Boiler & Machinery Insurance: A Business Bust

The cooler at the florist shop goes on the fritz. The microbrewery's machinery melts. The firm's all-important transformer breaks. What equipment does your business have that can cause major problems? This serious question is often forgotten when the subject of insurance comes up. Boiler & Machinery Insurance basically covers problems that arise out of mechanical, pressure, refrigeration, electrical, and turbine devices. The newer forms of Boiler & Machinery Insurance cover direct damage to property caused by a covered cause of loss. These have four extensions of coverage:

Boiler & Machinery Insurance covers some liability to others and their property for damage inflicted by your equipment, as in an explosion. For example, it will cover the damage when the florist's cooler breaks down and all the wedding flowers are damaged beyond use. There are Boiler & Machinery policies for small and large businesses alike. Moreover, there's Boiler & Machinery Business Interruption Insurance to cover lost business while a machinery problem has knocked a business out of operation. We won't describe here what is and isn't covered; so much detail may confuse you—or bore you. Just call our agency. We'll look at your circumstances and tell you what's needed for proper coverage.

Notes on Boiler & Machinery Coverage

Boiler & Machinery services require an annual inspection from the insurance company. These inspections are performed by licensed insurance company personnel for insurance purposes, but they satisfy legal inspection requirements, too. Moreover, the inspectors can "tag" objects to prevent governmental penalties and recommend loss-control measures that can improve an operation's efficiency and give equipment longer life.

In Boiler & Machinery terminology, "objects" include pressure vessels, refrigeration equipment, and electrical, turbine, heating, air-conditioning, and production machinery. Think about it. Businesses are surrounded by objects that may explode, break, and catch fire. For example, one office building suffered a flow switch failure in a 125-hp refrigerating system, damaging chiller tubes and resulting in a loss totaling $34,525. A church's cast iron boiler cracked, causing $34,969 of damage to the church organ, choir robes, and public address system. Add to this the interruption of a business' activities, and the loss can be very expensive indeed. The Commercial Property Policy (CPP) commonly written on buildings overlaps with a Boiler & Machinery Policy only in minor ways. Our agency can show you the importance of carrying both coverages.

Shoplifters Not Welcome!

No retailer is immune from retail theft. Studies show that the average retailer loses 1% to 3% of gross revenue to shoplifters. If such theft can't be entirely stopped, it can certainly be slowed by simple, inexpensive loss control. One good preventive measure is to establish closed-circuit televisions, although some retailers believe that this can alienate customers and employees. A simpler, less obtrusive (and less expensive) deterrent is to train store personnel to recognize and deal with shoplifters. Professional shoplifters have ways of distracting untrained employees, which can be guarded against. Shoplifters like to be left alone, so staff people should offer assistance as much as they can without annoying honest customers. Also, consider lowering shelves and widening aisles, since shoplifters like crowded stores with plenty of hiding space.

Clearing Up Coinsurance

After years in the corporate world, Sylvia quit and opened her own business, a boutique sandwich shop. She chose to locate her shop in a classy-looking strip mall that drew a large upscale clientele. Sylvia knew she would suffer a loss of business if the neighboring businesses burnt down or had to be closed for a time—so she looked into Dependent Property Business Interruption insurance.

If other mall properties suffered direct physical damage from a covered cause of loss, and Sylvia had to suspend operations during the period of restoration, Dependent Properties coverage would pay for the actual loss of business income. She can also consider purchasing Dependent Properties coverage with Extra Expense from Dependent Properties. This pays the necessary extra expense she would suffer because of a dependent property's loss. This policy covers necessary expenses during the dependent property's restoration, plus the expenses of continuing operations or minimizing their suspension. For example, Sylvia might rent a vacant lot across the street for parking until the mall's parking lot is completely open again, or she might rent a temporary location nearby. Expenses add up fast in such situations. Financially, Business Interruption Insurance is often more important to a business than Direct Damage Property Insurance, since the loss of income can easily exceed the cost of replacing damaged property.

What Are Dependent Properties?

HPR--A Way to Save Money

Do you manage superior properties and employ superior methods of loss protection? You may be able to reduce your premium costs by obtaining classification as a Highly Protected Risk (HPR). To achieve HPR status, a property must meet certain general criteria related to loss control (loss prevention and reduction). The time to develop HPR protection is while planning for a new or renovated location. Loss control is easier to build in sooner than add on later.

Here are some general criteria for HPR status:

Even if a business fails to win HPR status, it will still find loss control a valuable management tool

Exclusion Explained

Almost from the birth of insurance, Property policies have excluded "unexplained loss, mysterious disappearance or loss or shortage disclosed on taking inventory". This gap was accepted because if such protection existed, no one could determine whether a loss was insurable or if intentional dishonesty had occurred inside (or outside) the business. With modern electronic devices, such as electronically tagged goods, businesses have gone far to protect against shortages due to outsider criminal activity. Has your business thought of reviewing your Property Insurance with us? We have ideas and answers to business problems.

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