Managing heavy equipment claims

Technology boosts recovery of stolen property

By Dave Willis

As big and cumbersome as they appear to the average layperson, it would be logical to expect onsite collisions between pieces of heavy construction equipment to be a fairly common occurrence. That’s not the case, according to Ed Scott, claim consulting director for CNA. “On job sites, it’s rare for two pieces of equipment to collide,” he explains. That’s because most operators have a clear focus on safety and because they follow regulations on how equipment is to be used.

More common, Scott says, are colli­sions that involve the motoring public. “If a contractor is working, for instance, on a roadway, there is a great exposure from public traffic—cars and trucks on the highway.” Too often, drivers become impatient around a construc­tion zone and don’t follow signage and flagger directions. “What happens is they’ll run into the contractor’s equipment,” he says. Rarely do equipment operators run into private vehicles, again because of safety practices and regulatory compliance.

Sometimes damage occurs from equipment being overturned. In some cases, the contractor’s equipment operators are involved. Often, though, such accidents occur in conjunction with a theft or unauthorized operation. “When stolen equipment is recovered, quite often there’s damage to it,” Scott notes. “Most of the damaged equipment we get back has been misused. Often, it has either been run hot or they’ve run the engine low on oil, which results in engine damage.”

Stolen equipment generally doesn’t travel far. “Sometimes it’s in the next state,” Scott explains. “But that’s pretty risky.” Penalties are high for transporting stolen equipment across state lines. “Years ago, it was fairly common for equipment to leave the state and often end up in Mexico or other countries,” he notes. “Today, equipment stays pretty close to where it was stolen.”

Some equipment ends up out on joy rides. “That happens with some of the smaller pieces,” Scott says. “We don’t see an awful lot of that, but it does happen.” More commonly, thieves take equipment to dismantle it for parts. In some instances, it’s stolen to order. “If someone wants a certain piece of equipment, they’ll get the word out on the street and some­one will get it for them,” he adds.

The most important part of settling heavy equipment claims is timeliness. “We need to get a qualified appraiser out to inspect the equipment as quickly as possible, so it can be put back into service,” Scott explains. “Because the equip­ment is or was in use, doing without it for an extended period of time could affect our insured’s cost on the construction project.”

Another challenge, he notes, is meeting safety requirements and specs. “For instance, cranes have stringent engineering specifica­tions,” Scott says. “The cost of meeting these could be great. It may require replacing some parts that really don’t appear to be damaged but, because of safety reasons, they still need to be repaired or replaced to make sure the equipment operates properly.”

Technology is helping the claims adjusting process, especially in the area of recovery. “Data from a stolen piece of equipment is entered into a database,” Scott explains. “When repair shops take in a piece of equipment, they run a query against the database to see if the item is on the list.” This is a good line of defense, because stolen equipment is often damaged—usually because it’s not maintained or operated properly.

Several agencies track information on stolen equipment, including data on claim payments. “We notify local police agencies when we make a claim payment,” Scott says. “This gives them information they can use to identify equipment if it turns up. From time to time, that pays off. Recently we got a call from law enforcement authorities in Louisiana on a piece of equipment stolen eight or nine years ago. We didn’t have a file anymore, but we were able to recreate enough information to recover that equipment.”

Technology is aiding the recovery of stolen equipment in other ways. A theft ring recently was broken up in Georgia. “The tip-off was a LoJack device installed on the equipment that, when activated after a theft, sends out a signal,” Scott explains. “Using helicopters, police can monitor the beacon. They were able to follow it to a site where several pieces of stolen equipment were found, some of which were being dismantled to sell for parts.”

A key challenge facing the construction equipment appraisal business is too few qualified personnel. “What qualifies people is experience, knowledge and longevity in the business,” Scott notes. “Qualified heavy equipment experts say it’s hard to interest general adjusters in specializing, in large part because of the time and work required in developing the specialty.”

While agent and broker involvement in claims is generally modest, knowing a little about theft patterns may enable them to help reduce losses. “Most heavy equipment thefts occur on the weekend, when job sites are shut down,” Scott explains. “Police have certain indicators or red flags that they watch for.

“For instance,” he says, “if they see a piece of equipment being transported on weekends without a company name on the truck or the equipment, they’ll stop and inspect it. It’s unusual for such equipment to be unidentified.” Construction companies do not often work—or move equipment—on weekends.

Armed with this knowledge, agents and brokers can do more than write heavy construction equipment business. They can be extra “weekend eyes and ears” for the law enforcement and heavy equipment claims community.

The author
Dave Willis is a New Hampshire-based freelance insurance writer and regular Rough Notes magazine contributor.