As with any contract, understand your potential obligations when entering into an equipment lease.
While one of the leased cranes was in Sepesy’s possession, its telescopic boom was damaged, making the crane inoperable.
The damaged crane was stored for some time at Sepesy’s property before a towing company was hired to transport the damaged crane to a repair company. After loading the crane and leaving Sepesy’s yard, the tow truck driver drove into a ditch, flipping the trailer and damaging the crane’s exterior.
The crane was eventually repaired and returned to service, but only after more than 14 months of downtime, starting with the original damage to the boom.
Wilheit sued Sepesy for various claims arising from the lease agreement, including payment for rent and repairs. During the litigation, Sepesy’s insurance company paid $161,500 to Wilheit for repairs related to the crane’s telescopic boom, and the towing company (or its insurer) paid $85,900 to Wilheit for the damage sustained in the towing accident.
Unfortunately for Sepesy, its exposure did not end with repairs to the crane. At trial, the judge also found that, per the lease agreement, Sepesy was responsible for the rental payments for the entire period during which the crane was inoperable – from the time of the original damage to the boom, through the time it was stored on Sepesy’s yard and during its short tow trip, and while all of the boom and exterior repairs were being made – until the crane was finally returned to service.
The total rental bill was $269,000 ($19,000 per month for approximately 14 months). To make matters worse for Sepesy, the court also ordered it to pay Wilheit’s attorneys’ fees.
The moral of this story for contractors is clear. When you rent equipment, especially the expensive kind:
be clear on what your responsibilities are;
try to anticipate your financial exposure if things go badly (did either Wilheit or Sepesy foresee that a tow truck would land their crane in a ditch?);
run the contract by your insurance company to confirm your coverage; and
be confident that you can survive the out-of-pocket costs that could stem from your lease obligations.
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*The company names in this article are fictitious, and any similarity to actual company names is coincidental.