Why do I need Course of Construction Equipment Breakdown coverage?

Builder’s Risk Property policies typically exclude loss or damage caused by electrical arcing and mechanical breakdown.

Course of Construction Equipment Breakdown Coverage pays for the sudden and accidental, physical damage to equipment that requires its repair or replacement, during the course of a building’s construction.

The Canadian Construction Documents Committee, standard form CCDC2, requires equipment breakdown insurance to be taken in the joint names of the Contractor, Owner and Consultant. The policy shall name all Subcontractors as insureds, and coverage is to be maintained continuously from commencement of use or operation of the equipment insured, until 10 calendar days after the date of Substantial Performance of the Work*.

Course of Construction equipment breakdown insurance provides coverage during the high risk phases of testing and commissioning, and during the operation of equipment, until the project is handed over to its owner.

Once installed, equipment may undergo two forms of testing:

• Cold testing checks equipment under ‘dry run’ conditions. Examples include, using instruments to detect a circuit, or filling a pressure vessel with water to test for leaks.
  
• Hot testing operates equipment under actual working conditions, and includes the application of heat, fuel, feedstock, or connection of equipment to a grid or load circuit. The hot testing phase poses a high potential for breakdown.

Towards the end of a project’s timeline comes the Commissioning phase, which utilizes equipment under normal operating conditions to train personnel, and ensure equipment performs as expected whilst complying with the specifications that it was designed for.

High risk factors come into play, such as manufacturer defects, human error, and interaction with other building systems.

While warranties cover manufacturer defects, they typically exclude losses caused by external factors, such as temperature extremes, dusty conditions or improper installation.

They typically do not cover costs to remove and install replacement equipment, and business interruption expenses.

Course of Construction Equipment Breakdown Coverage closes gaps found in Builder’s Risk property policies. As technology and risk become more sophisticated, you can rely on HSB Canada to provide industry-leading products and services for equipment exposures.