How to handle equipment failure

By: TDIC Risk Management Staff

When faced with equipment failure, practice owners must be prudent with their actions should they seek to file a claim with their insurance carrier. At best, failure to preserve property can result in a delay in payment; at worst, it can result in the loss not being covered at all.

Some practice owners are unaware that many insurance companies, including The Dentists Insurance Company, have the right to inspect malfunctioning equipment in order to determine the cause of failure. Under most policies, some causes are covered, while some are not. The burden of proof to establish that the cause of the loss is covered rests with the insured.

“It is a policy requirement that we are provided an opportunity to inspect the broken equipment, and along with this requirement is the policyholder’s responsibility to preserve the property in question,” said Sheila Davis, assistant vice president, Claims and Risk Management Claims, TDIC. “This is essential so that we can determine whether the loss is covered. Disposal of property without our go-ahead could affect your claim.”

In 2015, TDIC had a total of 446 property claims with an average value of $30,000-$50,000, not including loss of income. Most claims were due to water damage, typically resulting from the failure of a water supply line to dental equipment.

A common scenario is this: Unbeknownst to the practice owner, there is a point of weakness in the water system. Perhaps there is a loose compression fitting, a worn valve or a tiny hole in a piece of flexible tubing. At night, or over a weekend, when the water is not being used, the water pressure builds and the dam bursts, flooding the office.

When faced with a situation like this, practice owners need to follow certain protocols. Because of the complex nature of dental equipment, they should preserve not only the entire mechanism, but the failed parts as well.

“Each of these can usually be examined to determine why the failure occurred and which part failed,” Davis said. “But if the equipment is disposed of, then the opportunity to determine how and why the failure occurred is lost.”

Some practice owners erroneously assume the repair technician’s report can be used to obtain this information. But the reality is, most of these “reports” are just invoices; they often lack the details needed to make a determination of cause.

“We need to know exactly how the equipment malfunctioned and why it failed. Tech reports don’t generally disclose this,” Davis said.

In addition, the opportunity to recover the amounts paid in the claim from the responsible party may be lost if the cause of the damage is disposed of. For example, should an insurance carrier determine the loss was caused by a manufacturer’s defect, the manufacturer would have a right to inspect the equipment independently. If there is no equipment to inspect, it is difficult, if not impossible, to hold the at-fault party accountable.

In some cases, practice owners don’t want the equipment taking up precious office space, nor do they know what to do with the broken equipment once a claim is in process. But more often than not, technicians will be happy to return for the equipment in a few days, after the insurance representative has had a look.

“For any type of equipment breakdown, it’s better to err on the side of caution and keep the equipment. In most cases, we can send out someone to inspect the equipment or failed component the same day or the following day,” Davis said.

In one recent case, a dentist experienced the failure of her vacuum. Knowing she couldn’t afford to close her practice during the claims process, she replaced it, storing the broken one on site. TDIC was able to get an inspector out to her practice right away, and she was able to continue seeing patients while her claim was being processed.

“We understand that you can’t afford to have downtime,” Davis said. “But by calling us in tandem with calling a technician, and by preserving your old equipment, you can ensure your claim will be processed smoothly.”

Experiencing an equipment breakdown is an unfortunate reality of the dental profession. As a practice owner, the steps taken during this time can mean the difference between a smooth recovery or a complicated one. By following a few simple protocols, dentists can get back to business quickly and painlessly.

TDIC’s Risk Management Advice Line at 800.733.0634 is staffed with trained analysts who can answer property insurance and other questions related to dental practice.
Reprinted from the CDA Journal.

Related Items

TDIC has announced the signing of a definitive agreement to purchase three Moda-held companies — Dentists Benefits Insurance Company (DBIC), Dentists Benefits Corporation (DBC) and Northwest Dentists Insurance Company (NORDIC). The definitive agreement follows TDIC’s recent announcement of the intent to purchase the companies that provide and administer insurance products and services to more than 4,500 policyholders in seven states.

May is Disability Insurance Awareness Month, which makes it a good time for dentists to make sure that their futures are protected. Disability Insurance Awareness Month was named by the LIFE Foundation, a nonprofit organization dedicated to helping consumers make smart insurance decisions to safeguard their families’ financial futures.

Dental practices are among the victims falling prey to ransomware, a type of malware that infects and disables computers and demands payment from victims to restore computer access. The Dentists Insurance Company warns dentists that ransomware can bring a practice to a standstill.