CP 10 46–EQUIPMENT BREAKDOWN CAUSE OF LOSS

(June 2019)

INTRODUCTION

This endorsement adds equipment breakdown to CP 10 30–Causes of Loss–Special Form as a separate cause of loss. It is not a unique coverage form and does not provide additional limits of insurance. It may be an excellent product for many insureds. However, if the insured currently has equipment breakdown or boiler and machinery coverage, comparisons should be made to identify potential gaps in coverage before eliminating the coverage form and replacing it with this endorsement.

Related Article: Equipment Breakdown Overview

SCHEDULE

The schedule is confusing. It appears to be a schedule for increases in the sub-limit. However, it is actually intended to list all premises and buildings subject to this endorsement.

Coverage applies to only the premises and building numbers listed on the endorsement schedule.

In addition, if higher limits for Ammonia Contamination and/or Hazardous Substances Other than Ammonia Sub-limits are desired, the revised sublimit(s) must be entered next to the covered premises and building number.

A. EQUIPMENT BREAKDOWN

Breakdown of Covered Equipment is added as a covered cause of loss but only for the locations on the endorsement schedule.

The cause of loss is defined later in the endorsement.

All terms and conditions of CP 10 30–Causes of Loss–Special Form continue to apply unless this endorsement specifically modifies them.

B. EXCLUSIONS

1. Three exclusions in CP 10 30 do not apply:

• B. 2. a. Artificially Generated Energy

This exclusion does not apply except when the loss or damage is due to a release of high-altitude electromagnetic energy.

• B. 2. d. (6) Mechanical Breakdown

This exclusion does not apply. There are no exceptions.

• B. 2. e. Explosion of Owned or Operated Steam Boilers

This exclusion does not apply. There are no exceptions.

2. A new exclusion is added: Testing

There is no coverage when loss or damage occurs while covered equipment is either being pressure tested or going through an electrical test. If a fire or explosion results from such tests, coverage applies.

3. Two exclusions are revised:

• B. 2. d (1) Wear and Tear

This exclusion adds an exception for damage that results from any breakdown.

• B. 2.d (2) Rust, etc.

This exclusion adds an exception for damage that results from any breakdown.

C. LIMITATIONS

The following limitations are eliminated without exceptions:

• C. 1. a. Steam Boilers, Steam Pipes, Steam Engines, or Steam Turbines
• C. 1. b. Water Heating Devices

D. LIMIT OF INSURANCE AND DEDUCTIBLE

1. Any direct loss or damage this endorsement covers is subject to the Limits of Insurance and the Deductible Sections in the coverage form(s) that apply. This endorsement provides an additional cause of loss, not additional limits of insurance.

2. Any loss of income or extra expense loss or damage that this endorsement covers is subject to the Limits of Insurance and waiting period in the coverage form(s) that apply. This endorsement provides an additional cause of loss, not additional limits of insurance.

3. All breakdowns that occur at the same time and from the same causes are considered a single occurrence even though the breakdowns may take place at multiple premises. In addition, when a breakdown starts a chain reaction that causes other breakdowns to take place, all such related breakdowns are considered a single occurrence.

4. The most paid for either an Ammonia Contamination or Hazardous Substance loss is 10% of the limit of insurance or $25,000, whichever is less. The $25,000 limit can be increased. When increased, the 10% limitation no longer applies.

Ammonia Contamination or Hazardous Substance payments are sub-limits and are subject to the limit of insurance. When combined with all other direct loss in a single occurrence, the total payment cannot exceed the limit of insurance.

Ammonia Contamination coverage and Hazardous Substance coverage are defined as follows:

a. Ammonia Contamination

This is when covered property is spoiled because ammonia contaminates it. Salvage expenses associated with such occurrences are considered part of the loss.

b. Hazardous Substance

This is when a hazardous substance contaminates, pollutes, or damages covered property. It includes costs the named insured incurs to replace, cleanup, repair, or dispose of the property. A government agency must have declared the substance to be hazardous to health. However, the substance cannot be ammonia.

E. SUSPENSION

This feature is unique to equipment breakdown coverage. If covered equipment is determined to be in or exposed to a dangerous condition, any insurance company representative may immediately suspend coverage with respect to that equipment by delivering or mailing written notice of suspension to the insured's last known address or to the location of the suspended equipment.

Example: Olivia is a representative of Equipment Insurance Company. She stops in at Crimson and Clover Floral Design to pick up flowers for her mother. She knows that her company insures Crimson and Clover. She is appalled when she notices that Crimson is bypassing safety devices in order to keep the refrigeration equipment working. She notifies the employee who waits on her that she is immediately suspending coverage on the refrigerated units because of the dangerous condition. She then writes out a notice and hands it to the employee, advising her to turn off all equipment and notify the owner. The employee immediately calls the owner.

After Olivia leaves, the owner returns to the store and turns on all of the equipment that was turned off. An equipment breakdown loss occurs that evening. The claim is denied because of the suspension notice.

Suspended coverage can be reinstated only by the insurance company issuing an endorsement for that covered equipment.

Note: Oral statements that authorize resuming operations are unacceptable and do not reinstate coverage.

If coverage is suspended, the insured receives a pro rata refund of premium paid to insure that equipment. However, the suspension takes place as soon as announced, even before refund of any applicable premium is offered or issued.

F. DEFINITIONS

1. Breakdown

This is direct physical loss that causes such damage to covered equipment that must be repaired or replaced.

a. The direct physical loss must be one or more of the following except as excluded elsewhere is this endorsement:

• Failure of pressure of vacuum equipment
• Rupture or bursting caused by centrifugal force and other types of mechanical failure
• Arcing and other types of electrical failure

b. The following situations are not covered as breakdown:

• Adjustment, alignment, calibration, cleaning, or modifying equipment that results in malfunction
• Computer equipment and programs defects, erasures, errors, limitations, or viruses. Any inability to process dates or times or to provide instructions to covered equipment is considered a defect.
• Leakage from valves, connections, joints, shaft seals, fittings, or gland packing
• Damage to vacuum tubes, gas tubes, or brushes
• Damage to structures or foundations even if they support covered equipment or its parts
• Function of any safety or protective device
• Cracking of any part of an internal combustion gas turbine exposed to the products of combustion

2. Covered Equipment

a. Covered equipment is the following:

• Equipment designed and intended to operate under internal pressure or in a vacuum. It does not include equipment that operates under only the pressure of the contents within it.
• Electrical or mechanical equipment used to generate, transmit, or use energy
• Communication equipment
• Computer equipment. The equipment must belong to the named insured and be programmable equipment used to retrieve and store data. Peripheral equipment is included provided is has input, output, or other useful functions that work with the programmable equipment.

b. Covered equipment does not mean or include:

• Data
• Media
• Any part of pressure or vacuum equipment not under internal pressure of its contents or internal vacuum
• Insulating or refractory material. However, the glass lining of covered equipment is covered.
• Catalysts

Note: As used in chemistry, a catalyst is a substance that modifies and increases the rate of a reaction without being consumed in the process.

• Vessels, piping, and equipment below the ground’s surface when excavation is required in order to inspect, remove, repair, or replace them
• Vehicles, aircraft, self-propelled equipment, or floating vessels. This includes covered equipment mounted on or used exclusively with any of these.

Note: This means that equipment that is otherwise covered but occasionally is used on vehicles, aircraft, self-propelled equipment, or floating vessels remains covered.

• Dragline, excavation, or construction equipment. This includes any covered equipment mounted on or used exclusively with any of these.

Note: This means that equipment otherwise covered but occasionally used on dragline, excavation, or construction equipment remains covered.

• Maintenance property such as felt, wire, screens, dies, extrusion plates, swing hammers, grinding discs, cutting blades, non-electrical cable, chains, belts, ropes, clutch plates, and brake pads. This also includes non-metal parts or any parts or tools subject to periodic replacement.

Note: This endorsement is not intended to insure relatively minor kinds of maintenance-type property.

• Machines or apparatus used solely for research, diagnosis, medication, surgical, therapeutic, dental, or pathological purposes. This includes any covered equipment mounted on or used exclusively with any of these.
• Equipment or equipment parts the named insured manufactures with the intent to sell it