HBP Part 19.1.12. Liability for Equipment Damaged by Facilities/Utilities Failures

Handbook of Business Procedures

Date published:November 2, 2018
Last revised: November 2, 2018
Issued by: Risk Management

19.1.12. LIABILITY FOR EQUIPMENT DAMAGED BY FACILITIES/UTILITIES FAILURES

A. Introduction

Given the age and condition of The University of Texas at Austin’s facilities, there is risk that department-owned equipment may get damaged due to facilities or utilities failures/interruptions. General liability insurance will not cover this risk, and the university’s comprehensive property insurance carries a large deductible. To address the gap, departments can choose to buy supplemental insurance offering lower deductibles through programs that the university offers.

B. Background

  • Facility failure events have sometimes resulted in varying degrees of damage to department-owned equipment, with losses ranging from thousands of dollars to potentially over $1 million.
  • Damaged equipment not insured by the departments sometimes resulted in departments seeking reimbursement from Facilities Services (FS), Utilities (UEM), and/or the university for costs associated with the repair or replacement of the damaged equipment.
  • The most common root causes of facilities failure include age, wear/fatigue, severe weather, utility interruptions, inadequate maintenance, human error, and equipment malfunction, among others.
  • The Comprehensive Property Protection Plan (CPPP) covers against major property losses, and includes buildings and equipment. This requires no premium payment by the department, but has a deductible of $250,000. For purposes of the 19.1.12 HBP policy, equipment covered only by the CPPP is considered underinsured.

C. Recommendation

  • When department-owned equipment is damaged due to facilities or utilities failures, the department who owns the equipment will be financially responsible for all costs associated with the repair or replacement of that equipment, to include any insurance deductibles that may apply.
  • Departments are encouraged to purchase supplemental insurance for equipment, where the loss of that equipment would be financially detrimental to the department.
  • Departments who choose not to insure their equipment do so at their own financial risk.
  • The university offers equipment insurance to departments at reasonable rates specifically to cover loss or damage from these types of risks (see 19.1.3 Equipment Insurance and Related Claims).

D. Liability

  • Facility failures caused by human error, but not due to negligence, gross negligence, or willful misconduct, will be treated as any other “no-fault” failure (such as from weather, etc.).
  • When equipment is damaged due to a facilities failure caused by employee negligence (or gross negligence or willful misconduct), the department responsible for the negligent employee will be responsible for paying the deductible costs for the damaged equipment (or, in the case of underinsured equipment, an amount equal to what the deductible would have been had the equipment been insured with a supplemental department equipment insurance policy).

E. Resources

 

Part 19. Risk Management - Table of Contents