Includes copyrighted material of Insurance Services Office, Inc., with its permission.
February 21, 2012
Endorsements Used to Modify the Equipment Breakdown Protection Coverage Form
Summary: In 2007, Insurance Services Office changed the named of the Boiler and Machinery program to Equipment Breakdown. This was done to more clearly emphasize the broadness of the coverage provided by the program. The program contains miscellaneous endorsements used to modify the equipment breakdown property damage forms. The endorsements are described in alphabetical order. Following is a brief description of each form.
Alphabetical Guide to Endorsements:
When an insured or the insurer—for underwriting reasons on older equipment—wishes to insure property loss by covered accidents on an actual cash value (ACV) basis rather than at full replacement cost, endorsement EB 99 59 09 07 is used. The endorsement contains a schedule of locations and covered equipment to be insured for ACV. Under this endorsement, the insurer agrees to pay the amount spent by the named insured to repair or replace covered property that is directly damaged by a breakdown. The payment will be the lesser of: the cost to repair or replace the damaged property with property of same kind, capacity, size or quality; or actual cash value of the damaged property.
The valuation of covered property will be as of the time of breakdown. And, the insurer will not pay for damaged property that is obsolete and useless to the named insured.
This endorsement modifies the declarations page that accompanies EB 00 20 09 11, the Equipment Breakdown Protection Coverage form. The insured uses this endorsement to change the amounts, limits, and days for specific coverages. For example, if the insured originally chose a $100,000 limit of insurance for property damage coverage and then, in the middle of the policy period, wants that limit changed to $200,000, EB 99 51 09 11 can accomplish this task.
Endorsement EB 99 62 09 10 waives the property damage deductible for breakdown to covered equipment for a period of two years from the original breakdown date if the repaired parts, replacement parts, or equipment sustain a similar breakdown resulting from a similar cause. The waiver applies only to the expense to repair or replace the same or replacement equipment that was previously damaged. Only the amount of the deductible that applies to the initial loss is waived.
Endorsement EB 99 56 09 07 provides scheduled property damage and business income and extra expense coverage for covered equipment described in the schedule. The endorsement pays for labor, rigging, rebuilding, and dismantling costs for the removal of the damaged equipment and installation of repaired or replacement equipment. Labor and material costs that result from removing, rebuilding, and dismantling of undamaged covered property to gain access to damaged covered property is also covered. Extra expenses or loss of business income resulting from additional time spent on the previously listed activities are covered. The specified limit on the endorsement does not increase limit of insurance.
Endorsement EB 99 63 09 10 extends coverage for loss or damage to covered property as a direct result of covered equipment breaking down while the equipment is away from the premises. The equipment must be operated under the insured's control, cannot be in transit but must be in a fixed location, and must be in use or connected and ready to use.
Endorsement EB 99 64 09 10 changes the valuation provision with respect to specified covered property. For covered equipment manufactured or built less than five years before the breakdown or had undergone a major rebuilding less than five years before the breakdown, the value is determined on a replacement cost basis. The insured will be paid the cost to rebuild, repair, or replace the covered property with new property of same kind, capacity, quality, or size, whichever costs less. If the damaged equipment cannot be rebuilt, replaced, or repaired, or if the insured wants to replace with new equipment for the same intended purpose, the insured will receive the fair market value based on replacement cost of new property of same kind, capacity, quality, or size at the time of the loss. If the insured decides not to rebuild, repair, or replace the covered equipment, it will be paid the actual cash value at the time of the breakdown. The insurer will not pay for property that is obsolete or useless to the insured.
Pressure or Vacuum Equipment EB 99 55
This endorsement deletes the definition of “covered equipment” on EB 00 20 in its entirety. EB 99 55 09 07 defines “covered equipment” as any equipment built to operate under internal pressure or vacuum. The equipment must be subject to mandatory state or municipal jurisdictional inspection and must be located where the inspection requirements can be conducted by an authorized insurance company inspector.
Endorsement EB 99 65 09 10 reimburses the insured for reasonable and necessary expenses, as listed, that are directly related to product withdrawal. The withdrawal must be initiated due to a defect in the covered product that occurred in the course of being manufactured, must have resulted in covered property breaking down, and the breakdown must be reported while the endorsement is in effect.
“Product withdrawal” is defined as the withdrawal of the insured's covered product from the market or use by any person or organization caused by a defect in the product.
Expenses covered include the expense of repairing or replacing the covered product due to defect, not to exceed the actual expense of initially manufacturing the product; and, if additional expenses are selected in the schedule, then expenses to notify affected parties, overtime pay and expenses, computer time, hiring temps and independent contractors, transportation, shipping, packaging, warehouse or storage space, and disposal of covered product that cannot be salvaged, not to exceed the expense to manufacture products.
Endorsement EB 99 57 09 07 changes the definition of “covered equipment” to not mean or include production or process machines or apparatus that processes, forms, cuts, grinds, shapes, of conveys raw materials, materials in process, or finished products, including covered equipment that is mounted on or used solely with any one or more production or process apparatus or machines.
The insurer agrees to pay for spoilage damage to the named insured's scheduled owned refrigerated covered property. The property must be in storage at the premises indicated on EB 15 39 09 07, and the damage must be caused by or result from the lack or excess of refrigeration due to a breakdown to covered equipment, or contact with or the permeation by a primary or secondary refrigerant due to a breakdown to covered equipment.
Endorsement EB 99 66 09 10 provides coverage for loss or damage to covered property caused by the solidification of materials resulting from a breakdown to covered equipment. “Solidification” means the act or process of materials being compact, hard, or solid from cooling, crystallization, or drying. The coverage includes the cost of removing solidified materials from the covered property but not the cost of the materials that are solidified or the expense for their disposal.
If the insured carries business income and extra expense coverage or extra expense coverage only, the endorsement extends the period of restoration to include an additional period of time required for the removal solidified materials from the covered property caused by the solidification of materials resulting from covered equipment breaking down.
Endorsement EB 99 58 09 07 covers scheduled spare equipment and parts that are in functional condition and ready for installation or use, available for the insured's use, and are at the premises described in the schedule. If these conditions are met, then the applicable coverage for the spare parts and equipment will be that found elsewhere in the policy; if the conditions are not met, then the applicable coverage will be that which is found on the schedule.
Endorsement EB 99 60 09 07 allows the suspension or reinstatement of coverage for the indicated covered equipment described in the schedule. And effective date must be stated in the schedule.
Endorsement EB 99 67 09 10 provides coverage for direct damage to covered equipment and the actual loss of business income or extra expense caused by the delay in the start up or partial or total shutdown of business due to breakdown of covered equipment in the course of its installation, construction, erection, or testing.
An optional coverage is available for additional expense incurred for direct damage to covered property and actual business income losses or extra expenses incurred due to the partial or total shutdown of the business due to the time required to repair or replace damaged covered property. Additional expense for any money owed to the insured is also an optional coverage. This does not include legal costs or payment of incentive bonuses that would have been received if the project was completed on schedule. These losses must result from a breakdown of covered equipment.
Endorsement EB 99 52 09 07 defines “breakdown” as a sudden and accidental explosion of any casing, combustor, duct, piping, precooler, intercooler, regenerator, or heat exchanger, forming a part of a gas turbine. The explosion must be caused by pressure of gas, liquid or vapor within these items.
“Breakdown” does not include explosion, breaking, or cracking of any rupture disk, gasket, seal strip or diaphragm, or shaft seal; breaking of any blade, vane, or bucket, whether it forms a part of a rotor, shaft, or spindle; breaking of any shroud ring or other fastening, coupling, or any gear; breaking or loosening of any electrical conductor or its insulation or of any band wiring, wedge, or retaining ring or their fastenings of any electric generator even when such damage is a result of breakdown of covered equipment; depletion, corrosion, deterioration, or erosion of material; wear and tear; loosening of any assembled parts; and the breaking of any structure or foundation supporting covered equipment or any part of the covered equipment.
Covered equipment is defined as any turbine unit, including auxiliary steam turbine; combustor, duct, piping, or heat exchanger forming a part of a gas turbine; or a compressor or pump on any shaft of the driving turbine.
Endorsement EB 99 61 09 07 provides a means for valuing scheduled property. If covered equipment breaking down results in reduction of marketability of any covered property, the value will be determined at fair market value, minus salvage obtained and overhead, labor, materials, or other expenses.
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