Why would a law firm need equipment breakdown insurance? After all, its attorneys and staff handle legal motions, not machinery, and most lease instead of own their office space. Like many business tenants, the partners in a busy law firm were not worried about equipment failure. Until a breakdown knocked out their power for a week and they lost $175,000 in income and extra expense.

TENANTS DEPEND ON OTHERS
Tenants need equipment breakdown coverage, not only to protect them from damage to their own equipment, but losses that may result from accidents to equipment that serves their leased offices and buildings. That was the case for the law firm when electrical arcing damaged the electrical distribution system. When power was restored, a second breakdown forced attorneys and staff to relocate until repairs were completed. The business income loss was $114,644; extra expenses totaled $60,356.

SPECIAL COVERAGE FOR EQUIPMENT
The loss of electricity, heat or air conditioning from a breakdown can drive customers away and send employees home. Power surges can damage equipment such as computers, electronic cash registers and communications systems. A landlord usually will not cover these expenses and property insurance may exclude them. Tenants need equipment breakdown coverage to pay for equipment losses like these:

• A paint store had to replace printers and point-of-sale equipment because of damage due to a power surge. Total paid loss: $19,370.

• An X-ray machine was destroyed in a doctor’s office when a utility power spike shorted out the power supply unit. Total paid loss: $41,604.

• A loose connection in a building’s electrical system resulted in damage to a tenant company’s computers, servers and printers. Total paid loss: $30,279.