220 - unit 14 boiler and machinery

The small business boiler and machinery broad form includes the above, but differs in the following principal respects:

(1) Both property damage and business interruption/extra expense apply blanket to all objects; (2) Spoilage coverage may be included subject to limits of $5,000, $10,000 or $25,000 with a separate deductible of $500; and (3) The internal limits for hazardous substances (other than ammonia) and ammonia contamination are each $25,000 per accident.

Coverage: The Boiler and Machinery Coverage form is divided into the following sections:

(A) Coverage (B) Exclusions (C) Limits of Insurance (D) Deductible (E) Conditions (F) Definitions

Describe covered property in a Boiler and Machinery insurance policy.

Describe covered property in a Boiler and Machinery insurance policy. It includes property owned by the insured, or in the care, custody or control of the insured and for which the insured is legally liable. This applies to all forms of property, not just a boiler or other objects that are the subject of coverage.

A new generator is being tested when it explodes causing damage to the surrounding equipment. This is covered under a Boiler and Machinery Policy.

FALSE

Describe the limitations as to types of businesses and insurable objects of the small business boiler and machinery policy forms.

For risks which have an 80% equipment replacement value of not over $5,000,000, with a required property damage limit of 80% of building replacement value.

Boiler and Machinery Coverage Form: Limits

Part C provides for payment of no more than the limit shown in the declarations for all direct loss from one accident. The minimum, basic limit is $500,000. Higher limits are common; rating manual tables provide for limits up to $20 million per accident. The cost of liability claim defenses and supplementary payments are not subject to the limit in the declarations page. There are limitations for certain coverages: (1) $25,000 is the maximum amount available for expediting expenses; (2) If damage is caused by a substance declared to be hazardous by a governmental agency (other than ammonia), $25,000 is the limit of payment for the additional expenses of cleanup, repair, replacement or disposal of the property damage; (3) $25,000 is the limit for damage caused by ammonia contamination; and (4) $25,000 is the limit for damage by water from refrigerating or air-conditioning vessels and piping.

Numerous boiler and machinery options to restrict or broaden the coverage provided in the basic form including: Internal limits of coverage may be increased. "Additional expediting expense," "water damage" and "ammonia contamination" endorsements permit increasing the $25,000 limit for each to any desired higher amount. These increases do not increase the per accident limit;

TRUE

Personal property owned by another, in the insured's care, was damaged in an accident involving a covered object, resulting in a liability claim by the owner." It would be Covered - because it is included in the definition of covered property.

TRUE

Boiler and Machinery Policy:

The declarations page states the name and address of the insured, policy dates, limits, deductibles, lender interests, and locations and descriptions of covered objects. Common Policy Conditions are the same as for several other insurance lines.

What is the deductible as stated in Part D of the Boiler and Machinery insurance policy?

The deductible will be subtracted from the amount that would otherwise be paid for each accident. If more than one object is involved in a single accident, the highest deductible applies. The standard deductible is $500; higher deductibles are optional.

Describe the valuation clause of a Boiler and Machinery insurance policy?

The valuation clause provides for replacement cost coverage on all covered property, except if repair or replacement is not made within 18 months of the date of accident, actual cash value applies

What are the objects definition forms available in a boiler and machinery insurance policy?

true

Describe the additional coverages of the small business boiler and machinery policy form broad form.

true (1) Both property damage and business interruption/extra expense apply blanket to all objects; (2) Spoilage coverage may be included subject to limits of $5000, $10,000 or $25,000 with a separate deductible of $500; and (3) The internal limits for hazardous substances (other than ammonia) and ammonia contamination are each $25,000 per accident.

Under a policy with the boiler and machinery form, with no endorsements, state "covered" or "not covered" for the following incident, and explain. If not covered, state how (if at all) it could have been covered under boiler and machinery insurance: "In an accident involving a covered object, a visitor on the insured's premises suffered injuries and sued the insured?"

"Not covered - bodily injury liability is an optional coverage, which must be added by endorsement; the bodily injury endorsement only applies on an excess basis." is the correct response to Under a policy with the boiler and machinery form, with no endorsements, state "covered" or "not covered" for the following incident, and explain. If not covered, state how (if at all) it could have been covered under boiler and machinery insurance: "In an accident involving a covered object, a visitor on the insured's premises suffered injuries and sued the insured?"

Exclusions - Part B excludes the following:

(1) Any increase in loss from enforcement of the law regulating repair, alteration, use, operation, construction or installation; (2) War and nuclear hazards; (3) Fires and explosions under varying circumstances designed to minimize overlap between the coverage provided by commercial property and Boiler and Machinery forms; (4) Windstorm, hail or freezing; (5) Lightning, aircraft, vehicles, sinkhole collapsed, smoke, sprinkler leakage or weight of ice, snow or sleet, if coverage is otherwise provided; (6) Flood, except if an accident results from a flood, direct damage to covered property caused by the accident is covered; (7) Any accident to an object while it is being tested; (8) An accident caused by earth movement; (9) Lack of power, light, heat, steam or refrigeration; and (10) Any indirect loss.

3 coverage forms

(1) Boiler and Machinery; (2) Small Business Boiler and Machinery; and (3) Small Business Boiler and Machinery Broad form. There are six object definitions forms, one or more of which is required only in connection with the Boiler and Machinery coverage form. The two small business forms contain the object descriptions as part of the coverage provisions.

Highlights of both forms are:

(1) Coverage may apply to boilers and pressure vessels for property damage and business interruption, and to air-conditioning and air compressing units for property damage only or both property damage and business interruption. Coverage is blanket for all objects, without specific identification of each object; (2) Covered property and covered causes of loss are the same as in the boiler and machinery policy; (3) Business interruption includes extra expense and covers on an "actual loss sustained" basis for 25 percent of the limit that applies to property damage losses; business interruption is an additional amount of insurance; (4) Coverage exclusions, internal limits and conditions are the same as in the boiler and machinery policy, except there is no coinsurance clause and there is no coverage for increased loss expense due to hazardous substances; and (5) A standard deductible of $500 per accident applies; higher or lower deductibles are available.

Indirect Loss Coverage Endorsements:

Coverage for loss caused by an accident to an insured object causing interruption of the insured's operations is available on either a "valued" or "actual loss sustained "form.

Boiler and Machinery Coverage Form: Extensions of Coverage: The following are coverage extensions of Part A:

Expediting Expenses: When there is damage to covered property, reimbursement will be provided for the cost of temporary repairs and to expedite permanent repairs or replacement. Some examples of expediting expenses included the cost of overtime labor, long distance telephone calls or the airfreight incurred to facilitate repairs or replacement. Expediting expenses coverage is subject to a $250 deductible. Automatic Coverage: 90 days automatic coverage is provided for an accident to an object at a newly acquired location, subject to the highest limit and deductible stated on the declarations for the same type of object. Defense: The insurer will defend the insured against claims or suits arising out of covered occurrences. There is no dollar limit applicable to this coverage. Supplemental Payments: The insurer pays all litigation costs for liability claims.

Miscellaneous Options:

Numerous boiler and machinery options are available to restrict or broaden coverage. Some of the more common options are: (1) When the object covered is a boiler, fired vessel or electrical steam generator, a "limited coverage" endorsement is available which redefines "accident" to cover only "sudden and accidental tearing asunder" of the object as opposed to "sudden and accidental breakdown"; (2) An endorsement, "actual cash value," is available to change loss settlement from a replacement cost to an actual cash value basis; (3) Internal limits of coverage may be increased. "Additional expediting expense," "water damage" and "ammonia contamination" endorsements permit increasing the $25,000 limit for each to any desired higher amount. These increases do not increase the per accident limit; (4) A "bodily injury liability" endorsement is available to provide excess coverage over any other liability insurance. Bodily injury liability is normally excluded under the basic contract because coverage for this exposure is normally provided under the insured's general liability policy; (5) "Consequential damage" is an optional endorsement covering loss due to spoilage from lack of power, light, heat, steam or refrigeration caused by accident to a covered object. This is a form of indirect loss and the specific type of property to be covered for spoilage must be stated in the endorsement.

DEDUCTIBLE

Part D states that the deductible will be subtracted from the amount that would otherwise be paid for each accident. If more than one object is involved in a single accident, the highest deductible applies. This standard deductible is $500; higher deductibles are optional.

Boiler and Machinery Coverage Form: Conditions

Part E contains usual policy conditions, but two are worthy of particular note. The valuation clause provides for replacement cost coverage on all covered property, except if repair or replacement is not made within 18 months of the date of accident in which case actual cash value applies. The suspension condition contains an unusual provision. Whenever an object is found to be in, or exposed to, a dangerous condition, any insurer representative may immediately suspend the insurance against loss from an accident to that object. Delivering or mailing a written notice of suspension to the insured's last known address or to the address where the object is located will meet the requirement.

A turbine requires a 2.5 horsepower engine to perform properly. The turbine breaks down and the owner replaces the motor with a 1.5 hp motor. The engine burns-up causing damage to the turbine and surrounding equipment. The Boiler and Machinery Policy will not cover the loss.

TRUE

Describe the valued business interruption endorsement in a boiler and machinery insurance policy.

TRUE

Objects Definitions Forms:

The forms defining the objects are highly technical in detail and it is not important to know complete details of all object definitions or which type of object is covered under which particular objects definitions forms. The following is a brief listing of some types of objects that are insurable: (1) Boilers (steam, hot water, fired tube, water tube, cast-iron types); (2) Refrigerating Equipment; (3) Air Conditioning Equipment; (4) Generators; (5) Pumps; (6) Engines; (7) Machinery; (8) Compressors; (9) Transformers; and (10) Turbines.

Describe the declarations and common policy conditions of a Boiler and Machinery insurance policy.

The statement should read: Information on the Declaration Page of a Boiler and Machinery Policy is similar to the Declarations Page on other policies. One difference is that the Boiler and Machinery Dec. Page list location and descriptions of covered objects.

Describe the extra expense form in a boiler and machinery insurance policy.

This coverage pays for an extraordinary expenses incurred to maintain ongoing operations, over and above normal expenses that would have been experienced had there been no accident to a covered object. An endorsement schedule applies limits to a selected total amount of coverage, depending upon the period of restoration. As with the commercial property form, "40%-80%-100% " means that 40 percent of the total limit its recoverable if the period of restoration is one month or less, 80 percent in two months, and the full limit if over two months. A deductible applies, expressed in dollars.

Small Business Forms:

Two small business boiler and machinery policy forms are available.The forms are subject to some limitations as to types of businesses and insurable objects. The forms are available to businesses that have an 80 percent equipment replacement value of not more than$5 million. The required property damage limit is 80 percent of the building replacement value.

Describe the suspension condition contained in a Boiler and Machinery insurance policy?

Whenever an object is found to be in, or exposed to, a dangerous condition, any insurer representative may immediately suspend the insurance against loss from an accident to that object. Delivering or mailing a written notice of suspension to the insured's last known address or to the address where the object is located will meet the requirement.

Describe the actual loss sustained business interruption endorsement in a boiler and machinery insurance policy. Ans. The actual loss sustained business interruption endorsement covers, subject to a stated limit...

actual lost profits and necessary continuing expenses through the interruption period. Coverage is subject to a 100 percent coinsurance clause, wherein the amount of insurance is related to the annual net profits plus fixed expenses of the insured as contained in required annual reports. The deductible operates the same as under the value form."

The coverage section states the insurer will pay for direct damage to "covered property" from a "covered cause of loss."

covered property includes property owned by the insured, or in the care, custody or control of the insured and for which the insured is legally liable. Note - covered property applies to all forms of property not just boiler or other objects. A covered cause of loss is an "accident" to an object shown in the declarations, which is in use or connected ready for use at the specified location.

boiler and machinery insurance

is also a specialized field (although some of the forms are standard). Some insurers write Boiler and Machinery coverage exclusively, while some insurers use specialized companies to underwrite the coverage. Still other insurers have their own specialized departments that write Boiler and Machinery coverage.

Accident

is defined to mean a sudden and accidental breakdown of the object or a part of the object, which, at the time of breakdown, manifests itself by physical damage to the object that necessitates replacement or repair. The following are excluded from the accident definition: (1) Depletion, deterioration, corrosion, erosion, wear and tear; (2) Leakage at any valve, fitting, shaft seal, gland packing, joint or connection; (3) Breakdown of any vacuum tube, gas tube, brush, electronic computer or data processing equipment, or of any structure or foundation supporting the object or any of its parts; (4) The functioning of any safety or protective device Explosions create the largest losses, but other breakdowns included in the definition of accident occur more frequently. Examples of covered losses include damage from over heating, burning, cracking, bulging, rupture, collapse, and short circuit in machinery or burn out.

Boiler and Machinery insurance covers

risks of direct loss and indirect loss arising from "accidents" (which will be defined later) to "objects" (which is the term used in this field for the subject of insurance such as boilers, generators, engines, pumps, compressors, and turbines). A completed Boiler and Machinery policy consists of Declarations, Common Policy Conditions, a coverage form, Object Definitions form, and perhaps endorsements.

An explosion that results in the collapse and rupture of boilers would be covered under Boiler and Machinery Insurance.

true

If a safety value on a boiler malfunctions resulting in property damage or bodily injury, it is covered under the definition of an accident in a Boiler and Machinery Policy.

true

Part A Coverage Extensions include costs to expedite, costs to defend, supplementary payments for litigation and 90 days automatic coverage.

true

The "limits" for direct losses in the Boiler and Machinery insurance policy Part C provides for no more than the limits shown in the declarations for all direct loss from one accident. The minimum basic limit is $500,000. Higher limits are common; for example, rating manuals provide for limits up to $20,000,000 per accident. Costs of liability claim defenses and supplementary payments are not subject to the limit. However, within the stated limit there are some limitations.

true

The three coverage forms in a Boiler and Machinery insurance policy are Boiler and Machinery, Small Business Boiler and Machinery, Small Business Boiler and Machinery Broad forms.

true

Describe the coverages of the small business boiler and machinery policy forms.

true (1) Coverage may apply to boilers and pressure vessels for property damage and business interruption, and to air-conditioning and air compressing units for property damage only or both property damage and business interruption. Coverage is blanket for all objects, without specific identification of each object; (2) Covered property and covered causes of loss are the same as in the boiler and machinery policy; (3) Business interruption includes extra expense and covers on an "actual loss sustained" basis for 25 percent of the limit that applies to property damage losses; business interruption is an additional amount of insurance; (4) Coverage exclusions, internal limits and conditions are the same as in the boiler and machinery policy, except there is no coinsurance clause and there is no coverage for increased loss expense due to hazardous substances; and (5) A standard deductible of $500per accident applies; higher or lower deductibles are available.