Equipment Breakdown Coverage

Equipment Breakdown Coverage (EBC) is a critical but often overlooked insurance protection for apartment building owners and condominium associations. While standard property insurance covers damage from external events like fire or storms, it typically excludes internal equipment failures caused by mechanical or electrical breakdowns. That’s where EBC comes in.

What Is Equipment Breakdown Coverage?

Equipment Breakdown Coverage provides protection for the sudden and accidental failure of machinery, systems, or appliances that are critical to the operation of a building. This includes:

• Heating, ventilation, and air conditioning (HVAC) systems
• Boilers and pressure vessels
• Electrical panels and transformers
• Elevators and escalators
• Security and intercom systems
• Pumps, motors, and compressors
• Back-up generators

In short, EBC covers many of the essential components that keep apartment buildings and condos running smoothly.

How It Applies to Apartment Buildings

For landlords and apartment complex owners, EBC helps avoid out-of-pocket costs for mechanical or electrical failures that aren’t caused by external events. For instance:

Example Claim: HVAC System Failure

An apartment building’s central HVAC system suffers a motor burnout in mid-summer. EBC covers the cost to repair or replace the system, plus any additional costs incurred for temporary cooling measures.

Example Claim: Elevator Malfunction

An elevator experiences an electrical failure. EBC pays for the repair and may also cover costs for emergency elevator service and notices to tenants.

How It Applies to Condo Association Master Policies

Condominium associations carry master insurance policies to cover shared or common elements of the building. EBC is often included (or should be added) to protect:

• Shared HVAC or boiler systems
• Building-wide fire alarm and sprinkler systems
• Electrical infrastructure servicing common areas
• Community generator systems

Example Claim: Sprinkler System Breakdown

A pressure issue causes the automated sprinkler system to fail its annual inspection. EBC covers the cost to repair the pump and bring the system back into compliance.

Example Claim: Generator Breakdown During Outage

A storm causes a power outage, and the condo building’s generator fails to activate due to an internal component failure. EBC pays for the generator repair and may also cover extra expenses such as temporary lighting or security in common areas.

Additional Benefits of Equipment Breakdown Coverage

• Business Income and Extra Expense: If a covered breakdown causes tenants to temporarily vacate or reduces habitability, EBC may cover lost rental income or additional costs (e.g., temporary lodging).
• Spoilage Coverage: If a refrigerator or freezer in a common area or clubhouse breaks down, EBC can cover the loss of perishable items.
• Expediting Expenses: EBC can pay for overtime or express shipping to get essential systems back up and running quickly.

What’s Not Covered?

• Gradual wear and tear
• Lack of maintenance
• Cosmetic damage that doesn’t impact function
• Damage caused by external perils (covered under standard property insurance)

Final Thoughts

For apartment building owners and condo associations, Equipment Breakdown Coverage is a valuable layer of protection that fills a major gap left by traditional property insurance. From boilers to elevators to security systems, EBC ensures that when critical systems fail, you’re not stuck with steep, unexpected costs—or frustrated tenants.

If you’re managing a residential property or serve on a condo board, make sure your master policy includes Equipment Breakdown Coverage. The relatively low cost of this endorsement can save tens of thousands of dollars in repair and liability expenses when things go wrong.