Good morning. Thank you so much for joining our webinar titled If You Don't Protect Your Equipment, Who Will? My name is Jamie Bates, and I am the Vice President of Operations with J.T. Bates Insurance Group. I'd like to start by briefly telling you a little bit about our firm. I think it's important to explain why we do what we do, and more importantly, why we should be considered a valuable resource on this topic. Anyone can talk about insurance and all it entails, but we're not just talking about insurance. We're talking specifically about the risks equipment dealers take every day when transacting business. Even more specifically, rental. It requires an understanding of the business, the risks involved, and what the dealership needs really are. With over 30 years of highly specialized experience in insurance equipment, our founder, Jim Ricker, began J. Griffin Ricker and Associates as a consulting firm. He started his very long career in this industry as an agent for John Deere Insurance before it was known as Century. After Century, he went on to work side-by-side with many of the dealers that have relied on his experience, only now in the capacity of a consultant. He walks alongside the dealers and educates them on their insurance needs. While building a more intimate relationship with his clients, he recognized the need for better protection for equipment dealers that goes beyond business insurance. In 2008, when the economy took a turn and many dealers started to rely heavily on rental to produce revenue, he saw the potential exposure and developed specific programs that were tailored to fit the dealer's needs. From there, J. Griffin Ricker and Associates expanded into J.P. Bates Insurance Group. J.P. Bates is a full-service insurance firm providing all our dealers' insurance needs, from business insurance to extended warranty, loss damage waiver, which we call rental equipment protection, and compliant services, which also includes our certificate management system. Today, we're focusing on educating dealers on how best to utilize loss damage waiver. Proper physical damage coverage for rental equipment can save a rental organization thousands or even millions of dollars in three ways. Repair and replacement costs for equipment, retaining and maintaining valuable customers, and protecting your organization from litigation. Recent legal cases prove that not having the proper program in place can be detrimental to your rental business. Loss damage waiver is a great way to mitigate this risk, at the same time increasing profitability. However, there are better ways than others to go about offering this program to your customers, and aspects to consider when building a program. In our short time together today, I'd like to discuss three things. What is loss damage waiver, and how does it work? Four different ways to protect your rental equipment, and why is it so important to obtain certificates of insurance when renting? Also, if you have the ability to ask questions under the audience questions, if you have anything that comes up that you would like to ask, please feel free to do so, and I'll answer as we go. I'm going to start with what is loss damage waiver, and how it works. Assuming that not everybody who is in attendance knows all there is about LDW, and I'll just briefly go over it here very quickly, but LDW, loss damage waiver, is a waiver of responsibility for the customer when renting equipment. The customer will pay a fee, often a percentage of the rental, to purchase the waiver. Then the coverage under this waiver can vary greatly depending on how it's administered, whether there's limited coverages, sometimes only fire, theft, and vandalism, or there can be more comprehensive coverages as well. Dealers may decide to self-insure this program, or have it underwritten by an insurance carrier. Basically, the intention of loss damage waiver is to allow the customer to waive that responsibility, however it ends up being handled. There are four ways to protect your equipment. The first is the customer responsibility. Customer provides a certificate of insurance, and that certificate should show that they have all the coverages they need to protect that equipment while it's out on rent. Things to be cautious of, though, is that it's very important to have a dedicated individual managing all those certificates. If you are relying on the customer to have all the coverages they need, you want to make sure that when you get that certificate, it's not just being filed, yep, we have a certificate, let's go ahead and rent, because there's so much information that needs to be on that certificate that proves that they have all the coverages they need to protect your equipment and to protect, potentially, the dealership from having any sort of responsibility or alleged responsibility for any damages done to property or to a person. The certificate sometimes cannot be very clear what losses are actually covered. It can say physical damage coverage, but every policy is a little different, and so there may be very limited coverages with that policy. And though it's still your customer's responsibility, there's that potential there that there could be a delay in trying to get a claim processed and paid in the event of a loss. The other piece that many don't think about on a certificate is the multiple expiration dates. That can make managing the certificate very tedious, because auto insurance might be on one policy term, and then general liability might be on another. And when you're renting equipment, you want to make sure those certificates are up-to-date and active at the time of the rental to make sure that the customer actually has protection. The other thing that we often will recommend is that the equipment be listed on the certificate of insurance, if at all possible. So just to give you a scenario, if you have a customer who comes in to rent, and they give you a certificate, and you see that they have physical damage coverage, and it's at $100,000, and they're renting from you a $50,000 piece of equipment. Well, you don't know if the dealership, what other equipment they may have on the job site that they're renting. So they might have some of their own equipment. They might be renting from another dealership for a different type of piece of equipment. And in those situations, if there's a catastrophic loss, it could be a large rainstorm and there's flooding. We've seen those happen before. Fire breaks out on the job site, and more than one piece of equipment is damaged. It doesn't even have to be a total loss, but if the losses are more than $100,000, there's always that potential there that the dealer could get stuck not getting reimbursed or made whole again after a claim. And so having your equipment actually listed on a certificate of insurance helps mitigate that risk a bit. It is a bit more tedious because as they rent, each time they have to give you a new certificate with that equipment listed on there, but it's always the safest bet for the dealership. So steps to take if you decide to do this route and only expect your customer to have responsibility in the event of, as far as their coverages are concerned, is clearly state in the rental contract that losses are the customer's financial responsibility. Making sure that you have the certificate, making the certificates mandatory with the rental, that sometimes can be, sometimes at the rental counter or on the phone, the rental coordinator, they need to make sure that they're getting that certificate every single time in those situations. And then again, as I mentioned on the other screen, training staff or using a service to actually validate proper coverages. I'm going to talk a little more about certificates as we go on, but one of the things that we see often is in commercial general liability, the only thing that covers a dealer or the customer really for is if they injure someone or damage someone else's property, not your rental equipment, but a building, a car, someone else's property. It doesn't cover the rental equipment. And there is a portion on the certificate under that coverage, that liability coverage, that says something about rented premises. And a lot of people get that confused to mean the rented property, the rental equipment, but it doesn't. And so I'll talk a little bit more about that, but that's one of the reasons why it's so important to make sure that the certificates are viewed and verified to make sure that they have the coverages that are necessary. The next way of being able to protect your equipment while it's out on rent is dealer responsibility. So some dealerships still do this, but dealers don't consistently obtain certificates or sell loss damage waiver. They just intend to fall back on their business policy in the event of a loss. This is something to be very cautious about as well, because although some inland marine policies may cover losses during rental, this can and will negatively affect premiums and possibly the ability to place insurance in the future. It's really important to understand the insurance market and how right now it's kind of hardening. There are a lot of insurance carriers that are no longer writing insurance for equipment dealers because of the risk. And so you want to keep that loss history as pristine as you possibly can to make sure that you can keep your premiums low and that you can continue to find insurance to cover your dealership. Okay, I'm not sure if anyone else is having issues with the audio. If you are, just let me know. I can see if there's anything I can do to change on my side. Another option is self-insuring through the dealership. So a self-insured waiver through the dealer. This is where the dealer takes full financial responsibility and acts as an underwriter, collects fees at the time of the rental, and uses the funds to offset cost of repairs when a claim occurs. In the past, this type of program has been very limited in what it will actually cover. This is where I was saying some of the dealerships will use. Fire, theft, and vandalism is really almost a standard in some ways. Those three things are oftentimes what's actually covered when a loss damage waiver is self-insured for the dealership. This can cause frustration on the part of the customer when there's a claim if it's not designed properly. You want to make sure that you have the right types of coverages available to the customer or this option can be frustrating in that relationship. The other thing I think that's important to mention is anticipate and expect losses. I don't know that a lot of dealerships have this part in mind, but you should expect to pay out around 30% of the proceeds to claims if the program is built to be a true value add to your customer. If you're keeping all of the revenue that you have brought in from this self-insured avenue, it can look like it's not really a value to your customer. Expecting to have losses and anticipating that can be very helpful in the process instead of assuming that all of that is going to go to the bottom line. Steps that we think are good to take if you decide to go this route, call your insurance commissioner's office in your state to find out the law regarding a self-funded or self-insured program. Believe it or not, there are some states that consider a self-insured program through the dealership to be insurance because when you are using an insurance company, you have someone financially backing the program that you're selling. You're not selling insurance specifically. It's still backed by an insurance company. Although they're not going to come and audit you like the IRS might, there is the potential that if you have a customer who is frustrated because you're charging the percentage but you're really not covering anything similar to previous lawsuits where they say that there were illusory benefits available, there are illusory benefits with the program, which means that really nothing was actually covered. You can run into situations where a customer may contact the insurance commissioner's office and complain. In those situations, the commissioner's office would then help your customer, which would be the plaintiff, in the event of a lawsuit. So just making sure that you have your eyes dotted and your keys crossed. Every state is different, but just contacting them and making sure that you understand what your state's regulation is on that is a great idea. Working with an attorney or an insurance consultant to help write the terms and conditions, or excuse me, to set up the program, to talk about what should be covered, what maybe isn't covered, how you handle deductibles and all of those pieces, it's always a great idea to have someone who's an expert in the field help you with that process. Then using legal counsel to write the terms and conditions of the program into your rental contract. There are plenty of templates out there that you could probably pull from a website. It's really not the best option in this situation because every business is different and every rental dealership or every dealership that's handling rental is a little different, and so it's not going to be a one-size-fits-all necessarily with a contract. So it's always good to have somebody who understands your dealership, the way that you're handling rental, what you're renting and all of those things, be involved in that process to help you write a great program. Have a reserve of funds set aside to pay for losses. Not every dealership does this. It is a great best business practice to have those funds set aside. Whatever you're bringing in through the program, to have it set aside in a reserve fund in the event of a loss or when there is a loss so that you have those to sort of pull funds from, not only to be able to measure how well that piece is actually doing for your company, but to make sure that those funds are available in the event of a loss. If you plan on filing claims with your business policy, sometimes dealerships will have a loss damage waiver that they self-insure, and then they sort of set a limit and say, well, if we have a claim that's over X amount of dollars, we're going to just go ahead and file a claim with our business insurance policy. So if you plan to do that, make sure that you clear that with your agent ahead of time and be certain that the claims won't cause your insurance premiums to sustain during cost increases. More than likely it will, depending on how often you do it and how large the claims are. But the agent and the insurance carrier should understand that that's how the policy is being used. And some of them won't, they may frown upon that only because the dealership is collecting and making a profit off of a program and then using them as a backup, and some of them don't like that. So it's always good to just make sure that you're all on the same page regarding that piece. And then finally, make sure you offer a competitive program. Comprehensive coverages are always good, covering accidental damage, collisions, overturns, theft, flood, acts of God, those sort of things that actually happen when equipment is out on rent. It's so important to make sure that those are included. This is part of what Jim discovered when he was – he discovered wasn't being provided with the original loss damage waiver programs. And anyone who's been in this industry for any amount of time knows what those programs used to look like. They were laughable. There really wasn't much to be had as far as coverages were concerned. We've had lots of rental coordinators who say, I don't even want to sell it, I don't want to talk about it because it doesn't really cover anything. And so they have customers come back in with damages done to equipment, and they'll be like – they'll say, well, sorry, that's not covered. That's not one of the things that we cover. And so in the past, that's how the programs were set up. It's no longer acceptable to cover minimal losses in your self-insured program if you want to compete in the market. There are the large rental houses that many dealers find themselves competing with, competing against. Understand this. And a perfect example is United Rental. They literally cover everything. They have no limitations on their coverage. And so it's hard for a dealership that's certainly not the same size as a United Rental to be expected to cover everything, but it's best practice to try to get as close as you can to make that damage waiver be an actual value add to your customer. And then finally, the insurance-backed policy, which is where the dealer purchases a policy through an insurance company to underwrite their damage waiver. This is the safest way for a dealership to mitigate their risk. There's very limited financial exposure on the part of the dealer. Yes, there is a premium that ends up being paid through this approach, but there's still profit to be made. And then you know at the end of the day what you get to keep from that program. And the deductible that oftentimes comes with an insurance-backed policy typically is passed through to the customer anyway. So this limits the financial exposure for a dealership. The other piece that I don't know that we talk about much is the managed service side of an insurance-backed policy. The claims processing alone that an insurance company does to handle this piece for you is invaluable. You still, even though you might be repairing the equipment in-house and everything else, you still have someone who's preparing all of that information typically, and then figuring out where in your accounting, in your cost codes and everything, all of that piece needs to go. This makes it much simpler for the dealership to just sort of hand off to an insurance company and say, we have a claim. Here's some pictures and here's the information you need. And then you get a check back and you're done. So definitely less hands-on and a lot less risk involved in the insurance-backed policy. Also, this option often gets the dealership a little closer to competing with some of the other rental house programs or dealerships that may have more comprehensive programs, and then at the same time limiting the financial exposure. Because obviously if a dealer is offering a lost damage waiver program, self-insured, LDW, and you're trying to get, be competitive with the program and you try to add a bunch of losses into your program, the more and more risk you have of losing the revenue that you're generating within the program. And so, again, by doing an insurance-backed policy, you get more coverages and you don't increase your risk at the same time. Recommendations that we have when you're looking at an insurance-backed policy is find one with a straightforward pay-as-you-go billing. Don't use a program that asks you to pay for the policy up front. You might have to pay a deposit or a small amount in the beginning, but you shouldn't be paying for an entire year's worth of protection at the very beginning like you might with your business policy or an auto policy or something. This is a more pay-as-you-go. So depending on how much business you do, how much you sell of the program, then you pay for the premium as you go with it. So that's a great thing to look for. The other piece is an insurance company that will waive segregation. And if you're not familiar with that, that means that they won't go after the customer. So if there's a claim, the customer says they've turned over your piece and you have to repair it because the insurance carrier will pay for the repairs. And then if there's not a waiver of segregation, they could potentially go after your customer's insurance company. But they are paying for a loss-damage waiver to waive their responsibility, and so you also want your insurance company to waive the right to segregate against their insurance company. The other piece is to look for a policy with a low deductible, typically lower than your customers would be on their own policy, because this is another great selling point to your customer to get their interest into the loss-damage waiver. There's obviously the piece where their protections may be better on your loss-damage waiver program, and it won't affect their insurance policy. But also if their deductibles are really high, we see them as $50,000 or more, depending on how large the customer is. But even $5,000 if there's damages done, that's a big chunk of money out of your customer's pocket oftentimes. So being able to promote that it's a lower deductible will help you sell the program better and increase your profitability on that as well. Okay, picking an insurance company. So you've decided to go ahead and go insurance-backed loss-damage waiver. Picking an insurance company, this is so very important, this part. Financial ratings and financial size categories are very important to know that the insurance company is actually going to be able to pay your claims when they come in. You guys are renting typically large pieces of equipment, right? You've got hundreds of thousands of dollars out at any given time to any given customer. So you want to make sure that if you have a substantial loss that that insurance company can actually protect you and cover the claim. So on the financial size category it goes up to 15, which means the insurance company has billions of dollars. And those are great carriers to find. The other piece is the admitted paper. And this can be kind of confusing, and it's one of those insurance jargon or whatever. But admitted and non-admitted. Admitted paper means that the government and the state protect in the event of errors in admissions or bankruptcy. So if you are on, if you have your program backed by someone on non-admitted paper, and you can very easily ask your agent or your carrier this question, are they on admitted or non-admitted? If they're on non-admitted paper and the carrier goes bankrupt or they stop paying your claims or there's any issue that you have with that insurance company, there is nothing the government and state can do to protect you or to help you. On admitted paper, they will do that. So there are many programs out there that are on non-admitted paper. We just recommend that you be very careful with those, because on admitted paper you have a lot more protection backing you in the event that something happens to that carrier. All right. Certificates. Why do I need them? Whether a loss damage waiver is offered or not at your dealership, we recommend a dealer always obtain and verify a copy of their customer's certificate of insurance. Proof of insurance is paramount when renting equipment, even if the customer chooses loss damage waiver. Ensure that the dealer is protected in the event of a loss. That's the intention of the certificate. Ensure proper liability coverage, something that dealerships may not consider. But if you're renting to a customer and they don't have proper liability coverage and they injure someone, heaven forbid they severely injure somebody or they cause property damage, the individual that has been injured or their property has been damaged will first go after your customer. If your customer doesn't have any insurance, the next place they're going to go to is you. Whether or not they have any legal standing or you would end up paying them out would be up to a court. But they could still pull you into the middle of it. So you always want to make sure that your customer has the appropriate liability coverages. On auto liability, auto liability is not as important if your dealership is always transporting and delivering and picking up your own equipment. But if you have a customer coming in with a trailer to rent a backup or a forklift or whatever, if they're transporting it over the road, you want to make sure that they have the appropriate liability coverage. And then obviously, of course, proof of physical damage coverage, also called rented equipment coverage. If they're not purchasing a lost damage waiver or in some other way protected in that, you want to make sure that you have the proof of physical damage coverage. So we have some recommendations on this piece as well. As I mentioned earlier, have a professional who understands insurance manager certificates. Whether that's someone that you have dedicated in your office, there are great services out there provided where you can outsource that to another company. But whoever has the responsibility of managing your certificates, it's so important to make sure that they understand and have experience in insurance and the complexities that can come with many policy types. The verbiage can vary widely on a certificate, especially when you get into the physical damage portion of it. It can say physical damage. It can say rented leased equipment. It can say contractor's equipment. I've seen all types of really interesting things on certificates of insurance. So you just want to make sure that whoever is handling those certificates, they're not just saying, yep, we have a certificate and putting them in a file and checking that off and saying we have a certificate because there's so much information to be seen and viewed on that certificate that it's important to be looking at those and reviewing them. Also ensure that coverage doesn't expire while the equipment is out on rent. If you don't have a great way of managing the certificates and they get put into a file, you may not know that a piece of equipment is out on rent and their certificate has expired in the process. So that's another piece to keep in mind while you're managing those certificates to make sure that you always have an active certificate in your hands. Over the years we've realized that this sort of management hasn't really been happening on a regular basis. We hear from dealers all the time that many of their certificates just end up in a file and they're not properly verified. The other piece of that, many of you have multiple locations. So when you're dealing with multiple locations, one location may not know that a certificate has already been obtained. So they might be looking for one or any number of scenarios can happen in that situation and being able to have them in one centralized location is always very helpful to make sure that everybody can communicate what certificates are there, what coverages your customer has and that sort of thing. So keeping that in mind as well. All right. I know this is a really tiny image. So the next screen is going to be zoomed in so that you can actually see the information. But this is what a typical certificate of liability insurance looks like. It's just a standard accord form. This piece here that I have zoomed in on are some of the most important pieces. So we have general liability. That's the part that if someone is injured, they hit someone and injure them or they're injured while they're on the equipment or if they run into someone's building or car or something, this is what's going to cover them. It may be too small, and I apologize if it is, but this is where it says damage to rented premises. And oftentimes there will be a dollar value in there, $100,000, $500,000, and people will confuse that to think that that is physical damage coverage, and it is not. It is just in the event that the customer is renting. Maybe they're renting a building or a storefront or something, and there's damage done to that rented premises, then it would be covered. So that might be self-explanatory to some of you, but some people get confused about that. And then the general aggregate piece oftentimes is confused as well to be sort of like umbrella, like an excess insurance or something, and that possibly physical damage could be covered under that, and that is not the case either. That is only the liability piece. Then we have this auto liability section as well, as we talked about before. It's important to have this if the equipment is being transported by the customer. And then down here at the bottom, the physical damage piece, physical damage, sometimes, like I said, it might be physical damage. It might say rented leased equipment. It could say contractor's equipment or property insurance. All types of different ways of then describing the insurance could be listed here. And then over here they'll put the limit. Sometimes the deductible as well will be listed here. And then down here on the bottom, this is where if they're going to include your equipment information, your serial numbers or anything else, they would include that down here in this piece. And the other portion that they would oftentimes include down here is whether or not the dealer is listed as a lost payee and possibly an additional insured. So just briefly, this piece is very important. Lost payee specifically, you always, always want to be included as a lost payee on the certificate. The reason for that is if your customer is the one holding the physical damage insurance and there is a loss and they've damaged your equipment and you go through the process with the claims and everything else and you repair the equipment, when that check comes from the customer's insurance company, it will go to the customer. And if you're not listed as a lost payee, it will only be in the customer's name because they are the ones insured. So you then have to collect those funds from the customer. If you are listed as a lost payee, that check will have your name, your dealership name and the customer's name on it as well. And so that just protects you a little bit more to make sure that you get paid in a more timely fashion. And the additional insured piece is regarding the liability portion, and that's always good to have as well just as a backup in the event that something happens, there's an accident with the equipment, that you would also be included on their insurance policy regarding that piece of equipment and whatever that claim might be. Something else on here that can be really important regarding the physical damage, rent and lease equipment, and really it has mostly to do with those two pieces, but it could be any portion of the certificate. As we talk about having somebody manage your certificate, it may be necessary for somebody to contact either the customer or the insurance company. And oftentimes I know there's frustrations with the certificate of insurance. The customer gets frustrated when it doesn't have everything that it needs, and the dealership goes back and asks for more. And so it's almost best business practice to just contact the insurance company directly, not to add anything to an insurance program or anything else, but just confirming information. So if physical damage isn't listed, being able to contact the insurance company and just ask, does your insurer, does our customer have physical damage coverage, or asking about limits and that sort of thing. So this, again, plays into the importance of having somebody who really understands the certificate and feels comfortable with communicating back and forth with either the customer or the insurance company to make sure that that certificate has all of the, verified and has all of the coverages that are necessary for the rental. Okay. So, again, another small image. But this is what an evidence of property insurance form looks like. These aren't as common, but we do still see these pretty regularly. This doesn't have anything to do with liability insurance. It's just the property insurance. But you will see these when you're looking for physical damage coverage sometimes. And there's not a lot of information to come on these typically, but it will have what the coverage is, whether it's physical damage, rental lease equipment, and that sort of thing, as I mentioned before. The amount of insurance and the deductible will be listed here. And, again, down here we always recommend if there's any way to get your equipment specifically listed, this is a great place to have them added on. And then the loss payee and additional insured is just in a little bit different position. But just to give you an idea of what those certificates look like, why it's so important to have them. Really, this piece of paper is invaluable to your dealership in the event of a loss where you don't have physical damage, whether it's a damage waiver or whatever else, that you have proof that they have coverage to make sure that you can be made whole again. So just the highlights on the certificates. Damage to rented premises does not cover rented equipment, and neither does general aggregate or the umbrella. Those are all liability coverages, and they will not cover physical damage. And then just understanding the difference between the loss payee, which is for physical damage, and the additional insured piece for the liability portion. Both are really important to understand and make sure that they're added onto your certificate. A couple of things that I wanted to just mention. We've had dealerships in the past ask if it's legal for the dealership to sell a damage waiver backed by an insurance company if they don't have an insurance license. And the answer to that is absolutely yes, because you're not selling insurance. Your damage waiver is being underwritten by an insurance policy, and it's only for the dealership. The insurance is for the dealership, not for the customer. So you don't have to have a producer or any type of insurance licenses or anything else to be able to sell a damage waiver that's backed by an insurance company. Another question that comes up sometimes is that a lot of your customers use their own insurance. So does it really worth spending a lot of time on this piece? And the answer is absolutely yes. If you don't have a loss damage waiver or program in place, we see many dealerships have to turn away business, because if the customer doesn't have a certificate of insurance, they don't have any way of having the appropriate coverages to be able to rent the equipment. So you're turning business away. The other piece is that this can be a revenue generator for your dealership. Depending on where you are in this, whether you're self-insured, you're not doing anything at all, or you have an insurance-backed policy, when you are able to bring in and generate some additional profit, it's always a good idea to have that opportunity, especially when it's a value-add to your customer. Having a really solid program that you can actually add that value, your customers will want to purchase it and not put the pressure on their own insurance policy, which helps you as a dealership be even more profitable. So it's always a great idea to have this, even if you are only utilizing it for a small percentage of your business. All right. So in conclusion, loss damage waiver is a crucial part of equipment rental. More and more dealers are using it in whatever capacity, but the loss damage waiver is a huge part of that, the rental part. Knowing and understanding how you're protected with whatever option you choose is really important. And then choosing wisely, choosing the direction that you go and choosing the way that you handle it and your contracts and the verbiage and all of that, just being really aware of that and choosing wisely is a great idea. And always, always obtain and verify certificates of insurance above all else is so very important. I have a few more minutes. I've reached the end of my presentation. If you have any questions at all, I just want to thank you for your time. And my information is at the bottom of the presentation. If you have any questions, you just want to bounce some ideas off of me or you have any additional questions regarding my presentation, I'm happy to help in any way I can. We love to educate our dealers and just give them the most resources that we can to help them be successful in business and rental and everywhere in between working with your customers. So thanks again for your time. I really appreciate it. And I hope to hear from you soon.

equipment dealers

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loss damage waiver

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customer responsibility

insurance-backed policies

certificates of insurance

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