Many inventory dealers wonder what happens when they have a claim. What claims are most common and what circumstances lead to those claims are also top questions asked by dealers. As one of the nation’s top insurance administrators, we see a lot of claims. Here are four of the most common claims for inventory and what happens in them.

1. Theft of Appliances

It takes great installers only a few minutes to deliver and install most brand-new appliances at a new home. Unfortunately, the same appliances can often be unplugged and wheeled out by criminals just as fast.

Theft is a major problem in the industry and inventory sites are especially vulnerable. Security is often minimal and most sites are empty outside of work hours. Even when cameras or workers are present, it’s not a guarantee that criminals will be deterred.

Many thieves try to look the part of regular site workers, so onlookers may be unable to tell that a crime is taking place. After all, there are numerous legitimate reasons for appliances to be moved in and out of a unit before a sale. Appliance units could be damaged, defective or the wrong model. Legitimate workers could be removing them for repairs, replacement, upgrade or long-term storage.

Claims for inventory appliance theft have several common aspects:

• When appliances are stolen, they are often stolen all at once.
• When sufficient access to an inventory unit is available, thieves will usually steal multiple appliances from the same unit.
• When multiple units are accessible, thieves will sometimes clean out the appliances from the entire inventory lot.
• Commonly stolen appliances include washers, dryers, refrigerators, microwaves, dishwashers, stovetop ranges and ovens.
• Occasionally, thieves will also target components of HVAC systems, copper wiring and plumbing, and even fixtures such as lights and ceiling fans.
• While many thieves attempt to leave minimal traces of their crime, both vandalism and incidental property damage are possible.
• Such property damage can include kicked-in doors, smashed windows, scraped flooring and plumbing and electrical wiring damage.

2. Transit Damage

Transit damage is an unavoidable risk in the inventory business. Dealers benefit greatly from the efficiency and cost savings of an onsite operation. But inventory units eventually need to be sold and moved from the dealership to the homesite.

A lot can happen when inventory units are transported between locations. To start, an inventory home faces the same risks as any other cargo being transported across America’s roads and highways: namely, traffic accidents. There were 5,930,496 traffic accidents reported to police in 2022, some of which involved the transport of a manufactured home.

Besides accidents, transit damage is also common simply due to the nature of transporting such a large, heavy object over long distances at relatively high speeds. Most homes today weigh over 15,000 pounds and conditions on the road can easily resemble a wind tunnel or powerful storm.

Claims for inventory transit damage often feature these aspects:

• When a traffic accident occurs at a high speed, a total loss of the inventory unit will result. However, losses are also common in accidents at lower speeds.
• When non-accident damage occurs, the most common issues are window shutters, roof shingles and small and large sections of siding lost to the wind.
• Additional transit risks include rocks or other objects encountered on the road striking and breaking windows and damaging underside mechanical systems.
• Another common result of inventory transit are stress cracks that can appear on the interior walls of the unit, with many types of wall surfaces vulnerable.
• Rarely, a manufactured home can also suffer frame breakage in transit, a serious event that means a total loss of the manufactured home unit in most cases.
• While existing home claims often fall on a moving company, new home claims can fall on the manufacturer or dealer, so working with reputable, insured movers is key.

3. Water Damage

Water is a key resource used in manufacturing many of the components that make up today’s manufactured homes. However, once those components are assembled into an inventory unit, the same water can be detrimental.

Inventory units are usually damaged by water in two ways: water intrusion and mold. Damage caused by water and mold is a major claim risk across the inventory industry. Such damage most commonly occurs when homes are not properly wrapped during construction.

Some claims center on certain building materials that degrade and deteriorate when directly exposed to water or excess moisture. Such damage can occur even when the building materials are brand new. In other claims, the presence of water promotes an overgrowth of mold on certain surfaces that causes health problems for homeowners and is difficult and costly to fix.

Claims for inventory water damage often involve these aspects:

• While some amount of moisture is always present in the environment, issues arise when too much moisture is able to get into the inventory unit.
• Similarly, mold spores are found in almost every built environment, but become a problem when natural ventilation is insufficient to get rid of it.
• Since inventory units are built to manage exposure to normal environmental moisture, these issues primarily have to do with the build of the home.
• Exact fault is difficult to determine. Unclear plans, negligent supervision, incorrectly ordered or installed materials, or poor workmanship could be to blame.
• House wrap products specify the fastener types compatible with installation. Use of unapproved fasteners might lead to water damage or mold.
• Unsuitable, defective or improperly installed flashing and roofing materials can also lead to water intrusion and mold growth in an inventory unit.
• Common building materials such as fiberboard, sheetrock and drywall are less able to withstand exposure to moisture than lumber and framing.
• Water-damaged inventory can cause problems both before and after a sale, with buyers lodging complaints when the damage is discovered later.
• If a unit is damaged by water intrusion or mold growth while it is in a dealer’s inventory, it will be the dealer who is forced to deal with the problem.

4. Storm Damage

Weather can be unpredictable. It’s sunny one minute and storming the next. With most inventory dealer’s product exposed to the elements, these storms can pose a serious risk. Just in terms of summer storm damage, the Congressional Budget Office has estimated the cost to commercial businesses at around $9 billion annually. Winter storm events make the figure even higher.

For inventory dealers, most risk of damage comes from spring and summer storms, and most of that risk is down to wind damage. Wind is a powerful force of nature capable of causing significant damage. From incidental storms to derechos, tornadoes and hurricanes, wind is capable of moving objects that can come into contact with inventory as well as moving the inventory itself.

When inventory dealers file claims for storm damage, wind is often the reason, although rain, hail and lightning can also be factors. Some storm damage claims involve multiple hazards, such as wind damage coupled with a related water damage claim.

Claims for storm damage have several common aspects:

• Unsecured objects on a dealer’s property that are caught by the wind, such as garbage cans, pallets and patio furniture, are a top hazard to inventory.
• Objects from a neighboring property also have the potential to be blown onto the dealer’s property by wind and cause damage to the inventory.
• Objects falling from overhead during a bad storm are another top risk for inventory, and can include trees, power lines, utility poles and streetlights.
• Permanent structures and fixtures located on the dealer’s property also have the potential to cause damage if they are moved by the wind.
• Inventory can also be damaged by the wind itself when components move, bend or break, such as siding, unsecured doors and roof materials.
• Besides wind damage, storm claims also commonly involve damage to inventory from hail and flooding. Rarely, fires can also result from a storm.

Insurance to Protect Your Inventory

With all the risks inventory faces, it makes sense to have insurance coverage made just for inventory dealers. Coverage available through the 21st Mortgage Inventory Insurance Program is tailored to protect against the risks dealers face in the inventory industry.

For more information about managing the risks that impact your outdoor inventory, contact Lockton Affinity.