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Understanding Dry Hire Arrangements and Cover

When it comes to insuring your mobile plant and equipment, all the terminology and jargon can make it seem like a minefield. 

Our National Product Manager, David Kidd, simplifies the process and policy wordings by sharing his expertise of dry hire arrangements to help you understand what’s involved in keeping your equipment covered correctly. 

There are three main types of plant and equipment uses in relation to our hire and rental insurance cover. These include: 

  • Owner operated
  • Dry hire: Hired to a third party without an operator
  • Wet hire: Hired to a third party with an operator (incl. contracted operators on behalf of the insured)

Yellow Cover’s policy is designed for the dry hire mobile plant industry and has some key components you should familiarize yourself with so can be confident that your business is covered. 

“Dry hire is when a company hires out their equipment to an operational business for a fee and the hirer’s own employees are responsible for operating the equipment,” says David. 

There is two coverage options available: 

Standard Dry Hire

We will cover an insured item whilst on dry hire to a third party without an operator.

In the event of loss/damage whilst on dry hire we will pay the insured for any loss or damage but will recover that cost against the hirer instead. Conditions apply.

Extended Dry Hire

Also known as a ‘Damage Waiver’ is the same as above except we will not recover the cost for loss or damage against the hirer as well. Conditions apply.

“Some businesses, particularly smaller ones, find this model the most economical way to operate as opposed to owning their own equipment.

 “Understanding the terms and conditions on this type of arrangement can seem meticulous but there are some key things to consider,” says David. 

A hire arrangement is the most important part of the dry hire process and must be signed by both parties as it sets out the conditions and who is responsible for what. It outlines:

  • Necessary training and how to operate the equipment 
  • Conditions of safe keeping, maintenance, and loss minimisation
  • Hirer’s responsible for loss or damage unless write back via damage waiver
  • Insurance clause sets out who is to insure hired item and if CoC required 
  • Indemnity/hold harmless clause releases the owner from any vicarious liabilities while in hirers possession and operating of the equipment

“We will automatically cover an insured item whilst on dry hire to a third party provided there is a hire agreement in place and the agreement protects our rights of subrogation against the hirer. Meaning that there is no damage waiver included in the agreement,” notes David. 

Put simply, subrogation refers to our legal right to pursue the third party that caused damage or loss to your plant or equipment. This is done so we can recover the amount of the claim that was paid to you. 

However, some hire agreements include a Damage Waiver, which is a write back in the agreement taken out by the third party for a fee. 

“This acts like an escape clause of sorts and allows the third party to absolve their responsibility for any loss or damage while the equipment is in their possession,” adds David.

This ultimately prevents us as an insurer from pursuing the third party to cover the costs of the damage and/or loss to your items. 

“A common problem that occurs when it comes to claims is the insured not having extended dry hire clause noted in their policy. This means a claim can be denied or reduced due to our right of subrogation being limited,” says David. 

To account for this, extended dry hire must be added to your standard policy. 

Keep your mobile plant and equipment covered with a tailored Yellow Cover policy. Have questions? You can contact our experts today on 1800 684 669 or speak to your local NTI representative.