Equipment Breakdown Coverage Now Offered in Homeowners Program

The American Association of Insurance Services (AAIS) is filing two new equipment breakdown coverage options for use with its revised homeowners forms. The endorsements are currently being filed and will take effect in most states later in 2007.

The new equipment breakdown coverage options were developed in conjunction with The Hartford Steam Boiler Inspection & Insurance Co., one of the country’s leading equipment breakdown reinsurers. The endorsement can be used with any equipment breakdown reinsurer, however.

The new endorsements add coverage for physical damage to specified types of covered property that occurs as a result of an equipment breakdown accident. The term ‘covered property’ can include furnaces, hot water heaters, heating/air conditioning systems, and similar types of property.

Residential property policies typically exclude coverage for losses arising from accidents within such equipment.

The equipment breakdown endorsements include two coverage extensions:

* To a limited extent, the loss of use coverage provided under the AAIS Homeowners policies is extended to apply when a covered equipment breakdown accident makes living quarters on the described location unfit for use.

* Refrigerated Property Coverage is extended to include loss caused by the electrical breakdown of a freezer or refrigerated unit on the described location.

Both endorsements state that the coverage provided under them does not apply to electronic entertainment or computer equipment, kitchen or laundry appliances, and other specified property. What sets the endorsements apart, however, is that one of them extends equipment breakdown coverage to kitchen and laundry appliances that are permanently installed in the structure of the insured residence.

“This is a fairly new coverage, but a number of companies have been going through the analysis and development to roll it out to their customers,” says Michael Fusselbaugh, senior vice president for strategic business development for HSB.

“This coverage is another tool AAIS is making available to our affiliates to help them have a competitive edge in their markets,” says Susan Luecke, AAIS assistant vice president for personal lines.

Source: AAIS