Myth:If somebody rents equipment from me, and never returns it, my insurance company considers that to be “theft.”
Fact:Equipment rented and not returned is considered “Illegal Conversion” and may not be covered by your rental house policy.
Recently, I attended the Theft Summit, hosted by PERG (Production Equipment Rental Group) in Burbank. Attending with me were detectives from law enforcement agencies such as LAPD, Burbank PD, and NYPD, and representatives from many major Los Angeles area rental houses. We all came together to discuss one major issue: Thefts in the entertainment industry.
Theft is a particularly large issue in the entertainment equipment industry. Much of the equipment is valuable and small, which makes it easy to transport and hide. Consequently, a large amount of entertainment equipment is stolen each year. However, 23% of the “thefts” that occur in the industry are not actually “thefts” at all. They are “Illegal Conversion” claims.
What is the Difference Between Illegal Conversion and Theft?
The difference between “Illegal Conversion” and “theft” lies simply in how the thief obtained the equipment in the first place.
For instance, a rental house knowingly gives their equipment to potential rental customers. If the customer simply does not return the rented items, then it becomes an illegal conversion claim.
In a theft situation, burglars or robbers take items without permission. Insurance policies cover theft because negligence does not exist, but policies exclude illegal conversion claims because you freely gave the equipment to the customer at the time of rental. None of it was ever taken against your will.
Protecting Yourself Against Illegal Conversion
So what can you do as a rental house? Well, PERG has a list of questions and requirements you should demand of all potential renters. You can see where they addressed this on their website at http://esta.org/PERG/index.html.
Call the agent listed on the renter’s certificate to verify their insurance is valid. I get calls all the time from rental houses making sure their customer’s insurance is valid and asking other questions they may have about their renter.
If you work at a rental house, it is your livelihood. Don’t be shy about asking questions of the renter and their agent. More importantly, you should ask your agent to add Illegal Conversion coverage to your policy.
If you want to refer your renters to a trusted insurance broker for their rental insurance, or if you want me to get you a quote for your rental house that includes Illegal Conversion, feel free to give me a call!