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Following Hurricane Katrina, construction equipment theft increased 22 percent in the Gulf region from the end of August to November 2005. As a result of the extensive flooding in and around Iowa this June, mounting evidence indicates a growth in equipment theft in the flooded region. And on Sept. 20, 2008, a large multi-quip, trailer-mounted diesel generator was stolen in the Houston area. More such thefts are expected in the wake of Hurricane Ike.

The reason for such trends is fairly straightforward. Equipment theft is higher where there is more equipment, particularly where demand is higher than supply. A huge surge in demand for equipment is usually caused by the immediate need for power generation, man-lifts, and equipment to rebuild an area. Sometimes the equipment is stolen out of need. In other cases, thieves are looking to take advantage of an area's surge in demand for equipment at a time when law enforcement resources are primarily engaged in immediate public safety activities and thus less able to prevent or investigate equipment theft.

An additional threat comes from those who are attracted to the chaos following a catastrophe to commit fraud and theft — particularly the use of false ID to rent or finance equipment.

A storm surge can have other indirect consequences. Equipment that was submerged, even partially or for a short period of time, may not fully function and may break down if key components are damaged. If this damage is not disclosed at the time of sale, it can create liabilities for owners and insurers in the future.

Ike vs. Katrina

There are a number of differences between the aftermath of Hurricanes Ike and Katrina. As Katrina hit, the demand for construction equipment throughout the country was already high. In 2008, domestic demand for equipment has been lower than usual, so the surge in demand for certain types of equipment may not outpace supply as it did in 2005. Additionally, many equipment owners have been struggling financially. Ike could provide an opportunity to file claims for equipment that was not being used and that may not truly be damaged or stolen.

Insurers and policyholders can adopt a number of strategies before and after a hurricane hits.

Most critically, insurance companies must confirm that the correct serial number has been provided for any type of claim on a machine. This serial number should be run against past loss and present ownership records. The simplest way is to ensure that the loss is reported quickly to the ISO ClaimSearch database and that it is coded correctly as construction equipment, farm equipment, or mobile off-road equipment (contact ISO for exact instructions). If correctly coded, the serial number will be reviewed and cross-checked by equipment specialists at the National Equipment Register (NER), an ISO subsidiary. Any red flags can be brought to the attention of the adjuster and the National Insurance Crime Bureau (NICB) for NICB member companies.

To reduce exposure to theft and ensure that critical equipment is available to support recovery efforts, insurers should also reach out to policyholders before a catastrophe.

Equipment Owners in Impacted AreasIf you're an equipment owner in the impacted area of a catastrophe:

?Return all equipment to yards if possible. Do not allow crews to abandon machines at job sites.

?Disable machines that must be left at sites.

?Document with operators where machines were left and how they were disabled. If parts were removed, document where they are stored.

?Conceal and disable machines. (Normally, NER suggests that machines be parked in highly visible areas to deter vandalism and theft. However, a storm will reduce traffic volume and the deterrence of public observation in some areas.)

?Post your contact information clearly on and in your equipment so responders can contact you if they need access to your equipment.

?Update NER registration records so emergency contact details and serial numbers are current. This may be the only way a public safety official knows you own the machine.

?Advise local law enforcement that you have equipment in the area and will assist emergency responders. Inform them that they should contact you instead of commandeering the machines.

After the storm, be sure to survey your equipment and verify all machines are accounted for. Report any thefts immediately to local law enforcement. (NER can record thefts on the NER system even if a police report cannot be made yet.)Equipment Owners in Adjoining AreasCon men, fraud artists, and unscrupulous contractors will descend on areas impacted by a storm. Past storms show that they will collect equipment along the way, by theft and fraud. If you're an equipment owner in the adjoining area of a catastrophe:

?Keep specialty equipment like brush chippers and stump grinders inside your yard. Don't leave generators at job sites. Rental companies should work with clients to educate them on machine security and the heightened theft threat.

?Don't let machines called off rent languish. Get machines back to the yard or on to the next client as soon as possible. If a pickup cannot be arranged, work with your client to secure the machine until you can retrieve it.

?Be wary of out-of-state customers and local customers with whom you have no business history.

?Verify local references. Do not rely solely on names and phone numbers provided by the customer.

?Verify all credit account rentals by company employees unfamiliar to you. Call a contact you know at the company to confirm authorization for the employee to rent.

?Get detailed information on where machines will be used, and check out the site. Contact the general contractor or property owner.

?Don't assume a credit card is valid because the deposit preauthorizes. Call the issuer to ensure there is no potential problem. Contact your card services fraud department for advice and assistance.

?Be cautious if clients want to provide their own transportation. (This is a common trend in both rental and purchase frauds.) Insist on delivering machines, and educate your delivery personnel to recognize a suspicious drop-off location.

?Plan how you will locate and retrieve the machine if the transaction turns out to be fraudulent.

?Insist on a maintenance check of the machine.

?Require 24- or 48-hour rental renewal for unknown customers.

?Conduct a spot check on machines to ensure the drop-off location was not a staging area to load your machines onto a thief's transport.

Communicate with Authorities

To avoid theft and fraud before and after a catastrophe, insurers must communicate with local law enforcement officials. Let officials know thefts may be on the rise because of a storm, so their patrol personnel can look for break-ins and odd-hour transports. All owners should verify their NER registration is up to date and their emergency contact information is current. (Update any new machine additions.) If something suspicious occurs, contact other local industry representatives to keep a look out. And most important — go with your gut.

David J. Shillingford is president of National Equipment Register, Inc., a member of the ISO family of companies. For more information call (212) 297-1805, [email protected].

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