9.4 Commercial Crime Coverage Forms & Equipment Breakdown (Boiler and Machinery)
Key Takeaways
- Commercial crime is written on either a loss sustained form, which requires the loss to occur during the policy period, or a discovery form, which responds when the loss is discovered during the policy period.
- Employee Theft covers dishonest acts of employees, while Forgery or Alteration covers written instruments drawn by the insured and Computer Fraud covers the fraudulent transfer of property by computer.
- Burglary requires unlawful entry or exit evidenced by visible marks of forcible entry, safe burglary requires forcible entry into a locked safe or vault, and robbery requires taking from a person by force or threat.
- Equipment breakdown insures accidents to covered equipment such as boilers, pressure vessels, mechanical, and electrical objects, which the commercial property causes of loss forms exclude.
- Expediting expenses pay the reasonable extra cost of temporary repairs and of speeding up permanent repairs after a covered equipment breakdown accident.
9.4 Commercial Crime Coverage Forms & Equipment Breakdown (Boiler and Machinery)
The North Carolina adjuster content outline lists Crime coverage forms and Boiler and machinery insurance as separate lettered sub-topics inside the eighteen-question commercial insurance domain. Both exist because the standard commercial property causes of loss forms exclude the exposures they cover: dishonest acts of employees, and mechanical or electrical breakdown. An adjuster who does not know these forms will misroute the claim.
1. The Crime Coverage Trigger: Loss Sustained vs. Discovery
This is the first question on any crime claim and the most commonly tested crime concept.
| Form type | Trigger | Practical effect |
|---|---|---|
| Loss Sustained Form | The loss must be sustained during the policy period and discovered during the policy period or within a stated period after termination | Protects against losses occurring while the policy was in force. Includes a limited extended discovery period, commonly one year |
| Discovery Form | The loss must be discovered during the policy period, regardless of when it occurred | Reaches back to losses that occurred before inception, subject to any retroactive date. Broader for long-running embezzlement |
Why it matters. Employee theft is usually a slow drain discovered years after it started. A bookkeeper who skimmed from 2021 through 2026 produces a loss that a discovery form picks up in full on discovery, while a loss sustained form responds only to the portion sustained during its own policy period and any prior periods under continuity provisions.
2. The Major Crime Insuring Agreements
| Insuring agreement | What it covers | Common trap |
|---|---|---|
| Employee Theft | Loss of money, securities, or other property resulting directly from theft committed by an employee, whether identified or not | Excludes loss caused by any employee after the insured learns of that employee's prior dishonest act |
| Forgery or Alteration | Loss from forgery or alteration of checks, drafts, promissory notes, or similar written instruments drawn by or on the insured | Covers instruments the insured issued, not instruments the insured merely accepted |
| Inside the Premises — Theft of Money and Securities | Theft, disappearance, or destruction of money and securities inside the premises or a banking premises | Money and securities only |
| Inside the Premises — Robbery or Safe Burglary of Other Property | Robbery of a custodian, or safe burglary, of property other than money and securities | Requires the defined act, not mere disappearance |
| Outside the Premises | Theft, disappearance, or destruction of money and securities, and robbery of other property, outside the premises in the care of a messenger | Messenger and custodian are defined terms |
| Computer Fraud | Loss resulting directly from the use of a computer to fraudulently cause a transfer of money, securities, or other property to a place or person outside the premises | Requires an actual transfer caused by computer use |
| Funds Transfer Fraud | Loss from fraudulent instructions to a financial institution to transfer funds from the insured's account | Distinct from computer fraud |
| Money Orders and Counterfeit Money | Loss from accepting in good faith a counterfeit instrument or currency | Good faith acceptance is required |
The Definitions That Decide Crime Claims
| Term | Definition | The distinguishing element |
|---|---|---|
| Employee dishonesty / theft | Unlawful taking of property to the deprivation of the insured, committed by an employee | The perpetrator's status as an employee |
| Burglary | Unlawful taking of property from inside the premises by a person unlawfully entering or leaving, evidenced by visible marks of forcible entry or exit | Visible marks of force |
| Safe Burglary | Unlawful taking from within a locked safe or vault by a person unlawfully entering, evidenced by marks of force, or the taking of the safe itself | Force against the safe or vault specifically |
| Robbery | Unlawful taking of property from a person by force, or threat of force, or by an obviously unlawful act witnessed by that person | A person is present and threatened |
| Theft | The broadest term — any act of stealing | No force or presence element required |
Worked distinction. A Durham retailer arrives to find the back door pried open and the register emptied: burglary — visible marks of forcible entry, no person present. The same register emptied at gunpoint during business hours: robbery — force against a person. Cash missing from the drawer with no forced entry and nobody threatened: theft, which is covered only if a theft-based insuring agreement applies. A pried-open floor safe: safe burglary.
3. Equipment Breakdown (Boiler and Machinery)
Why the Coverage Exists
The commercial property causes of loss forms exclude loss caused by mechanical breakdown, artificially generated electrical current, and the explosion of steam boilers, pipes, or engines owned or operated by the insured. Equipment breakdown insurance, historically called boiler and machinery insurance, fills that hole.
The Accident Definition
Coverage is triggered by an accident to covered equipment, which the form defines as a direct physical loss that causes damage to covered equipment and necessitates its repair or replacement. Typical covered equipment categories:
| Category | Examples |
|---|---|
| Boiler and pressure vessels | Steam boilers, hot water heaters, pressure tanks, piping under pressure |
| Mechanical objects | Pumps, compressors, motors, engines, turbines, gears |
| Electrical objects | Transformers, switchgear, panels, cable, motors |
| Air conditioning and refrigeration | Chillers, compressors, condensing units |
| Computers and communications equipment | Where scheduled |
What Equipment Breakdown Pays
| Coverage | Operation |
|---|---|
| Property damage | Damage to the covered equipment itself and to other property damaged by the accident |
| Expediting expenses | The reasonable extra cost of temporary repairs and of speeding up permanent repairs, such as overtime labor and express freight |
| Business income and extra expense | Loss of income during the period of restoration following a covered accident, where purchased |
| Spoilage | Perishable goods spoiled by an accident to refrigeration or other covered equipment |
| Utility interruption | Where endorsed, loss following an accident to utility-owned equipment away from the premises |
| Hazardous substance / ammonia contamination | Additional cost to clean up or dispose of contaminated property |
Expediting expense is the sub-topic the blueprint names directly. It is not the cost of the permanent repair, which is ordinary property damage — it is the premium paid to get the repair done faster, plus the cost of temporary measures that keep the operation running while the permanent repair is completed.
Worked example. A chiller at a Charlotte cold storage facility suffers a covered compressor accident. The permanent replacement compressor costs $84,000 and normally ships in three weeks. Property damage coverage pays the $84,000. Expediting expense pays the $6,500 air freight surcharge to get the unit delivered in four days and the $9,200 cost of renting a temporary portable chiller for that period. Spoilage pays for the product lost before the temporary unit arrived, and business income responds if the facility could not operate.
The Inspection Function
Equipment breakdown insurers perform jurisdictional inspections of boilers and pressure vessels, satisfying state inspection requirements and providing genuine loss prevention. This inspection service is a defining feature of the line and a common exam point: the insurer has a contractual right to inspect, but inspection does not amount to a warranty that the equipment is safe.
Trap: the right to suspend coverage. Equipment breakdown forms permit the insurer to immediately suspend coverage on any covered equipment found to be in a dangerous condition, by delivering or mailing written notice. Suspension is immediate on delivery of notice; it does not require the advance notice periods that apply to cancellation of the whole policy.
Exam Focus
- Loss sustained = loss occurred during the term; discovery = loss discovered during the term.
- Employee Theft turns on the perpetrator's employment status.
- Forgery or Alteration covers instruments drawn by or on the insured.
- Burglary requires visible marks of force; robbery requires a person threatened.
- Computer Fraud requires a computer-caused transfer of property.
- Equipment breakdown covers what the causes of loss forms exclude: mechanical breakdown, artificially generated current, and steam boiler explosion.
- Expediting expenses pay for temporary repairs and speed, not the permanent repair itself.
A Raleigh company discovers in 2026 that a controller embezzled funds steadily from 2022 onward. The company's crime policy is written on a discovery form. How does the trigger operate?
An adjuster investigates a commercial loss where the rear service door shows pry marks, the alarm was defeated, and inventory was taken overnight with no one present. Which defined crime peril does this describe?
A covered equipment breakdown accident damages a manufacturing motor. The insured pays $4,800 in overtime labor and expedited freight to shorten the outage, and $31,000 for the replacement motor itself. Which coverage responds to the $4,800?
Why does a commercial property program need a separate equipment breakdown policy alongside a special causes of loss form?