Equipment Breakdown Insurance: Too Important to Ignore!

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The base limit is $500,000. Each of the above coverages can be written subject to a separate limit or included as part of the base limit for direct damage (property damage) to covered property. Since “covered property” coverage not only encompasses property owned by the named insured but also property damage to property in the insured’s care, custody or control, and over which the named insured is legally liable, it is important that the limits be selected wisely. If a $500,000 base limit is selected and the other coverages are designated in the declarations as being included, coverage will hinge on how much is left after paying for damage to property the named insured owns or has in its care, custody or control.

One of the perennial sources of confusion within the realm of property insurance, which includes equipment breakdown, is the difference between expediting expenses and extra expenses. For a more comprehensive discussion of both subjects, refer to the article on page 10 of this issue.

Exclusions

With the expansion of equipment breakdown insurance, it is only natural to see the number of exclusions likewise increase. Currently, there are 21 exclusions. About six of these apply because the losses can be handled by property insurance. The other exclusions apply unless the coverages are selected under this policy. What can be referred to as new exclusions are those that also have been added to other property and liability policies, namely, fungus, wet rot and dry rot.

The coverage is excluded whether loss or damage is caused directly or indirectly from an exclusion and also from a concurrent cause; that is, an exclusion applies regardless of any other cause or event that contributes concurrently or in any sequence to the loss. It also does not matter whether the loss event results in widespread damage or affects a substantial area.

The 21 exclusions, as they appear in the ISO form EB 00 20—equipment breakdown protection coverage form—are as follows:


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