What Is Machinery Breakdown Insurance?
Machinery breakdown insurance (MB) is a property insurance for physical loss of or damage to machinery and plant whose numbers, years of manufacture, nature and values are listed in the policy inventory schedule, caused by sudden and unforeseen events. In the SEDDK General Conditions the product is called Makina Kırılması Sigortası. The cover relates to damage occurring while the machine operates normally after its trial period, or during cleaning, overhaul or replacement at the same workplace, or while idle.
The two sub-sections of this page are fixed machinery and mobile machinery; the boundary with Contractors' Plant & Machinery (CPM) is explained in a separate section.
Causes of Loss Under the General Conditions
The General Conditions cover the repair and replacement costs of physical loss or damage arising from any sudden and unforeseen cause that could not be determined in advance. The causes listed as examples include:
- Operating accidents
- Defects in model, manufacture, erection, material, mould, casting and workmanship
- Lubrication defects
- Direct effects of electrical energy: short circuit, arcing, voltage surge, insulation failure and indirect effects of atmospheric electricity
- Blockage and ingress of foreign matter
- Bursting caused by centrifugal force
- Water shortage in steam boilers and steam vessels
- Water hammer, sudden overheating or cooling
- Deformation such as crushing, tearing and crumpling of closed vessels due to low pressure
- Storm, hurricane, frost or the movement of thawing ice
- Negligence, fault, error, carelessness or sabotage of operating personnel or third parties
- Other sudden and unforeseen causes not otherwise excluded
Fixed Machinery and Plant
Fixed machinery and plant are production machines, motors, pumps and compressors, generators and power units, turbines and heating, cooling and pressure systems installed and operated at the workplace stated in the policy. All must be shown in the inventory schedule with their numbers, years of manufacture, nature and values.
- Boilers and pressure vessels: Water shortage in steam boilers and steam vessels is among the listed causes. Physical explosions resulting from the expansion of steam, gas or liquid gas in pressure vessels are excluded unless otherwise agreed. The direct effects of scaling and sludge in boilers during operation are also excluded.
- Foundations and bases: Damage to the foundations and bases of a machine or plant from causes within the cover is excluded unless otherwise agreed.
- Maintenance duty: The insured takes reasonable measures to keep the machinery in normal maintained and working condition, avoids overloading beyond accepted technical limits and complies with administrative rules on operation and inspection.
Mobile Machinery
The General Conditions contain no separate provision for mobile machinery (machinery that changes location). The text defines machinery by the inventory schedule and "the same workplace"; if the declared place or condition of the machine is changed without the insurer's consent, a duty to notify arises: immediately where the policyholder or someone with its express or implied consent made the change, or as soon as it learns of it where someone else did so without its consent; in both cases within 8 days at the latest. 8 days is an outer limit, not a free waiting period (art. 7).
- Sites of use: The workplace and sites where mobile machinery will operate should be stated expressly in the policy.
- Transport costs: Costs of transport by express means other than the usual means that ensure the earliest transport required by the loss (aircraft excepted) and overtime wages are excluded unless otherwise agreed.
- Change of location: Moving the machine outside the workplace, shipping it or using it at another site is not separately regulated in the General Conditions; if the declared place or condition is changed without consent, a duty to notify arises (immediately or on learning of it, within 8 days at the latest) and the insurer may ask for a premium difference or terminate the contract (art. 7). The manner of use should therefore be stated expressly in the policy.
Boundary Between Machinery Breakdown and Contractors' Plant & Machinery (CPM)
The machinery breakdown General Conditions do not set a separate boundary for construction machines and contractor equipment (CPM); the provisions on the position of machinery are as follows:
Scroll the table horizontally to see all columns.
| Question | Position under the General Conditions |
|---|---|
| Which machines? | Machinery and plant listed in the policy inventory schedule (art. 1) |
| Where? | At the same workplace; if the declared place or condition is changed without the insurer's consent it is notified immediately or on learning of it, within 8 days at the latest (arts. 1, 7) |
| Which period? | Normal operation after the trial period, cleaning, overhaul or replacement, and while idle (art. 1) |
| Construction machines? | The General Conditions do not separately regulate construction machines and contractor equipment |
| Which policy? | Depends on the policy schedule and the manner of use; for contractor equipment CPM and construction policies are considered separately |
The General Conditions do not separately regulate construction machines. Which policy comes into consideration for contractor equipment working on site is determined by the policy schedule and the manner in which the equipment is used; this page does not describe CPM cover. For CPM see the relevant section of the Engineering Insurance page, and for the construction period see Construction & Erection Insurance.
Exclusions and Policy Limits
The General Conditions contain two groups of exclusions. The first applies unless otherwise agreed and may be widened by special condition; the second is excluded outright.
Excluded unless otherwise agreed (art. 2)
- Loss or damage resulting from physical explosions
- Damage to the foundations and bases of the machine or plant from causes within the cover
- Costs of transport by express means (aircraft excepted), overtime and holiday wages and surcharges
- Loss or damage caused by strike, lockout, riot and civil commotion and the military and police action they require
- Loss resulting from acts of terrorism under Law No. 3713
- Environmental pollution losses arising directly or indirectly from the realisation of insured risks
Excluded (art. 3)
- War, invasion, civil war, revolution, rebellion and insurrection
- Nuclear fuel and radioactivity
- Acts of public authorities with respect to the insured items
- Fire or the extinguishing, demolition and salvage operations resulting from fire, and the direct effects of lightning
- Any loss of profit and financial liability, whatever the cause
- Theft or attempted theft
- Natural events such as landslide, avalanche, volcanic eruption, earthquake, flood and inundation
- Wear and tear from normal operation and use, decay, rust and oxidation; scaling and sludge in boilers; gradual deterioration
- Explosions resulting from the sudden oxidation or joint reaction of chemicals and gases; explosion of dusts prone to explode due to atmospheric electricity
- Loss arising from using the damaged machine before the damage is repaired
- Wilful act and (where agreed) gross negligence of the insured or the responsible person acting in its place
- Biological and/or chemical contamination or poisoning resulting from acts of terrorism
Sum Insured, Loss Settlement and Limitation Period
- Sum insured: It should equal the new replacement value of the machinery and plant (including transport, installation, customs, duties and charges where applicable). If the new replacement value at the time of loss exceeds the sum insured, the insured bears the proportion corresponding to the difference; a shortfall leads to proportionate settlement.
- Partial damage: Settlement consists of the new price of replaced spare parts, labour at local working-hour rates, normal transport (aircraft excepted), installation, customs, duties and charges. No deduction is made for fitting a new part in place of an old one; the value of salvaged parts is deducted.
- Total loss: Depreciation and salvage are deducted from the new value at the time of loss; the machine is treated as a total loss if repair costs equal or exceed that amount.
- Deductible: Subject to the minimum deductible stated for each machine in the policy, and unless otherwise agreed, 20 per cent of each loss remains with the insured.
- Limit: The insurer's liability is limited to the sum insured stated in the policy for each machine and plant.
- Other insurance: If the same loss is covered by another policy, the principles of co-insurance apply.
- Limitation period: Claims arising from the insurance contract are time-barred after 2 years.
Duties of the Insured and Notification of Loss
- Care and maintenance: The insured shows due care for the safety of the machinery and plant as if uninsured. The insurer is entitled to inspect and check the machinery.
- Notification of loss: A loss must be notified to the insurer within 5 days at the latest; salvage and protection measures are taken and the damaged place or property is not altered except where necessary.
- Repairs: Repairs that are essential for continuing operations may be carried out provided they are notified separately; if the insurer has not had the loss inspected within 7 days of the notification, the insured is free to have all repairs carried out.
- Change in risk: If the place or condition of the machine declared in the policy, proposal form and annexes is changed without the insurer's consent, the policyholder must notify the insurer immediately where the change was made by the policyholder or by someone else with its express or implied consent, and as soon as it learns of it where someone else made the change without its express or implied consent. In both cases the notice must be given within 8 days at the latest (art. 7); 8 days is an outer limit, not a free waiting period.
Boundary Between Machinery Breakdown and Other Policies
Machinery may fall within the scope of more than one policy. Under the General Conditions the main boundaries are as follows:
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| Machinery breakdown (MB) | Subject and boundary | |
|---|---|---|
| Electronic equipment | Machinery and plant | There are separate Electronic Equipment Insurance General Conditions for electronic machines and data-processing systems; fire and theft are listed causes there but are excluded in the MB General Conditions |
| Fire and natural events | Sudden damage to the machine itself | Fire, the direct effects of lightning, theft and natural events such as landslide, earthquake and flood are excluded under the MB General Conditions; they are dealt with in a property policy |
| Business interruption | Loss of profit is excluded | Under the General Conditions loss of profit and financial liability are excluded; loss of profit requires a separate business interruption cover |
| Construction and erection | Operating period after the trial period | The cover relates to the period beginning after the trial period; the construction and erection stage is considered under construction and erection policies, and the exact boundary depends on the policy |
| Contractors' Plant & Machinery (CPM) | Machinery and plant at the same workplace | For contractor equipment used between sites, CPM or construction policies are considered separately |
The table is a general framework; the final outcome is determined by reading the policies together. Related pages: Electronic Equipment Insurance, Engineering Insurance, Property & Fire, Business Interruption.
Information Needed for a Quotation and Underwriting
- Machinery and plant inventory: type, quantity, year of manufacture, model, nature and new replacement value
- For fixed machinery, the workplace; for mobile machinery, the sites of use and frequency of relocation
- Maintenance and service records, manufacturer instructions and warranty status
- Inspection and check information for boilers and pressure vessels
- Loss history and operating conditions
The information required may vary by insurer and type of machinery.
Frequently Asked Questions
What is machinery breakdown insurance?
Does machinery breakdown insurance cover fire and theft?
Can mobile machinery be insured?
Are construction machines and contractor equipment covered by machinery breakdown insurance?
Are loss of profit and production stoppage covered?
Does the insured bear part of each loss?
When must a loss be reported?
Neolife's Role
Neolife Group can review the relevant information and policy wording, research suitable local insurance solutions, run a placement exercise and compare the quotations received. This does not mean any insurer's capacity, acceptance of cover, price or payment is promised; acceptance and terms remain with the insurer.