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Insurance of hired plant – when it goes wrong

You hired it in. It’s gone. Now what? The most common terms of hire in use are those of the Construction Plant-hire Association and the Hire Association of Europe.

These conditions both make the hirer responsible for the costs of repair for damage to equipment, or for its value following loss. There are numerous other conditions available but they (almost) all share this feature. Equipment is hired at the risk of the hirer.

The plant owner’s insurance will have been arranged on the understanding that the hirer is responsible for any loss or damage and that the plant owner will only claim if the hirer defaults.

It might come as a surprise that many hirers seem unaware of this fact and therefore unaware of the financial responsibility they are accepting. This lack of knowledge is not confined to DIYers and the public at large; even experienced contractors and some quite large commercial undertakings have been known to make the same mistake.

The impact on the hirer

As the owner of plant being hired out, you might be forgiven for thinking these details are of little concern to you; unfortunately this is not the case.

When the hirer finds that they face a bill for which they are not insured, the common response is to look for reasons why they should not be held responsible. Very often the defence is that they were not aware of the hiring conditions and therefore they do not apply.

“A failure to properly incorporate your contract terms carries a particularly nasty sting in the tail”

In law, for the terms of any contract to be enforceable they must have been correctly incorporated into the contract. Generally a court will require proof that the customer was made aware of the conditions before the contract was agreed and that any onerous terms were clearly brought to their attention.

A failure to properly incorporate your contract terms carries a particularly nasty sting in the tail. If your insurance policy carries a condition that all hire is conducted under agreed terms of hire (such as a condition that all hire is under CPA conditions) and you have failed to incorporate these terms, then you have breached a condition of your policy.

Not only will your insurance not pay, but you also have no contractual right to recover from the responsible hirer and will be left out of pocket for the loss.

Common law uncertainty

Of course, it is possible to pursue the hirer in common law, but this is a less certain route to recovery and relies upon the hirer having been negligent in some way. It is far better to have the increased reliability of a contract term.

“There is little value in trying to recover money from a firm or individual who simply does not have the means to repay”

Furthermore, there is little value in trying to recover money from a firm or individual who simply does not have the means to repay. Very often we see claims where the plant owner has failed to check that the hirer is legitimate or has adequate and correct insurance cover.

Any loss that cannot be recovered from the hirer (or their insurance policy) will rest against the claims experience of the plant owner. This experience is a key factor in the cost of future insurance, so diligent checking and administration of hirers can play an important part in controlling your insurance overhead.

David Wagstaff is an insurance broker at Cooke & Mason

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