Spotlight on Insurance: Minimizing the Risk of Borrowed Equipment and Staff

November 2, 2013 No Comments

“Hey buddy, may I borrow your ride?”

How familiar is that statement? How often do you as an amusement rental operator go to one of your friendly competitors and borrow or sub-contract a piece of equipment for an event? Or better yet, sub-contract out that special “Jack Sparrow” character/entertainer for a child’s party? If you are at all like your colleagues in our industry, you should find yourself in this situation on a fairly regular basis. The question of the day is “How does this affect my company’s liability and insurance?”

Picture this scenario: You have a large party booked for the weekend and the customer demands an obstacle course. Unfortunately, you don’t have one in your inventory, but your good friend down the street does, so you work out a handshake deal and borrow his unit. Fast forward to the party, where little Johnny catches his ankle on a small tear in the unit and sustains a broken ankle. Little Johnny’s parents decide to pursue a claim. Whose insurance company is going to pay for this, yours or your buddy’s? Well, in the absence of proper contracts and documentation, the answer is most likely yours, which could ultimately impact your rates and insurability.

So, how do you avoid this situation? It’s easy, by practicing a pretty simple and basic Risk Transfer technique that has been used for years in the construction and service industries. The first step is to have a standardized sub-contractor agreement (contract) that you use for all sub-contracting situations. This would include catering, entertainers, characters or equipment transactions. The contract should clearly spell out the responsibility of the sub-contractor to provide evidence of insurance with limits that are equal to or greater than your own policy limits. It should require them to add your company as an Additional Insured to their policy as it relates to the sub-contractor agreement. Lastly, it should also include requirements that your sub-contractors have a protocol for doing background checks on any entertainer, clown or character that they provide you, as well as equipment maintenance.

While this may seem like a bit of extra paperwork, it truly can save you significant headaches and money down the road. Especially from an insurance perspective, if you were to provide our insurance program with proof of this system of Risk Transfer when utilizing sub-contractors, the rate for those situations would be approximately one quarter 25 percent the standard rate for the class. That alone could be huge savings and a big addition to your bottom line if you sub-contract out a lot of equipment or entertainers.

The bottom line is that it is OK to use other people’s equipment or personnel, just make sure you have a well-written agreement in place, and that you are provided with appropriate evidence of insurance (Certificates of Insurance) naming your company as an Additional Insured.

If you have any questions about this topic or have any other safety, insurance or risk management questions related to the Amusement Rental Industry, please email them to Drew@insureair.com.

Remember, inflatables don’t hurt people, poor operations hurt people!

(Drew Tewksbury is the program manager for Amusement Insurance Resources. A nationally recognized speaker on safety and risk management, he is also an active member of IAAPA’s Safe Inflatable Operators Training Organization, Responsible Operators Amusement Rentals (ROAR) and the ASTM International.  Additionally a certified Amusement Ride Inspector through the National Association of Amusement Ride Safety Officers, he holds inspection licenses in several states and can also be reached at 216-658-7844.)

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