Subrogation Waiver v’s Short Term Hire
Comparing Hirers Own Arranged Equipment Hire Insurance cover to the inclusion of a Subrogation Waiver Extension
Most contractors plant hire companies hire their equipment under CPA or HAE Conditions that make the hirer responsible for loss of damage to the equipment during the hire period, until collection, and Insurers will often make it a condition of the hire companies Annual Contractors Plant policy that the hire company obtains evidence of insurance from the hirer.
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Some insurers, but not all, will offer a subrogation waiver extension within their Annual Contractors Plant policy, once included, insurer will waive their right to subrogate against the hirer in the event of a loss and the hirer will not therefore, be responsible for loss or damage to the plant or machinery hired. This allows the hire company to claim for the loss or damage to the hired-out plant on their own policy, rather than pursuing the hirer for damages as per the hire conditions.
The advantage of this is that many hire companies will charge the hirer an increased cost (usually between 10-20% of the hire charge) to waive the rights of recovery for loss or damage, and a number of hire companies see this as a way to increase their revenue.
Advantages and disadvantages of arranged plant and machinery insurance vs. a Subrogation Waiver Extension
Comparing the hirers Own arranged cover to the inclusion of a Subrogation Waiver Extension involves weighing the advantages and disadvantages of each option.
Subrogation Waiver Extension:
Advantages:
Increased Revenue: The hire company can charge the hirer an additional fee for waiving the right of recovery for loss or damage, potentially increasing revenue.
Simplicity: With the waiver, the hire company can claim for the loss or damage to the hired-out plant on their own policy without pursuing the hirer for damages.
Disadvantages:
Negative Impact on Premiums: Claims on the hire company’s annual plant policy will increase premiums for up to three years after the loss, affecting the company’s financials.
No Cover for Continuing Hire Charges: If a claim takes longer to settle, the lack of cover for continuing hire charges could impact the company’s revenue.
Limited Insurer Availability: Not all insurers offer this extension, limiting options and potentially leading to higher premiums.
Insisting Hirer Purchases Own Cover:
Advantages:
No Impact on Claims Experience or Premiums: Claims will be handled by the hirer’s insurance company, leaving the hire company’s claims experience and premiums unaffected.
Continuing Hire Charges Included: Income from continuing hire charges is ensured until settlement, incentivising insurers to settle claims quickly.
Access to Full Market Evaluation: The hire company can benefit from a broader range of insurers, potentially leading to better coverage and pricing at each renewal.
Considering the advantages and disadvantages of each option, insisting the hirer purchases their own cover appears to offer more benefits for the hire company. While the subrogation waiver extension may provide simplicity and increased revenue initially, it comes with drawbacks such as premium increases, lack of cover for continuing hire charges, and limited insurer availability. In contrast, requiring the hirer to obtain their own cover ensures no impact on the hire company’s premiums, includes continuing hire charges, and allows for a broader market evaluation at each renewal, ultimately providing more flexibility and financial stability.
Contact the team today for a quick and easy plant hire insurance quote or to find out more about the unique coverage we can offer your business.
Insurance4Plant now offer the following policies:
- Combined
- Contractors Plant Policy
- Short-term
- Management Liability
- Cyber
- Motor Fleet Policy
- Professional Indemnity
Insurance4plant typically work with the following types of businesses:
- Tool Hire
- Plant Hire
- Traffic Management
- Crane Hire & Contract Lifting Companies