Contractors’ Equipment Losses: Knowledge of Hazards Can Reduce Risk Prevention tips from the Inland

Contractors and operation managers run a risky business. One area that is often overlooked is equipment security. Theft, vandalism or malicious mischief represent more than one-third of all losses to contractors’ equipment. Fire damage represents the second highest dollar loss to contractors’ equipment, accounting for 24 percent loss severity. Damage to equipment due to transit and operational hazards accounts for approximately 16 percent of dollar losses.

While there is no single method or device that can eliminate theft or vandalism, there are a number of loss control or security steps that insureds can take to mitigate such losses.

Construction site security
“Construction sites are attractive targets for thieves. The high value and portable nature of equipment can lead to quick profit for successful thieves, who can simply start up equipment with a universal key and drive off the job site. And even if the police happen to stop the vehicle, heavy equipment generally does not require licenses or registration, making it even harder to apprehend thieves.

Special-use vehicles and mobile equipment such as cranes, bulldozers, pavers and front-end loaders represent high-value equipment that can be target items for thieves. Certain types of equipment may be less susceptible to theft, either due to their uniqueness for a specific job or because size or configuration makes moving difficult. Smaller, trailer-mounted equipment such as air compressors, welders, generators, pumps, arrow or traffic and message boards are targets for theft since they can be easily transported.

Statistics show that a proportion of construction site crime is committed by people actually working at the site. Constant staff turnover can mean a lack of accurate records of who had access to the site and when. If supervisors take a strong line on site security, that can go a long way toward reducing the problem.

Key control and locks
Basic key control and specialized locks are an important factor in any contractor’s equipment loss control program. Locks should be placed on all vehicles, portable equipment, storage sheds and trailers, and utility bodies when not in use. Only “high security” locks (pick-resistant, case-hardened or laminated steel) should be used. If a chain is required, it too should be case-hardened and thick enough to prevent easy cutting. A multi-strand wire cable may be more appropriate.

In order to minimize vandalism, locking fuel caps should be placed on all vehicles, equipment and fuel storage tanks. Passive alarm systems are often utilized on large or high-value machinery to disable the equipment or sound an alarm in the event of attempted theft.

Storage yards and job sites
The storage yard location, whether at or remote from the job site, must be considered when developing any loss control program. More densely populated areas tend to offer limited storage space resulting in the concentration of equipment thereby increasing theft exposure.

Fences are the best form of perimeter protection-and exits and entrances should be kept to a minimum. Companies working in areas where there is good natural surveillance may find it better to use the portable mesh-type fencing panels rather than the solid boarded type, which would enable the public to report anything that looks suspicious.

Other safeguards include: lighting, such as motion-detecting floodlights operated by sensors; CCTV and alarm systems, either standalone or integrated; and warning notices stating that security precautions are in force around the perimeter.

Site office theft
One should try to position the site or trailer office in an area with limited access to the opportunist thief, yet highly visible to the public. Office equipment such as fax machines, computers and telephones can easily be stolen if not properly secured. They should be well-marked with indelible marking. Valuable business information such as payroll records, work schedules and future delivery schedules, should also be protected.

Some office loss prevention techniques include: protective metal bars or grating on windows and doors; a secure “skirt” installed around the trailer base to restrict access to the underside; a central station type alarm system; and immobilization of the trailer to prevent the entire unit from disappearing.

Fire prevention equipment
Minimizing the potential for fire damage is successfully achieved through an aggressive maintenance program and by controlling job site hazards and fueling activities.

Some preventive considerations include a thorough account of potential chemical hazards at the job site. In addition to being situated near adequate water supplies, sites should be easily accessible to emergency apparatus and vehicles.

Equipment fueling represents a significant fire hazard. Engaging an outside vendor to provide fueling services is a possible solution, as outsourcing eliminates the contractor’s responsibility to establish, maintain and control fueling operations. If the contractor retains responsibility for fueling, important considerations include: flammability of different fuels; design and locations of onsite fuel supplies; tank inspection designed to meet a nationally recognized standard; separation of the fueling facility and operation from ignition exposures; grounding and bonding procedures when handling fuel; and methods for cleanup and disposal of fuel.

Hour meters should be kept operational and frequently inspected since they may be the only valid indicator of when recommended maintenance should be performed. The equipment should also undergo a visual inspection by the operator prior to operation, and any maintenance and repair concerns should be reported to mechanics.

The machine’s operator must be specific to the equipment used and certified to the type and model. Training in the use of fire extinguishers, which must be available on each piece of equipment, is imperative for all employees.

To prevent the failure of hydraulic lines, mechanics must replace access covers or sleeves protecting the line from exposure to hot engine parts. Replacement of lines should be handled in accordance with the manufacturer’s recommendations and done with parts meeting OEM specifications.

Towed and hauled equipment security
Highly portable equipment presents a major problem. Air compressors, welders, and pumps are usually fitted with towing hitches or are trailer-mounted so they can be towed from site to site.

To lessen theft, it is necessary to secure the equipment to a stationary object with locks, chains or cables. Wheels and trailer hitches can be removed or locks put in place to prevent their use.

Due to the size of certain machinery, there may be travel restrictions when hauling equipment. The size or weight of the vehicle or equipment may create the need for provisions to be made for transit security.

Operating or transporting equipment
Whether operating or transporting heavy machinery, employees must be thoroughly screened. Drivers and/or operators must have a valid copy of their commercial drivers license. Other operator vetting areas include: medical history; criminal background check; motor vehicle record; written employment applications detailing capabilities and experience; random drug screenings; annual physical examination; and age, sight and hearing requirements. Employees should be trained in company policies, safety rules, and in the care and use of equipment and emergency procedures.

Whether the equipment is self-powered or transported by another vehicle, state and local requirements-special transit permits, marking the vehicle as slow-moving or wide-load, road height and weight restrictions or “chase” vehicles-must be considered. Oversized equipment must always have a vehicle escort.

In loading or unloading situations, key areas of enforcement include: the angle of the ramp-which should be kept as low as possible; stabilization of equipment; all equipment wheels and tracks chalked; installation of warning lights and placement of flags as required; operating controls neutralized; ignition locked; and brakes.

In accordance with the Federal Motor Carrier Safety Regulation, the equipment load must be appropriately secure. Additionally, a tie-down is required at every eight-foot interval. Chains with binders are usually more appropriate for securing heavy equipment since the chances of them stretching is slim. Inspection of cargo should take place before the trip, within the first 25 miles of the start, when the load has been driven three hours, and at any change of duty status.

If the equipment must be transported over water, the contractor must consider the suitability of the barge and towing vessel. The equipment must be properly prepared and fitted for the voyage and the adequacy of the loading dock.

Summary
Enforcing these safety precautions will not only help insure equipment, but also will increase success and competence level necessary to maintain professional standards in building construction.

This information is part of a five-part series on loss prevention techniques for contractors’ equipment published by the Inland Marine Underwriters Association (IMUA). For more information, call (212) 233-7958.