Equipment Breakdown – What Does it Cover?
What is Equipment Breakdown?
Equipment Breakdown is Property coverage. It has a different title, but it is an extension to the Property form. In most Property forms you will find exclusions for losses due to steam boiler explosion, loss due to mechanical breakdown and loss due to electrical arcing (the latter is where I see the majority of claims). The intent of Equipment Breakdown is to fill those specific gaps (exclusions) for Property damage, business interruption, extra expense and consequential coverage.
Who has an Equipment Breakdown exposure?
Every insured has an exposure. If you use electricity, you have an exposure. A specific Property exclusion is “Loss due to electrical arcing.” Without an Equipment Breakdown policy, if the power supply is lost because of a short, arcing, or a loose connection that causes the electrical main to disconnect or distribution of power to fail, there would be no coverage for the property damage, the interruption in your business, or the extra expense or consequential loss. If you had to temporarily relocate due to lack of power (which would affect your communication systems, heating, cooling, plumbing) there would be no coverage. Extra Expense on an Equipment Breakdown policy provides that coverage.
What Equipment Breakdown coverage is not is a maintenance policy. An example would be where rust and corrosion led to the demise of a gas fired heating blower. The unit had not been serviced in 10 years and thus no one knew that the unit was rusting away. Rust and corrosion are specifically excluded from coverage in the policy.