Borrowed Equipment Between Contractors: The Handshake That Needs Paper
In the excavation world, borrowing equipment from another contractor is common. A buddy has a skid steer sitting idle. A neighboring contractor can spare a mini excavator for a few days. Someone needs a compactor right away to keep a project moving.
But when it comes to borrowed equipment between contractors, a handshake agreement is rarely enough. If the machine is damaged, stolen, involved in an accident, or causes a jobsite loss, unclear expectations can quickly turn a good relationship into an expensive dispute. The smartest move is simple: put the agreement in writing before the equipment leaves the yard.
Why Borrowed Equipment Should Always Be Documented
Most contractors borrow equipment with good intentions.
The conversation often sounds something like this:
"Need my skid steer for a week?"
"Sure, I'll take care of it."
The problem is that neither contractor may fully understand who is responsible if something goes wrong.
Questions often arise such as:
Who pays for damage?
Who insures the machine?
Who covers transportation?
What happens if it is stolen?
What if an operator damages underground utilities?
Who is responsible if a third party is injured?
A simple written agreement helps answer these questions before they become problems.
Common Borrowed Equipment Situations
Borrowing equipment happens every day in the excavation and site-work industries.
Examples include:
Borrowing a mini excavator for a utility repair
Using a neighbor's skid steer during a busy week
Sharing trench boxes between contractors
Loaning a dozer to a subcontractor
Temporarily using a compactor on a site development project
Lending specialty attachments between crews
Many contractors view these arrangements as a favor between trusted professionals. However, insurance claims are often evaluated based on contracts and policy language, not verbal understandings.
The Biggest Risk: Nobody Knows Who Is Responsible
The most common issue with borrowed equipment is uncertainty.
Imagine a contractor borrows an excavator for three days. During excavation work, the machine tips on unstable ground near a spoil pile and sustains major damage.
The machine owner may assume the borrowing contractor pays.
The borrowing contractor may assume the owner's insurance covers the loss.
When expectations differ, disputes follow.
A written agreement helps establish responsibility before a claim occurs.
What Should a Borrowed Equipment Agreement Include?
The agreement does not need to be complicated.
In many cases, a simple document signed by both parties can reduce misunderstandings.
Important items to include:
Equipment description
Make and model
Serial number
Date equipment is borrowed
Expected return date
Condition of the equipment
Responsibility for repairs
Responsibility for fuel and maintenance
Transportation responsibilities
Insurance requirements
Contact information for both parties
Photographs taken before delivery can also help document the condition of the equipment.
Insurance Does Not Automatically Follow the Handshake
One of the biggest misconceptions in construction is that insurance automatically covers borrowed equipment because both parties know each other.
Insurance policies often contain specific language regarding:
Owned equipment
Leased equipment
Rented equipment
Borrowed equipment
Temporary equipment
Equipment in the care, custody, or control of another party
Coverage depends on the policy wording, endorsements, exclusions, and facts surrounding the loss.
That is why contractors should always review arrangements with their insurance agent before sharing equipment.
Who Insures Borrowed Equipment?
There is no universal answer.
In some situations, the equipment owner's policy may provide certain protections.
In other situations, the borrowing contractor's policy may be expected to respond.
Sometimes both policies may become involved, depending on the circumstances.
Factors that may impact coverage include:
Contract terms
Type of loss
Location of the equipment
Duration of the loan
Policy exclusions
Coverage limits
Never assume coverage exists simply because the equipment belongs to another contractor.
A licensed insurance professional should review the situation before equipment changes hands.
Certificates of Insurance Matter
Before loaning expensive equipment, many contractors request a Certificate of Insurance (COI).
A COI is a document that provides evidence that certain insurance coverage was in place on a specific date.
While a COI is not the policy itself, it can help verify that the borrowing contractor maintains insurance.
Contractors frequently request COIs when sharing:
Excavators
Dozers
Track loaders
Backhoes
Trenching equipment
Specialized drilling equipment
Having documentation in place may reduce confusion if a claim occurs later.
Liability Exposure Goes Beyond Equipment Damage
Many contractors only think about damage to the machine itself.
However, liability exposures can be much larger.
For example:
An operator strikes an underground utility that was not properly located.
A borrowed machine damages a customer's property.
Equipment causes a traffic incident near a work zone.
A hydraulic leak creates environmental damage.
A third party is injured around the machine.
In situations like these, questions regarding responsibility can become much more complex than a damaged bucket or broken cylinder.
The Occupational Safety and Health Administration (OSHA) provides construction safety guidance that can help contractors reduce equipment-related risks: https://www.osha.gov/construction
Equipment Theft Creates Another Challenge
Theft remains a serious concern for contractors.
If a borrowed skid steer disappears overnight from a jobsite, determining who bears responsibility may become complicated.
Questions may include:
Was the equipment secured properly?
Who had possession of it?
Was it stored according to agreement?
Does either party's insurance potentially apply?
Without a written agreement, these discussions can quickly become difficult.
The National Equipment Register offers equipment theft prevention resources and recovery information for contractors: https://www.nerusa.com
Understanding Equipment Insurance Responsibilities
Many contractors assume insurance automatically follows the machine wherever it goes.
That is not always the case.
Insurance policies vary significantly depending on the carrier, state, policy wording, endorsements, and specific circumstances.
Contractors should review their coverage with a licensed insurance agent before lending or borrowing equipment.
Inland Marine Insurance
Many contractors insure mobile equipment through inland marine insurance.
An inland marine policy generally helps protect equipment against covered causes of loss while the equipment is being transported, stored, or used off-site.
Whether borrowed equipment is covered depends on policy terms and conditions.
Some policies may include limited protection for borrowed equipment, while others may not.
General Liability Insurance
General liability insurance may help address third-party property damage or bodily injury claims arising from business operations.
However, general liability coverage typically serves a different purpose than equipment physical damage coverage.
Contractors should not assume general liability insurance will pay for damage to borrowed machinery.
Commercial Auto Insurance
If equipment is being hauled on public roads, commercial auto insurance may also become part of the risk picture.
Questions may arise regarding:
Trailer ownership
Vehicle ownership
Loading procedures
Transportation responsibilities
A written agreement should address transportation expectations whenever equipment will be moved between locations. add these
Why Documentation Protects Relationships
Most borrowed equipment arrangements happen between contractors who trust one another.
That trust is valuable.
However, trust alone does not eliminate misunderstandings.
In fact, written agreements often help preserve relationships because expectations are clearly defined from the beginning.
Instead of relying on memory months later, both parties can refer back to the document and verify what was agreed upon.
Good paperwork protects friendships, partnerships, and business relationships.
Best Practices When Borrowing Equipment
Contractors can reduce risk significantly by following a few practical steps.
Inspect Equipment Before Use
Walk around the equipment together.
Document:
Existing dents
Scratches
Hydraulic leaks
Tire or track condition
Attachment wear
Hour meter readings
Photos and videos provide useful documentation.
Verify Insurance Before the Loan
Speak with your insurance agent before borrowing or loaning equipment.
Ask how your policy addresses:
Borrowed equipment coverage
Equipment damage
Theft exposure
Transportation exposure
Liability claims
Insurance terms vary significantly between policies.
Put Everything in Writing
Even a one-page agreement can help prevent disputes.
Written documentation should identify responsibilities and expectations clearly.
Use Qualified Operators
Only trained and authorized operators should use borrowed equipment.
Improper operation may increase the likelihood of accidents, injuries, and damage.
Follow Jobsite Safety Procedures
Continue using normal safety procedures, including:
811 utility locates
Equipment inspections
Traffic control measures
Operator training
Site hazard assessments
Borrowed equipment should be treated with the same care as owned equipment.
The Cost of Assuming Instead of Confirming
Most equipment-sharing arrangements work out just fine.
The trouble starts when contractors assume they know who is responsible without confirming it.
A damaged excavator, stolen skid steer, or liability claim can quickly create costs far greater than the value of a simple written agreement.
The safest approach is straightforward:
Put the agreement in writing.
Review insurance requirements.
Exchange documentation.
Confirm responsibilities before delivery.
A few minutes of paperwork today may help avoid significant financial and legal complications later.
FAQ
Do I need a written agreement when borrowing equipment from another contractor?
Yes. A written agreement helps define responsibilities, reduce misunderstandings, and provide documentation if a dispute or insurance claim arises.
Does my insurance cover borrowed equipment?
It may, depending on your policy language, endorsements, exclusions, limits, and circumstances of the loss. Review your coverage with a licensed insurance agent.
Should I request a Certificate of Insurance before loaning equipment?
Many contractors do. A COI can help verify that insurance coverage exists, although it does not replace reviewing specific contractual requirements.
Who pays if borrowed equipment is damaged?
Responsibility often depends on the written agreement, the circumstances of the damage, and the insurance policies involved.
What happens if borrowed equipment is stolen?
Borrowing or sharing equipment with another contractor can be a smart way to keep projects moving, but it can also create unexpected insurance gaps if responsibilities are not clearly defined. Excavating Insurance Partners can help you understand how borrowed equipment may fit into your insurance program, review potential coverage concerns, and ensure you're better prepared before a loss occurs.
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