Santa Ana, CA--Sometimes when a company does everything right, following all the correct protocols and procedures and taking all the necessary precautions, unforeseen situations still arise. For Miami-based HD House, a rental company that specializes in very high-end HD film production equipment, this was a hard lesson to learn—but thankfully one with a happy ending. In January of 2011, HD House experienced a rental company's worst nightmare: a new customer, whom they fully vetted and researched, stole $255,000 worth of their equipment in a single day.
"We checked his background, ran a credit check, read through the company's entire website, and we even called the company's insurer to confirm they held an active policy," said Tony Perez, CEO of HD House. "We're in the business of loaning top-of-the-line cameras, lenses, computers, and accessories that can be worth up to hundreds of thousands of dollars, so we take the security of our inventory very seriously. We were shocked when we learned that this customer had stolen the identity of a reputable U.K. film producer, going so far as producing false identification and taking out a real insurance policy in order to commit fraud."
When HD House filed a claim with the client's insurer, the claim was denied because the policy was purchased with the intent to commit fraud. But this is where the happy ending comes in.
Less than 90 days before the fraud occurred, HD House had signed on with Take1 Insurance, which has specialized in insuring the live and non-live entertainment industries for more than 25 years. HD House's new policy with Take1 didn't save them money compared to their prior insurer, but they liked that it had been custom-tailored to the specific needs of an equipment rental company. Case in point: within hours of filing this claim with Take1, the wheels were turning on what ended up being a full payment of $255,000.
"As we were evaluating the risk profile of HD House, it quickly became clear they had outgrown their prior insurer," said HD House's insurance broker, Matt Kleinjan of the Jules Berlin Agency. "One of our key concerns was the collusion risk, i.e., how do we make certain their equipment is properly covered while it is out in the Care, Custody, and Control (CCC) of a customer. We never like to rely entirely on the customer's insurance, as it is often inadequate. In the case of fraud, the customer's insurance is completely moot. HD House recognized this risk and fortunately made the decision to move their insurance program to Take1."
"This was a highly sophisticated fraud," said Scott Carroll, executive vice president of Take1. "The criminal stole the identity of a producer from the UK who had a solid credit history and a reputable industry background, then he took out a fraudulent insurance policy for the real company, making it extremely difficult to detect he was an imposter. HD House did its due diligence and followed very rigorous vetting procedures before agreeing to loan the equipment to this new customer."
According to Carroll, "Take1's inland marine policy is broader than most of our competitors concerning fraud or misrepresentation, often times referred to as collusion coverage. Most insurance companies severely limit coverage in this area, especially with regard to fraud or collusion committed against the insured. In our opinion," Carroll said, "this broad language and the excellent claims handling capabilities of our primary carrier gives our insureds an added advantage when fraud is committed against them."
HD House's previous insurance company would have only been obligated to cover $140,000 of the loss as a maximum, and may have even tried to deny the claim completely, according to Carroll. "Luckily for HD House, they had Take1 on their side."
Take1's specialty program has designed inland marine coverage, among other specialty coverages for the entertainment industry, that automatically applies everywhere in the world, without the need for additional riders or endorsements. It eliminates co-insurance, thus protecting 100 percent of the insured value of the equipment covered; provides automatic replacement cost valuation; allows for separate limits in key individual coverage areas like owned equipment, equipment rented from others, equipment in the insured's Care Custody and Control (CCC), and equipment in transit; flood coverage for equipment in transit; and blanket limits that eliminate the need for clients' to itemize each and every piece of equipment, cable, LED panel, etc. being covered.
