Is a Manufacturer Considering Voiding an Equipment Warranty or Service Contract? AREPA Can Help

Imagine this scenario.

A fire in a laboratory caused contaminants to settle on sensitive, newly purchased analytical equipment. In an effort to minimize business interruption, the equipment is professionally cleaned and the manufacturer is contacted afterwards to perform testing, repair and recalibration.

The manufacturer does not have experience with post-loss equipment recovery. A concern is raised about future reliability and the possibility of repairs that may fall under an insurance claim as opposed to warranty. The manufacturer contemplates the available options. The first is the replacement of affected items with new equipment. The second is performing the testing, repair and recalibration as requested, although all future work would have to be paid for as well, as the warranty would be void. 

From your perspective, as an equipment owner or insurance adjuster, the equipment did not sustain catastrophic physical damage. The equipment was contaminated and the option of professional decontamination followed by functional testing, is a reasonable way to get the lab back in production in a fraction of the time it would take to procure new equipment. However, since the equipment was fairly new, you would like the warranty to remain intact. What can you do?

How to Approach Warranty Reinstatement

Similar to a car that was restored following an accident, the tires and brakes will continue to wear as the car is driven. Equipment will also continue to wear, and routine maintenance and perhaps even some repairs will be necessary, although the repairs should not be related to the loss event.

So, how do you go about convincing the manufacturer to reinstate the warranty? If the equipment can be easily restored through professional decontamination followed by testing, repair and recalibration, then your task is to include the manufacturer in the assessment and recovery process from the beginning. This will allow the manufacturer to have ample knowledge of the entire process, including the results from the assessments which will give them full confidence that the equipment will be fully restored and function as it did pre-loss.  

The process one would go through to reinstate a warranty involves educating a manufacturer on post-loss equipment evaluation, how to quantify contaminants scientifically, restoration methodologies, post-decontamination analytical sampling, electronics industry cleanliness standards, and the manufacturer’s role as a recovery partner. The goal is to instill confidence that the equipment will not fail in the future as a result of the loss event.

From an insurance company perspective, there may not be an obligation to address warranty reinstatement based on policy language, although insurance professionals strive to make their policyholders whole to include the remaining warranty that existed at the time of the loss.

What Can You Say to the Manufacturer?

The best route at this point is to help educate the manufacturer on the technical and scientific validity of equipment recovery. The manufacturer does not participate in post-loss recovery activities on a regular basis, and as such, needs knowledge on these activities to gain confidence in the process. Action items to move the process forward:

• Ask the manufacturer to quantify the specific damage they observed. This can then be compared to what the equipment specialists noted as a starting point. You might have to pay for an evaluation.
• The equipment specialist should harvest conductivity samples to determine the likelihood of equipment failure as a result of electrical short circuiting. This is especially important if the equipment will be powered on before removal of the contaminants.
• The equipment specialist should also swab contamination and send the samples to a lab. The lab results will provide more scientific detail about areas within the facility that may be deteriorating faster than others, based on the composition of the analyzed matter.
• Obtain from the manufacturer the original cleanliness specification that the equipment met when it was first manufactured. Most manufacturers are not sure where to find this specification, as it is a quality assurance metric versus an equipment functionality question.
• Educate the manufacturer about the IPC standard, which is the premier standard that printed circuit board industry abides by. Advise that equipment will meet the IPC cleanliness threshold post-decontamination. This means that loss-related contaminants will not rust metal or cause electrical short circuits between electronic components.
• Offer to pay the manufacturer to witness the decontamination. The manufacturer’s representative can participate in the process.
• Consider paying for a service agreement that would commence once the warranty lapses, as an economical way to ensure one additional year of repair support. Such a contract may be available through the manufacturer or a third-party.
• Advise all stakeholders that there are third-party service providers that are eager to help with the recovery and place their own service contract on the equipment.

Sometimes the warranty cancellation may happen after the equipment has been decontaminated, repaired, and put back into use; at this point your best option is to have the manufacturer do an inspection and demonstrate that the item has been restored to a pre-loss condition.

Use Science

When negotiating with the manufacturer, it is important to use science and facts. This means doing a full evaluation of the equipment before the negotiation even starts. Check against the equipment's operating parameters.

Consider obtaining temperature logs, which show how hot the room got, as well as humidity logs and document any signs of corrosion. Manufacturing design specifications detail acceptable storage and operational environmental limits (heat and humidity), although most do not publish cleanliness thresholds. Assessing the contamination level is important. Conductivity testing and wipe samples can be used to establish the type of contaminants present and in what quantity. This can sometimes be predicted from knowledge of what was consumed in the fire. A professional decontamination company such as AREPA, can advise what will be needed to remove the contaminants and how much damage they might have done in the form of metal pitting.

The contamination analysis can then be used to negotiate with the manufacturer, as well as to ensure that decontamination was successful. Ideally, the analysis should be done jointly, involving equipment owners and all manufacturers affected by the incident. It should also be done quickly, especially when considering corrosive contaminants, as rust can develop rapidly.

Post-decontamination, a testing protocol should be developed to ensure that the equipment is fully functional. Power on self-test, that many systems have integrated into their boot sequence, are the first step. AREPA recommends performing burn-in testing as such tests repeatedly exercise electrical circuits through all their functions. This process will discover a failure that might not be discovered during normal system operation.

The scientific approach helps instill confidence so that the manufacturer will not see the need to revoke the warranty to begin with. As opposed to a warranty, which is a free functional guarantee for new equipment, service contracts are a paid product that can be easily replaced. There are many companies that are eager to displace the manufacturer and perform the same quality repairs through a service contract of their own.

As noted above, the key to maintaining the warranty is to get everyone on the same page, from beginning to end, in order to make the equipment owner whole via a fair settlement. This requires negotiation and technical analysis to demonstrate that the equipment can be professionally decontaminated, repaired, and put back into use. Insurance companies, equipment owners, and manufacturers, all have their own interests to look out for, although the common goal is to help an entity that suffered an unfortunate loss recover as quickly as possible.

To find out more about how AREPA can help with warranty and service contract reinstatement after a fire, natural disaster, or other incidents, check out our webinar on the "Warranty Dilemma." Then contact us to learn how we can help get your equipment back up and running as quickly as possible.