Liability of Third-Party-Owned Equipment Plus PERG Contract Addendum for Limiting Rental Company Exposure

| PERG News: June 2025 |

Understand Your Legal Liability, June 2025 

In PERG’s recent Coffee Break, Understanding Your Legal Liability, four experts in the field explored liability as it relates to equipment rented by “third parties” like crew members. Over the past 20 years, industry practice has evolved, opening potentially serious exposure when third parties rent equipment with no contract and potentially little to no liability insurance. The panel described renters’ standard obligations and the steps they must take to protect themselves from liability exposure. The panel explored what happens in cases where defective equipment plays a part in an injury or property loss, and helped rental companies and production companies understand how they are implicated. 

Seventy-two people from PERG rental companies and from AICP production companies attended the Zoom meeting, which was held on Friday, June 20. Many attendees asked practical questions and described real-world scenarios, and the group of experts responded with clarity. The meeting was recorded; see link above. 

In the meeting, PERG introduced new sample language rental companies may adopt aimed at closing the liability gap. This addendum to the rental contract was developed to codify the contractual relationship between third-party equipment owners, the rental house, and production for third-party equipment billed through the rental house. The goal is to have the third-party equipment supplier agree to the same standards that the rental house must meet when renting equipment to production.  There are also provisions in the addendum whereby the third-party equipment owner agrees to indemnify and defend the rental house/production company against claims arising from defective or improperly maintained equipment. Lastly, the addendum specifies insurance requirements and minimum liability policy limits that must be maintained by the third-party equipment owner. These insurance requirements match the limits required by production in the standard rental terms and conditions between the rental house and production. The addendum was developed by PERG and approved by AICP and PERG legal counsel.

Scott Taylor (Taylor & Taylor Associates) was the mediator and contributor to the meeting. The three panelists have in-depth knowledge of the motion picture and television industry, and more specifically, the terms and conditions under which motion picture camera, lighting and grip equipment is rented to production. Attorney William Manning, a partner at Morris Duffy Alonso Faley & Pitcoff, has handled claims in the entertainment space. His firm provides legal defense work for insurance carriers on behalf of policyholders. Carol Driscoll, Senior Vice President of claims for SoundView, has spent most of her career handling entertainment industry liability claims. SoundView is a claim adjusting firm that handles Allianz/Fireman’s Fund and Arch policies. David Seaman is the entertainment practice leader for Hiscox who has spent his career underwriting entertainment risks. 

Below are the crib notes from the meeting.

Today's Coffee Break will focus on how a motion picture and television equipment rental company should think about their legal exposures, transfer risk to responsible parties, update their rental terms and conditions, and prevent claims from happening, as well as business and management characteristics that underwriters look for when underwriting a risk.  

1) The business liability environment, the increase in the frequency and severity of claims, and the causal relationship that must be proved to successfully bring a liability claim.

a) Claim against the equipment rental house: 

i) Did the Rental House put a defective product out on rental? 

ii) Was the product defective when it left the Rental House’s possession? 

iii) Was the product used by the customer in a reasonably foreseeable manner? 

iv) Did a third party suffer harm because of the defective product? IT IS IMPORTANT TO NOTE THAT THE RENTAL HOUSE DOES NOT HAVE TO BE THE OWNER OF THE DEFECTIVE PIECE OF EQUIPMENT.

b) Claim against the production company: 

i) Did the production company receive equipment in good working condition? 

ii) Did the equipment get damaged after it left the rental house? 

iii) Was the equipment misused by the production company? 

iv) Did the equipment damage or misuse of the equipment cause injury or damage to a third party? 

2) Potential causes of claims from production equipment: 

a) Manufacturing or maintenance defects 

b) Design defects 

c) Failure to Warn or Instruct 

d) Misuse/negligent use of equipment 

3) The necessity of rental terms and conditions agreements that makes the party who supplied the defective equipment responsible for the defense costs and damages and the need for liability insurance that will fund the culpable party’s legal obligations. 

a) There should be a rental terms and conditions agreement between the rental house and production, the rental house and sub-rental house(s), and the rental house and third-party owners. 

b) The terms and conditions agreement should at the very least contain the following provisions: risk of loss of the equipment, insurance requirements, indemnification provision, disclaimer of liability for production downtime, extra expense, production overages or consequential loss, inspection and testing and limited representations or warranties. 

c) The indemnification provision should require that the party responsible for placing defective equipment out on rental agree to indemnify and defend the innocent party. 

d) The rental terms and conditions and rental terms and conditions addendum needs to be signed by all parties. 

4) The claims process:

a) When a summons and complaint is received and forwarded to an insurance carrier: 

i) The claims adjuster will verify who is insured and coverage. 

ii) Depending on the fact pattern they might hire a cause and origin investigator. 

iii) Engage legal counsel. 

iv) Have the summons and complaint answered by counsel. 

v) Tender the claim to those carriers/parties legally or contractually liable to defend and settle the matter. 

b) Clarification of any misconceptions: 

i) A Third-Party Owner will not be covered by the rental house liability insurance policy for claims brought against their company for claims arising from defective equipment that they supplied for the rental. The rental house policyholder cannot extend the benefits of their policy to another individual or business to cover their negligence or failure to maintain the equipment.

ii) It is possible for a rental house to be liable for injuries caused by a defective product even though that business did not own the defective product. The business is the deep pockets and the only company with liability insurance or assets. 

5) The factors and attitude of management that go into making a business a risk that an insurance carrier wants as a customer. Things a business can do to reduce the likelihood of product liability claims are as follows: 

a) Thorough product testing and maintenance procedures to ensure the safety of the product. 

b) Warning labels in conspicuous easy to see places on the product. 

c) Stay current on industry regulations and compliance standards.

d) Maintain accurate procurement and maintenance records. 

e) Promptly address customer complaints and reports of defective products. 

f) Transfer of risk to a third party.

6) *Production Equipment Rental Group* (PERG). You can be confident doing business with a PERG member because they: 

a) Agree to adhere to ESTA's Code of Conduct.

b) Carry the appropriate insurance coverages.

c) Offer product maintenance, repair and support.

d) Are committed to the highest quality customer service.

e) Keep up to date on the latest standards and regulations. 

f) Maintain commercial premises with regular business hours, inventory, and staff to assist you.

Disclaimer: This presentation is designed as a service to PERG and AICP Members and is intended only to provide general information on the subject covered and not as a comprehensive or exhaustive treatment of that subject, legal advice or a legal opinion. Members are advised to consult with legal counsel and other professionals with respect to the application of the subject covered to any specific production or other factual situation. PERG and AICP recognize and encourage the fact that each company exercises its own independent business judgement regarding the terms and conditions under which it operates, and this presentation is intended to inform and assist the independent decision process. The brief description of coverage used throughout this presentation is intended for informational purposes and to simplify difficult concepts to grasp. This presentation is not intended to express any legal opinion as to the nature of coverage. You must read the actual insurance policies to determine exact coverage.