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Common Equipment Failures

Every business and institution in the world today is acquiring and increasingly relying on costly equipment and new technologies; from electrical supply and distribution to environmental controls, refrigeration to computer systems.


Understanding what can go wrong with equipment is key to reducing likelihood and severity of a failure, preventing losses and ultimately mitigating the risk of a financial impact should a failure occur.


Here is a guide to the most common failures experienced with various types of plant and equipment:

Refrigeration Equipment

An air conditioning or refrigeration breakdown can result in a business interruption loss that may far exceed the cost of the repair. Common causes of failure are:

  • Control failure
  • Vibration
  • Lack of lubrication
  • Scale build-up
  • Rapid weather change


The cost to repair or replace compressors, which are particularly prone to breakdown, and lost refrigerant, can be substantial.

Boiler and Pressure Vessels

Boilers and pressure vessels play a vital role in everything from a domestic hot water heating boiler to high pressure steam heated manufacturing processes. Common causes of failure are:


  • Pump failure
  • Low water cut-off mechanism failure
  • Control failure
  • Scale build up
  • Inadequate controls of safety devices


The effect that a boiler or pressure vessels breakdown can have on an operation should not be underestimated. Repair costs can soar and lack of heat or hot water can shut down a facility.

Business Equipment and Systems

Computers, telephone systems and communications equipment rely solely on sensitive electronic technology that can be prone to failure. Common causes of failure are:

  • Power surges
  • Power interruptions
  • Electrical line surges
  • Insulation deterioration
  • Overload conditions
  • Separation of assembled parts


Business equipment breakdown can shut an operation down, result in lost income and large repair/replacement bills.

Electrical Equipment

A loss of power can mean loss of income and customers. Since the panels, circuit breakers and cables in an electrical system are all interconnected, a short circuit in one part can cause damage to a part somewhere else.


Breakdown of electrical equipment is one of the leading causes of Business Interruption losses.


Electrical equipment includes power transformers, switchboards, distribution panels, circuit breakers, cables, bus ducts, motors, generators, disconnects, and related equipment. Common causes of failure are:


  • Burnout of windings
  • Insulator, connector or control failure
  • Bearing burnout in rotating equipment
  • Casing, rotor or shaft damage


Typical Loss Examples


Town Hall Building
A power surge causes damages to a generator, some radio equipment, printed circuit boards for a fire alarm system, a small step-down transformer and small electric motors. The total loss was £90,160.


Meat Packing Plant
A meat freezer fails because of condensation dripping into a relay. This causes a condenser fan coil to short out, the compressor to overheat and the refrigeration equipment to shut down. Over 40,000lbs of meat were spoiled. The total cost of this claim was £34,529 with the cost of the repair being only £549 and £33,980 for the spoiled meat.

Mechanical Equipment

Mechanical equipment can include machinery used for production processes, compressors, pumps, fans and blowers, engines, turbines, gear sets, etc. Common causes of failure are:


  • Valve failure or ring breakage
  • Rotating elements chip or break
  • Bearing or shaft failure
  • Scoring of cylinder walls
  • Casing or impeller distortion
  • Gear or coupling breakage
  • Seizing of moving parts


Typical Losses Examples


Food processor
A machine failed that made shaved ice to pack and for retail display when an ice deflector broke and bent an internal shaft. Ice had to be purchased at higher cost from a competitor until repairs were made. Equipment repair - £20,586, Ice cost - £5,100, Total cost - £25,686


Printing Company

On a four-colour offset printing press, a two-inch diameter wheel broke and entered the cylinders, damaging seven cylinders on the press. The total equipment loss was £48,478, and the business interruption loss was £75,687.


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This publication is available exclusively to Munich Re clients. Please contact your Client Manager.