At some point in time, contractors and subcontractors will have to use rented or leased equipment when taking on a job. The users will comply to an equipment contract which asks for required proof of protection from the rental company such as a “certificate of insurance”. The rental company may also want to be named as an “additional insured” in order to protect their legal liability and interest in rented or leased equipment.
Providing a certificate can be handled by endorsing a version of the Additional Insured-Lessor of Leased Equipment form onto the contractor’s liability policy which shows the rental companies name. Occasionally it is used for contractors who rent equipment with or without a written contract. Contractors who frequently enter equipment rental/lease agreements have a more advanced option. This latter form covers the interest of any rental or leasing company when a written contract is involved and without having to constantly endorse the policy to name the applicable rental firm.
A contractor and insurer should approach this situation by making sure all important areas are being handled. Primarily, be sure that the rental company has its own liability insurance. This is recommended just in case the contractor who is renting the equipment is not held responsible for a incident on the job involving the equipment. In such a case, the legal liability reverts back to the equipment’s owner. Next, ask all relevant parties (contractor, rental company insurance agent, and insurance company underwriter) to review the rental contract so that they are aware of the terms and conditions. This is the best way to determine how it correlates to the coverage and limitations of the additional insured form. Finally, it is very important that all parties are aware that coverage ends when the job is done and the equipment is returned to the rental company.
This additional insured form can help a contractor out in special situations, but it is only useful when all parties take the time to properly make use of the form.
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