Talking with the Tierney's - Examples of Broad Use of Equipment Breakdown Insurance
- Causes of loss related to equipment breakdown are often user/operator error, faulty design or improper installation
- Risk management efforts are very important
Equipment breakdown insurance used to be (and still sometimes is) referred to as "boiler and machinery" insurance
Equipment Breakdown: Loss Exposures: Other
Equipment Breakdown Insurance: Intro, Definitions and First 3 Agreements
Mechanical Equipment
Electrical Equipment
Property Damage
- Definition of property covered is much broader than "covered equipment"
- For example: a boiler explodes and damages the property around it
- Includes any property the insured owns
- Covers damage to an insured's building, personal property, and customer's property in the care, custody, and control of the insured
- Cables, motors and generators
- Electrical shorting of wingdings
Examples of Causes of Loss
Check out covered equipment on page 10.14 - especially look at the first 4 "it doesn't include"
- Insulator, connector, or control failure
- Bearing failure in rotating equipment
Introduction to Equipment Breakdown Insurance
Policy Definition of "Breakdown"
Office Equipment and Systems
- Business Income and Extra Expense (or Extra Expense Only)
Air Conditioning and Refrigeration Equipment
- Traditionally not covered by Equipment Breakdown insurance
- Ordinance or Law Coverage
- With the widespread use of complicated office equipment, this category has been added
Examples of components of this:
- Examples of Office Equip/Systems:
- Contingent Business Income and Extra Expense (or Ex Exp Only)
Spoilage Damage
Covers spoilage damage due to...
Expediting Expense
- Examples of covered causes of loss:
- Finished products while in storage
- Expenses incurred to speed up the repair or replacement of covered property
- Distortion or breakage of parts
- Finished products in the course of being manufactured
- Insulator, connector or control failure
- Improper control settings
Spoilage must have resulted from lack of or excess power, light, heat, steam or refrigeration
- Not as broad as "extra expense coverage"
Cracks or breaks in piping
- Doesn't cover rent for a substitute facility
Outline of Equipment Breakdown Insurance Assignment 10
- Equipment Breakdown Exposures
Equipment Breakdown Loss Exposures: Pressure Vessels
Insuring Agreements for Time Element Coverage
- Boilers and pressure vessels
Boilers are a fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water
Business Income and Extra Expense (or Ex. Expense Only)
Utility Interruption
Common types of boiler breakdown:
-Explosion caused by excessive internal pressure of steam
- Insurer agrees to pay the insured's actual loss of business income during the period of restoration resulting from breakdown to covered equipment
-Overheating, aka "dry-firing" (usually because of low water)
- A closed container that is heated by the direct fire of burning fuel and can withstand internal pressure
- Cracking of cast iron-e.g. expansion stresses
- Air conditioning and refrigeration equipment
-Bulging, aka bagging e.g. buildup of scale expansion stresses
- Extends any business income, extra expense, or spoilage damge coverage to include loss resulting from breakdown of equipment owned or operated by a public utility
- Extra expense coverage applies to extra expenses the insured incurs to operate the business during the period of restoration (e.g. relocation, rent, etc...)
- Boilers are the most common type of these
- Office equipment and systems
- e.g. Water, sewer, heating, gas, etc...
- Many buildings are heated by boilers
- Equipment Breakdown Insuring Agreements
Contingent Business Income and Extra Expense
Common Perils covered by Equipment Breakdown Policies:
- Definitions and First 3 Insuring Agreements
- A closed vessel that can withstand internal pressure but is not heated by the direct line of fuel
- Rupture or bursting from centrigal force
Covers business income and extra expense from breakdown to covered equipment:
Not covered by EB but covered by CPP:
- Insuring Agreements for Time Element Exposures
- Explosion of unfired pressure vessels
- At the dependent property shown in the declarations
- Not owned or operated by the insured
- Other Insuring Agreements
Perils of an unfired pressure vessel are explosion, bulging, cracking, and collapse
Coverage Provisions
Other Insuring Agreements
When there is more than one location, the limit should be set at the maximum possible loss at any one location bc there is virtually no chance of a catastrophic loss with this exposure
- Generally there is a "limit per breakdown"
- Limit for certain exposures is $25,000
- Spoilage from ammonia contamination
- Reduction in value of undamaged parts
- Ordinance or Law Coverage
- Insurer will not pay for loss that doesn't exceed deductible
- Time deductibles are used for time-element coverages
- Time deductibles may be expressed in hours or days
- May be a Multiple of Daily Value Deductible, e.g. 5, the deductible is amount of Business Income lost/days *5
Exclusions
- Has exclusions similar to the CPP (e.g. earth movement, nuclear hazard, etc...
- Fire or combustion that results in a breakdown
- Water or other means of extinguishing fire
- Breakdown caused by several other perils such as: freezing caused by cold weather, windstorm or hail, vandalism (usually provided by CPP)
Equipment Breakdown Insurance