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Few types of coverage are quite as misunderstood as Equipment Breakdown insurance. Though brokers and buyers are becoming more informed, there remains a common misconception that Equipment Breakdown only provides coverage for conventional equipment such as pressure vessels and mechanical machines. But this is not your father&rsquo;s (or your grandfather&rsquo;s) Boiler and Machinery insurance. Equipment Breakdown is an essential coverage for almost any business. While many owners and operators think losses related to equipment breakdown are covered under their Property policy, there are exclusions that Equipment Breakdown insurance is designed to fill. Not only does Equipment Breakdown insurance cover equipment that needs to be repaired or replaced, it also covers losses due to business interruption. For example, if key equipment is damaged, a company may not be able to continue their operations right away, which could have big financial and reputational impacts. Or, if a company has a refrigeration breakdown, it would be very costly to throw out spoiled product. Equipment Breakdown coverage helps companies mitigate revenue losses and get back in business as quickly as possible. So why has Equipment Breakdown coverage been widely misunderstood? A quick history lesson: Boiler and Machinery insurance was created during the Industrial Revolution to protect companies with steam boilers from the risk of explosion or other major breakdown. Over the ensuing decades, the coverage evolved to include a broader range of equipment and electronics, including computers, copiers and phone systems. Understandably, the Boiler and Machinery moniker led many people to believe that if their business didn&rsquo;t have a boiler or machinery risk, they didn&rsquo;t need the coverage. That necessitated new terminology&mdash;Equipment Breakdown insurance&mdash;which came about in the late 1990s. Today, Equipment Breakdown insurance is all-encompassing, ranging from HVAC equipment, to production machinery equipment (Computer Numerical Control &ndash; CNC - machines), to all types of electrical and technology equipment. However, there&rsquo;s still a lack of understanding about how essential this coverage is for just about every business. &ldquo;Many people who have been in the insurance industry for a long time still refer to it as Boiler insurance, but it&rsquo;s important to steer away from that language,&rdquo; says Natasha Blackbird, Portfolio Specialist, Equipment Breakdown, at Sovereign Insurance. &ldquo;If the insured doesn&rsquo;t have a boiler, they&rsquo;ll automatically think they don&rsquo;t need Equipment Breakdown insurance. But with all the new types of equipment&mdash;particularly electrical and electronics&mdash;there&rsquo;s more exposure, or failures that could temporarily shut down a company&rsquo;s operations.&rdquo; What about cost? &ldquo;Most of the time, Equipment Breakdown insurance is complementary and usually packaged with the Property policy,&rdquo; says Natasha. &ldquo;Whether Equipment Breakdown coverage is attached to a Property policy or Standalone, we work with brokers and clients to develop a tailored solution for their business.&rdquo; To keep Equipment Breakdown insurance top of mind among brokers and insureds, education is key. With the constant influx of new technologies and cutting-edge equipment, brokers need to stay up to date on the trends and have the tools and resources to provide information to clients. For Sovereign Insurance&rsquo;s part, Natasha says, &ldquo;we counsel our brokers, partners and underwriters on understanding the coverage and what questions to ask to match the insured&rsquo;s needs with the benefits of Equipment Breakdown insurance.&rdquo;

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As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance&rsquo;s annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard Lecker</a>, Senior Underwriter, &nbsp;Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape.&nbsp;
What were the key loss trends and exposures you saw in 2024?
The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).1 These legal actions&mdash;which can be initiated by consumers, shareholders and investors, and environmental advocacy groups&mdash;are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks.&nbsp;
What are some emerging risks to keep an eye out for in 2025?&nbsp;
One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there&rsquo;s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI&rsquo;s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn&rsquo;t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making&mdash;when, in reality, there&rsquo;s still a lot of human oversight involved. If AI tools generate inaccurate reports&mdash;like pulling up the wrong numbers&mdash;and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.
There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S. &nbsp;leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes.&nbsp;
With the current trade war between the U.S. and Canada, there&rsquo;s growing sentiment around &lsquo;Buy Canadian,&rdquo; but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn&rsquo;t meet legal definitions of terms like &lsquo;Product of Canada&rsquo; or &lsquo;Made in Canada,&rsquo; this could lead to claims. &nbsp; For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract.&nbsp;
We&rsquo;re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level. &nbsp;
How can organizations mitigate these risks?&nbsp;
For AI, it really comes down to transparency. Don&rsquo;t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It&rsquo;s similar to how companies should approach environmental strategies&mdash;be transparent about your actions and results. Like the saying goes, &lsquo;understate, overperform.&rsquo;
For the developments that we&rsquo;re watching in the U.S., it&rsquo;s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it&rsquo;s important to be aware of the legal requirements. Transparency is key here, too&mdash;if there&rsquo;s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you&rsquo;re not misrepresenting your actions, you&rsquo;re far less likely to face legal issues.&nbsp;
Sources 1 Jan. 31, 2025: Moodys, &ldquo;D&amp;O series &ndash; Evolving risks in the boardroom: A new era of D&amp;O liability &ndash; Part 3&rdquo; 1 Aug. 22, 2024: McCarthy Tetrault &ldquo;Greenwashing and AI Washing: Emerging Trends in D&amp;O Claims Across North America&rdquo; 1 Oct. 22, 2024: &ldquo;The Insurer: Greenhushing &ndash; An emerging D&amp;O liability?&rdquo;

Loss trends and emerging risks in 2025: Management liability 

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As businesses continue to rely on essential machinery and equipment, the risk of damage and breakdowns remains a significant concern. These incidents can disrupt operations, lead to costly repairs and result in extended downtime. &nbsp; As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-ionescu">Razvan Ionescu</a>, Manager, Equipment Breakdown Underwriting, Large Accounts &amp; Operations at Sovereign Insurance, shares insights into key loss trends from 2024 and emerging risks that organizations should be aware of in 2025.&nbsp; What were the key loss trends and exposures you saw in 2024? If we were to look for trends in the equipment breakdown insurance industry, the most notable phases would be the heating season and the cooling season. In colder months when heating systems are activated, for example, boilers that are used for heating buildings might experience breakdowns. This happens because they haven&rsquo;t been used for an extended period and when they&rsquo;re restarted, can fail due to improper shutdowns or lack of maintenance during the off-season. Similarly, with cooling systems, a lack of ongoing use and maintenance can lead to mechanical failures. In addition to seasonal concerns, we continue to see typical breakdowns of production machinery, transformers, and other equipment that businesses rely on day in and day out. This can be caused by issues like aging equipment, wear and tear, and lack of preventative maintenance.&nbsp; What are some emerging risks to keep an eye out for in 2025? One emerging risk I&rsquo;ve seen is a shift from traditional generators to electric or lithium-ion batteries as backup power sources or to reduce the on-peak service use. While generators have been in use for a long time, some businesses are turning to electric batteries. This shift brings new risks, especially when it comes to maintenance and exposure. With traditional generators, you typically need a mechanical specialist on-site to keep things running smoothly. But with electric batteries, the high-capacity maintenance is usually handled by the OEM (original equipment manufacturer), who monitors the battery&rsquo;s performance in various ways, for instance, through remote monitoring. So, the whole approach to upkeep is different. A big concern here is fire risks. Batteries are prone to something called thermal runaway, which is a chemical reaction inside the battery that causes it to overheat and potentially catch fire. This can happen without the presence of oxygen, which makes it more dangerous than other types of fires. If a thermal runaway event happens, it could damage the entire battery system, which might cost a company hundreds of thousands to replace. And of course, there are significant human safety risks with any type of fire. In contrast, if something in a backup generator breaks down, it&rsquo;s typically a mechanical issue that can be fixed &ndash; similar to how you would repair a car. How can organizations mitigate these risks? To keep machinery and equipment running smoothly and safely, the best approach is to follow the OEM recommendations. For example, if the OEM advises performing thermal scanning on batteries on a regular basis, it&rsquo;s important to stick to that schedule. There&rsquo;s a well-known saying: &ldquo;If you don&rsquo;t schedule maintenance, your equipment will schedule it for you.&rdquo; By regularly scheduling maintenance, you can ensure it&rsquo;s completed on time and reduce the chances of delays in sourcing spare parts. When it comes to batteries, there are also specific best practices to follow around proper use, storage, transportation, and disposal. Organizations should familiarize themselves with these guidelines to minimize risks. For any type of equipment, preventative maintenance is essential. Although insurance policies are designed to cover profit losses during downtime, the key is to maintain uninterrupted service to customers.

Loss trends and emerging risks in 2025: Equipment breakdown

From distracted driving on busy highways to the explosive rise of quick e-commerce deliveries on city streets, the landscape of risk is rapidly shifting for the transportation sector. As part of Sovereign&rsquo;s 2025 Q&amp;A series, Kevin Dutchak, Senior Risk Specialist, Commercial Auto, provides insights into the key loss trends of 2024 and offers practical advice on how businesses can mitigate risks to protect their operations this year and beyond.
<h4>What were the loss trends and key exposures you saw in 2024?</h4>
Distracted driving is still a big issue and it&rsquo;s becoming even more significant with the growing use of technology in the industry. Technology can be great, but it can also be distracting. For example, some drivers try to map out routes on the fly, and in the e-commerce delivery space, drivers are constantly looking at addresses along residential streets. These kinds of distractions may lead to a lot of loss incidents.
Additionally, traffic seems to get busier all the time. During rush hour and with ongoing construction, it&rsquo;s like that old video game, Frogger, with drivers switching lanes back and forth, speeding, suddenly cutting in front of other drivers, and trying to get ahead of everyone. Statistics show that road travel continues to be the riskiest form of transportation, from property loss and minor fender benders to serious injuries and fatalities. When you add distracted driving and traffic congestion into the mix, it can increase the risk significantly.
Driver controls are another ongoing issue. For example, there are cases where drivers took short cuts to try to save time. But that winding two-lane highway with limited passing lanes, for instance, can put you more at risk, especially in winter conditions.
<h4>What emerging risks should businesses be aware of in 2025?</h4>
Climate change and severe weather events are becoming more of an issue for the transportation sector. We&rsquo;re seeing more frequent storms and extreme temperatures, which can cause delays and put drivers in unsafe situations.
While cybercrime is becoming more of a risk in many industries, I don&rsquo;t see much of that in trucking yet. But as more companies integrate artificial intelligence into their operations, they should ask what they&rsquo;re doing to protect themselves so people can&rsquo;t hack into that and use it to their advantage.
<h4>How can organizations effectively mitigate these risks?</h4>
When it comes to distracted driving, the key to mitigation is the constant reminder that driving is your job 100% of the time. You can&rsquo;t afford to compartmentalize your thinking&mdash;you have to concentrate on the road because it&rsquo;s such a fluid situation.
Sound defensive driving practices are also critical. I&rsquo;m surprised at the number of fleets that don&rsquo;t provide that training, assuming that because their drivers have a licence, they don&rsquo;t need it. But despite our best efforts, we can all become complacent, distracted and forgetful. So, companies need to get the focus back on training. It&rsquo;s an investment in your drivers that can pay dividends.
In terms of driver controls, trip management programs can mitigate risks. Managers should have discussions with drivers to outline expectations: Here is when we expect you to be on the road, this is the route we expect you to take, here&rsquo;s when we expect you to stop. When there is an interruption to the plan due to situations such as poor road and weather conditions, traffic delays on route and driver fatigue, protocols should be in place for drivers to communicate with dispatch and operations staff to keep them advised, which in turn can be communicated to their clients. The safety of drivers and other road users is always the top priority. Telematics can also be used to monitor drivers&rsquo; routes and ensure drivers are following the proper procedures, such as speed limits and safety protocols.
If a driver does have a significant loss event, it&rsquo;s critical for companies to take effective corrective action, such as retraining or a driver interview. Often, a lack of corrective action can lead to further and more significant losses.
For weather events, fleet operations should focus on forecasting models, if they aren&rsquo;t doing so already. When severe weather conditions are imminent, companies should consider shutting down operations in the affected areas; all drivers should find the first safe place to park, advise dispatch of their status and stay in place until the shutdown order is lifted.

Risk Resilient: Water Damage

Risk Resilient: Water Damage

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