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INSURANCE

BY BERNARD K. QUINLAN, CIC, CRM, CPCU

Contractors’ Equipment Insurance A Primer

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“contractors’ equipment floater” is a form of inland marine insurance that covers mobile equipment and tools. An “installation floater” protects a contractor’s building materials. This article addresses the contractors’ equipment floater, and the installation floater will be the subject of our next article in the summer issue of The Professional Contractor. Contractors’ equipment insurance policies are offered by a number of underwriters including Acadia, CNA, Chubb, Hanover, Hartford, Liberty Mutual, Peerless and Travelers, among others. This coverage is not subject to a standard policy form, so coverage offered by two underwriters may differ significantly. As with any product or service, the lowest cost might not provide the best value. Contractors’ equipment insurance is available on a scheduled, blanket (unscheduled), or combination basis. Scheduled coverage specifies the equipment covered, including model and serial numbers, and states the limit applicable to each piece of equipment. Blanket coverage, which applies to all equipment and tools, may be subject to limits per location and per item, and a catastrophe limit. Contractors’ equipment policies can cover any type of construction equipment or tools, including but not limited to: • Cranes and cherry pickers • Bulldozers, backhoes, forklifts, scissor lifts • Compressors, pumps, generators • Office and utility trailers • Tools and spare parts Contractors and their insurance providers should review the policy form carefully (especially with respect to blanket coverage) to make sure the tools and equipment they desire to cover are included in the policy definition of covered property. Coverage for the following types of property is often limited or specifically excluded: • Property of others. If you lease, rent or borrow equipment, make sure that your policy provides coverage. If you regularly rent equipment, read the rental agreement carefully. If you are purchasing insurance as part of the rental fee, you may Bernie Quinlan is a principal with Sullivan Group. He can be reached at bquinlan@sullivangroup.com or by visiting the company’s website at www.sullivangroup.com.

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Spring 2012

find that this is very expensive coverage. If you elect to cover rented equipment on your policy, be careful to check the valuation requirement. The rental agreement may require replacement cost valuation, but your equipment floater may provide actual cash value (ACV) coverage that factors depreciation into loss settlement. • Newly acquired equipment. Most policies provide some coverage for newly acquired equipment. However, the coverage typically includes a time limitation, 30 to 90 days, during which the insured is required to report the acquisition to the underwriter. There may also be a value limitation for newly acquired equipment. • Equipment loaned or rented to others. If you lend or rent equipment to other contractors, or to your subcontractors, you may need to modify the policy. • Vehicles. Vehicles licensed for road use are more appropriately covered by auto insurance policies. However, equipment permanently mounted on vehicles, such as compressors and generators, may be covered by the equipment floater. • Aircraft and airborne property. • Watercraft, waterborne property, and property under water. • Construction materials. Building materials are intended to be covered by an installation floater or builders’ risk policy. As stated above, coverage for certain types of property may be excluded or limited by the policy form. Many underwriters offer coverage for the following items on an optional basis: • Leased or borrowed equipment. • Rental reimbursement coverage for the cost of renting equipment to temporarily replace your equipment that has been damaged or stolen. • Employee tools. • Pollutant cleanup costs resulting from damage to equipment. • Expediting expense coverage to help speed up the replacement and delivery of specialized equipment. Most contractors’ equipment coverage is written on an “all-risk” basis, which covers all perils except

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The Professional Contractor Spring 2012  

This issue of The Professional Contractor features coverage of the new wing of the Isabella Stewart Gardner museum; information about preven...

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