Insuring Success: Even in States Without Requirements, Rental Businesses Bank on Insurance

June 1, 2010 No Comments

The proper insurance can be as much of a selling point for companies that rent inflatables and party equipment as the brightly colored bouncers and fine china they cart to events. That’s what Robert De Los Santos discovered after he started Sky High Party Rentals in Houston, Texas, from his parents’ backyard shortly before his freshman year at the University of Houston in 2006.  After six months, he learned he needed insurance if he wanted to land contracts with schools, churches and town fairs. “They don’t want to work with a company that’s not insured,” said De Los Santos.  “Then I realized, ‘Hey, if something went wrong, it’s probably a good idea to have $2 million liability insurance.” These days, De Los Santos uses his insurance coverage as a marketing tool.  On a busy weekend, his workers will be setting up equipment from his Houston-area warehouse at 40 to 50 events.
De Los Santos said he looks for an insurance company with specific knowledge of the industry that also can provide safety training for his workers, particularly through online videos.  His present carrier also offers the ability to add “additional insureds” over the Internet, a convenience for the event hosts.
Like others in the industry, De Los Santos carries a variety of moonwalks, obstacle courses, slides and sports interactives where kids can do everything from jump around in fanciful castles to box with inflatable gloves.
Properly anchoring inflatables and making sure event-goers understand how to use the funhouses are key to preventing accidents, business owners said.   While some states, including Texas, regulate inflatables as amusement rides and require insurance, other states do not have any rules.
Dawn Legge, president and CEO of Amberg Entertainment in Aurora, Colo., said she maintains liability insurance even though Colorado does not require her to do so.
“I feel like I would be doing my customers a disservice by renting them equipment and not giving them the protection they’re paying for and they deserve,” she said.  “I wouldn’t get on a roller coaster that was not insured.”
Legge advises business owners to educate themselves about insurance and then shop directly for a company that knows the industry and an agent willing to function as “a member of your professional team.”
“It’s no different than an attorney or an accountant,” she said.  “You want an insurance agent who’s going to be responsive to you.”
Jim Cox Jr., president of Backyard Inflatables in Clarksburg, Md., said he’s seen premiums fluctuate along with insurance cycles in the 11 years he’s been renting inflatables.  
Premiums can range from $2,000 to $3,000 a year to more than $60,000, depending on the types of equipment and the number of events, said Cox, referring to national industry trends.   
“We look for A-rated insurance companies to make sure they’ve been around for a while,” said Cox, who also runs an indoor facility. “Our broker pretty much shops for us. “
He also advised business owners to stick with insurers in their home states since rules vary.  Maryland requires insurance.
“If you just shop yourself and find someone out of state, they might not have the same rules and regulations as the state you’re in,” he said.
Joe Sinagra, owner of Bounce Around Vermont in St. Albans, said insurance premiums add to the expense of operating an inflatables rental business in a New England climate where the prime outdoor fun season is about 15 weeks.  His payments range from $2,000 to $3,000 a year.
Sinagra said he carries the insurance even though he is not required to do so.  “It’s a selling point, frankly,” he said, noting many of his customers are throwing parties in their own backyards and could be held liable if an accident occurs.
“Children should be covered if something should happen,” he added. “It’s only fair their medical expenses should be covered.”
In California, where sunny weather makes for a lengthy outdoor party season, the prospect of making money by renting out inflatables draws operators who do not buy commercial-grade equipment or carry insurance, said Greg Knight, owner of San Diego Kids’ Party Rentals.
“Anyone can buy a few bounce houses and stuff them in their garage and rent them when they can,” he said. “But every park, every school, every church, they all need a copy of the insurance and they all get listed as what’s known as an ‘added insured.’ ”
“It not only gives us the peace of mind, it also comes across as a lot more professional,” Knight said. “Our costs are a bit higher but the people also know they’re getting something from a real company. It also helps differentiate us.”
Knight, who obtains his coverage through a broker, said his insurer audits his operations to make sure he is up to date on safety requirements and provides help with forms in advance.
Insurance is a business necessity even if the events a company is supplying are more sedate than a 6-year-old’s birthday bash.
“It is becoming more prevalent with your clients for them to ask for a certificate of insurance,” said Kevin Barrera, general manager of The Aries Company in St. Louis, Mo., which rents out fine china, chandeliers, dance floors, and sound systems, mostly for corporate events.  
He said he considers an insurance company’s rating and reputation when choosing a provider not only because of the quality of the service but also to enhance Aries’ image with potential customers.
Barrera, who hires a broker to line up coverage, said business owners who shop on their own should be careful to choose a provider who understands their business “so you have the correct types of coverage and you’re not overspending.”
“It makes sense for the individual shopping for the insurance to be very clear and open to the broker or the insurance company about the products you’re renting,” he said.
Carla S. Fischer, who has operated Fischer Kiddie Rides from her base in Sainte Genevieve, Mo., for nine years, checks out an insurer’s reputation with other operators before signing a contract. She also evaluates policies based on exclusions from coverage and on the quality of service provided.
“Every winter I revisit the issue,” she said. -

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