News

Equipment and Mechanical Breakdowns Can Impact Your Clients’ Bottom Line

Equipment is essential in today’s world. Businesses depend on equipment and that equipment evolves as technology advances. Mechanical, electrical and pressure system breakdowns are typically excluded or limited on the property policy form. Educating your clients what could go wrong with equipment is key to preventing losses and protecting your client’s bottom line. 

Equipment is exposed to unique risks that other property is not such as electrical short circuits and mechanical forces. Equipment Breakdown coverage is designed to cover a sudden event and damage typically will be caused by arcing, rupturing, bursting, fracturing, seizing, and the operation of the machinery stops suddenly. It is not intended to cover wear and tear. Wear and tear can be evidenced by damage like erosion, corrosion, rusting, leaking, squeaking and wearing with declining performance, capacity, and functionality.

Policy forms are not standardized and can vary significantly from one carrier to another. Be sure to review the forms to make sure you are covering the perils and types of equipment desired. Some examples of covered equipment would be:

• Electrical systems and panels

• Air conditioning and refrigeration

• Boilers and Pressure Vessels

• Computers, Servers and Telecommunications Hardware

• Mechanical such as elevators and backup generators

• Renewable/ Alternative Energy

• Production Equipment such as CNC equipment, robotics, machining tools, food processing equipment, etc. 

Here are a few claims examples in which equipment breakdown coverage comes into play

Electrical Breakdown

• A cast iron boiler in a vacant building was destroyed due to a low water condition, causing $12,760 in property damage.

• Lightning struck a utility’s sub-station and the area suffered a brown-out. When the surge of power occurred it damaged the compressor and condenser of the air conditioning unit. The entire air conditioning unit had to be replaced

• A furniture manufacturer had sawdust in an electrical distribution panel severely damage the interior of the panel. Repair costs were $21,087

Mechanical Breakdown

• The gap guard on a printing press came loose and was ingested between the plate cylinder and the imaging unit damaging the machine. Contributing factors to this mechanical breakdown were the lack of adequate maintenance and operator training

• The blower motor on a furnace seized, resulting in loss of heat and ultimately caused the pipes to freeze and burst which caused the breaker to trip on another furnace, resulting in further loss of heat

• A storage cooler for flowers seized, causing the cooler to produce freezing temperatures. The entire stock of fresh flowers was frozen and thus unusable

Pressure Equipment Breakdown

• Low water levels in a boiler unit resultedin the unit overheating and cracking. This caused loss of heat to the retail store and store had to be shut down for one day.

• A church had section of their boiler and steam pipe fitting cracked. Steam damaged the church organ, choir robes and public address system.