11.8 Farm Liability and Equipment Breakdown Coverage

Quick Answer: Farm coverage exists because an agricultural operation is simultaneously a residence and a business, and neither the homeowners form nor the CGL fits. The ISO farm program insures the dwelling, farm outbuildings, scheduled or blanket farm personal property, and liability under Coverage H (bodily injury and property damage), Coverage I (personal and advertising injury) and Coverage J (medical payments). Equipment breakdown — historically boiler and machinery — covers direct damage caused by an accident to a covered object: a pressure vessel, mechanical apparatus or electrical apparatus. Every standard property form excludes exactly this loss, and indirect loss endorsements add business income, spoilage, utility interruption and expediting expenses.

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Farm Coverage

Florida agriculture — citrus, sugarcane, nurseries, cattle, sod, aquaculture and equine operations — produces claims that a homeowners adjuster and a commercial adjuster would each hand to the other. The farm program solves that by insuring both halves in one contract.

The Property Sections

Livestock coverage deserves particular attention. Basic livestock perils are typically named perils — fire, lightning, windstorm, hail, explosion, riot, aircraft, vehicles, vandalism, theft, building collapse, flood, drowning, electrocution, and attack by dogs or wild animals — and coverage is written per head or per class with a per-head limit. Death from disease, freezing and childbirth is normally excluded absent a specialty form.

The Liability Sections

Exposures the adjuster must confirm:

• Custom farming. Work performed by the insured for others for a fee, which base forms often exclude or sublimit.
• Farm employees and workers' compensation. Florida's agricultural workers' compensation threshold — 6 or more regular employees, or 12 or more seasonal employees working more than 30 days in a season — determines whether an injured worker's claim belongs in Chapter 440 or in Coverage H. The farm liability form excludes obligations under any workers' compensation law.
• Roadside stands, u-pick operations and agritourism. These are business exposures that may or may not fall inside the farming operations grant.
• Animal liability and equine activities. Florida's equine activity statute limits liability for inherent risks of equine activities where the required warning is posted; that is a defense, not a coverage grant.
• Pollution and chemical drift. Aerial and ground application of pesticides and herbicides generally requires a specific chemical drift or applicators endorsement.
• Motor vehicles and mobile equipment. Farm tractors and implements used off public roads are usually inside the farm liability grant; a registered pickup on the highway is a business auto exposure.

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Equipment Breakdown (Boiler and Machinery)

Why the Property Form Cannot Handle It

Commercial property, homeowners and BOP forms all exclude loss caused by mechanical breakdown, artificially generated electrical current, and explosion of steam boilers, steam pipes, steam engines and steam turbines owned or operated by the insured. Those exclusions exist because the exposure requires inspection engineering, not merely rating.

The equipment breakdown insurer is therefore as much an inspection service as a carrier: the premium buys periodic jurisdictional and loss-prevention inspections of pressure vessels, and the inspection function is often the larger part of the value.

The Accident Trigger

The coverage form pays for direct damage to covered property caused by an "accident" to a "covered object." An accident is defined as a sudden and accidental direct physical loss to a covered object which causes damage to the object and necessitates its repair or replacement — for example, a rupture, bursting, bulging, implosion, arcing, burning out of electrical windings, or the breaking of a moving part. Gradual deterioration, wear, corrosion, leakage at a joint and depletion are not accidents.

Object Definitions Groups

Coverage is written by scheduling object groups, and modern comprehensive forms simply cover all equipment except a stated exclusion list:

The Direct Damage Grant

Payment covers damage to the covered object itself and to other property of the insured damaged by the accident. Standard additional coverages include:

• Expediting expenses — the extra cost of temporary repairs and of expediting permanent repairs, including overtime and premium freight.
• Hazardous substance / ammonia contamination — the additional cost to repair or replace because the property is contaminated by a hazardous substance released by the accident.
• Data restoration and computer equipment on current forms.
• Defense of legal proceedings brought against the insured because of an accident to a covered object, and payment for damage to property of others in the insured's care.

Indirect Loss Endorsements

Small Business Forms

Equipment breakdown is not only a heavy-industry line. ISO renamed and consolidated its program with the 07 01 edition: the old Boiler and Machinery Coverage Form became the Equipment Breakdown Protection Coverage Form (EB 00 20), a single form carrying ten coverages that are switched on by entries on the declarations rather than by scheduling every object. That structure is what makes the coverage sellable to a small risk.

For genuinely small commercial accounts, Florida adjusters see the exposure written three ways:

• As an endorsement to a Businessowners Policy, adding equipment breakdown at a single blanket limit with no scheduled objects — by far the most common form on a restaurant, dry cleaner, convenience store or small medical office.
• On the comprehensive EB 00 20 form with a modest limit, where the insured wants the jurisdictional boiler inspections that come with the policy.
• On a deliberately narrow form such as BM 00 25, Boilers, Fired Vessels and Electric Steam Generators — Limited Coverage, which pays only for the sudden and accidental tearing asunder of an object. It is cheap, and it is the form that produces the denial when a boiler simply fails without rupturing.

The adjuster's first question on a small-risk equipment breakdown claim is therefore which of these three the insured actually bought, because the accident definitions are not the same.

Exam Trap: A Steam Boiler Explosion Is Not a Fire Loss

If a steam boiler ruptures and wrecks the mechanical room, the commercial property policy excludes it, because it expressly excludes the explosion of steam boilers, steam pipes, steam engines and steam turbines owned or operated by the insured. The equipment breakdown policy pays. But if the boiler accident causes an ensuing fire, the resulting fire damage is generally picked up by the property policy, because the property form's exclusion does not extend to ensuing fire. Two carriers, two adjusters, one loss — allocate carefully.