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Equipment Breakdown Insurance: Why It’s Important to You and Your Business

Because your business depends on functioning equipment to operate and maintain revenue, a breakdown could be devastating. The threat of breakdown is increasingly prevalent because technologically advanced equipment tends to be sensitive and fragile, and can easily suffer damage that causes breakdowns. And the losses sustained continue to increase with the rise of just-in-time manufacturing, Internet marketing and improved supply chain management. Problems with your equipment can be extremely risky if you are not properly insured, as standard Property Insurance will not cover these types of losses. Equipment Breakdown Insurance (also referred to as Boiler and Machinery Insurance) will cover you in the event of damage or a breakdown.

Why are Breakdowns a Problem?

Though technology provides a host of invaluable features, it also poses many risks.

  • Circuitry on high-tech equipment is sensitive. A force as simple as static from bubble wrap can damage certain pieces of equipment.
  • Breakdowns that lead to interruptions in telecommunications, email and
    e-commerce mean lost time and revenue.
  • Interconnected but separate technologies can affect one another after a power surge or loss of functionality.
  • Obtaining parts to fix complex equipment can be difficult and time consuming.
  • Equipment may be located in areas of the facility that are difficult to reach, complicating repairs and concealing problems.

What are the Most Common Equipment Breakdowns?

  • Electrical Systems
    • Electrical systems make up 10 to 15 per cent of a building’s worth, and because they predicate all other business functions, a failure holds the potential for substantial loss for both building owners and their tenants.
    • A short circuit in a transformer, panel or cable can spread and destroy a large part of the system. These parts are often overlooked and underserviced.
    • Costs such as generator rental fees, relocation of tenants and the cost of leasing property in another location until equipment is repaired can worsen the financial impact of a breakdown.
    • For example, a 2008 incident of electrical arcing destroyed three main electrical panels and left an office building without power. Temporary measures were taken to restore power to tenants, contributing to a total loss of $1,507,389.
  • Air Conditioning and Refrigeration
    • Since many air conditioning units are located on the roof, repair or removal requires the hire of a helicopter or crane.
    • Without A/C, many businesses will need to relocate or rent temporary equipment while the unit is out of order.
    • Businesses that rely on refrigeration to maintain their products (hotels, restaurants, schools, nursing homes, hospitals, etc.) run the risk of spoilage in the event of a breakdown. They may be forced to hire a catering company or rent a refrigeration truck.
    • In one case, a hotel air conditioning compressor motor broke down during a July convention, causing $73,366 in total losses.
  • Boilers and Pressure Vessels
    • Cracking, collapsing, bulging or explosion can occur in boilers and pressure vessels (heating units, hot water units, cookers, sterilizers, cleaning equipment, etc.).
    • With no heat or hot water at a facility, businesses are forced to rent costly temporary units until the facility can be repaired.
    • For example, one store lost heat during the holiday shopping season when the boiler broke down and incurred $54,467 in losses.
  • Computers and Communication Equipment
    • Outages can affect computers, multi-line phone systems, TV satellite systems, point-of-sale systems, security systems and fire alarm systems.
    • An outage at your Internet Service Provider (ISP) can affect the functionality of your website and prevent your access to crucial information or Web services.
    • For example, a power surge damaged a service station/convenience store’s electronic cash register, auto diagnostic system, phone and paging equipment and security system for a total loss of $56,888.
  • Mechanical Systems
    • Can break down as a result of vibration, metal fatigue, seizing, misalignment or human error. This includes machines such as water pumps, ventilation fans, elevator and escalating machines, motors or engines.
    • Equipment is often critical to most buildings’ functions.
    • An example of this type of breakdown would be when a hydraulic lift in an auto repair shop needs to be replaced after welds gave way, costing around $9,000.

What Does Equipment Breakdown Insurance Cover?

It is important to understand the coverage you receive with your equipment breakdown policy. If you hold an older policy, you may want to review it with ALIGNED Insurance Inc. to be sure it covers any new, high-tech equipment you may have purchased. Typically, the following is covered under an Equipment Breakdown policy:

  • Property Damage – Cost to repair or replace damaged equipment due to an accident.
  • Off-Premises Property Damage – Covers portable equipment damaged away from the covered location.
  • Business Income – Covers the loss of income as a result of a covered accident until equipment is repaired or replaced. Also allows for additional time after repair or replacement to ensure that the business is operating at full capacity.
  • Contingent Business Income – Covers income loss after an equipment breakdown at an essential customer or supplier location.
  • Extra Expense – Covers additional expenses used to keep the business going after a covered loss, such as equipment rental fees.
  • Service Interruption – Covers business income and extra expenses after a breakdown at a supplier with whom the insured has a contract. If no contract exists, the equipment must be located within one kilometre of the insured’s location. Services such as waste disposal, air conditioning, refrigeration, heating, natural gas, compressed air, water, steam, electrical power and communications are often included. Considering the reliance many businesses have on Internet access, it is important to note that this may also cover your loss of business due to a mechanical or electrical breakdown in your ISP’s servers or other equipment. It will not, however, cover non-physical damage such as that caused by computer viruses.
  • Perishable Goods – Covers food spoilage, manufactured goods or other perishable items after a covered incident.
  • Demolition
  • Ordinance or Law – Covers costs associated with complying with building codes and laws (other than demolition).
  • Expediting Expense – Covers the temporary or permanent repairs necessary for basic business activity.
  • Hazardous Substances – Pays to clean, repair or replace areas that are contaminated by hazardous substances released in a covered loss.
  • Data Restoration – Pays for the restoration of lost or damaged data.
  • Newly Acquired Locations – Pays for damage to newly acquired locations.
  • Errors and Omissions – Covers locations that are outlined in the policy.
  • Brands and Labels – Reimburses for the loss when having to sell a damaged product for less than retail price.
  • Waive of In-Use Restriction – Pays for damaged equipment that was not in operation at the time of a covered accident.
  • Computer Equipment and CFC Coverage

Consult your broker to learn more about Equipment Breakdown Insurance to combat costly, and often unforeseen, problems at your place of business.

© Zywave, Inc. All rights reserved


Critical Cyber Exploits Affect Nearly All Computers

Cyber security researchers recently announced the discovery of two major security flaws that could allow hackers to bypass regular security measures and obtain normally inaccessible data. The flaws, referred to as Meltdown and Spectre, are both caused by design flaws found in nearly all modern processors. These vulnerabilities can be exploited to access all of the data found in personal computers, servers, cloud computing services and mobile devices.

Because Meltdown and Spectre are both caused by design flaws, experts believe that they will be harder to fix than traditional security exploits. Additionally, software patches that have already been released to help address the vulnerabilities can cause computer systems to slow down significantly, which may impact their ability to perform regular tasks.

Researchers believe that Meltdown and Spectre may be limited to processors manufactured by different companies, but also warn that the design flaws that contribute to Meltdown and Spectre have been present for years. Here are some key details about each flaw:

  • Meltdown: This flaw can be used to break down the security barriers between a device’s applications and operating system in order to access all of the device’s data. Meltdown can be used to access desktop, laptop, server and cloud computer systems, and can even be used to steal data from multiple users who share one device. Although researchers have only been able to verify that Meltdown affects processors made by Intel, other processors may also be affected. Many software developers have already released updates that prevent hackers from exploiting Meltdown.
  • Spectre: This flaw can be used to break down the security barriers between a device’s different applications and access sensitive data like passwords, photos and documents, even if those applications adhere to regular security checks. Spectre affects almost every type of computer system, including computers, servers and smartphones. Additionally, researchers have confirmed that the design flaw that enables Spectre is present in Intel, AMD and ARM processors that are used by nearly every computer and mobile device. Software developers are currently working on a patch to prevent the exploitation of Spectre, but some experts believe that future processors may have to be redesigned in order to fix the vulnerability.

When Meltdown and Spectre were originally discovered in 2017, researchers immediately reported them to major hardware and software companies so work on security fixes could begin without alerting hackers. As a result, services and applications offered by companies like Microsoft, Google, Apple and Amazon have already been updated to help defend against the flaws. However, you shouldn’t rely solely on a software patch to protect against these vulnerabilities. Here are some steps you can take to protect your computer systems and devices from Meltdown and Spectre:

  • Update all of your devices immediately, and check for new updates regularly. You should also encourage your friends, family members and co-workers to do the same.
  • Contact any cloud service providers and third-party vendors you use to ensure that they are protected against Meltdown and Spectre. Cloud services and computer servers are especially vulnerable to the exploits, as they often host multiple customers on a single device.
  • Install anti-virus and firewall systems to protect against regular malware. Researchers believe that hackers need to gain access to a device in order to exploit Meltdown or Spectre, so keeping your devices free of malware can help prevent data theft.

© Zywave, Inc. All rights reserved


Common Reasons Workplace Hazards Go Unreported

In order to ensure a safe and healthy workplace, organizations rely on their employees to report safety concerns. While hazard reporting is critical for discovering and addressing risks, many employees avoid it. The following are some reasons why workplace hazards go unreported:

  • Employees lack the time. It can be easy to be distracted by daily work and not take the time to fulfil extra responsibilities. However, if you notice a hazard, it’s important to notify your supervisor to ensure the safety of you and your co-workers.
  • Employees don’t know how to report the hazard. Sometimes employees may notice a safety issue, but don’t report it because they don’t know how. In these instances, it’s important to ask your supervisor to teach you hazard reporting processes.
  • Employees are concerned about getting in trouble. If a hazard is the result of negligence, employees may worry about repercussions for identifying an issue. However, hazard reporting isn’t about discipline, but rather prevention and correction. Employees should feel empowered to speak with their supervisors about workplace issues without worrying about getting in trouble.

When it comes to hazard reporting, employees should be proactive instead of waiting for an inspection to take place.

© Zywave, Inc. All rights reserved


Working Safely in the Cold

Employees that work outside in the winter months are at risk of serious health problems, including hypothermia, frostbite, dehydration and muscle injuries. What’s more, frigid temperatures can also cause additional pain for those who suffer from arthritis and rheumatism.

Common symptoms of cold-related illnesses and injuries include uncontrollable shivering, slurred speech, clumsy movements, fatigue, confusion, white or greyish skin, skin that feels waxy and numbness.

To reduce the risk of cold-induced injuries, consider doing the following:

  • Layer clothing to keep warm enough to be safe, but cool enough to avoid perspiring excessively. Layered clothing should contain the following:
    • An inner layer of synthetic weave to keep perspiration away from the body
    • A middle layer of wool or synthetic fabric to absorb sweat and retain body heat
    • An outer layer designed to protect from wind chill and allow for ventilation
  • Wear a hat.
  • Place heat packets in gloves, vests, boots and hats to add heat to the body.

It’s important to note that many people do not notice they are suffering from cold-related illnesses because their tissue is numb. Therefore, it is wise for employees to check on each other periodically when working outdoors in the cold.

If employees experience any symptoms of cold-related illnesses and injuries, they should get indoors, alert their supervisor and call for medical attention if symptoms do not subside.

© Zywave, Inc. All rights reserved


5 Cyber Risk Questions Every Board Should Ask

When a data breach or other cyber event occurs, the damages can be significant, often resulting in lawsuits, fines and serious financial losses. In order for organizations to truly protect themselves from cyber risks, corporate boards must play an active role. Not only does involvement from leadership improve cyber security, it can also reduce liability for board members.

To help oversee their organization’s cyber risk management, boards should ask the following questions:

  1. Does the organization utilize technology to prevent data breaches? Boards should ensure that the management team reviews company technology at least annually, ensuring that cyber security tools are current and effective.
  2. Does the organization have a comprehensive cyber security program that includes specific policies and procedures? Boards should ensure that cyber security programs align with industry standards and are audited on a regular basis to ensure effectiveness and internal compliance.
  3. Has the management team provided adequate employee training to ensure sensitive data is handled correctly? Boards can help oversee the process of making training programs that foster cyber awareness.
  4. Has management taken appropriate steps to reduce cyber risks when working with third parties? Boards should work with the company’s management team to create a third-party agreement that identifies how the vendor will protect sensitive data, whether the vendor will subcontract services and how it will inform the organization of compromised data.
  5. Has the organization conducted a thorough risk assessment and considered purchasing cyber liability insurance? Boards, alongside the company’s management team, should conduct a cyber risk assessment and identify potential gaps. From there, organizations can work with their insurance broker to customize a policy that meets their specific needs.

Contact your insurance broker to learn more about cyber risk mitigation strategies that you can start using today to keep your business secure.

© Zywave, Inc. All rights reserved


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