Inspections can help uncover hazards and reduce risk
Some rental operators — perhaps you’re one of them — find the prospect of undergoing a loss control survey an annoying interruption or even an intrusion. This risk-assessment inspection, however, often triggered by a new insurance application or a renewal, doesn’t solely benefit the insurance company, says Harvey Felzke, underwriting manager for ARA Insurance, Kansas City, Mo.
Although Felzke says the insurance company does use the data gathered by the inspection company to confirm or supplement the application information provided by the customer, the surveys also work to the business owner’s advantage.
“We hope that the technical expertise of the loss control representative can allow them to identify areas where we can help our customers reduce the potential for loss,” Felzke explains.
Losses can cost you money in the form of deductibles and higher insurance premiums, says Maura Paternoster, risk manager for ARA Insurance. However, these are just the direct costs. When you consider the indirect costs — such as the time spent collecting information
for claims, loss of business while repairs are being made, overtime pay to employees and so on — the hit to your business can be much higher, she says.
“Some hazards encountered during surveys relate to potential damage that is not covered by insurance, such as deterioration to a roof that will allow a leak to slowly damage the interior of the building,” Paternoster says. “Also, some hazards uncovered during loss control surveys relate to employee safety. It’s better that we find them and help the insured mitigate the risks than for OSHA [Occupational Safety and Health Administration] to find them during an inspection or after an injury — especially since OSHA assesses fines.”
Ed Wadley, owner of Taylor’s Rental Equipment Co., Fort Worth, Texas, says he values the objective second set of eyes these inspections provide.
“We have a pretty good-sized location,” says Wadley, whose operation sprawls over almost six acres and includes three large buildings. “I appreciate that they come out and pay attention to the details. It’s easy to overlook the small things that could present a hazard, like a grinder without a shield or a fire extinguisher not mounted on a wall.”
If hazards are discovered during a loss control inspection, recommendations are made to help reduce or eliminate them. By far the most common recommendation ARA Insurance passes along to customers is related to fire extinguishers as they are either not in the building at all or they don’t have current inspection tags attached.
Having clearly marked exit signs, properly storing compressed-gas cylinders and general housekeeping — for example, keeping aisles and work areas clear of storage and clutter — are other frequent recommendations.
What can you expect during a loss control survey? After making an appointment, most inspections begin with a sit-down interview where the inspector asks some general questions — such as your years of operation, payroll number of employees, prior losses and employment practices — used to write a description of the business, says Matt DeBerg, account manager/business development for Overland Solutions, Overland Park, Kan., a firm specializing in conducting commercial and residential surveys nationwide.
“This interview will also detail specific questions regarding the rental program,” DeBerg says. “Subjects include contract information, equipment inspections, operating manuals, what is rented and fleet management.”
Afterwards, the inspector conducts a physical tour of the operation, noting any liability concerns, gathering information on details of the building and its updates, along with common hazards, fire protection and crime data, says DeBerg.
“Our inspectors use the NFPA [National Fire Protection Association] most often to guide them in making recommendations,” he says. “One of the largest exposures to a rental operation is the preservation of the property they rent. The inspector can use NFPA to help make sure that the building where the equipment is stored isn’t on the verge of incurring a loss.”
OSHA, International Building Code (IBC) and International Fire Code (IFC) are among the other codes guiding recommendations.
Because liability is a concern when renting equipment to the public, inspectors also review maintenance, repair procedures, delivery/setup and operation instructions as all play an essential role in limiting one’s liability, says DeBerg.
While an inspection isn’t a requirement for insurance coverage, rental operators should consider going through one with a qualified
loss control representative, says Felzke.
“The insured may be unaware of unsafe conditions,” he explains. “It can be an eye-opening experience that will allow the insured
to better manage risk,” he says.
Mary Ann Gormly, CERP, is risk management coordinator for ARA Insurance, Kansas City, Mo. For more information, call 800-821-6580
or visit ARAinsure.com.