BP 0650–EQUIPMENT BREAKDOWN

(May 2025)

INTRODUCTION

This endorsement is used with the American Association of Insurance Services (AAIS) Businessowners Policy. It covers direct physical loss or damage to covered property caused by or that results from accidents to covered equipment. It also covers Loss of Income and Utility Service Interruption. It provides limited coverage for Data Restoration, Expediting Expenses, Pollutants, and Spoilage. Environmental, Safety, and Efficiency Improvements are also included.

SCHEDULE

This section has a space to enter the deductible amount that applies to each loss after all other loss adjustments.

NOTE: A limit is not necessarily needed because this endorsement adds a covered peril, not a separate coverage. This means that the limits on the declarations apply except when this endorsement states otherwise.

AGREEMENT

The insurance company provides the coverage in this endorsement in exchange for the named insured paying the required premium. Coverage is subject to this endorsement's terms as well as the Common Policy Conditions, Common Policy Definitions, and terms that apply to Property Coverages in the Businessowners Policy.

NOTE: The following property sections in the Businessowners Policy are changed but only with respect to the coverage this endorsement provides:

• Additional Definitions
• Additional Property Excluded and Limitations
• Additional Coverages
• Coverage C–Loss of Income
• Perils Covered
• Perils Excluded
• Additional Exclusions
• How Much We Pay
• Additional Conditions

ADDITIONAL DEFINITIONS

1. Revised Definition

This definition deletes and replaces the definition from the Businessowners Policy for this endorsement.

Restoration period

This Loss of Income coverage term determines when coverage begins and ends. It begins on the date an accident to covered equipment causes a loss. It ends at the earlier date when the property is repaired or when business resumes at a new business location. The restoration period is not limited to the policy's expiration date.

Restrictions for Restoration Period

It does not increase when a delay in construction occurs because of enforcing any type of ordinance or law that regulates rebuilding, rezoning, or any pollution-related activity.

2. New Definitions

The following definitions are added.

a. Accident

This term means any of the following, provided they are both sudden and accidental:

• Mechanical breakdown
• Machinery moving parts bursting or rupturing because of centrifugal force
• Interference, damage, disturbance, or disruption of electronic or electrical devices, appliances, networks, or systems by electromagnetic, magnetic, or electrical energy that is generated artificially. Any such events involving arcing are also considered an accident.
• Steam boilers, pipes, turbines, or engines exploding. This applies only to such items that the named insured owns, leases, or operates under its control.
• An occurrence or condition within steam boilers, pipes, turbines, or engines that causes a loss to them
• An occurrence within hot water boilers or heaters that causes a loss to them

b. Covered equipment

Property that is insured under Coverage A–Buildings or Coverage B–Business Personal Property in the Businessowners Policy and meets any of the following criteria:

• Uses, generates, or transmits energy. This includes computers.
• Operates under pressure or vacuum conditions under normal operating conditions. Pressure or vacuum conditions include those exerted by the weight of the contents of such property.

However, the definition of covered equipment changes slightly for Additional Coverage–Spoilage Utility Service Interruption and Coverage C–Loss of Income Utility Service Interruption in this endorsement. Covered equipment is property that meets the following criteria:

• Property that uses, generates, or transmits energy. This includes computers.
• Property that operates under pressure or vacuum conditions under normal operating conditions. Pressure or vacuum conditions include those exerted by the weight of the contents of such property.

NOTE: The difference between the two paragraphs above is that there is no requirement that covered equipment under the Additional coverage be covered property under Coverage A or Coverage B. The actual description of the covered equipment is identical.

Restrictions for Covered Equipment

The following equipment is not considered covered equipment:

• Equipment the named insured manufactures to sell
• Cabinets, compartments, coverings, or housings for covered equipment
• Any building or structure
• Foundations that underlie and support covered equipment
• Sewer piping, underground vessels and pipes, water pipes, and sprinkler (and other fire suppression) system pipes.

However, boiler feedwater and condensate return pipes and water pipes for refrigerating, air conditioning, and heating systems are included as covered equipment.

• Excavation, construction, and dragline equipment
• Vehicles
• Equipment that is mounted on a vehicle
• Refractory and insulating material
• Spacecraft and satellites
• Equipment mounted on spacecraft or satellites

c. Perishable stock

Business personal property that must be preserved and maintained under controlled temperature or humidity conditions. It is susceptible to loss if these conditions change.

d. Vehicle

Any apparatus or machine that moves under its own power or that is used for transportation. Examples are trains, trucks, buses, trailers, cars, watercraft, aircraft, tractors, bulldozers, harvesters, and forklifts. Property permanently installed at a covered location receiving electrical power from an outside power source is not a vehicle.

ADDITIONAL PROPERTY EXCLUDED AND LIMITATIONS

When this endorsement is attached to BP 0200–Businessowners Special Policy, Item. 2. Boilers, it does not apply.

NOTE: This change is important because it eliminates the potential for duplicate coverage.

ADDITIONAL COVERAGES

The following five coverages are added. The limit for each is a sub-limit of the limit for covered property, not in addition to it.

1. Data Restoration

The insurance company pays the named insured’s costs to research, replace, and restore lost programs and applications, data records, and proprietary programs when the loss or damage is due to an accident to covered equipment. The costs must be both necessary and reasonable.

The most paid for the sum of direct damage and loss of income is $25,000.

This coverage is excess over software coverage provided within this policy.

2. Expediting Expenses

The insurance company pays reasonable additional costs to reduce the amount of time needed to either replace or repair damaged equipment. This applies only if a covered peril causes damage to covered equipment. Temporary repairs to this equipment are also covered.

The most the insurance company pays is $25,000.

Example: Diego's Dairy Delights incurs a covered loss to one of its production boilers to the extent that it cannot be repaired, and a new boiler is needed. Delivery and installation usually take three months, but one of Diego's friends has an identical boiler on hand in case it must replace one of its units. The friend offers to sell it to Diego at its going cost plus 10%. Diego accepts the offer because he can resume operations in two weeks instead of three months. Coverage applies to the additional costs because this lets Diego resume operations sooner than expected.

3. Pollutants

The insurance company pays additional costs to repair or replace covered property contaminated by pollutants when an accident to covered equipment occurs. Coverage also applies to additional expenses to clean up or dispose of any contaminated property. The amount of additional expense is based on the additional costs to repair or replace the damaged property because it is contaminated. This coverage is excess over any specific Spoilage coverage endorsed to this policy.

This does not include perishable stock a refrigerant contaminates. This would be covered under Spoilage Coverage.

The $25,000 limit is the most paid for this coverage, including any Spoilage or Loss of Income that results from the contamination.

4. Spoilage

a. Accident to Covered Equipment

The insurance company will compensate the named insured for any loss of perishable stock due to an accident involving covered equipment. For a claim to be valid, spoilage must result from a direct physical loss. In addition to the loss or damage to the spoiled stock, the policy also covers the following:

• Any contamination of the named insured's perishable stock caused by the release of refrigerants, which includes ammonia and any other types of refrigerants.
• Necessary expenses incurred by the named insured to mitigate the impact of the spoilage loss. These expenses will only be covered if they help reduce the overall loss payable.

Example: Diego's bad luck continues. An electrical power failure causes a refrigerated line to go down for two hours. If the power is not restored quickly, the raw milk product being processed will spoil and must be discarded. This coverage applies to the entire $10,000 value of the spoiled milk.

However, Diego’s good friend has a generator he is willing to rent to Diego! The cost to rent, transport, and operate the generator is $1,000. The expense to rent the generator is paid because its cost is less than the $10,000 value of the spoiled milk.

b. Utility Service Interruption

The insurance company pays when the named insured’s perishable stock spoils because of an accident to covered equipment not owned by the insured. The spoilage must be a direct physical loss. The covered equipment must be owned by a utility, a landlord, a landlord’s utility, or another supplier that provides the named insured with any of the following utility services:

• Water, electrical power, or natural gas
• Data transmission, telecommunications services, wide area networks, or Internet access
• Heating, refrigerating, air conditioning, steam, or compressed air
• Waste disposal

c. Valuation

The valuation of stock is based on whether the named insured can replace the perishable stock before the date it was to be sold. The valuation is based on the Valuation of Property Losses in the Businessowners Policy, assuming it can be replaced quickly. If not, the insurance company pays the perishable stock’s selling price at the time of loss. The selling price is reduced by the expenses and discounts the named insured does not incur because the stock was not sold.

d. Coverage Limit

The most the insurance company pays under this Additional Coverage is $25,000. This coverage is excess over any other Spoilage coverage the policy otherwise provides.

5. Environmental, Safety, and Efficiency Improvements

If covered equipment is damaged in an accident and needs to be replaced, the insurance company will not only replace it with equipment of similar kind and quality. They will pay up to 150% of the replacement cost, allowing the insured to upgrade to safer and more efficient equipment, or to choose equipment that is better for the environment.

This Additional Coverage does not include any property subject to the Actual Cash Value basis.

COVERAGE C–LOSS OF INCOME

1. Customer Agreement

This is a new exclusion added to Loss of Income coverage.

Loss of income does not increase because of agreements made between the named insured and its customers or suppliers. Examples of such items that could increase the loss of income but are not covered include late fees, demurrage charges, contingent bonuses (or penalties), liquidated damages, and demand charges.

Example: Diego has a contract with the Marquette School District to supply it with milk. If the milk does not arrive as the contract requires, Diego must pay a penalty in addition to losing the revenue from the milk that was not delivered. The loss of revenue is covered as Loss of Income. The penalty is not covered.

2. Utility Service Interruption

The insurance company extends coverage for lost income and essential additional expenses resulting from a disruption of the insured's regular business operations. This disruption must be caused by an accident involving covered equipment that is not owned by the insured. The equipment must be owned by a utility company, a landlord, a landlord's utility, or another supplier providing the named insured with any of the following utility services:

• Water, electrical power, or natural gas
• Data transmission, telecommunications services, wide area networks, or Internet access
• Heating, refrigerating, air conditioning, steam, or compressed air
• Waste disposal

Period Of Interruption

There is a waiting period for this coverage extension. Coverage begins 24 hours following the direct physical loss or damage to the covered equipment not owned by the insured. It ends when utility service is completely restored to the insured’s scheduled premises.

PERILS COVERED

Perils Covered is deleted and replaced as follows, and applies to:

· Coverage A—Buildings

· Coverage B—Business Personal Property

· Coverage C—Loss of Income

The insurance company provides coverage for direct physical loss or damage to covered property caused by an accident involving covered equipment. However, there is no coverage if an excluded peril is responsible for the loss or damage.

PERILS EXCLUDED

The following exclusions in the Businessowners Policy are deleted and replaced by the exclusions in this endorsement.

2. Earth Movement

An accident involving covered equipment due to any earth movement is not covered.

3. Fungus or Related Perils

The following two exceptions are added for this endorsement only.

• This exclusion does not apply to spoilage of perishable stock that this endorsement’s Additional Coverages 4. Spoilage covers.
• Fungus or related perils may cause an accident to covered equipment. In that case, coverage applies to the loss or damage the accident causes unless an excluded or limited peril under the Equipment Breakdown coverage terms causes the loss or damage.

9. Water

The following three exceptions are added for this endorsement only.

· Coverage is added for the cost to dry out covered electrical equipment resulting from items a.1) through a.3) in the water exclusion.

· There is no coverage for loss resulting from fire, explosion, or sprinkler leakage.

· There is no coverage for loss to computers.

ADDITIONAL EXCLUSIONS

NOTE: The editors added titles to enhance clarity.

1. Exclusions That Do Not Apply

The coverage this endorsement provides is not subject to the following exclusions in either of the Businessowners Policies:

• Explosion or Boiler Explosion
• Electrical Currents
• Mechanical Breakdown

2. Exclusions Deleted and Replaced

The following exclusions are part of BP 0200–Businessowners Special Policy. They are removed and replaced with exclusions that have identical wording except that all exceptions are removed, and then an exception to pay for resulting loss or damage to covered equipment is added to each.

a. Animals

b. Contamination or Deterioration

The exceptions in the BP 0200 regarding building glass and contamination or deterioration are not applicable to this endorsement.

c. Wear and Tear

The exceptions in the BP 0200 regarding building glass and mechanical breakdown are not applicable to this endorsement.

Example: Years of steady use result in centrifugal force that causes a machine to disintegrate and its parts to scatter throughout the building. Coverage applies to the damage to walls, floors, ceilings, and other equipment caused by the flying parts.

d. Data and Computer Errors

The exceptions in the BP 0200 regarding building glass and computer viruses or hacking are not applicable to this endorsement.

3. Additional Exclusions

a. Discharge of Water

Coverage does not apply to loss or damage caused by water or other extinguishing agents used to fight a fire.

Example: The steam engine was red hot when the water from the fire department's hose used to fight the fire made contact with it. The engine’s metal immediately cracked. This endorsement does not cover the loss.

b. Testing

Coverage does not extend to loss or damage resulting from hydrostatic, pneumatic, or gas pressure tests conducted on any boiler or pressure vessel. Additionally, it does not apply to insulation breakdown tests of any electrical equipment.

Example: A city inspector ordered pressure to be applied to the boiler to verify its safety. An error in applying the pressure exceeded the boiler’s maximum pressure requirements and caused it to explode. This endorsement does not cover the loss.

c. Maintenance

Losses that occur because of poor or defective maintenance are excluded. This means that losses due to improper alignment or calibration and losses because equipment is tripped to go off-line are also excluded. In addition, losses caused by a condition that could have been corrected by adjusting, cleaning, tightening, or resetting is excluded as well as losses caused by any other condition that could be corrected by performing maintenance. The only exception is that coverage applies to the damage resulting from an accident to covered equipment.

d. Other Perils

The insurance company does not pay for any loss insured by Perils Covered in either of the Businessowners Policies.

NOTE: The ONLY covered peril in this endorsement is an accident to covered equipment.

HOW MUCH WE PAY

This deductible provision supersedes any other deductible related to this coverage provided by the endorsement.

Deductible

The deductible amount on this endorsement’s schedule applies to each loss after making all other loss adjustments.

NOTE: This is an each loss deductible, not an occurrence deductible.

ADDITIONAL CONDITIONS

1. Jurisdictional Inspections

The insurance company agrees to perform required inspections on covered equipment to comply with state or municipal boiler and pressure vessel regulations. It performs these inspections on the named insured's behalf.

The endorsement points out that this is not a safety inspection or a report that conditions surrounding the inspected equipment comply with any health or safety standards. In other words, it does not warrant the conditions of the boiler or pressure vessel.

2. Suspension

Any insurance company representative has the authority to immediately suspend coverage for loss or damage to any covered equipment found to be in or exposed to a dangerous condition.

The suspension of coverage must be documented in writing and can either be mailed or delivered to the address listed for the named insured on the declarations page, or to the location where the equipment is located. To reinstate suspended coverage, the insurance company must issue an endorsement for that specific covered equipment.

When insurance coverage is suspended, the named insured is entitled to a pro rata refund of the premium. However, the suspension remains in effect even if a refund has not been offered or processed.

Example: Boilers R-Us Insurance Company insures Diego's Dairy Delights. Boilers R-Us' equipment inspector notices certain equipment operating at temperatures that exceed their operating range. He issues a written suspension order to the shift manager that immediately ends coverage. However, Diego's shift manager ignores the order. The suspended equipment starts a fire a week later. Based on its copy of the inspector's written order, Boilers R-Us denies the claim because coverage had been suspended.