Meeting OEM Insurance Requirements: A Guide for Brokers Placing Equipment Dealers

A franchised equipment dealer does not choose its insurance in a vacuum. The franchise agreement with the manufacturer (the OEM) usually spells out the dealer’s OEM insurance requirements, and a policy that looks fine to you can still put your client out of compliance.

That is a problem for the dealer, who risks a default under the franchise agreement. It is also a problem for you, because a missed requirement can turn into an errors and omissions conversation long after the policy is bound.

This guide walks through the areas to check, where gaps tend to show up, and how a specialty program can take some of the guesswork out of the process.

Key Takeaways

• The franchise agreement is the final word. Manufacturer insurance standards vary, so always get the current insurance section from your client before you quote.
• Requirements cluster in six areas: liability limits, property and inventory, auto and transit, workers’ compensation, additional insured and certificate terms, and carrier standards.
• Most compliance gaps are quiet. Outdated limits, mismatched certificate wording, and generic packages often go unnoticed until a certificate request or a loss.
• Recheck at every renewal. Franchise agreements change and dealers grow, so a limit that once met the standard may no longer.
• Keep the agreement on file with the submission so anyone who touches the account knows what the coverage was built to satisfy.

Why OEM Insurance Requirements Matter When You Place a Dealer

For brokers, OEM compliance is part of the placement, not an afterthought. The dealer’s franchise standing depends on carrying the coverage the manufacturer expects, and your E&O exposure depends on catching what the agreement requires before you bind.

What OEM Insurance Requirements Typically Include

Manufacturer insurance standards differ from one OEM to the next, so the franchise agreement or dealer operating manual is always the final word. Still, the requirements tend to cluster in a handful of areas worth reviewing on every account:

• Liability limits. Many agreements set minimum limits for general liability and, often, excess or umbrella liability. Dealers handling large machinery can see minimums that exceed a standard package.
• Property and inventory. Requirements may address coverage for the dealer’s inventory, including equipment held on consignment, stored off-site or awaiting delivery.
• Auto and transit. Dealers that deliver equipment may need higher auto liability limits and coverage for equipment in transit.
• Workers’ compensation. Agreements commonly expect statutory coverage, with employer’s liability limits at a stated level.
• Additional insured and certificate terms. The OEM may need to be named as an additional insured, receive notice of cancellation, or both.
• Carrier standards. Some manufacturers specify a minimum carrier rating or approved market type.

The specifics vary by manufacturer and by agreement, so ask your client for the current insurance section before you quote.

Where Franchise Compliance Gaps Show Up

Most gaps are quiet. Nothing looks wrong until a certificate request arrives or a loss happens. Three patterns come up often:

1. Limits that were right at signing and are now too low. Franchise agreements can be updated, and dealer operations grow. A limit that met the standard several years ago may fall short today.
2. Certificate wording that does not match the agreement. A missing additional insured endorsement or notice provision can trigger a compliance flag even when the underlying coverage is sound.
3. Coverage built from a generic package. A standard commercial package may not address inventory in transit, off-site storage or higher excess needs, which are the areas OEMs tend to care about most.

The common thread is that the requirement lives in a document the broker may never have seen. Asking for it early prevents surprises at renewal.

A Broker’s Pre-Bind Checklist for OEM Compliance

Before you bind a franchised equipment dealer account, run through these questions:

• Have you read the insurance section of the current franchise agreement, not just a summary?
• Do the general liability and excess limits meet or exceed the stated minimums?
• Is inventory covered wherever it sits, including in transit, on consignment and at off-site locations?
• Do auto liability limits match what the agreement requires for delivery operations?
• Are workers’ compensation and employer’s liability limits aligned with the agreement?
• Does the certificate name the OEM correctly, with any required additional insured and notice terms?
• Is there a plan to recheck requirements at each renewal and when the agreement changes?

Keep the agreement on file with the submission so the next person who touches the account can see what the coverage was built to satisfy.

How Tangram Helps Brokers Meet OEM Requirements

Tangram’s Franchised Equipment Dealers program is built around how these dealers actually operate. Coverage lines include inland marine, cyber, workers’ compensation, auto, property, general liability and excess liability, so you can address most of an OEM’s franchise compliance insurance expectations through one specialty program instead of stitching together separate markets.

Because our underwriters work with franchised dealers every day, they know what manufacturer requirements tend to look like and can help you spot gaps before the quote goes out. Tangram works exclusively with retail brokers, so your client relationship stays yours.

Have a franchised equipment dealer in front of you? Submit a risk and we will review it against the dealer’s OEM requirements. New to Tangram? Get appointed and start placing equipment dealer accounts with a specialty partner.