The Insurance Services Office (ISO) Equipment Breakdown Protection Coverage Form insures losses to covered property caused by the breakdown of covered equipment. Eligible property includes all property the named insured owns.
It also includes property it does not own but that is in its care, custody, or control and for which it is legally liable.
There is no limitation on the type of business that can purchase this coverage. However, there is a limitation on the types of equipment that qualify for coverage.
The ISO Equipment Breakdown Protection Coverage Form can be written as part of a Commercial Package Policy or as a stand-alone monoline policy. In any event, a policy requires at least the following four forms:
- IL DS 00-Common Policy Declarations – The individual insurance company’s equivalent declarations may be used in place of IL DS 00.
- IL 00 17-Common Policy Conditions – This form contains the conditions common to all commercial lines of insurance. It is a mandatory form for most simplified monoline or multi-line policies.
- EB DS 07-Equipment Breakdown Protection Coverage Form Declarations
- EB 00 20-Equipment Breakdown Protection Coverage Form
EB 00 02 will pay for loss or damage caused by the breakdown of the named insured’s covered equipment.
Primary Coverages – There are ten separate coverages available in the basic coverage form:
- Brands and Labels
- Business Income and Extra Expense or Extra Expense Only
- Contingent Business Income and Extra Expense or Extra Expense Only
- Errors and Omissions
- Expediting Expense
- Newly Acquired Premises
- Ordinance or Law
- Property Damage
- Spoilage Damage
- Utility Interruption
Exclusions – There are a number of exclusions similar to the same exclusions in commercial property coverage forms. However, there are some exclusions that are unique to only this coverage.
Limits of Insurance – The most paid for all loss or damage that results from one breakdown is the limit of insurance on the declarations for the coverage. A breakdown is similar to an occurrence. Multiple breakdowns that occur simultaneously or as a chain reaction are treated as a single breakdown. As a result, only one limit and one deductible apply to the loss or damage.
The named insured has the option to select separate limits of insurance for each primary coverage that is subject to the one breakdown limit or to select only a per breakdown limit that applies to all coverages selected. That limit applies when the word “INCLUDED” is entered in the limits space for the coverage(s) on the declarations.
Deductibles – Four different types of deductibles are available:
- Dollar Deductible
- Time Deductible
- Multiple of Daily Value Deductible – This is subject to optional minimum and maximum fixed-dollar amounts.
- Percentage of Loss Deductible – This is subject to optional minimum and maximum fixed-dollar amounts.
EB 00 02 has many conditions to consider. There are two that are especially significant with respect to equipment breakdown coverage:
- Suspension – This condition allows the insurance company to immediately suspend coverage on one or more specific items of equipment because of safety concerns.
- Joint or Disputed Loss Agreement – This condition gets the named insured out of the middle of arguments between the property and the equipment breakdown carriers as to how much of a loss each will pay.
Definitions – Seventeen terms are defined. Breakdown, Covered Equipment, and Covered Property are the most important ones.
The coverage EB 00 20 provides is very broad. However, there are a number of endorsements that are available to tailor the coverage to the named insured’s specific needs.
Underwriting equipment breakdown coverage means identifying hazards, evaluating risk, and controlling losses. The equipment that could breakdown must be identified and the properties that could be damaged must be evaluated. Loss control must focus on the identified equipment, and how to prevent any breakdown.
Rating is very specific but fairly complicated. All equipment, location, and coverage information is used to develop the final premium.