Standard mobile equipment insurance was built for stationary, predictable operations, and that structure breaks down as soon as machinery starts moving between sites, storage and leasing arrangements, according to Gary Hirst (pictured), CEO of CHES Special Risk Inc.
Hirst said the gap became clear through conversations with brokers who kept running into the same limitation in the market.
"The current mobile equipment coverages seem to be very square-box," Hirst said. "They're very static."
That rigidity works fine for a narrow slice of contractors, he said, but not for the more typical, flexible operation where equipment is constantly relocating and changing configuration.
"If you've got a contractor that just digs drainage ditches all year round, that's obviously going to be great for them," Hirst said.
But contractors running more flexible operations face a different reality: a piece of specialized equipment might be contracted for a two-month job in one area, then loaded onto a transporter, moved to a new location, unloaded, partially reassembled, and put to work again on the next job.
CHES designed its coverage to follow that entire cycle under a single policy rather than treating each stage separately, Hirst said, including the periods when a piece of equipment sits unused and effectively unmonitored between jobs.
The policy is structured as all-risk, Hirst said, specifically to keep exclusions minimal across that full range of activity, including the moments of loading and unloading that traditional policies often treat as gaps in coverage.
Leasing arrangements add another layer of complexity, Hirst said, since coverage needs differ depending on whether equipment is leased with an operator or without one.
Hirst said leases generally fall into one of two categories: wet or dry. A wet lease means the insured is hiring out the equipment along with a qualified driver or operator, while a dry lease involves the equipment alone, without an operator included. He said CHES builds flexibility into its coverage to reflect either arrangement.
Bank financing introduces a separate but related concern, Hirst said, since lenders want assurance that the equipment securing a loan remains adequately protected throughout its use.
"The banks want to make sure that the asset that they basically own until the loan is paid off is adequately protected," Hirst said.
Real claims scenarios show where the ambiguity around leasing and transport responsibility tends to surface most, Hirst said, particularly when multiple parties are involved in moving a piece of equipment, and no one has clearly established who is responsible for insuring it.
"A truck has turned up with a low loader on it, and they're putting the bit of machinery onto the low loader, and for whatever reason, it topples, and it falls over," Hirst said. "Or they're driving along the road, and they have not calculated the height of the bridge, and now the item of machinery is taller than the bridge, and they ram into the bridge causing damage."
In those situations, responsibility for insurance often isn't clearly assigned in advance, Hirst said, which leaves everyone assuming someone else has it covered.
"Whatever happens, the banks don't really care. They want to make sure their asset is protected," Hirst said. "Sometimes the conversation over insurance was never had. Maybe the contractor was responsible for insurance and forgot to extend his insurance to cover the transit."
That confusion, he said, tends to surface only after damage has already occurred, when it becomes clear that no one had actually taken ownership of the coverage question.
"Everyone assumes everyone else is responsible," Hirst said. "And lo and behold, you've got some sort of accident or damage to the machine, and there is no coverage. There is a lot of that that goes on."
Demand for more adaptable coverage has grown alongside a broader shift in how equipment is being used across Canada, Hirst said, driven in part by a wave of investment in natural resources and mining.
"There is a lot more activity now in natural resources in Canada," Hirst said. "If you look at Timmins, there's new mine sites going up, which is extremely exciting for the Canadian economy. So, there is obviously an influx of new machinery."
Much of that new equipment is also more advanced and expensive than what the market has traditionally insured, Hirst said, adding further pressure on standard coverage models built around simpler machinery.
