Equipment Breakdown
Coverage for sudden and accidental mechanical or electrical breakdown of equipment like boilers, HVAC systems, and electrical panels.
What It Is
Equipment Breakdown coverage, formerly known as Boiler and Machinery insurance, covers direct physical damage caused by the sudden and accidental breakdown of covered equipment. This includes mechanical breakdown, electrical arcing, motor burnout, boiler explosion, pressure vessel failure, and similar equipment failures. Standard commercial property policies specifically exclude these losses.
Covered equipment typically includes boilers, pressure vessels, HVAC systems, electrical panels and transformers, refrigeration systems, production machinery, computer and telecommunications equipment, and renewable energy systems. The coverage pays for damage to the equipment itself and to other property damaged by the breakdown.
Modern equipment breakdown policies also include valuable loss prevention services—regular inspections of boilers and pressure vessels (often required by state law), infrared scanning of electrical panels, and risk engineering recommendations. Many states require boiler and pressure vessel inspections, and the equipment breakdown insurer often provides these inspections as part of the coverage.
Why It Matters for Brokers
Equipment breakdown is one of the most commonly overlooked coverages in commercial property insurance. The standard property policy's exclusion for mechanical and electrical breakdown means that a failed compressor, burst boiler, or shorted electrical panel—among the most common equipment losses—is uninsured without this coverage. Brokers who recommend equipment breakdown to every commercial property client provide significant value.
Real-World Example
A hotel's main chiller compressor suffers a mechanical breakdown in July, requiring $145,000 for replacement plus $38,000 in spoiled food from the failed refrigeration and $92,000 in lost room revenue during the 3-week repair period. The standard property policy denies the claim because mechanical breakdown is excluded. With equipment breakdown coverage (annual premium approximately $3,200), the insurer pays $275,000 for equipment repair, spoilage, and business income loss combined.
Common Mistakes
- 1Assuming the standard commercial property policy covers equipment failures—it specifically excludes mechanical and electrical breakdown.
- 2Not adding business income and spoilage coverage to the equipment breakdown policy, which are available as additional coverages and often represent the largest losses.
- 3Overlooking equipment breakdown for technology-heavy businesses like data centers, medical offices, and manufacturing facilities where equipment failure is the primary risk.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker flags every commercial property policy that does not include equipment breakdown coverage. The system identifies equipment-intensive business classifications and escalates the recommendation priority for those accounts. The platform also tracks state boiler inspection requirements and verifies that the equipment breakdown carrier provides required inspections.