TECHNICAL BULLETIN: Electronics Restoration – Proper identification of equipment

Within the world of commercial and industrial disaster restoration there are many different types of equipment to be evaluated prior to and after a loss event occurs.  Quite often a site pre-loss assessment is required by the underwriters and brokers to ascertain the distinction of machinery and equipment types as well as confirm the current conditions including age, manufacturer and use for insurance purposes. Typically, machinery that is in support of normal electrical and HVAC and supports structural systems of buildings such as lighting, power distribution, heating, cooling and plumbing are considered normal structural items. Other non-building plant equipment used in the production process of a factory is often considered contents under one of the equipment provisions of the insurance policy.

After a loss event, the reasons a carrier needs to distinguish the different equipment types are numerous. However, the most basic issue is to establish proper coverage for the client.  This involves inventory by equipment type, establishing which limits are in place for which type of equipment being used and understand the scope and value of the affected items after a loss to determine if restoration is viable or help to determine replacement options. An accurate assessment and quantifying of equipment helps the insurance professional with their interpretation of what is considered structural and content as well as the finer classification as to what is deemed “building equipment” and what is classified as “non-building equipment” so that items may be restored or replaced as deemed necessary.

After a loss event occurs the inventory and identification process is an extremely important function that assists the insurance adjuster or property manager in making a proper categorization of these equipment asset items. Using equipment, machinery and electronics experts after a loss helps the insurance carriers or risk managers sort out the equipment’s use which helps them determine subsequent coverage available under the policy to see if there is enough coverage for the claim for the restoration or replacement options. Being able to segregate equipment classifications and types is very important when excessive damage such as an outside flood, explosion or extreme fire has ruined items beyond repair, meaning heavy replacement may be necessary and policy limits may be exceeded. In these cases equipment restoration and electronics restoration may be valuable but past a certain point restoration efforts may not always be cost effective or prudent.  This is when equipment experts need to be used as technical consultants to lay out clearly what is a total loss and what might be a good candidate for repair, restoration and re-certification with the OEM.

Some special systems may be considered content or structure depending upon the individual policy and the interpretation of that policy. Typically if equipment is in support of or part of standard building systems then it is considered part of the structural claim.  If the equipment is an add-on system or component in support of plant machinery or the manufacturing process, it is typically considered contents under the specific equipment section of the policy.

Some insurance policies determine the status of large equipment or systems based on whether they are “scheduled”, “attached”, “affixed”, “installed”, “connected” or an “easily movable asset or not”. Equipment items which are attached are at times considered structural and on other occasions contents. Some equipment is not part of the building system but must be attached to the slab or structure because it can create vibration or move if not properly fixed to a foundation or structural steel member for safe operation.

Other equipment used in the manufacturing process that requires domestic water consumption or drain lines is connected into the building system and may go either way depending upon policy language.  However, these are often considered under equipment policies especially if scheduled or listed as equipment separately in the policy, whether attached to the structure or not.

Another scenario requiring clarification is when the owner leases a building and the system or equipment is part of the build out or production process but owned or paid by the tenant through his lease.

A final complication is to determine if the content item is leased or owned equipment and if it is covered in the business machine area of the policy or if a machine used in the production of manufacturing is covered under equipment if it is scheduled and if it may be covered whether leased or not.

Other specialty systems such as alarms, security systems, building controls including elevators, escalators, boilers and chillers are typically part of the building and considered structural or boiler & machinery equipment of the policy.  

Specific equipment types usually included in the equipment section of the policy may include CNC lathes, presses, mold injection machines, die casting, furnaces, coolers, proofers, heating chambers, refrigeration systems, water treatment systems, tanks, pumps, filters, air handlers, vats, process pipe work, electrical control wiring, material handling systems, belt or chain conveyors and cranes inside a production area or on the factory floor are needing assessment. Other types of content classifications exist: Boiler and Machinery, EDPM- or electronics Data Processing Machinery (the old term for IT systems and computers) or computers as well as all business machines. All these types of machines need classified and assessed and possibly mitigated after a disaster event to preserve them and ensure that they are in a condition to be restored when the time comes. Lack of mitigating effort will most likely result in the items being deemed un-restorable and force replacement in spite of the costs to purchase, install and commission taking away the restoration option all together and thus reaching policy limits faster. This will also have an impact on recovery because replacement usually is associated with long lead times and expediting costs. It should be noted that any item receiving direct damage from an event or offending contamination may be at risk. Also, items that were not directly affected but are in the area of fire suppression, smoke/soot or other hazards may have received secondary damage affecting the equipment.

 Building related and plant machinery requiring restoration also needs a vast array of specialists on the team who perform the restoration functions to ensure its proper recovery. Inside the technical area are electrical journeyman, mechanical specialists, piping and plumbing trades as well as millwrights, machinists, electronics technicians, insulators, fitters/welders riggers, crane operators and electro-mechanical restoration specialists involved in the recovery of various equipment types.

At various intervals proper restoration requires different electro-mechanical tradesman and may include other special services such as laser leveling of equipment, vibration analysis, decibel and lighting reports PLC programming, process monitoring, third party motor and power tests.  Both the mechanical and electronics restoration skill sets are highly needed specialty areas of technical restoration common in most equipment types. Most of today’s equipment types are electronic in their control systems (some simple and others have complex controls) such as push bottom operation while others have relay logic control panels and yet others are PLC or program logic controlled.  

Today’s equipment requires complete services to make it safe and functional running within OEM operational parameters. Knowing what is being done and what the expected outcome is will help guide the equipment and electronics restoring process. Being able to provide not to exceed time frames and estimates is key to a successful recovery of vital equipment assets such as machinery, electronics and computer equipment.

This article is provided by Mark Schafer, Sr. Project Manager of Electro-Mechanical Recertifiers, LLC.; a premier technical group of equipment and electronics restoration experts. For expert consulting or assessments please call us at 877-378-4183 for assistance on your equipment claims. We are business interruption specialists that offer nationwide service to help assess, restoration and re-certify your plant, factory or building.