Machinery breakdown claims: fees for the policyholder's expert

What the mandate covers on a breakdown claim

Machinery breakdown and engineering policies cover sudden and unforeseen physical damage to plant from internal causes, such as mechanical failure, electrical faults or operator error, subject to exclusions for wear and tear, gradual deterioration and parts that are expected to be replaced periodically. The expert's first task is to identify how the wording treats the failed component.

The mandate then extends to evidence gathering, coordination with the insurer's engineering surveyor, review of manufacturer and repairer reports, costing of repair or replacement, dealing with expediting costs and, where the policy includes it, loss of profits following breakdown.

• Wording review, including excluded parts and wear provisions
• Coordination of strip-down and examination
• Repair versus replacement costing and lead times
• Expediting and hire costs
• Negotiation and settlement, including any BI element

Indicative fee bands

No official scale applies to policyholder experts on breakdown claims in the UK, US, Canada, Australia or Ireland. The table on this page shows an indicative order of magnitude observed on the market, not an official or legal tariff. Percentages decline as the settlement increases.

Where a US public adjuster is engaged, state licensing rules and any statutory fee caps must be respected. Elsewhere, fees are contractual, subject to conduct and consumer protection rules.

Indicative amounts, to be checked with each expert.

Calculation methods

Percentage fees may apply to the full settlement, to recoveries after appointment or to the uplift above the insurer's initial offer. On breakdown claims, where the debate often concerns whether a component is covered at all, an uplift basis can align interests well. Hourly or daily rates are common for technical reviews and for supporting the insured during strip-downs.

Fixed fees can work for straightforward claims, such as a single motor rewind, where the scope is predictable.

Engineering and testing costs

Independent mechanical or electrical engineers usually bill time and expenses. Metallurgical analysis, oil analysis, vibration data review and non-destructive testing are extra. Strip-down costs, needed to establish cause, are sometimes covered by the policy if the loss is accepted, so agree in advance with the insurer who pays if the cause turns out to be excluded. Taxes such as VAT or GST apply to most fees.

What makes a breakdown claim cost more

Lead times are a major driver. When replacement parts or whole machines must be manufactured abroad, the claim stays open longer and the expert spends more time on expediting options, temporary hire and the related loss of profits. Bespoke or obsolete plant adds research into equivalent equipment and arguments about betterment.

The insurer's stance is the other driver. If the engineering surveyor accepts the cause early, the file may close quickly with modest advisory cost. Where the surveyor relies on a wear-and-tear or excluded-parts argument, the expert has to build a technical counter-case, often with the manufacturer's input, and the fee rises accordingly. Ask the firm to explain how its proposal would change in each scenario.

Policy provisions that may help

Engineering policies sometimes cover the cost of investigating cause, expediting expenses and temporary repairs, each subject to limits. Claims preparation costs, where included, may offset accountants' work on a breakdown loss of profits claim. These provisions rarely fund the policyholder's own advocate.

The deductible is also relevant: breakdown policies often carry significant deductibles or time excesses on loss of profits, which reduce the net recovery against which the expert's fee should be weighed.

Cost profile for small, medium and major breakdowns

For a small breakdown, such as a £10,000 pump repair, independent help is rarely economic; the repairer's report and the insurer's surveyor usually resolve it. For a £150,000 gearbox failure where the insurer argues wear and tear, a representative at around 10% plus an engineer's report could cost £15,000 to £20,000 overall.

For a major failure of a turbine or large press with a combined repair and loss of profits claim above £2 million, the representative's percentage typically drops to the low to mid single digits, while engineering costs increase with the depth of investigation.

Illustrative calculation

Suppose the insurer offers £400,000 on a repair basis and the expert, supported by the manufacturer's evidence that repair is not viable, secures £640,000 for replacement. At 8% on the total, the fee would be £51,200; at 18% on the £240,000 uplift, it would be £43,200. Add engineering costs of, say, £9,000. These figures are illustrations, not quotes.

Remember also that many engineering policies are linked to statutory inspection contracts for boilers, pressure systems and lifting equipment. The inspection reports produced under those contracts are often the best evidence of condition before the breakdown, so make them available to your expert early, which can shorten the work and reduce the bill.

Choosing a firm and checking the terms

Choose a firm with demonstrable engineering claims experience and access to specialists for your type of plant. Ask who will attend strip-downs and how quickly. Compare proposals using total expected cost, including engineering fees, rather than the headline percentage.

Avoid advisers who promise that any exclusion will be overturned. The engagement letter should set out the fee base, rate, minimum, specialist costs, taxes, termination terms and fees due if the claim is declined.

Finally, check whether the firm has worked with the manufacturer of your equipment or with its approved repairers. Those relationships often speed up access to technical data, failure histories and realistic lead times, which in turn shortens negotiations and keeps time-based costs under control.

• Engineering resources and response time
• Fee base and illustration on your figures
• Who pays for strip-down if cover is refused
• Minimum and cap
• Termination and declined-claim provisions

Breakdown claims reward early technical clarity, which also keeps advisory costs proportionate. Learn more about engineering claims on expertdassure.com.