Equipment Breakdown Coverage Basics

equipment_breakdown 1A 60” Ultra HD curved screened TV that was worth $6000 was damaged by a power surge in a corporate conference room.  A 12 unit apartment building’s water heater has stopped working due to an internal explosion.  Looks like no coverage and likely a denial, but something that could cost the insured thousands of dollars to repair or replace.

As field adjusters, we are familiar with these types of claims.  Well my fellow adjusters, do any of you remember something called Boiler and Machinery Coverage in your distant past?

Then welcome an old friend with a new name!!  But you say, wait, that only provides coverage for pressured vessels and boilers that rupture or break apart.  And that may have been correct 20 years ago.  Today, however, Equipment Breakdown Coverage has been expanded and refined.  In addition to covering boilers and other pressurized vessels, the coverage now frequently insures against the formerly excluded perils of mechanical breakdown and electrical arcing.  The trigger of coverage for an equipment breakdown loss requires an “Accident” to occur.  An “Accident” is frequently defined as a fortuitous event that causes direct physical damage to “covered equipment.”  Unlike commercial property coverage which covers external causes of loss, Equipment Breakdown Coverage covers loss within the equipment.

iStock_000010035942Medium - CopyA number of recent articles recommend that all commercial insureds should add Equipment Breakdown Coverage to their policy.  The costs to replace and repair large systems are growing more costly every year.  Many insurance carriers make this type of insurance available, but many have other companies such as Hartford Steam Boiler or Mutual Boiler Re underwrite and assist in the adjustment of the claims with the insurance company’s own desk adjusters.

Now that you know a little more about the coverage offered under such coverage, it is very important that field adjusters review and understand the coverage that is available to an insured.  If you see Equipment Breakdown Coverage available to an insured, you must be able to determine whether an excluded property claim may be covered under the Equipment Breakdown Coverage and to complete the additional investigation required.  Now maintenance records, contact with the insured’s contractor and possible expert examination may be required.  Immediate contact with insurance company adjusters and if the coverage is underwritten, notice by the insurance company adjusters to the sub-carriers become crucial, especially with situations involving the loss of heat in winter conditions.  In many cases, repairs or replacement will be completed before the loss can be adjusted.  Instructions by field adjusters to remind the insured not to throw away any damaged parts and to permit joint inspections must be promptly initiated.  As with all time sensitive losses, communication and prompt reporting of issues are critical to successfully adjusting the loss.

If you are interested in finding out more information about Equipment Breakdown Coverage and how to adjust EB losses, feel free to contact us at Provencher & Company LLC.

© Provencher & Company LLC 1/11/2015

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