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READERS’ FEEDBACK Equipment maintenance insurance In the October 2005 issue (page 48), the article titled “Equipment Maintenance Insurance” discusses the income opportunities for agents and, at the same time, the cost savings for their clients who buy equipment maintenance coverage. While equipment maintenance insurance is a relatively recent concept, one of the earlier forms of this coverage dealt with television sets in the 1940s. During this period, several leading television manufacturers proposed to install and service their product for a certain period, with opportunities to extend that period and to provide replacement parts for an additional fee. Considering the quantity and prices of television today, this insurance coverage has gone the way of buggy whips. With equipment maintenance insurance, however, the need may persist for many years since these policies can encompass an almost limitless variety of complex equipment, such as appliances, computers, and the like for home and business use. While this coverage concept makes sense, agents cannot accept these policies without checking them very carefully. I am not questioning the value of Zurich’s insurance policy, which was discussed in the article, because I have not had the opportunity to review it. I am only making comments here in generalities. One of the goals of this kind of centralized program is for someone, other than the entity itself, to be able to handle all of the tasks normally associated with service or maintenance agreements. Among those tasks would be (1) managing the equipment, (2) issuing purchase orders for service, (3) seeing to it that repairs and maintenance are properly performed and that work performed is commensurate with time and material put into each project. A temporary drawback is having to monitor the protection provided under warranty to make sure it is utilized when the need arises. This is an especially important consideration, given that equipment maintenance insurance does not commonly apply during warranty periods. Another drawback has to do with the amount of information an insured must provide to the insurer in the way of required information to get this centralized program functional. Prospective insureds most assuredly will want to weigh the economic advantages of this insurance against all of the time and expense required to get this insurance into motion. The general idea of the insurance part of this program is to cover losses and costs not routinely available from property and inland marine floaters. Considering that many of these policies and floaters are not standard, determining what is or is not routinely available is a difficult exercise short of analyzing countless coverage documents. Watch out for phraseology which states that loss and costs are excluded directly or indirectly because of loss from fire, lightning and windstorm, for example. The problem here is that coverage may also be excluded for any loss to electronic equipment from power surges brought about by fire, lightning or windstorm. Some policies may also exclude coverage for any deliberate acts of any insured. With almost all decisions and acts performed by insureds, during the course of their employment, being deliberate, the insurer with this kind of an exclusion could have an open door to deny coverage for any loss. When reviewing these policies, watch out for exclusions that bar coverage for repair or replacement of parts when discovery of deficiencies occur during maintenance, refur-bishment, improvement, updates, etc. Once the insured discovers or becomes aware of a potential problem during repair, maintenance, overhaul, etc., the resulting loss, arguably, is not fortuitous. Likewise, beware of policy exclusions applicable to loss resulting from gradual deterioration or depreciation of the insured property. What property does not gradually deteriorate or depreciate? Such exclusions are far too restrictive and carry enormous potential for denying coverage. Looking at equipment maintenance insurance programs is wise and may turn out to be productive for the agent and insured, alike. But it may be wiser first to look at and compare some of these programs before making the sales pitch. Donald S. Malecki, CPCU |
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