Coverage Spotlight

Equipment Breakdown

In this coverage spotlight, an equipment breakdown underwriter sat down with R&I to discuss the ins and outs of covered losses due to mechanical or electrical breakdown.
By: | November 1, 2017 • 3 min read

Karen Caulfield, senior underwriting manager, equipment breakdown underwriting, Liberty Mutual Insurance, with more than 30 years of equipment breakdown underwriting experience, discusses the equipment covered under this type of insurance, how this coverage came to be and how it plays a role in businesses as small as a bakery to as large as a fortune 100 manufacturer.


R&I: What is equipment breakdown coverage?

Caulfield: Equipment breakdown (EB) covers losses stemming from damage to key equipment caused by failure of mechanical, electrical or other components due to power surges, electrical arcing, steam explosion and other events. Such losses are typically excluded by standard commercial property forms.

EB pays for repairing or replacing damaged equipment as well as the resulting business income losses.

The coverage was originally developed to protect the steam boilers that powered large factories at the turn of the 20th century. Today, however, the business-critical equipment of any size company can be covered by this insurance, such as diagnostic equipment in hospitals, air conditioning and refrigerators in restaurants, and business and communications equipment in offices.

R&I: What is covered under equipment breakdown?

Caulfield: EB policies cover the cost to repair or replace key pieces of equipment. They can also pay for other expenses related to the loss, such as lost income, extra expenses needed to continue operations while the machinery is fixed, or the lost value of spoiled or contaminated products. A policy can even cover expenses incurred when normal operations are interrupted by the failure of off-site, non-owned equipment (contingent business interruption).

Karen Caulfield, senior underwriting manager, equipment breakdown underwriting, Liberty Mutual Insurance

R&I: Why is this coverage important today?

Caulfield: EB coverage should be a key part of any company’s insurance program, because both the frequency and severity of these claims are rising.

There are three reasons for this. First, technological advances in electronics have increased the complexity of equipment. Today, most equipment contains a range of sophisticated controls and sensors, internet connectivity and advanced electronic sub-components never imagined just five years ago.

Second, this new technology often requires specialized technicians to diagnose and fix the damaged equipment, increasing both downtime and repair costs.

Third, the nation’s aging electrical grid can cause fluctuating electrical supplies and outages, which can produce electrical surges that can seriously damage equipment.

R&I: What is the difference between equipment breakdown and property coverages?

Caulfield: EB is a type of property insurance that covers specific equipment damaged by mechanical and electrical failure and other events, which are typically excluded from property policies given the specialized underwriting and risk engineering resources needed to insure against these. EB was designed to fill the gaps in property policies.

R&I: Who can benefit from such coverage?

Caulfield: Any size company in any industry should consider EB as part of its risk management program.

From an office building to a main street bakery to a fortune 100 manufacturer, every company has sophisticated equipment that is key to generating output, and hence revenue. When that equipment grinds to a halt, revenue stops and the cost of continuing operations rises, further impacting the bottom line.

EB coverage protects a company’s bottom line by providing the resources to quickly repair or replace key machinery or for temporary production facilities.

R&I: What are current market conditions?

Caulfield: The EB market is healthy. Pricing, terms & conditions and capacity are stable. Interest in the product is shifting down market from large and mid-sized companies to smaller accounts.

R&I: What should brokers, agents and buyers look for in an equipment breakdown provider?

Caulfield: Brokers, agents and buyers should understand a potential provider’s complete equipment breakdown offering.


It all starts with underwriting. Does the insurer have the experience to help define the exposure and develop plans for managing, mitigating and effectively pricing that risk?

Risk engineering is also critical. Does the carrier have the qualified, National Board-certified engineers who can help identify hazards and production bottlenecks, improve an account’s maintenance programs, infrastructure and business continuity plans, prevent unplanned downtimes, and allow a business to quickly recover from equipment failures?

One quick and effective measure of a potential carrier’s EB expertise is that insurer’s ability to offer its EB offering to other carriers so that those insurers can meet the full insurance needs of their customers.

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]