Dave runs a precision machine shop in Kent with twenty-two employees, making parts for aerospace suppliers and medical device companies. Over three years, he added two five-axis CNC mills, a coordinate measuring machine, and a new compressor system.
He sent us his renewal because the premium had not changed in three years, which struck him as odd given how much the shop had grown.
What he asked for
A check on why the renewal looked the same.
What the review found
The equipment limit was three years old. The policy insured business personal property at a figure set before the new machines arrived. The shop's actual equipment value was now far higher.
Coinsurance turned that into a penalty on every claim. The commercial property form had a 90 percent coinsurance clause. Because the shop was insured for far less than 90 percent of its true value, the carrier could reduce any claim in proportion, even a small one. A fire that damaged one mill would have been paid at a fraction of the repair cost.
No equipment breakdown. A spindle failure or an electrical fault in a CNC machine is not fire or theft. Standard property forms exclude it.
Customer requirements had moved. Aerospace and medical customers had tightened their supplier insurance requirements. The shop's general liability did not include the products-completed operations limits two customers now required, and neither customer was named as an additional insured.
Stop-gap was missing. L&I covered the shop's machinists. There was no stop-gap employers liability, which one customer's agreement required.
What we put in place
We rebuilt the equipment schedule at replacement cost using current prices, and added an agreed value endorsement, which suspends the coinsurance clause for the policy year once values are documented. We added a new-equipment reporting provision so machines added mid-year are covered immediately.
We added equipment breakdown with business income, so a failed spindle or controller is covered along with the lost production while it is repaired, and extra expense for sending urgent work to another shop.
We raised the general liability's products limits to match customer requirements and added the two customers as additional insureds. For the aerospace work, we flagged that some parts require aviation products liability, which we placed separately.
We added stop-gap employers liability.
Why it mattered
The premium went up, which is what should have happened three years earlier. Six months later, a power surge damaged the controller on one of the new mills. Equipment breakdown covered the repair and three weeks of lost production. Under the old policy, breakdown was excluded, and even a covered cause would have been reduced by coinsurance.
If you run a manufacturing shop
- Update your equipment schedule every time you buy a major machine
- Ask for agreed value to take coinsurance off the table
- Add equipment breakdown; fire and theft are not your biggest risk
- Match products limits to what your customers require
Get a free policy review and we will rebuild your values from scratch.