Risk & Business Magazine Spectrum Insurance Magazine Fall 2018 | Page 7

EQUIPMENT BREAKDOWN INSURANCE
WHY ARE BREAKDOWNS A PROBLEM?
Though technology provides a host of
invaluable features, it also poses many
risks:
• Circuitry on high-tech equipment is
sensitive. A force as simple as static from
Bubble Wrap can damage certain pieces
of equipment.
• Breakdowns that lead to interruptions
in telecommunications, email, and
e-commerce mean lost time and revenue.
• Interconnected but separate technologies
can affect one another after a power
surge or loss of functionality.
• Obtaining parts to fix complex
equipment can be difficult and time
consuming.
• Equipment may be located in areas
of a facility that are difficult to reach,
complicating repairs and concealing
problems.
WHAT ARE THE MOST COMMON
EQUIPMENT BREAKDOWNS?
ELECTRICAL SYSTEMS
• Electrical systems make up 10 to 15
percent of a building’s worth, and
because they predicate all other business
functions, an electrical system failure
holds the potential for substantial loss
for both building owners and their
tenants.
• A short circuit in a transformer, panel, or
cable can spread and destroy a large part
of an electrical system. These parts are
often overlooked and underserviced.
• Costs such as generator rental fees,
relocation of tenants, and the cost of
leasing property in another location
until equipment is repaired can worsen
the financial impact of a breakdown.
• In one example of electrical systems
failure, a 2008 incident of electrical
arcing destroyed three main electrical
panels and left an office building without
power. Temporary measures were taken
to restore power to tenants, which
included an accounting firm in its tax
season crunch, contributing to a total
loss of $1,507,389.
AIR CONDITIONING AND
REFRIGERATION COMPUTERS AND COMMUNICATION
EQUIPMENT
• Since many air conditioning units are
located on the roof, repair or removal
requires the hire of a helicopter or crane.
• Without A/C, many businesses will
need to relocate or rent temporary
equipment while the unit is out of order.
• Businesses that rely on refrigeration
to maintain their products (hotels,
restaurants, schools, nursing homes,
hospitals, etc.) run the risk of spoilage
in the event of a breakdown. They may
be forced to hire a catering company or
rent a refrigeration truck.
• In one case, a hotel air conditioning
compressor motor broke down during
a July convention, causing $73,366 in
total losses.
BOILERS AND PRESSURE VESSELS • Outages can affect computers, multi-
line phone systems, TV satellite systems,
point-of-sale systems, security systems,
and fire alarm systems.
• An outage at your Internet service
provider (ISP) can affect the
functionality of your website and
prevent your access to crucial
information or web services.
• For example, a power surge damaged
a service station/convenience store’s
electronic cash register, auto diagnostic
system, phone and paging equipment,
and security system for a total loss of
$56,888.
MECHANICAL SYSTEMS
• Cracking, collapsing, bulging, or
explosions can occur in boilers and
pressure vessels (heating units, hot
water units, cookers, sterilizers,
cleaning equipment, etc.).
• With no heat or hot water at a facility,
businesses may be forced to rent costly
temporary units until the facility can be
repaired.
• For example, one store lost heat during
the holiday shopping season when the
boiler broke down and incurred $54,467
in losses.
• These systems can break down as
a result of vibration, metal fatigue,
seizing, misalignment, or human error.
This includes machines such as water
pumps, ventilation fans, elevator and
escalating machines, motors, or engines.
• Equipment is often critical to most
buildings’ functions.
• An example of this type of breakdown
would be when a hydraulic lift in an
auto repair shop needs to be replaced
after welds give way, costing around
$9,000. >
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