Nobody reads the damage waiver until a machine comes back broken. Then everyone wants to know what it says, whether insurance covers it, and whether it’s worth calling a lawyer. James Waite’s firm hears some version of that question 10 to 20 times a week.
On episode 125 of The Rental Roundtable, I sat down with James Waite, founder of JWL International. James started in the Air Force, went to law school, and spent the early part of a legal career buying and selling rental companies before starting the firm nearly 30 years ago. James also wrote the ARA’s book on rental contracts, and the firm has now done deals in more than 30 countries.
We went through the legal issues James is hearing about most from rental companies right now. Some are old problems with new wrinkles. Others didn’t exist a year ago. Almost all of them come back to one document you probably haven’t looked at in a while.
Know Your Options Before You Call a Lawyer
When equipment comes back damaged or disappears, the first instinct is often to call an attorney. James’s advice is to check the math first.
“The dollar amount has risen. It’s very tough to justify hiring a lawyer for a case involving under, say, $40,000 or $50,000 in any circumstance anymore.” James Waite, Founder, JWL International, (6:03)
For claims under that line, James lays out an order of operations. Start with your own insurance company. The industry has some well-capitalized, reputable insurers, starting with ARA Insurance, and they typically have a duty to defend if a negligence or products liability claim comes back at you. If that doesn’t work, or you’d rather not run up your loss history, try small claims court, where limits typically run $5,000 to $20,000 and you can file without a lawyer (though it takes time). Then collection companies, which take 30-40% of the recovery. A lawyer is the last stop.
And when you do hire one, it needs to be someone who knows this industry. I live in Georgia, and if I call my friend in Colorado about how a damage waiver claim played out, the answer may not apply to me at all. For more on coverage, see episode 111 on what to look for in an insurance broker and episode 96 on why damage waivers aren’t insurance.
Rental Law Doesn’t Work Like Other Law
A big reason a generic lawyer can let you down is that the laws themselves are different. James pointed to liens as the clearest example.
“If you need to recover on unpaid rent, there are a number of states out there now that have adopted mechanics lien laws that say if you don’t get paid rent, you can file a mechanics lien on the real estate that was improved with your equipment.” (9:08)
That gives you a tremendous amount of leverage. James has seen property owners who weren’t even the contractor call up and offer to pay, because they couldn’t sell the property without a release.
Liens can cut the other way, too. Mechanics who repair your equipment and warehouse providers can claim them, and a warehouseman’s lien trumps any other lien. If you get a notice from somebody claiming one, James said to “get to a lawyer immediately.” In many states that lien forecloses quickly, and you can lose the equipment entirely.
Get Consent Before You Track
Theft has taken center stage in a lot of the country, and GPS and telematics have become ubiquitous as the hardware gets cheaper. That’s terrific for tracking, but James flagged a risk most operators haven’t heard about: data privacy and stalking laws.
“If you’re in a place like Oklahoma, you can actually be charged with a felony if you don’t get written consent from a user of your equipment that you have telematics for GPS tracking on that equipment.” (12:05)
James counts at least 9 or 10 states with that kind of law, with more on the way. When I asked whether most rental companies know they need consent, the answer was no. Enforcement has been spotty, because a local DA has to know the law exists, but James expects it to grow as awareness does.
Even if you’re not in one of those states, getting written consent on every rental with telematics is a cheap habit to build now. It’s one line in your rental contract, as long as somebody knows to put it there.
Close the Class Action Door in Your Contract
Telematics and autonomous equipment raise a bigger worry. James expects a shift from old negligence-type liability toward products liability and class actions, and class actions are dangerous for equipment companies because one plaintiff can become 10,000 or 100,000 in a matter of days.
“Take a look at your rental contracts and... see if it’s got a class action waiver and also see if it’s got a waiver of trial by a jury. You need both in order to make that effective.” (13:43)
Getting disputes away from a jury and away from class actions is, in James’s words, “among the best investments you can make.”
The problem is that most contracts don’t have it. James’s team reviews thousands of rental contracts a year for free, sent through the ARA and through partners, and most are missing provisions like these. AI-generated contracts haven’t fixed that. They look good from six feet away, but James sees them pick a governing law that hurts the rental company, waive rights, or include indemnities no rental company should give.
“A rental company should never indemnify for a busted track. As a matter of fact, that’s virtually always an indication of misuse or abuse.” (18:34)
Even a contract that was well done five years ago may need an update. If yours hasn’t been reviewed by someone who knows rental, that free review is an easy win.
Treat “Smart” Pricing Tools With Caution
James also pointed to the multidistrict class action in Illinois alleging price fixing against most of the major rental companies. As RER reported, the case centers on pricing data shared through a third party. Calling a competitor to agree on a telehandler rate has always been facially illegal. Now plaintiffs are arguing that kind of agreement can be implied by an algorithm.
I asked what that means for a rental company using dynamic pricing tools without knowing whose data is underneath. James called it shifting sands, but offered one clear rule of thumb.
“If a software company comes to you and says, ‘By the way, we’ve got this algorithm that you just got to see and it maximizes your returns and it compares your prices to other competitors in your area,’ that is a red flag.” (26:10)
If you do sign with a pricing software vendor, James would write three protections into that contract: a promise from the vendor that its software doesn’t violate antitrust laws, an agreement that the vendor covers your costs if it does, and proof that the vendor’s insurance would pay out if the FTC brought an antitrust action against you.
The same caution applies to right to repair laws, which are being enacted or threatened in a number of states. Fixing your own machines can look like a big savings, but James urged checking with your dealer or OEM before touching embedded software. If a repair goes wrong and somebody gets hurt, you could be in a lawsuit for years.
When the Law Can’t Keep Up, Your Contract Has To
Last month James and I were in a room in Fort Worth with about 30 owners talking about AI, and the questions got hard fast. Who’s liable when your agent recommends a machine and someone gets hurt? What if your agent and a competitor’s start negotiating prices? James’s answer starts with how slowly laws move. A bill can take one or two legislative sessions to pass, and by then the technology has left it in the rearview mirror.
“What you’re left with, of course, is A, the interpersonal relationships, and B, the contracts. So contracts are becoming so much more important in this space because the statutory mandates can’t react fast enough.” (29:21)
AI won’t fill that gap, because it learns from old contracts that reflect the law from two or five years ago. So James’s team is building in protections now for the Illinois litigation, right to repair, and autonomous equipment, which James hasn’t seen a rental contract address in any real way yet. A new contract six weeks from now may look completely different from one written six months ago.
That’s the real point for independents. The tools are moving fast, and you should use them. Just make sure the document that protects you is moving too.
Less Talking, More Doing
For all the threats we covered, James is optimistic. The bigger the industry gets, the more claims and plaintiffs’ lawyers will follow, but James sees the overall picture for rental as a wonderful one, with Section 179 and bonus depreciation driving investment into the space. Even in a downturn, like 2008 and 2009, people stop buying and start renting.
I close every episode by asking for the best career advice a guest has received. James kept it short.
“Less talking and more doing. There are a million excuses out there, and a million excuses doesn’t equal one success.” (35:19)
James’s advice to a young person is to get up and go do it. Nearly 30 years ago, that meant staying in the industry after a sale and starting a firm from zero.
For you, it might mean pulling your rental contract out this week instead of meaning to. If you’d like the rest of your operation as buttoned up as that contract, we’d be glad to walk you through Quipli.
