What Is Machinery Breakdown Insurance?

What Does Machinery Breakdown Cover Protect?

Machinery Breakdown (MB) insurance protects the machinery listed on the inventory schedule attached to the policy against sudden and unforeseen physical damage, once that equipment has passed its commissioning tests. The starting line matters: everything before the test period ends belongs to erection insurance.

In Türkiye the wording is not written by each insurer. Article 1 of the machinery breakdown general conditions extends cover beyond running hours: damage occurring while the machine is cleaned, overhauled or relocated within the same premises, or while idle, falls inside the policy. Twelve causes follow — among them operating accidents, defective manufacture, erection, material and workmanship, faulty lubrication, short circuit, blockage, water shortage in steam boilers, overheating, and negligence or sabotage by staff or third parties. A catch-all keeps the list open: any cause not expressly excluded is covered.

What the policy pays is not the loss itself but the repair and replacement cost the loss makes necessary. The same article also places certain high-wear consumables outside cover from the start:

• Drills, shears, blades, saws and cutting tools
• Dies and moulds, templates and patterns
• Hot rolling mill rolls, grinders, crushers and mixers
• Sieves, ropes, chains, conveyor belts and driving belts
• Parts renewed at set intervals such as carbon brushes and lamps — insulating materials and oils excepted

What the Policy Does Not Pay

The substantive exclusions sit in Article 3 and cannot be bought back. Two surprise businesses most often: fire and theft. The direct effect of fire, the firefighting, demolition and salvage operations a fire causes, and the direct effect of lightning are outside this policy; their home is a commercial property policy carrying fire cover. Theft is excluded too — the clearest line against electronic equipment insurance.

• Fire, firefighting, demolition and salvage operations, and the direct effect of lightning
• Theft and attempted theft
• Earthquake, flood, subsidence or landslip, avalanche, volcanic eruption
• Any loss of profit and any legal liability, from whatever cause
• Wear, tear, decay, rust and oxidation from customary use; scaling in steam boilers
• Explosions from sudden oxidation or joint reaction of chemicals and gases
• Continued use of a damaged insured machine before the damage is repaired
• The wilful act of the insured and, where the contract so provides, gross negligence
• War and warlike events, nuclear risks, and acts of public authority

Cover That Can Be Bought Back by Endorsement

The third exclusion from the end most often reduces a settlement: running a damaged machine to save the shift also puts the original claim in dispute. Article 2 defines a middle category — perils excluded "unless otherwise agreed", which can be endorsed on for additional premium.

How the Sum Insured and the Settlement Are Calculated

Article 4 sets the sum insured on a new replacement value basis: what the machinery would cost new today, including freight, erection, customs duty and taxes — neither market nor book value. If it falls below that value at the date of loss, the insured carries the loss in proportion to the shortfall. Underinsurance is the commonest reason for a reduced engineering settlement. Three rules in Article 14 govern the calculation.

• For repairable damage the new price of the replacement spares is taken; no deduction is made because a new part replaces an old one. Salvageable parts are deducted.
• For a total loss, depreciation, wear and salvage are deducted from the machine's new value at the date of loss. If the repair cost reaches that figure, it is a total loss.
• Unless otherwise agreed, 20% of every loss stays with the insured, and never below the minimum deductible stated in the policy. How the deductible is structured is a decisive difference between quotations.

Machinery Breakdown and Loss of Profit

The general conditions exclude every kind of loss of profit and legal liability, whatever the cause. When a press fails the policy repairs the press; it does not answer for the order that could not be filled, the fixed costs that keep running, or the late-delivery penalty paid to a customer.

Financial loss from an interrupted line is a separate contract, arranged as a loss-of-profit arrangement attached to the machinery breakdown policy, where the indemnity period, gross profit and any waiting period are settled. A practical test: if downtime costs more than the repair, loss of profit is worth discussing.

What to Do When a Loss Occurs, and When Payment Falls Due

The general conditions set out the claims process step by step, and several steps run on a clock. Missing a deadline weakens the entitlement directly.

Under Article 1427 of the Turkish Commercial Code the indemnity falls due once the risk documents have been supplied and the insurer's enquiries are complete, and in any event forty-five days after notification. If those enquiries are not complete within three months, the insurer must advance at least 50% of the loss amount as assessed by a preliminary survey. Under Article 1420, claims are time-barred two years from the date the debt fell due, and six years from the date the risk occurred.

• Notify the insurer within 5 days of learning of the damage.
• Take salvage and protection measures as though uninsured; apart from unavoidable cases, do not alter the loss site.
• Assemble the documents showing the cause, circumstances and amount, and submit the claim statement in reasonable time.
• If the insurer has not inspected within 7 days of notification, the wording leaves you free to proceed with repairs.
• Where the amount cannot be agreed, it is fixed by hakem-bilirkişi — expert-arbitrators chosen from among engineers.

Where We Come In as an Agency

Machinery breakdown general conditions are identical for every insurer in Türkiye. Article 11 of Insurance Law No. 5684 requires the main content of insurance contracts to follow approved general conditions that insurers apply in the same way. The real difference between quotations therefore lies in the special conditions, the endorsements, the deductible structure, the sum insured and the limits granted.

RYL Sigorta Aracılık Hizmetleri is an insurance agency. We prepare quotations from the insurance companies we act for and make sure the schedule reflects your machine park in full and the sum insured is built on new replacement value. Article 1423 of the Turkish Commercial Code places the duty to inform on the agency alongside the insurer. The policy is issued by the insurance company, and the indemnity is paid by the insurance company. See our engineering insurance page or the quotation form.

Frequently Asked Questions

Sources

• Machinery Breakdown Insurance General Conditions, in force since 25 February 1967 (TSB)
• SEDDK — index of insurance general conditions
• Insurance Law No. 5684 (mevzuat.gov.tr)
• Turkish Commercial Code No. 6102 (mevzuat.gov.tr)

This article is for information only; the scope of cover is set by the policy’s specific and general terms.