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NOVEMBER 2013 issue of
Rental Management

Risk Management: The importance of maintenance records
10/31/2013

Document who, what, when and where the work was done

 

If there was any doubt about the critical role equipment maintenance records play in protecting rental businesses from liability claims, Chris Schmidt, senior casualty adjustor for York Risk Services, Parsippany, N.J. — an independent third-party claims administrator for ARA Insurance — can dispel them.

Schmidt, located in Middleburg Heights, Ohio, recalls a case he handled several years ago where a contractor, hired to flush out a large commercial holding tank, had rented a submersible commercial hydraulic pump. During the process of pumping out the tank, the O-ring blew, leaking out the vegetable oil used to lubricate the pump.

“The tank owners were holding the contractor responsible and the contractor turned around and tried to pass this off to the rental operator saying the O-ring was old and the equipment wasn’t maintained,” Schmidt says.

“However, the rental operator was able to provide all the records for the pump,” he says. “Based on these records, we saw the seal had been replaced two weeks prior to the [incident] and in this timeframe, the pump had only been rented out once and used for just one hour.”

The verdict? The failure was caused by operator error. The contractor hadn’t properly idled down the machine and the resultant pressure blew out the O-ring.

Schmidt says claims primarily arise because of operator error or equipment misuse. However, since the plaintiff’s attorney is unlikely to admit to this, the assertion that maintenance was an issue is often the primary line of attack, particularly since most attorneys are  generally unwilling to face off against an equipment manufacturer.

“That’s too much of an uphill battle,” Schmidt explains. “Instead, they go up against the rental operator, pursuing a negligent-maintenance theory of liability.”

The rental operator in Schmidt’s case did everything right. The service was documented and the records were detailed and retained.
As an example of what difficulties the absence of detailed records can bring, consider a case that William Sicheri, Esq., an attorney with Callahan & Fusco, is currently dealing with. The law firm has offices in New Jersey, New York, Pennsylvania and Florida, and provides defense to a wide variety of clients on a broad spectrum of litigation issues.

His client has two machines he rented out. One machine had warning labels that were legible and the other where they were too faded to read. The plaintiff in this case, who suffered a significant injury, claims that the machine was the cause of the incident and that it lacked legible and proper warning labels.

“We can’t use as a defense that the machine in question was fine and that it had all the labels, because no serial numbers were written down on any document, not in the maintenance records or in the rental contract, so we can’t tell which one was rented out or even serviced,” says Sicheri.

To avoid these errors and get a better handle on maintenance records management, Schmidt and Sicheri suggest:

  • Making sure records are comprehensive. If doing repairs/service in the field, capture the customer name, the complaint (be detailed), the time the complaint was made, when the technician arrived at the job site and when the repair was made, says Sicheri. In addition, the technician should test the machine and document that it operated fully. Also have the customer sign that the repair was completed to his satisfaction.
  • Documenting in-house repairs/servicing just as thoroughly. The records also should show evidence of routine inspections, documenting that the equipment was checked before and after rental, says Schmidt. Be sure to record serial or unit numbers.
  • Follow the manufacturer’s recommended schedule. This then reflects and proves the equipment was maintained in accordance to their specifications, says Schmidt.

Record retention varies by state. Generally, says Sicheri, it’s safe to keep them five years after the machine is no longer in use. He also suggests scanning the documents and having backup copies at a different site. Schmidt advises looking at the statute of limitations with the longest time period — in many cases this will be the breach of contract statute — and keeping the records for this length past when the machine is no longer used.

Don’t underestimate the importance of good maintenance records management. Although, according to Schmidt, the claimant’s attorney bears the burden of proof, missing maintenance records or those with information gaps makes the rental operator look careless, planting the seeds of doubt. “This can also force employees to take the witness stand and this is never good,” he says.

Maura Paternoster is risk manager for ARA Insurance in Kansas City, Mo. For more information, call 800-821-6580 or visit  ARAinsure.com.

 

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