Texas General Lines — Property and CasualtyCommercial LinesMedium
A client owns a manufacturing plant that produces specialized industrial components. They have a Commercial Property policy with a Building and Personal Property Coverage Form. A critical piece of machinery, vital to their production line, suffers a sudden and accidental breakdown due to a mechanical failure, causing significant damage to the machine itself and halting production for several weeks. Which type of specialized coverage would be required to cover the repair or replacement of this machine and the resulting loss of business income?
- AEquipment Breakdown Coverage
- BBusiness Income and Extra Expense
- CInland Marine - Contractors Equipment Floater
- DCommercial General Liability (CGL)
Show answer & explanationAnswer & explanation
Correct answer: A. Equipment Breakdown Coverage
Equipment Breakdown Coverage (formerly Boiler and Machinery) is specifically designed to cover direct physical damage to insured equipment due to sudden and accidental breakdown, as well as the resulting business interruption.
Why the other options are wrong
- B. Business Income and Extra Expense coverage would respond to the loss of income, but only if the direct damage to the equipment was covered by another policy. It does not cover the equipment breakdown itself.
- C. A Contractors Equipment Floater covers mobile equipment used by contractors, not stationary production machinery in a plant.
- D. CGL covers third-party bodily injury and property damage, not damage to the insured's own equipment.
Equipment Breakdown Coverage
Insurance that covers direct physical loss to specified equipment due to sudden and accidental breakdown, as well as indirect losses like business interruption resulting from the breakdown.
- Covers mechanical, electrical, or pressure system breakdowns.
- Includes repair/replacement of damaged equipment.
- Often includes business income and extra expense coverage.
- Typically excludes damage covered by standard property policies (e.g., fire).
Memory trick: Broken machines need 'Breakdown' protection.