Equipment Breakdown Insurance

so let's get started our speaker today

is David Rossum Senior Account Executive

here at Adventist Risk Management this

is a topic of great interest David so

I'm going to get out of the way and let

you get started you know David it's been

fun to watch the growth and development

of the webinar program I can remember

the first one the first webinar that I

participated in I think we had three or

four participants and it's been fun to

watch the growth in the number of

participants since that that original

one today we're going to talk about

equipment breakdown coverage this

shouldn't be a foreign topic to most of

you those of you who have been in

Treasury for a while will relate to this

coverage because originally it had to do

with boiler coverage that we had at our

large churches and our large schools our

universities and and so forth but it's

evolved over time just like we've had an

evolution in our property policy from

its first inception when it covered

primarily fire to where it's become an

all risk policy we're seeing the same

kind of evolution take place with our

equipment breakdown or boiler coverage

and it's become equipment breakdown

coverage which covers a much broader

venue of equipment than we've had in the

past so our current we're currently

partnering with mutual boiler re in

providing this coverage there's some new

and exciting connections that are

created as a result of that relationship

and those are some of the things that we

want to get into and want to cover as we

go through the presentation today first

of all let's talk about program elements

the things that we want to talk about

specifically with the program itself

we're going to talk about the elements

we're going to talk about covered perils

we'll give some illustrations or the

kind of perils that are covered with

this with this program

specified conference locations covering

specified locations versus covering all

conference locations in how that it's

been endorsed into your policy and your

property policy now rather than being a

standalone policy all on its own and the

last item that we'll talk about is how

we've unified the claims process to make

it easier to use from your point of view

easier is better program elements first

as I just mentioned we've taken the

policy and we've endorsed it into your

existing property policy this has some

distinct advantages rather than having

two policy documents like we have in the

past we now have a single policy

document and many of the limits

deductibles and so on are common to both

policies so with the endorsement into

the property policy it makes it a much

more fluid situation for those of you

who are using it secondly premiums

calculated based on total insured value

that you show on your property policy

and a raid is applied to that to come up

with a premium to be associated with

this additional type of coverage the

deductible as I mentioned is common with

the deductible on the property policy so

whatever you're carrying on the property

policy also follows for the equipment

breakdown coverage and inspections many

of you have had to be involved with

inspections of your large boilers as we

mentioned earlier and those those

inspections will continue under this new

program they'll be assigned to an

inspector in your area who come by and

perform the on-site inspections

the equipment breakdown endorsement

covers three perils specifically

mechanical breakdown electrical

breakdown and the the pressure system

breakdown that most of us have been

aware of through the years first of all

before we get into some of the specifics

I threw a slide on here that'll give you

some of the the history and the

breakdown both a number of claims the

frequency of claims and also in the

severity of claims as it relates to

these three broad categories you can see

from the graph on the Left that

electrical breakdown makes up 65 percent

of the claims that are submitted under

this coverage mechanical breakdown

represents 30 percent and pressure

equipment breakdown represents five

percent but if you look at severity

you'll see that those numbers begin to

change even if ever so slightly in terms

of severity

rather than being sixty five percent for

electrical breakdown it shifts to 53

percent mechanical breakdown goes from

30 percent to 40 percent by virtue of

the severity of the claim and the

pressure equipment goes from five

percent up to seven percent so this will

give you some idea as to what the

composition is and what how the

frequency and severity arm are gauged

covered parallels electrical breakdown

we're just going to give some examples

so that you get some idea of what's

involved with this coverage the examples

of the kind of equipment that would be

involved would be power transformers

electric motors switchboards

distribution pet

circuit breakers cables bus ducts and

related equipment the contributing

factors to losses under electrical

breakdown would come from supply line

surge excessive moisture insulation

deterioration poor workmanship operator

error or poor content tack contacts

would be an example of the kind of

contributing factors and the resultant

damage that would come as a result of

that would be motor burnout ground

faults and arcing covered perils under

mechanical breakdown an example of the

kind of equipment that would be included

under mechanical breakdown would be

pumps fans blowers engines turbines

compressors gear sets for production

process contributing factors oil

contamination misalignment vibration

over speed bearing wear in operating

operator error and the resulting damage

from that would be the breaking of a

shaft or the seizing of a moving part

lastly the pressure system breakdown

examples of pressure systems would be

heating or process boilers pressure

vessels cookers sterilizers air tanks

the contributing factors would be

control failure scale buildup low water

condition vibration operator error and

the resultant damage is a result of one

of those contributing factors would be

an explosion an implosion

bulging overheating or bursting covered

perils let's explore as it relates to

the kinds of problems that we may face

in the seventh-day Adventist Church the

common locations that we're going to

talk about first of all will be

something that you might find in the

school cafeteria a camp kitchen or maybe

in one of our ABCs the cupboard

equipment we're going to talk about will

be coolers and refrigeration units air

conditioning and heating units

compressors point-of-sale systems or an

electrical distribution system an

example in the bottom left hand corner

will give you some idea of how this

would work the compressor on the

refrigeration unit seizes the unit was

able to be prepared repaired but there

was resulting food spoilage as a result

of the shutdown in this particular

instance there was property damage of

five thousand one hundred eighty nine


there was also spoilage that was repaid

in the amount of four thousand and

twenty four dollars another example from

a printing press that you might find in

a conference office at a school maybe in

a camp or in our large churches and the

covered equipment under this one would

be telephone systems electrical systems

switchboards air conditioning and

heating systems or maybe a data center

the example we've got again in the

bottom left hand corner is a printing

press sustains damage when a defective

coated paper if passes through the

machine the press miss fed and miss

applied the ink this caused damage them

to the impression cylinder the blanket

cylinder and the bearings the proper

damage property damage under this

particular loss was 80

thousand dollars the extra expenses

associated with the loss amounted to

seventy nine thousand dollars or a total

loss of a hundred and fifty nine

thousand dollars that was covered under

this particular coverage the next one

will explore might relate to our

conference shops Camp repair bays school

maintenance departments or maybe school

mechanical training and again the

equipment that we'd be talking about

would be air conditioning systems

milling machines electrical distribution

systems pumps and engines or

transformers again in the bottom left

hand corner foreign material entered the

press causing the crankshaft on the

stamping press to break repair was

expedited which advert averted a larger

business interruption but the damages

that resulted from it property damage in

the amount of sixty four thousand

dollars expediting expense for getting

on it quickly with sixteen thousand

dollars and business interruption while

the while the press was down was twelve

thousand dollars or a total of ninety

two thousand dollars which the

indication is could have been much

larger if it hadn't have been expedited

now we're going to take a look inside of

your office where you work and you see a

variety of things located in that office

we're going to go to the next slide and

it'll show you which which part of that

equipment would be covered under this

equipment breakdown coverage so you

still got your computers that are

covered you've got your printer that's

covered these are the types of things

that would be covered in your office

setting let's say that we were to have a

power surge

and the power surge burned out the

computers the computers would be covered

under the equipment breakdown coverage

as a result of the surge another example

shows another office setting with

additional types of equipment again if

we move the slide it'll show what

equipment is covered in this scenario

hot water heaters and the heavy pressure

generators and boilers in the lower

floor of the office building represents

equipment that would be covered once

again under the equipment breakdown

coverage want to make very clear because

there's oftentimes a misunderstanding as

to how far equipment breakdown coverage

will go in providing coverage for loss

property not performing due to age wear

and tear corrosion or deterioration is

not a covered loss by way of this

endorsement understand that this

coverage is not meant to be a

maintenance program for your

organization it's meant to service

extraordinary extraordinary types of

events that create loss let's look at

this particular program with mutual

boiler reefer for just a second from the

standpoint of the two types of programs

that they're offering to our local

conference and we'd like you to as

conference leaders and as leaders of the

organizations within the church to take

a hard look at what they're offering

because this is a new and unique

opportunity to get this kind of coverage

at very favorable rates

first of all we're going to talk about

the all location coverage that means

that this coverage would be available to

every church every school your office's

your academies your any types of

industrial buildings that you might have

associated with your schools would all

be covered under this the premium is

based as you can see on the screen by a

rate times the total insured value of

all that you show on your statement of

values the total insured value for the

conference equals the additional

property premium that you would pay for

this coverage coverage will then be

available to all insured locations there

is a rate reduction associated with

purchasing the coverage for all

locations and the deductible as we

mentioned before is the same as what's

shown on your property policy okay the

point that I'd like to make with this

particular all location coverage is the

issue of the rate reduction when you

include all your properties as part of

this program now for those of you who

have been equated through the years with

the programs that we've had in the past

and have locations that we are currently

servicing with equipment breakdown on a

per location basis Miuccia boiler re is

offering selective location coverage it

includes up to ten and I want to

emphasize 10 locations can be included

on this coverage I'm going to give you

an illustration of why that's important

in just a second the premium in this

instance is based again on a rate and I

will I want to let you know that the

rate for the selective location coverage

is higher than the rate that they apply

when you

you have all your locations involved

it's the rate times the total insured

value for the additional property

premium of those locations that are

included in your selective in your

selections again it includes up to ten

selected locations the standard rate

applies rather than the rate reduction

and the deductible once again as is the

same as the the property policy now

here's where I'd like to make a point

for those of you who currently join

selective locations I happen to have a

client that has 23 locations right now

that they have on a selected basis the

new program will include up to ten this

means that that particular organization

is going to have to make a decision

they're going to have to decide whether

whether to cover all their locations or

to cover the ten and then find another

means of covering the additional 13 so

those are the choices some of the

choices that are going to have to be

made if you have individual locations

and if that's what you're working on at

the present time and don't feel

comfortable in going to the all location

coverage program I want to make one

other point with this and that is when I

did the calculations for what the 23

locations would be versus providing a

premium for all locations for that

particular client there wasn't all that

much difference in premium between

covering the 23 or covering the whole so

when you're talking to your account

executive make a point at looking at

what the differences might be seriously

consider in going to the all location

coverage coverage you know we have all

kinds of things

that are happening right now we've got

storms that we haven't experienced in

the past we've been through a winter

that has been second to none we've got

all kinds of things that we face in the

church and we've had all kinds of losses

that have been incurred as a result of

it these things affect not only the big

churches and the schools

it also affects all the churches within

our conferences all of them are impacted

think seriously about providing all

location coverage for your conference we

mentioned earlier that it is endorsed

into your property policy what this does

is it provides a single policy document

as we mentioned before rather than two

separate policies it provides blended

coverage which helps to eliminate the

potential for gaps that have been there

in the past between the two standalone

policies so we mentioned earlier it's

the same deductible that's what you have

with your property policy and one of the

big items that may seem small but really

is huge it creates efficiency and

adjudicating claims when you submit a

claim under the program you'll submit it

as you always have you can go to WWE and

you submit your claim to Adventist risk

management our claims specialists will

review it they'll look to determine

where coverage rightly belongs if it

belongs to Mutual boiler re as a

equipment breakdown claim it will be

forward to mutual boiler re if it's

adjusted as part of your property

program it will be adjusted here locally

with your armed claims examiner the

location is identified when the claim is


coverage is then the

termen and confirmed so that simplifies

the process of adjudicating claims in

the past if you had a claim and you

weren't sure which side of the equation

had fallen on fill on whether it fell on

the property side or whether it fell on

the equipment breakdown side it created

confusion and where to submit the claim

do we submit it to the to the equipment

breakdown carrier or do we submit it to

a RM this helps to eliminate the

confusion by leaving the burden for

determining where the claims goes to the

arm claims examiner