Topics covered:
History of B&M
ISO program
Form designations
Rules and rating information

Boiler and machinery, historically regarded as a “casualty” coverage although in many ways more closely resembling property insurance, had its beginnings in 1866—as an adjunct to boiler inspection service, the first intensive application in the insurance field of loss control to avoid accidents rather than the simple use of insurance to pay for the consequences of accidents when they occur. To this day—unique among insurance coverages—boiler and machinery underwriting and inspection expenses comprise a larger portion of the premium with most insurers than do loss payments and claim expenses.

For many years, boiler and machinery insurance was one of the most stable and unchanging lines of insurance. Because of the intensive loss control activities, claims experience remained stable even in periods of general underwriting unprofitability, and because of the esoteric nature of the coverage, there was little pressure for changes.

But in recent years, this has changed and the coverage has undergone a series of revisions. The changes have moved boiler and machinery insurance closer to property insurance in terms of coverage concepts, provisions, and terminology.

The coverage forms for boiler and machinery published by the Insurance Services Office (ISO) were revised in 1977, 1979, 1981, and 1983, followed in 1986 by ISO's introduction of the simplified commercial insurance program. Since then, further change occurred in the forms in 1989, 1991, 1995, and 2001. The 1989 revision made minor changes in the forms and rules, and completely changed the rating method, going from a rating plan based on charges for individual objects to a plan that uses an occupancy classification to establish the basic rate, which then can be modified by various coverage and risk modifiers to arrive at a final premium. The most recent change involves scrapping the existing boiler and machinery forms and endorsements entirely. The basic coverage forms—BM 00 25, BM 00 40, and BM 00 45—have been replaced by a single form, BM 00 20, with an effective date of July 2001.

However, as with other coverages under the ISO simplified commercial insurance program, the boiler and machinery forms are still added to a common policy declarations page and common policy conditions form IL 00 17 to form a monoline boiler and machinery policy; or, these forms can be combined with other coverage parts to form a package.

The new coverage form is BM 00 20, equipment breakdown protection coverage form. The equipment breakdown protection coverage form declarations, BMDS07, is used with BM 00 20 to outline the coverages, limits, and deductibles that are to apply. Endorsements dealing with such items as business income, turbine units explosion coverage, and pressure or vacuum equipment are also available for use with BM 00 20.

The boiler and machinery rules and rating information are found in division two of the commercial lines manual (CLM).