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 they give little attention to the warranty and its terms.
Explore this issue:September 2012
In general, three types of warranties are available for medical equipment: manufacturer’s warranty, retail seller’s warranty and extended warranty. Manufacturer’s warranties and retail seller’s warranties are provided by the manufacturer and retail seller, respectively, at no additional cost to the purchaser. Typically, these warranties are non-negotiable and cover a product for a very limited period of time. An extended warranty—also known as a service contract, protection plan or maintenance agreement—is a contract the consumer purchases at an additional cost for the maintenance and repair of the equipment. It is intended to enhance the manufacturer’s and retail seller’s warranties by providing additional 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, and its start date, are of great importance. Second, the majority of the language found in warranties is about coverage—specifically, what is covered, along with any conditions, limitations and exclusions from coverage.
Dr. Buyer wanted to purchase an extended warranty so that the equipment would be under warranty for a period of time beyond what was otherwise included in 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 it 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 a certain 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 received the best protection with the fewest 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 the following:
- 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