Dr. Buyer was recently considering the purchase of an expensive, state-of-the-art piece of equipment for his practice and asked me to review the extended warranty. The art of purchasing a piece of medical equipment (and its extended warranty) requires the perfect combination of medical, financial, business, and legal expertise. Physicians are often so focused on the price of the equipment that little attention is spent on the warranty and its terms.
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Explore This IssueSeptember 2012
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In general, there are three types of warranties available for medical equipment: manufacturer’s warranty, retail seller’s warranty, and extended warranty. Manufacturers’ warranties and retail sellers’ warranties are provided by the manufacturer and retail seller, respectively, and are at no additional cost to the purchaser. Typically, these warranties are nonnegotiable and are for a very limited period of time. An extended warranty (also known as a service contract, protection plan, or maintenance agreement) is a contract that the consumer purchases at an additional cost for the maintenance and repair of the equipment. It is intended to enhance the manufacturers’ and retail sellers’ warranties by providing coverage and protection for a longer period of time.
This article describes key provisions that can make or break an extended warranty for medical equipment. First, the length of the warranty is of great importance. Equally as important is when the clock starts ticking on the warranty. Second, the majority of language in warranties is about coverage—specifically, what is covered and the conditions, limitations, and exclusions from coverage.
Dr. Buyer wanted to purchase an extended warranty so that the equipment would be under warranty for an additional period, in excess of what was otherwise included under the manufacturer’s and retail seller’s warranties. Although the retail seller’s warranty was for 90 days and the manufacturer’s warranty was for one year, Dr. Buyer wanted longer coverage.
When reviewing the warranty’s term, it is important to determine when coverage begins and when coverage expires. Typically, coverage commences on the date the equipment is purchased, the date the extended warranty is purchased, or after the manufacturer’s and/or seller’s warranties expire. Coverage often terminates after an elapsed period of time or number of uses of the equipment.
In the extended warranty presented to Dr. Buyer, the warranty’s clock started ticking after the manufacturer’s one-year warranty expired. Thus, if the equipment required repair during the first year, Dr. Buyer would need to seek coverage from the manufacturer and not the seller of the extended warranty. I was concerned that if a repair was needed during the first year, but was for some reason excluded from the manufacturer’s warranty (e.g., repair due to improper use), Dr. Buyer would have to pay out of pocket because the extended warranty would not be effective until the initial one-year ownership period lapsed. Fortunately, I was able to negotiate this fine point with the seller of the extended warranty so as to provide overlapping coverage, ensuring that Dr. Buyer was best protected, with the least amount of time limitations.
When considering the purchase of an extended warranty for a piece of medical equipment, you must understand what is and is not covered to determine if the warranty is worth the added expense. Some important questions to ask yourself when reviewing a warranty include:
- Who determines whether the equipment requires repair?
- What factors determine whether the equipment requires repair?
- Is routine maintenance covered?
- Are manufacturing defects covered?
- Is normal wear and tear covered?
Additionally, you should determine what the extended warranty provides that the manufacturer’s and retail seller’s warranties do not. It would be a waste of money to purchase coverage that is already included in the cost of the medical equipment via the manufacturer’s warranty, for example. In the extended warranty presented to Dr. Buyer, some of the covered items were already covered in the manufacturer’s warranty. For example, a specific part was replaceable for the same period of time, regardless of whether replacement was needed due to a manufacturer defect, overuse, or improper use. When negotiating the terms with the seller of the warranty, you may be able to carve out certain coverage that is duplicative of the manufacturer’s warranty, effectively reducing the purchase price of the extended warranty.
You should also be aware of all conditions, limitations, and exclusions that could void your coverage altogether. You would not want the equipment to inadvertently be unprotected by the warranty because of an act or omission to act that was otherwise avoidable. A physician client of mine successfully repaired a sticking key on the keyboard attached to a piece of equipment in his office. Even though he repaired the sticking key, when the machine had an unrelated problem that was otherwise covered by the extended warranty, the coverage was denied because the machine had previously been repaired by an unauthorized party. I have reviewed and negotiated numerous medical equipment warranties whereby coverage is voided in the event the equipment is not maintained or used as explicitly directed in the equipment’s manual.
The benefits and protections you receive under an extended warranty depend entirely on the language in the document. If provisions of the warranty do not meet your needs and the needs of your practice, then those terms should be revised and negotiated. While it is important to read, examine, and understand all terms of an extended warranty yourself, I do not recommend purchasing an extended warranty without having an attorney review and negotiate (if needed) the warranty, and to explain any terms that are not fully understood. In order for an extended warranty to work to your best advantage, it is important to incorporate legal advice into the mélange of expertise necessary to decide whether to purchase the warranty or not.
Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins, LLC. He may be reached at [email protected].