Article: How to protect your tools and equipment

[InspectorPro Insurance]

Hi TIJ readers!

Hope you're all enjoying the summer inspection season. Our latest article was inspired by a question we that kept coming up at shows and on the phone: I know that E&O and GL can protect my business against claims. But is there a type of insurance that can protect my business from loss or damage to all the expensive equipment I use?

The answer is yes. Equipment coverage, otherwise known as inland marine insurance or a property floater, is an add-on coverage that protects your tools and equipment. Check out the preview below to start learning what the coverage entails, how it works, and what happens when you have a claim.

Best,
Stephanie

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How to protect your tools and equipment

Earlier this year, one of our insured home inspectors sent his radon monitor in for calibration. When the servicing was complete, the manufacturer shipped the monitor back to the home inspector. But, when the inspector returned home, the radon monitor was nowhere to be found.

The inspector put in a claim with the radon monitor manufacturer, who subsequently put in a claim with the shipping company. Both the manufacturer and the shipping company denied any liability or coverage for the loss. So, the home inspector filed a police report with his county's Sheriff's Department and contacted us, his insurance provider, to see if we could cover the lost radon monitor.

What is equipment coverage?
Formally known as inland marine coverage or a commercial property floater, equipment coverage insures your inspection tools and equipment. Unlike standard property insurance, inland marine coverage protects your tools and equipment regardless of their location. This is important in the home inspection industry since, rather than housing your tools and equipment in an office, you usually have your materials in your work vehicle or on inspection sites.

In most cases, equipment coverage for home inspectors reimburses you for the actual cash value (not the cost of the items brand-new) of your stolen or damaged equipment or tools. Oftentimes, coverage extends to not just items you own but items you lease or rent.

Most home inspection tools and equipment are eligible for inland marine insurance endorsements. Examples of typical inland marine insurance claims include:

• Someone burglarizes your locked inspection vehicle and swipes your drone.
• As you're taking inspection photos, you trip and drop your digital camera, breaking the lens.
• While inspecting the roof, someone steals your infrared camera, which you left at the base of your ladder.
• Someone takes your leased radon monitor from where you left it overnight on the inspection site.
• While taking off, you lose control of your drone and crash it to the ground, damaging the wings and internal computer.

Many equipment insurance policies cover physical loss or damage caused by perils, such as falling objects, fire, lightening, sink hole collapse, vandalism, vehicles, and water damage. To see what perils are and are not covered, review the Conditions and Definitions sections of your inland marine policy.

How does equipment coverage work?
Typically, equipment coverage is subject to your "schedule of coverages," which describes the property you'd like the insurance company to insure. Most insurance companies require that inspectors provide property descriptions?including the make, model, and serial number?for any items worth more than a certain amount.

Here at InspectorPro, we require property descriptions for any items worth $500 or more. For any items worth less than $500, InspectorPro insureds may still cover the property as "miscellaneous tools" without providing make, model, and serial information for each tool. The only caveat is that miscellaneous tools cannot exceed $2,500 in total value.

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[Jim Katen]

Thanks, Stephanie. 

Many years ago, my tool bag was stolen and my inland marine coverage covered the loss. Several months later, I discovered some of the items in a pawn shop, where, after a brief discussion with the proprietor, they were returned to me. I called my insurance agent to ask what to do, and she told me, basically, to hang up the phone and never mention it again. 

Just out of curiosity, what is the *proper* course of action in such a situation? 

[InspectorPro Insurance]

20 hours ago, Jim Katen said:

Thanks, Stephanie. 

Many years ago, my tool bag was stolen and my inland marine coverage covered the loss. Several months later, I discovered some of the items in a pawn shop, where, after a brief discussion with the proprietor, they were returned to me. I called my insurance agent to ask what to do, and she told me, basically, to hang up the phone and never mention it again. 

Just out of curiosity, what is the *proper* course of action in such a situation? 

Great question, @Jim Katen. While finding the property after the fact is rare, it does happen, so most equipment coverage insurance policies have a section dedicated on what to do when you recover the lost or damaged property. You'd have to check your specific policy to be sure of the proper course of action according to your carrier. But, to get an idea, here's what it says about recoveries in our inland marine policy:

Quote

Recoveries -- If "we" pay "you" for the loss and lost or damaged property is recovered, or payment is made by those responsible for the loss, the following provisions apply:

a.   "you" must notify "us" promptly if "you" recover property or receive payment;

b.   "we" must notify "you" promptly if "we" recover property or receive payment;

c.   any recovery expenses incurred by either are reimbursed first;

d.   "you" may keep the recovered property but "you" must refund to "us" the amount of the claim paid, or any lesser amount to which "we" agree; and

e.   if the claim paid is less than the agreed loss due to a deductible or other limiting "terms" of this policy, any recovery will be pro rated between "you" and "us" based on "our" respective interest in the loss.

So, technically, according the most equipment coverage policies, your recovered equipment and tools would be the property of the insurance company, and they should have the final say if they would like it back or if it's not worth the value to have you return it to them.

It probably wasn't your insurance agent's place to dismiss it and advise you not to bring it up again; it should have been the insurance carrier and their claims adjusters' call. Additionally, if you're still working with that agent, you may want to consider how her counsel in this situation could reflect the quality of future counsel in the future and act accordingly.

Hope that's helpful. If you have a current equipment coverage policy and are curious about its stance on recoveries, I'd happy to look it over for you, too.

[Jim Katen]

Thanks. This was in the '90s and the agency has changed ownership twice since then. None of the same people are working there. 

[InspectorPro Insurance]

14 hours ago, Jim Katen said:

Thanks. This was in the '90s and the agency has changed ownership twice since then. None of the same people are working there. 

Info for the future then. Thanks for asking the question!