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KNOW THE GAPS BEFORE THEY BECOME A CLAIM PROBLEM
Why Exclusions Matter for Steel Manufacturers
Most steel manufacturing claims don’t fail because a business had “no insurance” - they fail because the policy wording did not match the actual cause of loss, or because the business assumed something was covered when it was not. Steel manufacturing has severe loss drivers: fire/heat risk, electrical complexity, breakdown dependencies, high values, and long lead-times. It also has exposures that sit outside standard policy intent: contractual penalties, quality/spec rejections, pollution events, and cyber/OT shutdowns.
This page explains the most common exclusions and gaps we see in steel manufacturing insurance programmes. It’s not legal advice - and every policy is different - but it will help you ask the right questions at renewal and avoid “false confidence” cover.
If you’d like, Insure24 can review your schedule and key wordings and highlight the areas where steel manufacturers most often get caught out. That includes coordination between property damage, machinery breakdown and business interruption (BI), and the “grey areas” where policies overlap.
THE MOST COMMON STEEL INSURANCE GAPS
Quick Note: “Typical” Doesn’t Mean “Always”
Many exclusions can be negotiated, endorsed, or addressed through specialist extensions. The key is identifying your real exposure, then matching cover to your process, contracts, and downtime drivers.
1) Property & Fire Insurance: Common Exclusions & Gaps
Property insurance is designed to cover physical loss or damage to insured assets from insured perils. For steel manufacturers, the most important factor is not just “do we have property cover?” - it’s whether sums insured, definitions, and endorsements reflect the real site, real values, and real loss drivers (fire spread, electrical, heat and ignition sources, and storage risks).
Underinsurance & Valuation Gaps
- Buildings insured at market value instead of reinstatement
- Plant & machinery values missing installation, commissioning, freight, duty, and inflation
- Electrical infrastructure (substations, switchgear, cabling) under-declared
- Professional fees and debris removal sub-limits too low for heavy industrial loss
- Peak stock/WIP not declared (seasonal or contract-driven peaks)
This isn’t a “technicality” problem - underinsurance can reduce claim payments under average clauses.
Common Policy Restrictions
- Unattended theft restrictions for yards and external storage
- Hot works conditions and warranties (permits, supervision, fire watch)
- Electrical exclusion language that limits certain failure types (policy dependent)
- Flood/surface water exclusions or high excesses for higher-risk locations
- Unoccupied premises conditions (relevant during shutdowns or reduced shifts)
Many restrictions are manageable - if you know they exist and can evidence compliance.
2) Machinery Breakdown: “Sudden” vs Wear & Tear (The Biggest Steel Gap)
Machinery breakdown (engineering) policies are designed to cover sudden and unforeseen breakdown of insured plant/electrical equipment - not gradual deterioration. In steel manufacturing, many failures begin as gradual wear, misalignment, contamination, fatigue, or overheating, then “suddenly” become catastrophic. The boundary between wear and tear vs insured breakdown is where disputes occur.
If you rely on breakdown cover to protect downtime, you need to ensure: key machinery is scheduled/insured, definitions include relevant electrical and electronic components, and maintenance/inspection expectations are realistic for your process.
Typical Exclusions to Understand
- Wear and tear, corrosion, erosion, scaling, gradual deterioration
- Defective design/material/workmanship (often with “resulting damage” nuance)
- Lack of maintenance or failure to follow manufacturer recommendations
- Consumables and replaceable parts (belts, filters, seals) unless damage spreads
- Computer/software and data issues unless specifically included (policy dependent)
The key question: if a bearing fails due to wear, does resulting damage to the machine become covered? Wording varies.
Common Steel Manufacturer “Assumption Gaps”
- Assuming breakdown includes electronics/PLC/control panels without checking
- Assuming cranes are automatically included (often need scheduling and inspection evidence)
- Assuming breakdown automatically triggers BI (only if BI includes breakdown trigger)
- Assuming utilities interruption is included (often not, unless endorsed)
- Not aligning excess/deductible to realistic incident frequency and cashflow
We structure breakdown wordings around your critical machinery and failure modes - so BI protection is real, not theoretical.
3) Business Interruption: Trigger & Indemnity Period Gaps
Business interruption (BI) is often the most expensive part of a steel loss - but also the easiest place to accidentally leave a gap. Two issues drive most BI problems: (1) the BI trigger does not match the cause of shutdown, and (2) the indemnity period is too short for realistic recovery.
For example, if the business stops due to machinery breakdown, but BI only responds to property damage perils, you can have a shutdown with no BI payout. And even when BI does respond, steel equipment lead times can stretch recovery far beyond 6–12 months.
BI Trigger Mismatch Examples
- Breakdown causes shutdown but BI requires insured property damage
- Cyber/OT incident stops production but BI excludes cyber causes (common)
- Utility failure stops site but utilities extension not included
- Supplier failure creates downtime but contingent BI not purchased
- Access restrictions after nearby incident but denial of access not included
The policy needs to reflect how your business actually stops - not how insurers prefer it to stop.
Indemnity Period & Calculation Gaps
- Indemnity period too short for long lead-time plant (transformers, drives, specialist equipment)
- Incorrect basis of cover: gross profit vs revenue not aligned to accounts
- Increased cost of working sub-limit too low to accelerate recovery
- No allowance for ramp-up time back to normal output
- Seasonality not reflected (shutdown during peak months is more costly)
BI works best when it’s built around a realistic recovery plan and credible downtime scenario.
4) Liability: Contractual Penalties, Pure Financial Loss & Product Quality Rejection
Steel manufacturers often sign contracts that include warranties, indemnities, penalties, and “fitness for purpose” language. Many of these exposures are not automatically insured. Liability insurance is designed to cover legal liability for injury or property damage (and sometimes limited financial loss) - not to guarantee contract performance.
Commonly Uninsured (or Restricted) Exposures
- Liquidated damages and contractual penalties for late delivery
- Pure financial loss without injury or property damage (often excluded/restricted)
- Cost of replacing your own product absent insured damage (wording dependent)
- Guarantees and performance warranties beyond legal liability
- Product quality rejection (spec failure without damage) – usually not a standard claim
The fix is not “hope.” The fix is contract review, correct liability structure, and (where appropriate) specialist cover options.
Recall & Trace/Withdraw Gaps
- Assuming recall is included in product liability (it often isn’t)
- Misunderstanding the trigger for recall-style cover (defect/safety risk definitions vary)
- Not declaring export territories and higher-litigation jurisdictions
- Weak traceability creates “wide recall” scope and severity (insurance may still respond, but cost rises)
- Contract requirements for specific endorsements not matched in the schedule
If you supply critical applications, recall/withdraw planning and traceability can be as important as the policy limit.
5) Pollution, Waste & Cyber/OT: The “Silent Exclusions”
Two of the most misunderstood exclusions in manufacturing insurance are pollution and cyber. Many standard liability policies restrict pollution to narrow “sudden and accidental” definitions (or exclude it), and many property/BI policies include cyber exclusions that can remove cover when production stops due to systems failure or malicious attack.
Steel operations can be exposed to pollution through oils, coolants, effluent, waste and slag handling, and contractor disposal chains - and exposed to cyber/OT risk through PLC/SCADA, MES, scheduling systems, and connected equipment. If these are meaningful risks for your site, you need to address them deliberately, not assume “it’s part of the package.”
Pollution / Environmental Limitations
- Pollution excluded unless sudden & accidental and tightly defined
- Clean-up costs not covered under standard liability without a specialist section
- Offsite disposal / contractor chain exposures not included unless endorsed
- Gradual pollution often excluded unless specifically bought
- Site history (known contamination) can be excluded or restricted
Environmental insurance can often be arranged to cover these gaps, subject to underwriting and site risk profile.
Cyber / OT Exclusions and BI Impact
- Production stops due to cyber/OT incident but property/BI excludes cyber causes
- Data/software restoration not included under standard covers
- Extortion/ransom events excluded (requires cyber policy)
- System failure (non-malicious) may also be excluded depending on wording
- Operational technology dependencies not disclosed to insurers (creates claims friction)
If OT downtime is your exposure, you need a deliberate cyber/OT strategy - and clear coordination with BI.
We assumed breakdown automatically meant BI would pay if the line stopped. Insure24 highlighted the trigger gap, restructured the programme, and helped us build a realistic recovery scenario for underwriting. It changed how we think about insurance.
Managing Director – Steel ManufacturingIDENTIFY GAPS NOW - NOT DURING A LOSS
- Policy review against common steel manufacturing exclusions
- Breakdown & BI trigger alignment to real downtime scenarios
- Liability structure matched to contracts and export territories
- Environmental and cyber/OT gap identification and options
- Clear renewal plan to improve terms without creating exposures
FREQUENTLY ASKED QUESTIONS
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What is the most common insurance gap for steel manufacturers?
The most common gap is a mismatch between what causes downtime and what triggers business interruption (BI) cover. For example, machinery breakdown may stop production,
but BI may only respond to insured property damage unless the policy is structured to include breakdown triggers.
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Does machinery breakdown cover wear and tear?
Typically no. Breakdown policies generally exclude wear and tear, gradual deterioration and maintenance issues. Cover is usually intended for sudden and unforeseen breakdown.
The “grey area” is how the policy treats resulting damage after a worn part fails - wording varies.
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Are contractual penalties and late delivery charges insured?
Generally not. Liquidated damages and contractual penalties are usually uninsurable under standard policies. The best approach is contract review, realistic delivery resilience planning,
and ensuring your BI and increased cost of working cover is structured to support recovery.
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Does product liability cover rejected batches or spec failure?
Product liability typically focuses on third-party injury or property damage caused by your products. Rejection for spec/quality issues without damage is often treated as a commercial/contract issue,
not an insured liability claim. Recall/trace & withdraw style cover may be available for defined defect triggers, depending on wording.
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Is pollution covered under public liability?
Often only in limited circumstances (typically sudden and accidental, and tightly defined). Many policies restrict or exclude pollution and clean-up costs.
Specialist environmental/pollution liability cover is usually required for broader protection.
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Can cyber or OT incidents be excluded even if they cause physical shutdown?
Yes. Many property and BI wordings include cyber exclusions that can restrict cover when loss is caused by systems failure or malicious cyber events. If OT downtime is a material risk,
you should consider a cyber/OT strategy and ensure coordination with BI triggers.