POWER April 2011 - 20

any problems he has at the plant, regardless
of operation and maintenance
practices. On the surface this may be
true, but when it comes time to renew
coverage, the plant will either be paying
significantly more in premiums or the
insurer may choose to deny coverage.
According to HSB, equipment breakdown
insurance pays for loss incurred
when equipment breaks down suddenly
and accidentally. Property insurance
covers many standard perils, such as
fire. But even " all risk " property coverage
isn't designed to pay for equipment
accidents from unique causes of
equipment failure, including mechanical
breakdown or operator error.
Insurance is designed to make the insured
" whole, " or to bring the plant back
to where it was before the failure occurred.
And the insurer is concerned with the approach
taken to make the plant " whole "
again. Keep in mind that an insurer shares
in any risk associated with a repair.
Eyes and Ears
The insurance market currently is soft,
which means that good rates can be negotiated.
But an insurance company can be
a valuable asset to a power plant manager,
so an analysis of potential insurers should
go deeper than just the rates.
Top-notch insurance companies maintain
a staff of qualified engineering inspectors.
These engineers not only have
an in-depth knowledge of plant equipment
but also have knowledge of how the
equipment is performing in the field. If
these inspectors see a trend or problem
in the field, then they will alert you to
any potential impacts. This information
can prove invaluable in preventing a catastrophic
failure. (For example, see p. 58
for a discussion of fire protection for generators
in hydroelectric plants. The author
of that article is a risk consultant for various
insurance agencies.)
As Chubb Insurance Co. notes in a discussion
of utility industry insurance on its
website, boiler and machinery insurance is
unique. Much of the premium dollar is returned
to the policy-holder in the form of
inspections and advice about loss control.
During an inspection, the risk consultant
will make observations about
the operation of the equipment, review
and discuss maintenance practices, and
witness the operation and testing of
safety devices. Once an inspection is
completed, the inspector evaluates and
compares the plant with good engineering
practices, insurance standards, legal
requirements, and similar risks.
Management is given the results as well
as an assessment of problems and recommendations
for their solutions. These are
not ultimatums requiring immediate response.
Rather, they are specific action
items that an insurance company wants to
see implemented over time. In some cases,
you may agree to disagree over certain recommendations.
In general, however, good
inspectors are well-regarded in their technical
field. Smart plant managers will adjust
their outage schedules to accommodate an
insurance inspector because they value the
expertise. One plant manager noted that
his plant's insurance inspector was viewed
as another set of eyes and ears.
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Filing a Claim
Should machinery or equipment fail, notify
your insurer as quickly as possible. The
actual notification and claim forms will
probably be filed by your company's risk
manager. Note that most companies are
self-insured for a specified amount of any
claim, much like a deductible. Also, make
yourself aware of any inspection requirements
associated with any claim, such as
photographs and forensic laboratory tests,
before starting repairs. If equipment needs
to be sent back to the manufacturer, make
sure you get clearance for the insurance
company's inspector to see the equipment
there. It is more difficult for the inspector
to make an assessment after a repair has
been completed.
As a plant manager, you must also
educate staff to collect costs the right
way, meaning the way that the insurance
company requires. You should seriously
consider setting up a separate holding
account to collect all charges associated
with the problem.
In some cases there may be a difference
of opinion about the costs associated with
getting things back up as quickly as possible.
For example, you must be able to
differentiate between straight time and
overtime salary records and be able to
justify paying a premium to get up and
running quickly.
Finally, filing a claim that's easy to
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POWER | April 2011
understand is also in your best interest.
What the insurer will cover depends on the
type of coverage you have, so familiarizing
yourself with the terms of your policy
is a good idea. ■
- Dr. Robert Peltier, PE, is POWER's
editor-in-chief.
T R A I N I N G * F I E L D S U P P O R T * T E C H N I C A L E X P E R T I S E
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POWER April 2011

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