I am looking for some direction to see if the insurer is correct in their assessment that they will not pay for a situation where a wood chipper type machine was worked on by an employee who changed out the teeth on the machine – claiming mechanical breakdown exclusion. I need to find some assessment that the insurer is correct or if there are similar situations or even case law. Anything would be appreciated.
Here is policy language as well as a portion of the denial letter justification.
Mechanical Breakdown — "We" do not pay for loss caused by any mechanical, structural, or electrical breakdown or malfunction including a breakdown or malfunction resulting from a structural, mechanical, or reconditioning process.
But if a mechanical, structural, or electrical breakdown or malfunction results in a covered peril, "we" do cover the loss or damage caused by that covered peril.
As noted above, the improper installation of the new blades caused the damages to the unit. The Mechanical Breakdown exclusion that is cited above, includes any loss caused by mechanical or structural breakdown including a breakdown or malfunction resulting from a mechanical or reconditioning process. Unfortunately, the policy is unable to provide any coverage for the damages in this matter.
Wisconsin Subscriber
The introductory language to the mechanical breakdown exclusion in CP 10 30 Special Causes of Loss form states that the applicability to the exclusions is for loss that is caused by or resulting from the excluded term. As such, the mechanical breakdown itself is excluded if it is the direct or resulting cause of the loss. Also, in paragraph 3., there are additional exclusions that apply and subparagraph c.(2) excludes loss from faulty, inadequate or defective workmanship.
In your situation, the direct cause of loss is the faulty workmanship is changing out the teeth on the wood chipper; and the resulting cause of loss is the machine's mechanical breakdown – neither of which are a covered cause of loss under the policy.