Protecting Yourself When Lending Equipment to Others
August 27, 2015
Author: Scott Herrig, Vice President
If you operate as a motor carrier, you have likely either borrowed another company’s equipment or lent someone your equipment. Many companies have allowed others use their equipment without anything more than the exchange of a good old fashioned handshake. With that being said, the days of lending your equipment to others with only a simple handshake agreement now have given way to ensuring that you protect your personal interests and your company while your equipment is in the care, custody, & control of another party.
When lending your equipment to others you should consider possible exposures that you open yourself up to while your equipment is in the possession of others.
- What would happen if you lent a trailer to another trucking company and they dropped your trailer at an unprotected location?
- What if your trailer was stolen when it was dropped at an undisclosed location?
- What if your trailer was left on the side of the highway after the other party’s tractor had mechanical problems?
- What if another party came along and ran into your trailer while it was sitting on the side of the highway?
- What if you lent another party your tractor and then the tractor was responsible for a fatality related claim?
All of these scenarios give way to how this could adversely affect you or your company.
Proper Protection
The purpose of this article is to address how to properly protect you and your company when lending equipment to others. To start, you should implement a written contract/agreement to use in place of the old handshake agreement. The contract should address who is responsible in the event of damage to the tractor/trailer or property damage and bodily injury to another party. It should also address who is responsible for that damage with the goal of any claim(s) arising from the use of the tractor or trailer while in the possession of another party be assumed by that party instead of you or your own insurance policy. It is recommended to consult with an attorney with a focus in transportation to help put together a contract that will protect your interests.
The contract should transfer the responsibility/liability to the party that is using your tractor or trailer. With a written contract in place you can request that the other party provide proof of coverage for the tractor or trailer for the value of the equipment. For example, if you are allowing another party to use your trailer under a written agreement, you should request to see proof of trailer interchange coverage for the value of the trailer.
If you decide not to use a written agreement you should request an adequate limit for either non-owned trailer or bailee coverage. Non-owned trailer is an insurance term that provides physical damage coverage to the other party only when they are hooked up to your trailer. Bailee coverage is broader, but not always available in the marketplace, providing coverage for legal liability resulting from damage or destruction of a bailor’s (owner’s) property while temporarily under the care, custody and control of a bailee (other party). If the other party is using your equipment for an extended period of time you could also request that they schedule your equipment on their policy. Trailer Interchange coverage is typically the most available and broadest protection for your trailer while in the other party’s care, custody and control. Essentially, this should cover damages done to your trailer while it is in another party’s possession.
Next, you should ask to be named Additional Insured under the other party’s Auto Liability policy with a minimum combined single limit of $1,000,000. By being named additional insured under their policy this will afford coverage for property damage or bodily injury to others while they are using your trailer whether your trailer is sitting at an undisclosed location or in the event of the trailer going down the road being pulled by the other carrier.
Finally, you should always request proof of coverage on a certificate of insurance (COI) from the other party’s insurance agency/company. This COI should incorporate the following items: Trailer Interchange coverage for limit of equipment less deductible (absent of a written contract you could request non-owned trailer or bailee coverage) and Auto Liability coverage including Additional Insured. It is also recommended that the insurance company is A.M. Best Rated A- or above to ensure the insurance company’s financial status and ability to pay claims.
 Scott Herrig |
Scott Herrig is a Vice President at Cottingham & Butler, working with the company for over 13 years in transportation insurance. In that time, Scott has earned the following insurance designations: Chartered Property Casualty Underwriter, Certified Insurance Counselor, Associate in Commercial Underwriting-Management, Associate in Underwriting, and Accredited Advisor in Insurance. |
References:
- https://www.ambest.com/home/default.aspx
- https://www.investopedia.com/terms/b/bailees-customers-insurance.asp
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