Legally Speaking: Responsibilities for customer safety

Question: What are my responsibilities as a rental company with respect to training my customers and offering or making sure they use personal protective equipment, such as goggles, gloves, boots, harnesses and other items?

Answer: As a general proposition, rental operators are required to act “reasonably” with respect to the equipment they rent and the customers to whom they rent it. As you might guess, what is “reasonable” can vary dramatically depending on the type of equipment being rented, what the customer intends to use it for, the customer’s own capabilities — for example, his/her knowledge and experience, licenses, training and/or certifications, or perhaps even his/her own physical or mental limitations — not to mention external factors such as weather,
soil conditions, topography, overhead hazards and surrounding activities. In other words, the rental operator’s responsibilities are going to be dictated to a considerable extent by factors over which the rental operator has little or no control.

As a threshold issue, rental operators are charged with three primary duties:

– Inspect: The duty to inspect the equipment they rent — and repair defects or take the equipment out of service if the necessary repairs cannot be made prior to renting it.

– Instruct: The duty to instruct users in its proper use, transportation, storage and perhaps maintenance, if applicable.

– Warn: The duty to warn users of potential hazards associated with using, transporting, storing and perhaps maintaining that equipment. This duty includes potential risks associated with “foreseeable” misuses of the equipment, meaning lessors can no longer simply rely on a claim that the customer “misused” equipment in an effort to avoid liability. If the lessor could reasonably have foreseen the misuse, the lessor may still be liable for failing to warn the customer not to misuse the equipment in that way.

Failure to satisfy any of the above requirements can expose rental operators to liability for negligence — failure to exercise the care that a reasonably prudent person would exercise in the same or similar circumstances. These lawsuits can yield millions of dollars in damages. Beyond the liability itself, however, which is often at least partly covered by insurance, are the undocumented costs, such as the management time and intellectual effort required to defend such cases. This can include appearing for depositions, responding to written interrogatories and requests from production made by plaintiff’s lawyers and testifying at trial. Then there is the staff time required to compile documents and other information required to defend these claims. Ultimately, these costs can far exceed the amount of the plaintiff’s original claim. Even if you win the lawsuit, you can still wind up “losing” just by having been sued in the first place.

I have been advising rental operators for many years on how to limit or avoid liability and to avoid being sued in situations like these. In doing so, I’ve compiled a list of recommendations that, when followed closely, has proven effective in helping lessors limit or shift to others their potential liability. Here is an abbreviated version of the list I’ve compiled so far:

– Ask questions, but nicely. Never assume your customer has the necessary expertise to safely and properly use a piece of equipment. Remember, most people are uncomfortable admitting they have limited or no expertise with respect to anything and might try to conceal that fact even if it places them in danger. This makes it imperative not only to ask enough questions to gain a clear understanding of the customer’s knowledge and intended use of your equipment, but also to do so in a way that doesn’t make the customer feel ignorant or foolish. If a customer lies to you, he or she potentially creates more risk.

– Satisfy your implied duties. This means you should carefully inspect each piece of equipment before each rental and take the time to properly instruct customers in the safe and proper use as well as transportation of rented equipment. Be sure to provide all safety manuals received from the manufacturer and warn customers of all reasonably foreseeable hazards associated with using a given item of equipment. Never paint over or remove safety warnings provided by manufacturers.

 Document your inspections. After an accident, you may be called upon to prove you inspected a piece of equipment before it was rented and after the customer claims it was defective.

– Document customers’ receipt of instructions. The question after an accident won’t be, “What did you do?” It will be, “What can you prove you did?” Have the customer sign an acknowledgement of receipt or in some cases, declination, of the necessary training, instructions and, with respect to aerial work platforms, familiarization.

 Document customers’ receipt of warnings. To prove what you provided is more important with respect to warnings. When a warning is ignored, the consequences can be severe injuries or even fatalities. Have the customer sign an acknowledgement of receipt of all applicable warnings regarding potential hazards.

– If safety equipment is available, document it. Rental operators are not required to and cannot force customers to buy, rent or use safety equipment, but prudence dictates that rental operators offer it, particularly with respect to inherently dangerous equipment. Documenting the fact that it was made available for purchase or rent, or in some cases, included with the equipment free of charge, arguably shifts the responsibility for its use, non-use or improper use to the customer.

 Document customers’ examinations of rented equipment. Under the Uniform Commercial Code as adopted in most states, if the customer has “examined” rented equipment, there is no implied warranty with regard to defects that an examination ought to have revealed. In other words, having the customer acknowledge his or her examination of the equipment in writing and the fact that the equipment was not defective upon delivery or receipt can make it difficult or impossible for the customer to later prevail against the rental operator on a defect claim.

– Manufacturer’s intended use. Require customers to agree in writing to limit the uses they make of rented equipment to the “manufacturer’s intended use.” Doing so places the customer on notice that any other use is, by definition, a “misuse,” which can be a valuable defense for rental operators and arguably makes that any “other unauthorized” use both unforeseeable as the customer expressly agreed not to use it for any unauthorized purpose and a breach of the rental contract.

– Include “hold harmless,” “assumption of risk” and “indemnity” provisions in the rental contract. A “hold harmless” provision is the customer’s agreement not to sue the rental operator for injuries and/or damages arising in connection with the rental. An “assumption of risk” provision goes further by acknowledging the customer’s agreement to also “actively assume” the risk of such injuries and damages. Finally, a proper indemnity provision further requires the customer to, among other things, pay for any losses or damages associated with his or her use or misuse of rented equipment. Since third parties who might be injured in connection with a customer’s misuse of rented equipment can also sue the rental operator for negligence, the assumption of risk and indemnity provisions should cover not only customers’ claims, but also claims made by others.

Carefully following these steps can mean the difference between a lengthy and expensive trial, the possibility of a multi-million-dollar judgement against you and never being sued in the first place. Consequently, rental operators are routinely requiring their customers sign a contract addendum, a separate sheet of paper acknowledging one or more of the above, whenever they rent potentially dangerous equipment. One additional benefit of doing so is that it helps overcome the inevitable argument by plaintiffs’ lawyers that “the court shouldn’t allow the rental operator to escape liability just because it included some self-serving protective language in fine print on the back of its rental contract.”

The best advice I can give anyone in this business is to get out in front of as many potential liability issues as possible while you can, which means before you rent potentially dangerous equipment. Taking a few simple precautions can save you a fortune.