Commercial property insurance covers a restaurant’s building, equipment and inventory against outside events such as fire, windstorm, theft and burst pipes, but the standard special causes-of-loss form excludes mechanical breakdown and electrical damage originating inside the equipment. Equipment breakdown coverage fills that gap, paying when a walk-in compressor, fryer control board or POS terminal suddenly fails from an internal mechanical or electrical cause.
Restaurants run on machines: refrigeration, cooking lines, dish machines, ice makers, HVAC, hood fans and the point-of-sale network. Many owners assume “all risk” property covers every way those machines can be damaged. It does not, and the most common restaurant equipment losses sit squarely in the part property insurance leaves out.
The exclusions that create the gap
Most restaurant property is written on the ISO special form (or a BOP property section built the same way). That form excludes mechanical breakdown, damage from artificially generated electrical current such as arcing or a power surge that disturbs electrical devices, explosions of steam boilers and similar pressure equipment you own or control, and wear and tear, rust, corrosion or gradual deterioration. If a covered peril such as fire results, the resulting damage is covered, but the breakdown itself is not. Equipment breakdown coverage is designed to put those sudden internal failures back in.
Equipment breakdown and commercial property, side by side
- What it covers — Commercial property: direct physical loss to your building or improvements, equipment, furniture and inventory from causes that are not excluded, such as fire, smoke, wind, hail, theft, vandalism and sudden water discharge. Equipment breakdown: sudden and accidental damage to covered equipment from mechanical breakdown, electrical arcing or short circuit, motor burnout, and failure of pressure or refrigeration systems, often with spoilage, expediting expenses and data restoration.
- Who needs it — Commercial property: any restaurant that owns equipment, stock or tenant improvements, or owns its building. Equipment breakdown: any restaurant that depends on refrigeration, cooking equipment, HVAC or electronic ordering systems, which is nearly all of them.
- Common restaurant claim example — Commercial property: a delivery truck backs through the front window and damages the host stand and booths. Equipment breakdown: the walk-in’s compressor seizes on a holiday weekend and the unit needs a new compressor.
- How it’s usually bought — Commercial property: the property section of a BOP or a commercial property coverage part in a package policy. Equipment breakdown: an endorsement to the BOP or package (sometimes included automatically, sometimes optional), or occasionally a standalone policy from a specialty equipment breakdown insurer.
- Common gaps — Commercial property: excludes breakdown and electrical disturbance, and may limit spoilage and utility interruption. Equipment breakdown: excludes wear and tear and gradual deterioration, may carry low sublimits for spoilage or data, and does not replace a maintenance contract.
Four equipment losses and which coverage answers
The walk-in dies in July. A compressor seizes during a heat wave. Property coverage excludes the mechanical breakdown. Equipment breakdown pays to repair or replace the compressor, may pay overtime and expedited shipping to get a technician in over the weekend, and, if the endorsement includes spoilage, the spoiled proteins and dairy.
The surge that took out the line. Utility work down the street sends a surge through the building, frying the fryers’ control boards, the dish machine and two POS terminals. Damage caused by artificially generated electrical current is excluded under property unless a fire results, so this is an equipment breakdown claim.
The grease fire. Grease buildup ignites in the hood and destroys the flat-top, fryers and ceiling finishes. Fire is a covered cause of loss, so commercial property responds; equipment breakdown is not needed.
The dish machine that just wore out. A pump fails after years of hard water and missed descaling. Wear, scale buildup and gradual deterioration are excluded by both coverages, which is why maintenance records and service contracts matter.
Which do you need?
Almost every restaurant with a kitchen needs both. Property protects you from the catastrophic events; equipment breakdown protects you from the far more frequent mechanical and electrical failures. The practical checks are whether your BOP already includes equipment breakdown (many do, some don’t), whether spoilage is included and at what limit, and whether business income applies to breakdown losses. Also confirm equipment is valued at replacement cost rather than actual cash value, because older ranges and coolers depreciate quickly.
Price drivers and getting quotes
Property pricing depends on construction, fire protection class, sprinklers and suppression, the values insured and your deductible. Equipment breakdown pricing reflects the type and age of equipment, whether it is under maintenance agreements, and protections such as surge suppression and temperature alarms on refrigeration. Provident Financial Group is an independent agency, so we quote property and breakdown from multiple carriers with one application and show you side by side which packages already include breakdown and spoilage. Once coverage is bound, certificates are available for your landlord. Call (866) 964-6660.
Frequently asked questions
Does equipment breakdown cover food spoilage?
Often, as an included extension with its own limit, when spoilage results from a covered breakdown. Check the limit against a full walk-in’s worth of inventory.
Is a power outage from the utility covered?
An off-premises utility failure is usually addressed by a separate utility services or spoilage provision rather than by equipment breakdown itself. See our power outage answer.
Will insurance replace equipment that simply wears out?
No. Both property and equipment breakdown exclude wear and tear and gradual deterioration; coverage is for sudden and accidental damage.
Is leased equipment covered?
It can be if you are contractually responsible for it and it is included as covered property. Tell your agent which items are leased, such as ice machines or dish machines, so they are counted.
Want to know whether your current policy includes breakdown? Get Multiple Quotes within minutes.