In this article, we are going to discuss inland marine insurance policies, including equipment valuation, coverages and options, focusing primarily on insuring aerial lifts and cranes.
Many TCI Magazine readers are well versed in what inland marine coverage is and how it works, but let’s start with a quick background and explanation of the coverage.
Inland marine insurance is coverage for any of your business equipment, or equipment owned by others that is in your care, that travels with you into the field on work sites. This might include chain saws, chippers, grinders, skid steers, loaders, cranes and lifts. It excludes autos and trucks.
As stated above, for this article, we’ll focus on insuring cranes and lifts.
Valuation
When establishing the value you want to insure a crane or lift for on your inland marine policy, take some time and do some research. With the economy and inflation being what it is today, I would advise against insuring any equipment for what you actually paid for it when it was purchased. Equipment values for both new and used equipment have increased dramatically over the past several years. Valuations also can vary geographically. Supply-chain issues, parts availability, distance to qualified service dealers and so on can all factor into the cost to replace or repair a piece of equipment.
Replacement Cost vs. Actual Cash Value (ACV) coverage
Replacement Cost coverage, whenever available, is always preferable. Equipment insured for Actual Cash Value will only receive a settlement from the insurance company for a depreciated value. Many inland marine policies will offer the insured Replacement Cost coverage for equipment that is five years old or less. Whether you have Replacement Cost coverage or Actual Cash Value coverage, always insure the equipment for its full value. You’ll see why below.
Coinsurance clauses
Uh-oh! Another insurance word. Coinsurance. What does that mean? Most inland marine policies contain coinsurance clauses.
Let’s say I have a lift I got for a great price from a friend of mine who was going out of business. He sold me his lift for a sweet-deal price of $75,000. In actuality, though, this lift has a true sale value of $100,000.
I decide to value the lift on my inland marine policy for what I paid for it, $75,000. Shortly thereafter, I have a little mishap on one of my work sites and the lift takes a tumble down an embankment. Fortunately, nobody is injured or killed, but my new lift is a total loss.
I go to my inland marine insurance and file my claim for $75,000, minus the $1,000 deductible on the policy. I’m expecting a settlement of $74,000. The insurance company comes back and only offers me $49,000. Why? Because at the time of the loss, the lift was worth $100,000 (market value) and I only had it insured for $75,000.
I have just been given a loss settlement that includes a “coinsurance penalty,” because I did not insure my lift for its full value, in addition to the $1,000 deductible!
Loss of Income coverage
Let’s talk about cranes. Have you ever asked yourself how much revenue your crane generates for your company on a weekly basis? I ask this question of many owners with heavy crane use, and the crane-income numbers can be staggering. Some owners have told me their crane alone generates as much as $25,000 weekly revenue. That’s more than $100,000 a month, and $1.3 million annually.
So, what if that crane has an accident and, due to damage sustained, it is taken out of service for a lengthy period? This is the basis of a Loss of Income insurance claim.
If the accident is caused by a covered peril under one’s inland marine policy, and a sufficient amount of Loss of Income coverage is included in the inland marine policy coverage, then the owner might be able to defray a sizable portion of income lost due to the temporary loss of use of the crane.
Loss of Income coverage is usually an option made available under many inland marine policies, but one must inquire about its availability and cost.
Rental Reimbursement coverage
Rental Reimbursement is an optional coverage available under many inland marine policies, so inquire about its availability and cost.
Let’s move things along from the crane-loss situation above when I discussed Loss of Income coverage. So the crane is damaged by a covered peril under your inland marine policy and is out of service for an extended time period. It’s obvious that one of two things will happen in this situation. You will either rent a crane from an equipment rental company or you will line up another company as a subcontractor. Either of these options will enable your company to stay on schedule to meet the obligations of backlog, preserve your crane-service reputation or whatever the case may be.
Crane substitution is not cheap, whether it involves equipment rental or subcontracting. These costs alone will erode a large portion of your gross crane revenue. By purchasing Rental Reimbursement coverage, you can defray large portions of rental costs in these situations.
Understand that Loss of Income and Rental Reimbursement coverage benefits will probably be coordinated by the insurer between these two different coverage options. But having these two separate coverage options in play can make a huge difference when significant crane losses occur.
Debris Removal coverage
We’ve all seen what happens when a crane falls over; usually the stick is fully extended when this happens. The cost to extract the damaged crane from the accident location can be significant. Often, the extended boom needs to be cut into several pieces by the extraction contractor to safely remove it from the site. The cost of this service can be extensive.
There is not room in this article to discuss all the collateral damages involved in accidents such as these, but make sure to ask your agent about Debris Removal coverage. I advise purchasing limits that may seem higher than you think you might need.
Weight of Load Exclusion
Oh, no! Exclusions. All insurance policies have exclusions. No insurance policy covers everything.
If the inland marine policy contains a “Weight of Load Exclusion,” the policy will very probably exclude coverage for damage to the crane when the damage is due to overturning caused by overload.
If you own, operate or rent cranes, never settle for any inland marine insurance that contains a Weight of Load Exclusion. Understanding the risks involved with arbor-related crane picks, I can tell you that such an exclusion can be extremely problematic.
Final observations
It is important to note that we are only covering some very basics here about inland marine coverage as it pertains to cranes and lifts. The examples I cited to lifts and then cranes can apply to one or the other. Like cranes, lifts also generate income. Coinsurance can apply to any piece of equipment, not just a crane or a lift.
The coverage and terms of an inland marine policy can vary greatly from one insurer to another. It is critical that you engage your insurer or insurance provider and ask questions. What coverage options are available? Are the values I am using for my equipment accurate? A little research will go a long way to make sure you have properly insured your equipment.
Rick Weden is team practice leader of the Tree Care Insurance Specialty Team at Corcoran & Havlin Insurance Group, a division of Cross Insurance and a 13-year TCIA corporate member company located in Wellesley, Massachusetts. He manages the insurance needs of many tree care operations countrywide, using a wide range of insurance companies, including ArborMax. He has presented at many TCI EXPOs, and is a member of the Massachusetts Arborists Association and of TCI Magazine’s Editorial Advisory Committee.
