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Equipment Breakdown

Practice questions on equipment breakdown for the property exam, each with an answer and explanation.

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Study questions and answers

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1. Equipment breakdown insurance, formerly called boiler and machinery, covers loss caused by:

  1. Fire spreading from a neighboring building
  2. An accident such as mechanical breakdown or electrical arcing of covered equipment
  3. Theft of tools
  4. Flood damage to machinery
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B. An accident such as mechanical breakdown or electrical arcing of covered equipment
Equipment breakdown covers sudden accidents to covered equipment, such as mechanical breakdown, electrical arcing, and explosion of steam boilers.

2. Explosion of a steam boiler owned by the insured is excluded under commercial property causes of loss forms. Where is this loss usually covered?

  1. General liability
  2. Inland marine
  3. Business income from dependent properties
  4. Equipment breakdown coverage
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D. Equipment breakdown coverage
Steam boiler explosion is excluded from the commercial property causes of loss forms and is covered under equipment breakdown insurance.

3. A large share of the premium for equipment breakdown insurance typically goes toward:

  1. Inspection and loss prevention services
  2. Agent commissions only
  3. Liability claims
  4. Reinsurance of flood losses
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A. Inspection and loss prevention services
Equipment breakdown insurers devote much of the premium to inspecting boilers and machinery to prevent accidents, often meeting jurisdictional inspection requirements.

4. Under equipment breakdown coverage, the insurer finds a boiler in a dangerous condition. The insurer may immediately stop coverage on that boiler under which provision?

  1. Cancellation
  2. Vacancy
  3. Suspension
  4. Liberalization
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C. Suspension
The suspension condition lets the insurer immediately suspend coverage on a dangerous object by delivering or mailing written notice. The rest of the policy stays in force.

5. A covered breakdown of a refrigeration unit causes food inventory to rot. Which equipment breakdown coverage applies to the food?

  1. Expediting expenses
  2. Spoilage damage
  3. Utility interruption
  4. Newly acquired premises
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B. Spoilage damage
Spoilage coverage pays for perishable goods damaged by lack of power, heat or refrigeration resulting from a covered accident.

6. After an equipment accident, the insured pays for overnight shipping of a replacement part and overtime labor to make temporary repairs. These costs fall under:

  1. Spoilage damage
  2. Business income from dependent properties
  3. Utility interruption
  4. Expediting expenses
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D. Expediting expenses
Expediting expenses pay the reasonable extra cost of temporary repairs and of speeding up permanent repairs or replacement, such as express freight and overtime.

7. A covered breakdown of a production machine halts operations for three weeks. Which equipment breakdown coverage pays the lost income during the shutdown?

  1. Expediting expenses for temporary repairs
  2. Spoilage coverage for perishable stock
  3. Business income and extra expense
  4. Jurisdictional inspection coverage
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C. Business income and extra expense
Business income and extra expense coverage pays lost income and added costs during a breakdown shutdown, but it is optional and must be on the policy. Expediting speeds repairs and spoilage covers perishable goods.

8. A transformer at the utility's substation suffers an accident that cuts power to the insured's plant. Which equipment breakdown coverage may respond to the plant's loss?

  1. Expediting expenses for repairs
  2. Newly acquired premises coverage
  3. Pollutant cleanup and removal
  4. Utility interruption coverage
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D. Utility interruption coverage
Utility interruption covers income or spoilage loss when a breakdown of the utility's equipment off the premises cuts the service. It is an added coverage, usually with its own limit.

9. Which of these is generally NOT a covered breakdown under an equipment breakdown form?

  1. Sudden burnout of an electric motor winding
  2. Routine adjustment or calibration of a machine in service
  3. Rupture of a pressure vessel under steam load
  4. Mechanical failure of a broken compressor shaft
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B. Routine adjustment or calibration of a machine in service
A breakdown is direct physical damage from mechanical or electrical failure or pressure rupture, and it does not include routine malfunctions such as adjustment, cleaning or calibration. Burnouts and ruptures are core covered accidents.

10. Electrical arcing burns out a generator and starts a fire that damages the building. With no equipment breakdown coverage, what does the commercial property special form cover?

  1. Both the fire damage and the damaged generator unit
  2. Neither the fire damage nor the generator
  3. Only the resulting fire damage to the building
  4. Only the generator, but not the fire damage
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C. Only the resulting fire damage to the building
Commercial property forms exclude mechanical breakdown and electrical arcing but cover a resulting fire. Equipment breakdown coverage fills the gap for the generator itself.

11. Which item is typically covered equipment under an equipment breakdown policy?

  1. A company delivery truck used on the road
  2. The building's concrete foundation and slab
  3. Landscaping and trees on the grounds
  4. A rooftop air conditioning compressor
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D. A rooftop air conditioning compressor
Covered equipment is mechanical, electrical and pressure equipment such as boilers, HVAC units and switchgear. Vehicles, building structure and land are not covered equipment.
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