machinery breakdown insurance case

machinery breakdown insurance cover in-service equipment against sudden and unforeseen physical damage to any types of machinery whether at work or at rest and during cleaning, inspection, overhauling and removal to another position within the premises. The most important of machinery breakdown insurance is about exclusion.

What are the major exclusions under this policy ( machinery breakdown insurance case)? This policy does not cover losses such as :

1. Loss of or damage to exchangeable tools, catalyst
2. Loss or damage due to fire & allied perils, flood, collapse of building, landslide
3. Loss or damage due to burglary, theft
4. Loss or damage for which a contractor, supplier or repairer is responsible either by law or under contract
5. Loss or damage caused by existing defects or faults
6. War, Civil War and any act of Terrorism
7. Radioactive and nuclear energy risks
8. Wilful acts or wilful negligence
9. Loss or damage as a direct consequence of the continual influence of operation (e.g wear & tear)
10. Consequential loss or liability of any kind

machinery breakdown insurance case on Heat Exchanger.

An oil and gas operating company purchased a heat exchanger. The heat exchanger manufacturer gives warranty for 2 years. After 15 months operation, found a crack on heat exchanger shell, near longitudinal weld. As requested by owner, an pressure vessel inspector inspected the crack and asked laboratory investigation and deep analysis.  Heat Exchanger manufacturer sent their technical expert and investigated this failure. Machinery breakdown insurance company also sent their technical team and loss adjuster to verify this failure.

 technical discussion of machinery breakdown insurance case

It was difficult to find the real cause of the crack. Each party has a different conclusion.

1. According to an pressure vessel inspector, the crack was suspected due to imperfect welding process in the Manufacturer premises.
2. According to the manufacturer, the crack was caused by stress corrosion cracking. the heat exchanger was used for service fluid not intended for this shell material. In addition, according to operating data, they found a pressure cyclic for a long time that triggered stress corrosion cracking.

Based on reason number 1, the Loss or damage for which a contractor is responsible either by law or under contract (warranty period). The manufacturer should make an appropriate repair. However, based on reason number 2, the loss or damage is covered under Machinery breakdown insurance.

Finally, the owner asked third opinion from Material and Welding Expert from University. Based on deep analysis using SEM tools, it was found a corrosion cracking. Based on this finding, the loss of heat exchanger was covered under Machinery breakdown insurance policy.