Inside This Article:
- Several pieces of heavy construction equipment were severely damaged in a recent vandalism incident at a California housing development.
- Damage to heavy equipment can create major financial and operational challenges for contractors, including project delays and replacement equipment costs.
- Contractors should review their Inland Marine Insurance and related coverages to ensure owned, leased, and borrowed equipment is adequately protected.
- Implementing security measures and regularly reviewing insurance policy equipment values, limits, and endorsements can help construction firms reduce their risks.
When construction crews arrived at a California housing development site one morning in May, they encountered the devastating work of overnight vandals, including broken windows, mirrors, headlights, and control systems in their equipment — even an attempt by the criminals to hotwire a water truck. The incident created delays in this project in the Rio Vista neighborhood of Cathedral City and forced the contractor to make costly repairs and bring in rental equipment to keep the project on track.
The company’s chief operating officer told KESQ News Channel 3 that he had “never had this much damage at one time before” and that the incident was unlike anything he had seen in the construction industry.
“It definitely was surprising to me, especially in terms of it being vandalism,” said Josh Schmidt, Broker, Commercial Insurance, Burns & Wilcox, Brokerage Division, San Francisco, California. “That is something that, at least in my experience in the decade or more that I have been in insurance, I have not seen from a claim standpoint.”
While police are still investigating and the construction firm is offering a reward for information leading to the suspects, the incident highlights the significant impact equipment losses can have on construction operations. These losses can be covered by Construction Insurance policies such as Inland Marine Insurance.
“Inland Marine Insurance is a specialized type of property insurance designed to protect business assets while they are in transit or stored at temporary locations,” said Angela Gold, Underwriter, Commercial Insurance, Burns & Wilcox, Ft. Lauderdale, Florida. “This was a senseless, unfortunate loss; however, it is a good example of why it is so important to have adequate insurance coverage in place.”
Inland Marine Insurance is a specialized type of property insurance designed to protect business assets while they are in transit or stored at temporary locations.
Equipment damage can disrupt operations
Damage to a single piece of equipment can interrupt operations and create expenses that extend beyond repairs, including rental costs and scheduling delays. In addition to repairing damage caused by the Cathedral City vandalism incident, the construction firm reportedly needed to rent replacement equipment to keep work on the housing project moving. Heavy equipment theft is another major driver of construction losses and costs the industry an estimated $300 million to $1 billion annually, according to the National Equipment Register.
Although vandalism may be less common than other causes of equipment loss, Schmidt said damage to construction equipment is not unusual. When equipment is damaged, losses can quickly reach hundreds of thousands of dollars or more.
“I have a policy where there was a $300,000 loss due to fire damage on one piece of equipment,” he said. “You can absolutely see these getting into the hundreds of thousands of dollars, and if it really is a significant loss, you can see it going up into millions for sure.”
You can absolutely see [equipment losses] getting into the hundreds of thousands of dollars, and if it really is a significant loss, you can see it going up into millions for sure.
Gold said contractors should review their Inland Marine Insurance policies closely, as most insurance carriers require certain safety measures to be in place for coverage to apply in the event of a loss.
“Business interruption, theft, and vandalism are a few examples of add-on coverages available, usually for an additional premium,” Gold explained. “You may think vandalism coverage is automatically included, for example, but it may be excluded unless it is specifically requested. Be sure to review your coverages, limits, and forms carefully.”
You may think vandalism coverage is automatically included, for example, but it may be excluded unless it is specifically requested. Be sure to review your coverages, limits, and forms carefully.
Insurance coverage should match job site risks
Earlier this year, vandalism at an A&W Construction job site in Chesapeake, Virginia, caused almost $500,000 worth of damage after multiple pieces of heavy equipment were vandalized, WAVY News reported in May. In August 2024, unknown individuals gained access to a construction site in Kitsap County, Washington, and used heavy equipment to cause “extensive destruction” that was expected to cost millions of dollars to repair.
Construction companies may also face exposures from fire, wind, earthquakes, and accidental damage during a project. When purchasing Inland Marine Insurance, business owners should know that coverage can be tailored to address the specific risks associated with their operations. “Coverage for almost any type of exposure is typically available,” Schmidt said.
While contractors may assume that their Commercial General Liability (CGL) Insurance could respond to equipment-related losses, this is typically not the case, he added. “The primary coverage for construction is the CGL policy, but more often than not it would not cover this type of claim,” he said.
When contractors rely on leased, rented, or borrowed equipment to complete projects, they should ensure this equipment will be covered by their Inland Marine Insurance. Coverage for rented and borrowed equipment is usually available as an add-on to these policies, Gold said.
Schmidt said he recently placed specialized Inland Marine coverage for a contractor using approximately $3 million in borrowed equipment, and Gold said she recently placed coverage for an underground cable contractor with nearly $1 million in scheduled contractors equipment, including $100,000 in coverage for rented, leased, and borrowed equipment.
“The question should absolutely be brought up: Do you have coverage for this in case damage occurs, whether it is vandalism or something else?” Schmidt said.
The question should absolutely be brought up: Do you have coverage for this in case damage occurs, whether it is vandalism or something else?
Review exposures before a loss occurs
Equipment values have increased significantly in recent years, making regular policy reviews increasingly important for contractors relying on high-value equipment. Contractors should periodically review equipment schedules and policy limits to ensure coverage keeps pace with the value of their equipment, Schmidt said.
“One of the most important things to look for is ensuring you have the necessary limits to cover what happens if you have a complete loss,” Schmidt said. “You want to make sure you have enough coverage to protect yourself from needing to pay a large sum of money out of your own pocket.”
Gold said contractors should also take practical steps to help protect equipment.
“It is important to have safety measures in place; for example a fenced, locked, and secured area, with equipment under adequate lighting,” Gold said. “From an insurance carrier’s perspective, that could be a make or break if they are going to pay out on a claim. It is the insured’s responsibility to take proper measures to protect the equipment.”
