A Florida contractor is building a new commercial property. The project requires specialized equipment, including a large industrial generator and a custom-built HVAC system. The contractor is concerned about the risk of mechanical breakdown or electrical arcing to this equipment during installation and initial operation. Which type of coverage would be most appropriate to address these specific concerns?
- ACommercial Property Policy
- BBuilders Risk Policy
- CCommercial General Liability (CGL)
- DBoiler & Machinery (Equipment Breakdown) Coverage
Show answer & explanationAnswer & explanation
Correct answer: D. Boiler & Machinery (Equipment Breakdown) Coverage
Boiler & Machinery (now commonly called Equipment Breakdown) coverage is specifically designed to cover losses due to sudden and accidental breakdown of machinery, boilers, pressure vessels, and electrical equipment. This includes perils like mechanical breakdown, electrical arcing, and explosion of steam boilers, which are not typically covered by standard commercial property or builders risk policies.
Why the other options are wrong
- A. A standard Commercial Property Policy covers direct physical loss or damage to property but typically excludes mechanical breakdown or electrical arcing of machinery.
- B. A Builders Risk policy covers property under construction from perils like fire, wind, and theft, but generally excludes internal breakdown of machinery.
- C. CGL covers liability to third parties for bodily injury or property damage, not damage to the insured's own equipment.
Boiler & Machinery (Equipment Breakdown) Insurance
Coverage designed to protect against financial losses due to the sudden and accidental breakdown of equipment and machinery, including perils like mechanical breakdown, electrical arcing, and explosion of boilers.
- Covers sudden and accidental breakdown.
- Includes mechanical breakdown, electrical arcing, boiler explosions.
- Fills gap left by standard property policies.
- Can cover direct damage, business interruption, and spoilage.
Memory trick: Special Property: For risks beyond the 'standard' storm.