top of page

Machinery Breakdown risks increase with extreme heat conditions

Updated: Mar 20

If we ever needed evidence that the world is getting hotter, a look at the blistering heatwave in Western Australia this summer should have even the most ardent skeptics scratching their heads.


The heatwave conditions have been driven by three west coast troughs delivering warm and dry air, created by a combination of the El Niño weather pattern, climate change and the Indian Ocean dipole.


Perth set a new record of seven days over 40 degrees in the month of February 2024 – smashing the previous record of just four days. And Carnarvon recorded the world's hottest day of 2024 with a 49.9C scorcher.


COMMUNITIES UNDER STRESS


With heatwaves becoming increasingly common, the need to protect valuable assets from unexpected breakdowns has never been more important. Extreme weather conditions intensify the strain on machinery and equipment. The risk of equipment overheating and malfunctioning escalates significantly. Air conditioning systems struggle to keep indoor spaces cool, electrical systems face increased demand, and mechanical components are pushed to their limits.


Every strata scheme has equipment that facilitates the day-to-day operation of the property. And the schemes are responsible for repairing and maintaining their common property and assets. Machinery and equipment breakdown can result in major interruptions and financial losses if a piece of equipment – such as an elevator or air conditioner – malfunctions.


PROTECTING COMMUNITIES AGAINST LOSS


To help minimise the disruption to residents in a strata scheme, many strata insurance policies provide an optional section of cover called Machinery Breakdown or Equipment Breakdown.


It offers some relief for unplanned and unexpected breakdowns of machinery that aren’t triggered by an event covered by a strata insurance policy, such as a power surge, storm damage or fire. It's also usually a broader cover than Fusion of Motors, where the repair/ replacement value has a lower limit, typically $5,000.


In addition to the actual cost to repair or replace the equipment, some Machinery Breakdown cover offers additional benefits.


  • Hiring necessary temporary replacement items.

  • Temporary accommodation or loss of rent cover.

  • Replacement for loss and spoilage of stock, or loss of profits while waiting for the parts to repair machinery.


Imagine the scenario…

An air conditioning system motor burns out in a high- rise apartment building. Aside from the cost of repair, the sizzling 40-degree temperatures mean it’s necessary to rent temporary air conditioning units to avoid health hazards. 


This increases the cost of repair for the strata scheme.


Plant damage $85,000 

Hire cost $10,000 

Total $95,000

Typical equipment and machinery in strata schemes

  • Lift motors

  • Water pumps, generators, compressors

  • Centralised air-conditioning systems

  • Chillers and refrigeration units

  • Security systems

  • Fire detection system

  • Electrical equipment and control panels

Downtime resulting from equipment failures can disrupt essential services, inconvenience residents, and even lead to legal liabilities. Machinery Breakdown insurance offers a vital layer of protection, enabling rapid response and recovery in the event of an unexpected breakdown.


NOT A SUBSTITUTE FOR REGULAR MAINTENANCE


Machinery Breakdown cover is about being better prepared for the unexpected. But it doesn’t help those strata schemes who’ve neglected to maintain their property. It won’t cover damage caused by wear and tear, or deterioration of existing damage or flaws.


We recommend strata schemes have an annual Maintenance/Service Agreement. Insurers tend to view these positively and will determine their annual premium based on the extent of protection and service standards under the agreement.


ENSURING ADEQUACY OF COVER


New apartment complexes are becoming more hi-tech with integrated automation across all functions.


As climate-related risks increase, proactive risk management is critical for strata communities. Machinery and equipment failure can cause major disruption and lead to significant expense, so adequacy of the sum insured and limits is extremely important.


One way to provide certainty is for strata schemes to have an asset schedule that lists all machinery and equipment at the property. The sum insured should be the current replacement value of all the machinery to be insured.


Whether a strata scheme has a lot of equipment or just a few key items, investing in Machinery Breakdown insurance can help you protect the property. As our weather patterns continue to surprise and challenge us, it’s one way to create peace of mind for strata communities in an increasingly difficult natural environment.


FOUR BENEFITS OF A MAINTENANCE AGREEMENT


The best maintenance agreements typically cover a thorough assessment of all a system’s components, filter changes, and most importantly, tests meant to assess the system’s efficiency and reliability.


  1. Identify and solve any existing problems with your system before they escalate and become costly.

  2. Well-maintained systems run more efficiently, consuming less energy and fuel.

  3. Regular system inspections decrease the risk of breakdown during the most inconvenient times.

  4. Well-maintained systems have a longer lifespan.


Machinery Breakdown insurance coupled with an annual Maintenance Agreement is a good risk management program to alleviate the unexpected cost.

QUESTIONS?

If you have any questions, please contact your local BCB branch via one of the options below.


Download the document below to read on!

BCB SCA WA Machinery Breakdown 2024
.pdf
Download PDF • 272KB

This article was brought to you by BCB.

Comments


bottom of page