No matter how well-equipped your construction company is right now, eventually you will run into a contracting challenge that requires a specialized or advanced piece of equipment, and you may need to sign a damage waiver to rent it. Signing a damage waiver with the contractor equipment rental company is common practice, but it may not protect you in the way you're hoping. Find out what alternatives are available and how damage waivers really work before assuming you're off the hook for any damage done to the machine while you use it.
What the Waiver Covers
Despite being referred to as insurance, a damage liability waiver is not an insurance policy for the equipment you rent. It's a binding legal agreement stating that in return for a fee equal to 10-15% of the total rental cost the company will not require you to pay for most forms of damage to the equipment. This means that only forms of damage included in the contract's wording, or at least not specifically excluded, will be covered by the waiver agreement. Many contractors don't realize that their reckless behavior or a stranger gaining access to the work site could void the agreement, no matter what kind of fee they paid.
Why Exclusions Matter
It's essential to read all the waiver details and determine what forms of damage are excluded before signing one of these agreements since it's possible that your intended use of the equipment could fall directly into one of those exclusions. Some companies don't provide a copy of the terms and conditions until after you've signed everything and paid for the rental, so insist on getting a waiver copy beforehand. Common damage exclusions include
- Using the equipment beyond its rated load capacity or other service rating
- Usual wear and tear, which is usually not the responsibility of the renter anyway
- Disappearance due to theft or mismanagement
- Mechanical issues caused by a lack of routine maintenance.
However, exclusions vary greatly by rental company. One company may include vandalism but exclude theft, while another excludes all natural disasters but covers overloading. You can only be sure you're agreeing to a fair set of exclusions by reading the waiver contract in full.
How to Opt Out
If you want to opt out, you must opt out of a waiver before signing it or paying for it. Disputing the terms of a contract after the fact won't change your responsibility for paying for damages to a $100,000 backhoe. Keep in mind that most rental companies will require you to take out your own insurance to cover potential damages if they don't offer a damage waiver or you opt out of using it. This is a good idea regardless of whether you choose the waiver or not because a dedicated property damage rider, or an extension of your company's current insurance to name the rental company, offers a lot more protection in case of an accident that damages or totals the equipment you rent. There's nothing wrong with doubling your protection with both a waiver and a policy.
Why You Need Specific Coverage
Many contractors think it's ridiculous to call their insurance company over spending a few hundred dollars to rent a trench digger or a soil compactor. However, a $500 rental often involves equipment worth hundreds and even thousands of dollars more. Making sure that either the damage waiver or the insurance rider specifically covers what you plan to do with the equipment is the only way to know for sure that you and your company won't end up legally responsible for paying to replace a damaged piece of construction equipment. If you're planning to use a backhoe to uproot trees but the rental company or your insurance doesn't consider that a covered use for the equipment, you're out of luck. It's worth a small fee and the effort of making official arrangements with your insurer to potentially save hundreds of thousands of dollars.
