When a compressor seizes, a power surge fries a control board or a boiler cracks, your regular property policy usually won’t respond, because mechanical breakdown, artificially generated electrical current and steam boiler explosion are on its exclusion list. Equipment breakdown coverage is the piece that adds them back. It is written as an endorsement to your property policy or as its own policy, and it is designed to pay to repair or replace the equipment, fix other property the breakdown damaged and, depending on the form, cover lost income, spoiled stock and the extra cost of rushing repairs. It is not designed to pay for wear and tear itself or for problems fixed by routine maintenance.
What counts as a breakdown
Equipment breakdown forms are built around a defined event. In one widely used endorsement, an equipment breakdown endorsement (form CPEB 002 03 18) that attaches to a commercial property policy, an “accident” is a fortuitous event that causes direct physical damage to covered equipment and is one of these:
- Mechanical breakdown, including rupture or bursting caused by centrifugal force.
- Artificially generated electrical current, including arcing, that disturbs electrical devices, appliances or wires.
- Explosion of steam boilers, steam pipes, steam engines or steam turbines you own, lease or control.
- Damage inside boilers, steam or hot water, caused by a condition or event inside the equipment.
Covered equipment in that form is covered property that generates, transmits or uses energy, or that operates under vacuum or pressure other than the weight of its contents. Applied to a typical business, that definition reaches the equipment it runs on: HVAC and refrigeration, boilers and water heaters, electrical panels and switchgear, production machinery, and computers and office equipment. IRMI’s definition names photocopiers and computers among the equipment this coverage applies to.
Why your property policy leaves it out
A commercial property policy written on a special causes-of-loss form (ISO’s is CP 10 30) covers loss from any cause unless the cause is specifically excluded. The exclusions are where breakdown sits. North Carolina’s State Property Fire Insurance Fund, which insures state agencies, publishes its all-risk special form, and it is a clear example: it excludes artificially generated electrical current unless it causes a fire, mechanical breakdown unless it causes an elevator collision, and explosion of steam boilers, pipes, engines or turbines unless it causes a fire or combustion explosion. Wear and tear, rust, corrosion and latent defects are excluded in the same list.
Put the two side by side and the design is plain. The equipment breakdown endorsement adds back, as a covered cause of loss, almost exactly the breakdown events the property form takes out.
What the coverage parts pay for
- Property damage. Direct physical damage to covered property that results from the breakdown, not just the machine itself.
- Business income and extra expense. In the endorsement form, any business income or extra expense coverage on the policy is extended to breakdown losses.
- Expediting expenses. The reasonable extra cost to make temporary repairs and speed up permanent repairs or replacement.
- Spoilage. Perishable goods that spoil, or that are contaminated by released refrigerant such as ammonia.
- Service interruption. Losses when a breakdown of a utility’s, landlord’s or other supplier’s equipment cuts off power, heat, refrigeration, water or similar services. In this form the outage must last more than 24 hours unless the schedule says otherwise.
- Data restoration and hazardous substances. The cost to restore lost data, and the extra cost to repair, replace or clean up property a breakdown contaminates with a hazardous substance.
Several parts carry their own sublimits, none of them adds to the policy’s overall limit, and deductibles can differ by coverage, so I read the schedule, not just the form name.
What it doesn’t cover
The same endorsement says none of these is an accident: misalignment, miscalibration, tripping off-line, or anything fixed by resetting, tightening, adjusting, cleaning or routine maintenance. It also excludes loss from fire, flood, earth movement and vandalism, and breakdowns caused by lightning, windstorm or hail, with narrow exceptions, or by a pressure test of a boiler or vessel. Vehicles and equipment mounted on them, construction and excavation equipment, buried piping, sprinkler piping and equipment you manufacture for sale are not covered equipment. Forms differ by insurer, so wording matters.
Boiler and pressure vessel inspections vary by state
Boiler inspection rules are set by each state. Two examples:
- Texas. Under Health and Safety Code section 755.025, power boilers get an annual certificate inspection, steam and hot water heating boilers every two years, and hot water supply boilers and potable water heaters every three years. The Texas Department of Licensing and Regulation says insured boilers must be inspected by the insurance company providing the insurance, or its designee, and uninsured boilers by a TDLR inspector.
- California. Labor Code section 7680 bars operating a boiler or tank without a permit. Section 7682 calls for each installed fired boiler to be inspected internally and externally at least once a year, and lets the state stretch the internal interval to as long as 36 months where operating experience and design show equivalent safety. Section 7683 limits a boiler permit to one year.
Breakdown underwriters ask about boilers and pressure vessels up front, and the endorsement I reviewed says the insurer will perform inspections that state or municipal boiler and pressure vessel rules require. If you have one, have its current certificate or permit ready along with your commercial property or businessowners policy details.
Common questions
Is equipment breakdown the same as boiler and machinery insurance?
It is the same line of coverage. IRMI lists boiler and machinery as a synonym and says equipment breakdown policies are increasingly replacing traditional boiler and machinery forms, typically with slightly broader coverage.
Does my commercial property policy cover a broken air conditioner or compressor?
Usually not for the breakdown itself. Special causes-of-loss forms like the public example above exclude mechanical breakdown and artificially generated electrical current, which is the gap equipment breakdown coverage is designed to fill.
Does equipment breakdown cover wear and tear?
No. Conditions fixed by maintenance, adjusting or cleaning are not a covered accident, though in the endorsement I reviewed, a breakdown that results from wear is treated as an accident and the resulting loss is covered.
Does it cover spoiled food after a refrigeration failure?
The endorsement I reviewed covers spoilage of perishable goods, including contamination from released refrigerant such as ammonia. It carries its own sublimit, so check the schedule.
Do my vehicles or forklifts count as covered equipment?
Generally not. The form I reviewed excludes vehicles and equipment mounted on them, and its definition of vehicle names forklifts, bulldozers and tractors; construction and excavation equipment is excluded too.
Sources
- IRMI: equipment breakdown insurance (definition)
- IRMI: special causes of loss form (CP 10 30)
- North Carolina State Property Fire Insurance Fund: “All Risk” Special Form, covered causes of loss and exclusions
- Equipment breakdown endorsement, form CPEB 002 03 18 (published form library copy)
- Texas Department of Licensing and Regulation: Boiler Safety at a Glance
- Texas Department of Licensing and Regulation: boiler program FAQ
- Texas Health and Safety Code section 755.025: inspection of boilers
- California Labor Code section 7680: permit required to operate a tank or boiler
- California Labor Code section 7682: boiler inspection intervals
- California Labor Code section 7683: permit issuance and duration
General information about equipment breakdown coverage and state boiler inspection rules as of October 2026, not legal advice; your policy’s forms and schedule, and your state’s boiler laws and regulations, control. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.