely? Yes. Unheard of? No.

Insurance claims are part of the rental business, and those in the shop need to know how to act, and react, if a lawsuit or claim is filed against their operation. One key is being aware of whom you talk to about equipment that was involved in an accident.

"The owner should instruct all employees not to speak to anyone other than your own insurance company," says Mike Martinie, claims and underwriting manager with ARA Insurance Services in Kansas City, Mo. "And rental yard employees should verify whom they are talking to before giving out any information."

Rental equipment companies are typically involved in two types of insurance claims: liability and property. Liability claims involve the customer and alleged damage to the equipment, the individual and/or the individual's property during use of the rental equipment. Property claims are filed by the rental company if its equipment is damaged, vandalized or stolen while on the lot.

If a customer files a complaint regarding equipment involved in an accident, the most important thing the rental center can do is take photos of the equipment.

Disposable cameras should be located in rental center trucks and offices so that damage to a piece of equipment can be recorded as quickly and accurately as possible, says R. Jeffrey McGeary, vice president of sales with Allied Insurance Brokers in Pittsburgh.

Similarly, keep evidence from the accident; it also is vital for insurance companies as they investigate any liability.

"Do not destroy or throw away things that contributed to the accident," says Dale Blackwell, president of Aba Daba Rents in Sacramento, Calif. "And do not do any repairs or put the equipment back in service."

Should someone ask store employees about damaged equipment, that individual should be referred to rental center management. If an accident involving Aba Daba Rents occurs, Blackwell says an accident report is filled out and given to the customer so that individual can tell his or her side of the story. The report is then submitted to the company's insurer for further action.

A rental center employee is usually one of the first on the accident scene, so statements should be taken immediately because memories tend to fade, McGeary says. Likewise, the rental contract serves as an important document for similar reasons in the event of a customer complaint.

"Have your employees sign out the equipment and sign it back in when the customer returns it so if there's any question about the condition of the equipment you can go straight to the employee who signed for it," McGeary says.

While it is impossible for a rental center to know if and when a claim will be filed against it, certain types of rental equipment are more likely to trigger claims than others.

Martinie, who oversees the insurance policies of ARA member companies nationwide, says towed equipment, such as trailers, generators and log splitters on wheels, consistently leads in the number of claims filed. Second are tents, with claims arising from people tripping over stakes, tents collapsing and stakes striking underground utility lines. Manlifts and hoists are consistently third on the list, he says.

While no specific numbers were available for the dollar amounts paid to settle claims, towed equipment topped that list, too, with lifts and hoists second and scaffolding third.

Claims might lead to litigation, and if that is the case, an important part of a rental center's defense could come down to maintenance records and the instructions given to customers on how to use the equipment. Les Chayo, general counsel for the Rental Industry Association, says it is vital for rental centers to service equipment and keep adequate records on how, when and what maintenance was carried out because those "records become issues in lawsuits."

To guard themselves, rental center staff should:

Take photographs from all angles

Take statements from all involved

Never admit liability

Not throw away evidence

Not put the equipment back in service

Refer all inquiries to management

Properly maintain all equipment

Be wary of whom they give information to