Machinery breakdown claims: how the expert assessment works

Why breakdown losses turn on causation

Machinery breakdown or engineering policies cover sudden and unforeseen physical damage to plant, typically arising from mechanical or electrical failure. Almost every wording, however, excludes gradual deterioration, wear and tear, corrosion, erosion and the cost of replacing parts that are consumed in normal operation. The boundary between a covered sudden failure and an excluded slow decline is where most arguments start.

A bearing that collapses may have done so because of a lubrication fault on the day, a manufacturing defect, a power surge or years of fatigue. Each explanation leads to a different answer under the policy. That is why the technical diagnosis, not the invoice, sits at the heart of the claim.

Who examines the damaged equipment

The insurer usually appoints a loss adjuster with engineering experience, often supported by a specialist engineer or a forensic laboratory for metallurgy, oil analysis or electrical testing. Their task is to establish the cause, confirm cover and agree a reasonable cost of reinstatement.

The policyholder may bring in a loss assessor or public adjuster, depending on the country, together with its own engineer or the original equipment manufacturer. In the UK and Ireland the term loss assessor is common; in the United States and Canada public adjusters are licensed at state or provincial level; in Australia claims preparers and independent consultants fill a similar role.

From shutdown to settlement: the usual sequence

A well-run claim follows a predictable path, and acting quickly at each step avoids later disputes about whether evidence was lost.

• Immediate notification and isolation of the machine, with photographs before any dismantling
• Agreement with the insurer's adjuster on who strips down the unit and when, so both sides can attend
• Retention of failed components, broken shafts, windings or seals for laboratory examination
• Collection of maintenance logs, inspection reports, oil sampling history and control system data
• Quotations for repair, exchange units and full replacement, with lead times
• Discussion of the cause, the policy response and the adjustment for betterment or depreciation

The evidence that wins or loses the argument

Maintenance records are decisive. A planned maintenance schedule, completed on time and documented, makes it far harder for an insurer to blame neglect. Gaps in servicing, overdue statutory inspections or ignored warnings from condition monitoring tend to be used against the claimant.

Data from programmable controllers, vibration sensors, thermal imaging and alarm logs can show the minutes before the failure. Many businesses overwrite this data automatically, so it should be exported and preserved as soon as possible. In the UK, written schemes of examination for pressure systems and lifting equipment are also relevant where those regimes apply.

Repair, exchange or replace

The claim value depends on the method of reinstatement. An insurer may favour an in-situ repair or a reconditioned exchange unit, while the business may argue that only a new machine restores it to its pre-loss condition, especially for obsolete equipment with no available spares.

Where new equipment replaces old, the insurer may apply a deduction for betterment, or the policy may limit settlement to indemnity value unless replacement is actually carried out. Reading the basis of settlement clause before agreeing a route is essential.

Typical points of disagreement

Beyond causation, disputes often concern the scope of damage, consequential damage to connected equipment, expediting costs such as air freight of parts or overtime labour, and the treatment of the excess. If business interruption cover is attached, the indemnity period and the time a reasonable repair should take become contested too.

Insurers sometimes split a single event into several failures, each with its own deductible, or argue that damage to one component triggered an excluded part replacement. A clear technical narrative, supported by an independent engineer's report, is the best answer to these arguments.

When a policyholder's expert is worth considering

Independent support is most useful when the loss is large, when the insurer has raised wear and tear or lack of maintenance, when there is a linked business interruption claim, or when the business lacks in-house engineering staff with time to manage the claim. For a small repair that the insurer accepts without question, the cost of outside help may not be justified.

A good assessor coordinates the engineer, the accountant and the repairer, keeps the insurer to a timetable and makes sure no cost is forgotten. They cannot rewrite the policy, and nobody honest will promise a particular settlement before the cause is established.

Practical steps for plant managers

Prepare before anything goes wrong: keep an up-to-date asset register, maintenance records and contact details for manufacturers. After a failure, avoid disposing of parts, avoid authorising full replacement before the adjuster agrees the approach, and write down what operators saw and heard.

• Photograph the machine and its surroundings before and during strip-down
• Label and store every failed component
• Export control and monitoring data immediately
• Keep a log of downtime, extra costs and decisions taken

A machinery breakdown claim is won on engineering evidence gathered in the first days after the failure. Preserve the parts, the data and the records, and bring in independent expertise when causation or cost is disputed.