What it does

The Special form excludes mechanical breakdown, artificially generated electrical current and steam boiler explosion. CP 10 46 adds "Breakdown" of "Covered Equipment" as a Covered Cause of Loss at the premises in its Schedule.

• "Breakdown" is direct physical loss that damages covered equipment and requires repair or replacement: failure of pressure or vacuum equipment, mechanical failure (including rupture or bursting from centrifugal force), or electrical failure including arcing. It does not include malfunctions needing adjustment or calibration, computer defects or viruses, leakage at valves and seals, damage to vacuum tubes or brushes, damage to supporting structures, the functioning of safety devices, or cracking of gas turbine parts exposed to combustion.
• "Covered Equipment" is equipment operating under internal pressure or vacuum, electrical or mechanical equipment used to generate, transmit or use energy, communication equipment, and computer equipment. Data and media, buried vessels and piping, vehicles and mobile equipment, construction equipment, and wear parts such as belts, blades and dies are not covered equipment.

Key provisions

• For breakdown losses, the endorsement lifts the mechanical breakdown, electrical current and steam boiler exclusions and limitations, except for high-altitude electromagnetic release. It adds an exclusion for equipment undergoing pressure or electrical tests. Wear and tear and rust are excluded, but resulting breakdown loss is covered.
• Coverage is within the existing property limit and deductible. Business income and extra expense follow the existing time-element limit and waiting period. It is not additional insurance.
• Ammonia contamination and hazardous substance cleanup are each limited to the lesser of 10% of the limit or $25,000, unless a higher sublimit is scheduled.
• Related breakdowns, or breakdowns at one site from the same cause at the same time, are one occurrence.
• The insurer may suspend breakdown coverage on dangerous equipment by written notice. See CP 10 47 for the companion suspension provision.

Quoting and selling notes

• Boilers, HVAC, electrical panels, elevators, refrigeration and production machinery all break down. Many claims (burned-out compressors, arcing switchgear) are excluded without this endorsement or a separate equipment breakdown policy.
• Jurisdictional boiler inspections may still be needed. Ask how the carrier handles them.
• If equipment breakdown is bought from a separate insurer instead, attach joint loss agreements (CP 12 70) to both policies.