Ch. 9 Boilers, etc

Boilers, Machinery, and what else?

pg. 5

B&M Insurance is primarily Property Insurance designed to pay for damages accidentally inflicted on (or by) specific kinds of objects.

~

Since the policy premium varies with the specific items being covered, the Insured must list these objects to be covered on the DECLARATIONS page of the policy.

~

The covered objects fall into six general categories:

• Boilers (but not stoves or furnaces), pressure and refrigeration objects, air conditioning units, compressors, and electric steam generators;

• Mechanical Objects: engines, pumps, fans, and blowers;

• Electrical Objects: transformers, induction feeder regulators, and rectified units;

• Turbine Objects: turbines, components on a turbine shaft, and mechanical or hydraulic governing mechanisms;

• Comprehensive Coverage Excluding Production Machinery: all insurable boiler and machinery objects except production machinery;

• Comprehensive Coverage Including Production Machinery: all insurable boiler and machinery objects including production machinery.

B&M Policy alternative names

Boiler & Machinery is also known as an Equipment Breakdown Policy. All abbreviated as B&M.

pg. 3

Accident vs. Occurrence

An accident is sudden, and an occurrence is slow, gradual and repeated. This only insures accidental damage.

pg. 4

Occurrence definition

Happenings that fall into the occurrence category (and therefore are not covered by an accident-only policy) include corrosion, erosion, deterioration, wear and tear, and gradual leakage.

pg. 4

Boiler and Machinery Coverage

Types of coverage a B&M Policy provides:

• The Insured’s Property: The primary function of a B&M Policy is to cover damage that is directly caused by any of the items listed in the Declarations Section of the policy. If the Insured’s other property, including the building itself, is also damaged by the accident, it is covered as well.

• Property of Others: In addition, the B&M Policy covers damage to property that belongs to someone other than the Insured if that property is in the Insured’s care, custody, or control when the breakdown, explosion, or whatever occurs.

• Expediting Expenses: B&M Policies automatically include $25,000 coverage specifically for expediting expenses to cover the cost of temporary repairs and to expedite the replacement of the damaged equipment.

• 90 Days Automatic Coverage for Newly Acquired Locations: Businesses move or expand all the time, and this provision extends coverage to B&M-type objects at these new locations. This extension is good for only 90 days, after which the Insured must report the new machinery and pay the additional premium.

• Defense Against Suits for Property Damage: This clause says the insurance company will pay the costs of defending the Insured against lawsuits that claim that the Insured is responsible for damage done to property while in the Insured’s care, custody or control.

Policy limits

pg. 7

Expediting expenses limit: $25,000

Water damage limit: $25,000

Hazardous substances clean-up limit: $25,000

Ammonia contamination limit: $25,000

Exclusions

pg. 8

• Accidents during boiler testing (because testing often involves straining the boiler to high pressure limits);

• Malfunctioning safety devices;

• Damage to neighboring property;

• War and military action;

• Changes required by ordinance or law;

• Floods;

• Lightning;

• Accidents caused by earth movement; and

• Nuclear hazards.

• Indirect loss

Optional Coverage for Indirect Loss

pg. 8

• The B&M Policy covers direct loss only. If the explosion results in a loss of business income, that loss isn’t covered.

• To fill in that gap, the Insured may purchase Business Income or Extra Expense Coverage (also known as Consequential Loss Coverage, or Indirect Loss Coverage, or Business Interruption Coverage).