With a separate rating procedure, an equipment breakdown reinsurer such as Hartford Steam Boiler can assume the premium and exposure for equipment breakdown, while the commercial property insurer retains the premium and exposure for other perils. Also, because the coverage is written as an endorsement, in a loss situation the insured usually can deal only with one insurer in a seamless process. In addition to the equipment breakdown endorsement, AAIS has developed two additional property endorsements as options with the BOP policy. One covers direct physical loss to property caused by the interruption of a utility located off premises, and the other adds time element coverage for utility interruption. This endorsement adds equipment breakdown coverage to the businessowners policy, providing coverage that is otherwise excluded in standard BOP forms.
Coverage is provided for an accident to covered equipment subject to the terms of the endorsement.
For a building owner, coverage is provided for direct physical damage caused by or resulting from an accident to covered equipment, unless an exclusion applies. When the BOP policy covers a tenant, coverage is provided for business personal property and for any non-owned building equipment for which the insured is responsible under the lease. Equipment breakdown coverage is subject to a separate deductible, which must be shown on the front of the endorsement. Accident means direct physical loss and includes such situations as mechanical breakdown, rupturing or bursting of moving parts of machinery, electrical arcing, steam boiler explosion, or loss to hot water boilers or heaters caused by a condition within such equipment. Covered equipment refers to property covered under Coverage A and Coverage B of the underlying BOP policy that is built to operate under vacuum or pressure or is used for the generation, transmission, or utilization of energy.