1. Forms
2. EB
3. EB-00-20

Form EB 00 20: Equipment Breakdown Protection Coverage Form

The Equipment Breakdown Protection Coverage Form (EB 00 20), formerly known as Boiler & Machinery coverage, is a crucial insurance policy that addresses losses stemming from the accidental breakdown of covered equipment. Its primary function is to cover direct property damage to the equipment itself, as well as consequential losses like business income, extra expenses, spoilage, and even losses from utility service interruptions caused by a breakdown of the utility's equipment. The core of the coverage hinges on the term "breakdown," which generally refers to direct physical loss causing damage to covered equipment that necessitates its repair or replacement, such as failure of pressure or vacuum equipment, mechanical failure (including rupture or bursting from centrifugal force), or electrical failure (like arcing).

Classes of Business It Applies To

This form is versatile and applies to a wide array of businesses that rely on specialized equipment for their operations. It's not limited to specific industries, meaning any entity with eligible equipment can benefit. Real-world examples include:

• Manufacturing Plants: Coverage for production machinery, boilers, and electrical distribution systems. A breakdown of a critical production machine can halt operations, leading to significant income loss, which this form can cover.
• Hospitals and Healthcare Facilities: Protection for HVAC systems, medical gas systems, emergency generators, and sophisticated diagnostic equipment (if scheduled). For instance, a failure of an MRI machine or a hospital's primary boiler would be covered.
• Commercial Real Estate (Office Buildings, Retail Centers): Coverage for elevators, HVAC systems, and electrical switchgear. If a central air conditioning unit in an office building breaks down, this policy can cover repair costs and potential loss of rental income.
• Schools and Universities: Protection for heating and cooling systems, electrical infrastructure, and kitchen equipment in cafeterias.
• Hospitality (Hotels, Restaurants): Coverage for refrigeration units, kitchen equipment, laundry machines, and HVAC systems. A restaurant losing its refrigeration system could face significant spoilage and business interruption.
• Farms: While farms have specialized forms, equipment breakdown coverage can apply to items like water pumps, generators, and specialized agricultural machinery not otherwise covered.
• Data Centers and Communication Hubs: Protection for critical power supply equipment, cooling systems, and communication infrastructure.
• Utilities: The form can cover equipment owned by a utility that supplies services (electric, gas, water, etc.) to the insured's premises, if an interruption of these services is due to a breakdown of the utility's covered equipment.

Special Considerations

Several important factors come into play when utilizing Form EB 00 20:

• Covered Equipment Definition: It's crucial to understand what qualifies as "covered equipment." Generally, this includes equipment built to operate under internal pressure (boilers, pressure vessels), electrical or mechanical equipment used for generating, transmitting, or utilizing energy, communication and computer equipment, and similar equipment used by utilities. However, property like obsolete equipment or equipment the insured manufactures for sale is typically not covered.
• "Breakdown" Definition: The definition of "breakdown" is specific and excludes events like normal wear and tear, depletion, corrosion, erosion, or damage from testing. It also typically excludes defects, erasures, errors, limitations, or viruses in computer equipment and programs.
• Integration with Commercial Property Policy: Equipment breakdown is often excluded or limited under standard commercial property policies. The EB 00 20 fills this gap. A "Joint or Disputed Loss Agreement" is often recommended when the commercial property and equipment breakdown coverages are with different insurers to streamline claims where coverage might overlap or be disputed.
• Declarations Page (EB DS 07): The Equipment Breakdown Declarations (Form EB DS 07 or equivalent) is a critical part of the policy. It lists the specific coverages selected, limits of insurance, deductibles, and covered locations. Accuracy on this page is paramount as coverage only applies if a limit or "INCLUDED" is shown for that specific coverage.
• Optional Coverages: The form offers several optional coverages that must be specifically selected and may have separate limits or be included within the overall breakdown limit. These can include Business Income and Extra Expense, Spoilage Damage, Utility Interruption, Ordinance or Law, Brands and Labels, and Contingent Business Income.
• Exclusions: Common exclusions include damage from fire or combustion explosion (as these are typically covered by commercial property insurance), earth movement, ordinance or law (unless bought back), and often, cyber incidents (especially with newer endorsements like EB 10 01).
• Newly Acquired Premises: Coverage can automatically extend to new premises acquired during the policy period for a limited time (e.g., 90 days), provided the insurer is notified and additional premium is paid.
• Valuation: Loss valuation is typically based on the cost to repair or replace with property of like kind, capacity, size, and quality, or the actual cost incurred, whichever is less. Obsolete and useless property is not covered.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriting equipment breakdown coverage requires a detailed understanding of the insured's operations and the specific equipment they rely on. Key factors include the age, condition, maintenance history, and criticality of the equipment. Jurisdictional inspections (often required for boilers and pressure vessels) can be a valuable underwriting tool.
• Pricing: Rating is complex and considers the type, age, and value of the equipment, the industry, loss history, chosen coverages, limits, and deductibles.
• Coverage Gaps: Agents should be vigilant about potential gaps. For example, standard property policies often exclude the types of electrical arcing or mechanical breakdown covered by EB 00 20. Conversely, EB 00 20 excludes fire, which the property policy covers. Understanding the interplay is key. The rise of "silent cyber" and the subsequent introduction of cyber incident exclusions (like EB 10 01) means that equipment breakdown due to a cyber event may not be covered unless a specific cyber policy or a more robust equipment breakdown form is in place.
• Deductibles: Deductibles can be dollar amounts, time-based (e.g., for business income), or a percentage of the loss, and can vary by coverage. The declarations page will specify these.
• Loss Control: Recommending and verifying good maintenance practices, operator training, and adherence to inspection requirements can significantly reduce the likelihood and severity of breakdowns. Some insurers offer loss control services.
• Endorsements: While EB 00 20 is a standard form, numerous endorsements are available to tailor coverage. For instance, an Actual Cash Value endorsement (like EB 99 59) might be used instead of replacement cost for older equipment. Insurers may also have their own proprietary forms and endorsements that can be broader or more restrictive than ISO versions.
• Utility Interruption Nuances: For Utility Interruption coverage to apply, the interruption must result from a breakdown of the utility's covered equipment used to supply specified services (like electricity, gas, water) and often must exceed a waiting period stated in the declarations.
• Business Income and Spoilage: These coverages are particularly important for businesses where equipment uptime is critical for revenue generation or where perishable goods are involved. For Business Income, the policy will consider the business's experience before the breakdown and the probable experience it would have had without it. Annual reports of values may be required for Business Income coverage.