1. Forms
2. EB
3. EB-99-59

Form EB 99 59: Business Income And Extra Expense Coverage (Equipment Breakdown)

1. What the form is

Form EB 99 59, Business Income And Extra Expense Coverage, is an endorsement to the standard Equipment Breakdown Protection Coverage Form (like EB 00 20). Its primary purpose is to add or modify coverage for losses of business income and extra expenses that a business incurs specifically due to a covered equipment breakdown. This means that if a critical piece of machinery or equipment fails, and that failure is a "covered breakdown" under the policy, this endorsement helps the business recover lost profits and cover additional costs necessary to keep the business operating or to expedite its return to normal operations. It details how these financial losses are calculated, the period for which they are covered (the "period of restoration"), and any applicable waiting periods or deductibles.

2. Classes of business it applies to

This endorsement is crucial for any business that relies heavily on specific equipment for its operations and revenue generation, where a breakdown would lead to a significant financial impact beyond the mere cost of repairing or replacing the equipment. Examples include:

• Manufacturing plants: A breakdown of production line machinery (e.g., CNC machines, presses, packaging equipment) can halt output, leading to lost sales and ongoing fixed costs.
• Food processing facilities: Failure of refrigeration units, ovens, or processing equipment can lead to spoilage, lost production, and the need for temporary alternative facilities.
• Hospitals and healthcare facilities: Breakdown of critical medical equipment (e.g., MRI machines, sterilizers, HVAC systems vital for operating rooms) can disrupt patient care and revenue.
• Data centers and IT service providers: Failure of servers, cooling systems, or power backup systems can lead to service interruptions, data loss, and significant financial penalties or lost customer trust.
• Commercial laundries: Breakdown of large washers, dryers, or pressing machines can stop operations.
• Power generation facilities: Failure of turbines or generators directly impacts their ability to produce and sell electricity.
• Businesses relying on specialized refrigeration: Supermarkets, cold storage warehouses, and pharmaceutical companies are highly vulnerable to refrigeration breakdowns.
• Hotels and resorts: Breakdown of boilers for hot water, HVAC systems, or essential kitchen equipment can severely impact guest services and revenue.

Essentially, any business where equipment is a key income-producing asset or vital for service delivery should consider this coverage.

3. Special considerations

• Relationship to EB 00 20: This form (EB 99 59) modifies the base Equipment Breakdown Protection Coverage Form (e.g., EB 00 20). It doesn't stand alone and its terms must be read in conjunction with the main coverage form.
• Actual Loss Sustained: Coverage is typically for the "actual loss sustained" of business income and necessary extra expenses. This means the policy will respond to the quantifiable financial downturn and the reasonable additional costs incurred.
• Period of Restoration: This is a critical concept. It's the time reasonably required to repair or replace the damaged equipment and resume normal operations. The endorsement may specify how this period is determined and if there are any extensions (e.g., Extended Period of Restoration).
• Waiting Period/Deductible: Business income coverage often has a time-based waiting period (e.g., 24 or 72 hours) before coverage kicks in, or a monetary deductible that applies to the business income loss. This needs to be clearly understood by the insured.
• Extra Expense vs. Expediting Expense: While both aim to mitigate loss, expediting expenses (often a separate coverage in EB 00 20) are costs to speed up the repair/replacement of the damaged equipment itself. Extra Expenses under EB 99 59 are broader and cover costs to continue operations, such as renting temporary equipment or relocating.
• Resumption of Operations: The insured has a duty to resume operations as quickly as possible, and to use any available means (including undamaged property at the described location or elsewhere) to mitigate the loss. Failure to do so can impact the claim payment.
• Valuation: One search result (though potentially misattributing the form number's primary function) mentions an "EB 99 59–Actual Cash Value" endorsement that changes property damage valuation from replacement cost to ACV for scheduled equipment. While the primary EB 99 59 focuses on Business Income/Extra Expense, it's crucial to verify if this specific version or another related endorsement is altering property valuation, as this would be a significant coverage reduction for the physical damage aspect.

4. Key information for agents and underwriters

• Accurate Values: Obtaining accurate and up-to-date business income figures (net income plus continuing normal operating expenses) is paramount for setting appropriate limits. Underwriters will scrutinize these values. Using a Business Income Worksheet is highly recommended.
• Risk Assessment - Critical Equipment: Identify the specific pieces of equipment that are critical to the insured's operations and revenue. What is the financial impact if one of these fails? How quickly can it be repaired or replaced? Are there redundant systems?
• Interdependencies: Consider interdependencies. The failure of a relatively small piece of equipment (e.g., a control panel) could shut down a much larger, more expensive system.
• Supply Chain for Repairs/Replacement: For specialized or custom-built equipment, what are the lead times for parts or replacement? This directly impacts the potential Period of Restoration and the amount of loss.
• Contingent Business Income: While EB 99 59 typically covers direct losses, consider if the insured has contingent business income exposures related to equipment breakdown at key suppliers or customers. This might require separate contingent coverage.
• Coverage Gaps: Ensure there are no unintended gaps between the Commercial Property policy's business income coverage (which typically requires physical damage from a covered *property* peril like fire) and the Equipment Breakdown policy's business income coverage (triggered by a "breakdown").
• Coinsurance (if applicable to Business Income): If the underlying Business Income coverage (which this endorsement modifies) has a coinsurance clause, failure to insure to the required percentage of values can result in a penalty at the time of loss.
• Underwriting Guidelines: Underwriters will assess the age, condition, maintenance history, and criticality of the equipment. Poorly maintained or obsolete equipment presents a higher risk for both physical damage and extended downtime, impacting business income.
• Limits and Sublimits: Pay close attention to the limits provided for Business Income and Extra Expense, as well as any sublimits for specific aspects like data restoration or spoilage if these are integrated or affected by this endorsement.
• Review Declarations Carefully: Ensure the declarations page accurately reflects the intended coverages, limits, and any specific equipment or locations scheduled. The form often refers to information "shown in the declarations."