(December 2022)
This covers only the mechanical breakdown of covered equipment. It does so through exceptions and deviations from AG 00 01–AG 00 01 Agricultural Capital Assets (Output Policy) Coverage Form. This analysis examines each of them.
The endorsement schedule has spaces for the following information:
Per Breakdown–Direct Damage Limit of
Insurance
Note: This limit applies over all locations and for all covered equipment. If limited coverage is desired for specific equipment at a specific location, attach AG 04 36–Limited Coverage for Specified Equipment to the policy along with this endorsement. The AG 04 36 is explained in more detail at the end of this article.
Sub-Coverages
· Ammonia Contamination
· Hazardous Substance
The most the insurance company pays for either of these sub-coverages is $25,000 unless there is either a higher limit or the word "Included" is entered in the spaces provided. These limits are part of the Per Breakdown–Direct Damage Limit of Insurance and are not in addition to it.
Deductible
Note: This information may be entered on the declarations if it is not entered on the endorsement schedule.
The insurance company pays for direct loss or damage to covered property because of a breakdown of covered equipment at a covered location.
The Exclusion section of the coverage form is amended with respect to the coverage this endorsement provides.
1. The following exclusions are eliminated entirely for this endorsement:
2. A
new exclusion is added. Coverage does not apply to loss or damage to covered
equipment that is being subjected to electrical or pressure testing. However,
this does not negate an exception to Exclusion C. 2. n. Installation, Testing,
Repair that provides coverage for the resulting fire or explosion direct loss
or damage due to installation, testing, repair, or similar services performed
on computers.
3. Two replacement exclusions are added. They are similar to corresponding exclusions under C.2. d. Other Types of Losses in the coverage form with the change being an addition if exceptions to provide coverage:
The following two limitations in the Limitations Section in the coverage form to this endorsement are removed:
1. The entire D. 1.a. limitation that addresses losses that are caused by or that result from conditions or events inside steam boilers, pipes, engines, or turbines.
2. The entire D. 1. b. limitation that addresses losses that are caused by or that result from conditions and events inside water heating equipment or hot water boilers, other than explosions.
The limits in this section are subject to the coverage form’s limits of insurance.
1. The Per Breakdown–Direct Damage Limit of Insurance
This limit on the endorsement schedule is the most the insurance company pays for direct damage in any one breakdown. This limit is a sublimit of the coverage form limits of insurance, not an addition to it.
2. Specific
Sub-coverage Sublimits
In an unusual method of limiting coverage, this endorsement places a coverage limitation within the limit of insurance section. These sub-coverages are not described in any other part of the endorsement, so without this item, full limits are available. This item offers three different limits. The first is the $25,000 for each coverage. The second is a limit above the $25,000 but less than the limit provided in paragraph 1 above. The third is the word Included, which means that the paragraph 1. Limit applies without limitation.
a. Ammonia Contamination
This is contamination of covered property by ammonia that results in spoilage. Salvage expenses are covered as part of this sublimit.
b. Hazardous Substance
These are additional expenses the named insured incurs to clean up, repair, replace, or dispose of covered property that is damaged, polluted, or contaminated by a hazardous substance. The expenses paid are those that are over and above amounts the insurance company would have paid if the loss did not involve hazardous substances.
1. Application of
Deductibles
There is no payment for covered loss or damage that results from a breakdown until it exceeds the deductible amount on the endorsement schedule.
2.
Determination of Deductible
There are two different types of deductible:
a.
Dollar Deductible
If there is a dollar deductible on the endorsement schedule, it is first deducted from any loss that is otherwise eligible for payment. The insurance company then pays the lesser of the amount of loss that exceeds the deductible or the limit of insurance.
The deductible in the coverage form applies if a dollar deductible is not entered on this endorsement.
b.
Time Deductible
If there is a time deductible on the endorsement schedule with respect to Business Income and Extra Expense, the insurance company is not liable for any loss that occurs during the waiting period on the endorsement schedule that starts immediately after a breakdown occurs. If there are two or more deductibles that involve different causes of loss that apply to the same loss, only the largest is deducted.
Note: This deductible is unusual because there are usually exceptions for the extra expense with respect to time deductibles but not in this case.
Any insurance company representative can immediately suspend breakdown coverage on covered equipment when it is found to be in or exposed to a dangerous condition. The representative delivers or mails written notice to the named insured's last known address or to the address that has the covered equipment involved. Coverage suspended this way can be reinstated only by endorsement.
If such coverage is suspended, the named insured is entitled to pro rata refund of the premium for the affected equipment. However, the suspension applies even if such refund has not been offered or made.
The following four definitions are added to the Definitions Section in the coverage form.
1. Breakdown
This is a direct physical cause of loss that damages covered equipment so that it must be repaired or replaced. Breakdown includes pressure or vacuum equipment failure. It is also a mechanical failure that includes centrifugal force caused by rupture or bursting. Electrical failure is also breakdown and includes electrical arcing.
Breakdown does not include or mean any of the following:
2. Covered equipment
This is equipment that operates under internal pressure. It is also equipment that operates under vacuum pressure that is not from the weight of its own contents. Electrical or mechanical equipment that is used to generate, transmit, or utilize energy and computers and communications equipment are also considered covered equipment.
Covered equipment does not include or mean:
3. Hazardous substance
This is any substance a government agency declares to be a health hazard. It does not include ammonia.
4. One breakdown
This term is used in the Limits of Insurance and Deductible Sections. When an initial breakdown occurs and, because of that initial breakdown other breakdowns occur, all breakdowns triggered by that initial breakdown are considered one breakdown.
In addition, multiple breakdowns at a single location that happen at the same time and are the result of the same cause are considered a single breakdown.
The use of this term prevents multiple limits from being available to cover the multiple losses but also prevents the named insured from being assessed multiple deductibles.
This endorsement starts with a schedule for the following three entries:
Only the Limits of Insurance section of AG 04 34–Equipment Breakdown Protection Coverage Endorsement is amended when this endorsement is attached, but that change is significant.
The coverage for any equipment listed in the schedule is limited to only the following:
The limit of loss in the schedule is a sublimit subject to the Per Breakdown–Direct Damage Limit of Insurance in the AG 04 34 schedule. It is not an additional limit.