What to do when commercial refrigeration equipment breaks down

A refrigeration failure can quickly become a business problem

For restaurants, cafés, food retailers and other businesses that depend on refrigeration, a cool room or freezer failure can affect much more than the equipment itself.

Within a short period, the business may be dealing with:

• spoiled or unsafe stock;
• emergency repair costs;
• temporary cold-storage expenses;
• interrupted trading;
• reduced revenue; and
• food-safety concerns.

The first response should focus on safety, preventing further loss and keeping a clear record of what happened.

Start with safety and loss prevention

Do not continue using equipment that may be unsafe.

Where practical and safe to do so:

• move stock to functioning refrigeration;
• arrange temporary cold storage;
• isolate damaged equipment;
• photograph the equipment and affected stock;
• keep records of any stock that must be discarded; and
• retain invoices for emergency expenses.

Urgent action should not be delayed where there is a safety issue or a risk of further loss.

A repair quote may not be enough

A quotation can tell the insurer how much a repair may cost.

It does not necessarily explain why the equipment failed.

That distinction can be important because the policy may treat sudden mechanical or electrical failure differently from wear and tear, corrosion, gradual deterioration, maintenance issues or other excluded causes.

A technician may therefore be asked to explain:

• which component failed;
• what caused the failure;
• whether the failure appears sudden;
• whether wear, corrosion or maintenance contributed;
• what repair is required; and
• whether replacement is necessary.

A clear cause-of-failure report can be more useful than a quotation that simply lists parts and labour.

Equipment breakdown is not the same as ordinary property damage

A business policy may cover physical damage caused by insured events such as fire, storm or impact.

Mechanical or electrical breakdown may depend on a separate Machinery Breakdown or Equipment Breakdown section.

The policy may also treat the following separately:

• physical damage to the equipment;
• deterioration or spoilage of stock;
• business interruption;
• refrigerant loss;
• external power failure;
• maintenance; and
• wear and tear.

The fact that refrigeration equipment is located at the premises does not, by itself, mean breakdown is insured.

Notify the claim early

It is generally better to notify the broker or insurer before all repairs are completed.

Early notification allows the insurer to consider whether it requires:

• an inspection;
• a technician’s report;
• repair or replacement quotations;
• stock records;
• disposal evidence;
• maintenance records; or
• financial information relating to business interruption.

Emergency work may still need to proceed, particularly where food safety or further damage is involved. Keep records of what was done, why it was necessary and what it cost.

Evidence that may be requested

Depending on the policy and the circumstances, this may include:

• photographs;
• technician’s report;
• service and maintenance records;
• repair and replacement quotations;
• equipment age and serial number;
• purchase invoice;
• stock inventory;
• stock purchase records;
• disposal records;
• temperature records; and
• sales or other financial records.

Different claims require different evidence.

Business interruption may be a separate issue

Even where equipment damage is covered, loss of revenue is not automatically included.

Business Interruption cover may depend on:

• the insured event;
• the cover selected;
• the financial basis used in the policy;
• the Indemnity Period;
• waiting periods or excesses;
• sub-limits; and
• supporting financial records.

Businesses should retain records showing how trading was affected, including reduced opening hours, cancelled bookings, alternative storage costs and other additional expenses.

How Wesure can assist

Where Wesure is the broker, we can assist with:

• notifying the insurer;
• identifying information still required;
• coordinating documents from the client and technician;
• communicating with the insurer or claims representative; and
• following up outstanding matters.

The insurer remains responsible for determining whether the loss falls within the policy.

Key point

When refrigeration equipment fails, documenting why it failed can be just as important as documenting the cost of repair.

General information / important information

General information only: This article does not take into account your objectives, financial situation or needs. Whether a loss is covered depends on the facts, the cover selected and the terms, conditions, limits and exclusions of the relevant policy.