1. Insurance Community University www.InsuranceCommunityUniversity.com Agricultural Equipment Breakdown 1  The webinar will begin shortly.  There is no audio at this time.  This presentation is being recorded for your viewing pleasure at a future date.  The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.  The PowerPoint presentation is also available under ‘Materials’.  You will receive the course number for your state near the end of class.  Use the ‘chat’ window for questions on the content.  100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

2. Insurance Community University www.InsuranceCommunityUniversity.com Agricultural Equipment Breakdown Sponsored By: Hartford Steam Boiler and Inspection Company 2

3. Insurance Community University www.InsuranceCommunityUniversity.com Welcome to your Insurance Community University All of you are currently on mute – Un-mute your own system – Telephone Option Select Telephone on your screen Dial in the PIN number so that your number becomes active – Microphone and/or Speaker Option You can use this option if you have a headset that you use with your computer Audio 3

4. Insurance Community University www.InsuranceCommunityUniversity.com Participation & Chat Window You will receive information from the monitor via the ‘Chat’ window. –Please locate window in the control panel Q & A is welcomed during the presentation and at the end of the presentation You will find the question box on your control panel –Write your question in that box and send it to the presenter/organizer The presenter will take those questions in the order submitted 4

5. Insurance Community University www.InsuranceCommunityUniversity.com DOI Requirements When you see a slide with the hand up symbol, touch the “hand” icon on your control panel – Click ONCE only If you do not raise your hand, the monitor will be in contact with you in the chat box If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times 5 = Hand is down

6. Insurance Community University www.InsuranceCommunityUniversity.com Polling Throughout the class we will be conducting periodic polls We need 100% participation on the polls The polls are intended to check participation but also to create discussion topics throughout the presentation 6

7. Insurance Community University www.InsuranceCommunityUniversity.com Forms To Complete for CE After class ends – Return attendance form – Proctors – return your form to email address Email address is in chat window or in email sent to you today 7

8. Insurance Community University www.InsuranceCommunityUniversity.com DOI Requirements We will file your hours with the DOI after the completion of this webinar and we have received the attendance form. You have 48 hours to return the form You will be sent a Certificate of Attendance/Completion by email. Please retain this for your records for five years. 8

9. Insurance Community University www.InsuranceCommunityUniversity.com Internet Disruption If the presenter looses internet connection STAY ON THE LINE The administrators will communicate with you

10. Insurance Community University www.InsuranceCommunityUniversity.com Internet Failure If the internet fails and all participants are kicked off line by Go To Training or other source then the seminar will be terminated You will receive instructions by email as to how we will proceed This is a precautionary notice, only 10

11. Insurance Community University www.InsuranceCommunityUniversity.com This class is being recorded Available in the University This course is approved for CE in CA Only

12. Insurance Community University www.InsuranceCommunityUniversity.com Disclaimer Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by the instructor or the creator(s) of this material do not modify or revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2013 All Rights Reserved www.insurancecommunitycenter.com 12

13. Insurance Community University www.InsuranceCommunityUniversity.com Your Instructor Today Laurie Infantino, CIC, AFIS, CISC, ACSR, CISC, CRIS President and Co-Founder of The Insurance Community Center

14. Insurance Community University www.InsuranceCommunityUniversity.com Agricultural Equipment Breakdown 14

15. Insurance Community University www.InsuranceCommunityUniversity.com What this class will cover Equipment Breakdown Insurance is essential for most business risk including the Agricultural Industry. This course will cover such issues as: 1.Understanding the limitations in the Commercial Property Form that require the addition of Equipment Breakdown Insurance 15

16. Insurance Community University www.InsuranceCommunityUniversity.com What this class will cover 2.Why Equipment Breakdown is necessary for the Agricultural Risk and methods of writing Equipment Breakdown 3.Review of Agricultural Equipment Breakdown Form(s) 16

17. Insurance Community University www.InsuranceCommunityUniversity.com #1-- Understanding the limitations in the Commercial Property Form that require the addition of Equipment Breakdown Insurance 17

18. Insurance Community University www.InsuranceCommunityUniversity.com Background  Previously Boiler & Machinery  Currently referred to Equipment Breakdown which is a much more generic and all encompassing term 18

19. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #1 19

20. Insurance Community University www.InsuranceCommunityUniversity.com Air Conditioning Unit Your insured has an air conditioning unit on the top of their processing building that malfunctioned causing damage to the unit and resultant power loss that resulted in a business income claim. How is this loss covered? 20

21. Insurance Community University www.InsuranceCommunityUniversity.com Why is Equipment Breakdown Coverage Necessary (MES) It is all about the “perils” that cause the loss 21 Electrical Mechanical Direct Damage Spoilage Boilers Business Income

22. Insurance Community University www.InsuranceCommunityUniversity.com Also Excluded (S) Spoilage (Not Specifically Excluded Dampness or dryness of atmosphere Changes in temperature or extremes of heat or cold, including freezing – Example - Dairies or Refrigerated lockers particular have very large refrigeration systems that are often ammonia based. If the system malfunctions; ammonia could leak with the result of spoilage and ammonia contamination—the loss would NOT be covered on the property form. This would be covered on an EB Form with Spoilage.

23. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #2 23

24. Insurance Community University www.InsuranceCommunityUniversity.com Loss of Farm Medication and Vaccines The insured had a power outage that lasted 8 hours due to excessive heat and lack of generating capacity. All of the refrigerated farm medications were destroyed for a replacement value of $10,000. How would this loss be covered? 24

25. Insurance Community University www.InsuranceCommunityUniversity.com Property vs EB Considerations There are some important considerations as to whether to write certain coverages on EB or on a different form: – Spoilage (in the Property Series) – Computers (Inland Marine) 25

26. Insurance Community University www.InsuranceCommunityUniversity.com Spoilage A VERY important coverage for the agricultural risk – Spoilage to Product – Spoilage to Medicines – Spoilage to Semen 26

27. Insurance Community University www.InsuranceCommunityUniversity.com Definition (Spoilage) "Perishable stock" means personal property: (IMPORTANT DEFINITION) a.Maintained under controlled conditions for its preservation; and b.Susceptible to loss or damage if the controlled conditions change 27

28. Insurance Community University www.InsuranceCommunityUniversity.com Definition CP & EB “Stock” means merchandise held in storage or for sale, raw materials, property in process or finished products including supplies used in their packing or shipping. 28

29. Insurance Community University www.InsuranceCommunityUniversity.com 29 EB Spoilage Breakdown/Accident On Premises (can extend) RC/Selling Price Sub-limited on Dec Page Spoilage on Property Insurance Perils Beyond your Control On or Off the Premises Selling Price Full Limit

30. Insurance Community University www.InsuranceCommunityUniversity.com EDP Property Equipment Breakdown EDP 30

31. Insurance Community University www.InsuranceCommunityUniversity.com 31 Property Form ONLY Property Perils No or Limited Data Equipment Breakdown Requires Breakdown Perils Limitation Limited data coverage EDP Inland Marine Broadest Peril Definition Broadest Property Definition Includes data

32. Insurance Community University www.InsuranceCommunityUniversity.com Objective #2 Why Equipment Breakdown is necessary for the Agricultural Risk and methods of writing Equipment Breakdown 32

33. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown and the Farm Risk Equipment is essential to keep farms producing and INCOME earned Most equipment now contains highly sensitive technology that can easily be damaged by a power surge or other cause 33

34. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown and the Farm Risk Replacement cost of equipment can be costly Equipment may become obsolete and cost to replace may be prohibitive Repair costs of equipment increases— level of expertise required may not be readily available Increased exposure to lengthy closures resulting in a loss of income 34

35. Insurance Community University www.InsuranceCommunityUniversity.com Emerging Coverage Issues Toxic Mold caused by damage to covered equipment: Example: a machine that controls atmospheric temperature and humidity controls failed causing mold Terrorism (Agro-Terrorism) 35

36. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #3 36

37. Insurance Community University www.InsuranceCommunityUniversity.com Horse Ranch Your insured lives on a ranch and raises horses and does some breeding. In his home he has installed extra refrigerators to store the medicines and supplements for the horses. Can he get equipment breakdown insurance on his home that would cover any loss to the refrigerator and contents. 37

38. Insurance Community University www.InsuranceCommunityUniversity.com Every type of risk has their own unique exposures Home Farm Ranch Crop Cattle Dairy Hogs Poultry 38

39. Insurance Community University www.InsuranceCommunityUniversity.com EB and HOME Risk Many farm operations have their “home” on the farm property Written on a Farm Property Form (Similar to a Homeowners Policy) Homeowners Policy (Farm Property) do not have coverage for equipment breakdown 39

40. Insurance Community University www.InsuranceCommunityUniversity.com EB and HOME Risk Equipment that provides heating, cooling and electricity. More sophisticated and complex, breakdowns are more costly. Many hobby farms or smaller farms may store medicine, semen or other perishable property on their premises. 40

41. Insurance Community University www.InsuranceCommunityUniversity.com Important Questions for the Farm Operation. What if…… …The main circuit breaker failed and there was no electricity to the farm …The refrigeration system failed due to mechanical breakdown and expensive medications were spoiled 41

42. Insurance Community University www.InsuranceCommunityUniversity.com Important Questions for the Farm Operation. What if…… …a power surge damaged the electrical equipment and computers and shorted out a grain dryer or ventilating fan. Could you: – Continue your operation – Replace the wet grain in process or storage 42

43. Insurance Community University www.InsuranceCommunityUniversity.com Do You? …Have enough value on your equipment such as your milking carousels, grain handling equipment, pivot irrigation …Have a method of utilizing other equipment if yours is damaged …Have a budget in place for repair and replacement of equipment 43

44. Insurance Community University www.InsuranceCommunityUniversity.com Examples of Farm Equipment Electrical distribution systems Boilers and pressure vessels Healing and cooling systems Refrigeration systems Deep well pumps and motors 44

45. Insurance Community University www.InsuranceCommunityUniversity.com Examples of Farm Equipment Pivot irrigation equipment Emergency generators Grain dryers Milking machines 45

46. Insurance Community University www.InsuranceCommunityUniversity.com Examples of Farm Equipment Ventilation fans Mechanized feed, waste and egg handling equipment GPS Equipment Refrigerated Vessels—Cold Storage Vessels for nitrogen used to prevent aging 46

47. Insurance Community University www.InsuranceCommunityUniversity.com Examples of Farm Equipment Computers/Computerized Equipment Cow Identification Systems Electronic Timers and Clock Controllers (example ventilation fans) 47

48. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #4 48

49. Insurance Community University www.InsuranceCommunityUniversity.com How to write EB How is Equipment Breakdown Coverage written? 49

50. Insurance Community University www.InsuranceCommunityUniversity.com Ways to write Equipment Breakdown With the same carrier as the Property company (Farm Property Company Coverage PART Adding EB coverages by endorsement to the Commercial Property (Farm Property) Eliminating the major exclusions under the property form Endorsement 50

51. Insurance Community University www.InsuranceCommunityUniversity.com Ways to write Equipment Breakdown With the same carrier as the property (Farm Property) Written as a Separate Policy With a different carrier Written as a Separate Policy 51

52. Insurance Community University www.InsuranceCommunityUniversity.com Objective #3 Review of Agricultural Equipment Breakdown Form(s) 52 The BASIC Intent of all the forms is the same

53. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #5 53

54. Insurance Community University www.InsuranceCommunityUniversity.com Off Premises There was a truck off premises that ran into a main power poll. The electricity was off for a full day and the insured was not able to operate their machinery. They suffered a loss to product in process as a result of no electricity. How would this loss be covered? 54

55. Insurance Community University www.InsuranceCommunityUniversity.com 55 Breakdown to Covered Equipment Trigger Damage to Equipment Damage to Property Damage to Property of others Business Income SpoilageOff Premises OTHER COVERAGES

56. Insurance Community University www.InsuranceCommunityUniversity.com Commercial Property Off Premises 56 Truck ran into power polls Wind is a “Cause of Loss” on a Commercial Property Form. Covered on Utility Interruption Endorsement to a CPP

57. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown Off Premises 57 Transformer Overloads causing damage Covered on Utility Interruption on an Equipment Breakdown Form

58. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #6 58

59. Insurance Community University www.InsuranceCommunityUniversity.com Writing Coverage In general which approach provides the broadest coverage for Equipment Breakdown? 59

60. Insurance Community University www.InsuranceCommunityUniversity.com Why Equipment Breakdown Is Written Mechanical, Electrical or Steam Equipment on Premises Inspection Service - the insured also has the advantage of using an inspection service provided for certain types of equipment that can assist in preventing serious losses. Typically an insurance company will provide this service as part of the premium charged.

61. Insurance Community University www.InsuranceCommunityUniversity.com Inspections The various state and municipalities are principally responsible for the inspections and maintenance of the log for boilers and unfired pressure vessels that are subject to inspection by the state jurisdiction. In most jurisdictions, insurance company inspections are acceptable in lieu of inspections made by a state inspector.

62. Insurance Community University www.InsuranceCommunityUniversity.com Form Series AAIS Farm Form – Named Perils Not Named – Optional Perils Not Named – AAIS AgOP Open Perils Excluded ISO Three Form Options Basic Form – Not named Broad Form – Not Named Special Form – Excluded 62

63. Insurance Community University www.InsuranceCommunityUniversity.com Policies in Review AAIS ISO Equipment Breakdown Protection – FP 0660 10 06 Equipment Breakdown Protection Coverage Form – EB 00 10 01 13 63

64. Insurance Community University www.InsuranceCommunityUniversity.com AAIS Equipment Breakdown FO 04 20 – Added when writing the AAIS Farm Property Form – Begins with Definitions – “We” insure against direct physical damage to covered property that is the direct result of an “accident”. Equipment Breakdown AG 0130 – Added when the AgOP is written 64

65. Insurance Community University www.InsuranceCommunityUniversity.com AAIS Format Agreement Definitions Property Not Covered Incidental Property Coverages – Expediting Expense – Spoilage – Computers in the Dwelling – Data Restoration – Utility Service Interruption 65

66. Insurance Community University www.InsuranceCommunityUniversity.com AAIS Format Farm Income Perils General Exclusions How much we pay for loss or claim Other Equipment Breakdown Conditions – Suspension – Environmental, Safety and Efficiency Improvements – Coinsurance 66

67. Insurance Community University www.InsuranceCommunityUniversity.com ISO Equipment Breakdown Protection Coverage FP 06 60 10 06 67

68. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown Protection An “Endorsement” to the – Cause of Loss Farm Property – Farm Property—Barns, Outbuildings and Other Farm Structures Coverage Form – Farm Property—Farm Personal Property Coverage Form – Farm Property—Other Farm Provisions Form—Additional Coverages, Conditions, Definitions 68

69. Insurance Community University www.InsuranceCommunityUniversity.com Limited Coverages Provided Equipment Breakdown Protection Limit Of Insurance: $ Spoilage Damage Limit Of Insurance: $ Utility Interruption Is:Covered Not Covered Utility Interruption Waiting Period: Equipment Breakdown Protection/Spoilage Damage Deductible: $ (If no amount is shown, the Deductible shown in the Declarations will apply.) Information required to complete this Schedule, if not shown above, will be shown in the Declarations. 69

70. Insurance Community University www.InsuranceCommunityUniversity.com Coverage A. Equipment Breakdown Protection We will pay up to the Equipment Breakdown Protection Limit Of Insurance shown in the Schedule for the direct physical loss of or damage to Covered Property caused by or resulting from a "breakdown" to "covered equipment". 70

71. Insurance Community University www.InsuranceCommunityUniversity.com Coverage B. (1) Spoilage Damage/Contamination Resulting From A Breakdown At An Insured Location 71

72. Insurance Community University www.InsuranceCommunityUniversity.com Coverage B. (2) Spoilage Damage Resulting From A Utility Interruption – The interruption is the direct result of a "breakdown" to "covered equipment" owned, operated or controlled by the local private or public utility distributor that directly generates, transmits, distributes or provides utility services which you receive 72

73. Insurance Community University www.InsuranceCommunityUniversity.com Coverage C. Farming Operations Income And/Or Extra Expense 1.As a result of a "breakdown" to "covered equipment" we will pay 2.If "media" is damaged or "data" is lost or corrupted, we will pay the lesser of your actual loss of "farming operations income" and/or "extra expense" up to 30 days after the "period of restoration" or $25,000 73

74. Insurance Community University www.InsuranceCommunityUniversity.com Coverage 3. The most we will pay for any one Farming Operations Income And/Or Extra Expense loss is an amount equal to 25% of the Equipment Breakdown Protection Limit of Insurance. The limit for Farming Operations Income And/Or Extra Expense is in addition to the Equipment Breakdown Protection Limit of Insurance. 74

75. Insurance Community University www.InsuranceCommunityUniversity.com “Covered Equipment” (1) Equipment built to operate under internal pressure or vacuum other than weight of contents; (2) Electrical or mechanical equipment that is used in the generation, transmission or utilization of energy; (3) Communication equipment, and "computer equipment"; and (4) Equipment in Paragraphs (1), (2) and (3) that is owned by a public or private utility and used solely to supply utility services to your location 75

76. Insurance Community University www.InsuranceCommunityUniversity.com ISO Equipment Breakdown Protection Coverage Form 76

77. Insurance Community University www.InsuranceCommunityUniversity.com Policy Overview It is its own form and not simply an endorsement to a property form These are activated by inserting a limit, number of days, or the word “INCLUDED” on the Declarations Page.

78. Insurance Community University www.InsuranceCommunityUniversity.com “Breakdown” Means the following direct physical loss, that causes damage to "Covered Equipment" and necessitates its repair or replacement: NOTE: Used to say “sudden and accidental”. 78

79. Insurance Community University www.InsuranceCommunityUniversity.com “Breakdown” (1)Failure of pressure or vacuum equipment; (2)Mechanical failure including rupture or bursting caused by centrifugal force; or (3)Electrical failure including arcing; unless such loss or damage is otherwise excluded within this Coverage Form 79

80. Insurance Community University www.InsuranceCommunityUniversity.com “Breakdown” Exclusions Examples Malfunction—Calibration, etc Defects, erasures, errors, limitations or viruses in computer equipment and programs Leakage at any valve, fitting, shaft seal, gland packing, joint or connection 80

81. Insurance Community University www.InsuranceCommunityUniversity.com “Covered Equipment” Equipment built to operate under internal pressure or vacuum other than weight of contents; (2)Electrical or mechanical equipment that is used in the generation, transmission or utilization of energy; (3)Communication equipment, and "Computer Equipment"; and 81

82. Insurance Community University www.InsuranceCommunityUniversity.com “Covered Equipment” (4)Equipment in Paragraphs (1), (2) and (3) that is owned by a public or private utility and used solely to supply utility services to your premises. CAUTION: there is always a HOWEVER after these paragraphs that lists what they do NOT intend to cover. 82

83. Insurance Community University www.InsuranceCommunityUniversity.com “Covered Property” a.You own; or b.Is in your care, custody or control and for which you are legally liable. 83

84. Insurance Community University www.InsuranceCommunityUniversity.com Coverages Available IF on Dec or says INCLUDED a.Property Damage b.Expediting Expenses c.Business Income and Extra Expense OR Extra Expense Only d.Spoilage Damage e.Utility Interruption f.Newly Acquired Premises 84

85. Insurance Community University www.InsuranceCommunityUniversity.com Coverages Available IF on Dec or says INCLUDED g.Ordinance Or Law Coverage h.Errors And Omissions i.Brands And Labels j.Contingent Business Income And Extra Expense Or Extra Expense Only Coverage 85

86. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown Protection Built in Coverages Errors and Omissions a.Protects the insured for an oversight on premises that should have been insured in the policy b.Does not extend to errors or unintentional omissions committed by insured in the reporting of values or requesting coverage

87. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown Protection Built in Coverages Brand and Labels a.Extends property damage coverage to allow insured to stamp the word SALVAGE on or remove the label from damaged merchandise at the insurer’s expense b.Not to exceed the limit of insurance on such property

88. Insurance Community University www.InsuranceCommunityUniversity.com Exclusions Ordinance Or Law Earth Movement Water Nuclear Hazard War or Military Action 88

89. Insurance Community University www.InsuranceCommunityUniversity.com Exclusions Fungus, wet Rot and Dry Rot Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease – NOTE: Some states have forms for this coverage – Some limited coverage is provided 89

90. Insurance Community University www.InsuranceCommunityUniversity.com Exclusions Depletion, deterioration, corrosion, erosion, or wear and tear. However, if a "Breakdown" occurs, we will pay the resulting loss or damage 90

91. Insurance Community University www.InsuranceCommunityUniversity.com Polling Question #7 91

92. Insurance Community University www.InsuranceCommunityUniversity.com Ammonia Leaked Your insured packages ice cream and there is an ammonia leakage from the refrigeration piping. All of the ice cream is destroyed. Is there automatic coverage on the ISO Equipment Breakdown Protection Coverage Form? 92

93. Insurance Community University www.InsuranceCommunityUniversity.com Equipment Breakdown Sub- Limits ($25,000) Ammonia Contamination Hazardous Substance ConsequentialData & MediaWater damage 93

94. Insurance Community University www.InsuranceCommunityUniversity.com Valuation a.Replacement Cost in most cases b.Up to an additional 25% of the property damage loss to “Covered Property” for repairing equipment in a manner that does not harm the environment, increases its efficiency or enhances its safety

95. Insurance Community University www.InsuranceCommunityUniversity.com Valuation c. Provides for the loss in value of an extended warranty d.“Covered Property” may be valued at its selling price e.“Data” and “Media” have limitation on replacement and valuation

96. Insurance Community University www.InsuranceCommunityUniversity.com Valuation Underwriters often restrict coverage on older boilers and machines. Some firms agree to exclude certain kinds of equipment or insure at ACV and/or have high deductibles on categories. Actual Cash Value Endorsement

97. Insurance Community University www.InsuranceCommunityUniversity.com Deductibles Dollar Deductible Time Deductible Percentage of Loss 97

98. Insurance Community University www.InsuranceCommunityUniversity.com 98

99. Insurance Community University www.InsuranceCommunityUniversity.com 99 Upcoming CE Classes FREE Community Class 9/5/12Claim s Made Critical Issues 9 12 & 13Insight on Errors and Omissions 9/19Farm Liability 9/18 Wage and Hour New EPL Trends 9/20 Landscapers—A Mattei Showcase Webinar Join the Community TODAY at: www.insurancecommunitycenter.com