Equipment Breakdown - Risk Engineering

Equipment Breakdown
(previously known as Boiler and Machinery)
The traditional world of “boiler and machinery” has changed.
Where we once thought of a gear set breaking or a steam
turbine failing, we now have to think about all of the electronic
components, computerized control systems and software that
make modern production methods, quality controls and higher
efficiency possible.
When these newer systems are injured by electrical surges,
they can create more havoc for a manufacturer than the
gear set breaking down. The costs of meeting customer
commitments, backing up software and machine
programming, and repairing or replacing damaged equipment
can be significant and even threaten profitability. Equipment
breakdown insurance can help reduce these risks.
Zurich’s solution: flexible property coverage
With Zurich’s proprietary Property Portfolio Protection (P3)
policy, equipment breakdown is a covered cause of loss, not
subject to separate limits of insurance, deductibles or joint loss
agreement endorsements. This seamless approach to property
insurance means that no separate coverage forms or
endorsements are needed for equipment breakdown coverage.
By including equipment breakdown coverage in our
comprehensive all risk policy, you eliminate the potential for
difficult loss settlements between carriers.
Customers are automatically covered for:
• The cost to repair or replace damaged equipment
• Business income losses
• Costs to expedite restoration of operations after a
breakdown
What is “cause of loss” for equipment
breakdown
The phrase “cause of loss” refers to the incident or event that
can result in loss or damage to property including breakdown
of machinery and equipment. For Zurich, equipment
breakdown cause of loss means:
• Artificially generated electrical current, including electrical
arcing, that injures or disturbs electrical devices, wiring
or equipment;
• Explosion, rupture or bursting of steam boilers, steam pipes,
steam engines, steam turbines and gas turbines that are
owned, operated or controlled by you;
• Any condition or event inside steam boilers, steam pipes,
steam engines, steam turbines and gas turbines that are
owned, operated or controlled by you.
How does Zurich help you prevent potential
causes of loss
To determine the cause of loss — as well as help mitigate the
costs of a breakdown event — Zurich looks to its group of
machinery breakdown risk engineers. These experienced
professionals are trained to recognize the primary causes of
equipment breakdown losses and provide risk improvement
advice that will return the business to normal operations and
help prevent future losses.
Zurich also has a boiler and machinery claims team in field
operations dedicated to processing these types of claims. In
addition, specialists in our large loss unit handle equipment
breakdown claims for all types of businesses. As with all
types of claims, our adjusters respond quickly and work
with customers to expedite repairs/replacement as well as
to find alternative means to keep production going during
a loss event.
Coverage highlights
P3 addresses the common equipment breakdown coverages
as follows:
• Contamination by a refrigerant
– Base limit is $25,000 but can be increased as needed
– Refrigerant is not restricted to only ammonia
• Spoilage resulting from an equipment breakdown event
– Base limit is $100,000
• Hazardous substances
– The pollutants exclusion has a give back for the loss or
damage resulting from pollutants if the release was
caused by an equipment breakdown cause of loss

Some of the other standard P3 coverages that could apply to
an equipment breakdown loss are:
• Water damage
– Covers loss from an equipment breakdown
without sublimits
• Consequential loss — undamaged stock
– Base limit is $250,000 but can be increased
• Duplicate information property
– Covers information that can be copied from the original
source or purchased, regardless of the type of media on
which it is stored
• Original information property
– Covers valuable information unique to your company that
must be restored or recreated, regardless of the type of
media on which it is stored
• Expediting expense
– Base limit is $25,000 but can be increased
Equipment breakdown coverage in action:
Sample loss scenarios*
By automatically including equipment breakdown coverage in
its P3 policy, Zurich protects customers from the various types
of physical damage exposures that often result from a
breakdown event. Examples include:
• An electrical panel overheats from loose connections,
causing an electrical short and damage to equipment.
• Low voltage controls and sensors are damaged when
another machine in the plant starts up, causing a fluctuation
in line voltage.
• Computer controls on a CNC milling machine are damaged
when the power is restored, causing a surge following a
rolling blackout.
• Lightning strikes the electrical panels in a manufacturing
plant, causing a surge throughout all the computerized
material handling machinery. The plant shuts down until the
burned equipment can be replaced and tested.
• A dedicated air conditioning unit for the master control
center of a manufacturing plant loses refrigerant, allowing
heat buildup in equipment and causing failure of computers,
as well as potential contamination of equipment from
escaped refrigerant.
• A polymer and resin manufacturer experiences electrical
arcing, which damaged shredders and other production
line equipment.
• The steam pipe for heating a building fractures and leaks
into the data center, causing water damage to equipment.
• A squirrel climbing on a transformer struck wires and caused
a power surge in a food products manufacturing facility,
damaging electrical panels on various equipment and
causing product spoilage.
• An equipment manufacturer experiences a power surge,
which damaged a lathe used in operation.
For more information
To learn more about how Zurich’s P3 policy can provide
the equipment breakdown coverage you need, visit
www.zurichna.com or talk to your broker.
Examples of covered machinery
and equipment
When equipment breakdown coverage was thought of as
boiler and machinery, there was a mistaken belief that if a
manufacturing company did not have a boiler they did not
need this coverage. Today’s modern manufacturing plant is
increasingly more dependent on a wider array of complex
and sophisticated types of machinery and equipment that
are exposed to electrical injuries such as surges.
Representative examples of equipment covered under
Zurich’s P3 insurance policy include:
• Air conditioning systems
• Boilers
• Chilling towers
• Compressors
• Coolers
• Electrical distribution
panels
• Electronic data
processing hardware
• Engines
• Factory automation
systems and sensors
• Fans and blowers
• Freezers
• Gear sets
• Generators
• Heating units
• Motors
• Piping
• Production machinery
• Pumps
• Refrigeration units
A1-20292-A (09/11) 11-2650
Zurich
1400 American Lane, Schaumburg, Illinois 60196-1056
800 382 2150 www.zurichna.com
* Every claim or suit is unique and insurance coverage must therefore be based upon an analysis of the applicability
of the relevant policy language to the specific facts of the claim, according to the controlling law, including case
law, of the applicable jurisdiction.
This is intended as a general description of certain types of insurance and services available to qualified customers
through the individual member companies of Zurich in North America, including Zurich American Insurance
Company. The coverages are underwritten by individual member companies of Zurich in North America. Certain
coverages are not available in all states. Some coverages may be written on a nonadmitted basis through licensed
surplus lines brokers. Your policy is the contract that specifically and fully describes your coverage. The description of
the policy provisions gives a broad overview of coverages and does not revise or amend the policy. Risk engineering
services in the U.S. are provided by Zurich Services Corporation.
©2011 Zurich American Insurance Company