Boiler & Machinery Insurance Policies

Standard commercial property policies contain exclusions that eliminate coverage for explosion of boilers owned or operated by the insured and for mechanical and electrical breakdown. These exclusions also eliminate coverage for resulting loss of income and extra expenses. Boiler & Machinery insurance, also known as equipment breakdown insurance is available to close these gaps in the commercial property policy covering the businesses own facilities.

Coverage the policy provides:

Traditional boiler and machinery policies can be written to cover the breakdown of individually described pieces of equipment (referred to in traditional boiler and machinery policies as "objects") or specific categories of equipment. However, most equipment breakdown policies use a very broad definition of covered equipment so that nearly all equipment owned, leased, or operated by the insured is covered automatically.

Covered losses:

Equipment breakdown insurance pays for the cost to repair or replace covered equipment that suffers a covered breakdown or accident. If the breakdown or accident damages other property belonging to the insured (and, in most policies, property of others that is in the insured’s care, custody, and control), the cost to repair or replace that other property is covered as well.

Nearly all equipment breakdown policies also provide some coverage for "expediting expenses," which are generally defined as expenses that are incurred to speed up the repair or replacement of damaged property, plus the cost of temporary repairs. Express shipping charges and overtime wages are examples of expediting expenses. Most policies place a maximum (such as $25,000) on the amount of coverage that is available to cover expediting expenses.

Additional policy coverages:

Some equipment breakdown policy forms include business income and extra expense coverage automatically. Others contain business income and extra expense coverage options that the insured may elect to purchase. Still other policy forms must be endorsed to add the appropriate coverage provisions. Business income and extra expense coverage may be subject to separate limits of insurance, a single limit that applies to both, or the overall policy limit.

Coverage limitations:

Most equipment breakdown policies provide only limited coverage for the following types of damages that may result from an accident or breakdown.

• Hazardous substances
• Ammonia contamination
• Water damage

These types of damages usually are subject to a maximum, referred to as a sublimit. This sublimit is part of, rather than in addition to, the direct damage coverage limit. The current standard equipment breakdown coverage form specifies a $25,000 limit for each.