When a Vacant Building Tanks
Equipment breakdown coverage is typically appropriate for properties that are occupied, often being linked to restaurants for food spoilage coverage, office buildings to cover communication devices and any other occupied building to cover air conditioning units, heaters, back-up generators, etc.
But vacant buildings? This is not the obvious exposure for equipment breakdown coverage. Insureds may not think about the fact that vacant buildings still use electricity and heating and cooling systems, so their thought is, “what equipment is really being used?”
Just because vacant buildings don’t have bodies to warm, people to turn the lights on or people to ride the elevator, doesn’t mean that there isn’t any equipment. What is often overlooked is what goes on behind the scenes to keep the vacant sections of a property looking so pretty. There are pipes to keep warm, alarms to sound, surveillance cameras to roll and generators to run.
The other issue with vacant buildings is that the property losses aren’t noticed until significant damage is done. The property may be inspected or checked on once a week, but more often than not, only the exterior is being studied, while the interior may be in trouble.
While a building may be unoccupied, there are scenarios in which contents are still being held in the building. In the following claim example, an office building was temporarily unoccupied for a year-long policy term, with desks and tables arranged throughout the building. The heat in the building was being maintained by a cast iron steam boiler. With the lack of maintenance on the equipment, the boiler experienced a low water condition, causing it to overheat and ultimately rupture. Not only did the boiler have to be replaced for $24,500, but the contents inside the building were also damaged along with the building itself. This insured was lucky. The effects of an explosion can be catastrophic, with the equipment propelling thousands of pounds of pressure. This video, hosted by ABC7 Eyewitness News, illustrates how much pressure is typical for a residential hot water heater.
Equipment breakdown coverage can be added to an insurance policy and should be recognized as an essential coverage part. A simple property policy would not cover the replacement of the $25,000 piece of equipment in the above example, but the equipment breakdown coverage would. Wear and tear would also be covered, which can be a significant expense for an insured.
With an inexpensive price tag, this coverage grants an exceptional amount of peace of mind. When a building is unoccupied with no one to regularly tend to such necessary upkeep, a building owner can take comfort in knowing that their equipment and resultant damage is covered.
Contact your Devon Park Specialty underwriter to learn more about our solutions for this coverage need.
As always, thank you for your support and business.
Written by Molly McShea
September 15, 2016
Contact Cheryl Ryan,
Executive Vice President, Division Leader | 844-438-6775 Ext. 2582