Machinery breakdown · inherent defect · consequential loss
Engineering insurance through Chubb
Engineering insurance covers damage to the installation itself, even without fire or burglary. The distinction between a sudden breakage and normal wear determines whether a claim is paid.
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Deze pagina in het Nederlands: Technische verzekeringen via Chubb.
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In brief
The heading of engineering insurance covers policies insuring the item itself against sudden and unforeseen damage: machinery breakdown, electronics, and, for construction and installation work, CAR and and erection all risks insurance. That is a different starting point from a fire policy, which lists insured events. Here the question is not what caused the damage, but whether the cause appears on the list of exclusions. Finass brokers with Chubb among others and also compares the offerings of more than thirty other insurers.
The pivot is the concept of inherent defect. A material fault, a construction fault or a casting fault leading to a breakage is covered under machinery breakdown cover, whereas that same cause is excluded under a fire or contents policy. What is not included is gradual deterioration: wear of bearings and cutting parts, corrosion, erosion, scaling and material fatigue. When a claim arises, an insurer therefore looks first at the maintenance log and at when the fault first appeared.
The second question is what happens after the breakage. Replacing a drive is one bill; production coming to a halt is another. That consequential loss is not automatically included in engineering cover, but requires a business interruption insurance with a section for machinery breakdown business interruption expressly included. For power generation and process installations, for which Chubb runs a separate line , that section is usually more important than the cover on the machine itself.
This page deals with one situation. The full overview is on SME insurance package.
What to look for in engineering cover
Four points that are checked first when an engineering claim arises.
The schedule of items determines the cover
Machinery breakdown and electronics are insured on the basis of a specified list with a description, year of construction and purchase value. A machine that is not on it is not insured, even if it stands in the middle of the production line. Update the list with every purchase, replacement or hired machine that stays longer than a season.
Maintenance and warranty come first
What the supplier has to put right under a warranty or maintenance contract is not paid by the insurer; those costs belong with the supplier. Also excluded are the periodic replacement of wearing parts, topping up and cleaning, and repairs that amount to routine maintenance. Keep service reports, because they show that the fault was sudden.
Software, data and settings
Electronics cover pays for the hardware. Loss of data, a control program that has to be reconfigured or damage from an attack on the network are not covered; that belongs on a cyber insurance. A fault caused by an external voltage surge is also dealt with differently from policy to policy, so read what is provided about the electricity network.
Testing, erection and the maintenance period
During installation and test running it is often not machinery breakdown cover that applies but erection insurance. That is followed by the maintenance period, during which you return to the works. Arrange that transition expressly, otherwise a period arises in which one policy has ended and the other has not yet started.
What does your premium depend on?
- Nature and age of the installation — a production line is weighted differently from office equipment
- Total value on the schedule of items — replacement value as new or replacement value per item
- Maintenance regime — a contract with periodic inspection reduces the risk
- Consequential damage included — business interruption after machinery breakdown included or not
- Excess per event — for large installations often deliberately set higher
- Continuity and spare capacity — a second line or standby facility limits the downtime
Insurers weigh these details differently. That is why comparing pays off.
What is covered
| Situation | Machinery breakdown | Fire and business contents policy |
|---|---|---|
| A bearing seizes and the drive of your production line breaks | Yes | No |
| A casting fault in the motor housing leads to a crack after two years | Yes | No |
| A forklift truck runs into the packaging line | Yes | No |
| Fire in the switch cabinet damages the line's control system | Yes | Yes |
| A voltage surge from outside the premises destroys the control board | Provided that | Provided that |
| Corrosion in a heat exchanger that was already visible on the last inspection reports | No | No |
What the machine costs is one bill; what the downtime costs appears on neither policy without a machinery breakdown business interruption section.
Frequently asked questions
The questions we are asked most often about this.
Is an operating error by an employee covered?
Clumsiness, inattention and incorrect operation are in principle insured under machinery breakdown cover; that is precisely the difference from a fire policy. If someone deliberately acts against the safety instructions or a guard is intentionally bypassed, Article 7:952 of the Dutch Civil Code comes into play and the loss stays at your own expense.
What if the machine runs worse and worse after a fault?
The question is then whether there is one sudden event or a process. Damage building up gradually through wear, corrosion or overloading is excluded. So report a fault straight away, even if you first have it looked at yourself; Article 7:941 of the Dutch Civil Code requires you to report the loss as soon as you are reasonably aware of it.
How is the loss paid: new for old?
That depends on the valuation basis chosen and the age of the item. Many engineering policies pay repair costs in full, but on a total loss of an older item they fall back on market value. Article 7:960 of the Dutch Civil Code underlies this: the payout must not put you in a better position than before the loss.
Does this cover replace liability insurance?
No. Engineering insurance concerns your own installation. If someone is injured by the breakage or another person's property is damaged, that is a third-party claim and belongs on the public and employers' liability insurance. Both policies can respond alongside each other to the same event.