Chapter 10 short answer

For each of these categories of exclusions in equipment breakdown policies, identify one or more examples of such exclusions: Exclusions that eliminate coverage for perils usually insured in other policies

1.) Breakdown caused by windstorm or hail 2.) Water or other means of extinguishing a fire 3.) Fire or combustion explosion that results in a breakdown, that occurs at the same time as a breakdown, or that ensues from a breakdown 4.) Breakdown caused by any of the following perils if coverage for that peril is provided by another policy of the insured's whether collectible or not: aircraft or vehicles, freezing caused by cold weather, lightening, sinkhole collapse, smoke, riot, civil commotion, or vandalism; or weight of snow, ice, sleet.

List the three insuring agreements for time element coverages in the Equipment Breakdown Protection Coverage Form:

1.) Business income and Extra Expense or Extra Expense Only 2.) Utility Interruption 3.) Contingent Business Income and Extra Expense - or Extra Expense Only

Name four common types of breakdown losses to fired pressure vessels:

1.) Explosion caused by excessive internal pressure of steam 2.) Overheating caused by continuing firing when there is insufficient water in the vessel 3.) Cracking of cast iron sections because of expansion and contraction stresses 4.) Bulging, usually caused by improper heat transfer.

Identify the different types of limits of insurance that may apply under an equipment breakdown policy:

1.) One overall limit for loss or damage resulting from any on breakdown 2.) Separate limits for applicable insuring agreements 3.) Sublimits applicable to certain exposures such as ammonia contamination or fungus

Under the Property Damage insuring agreement, the insurer agrees to pay for direct damage to covered property. Describe what types of property are considered "covered property:

1.) Property owned by the insured 2.) Property that is in the named insured's care, custody, or control and for which the named insured is legally liable.

Describe 3 types of deductibles that might be found in the EBP form, other than a dollar deductible:

1.) Time deductible - The insurer is not liable for any loss occurring during the specified number of hours or days immediately after the breakdown. 2.) Multiple of daily value deductible- Shown the the dec as a number and it would be times the insured's daily value, calculated as the amount of business income that the insured would have earned during the period of restoration if no breakdown had occurred, and divided by the number of working days in that period. 3.) Percentage of loss deductible

Why is combustion explosion not covered cause of loss under most equipment breakdown policies:

Because commercial property policies specifically cover it.

Identify specific perils that can damage equipment that are not covered by commercial property policies but are covered by equipment breakdown policies:

Boiler explosion, electrical breakdown, mechanical breakdown, and rupture from centrifugal force are covered by equipment breakdown policies and not commercial property policies.

Give two examples of fired pressure vessel:

Boilers and economizers

Give two examples of air conditioning and refrigeration equipment

Coils and fans

Is electrical breakdown of motors ever covered under commercial property policies:

Commercial property policies do not cover electric breakdown of motors caused by short circuits but do cover breakdown if its caused by lightening.

Give two examples of unfired pressure vessels:

Compressed air tanks and liquified gas tanks

Give two examples of mechanical equipment

Compressors and pumps

Give two examples of office equipment:

Copiers and computers

Indicate whether each of the following occurrences would qualify as a covered "accident" under the equipment breakdown protection coverage form. If an occurrence would not qualify as a covered accident, explain why: A flywheel on a machine broke apart from centrifugal force:

Covered

Indicate whether each of the following occurrences would qualify as a covered "accident" under the equipment breakdown protection coverage form. If an occurrence would not qualify as a covered accident, explain why: A steam boiler cracked from overheating as a result of insufficient water in the boiler

Covered

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Damage to customers' property in the insured's custody

Covered

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Damage to the insured's building

Covered

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Damage to the insured's business personal property:

Covered

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Destruction of the boiler

Covered

For each of these categories of exclusions in equipment breakdown policies, identify one or more examples of such exclusions: Other exclusions found in equipment breakdown policies:

Damage to covered Equipment undergoing a pressure or electrical test

What are common causes of loss for office equipment and systems breakdowns:

Electrical line surges, deterioration of insulation, electrical overload, excessive moisture, operator error or abuse, and the presence of foreign objects are some of the causes of loss for office equipment systems breakdown.

For what types of equipment do "Main Street" customers usually need equipment breakdown insurance:

Main street customers typically need equipment breakdown coverage for heating and air conditioning equipment.

Indicate whether each of the following occurrences would qualify as a covered "accident" under the equipment breakdown protection coverage form. If an occurrence would not qualify as a covered accident, explain why: Unburned natural gas exploded in the exhaust flues of the boiler:

No, the occurrence described is a combustion explosion, covered by the commercial property policy.

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Bodily injury to a member of the public who was walking by the building when the explosion occurred

Not covered

The insured's boiler exploded, causing the losses listed. If the insured had a typical equipment breakdown policy, which of these losses would the policy cover: Damage to the neighboring building own by another business

Not covered

Explain why equipment breakdown policies contain the Suspension condition

Occasionally, a breakdown insurer will discover a dangerous situation involving a steam boiler or other equipment. In most cases, the insured will take corrective action immediately. However, in the rare cases, the insured may not comply with the insurer's recommendations, and the possibility of loss is greatly increased. The Suspension condition permits the insurer, in such dangerous situations to suspend coverage immediately to the affected equipment.

For each of these categories of exclusions in equipment breakdown policies, identify one or more examples of such exclusions: Exclusions similar to commercial property exclusions

Ordinance or law, earth movement, water, nuclear hazard, war or military action, wear and tear or gradual deterioration, neglect to use all reasonable means to save covered property from further damage at and after the time of loss; and fungus, wet rot and dry rot.

Give two examples of electrical equipment:

Power transformers and circuit breakers

Briefly describe the coverage provided by each of the insuring agreements that an equipment breakdown policy might provide in addition to the basic property damage coverage: Brands and Labels

The Brands and Labels insuring agreement covers reasonable costs of stamping merchandise with the word "Salvage" or removing brands and labels.

What is the effect of the Defense condition contained in the Equipment Breakdown Protection Coverage Form:

The Defense loss condition gives the insurer the right, but not the duty, to defend the insured against suits arising from claims made against the insured by owners of property in the insured's care, custody, and control.

Briefly describe the coverage provided by each of the insuring agreements that an equipment breakdown policy might provide in addition to the basic property damage coverage: Errors and Ommission

The Errors and Omissions insuring agreement commits the insurer to pay for loss or damage not otherwise covered by the coverage form because of these reasons: 1.) Any error or unintentional omission in the description or location of the insured property. 2.) Any failure thorough error to include any premises owned or occupied by the insured on the policy's inception date 3.) Any error or unintentional omissions by the insured that results in cancellation of any premises insured under the policy.

Briefly describe the coverage provided by each of the insuring agreements that an equipment breakdown policy might provide in addition to the basic property damage coverage: Newly Acquired Premises:

The Newly Acquired Premises insuring agreement extends the policy coverages to newly acquired premises that the insured buys or leases for the number of days shown in the declarations.

Briefly describe the coverage provided by each of the insuring agreements that an equipment breakdown policy might provide in addition to the basic property damage coverage: Ordinance or Law Coverage

The Ordinance of Law insuring agreement covers losses sustained, such as the cost of demolishing undamaged parts of a building or the increased cost of construction, in addition to the direct loss resulting when the equipment damaged in the breakdown is subject to ordinances or laws.

Summarize the coverage provided under the Spoilage Damage Insuring agreement in the Equipment Breakdown Protection Coverage Form:

The Spoilage Damage insuring agreement covers spoilage damage to raw materials, property in process, or finished products while in storage or in the course of being manufactured. The spoilage must result from lack of or excess of power, light, heat, steam, or refrigeration, and the insured must own or be legally liable for the property. The insurer will also pay expenses the insured incurs to reduce the amount of spoilage loss, not to exceed the amount that would otherwise have been payable.

How, typically, do the equipment breakdown insurance needs of midsize commercial insureds differ from those of main street customers:

The exposure for midsize commercial insureds change from principally heating and air conditioning equipment to production machinery and processing equipment. Equipment tends to be larder and requires a more detailed inspection by the insurer.

Explain how much an insurer will pay if the insured does not repair or replace damaged property within 24 months after the loss occurrence

The insured would pay no more than the cost to repair the property at the time of the loss or the property's actual cash value at the time of the loss, whichever is less.

When does the period of restoration end for purposes of the Business Income and Extra Expense - Or Extra Expense Only insuring agreement:

The period of restoration in the ISO Business Income and Extra Expense - Or Extra Expense Only insuring agreements ends five consecutive days after the damaged property is repaired or replaced with reasonable speed. The period of restoration can be extended by the number of additional days if shown in the policy declarations.

What is the purpose of Joint or Disputed Loss Agreement in an equipment breakdown policy:

The purpose of Joint or Disputed Loss Agreement is to enable the insured to receive full payment promptly for a loss that is covered by either the commercial property insurer or the equipment breakdown insurer or by both. Each insurer will pay the entire amount of loss that each agrees is covered under its own policy plus one half of the amount in dispute. In this way, the insured is fully paid without having to wait for the insurers to each agreement on their respective liabilities. After the insured has been compensated, the agreement requires the insurers to settle their differences through arbitration.