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Power Failure Insurance (Refrigeration Failure) for Construction & Engineering: A UK Guide
Why refrigeration failure is a construction and engineering risk
On many construction and engineering sites, refrigeration isn’t a “nice to have”. It can be essential for:
- Temperature-controlled storage of adhesives, resins, epoxies, sealants, coatings, and membranes
- Chilled storage for specialist materials and chemicals with strict shelf-life requirements
- Welfare facilities and canteens (food safety and hygiene)
- Temporary site labs, calibration materials, and certain medical or scientific installations
- Commissioning phases for HVAC, cold rooms, and process systems
If the power fails, refrigeration can fail quickly. Even a short outage can cause temperature excursions that ruin materials, trigger rework, or delay critical path activities. The knock-on effects can be bigger than the value of the stock itself.
What “power failure insurance” usually means in commercial policies
In the UK market, “power failure insurance” is often arranged as an extension to a property or engineering policy. It’s commonly linked to:
- Deterioration of Stock (DoS): Cover for spoilage of refrigerated or frozen stock due to temperature change.
- Refrigeration Breakdown: Cover when the refrigeration plant fails (mechanical/electrical breakdown).
- Public Utility Failure: Cover when the incoming electricity supply fails (not just your equipment).
- Business Interruption (BI): Cover for loss of gross profit or increased cost of working following insured damage.
For construction and engineering businesses, the right structure depends on where the refrigeration sits:
- At your own premises (warehouse, yard, workshop)
- At a temporary site (site compound, containers, temporary cold storage)
- As part of a project you’re building/commissioning (cold rooms, plant rooms, process refrigeration)
The key is matching the cover to the exposure: stock spoilage, plant breakdown, project delay, and contractual penalties.
Refrigeration failure: what can go wrong (and why insurers care)
Insurers look at refrigeration risk as a combination of:
- Cause of loss (power outage, equipment failure, human error)
- Speed of loss (how quickly stock becomes unsaleable)
- Value at risk (maximum stock value in a single location)
- Controls (alarms, monitoring, maintenance, backup power)
Common real-world causes include:
- Local grid outage or planned utility works
- Tripped breakers, blown fuses, damaged cables, water ingress
- Generator failure, empty fuel tanks, poor changeover testing
- Refrigeration plant breakdown (compressor, condenser, fan motors)
- Door left open, seals damaged, poor loading practices
- Incorrect thermostat settings or sensor failure
- Hot works or site activities damaging power or refrigeration lines
On construction sites, the environment is harsher: dust, vibration, temporary wiring, frequent changes, and multiple contractors. That’s why underwriters often ask more questions for site-based refrigeration.
What’s typically covered (and what isn’t)
Cover varies by insurer and wording, but these are the usual building blocks.
1) Deterioration of stock (spoilage)
This can cover the value of stock that becomes unusable due to a rise (or sometimes fall) in temperature following:
- Power failure (including public supply failure, if included)
- Refrigeration plant breakdown (if included)
- Accidental failure of temperature control
For construction and engineering firms, “stock” might include:
- Temperature-sensitive adhesives, coatings, resins, and chemicals
- Specialist components requiring controlled storage
- Food stock for welfare facilities (smaller exposure, but still relevant)
Watch-outs:
- Some policies define stock narrowly (e.g., “food and drink”). You may need wording that includes materials and chemicals.
- There may be a time excess (e.g., first 2–12 hours not covered) or a monetary excess.
- There may be a maximum limit per event and a separate limit per location.
2) Refrigeration plant breakdown
This covers physical damage or breakdown of the refrigeration equipment itself, typically under an engineering breakdown section.
Watch-outs:
- Wear and tear, gradual deterioration, and lack of maintenance are commonly excluded.
- Portable or hired-in units may need to be specifically declared.
3) Public electricity supply failure
If your refrigeration fails because the incoming supply fails, you may need a specific extension.
Watch-outs:
- Some wordings only cover supply failure caused by “damage to the public supply system” within a stated radius.
- Planned outages, load shedding, or supplier restrictions may be excluded.
4) Business interruption and increased cost of working
If refrigeration failure causes:
- Project delays
- Rework
- Additional labour and overtime
- Expedited shipping of replacement materials
- Temporary hire of cold storage
…then BI or increased cost of working can be essential.
Watch-outs:
- BI usually requires “insured damage” to property. If the only trigger is a power outage with no insured property damage, BI may not respond unless you have the right extensions.
- Construction projects may need Delay in Start Up (DSU) or project-specific covers, depending on the contract.
How this fits within construction and engineering insurance
Construction and engineering risks are often insured through a combination of:
- Contract Works / Contractors All Risks (CAR): Covers the works in progress and materials on site.
- Plant & Tools / Contractors Plant: Covers owned or hired plant.
- Engineering Inspection / Breakdown: Covers machinery breakdown and sometimes deterioration of stock.
- Public & Employers’ Liability: Covers injury and third-party property damage.
- Professional Indemnity: Covers design/specification errors.
- Business Interruption: Covers loss of gross profit following insured damage.
Refrigeration failure can touch multiple sections:
- Spoiled temperature-sensitive materials might be stock at your premises (property/DoS) or materials on site (CAR).
- A failed refrigerated container might be hired plant (plant policy) or part of the site setup.
- A power outage might be a utility failure exposure rather than a physical damage event.
Because of these overlaps, it’s important to map the scenario:
- Where is the refrigeration located?
- Who owns it (you, hire company, principal contractor)?
- What exactly is being refrigerated?
- What is the worst-case value at risk?
- What is the likely knock-on cost (delay, rework, penalties)?
Typical exclusions and conditions to plan around
Even well-arranged cover can fail if the wording doesn’t match the loss. Common issues include:
- Maintenance conditions: Proof of servicing, inspection, and records may be required.
- Alarm/monitoring requirements: Some insurers require temperature alarms, remote monitoring, or call-out arrangements.
- Security and access: For site containers, insurers may require compound security, locks, and restricted access.
- Time excess: Losses within the first X hours may be excluded.
- Gradual deterioration: Slow temperature drift due to poor seals or poor housekeeping may not be covered.
- Known defects: If equipment was already faulty, claims can be disputed.
- Incorrect storage: If manufacturer storage requirements weren’t followed, insurers may argue the stock wasn’t “fit for purpose”.
Underwriting questions you should be ready to answer
To get competitive terms, expect questions like:
- Maximum value of refrigerated stock at any one time (and typical value)
- Temperature range required and tolerance (e.g., 2–8°C, -18°C)
- Type of refrigeration (walk-in, container, cold room, portable units)
- Ownership (owned vs hired) and maintenance arrangements
- Backup power (generator/UPS), capacity, and testing frequency n- Monitoring (local alarm, remote monitoring, call-out)
- Door discipline and access controls
- Site conditions (dust, vibration, exposure to weather)
- Claims history and near misses
If you can provide clear answers and evidence of controls, you’re in a stronger position.
Risk management: how to reduce refrigeration failure losses
Insurers like practical controls that reduce both frequency and severity.
Backup power that actually works
A generator on paper isn’t enough. Consider:
- Load testing under realistic conditions
- Fuel management and refuelling plans
- Automatic changeover testing
- Clear responsibility for weekly checks
Temperature monitoring and escalation
- Continuous monitoring with data logging
- Remote alerts to multiple contacts (not just one person)
- Clear escalation steps: who attends site, who authorises stock movement
Maintenance and housekeeping
- Planned preventative maintenance for refrigeration plant
- Cleaning condensers and filters (dust is a killer on sites)
- Checking door seals, hinges, and auto-closers
Stock and materials discipline
- Don’t overfill units (airflow matters)
- Separate high-value, high-sensitivity materials
- Rotate stock and track expiry
- Keep manufacturer storage requirements on file
Contingency planning
- Pre-arranged hire of temporary cold storage
- Agreements with nearby facilities for emergency storage
- Clear plan for rapid disposal and replacement
Claims: what to do if you have a refrigeration/power failure event
If you suspect a loss, speed and documentation matter.
- Record the time of outage and restoration
- Download temperature logs and alarm notifications
- Photograph equipment, control panels, and any visible faults
- Isolate and label affected stock (avoid mixing)
- Keep purchase invoices and stock records
- Arrange engineer attendance and keep reports
- Notify your broker/insurer promptly
The more evidence you can provide, the smoother the claim tends to be.
Choosing limits: how much cover do you need?
A common mistake is buying a spoilage limit that matches “typical stock”, not “peak stock”. For construction and engineering firms, peaks happen when:
- A large delivery arrives ahead of a programme milestone
- Multiple projects are being supplied from one depot
- Specialist materials are staged for a shutdown or weekend works
A simple approach:
- Estimate maximum value at risk at each location.
- Add a buffer for peak deliveries (often 20–30%).
- Consider the cost of rework and delay, not just stock value.
- Align limits with your contract obligations and any liquidated damages exposure.
Example scenarios (how cover might respond)
Scenario A: Depot power outage spoils temperature-sensitive resins
A local power failure overnight causes a refrigerated store to rise above tolerance. High-value resins are written off.
- DoS extension may cover the spoiled materials (subject to time excess and limits).
- Engineering section may cover the refrigeration plant if it also suffered damage.
Scenario B: Site refrigerated container fails due to generator fault
A temporary cold container on site loses power when the generator fails to start. Adhesives and coatings are ruined, and the programme slips.
- DoS may respond if site locations and materials are included.
- Increased cost of working may help with urgent replacement and overtime, if the trigger is covered.
Scenario C: Commissioning a cold room goes wrong
During commissioning, a control fault causes temperature swings that damage stored components.
- Depending on the contract and policy, this may fall under CAR/engineering commissioning cover.
- If the issue is design/spec error, PI may be relevant.
These scenarios show why it’s important to align the policy to the real operational setup.
Quick checklist: what to ask your broker to include
- Deterioration of stock cover that includes materials/chemicals, not just food
- Public supply failure extension (where relevant)
- Refrigeration plant breakdown cover (owned and hired)
- Site locations and temporary units included
- Clear definition of “stock” and “insured event”
- Appropriate limits per location and per event
- Practical excesses (time and money)
- BI/increased cost of working extensions that match the trigger
Need help arranging power failure and refrigeration failure cover?
If you store temperature-sensitive materials or rely on refrigeration for project delivery, it’s worth stress-testing your insurance before a loss happens.
Speak to Insure24 to review your construction and engineering insurance programme, confirm your maximum values at risk, and make sure refrigeration failure and power failure exposures are properly covered. Call 0330 127 2333 or request a quote via insure24.co.uk.