Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceEasy
A Florida manufacturing facility uses several large industrial boilers and specialized textile machinery. They are concerned about the financial impact of sudden and accidental breakdown of this equipment, which could lead to explosion, mechanical failure, or electrical surge, causing property damage and business interruption. Which type of insurance policy is specifically designed to cover these types of losses?
- ACommercial Property Policy
- BInland Marine Policy
- CBoiler and Machinery (Equipment Breakdown) Policy
- DCommercial General Liability Policy
Show answer & explanationAnswer & explanation
Correct answer: C. Boiler and Machinery (Equipment Breakdown) Policy
Boiler and Machinery, now more commonly called Equipment Breakdown insurance, is designed to cover direct damage to covered equipment from sudden and accidental breakdown, as well as resulting business interruption and spoilage. Standard commercial property policies typically exclude these types of losses.
Why the other options are wrong
- A. A standard Commercial Property Policy generally excludes losses due to mechanical breakdown, electrical arcing, or boiler explosions.
- B. Inland Marine policies cover property that is in transit, instruments of transportation/communication, or movable property, not typically fixed industrial machinery breakdown.
- D. A Commercial General Liability Policy covers liability to third parties, not damage to the insured's own equipment.
Boiler & Machinery / Equipment Breakdown
Boiler and Machinery (Equipment Breakdown) insurance covers direct damage to equipment and resulting losses (e.g., business interruption) due to sudden and accidental breakdown.
- Covers mechanical, electrical, and pressure systems.
- Often includes business interruption and spoilage coverage.
- Excludes wear and tear, rust, and calibration errors.
Memory trick: Specialized property is 'B.I.C.' for 'Boiler, Inland, Commercial'.