What is dry hire?
Dry hire is a term used to describe a situation where a company leases / lends / hires a piece of equipment to a third party for reward and without an operator.
Are you thinking of dry hiring a piece of equipment? Looking for dry hire plant and equipment insurance?
Firstly , nearly all plant and equipment insurance policies stipulate that a written hire agreement must be in place between the owner and hirer.
Often owners of equipment believe they can get away without having an agreement in place. In other words they trust the hirer to do the right thing. These circumstances often occur when the hirer is family member or friend in a short term arrangement.
However in doing so the owner is putting the insurance in jeopardy because the insurance policy states the cover will be in ‘connection’ with the terms and conditions of the agreement. So the policy may be void if the owner decides to not have a written hire agreement in place.
There are two types of dry hire insurance – subrogation and damage waiver
Subrogation is where the terms and conditions state the hirer is responsible for all loss and damage caused by the hirer whilst the equipment is in there possession.
In this circumstance if the hirer damages the machine unintentionally, the insurer will repair the machine and send a bill to the hirer.
Damage waiver is a term used to describe an all inclusive cover for the hirer and owner. In this circumstance if the hirer damages the machine unintentionally the insurer will repair the machine and no bill will be sent.
The damage waiver is a clause that must be written into the hire agreement and stipulating the hirer will be covered under the owners insurance policy.
What are the pros and cons of damage waiver and subrogation?
Under subrogation the owner is still covered but the hirer is not. This means the policy is more inexpensive (lower risk) and if a claim occurs it is less likely to affect the owners insurance history, unless the insurer is unable to recover monies from the hirer.
Under damage waiver the policy is more expensive, however the hirer is covered. If a mum and dad style hirer is leasing for a day or two they would most likely prefer cover to be included as it is near impossible for them to arrange there own insurance. Is it fair for a mum and dad style hirer to receive a $40,000 bill for unintentional damage to a machine after a one day hire?
These are the questions we should ask when organising dry hire insurance.
Besides equipment insurance, what other covers do dry hire companies typically take out?
Public liability insurance is a cover designed to protect business from litigation and third party compensation arising from there operations. The cover responds to claims of personal injury and or property damage including legal defence costs.
What are the public liability risks for dry hire businesses?
As the owner of the equipment the responsibility is for you to maintain the equipment in good working order. If you fail to maintain the equipment properly you could expose yourself to a personal injury or property damage matter say if the machine were to malfunction or catch on fire whilst in use.
Each hire agreement should include a legal waiver in respect of loss or injury. However public liability insurance will step in to provide legal defence costs if you find yourself facing a third party demand in respect of personal injury or property damage.
What are the costs in setting up an insurance policy for dry hire?
Firstly we need a hire agreement, these can range from $500 to $1000 depending on your solicitor fees.
For a $50,000 piece of equipment such as an excavator you can be looking at $600 – $1500 per annum depending on your location. In say Sydney metro you could expect to pay $1200 whilst In a regional area such as Dubbo it could be $600. The insurance premium is based on theft and incident risk and location is a big factor in this.
The above price indication does not include damage waiver cover. You could expect to pay an extra 20-30% to include cover for the hirer.
Public liability insurance for a single machine company with a turnover under $100,000 could cost $600-$1000 for a $10,000,000 public liability policy. Larger companies with higher turnovers and exposures may incur higher premiums.
Get in touch with an Insuregroup representative to discuss your insurance requirements.