Chapter 6

Which statement is true of the Equipment Breakdown Protection Coverage Form? A) The form automatically includes Business Income and Extra Expense Coverage. B) It is a Coverage Form eligible to be written under the Commercial Property Coverage Part. C) Explosion and damage during testing are covered. D) Defects, erasures, errors, limitations or viruses in computer equipment are included in the definition of breakdown.

Answer A is correct. Business Income and Extra Expense Coverage are automatically provided, the insured may choose Extra Expense Only, however.

Covered equipment under the Equipment Breakdown Protection Coverage Form, includes: A) Electrical and mechanical equipment used in the utilization of energy. B) Catalysts C) Insulating and refractory material D) Equipment manufactured by the insured for sale.

Answer A is correct. Catalysts insulating and refractory material, and equipment manufactured by the insured for sale are not included as covered equipment.

Under the Equipment Breakdown Coverage form, what is the most the insurer will pay to clean up an ammonia spill causing damage to property? A) $10,000 B) $25,000 C) $50,000 D) $100,000

Answer B is correct. A $25,000 limit applies to the following types of losses: Ammonia Contamination, Consequential Loss (Indirect), Data and Media, Hazardous Substance, and Water Damage.

Which of the following losses to covered equipment would be covered under the Equipment Breakdown Protection coverage form? A) Damage caused by hail. B) Damage caused by nuclear hazard C) Damage caused by wind. D) Damage from an explosion caused by the centrifugal force of moving parts.

Answer D is correct. The Equipment Breakdown Protection coverage form excludes MOST explosions; however, an Exception is made for explosions caused by centrifugal force. Wind, Fire, and Nuclear Hazard are all considered exclusions.

XYZ Manufacturings boiler explodes, setting the factory on fire and causing extensive smoke damage. Significant water damage is done by the firemen extinguishing the blaze. All are true about XYZs coverage, EXCEPT: A) The fire damage is covered by XYZs Equipment Breakdown coverage. B) The boiler is covered by XYZs Equipment Breakdown coverage. C) The water damage is covered by XYZs Commercial Property coverage. D) The smoke damage is covered by XYZs Commercial Property coverage.

Answer A is correct. Fire is excluded under the Equipment Breakdown coverage because it is covered by the commercial property coverage under the CPP. Water and Smoke damages are covered by the Property coverages as indicated in the answers. The boiler is the only item that is actually covered by the Equipment Breakdown coverage form.

In the Equipment Breakdown Protection coverage form, coverage for business income, spoilage damage and utility interruption is A) provided if the insured has selected these coverages in the Declarations. B) automatically provided if the insured maintains at least 80% coinsurance throughout the policy period and at the time of loss. C) provided as an extension of coverage, but for coverage to apply the insured must maintain 80% coinsurance and the coverage must be indicated on the declarations page. D) not provided at all.

Answer A is correct. The Equipment Breakdown Protection coverage form provides many additional coverages including Business Income, Spoilage Damage, Utility Interruption, etc. provided either a specified limit or the word INCLUDED is shown for that coverage in the policy's declarations page. There is no coinsurance requirement specified and these additional coverages are not automatically included.

All of the following are indirect loss coverages available under the Equipment Breakdown coverage form, EXCEPT: A) Spoilage. B) Bodily Injury. C) Business income. D) Expediting expenses.

Answer B is correct. Bodily injury is liability coverage and is not referred to as an indirect loss. Spoilage, Business income, and Expediting expenses all occur as a result of a direct loss to property, therefore are considered indirect or consequential losses.

All of the following are true of the Equipment Breakdown Protection Coverage Form, except: A) Property is insured on a replacement cost basis, unless the Actual Cash Value Endorsement is chosen. B) Leakage of a valve is included in the definition of breakdown. C) Coverage is included for property of others that is in the insured's care, custody and control, and for which he or she is legally liable. D) Coverage is automatic, at newly acquired premises for a period of time as specified in the Declarations.

B is correct. The definition of breakdown does not include leakage at any valve.

Which statement is false regarding the Equipment Breakdown Protection Coverage Form? A) Covered equipment does not include catalysts, insulating, or refractory material. B) If an initial breakdown causes other breakdowns, all will be considered one breakdown. C) The period of restoration ends 15 consecutive days after the date when the damaged property is repaired or replaced. D) Deductibles ordinarily apply separately to each applicable coverage.

Answer C is correct. The period of restoration ends five consecutive days after the date the damaged property is repaired or replaced.

Which statement is false regarding the Equipment Breakdown Protection Coverage Form? A) Spoilage damage due to lack or excess of power, light, heat, steam, or refrigeration is covered. B) A breakdown caused by windstorm or hail is covered. C) Loss resulting from earth movement is excluded. D) Expediting Expenses include extra costs to expedite permanent or replacement parts.

Answer B is correct. Breakdown caused by windstorm or hail is specifically excluded.

Equipment Breakdown coverage losses are settled on what basis? A) ACV B) Replacement Cost C) Market Value D) Machine Value

Answer B is correct. Everything is paid at Replacement Cost (R/C) in the Equipment Breakdown (Boiler and Machinery) coverage form, Unless the ACV Endorsement is attached to change the valuation to ACV.

All of the following are true of the Equipment Breakdown Protection Coverage Form, except: A) Property is insured on a replacement cost basis, unless the Actual Cash Value Endorsement is chosen. B) Leakage of a valve is included in the definition of breakdown. C) Coverage is included for property of others that is in the insured's care, custody and control, and for which he or she is legally liable. D) Coverage is automatic, at newly acquired premises for a period of time as specified in the Declarations.

Answer B is correct. The definition of breakdown does not include leakage at any valve.

Which of the following are considered to be covered property under an Equipment Breakdown Protection Coverage Form? A) Property that the insured owns. B) Property that is in the insureds care, custody or control and for which the insured is legally liable. C) Both A and B D) Neither A nor B

Answer C is correct. Covered Property includes property that the insured owns or property that is in the insured's care, custody or control and for which the insured is legally liable.

Which statement is false regarding the Equipment Breakdown Protection Coverage Form? A) Covered equipment does not include catalysts, insulating, or refractory material. B) If an initial breakdown causes other breakdowns, all will be considered one breakdown. C) The period of restoration ends 15 consecutive days after the date when the damaged property is repaired or replaced. D) Deductibles ordinarily apply separately to each applicable coverage

Answer C is correct. The period of restoration ends five consecutive days after the date the damaged property is repaired or replaced.

Under Boiler and Machinery Insurance, which of the following describes one breakdown? A) The one accident that apparently caused the damage. B) The first accident, when there is more than one accident simultaneously. C) The last accident, when there is more than one accident simultaneously. D) All breakdowns at any one premises that manifest themselves at the same time and are the direct result of the same cause.

Answer D is correct. All breakdowns are covered as one breakdown if (1) they occur at any one premises, (2) they manifest themselves at the same time, and (3) they are the result of the same cause.

Which of the following would NOT be covered by Equipment Breakdown coverage? A) Steam boilers B) Refrigeration equipment C) Computers, Data and Media equipment D) Bathroom fixtures

Answer D is correct. Bathroom fixtures like toilets, sinks, etc. would be covered under property coverage, not equipment breakdown. Steam boilers, Air conditioners and other Refrigeration equipment, and Data and Media equipment like Computers would all be covered.