What is equipment breakdown insurance?
Equipment breakdown insurance, sometimes called boiler and machinery coverage, pays for sudden mechanical, electrical, and pressure-system failures that a standard property policy typically excludes. It may cover the equipment itself, resulting damage to connected property, spoiled stock, and lost income, closing a gap that standard property coverage leaves open.
When critical equipment fails suddenly, the repair bill is only part of the problem, because the downtime and spoiled goods can cost even more. We help California business owners close this gap so a breakdown does not turn into a shutdown.
What counts as a breakdown?
What does Equipment Breakdown Insurance cover?
- Sudden and accidental mechanical breakdown, such as a motor, compressor, or production machine that fails.
- Electrical breakdown, including arcing and damage to electrical panels and systems.
- Pressure-system failure, the classic boiler and machinery exposure.
- Damage to the equipment itself plus resulting damage to connected property.
- Spoilage of perishable stock when refrigeration or climate control fails, in many programs.
- Business income and extra expense from a covered breakdown, so you can keep operating or reopen sooner.
- Expediting expense: the added cost of speeding a repair, including overtime, express freight for a part, and temporary rental equipment while the permanent unit is rebuilt.
- Jurisdictional inspection. California requires permits and periodic inspection of pressure vessels, and insurers with certified inspectors commonly carry out those inspections, which makes this coverage a service as well as an indemnity.
Why does it matter in California?
California businesses run heavy HVAC and refrigeration loads, and the state’s power environment, including planned outages and grid stress during heat events, can put added strain on electrical and cooling equipment. We help you understand how this coverage would respond and how it works alongside your property policy.
Why is a breakdown not a property claim in California?
Because the standard fire form insures against named perils, and mechanical or electrical failure is not one of them. Insurance Code section 2071 adopts the California Standard Form Fire Insurance Policy, which covers loss by fire, lightning and removal, with other perils added by endorsement. A compressor that seizes, a transformer that arcs, or a boiler that cracks has not suffered a covered peril under the property form, which is why equipment breakdown exists as its own coverage. The settlement basis matters as much as the peril. Under section 2051, an actual cash value settlement deducts physical depreciation from components normally subject to repair and replacement during the structure’s useful life, and machinery is exactly that. A ten-year-old walk-in cooler settled at actual cash value is worth a fraction of its replacement, so the replacement cost basis of the equipment breakdown form is doing real work. Where a breakdown causes damage that is repaired, 10 CCR 2695.9 applies to the repair: matching, a copy of the estimate, and your choice of contractor.
The Insurance Code sections and the claims regulation cited here are as published by the California Legislative Counsel and the Office of Administrative Law at the time of writing. Both are amended from time to time, and those offices publish the current text.
Which businesses need it?
Any business that relies on mechanical, electrical, or climate-control equipment has this exposure. Common examples include HVAC systems, electrical panels, refrigeration in a restaurant or grocery, elevators, and production machinery in a shop or plant.
How do we schedule your equipment?
Tell us what equipment your business depends on and what a failure would cost you in repairs, spoilage, and downtime. We review those exposures with you, help you decide whether to add equipment breakdown to your property program, and explain what it covers in plain English.
Equipment insurance in California: which policy answers, explained
Which “equipment insurance” do you mean?
“Equipment insurance” is a plain-language phrase, not a policy. In California it usually points to one of three products, and they respond to different events. Your commercial property policy or business owners policy covers equipment at your premises against outside causes such as fire, theft and windstorm. A contractors equipment floater, a form of inland marine, covers tools and machinery that travel to job sites. Equipment breakdown, the modern name for boiler and machinery, covers failure that starts inside the machine. The Insurance Code treats the last one as its own class: section 111 defines boiler and machinery insurance separately from the fire insurance defined in section 102. This page is about the third product. The sections below say where the other two begin and end, so you can tell which one a given loss belongs to.
Is my equipment already covered by my property policy or BOP?
Against outside causes, usually yes. The Department of Insurance’s commercial insurance guide describes commercial property coverage as reaching the buildings you own or lease and your business personal property. It describes a BOP as property, general liability and business interruption in one policy. A fire that destroys a production line, a burglary that empties the tool crib, a storm that drops a tree through the roof onto the walk-in cooler: those are property claims. What the property form does not do is pay for the machine that stops working on its own. That is the gap the next section describes.
What does the property form exclude that equipment breakdown puts back?
The standard causes-of-loss form used on most commercial property policies carves out three internal events. It excludes mechanical breakdown, including rupture or bursting caused by centrifugal force. It excludes artificially generated electrical energy that damages or disrupts an electrical device, unless a fire results. And it excludes explosion of steam boilers, steam pipes, steam engines or steam turbines you own, lease or operate. The equipment breakdown form is written to insure exactly those three: mechanical failure, electrical failure including arcing, and pressure or vacuum failure, as IRMI’s summary of the ISO form sets out. The two forms are designed to fit together with no overlap and no gap. Editions vary and carriers file their own wording, so the exclusion and buy-back language on your own policies controls, not the summary here.
My tools and equipment leave the shop. Is that a different policy again?
Yes. Property coverage is written for a described premises. Equipment that moves goes on a contractors equipment floater: an excavator on a Sylmar job site, a mobile welding rig, a landscaper’s mowers and trailers. That floater is what IRMI defines as property insurance for equipment that is often moved from place to place. It is inland marine because the Nationwide Marine Definition, adopted by state regulators, lists mobile articles, machinery and equipment floaters among the property that class may insure. A floater typically answers for theft, fire and damage in transit or on site. What it typically excludes is the same internal failure the property form excludes: mechanical breakdown and wear and tear. A hydraulic pump that seizes on a scheduled excavator is not a floater claim. Our contractors tools and equipment page covers the floater in detail, and the inland marine page covers the wider class.
Does a Cal/OSHA boiler or pressure vessel permit come with the policy?
No. The permit is yours to hold, whatever you insure. Labor Code section 7680 says no tank or boiler shall be operated without a permit issued by or on behalf of the Division of Occupational Safety and Health. Fired boilers are inspected internally and externally at least every year under section 7682, and air and LP-gas tanks at least every five years under section 7681. Cal/OSHA’s Pressure Vessel Unit lists the thresholds: air tanks over 1.5 cubic feet, LP-gas tanks over 125 gallons and power boilers over 15 psig, with exemptions that depend on capacity and operating pressure. The connection to insurance is practical rather than legal. The Division may accept an inspection performed by a qualified inspector employed by an insurance company, so an equipment breakdown carrier’s inspector can often do the jurisdictional inspection during the same visit. Buying the policy does not issue the permit, and operating without one is not something a policy can cure.
Is a Public Safety Power Shutoff a “breakdown”?
No, and this is the question California businesses ask most. Under authority the Public Utilities Commission confirmed in 2012, an electric utility may de-energize lines when it reasonably believes there is an imminent and significant risk of wildfire. Nothing breaks. The equipment breakdown form requires direct physical loss that damages covered equipment through mechanical, electrical or pressure failure, so a deliberate shutoff is outside it. The property form is no help either: it excludes failure of utility service that originates away from your premises, however caused. The spoiled stock in a Granada Hills restaurant’s walk-in after a two-day shutoff falls between both forms unless something has been added. Two additions exist. Utility service endorsements on the property policy, and utility interruption and spoilage options on the equipment breakdown form. Each has its own trigger, and a precautionary shutoff with no damage at the utility’s equipment may not meet it. If shutoffs are a real exposure for you, this is the sentence to read in your own forms before the next red flag warning.
Does California’s replacement cost law reach business equipment?
Partly. Insurance Code section 2051 and section 2051.5 sit in the fire insurance chapter. They set actual cash value as the cost to repair or replace less a fair and reasonable deduction for depreciation, and replacement cost as that cost without the deduction, capped at the policy limit. The parts of section 2051.5 that limit holdbacks and extend rebuilding time are written for residences and do not reach a business. For a commercial fire loss to equipment, those sections frame the measure. Equipment breakdown and inland marine are different classes of insurance, and their forms carry their own valuation terms. Read the valuation condition on each policy rather than assuming the fire rule applies across the board.
Which policy pays when the same machine is hit two ways?
Take one commercial refrigeration compressor. A fire in the adjoining unit melts it: property policy. A thief takes it from a trailer between jobs: equipment floater. Its motor windings short and arc: equipment breakdown. The utility shuts the neighborhood off for three days and the stock spoils: none of the three, unless a utility or spoilage option was added. Same machine, four events, four answers. If you tell us what the equipment is, where it lives, whether it travels and whether it runs under pressure, we can tell you which of these you have and which you are missing. Some accounts we can place directly and quickly. Others go to underwriting for approval, or need a wholesale market, and those take longer. Either way you know which applies before you decide. Start an equipment breakdown quote, or call the Granada Hills office.
Statute citations, permit thresholds and inspection intervals current as of September 2026. Policy form language is summarized from published descriptions of ISO forms; editions differ and your own policy wording controls.
Common questions about Equipment Breakdown Insurance
Answering the most frequently asked questions about Equipment Breakdown Insurance.
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Schneiderman Insurance Agency makes the process of finding Equipment Breakdown Insurance convenient for you. Tell us about your situation, we review your risks and options with you, we help you put the right coverage in place, and we stay with you at renewal.
Equipment breakdown fills the mechanical and electrical failure gap in the commercial property form, and the income lost during the outage is business interruption. The wider program is on our business insurance page.
