Exam 2: Equipment Breakdown

Question 1

Equipment Breakdown Covered Losses

Answer 1

Losses due to accidental breakdown of most equipment

• Steam Boilers
• Electrical Generators
• Pumps
• Turbines
• Engines
• Air Conditioning
• Refrigeration Systems

Question 2

What is Equipment Breakdown Coverage also known as?

Answer 2

“Boiler and Machinery Coverage”

Question 3

Where is previous equipment breakdown covered?

Answer 3

BPP

Question 4

What does BPP exclude?

Answer 4

1) Electrical Breakdown
2) Covers damage to the equipment and damage to other property around it
* Combustible dust

Question 5

What does equipment breakdown coverage do in relation to the BPP?

Answer 5

• Fills the coverage gaps

- Covers damage to the equipment and damage to other property around it

Question 6

Insuring Agreement

Answer 6

Breakdown of covered equipment

Question 7

“Breakdown” (Insuring Agreement)

Answer 7

Direct physical loss to equipment due to pressure, mechanical or electrical failure

Question 8

“Covered Equipment” (Insuring Agreement)

Answer 8

• Equipment built to operate under internal pressure or vacuum
• Electrical or mechanical equipment generating energy
• Communication and computer equipment

Question 9

Property Damage

Answer 9

Covers Direct damage to “covered property”

Question 10

“Covered Property” (Property Damage)

Answer 10

• Property named insured owns
• property in named insured’s care and control and they could be held legally liable
• Must reside at premises named in declarations

Question 11

Expediting Expenses

Answer 11

• Payment for extra cost to make temporary repairs and - speed up permanent repairs (paying overtime to workers)
• Some coverage duplication exists with extra expense under business income

Question 12

Spoilage Damage

Answer 12

• Payment for loss of perishable goods due to breakdown

- Will cover any expenses associated with attempting to save goods or reduce loss

Question 13

Utility Interruption

Answer 13

• Coverage for shut down of equipment due to failure of utility service
• Covers loss of income

Question 14

Ordinance of Law

Answer 14

If equipment breakdown causes damages that:

- require demolition or extra repairs required by local code

Question 15

Insurance Limits

Answer 15

• Policy is written with one overall limit (the most insurer will cover for losses from anyone break down

Question 16

What is the sub limit for Insurance Limits and Why?

Answer 16

$25,000

1) Ammonia Contamination: used as refrigerant in some equipment
2) Hazardous Substance: old electrical transformers may contain PCB’s
3) Consequential Loss: reduction in value of undamaged parts - because the main equipment is damaged/destroyed
4) Data and Media: Applies to the expense to research, replace or restore damaged media/infrastructure

Question 17

Suspension Provision

Answer 17

Insurer can suspend coverage of it finds it to be in dangerous condition

1) Must deliver or mail written notice
2) Usually the result of a loss control inspection
3) Insured is usually cooperative

Question 18

Valuation

Answer 18

• Replacement Cost
• Pays the smallest of the following:
  1) Cost to repair damaged property with property of same kind, capacity, size or quality
  2) Cost to replace damaged property
  3) Amount to insured actually spends to repair property

Question 19

Deductible

Answer 19

• Dollar deductible: exceed a certain amount before losses are paid
• Multiple Daily Value: uses some multiple of daily business income (3X) to set deductible
• Percentage of Loss: 2% deductible of $100,000 loss is $2,000

Question 20

Dollar deductible

Answer 20

exceed a certain amount before losses are paid

Question 21

Multiple Daily Value

Answer 21

uses some multiple of daily business income (3X) to set deductible

Question 22

Percentage of Loss

Answer 22

2% deductible of $100,000 loss is $2,000