Boiler and Machinery

This coverage part may also be added to the CPP. It provides property and liability protection resulting from an accident to an insured object.

Coverage applies to:

• Damage to the insured’s property
• Liability arising out of damage to property of others in the care, custody, or control of the insured, if the loss is caused by a covered peril

The definition of an “object” is the equipment described in the declarations. Insurers may use different categories of objects, including:

• Pressure and refrigeration objects
• Mechanical objects
• Electrical objects
• Turbine objects

The covered cause of loss is an accident to an insured object listed in the declarations. The definition of accident does not include corrosion, erosion, wear and tear, deterioration, or depletion.

Standard exclusions in this form include ordinance or law, war, and nuclear hazard. Accidents to objects while being tested are also not covered.

There are four available extensions of coverage:

1. Expediting expenses provides payment for the reasonable cost of temporary repairs and expediting permanent repairs. Standard coverage is $5,000 but may be increased for an additional premium

2. Automatic coverage provides protection for newly acquired objects of the type insured for up to 90 days

3. Defense costs are paid if the insurer defends the insured in a legal suit

4. Supplementary payments are provided similar to that of other liability policies, but the included amount is $250 per day for loss of earnings

Sidenote

Know this...

These extensions typically appear automatically in many equipment breakdown policies, but availability may vary by insurer.

Any of three endorsements may be added to the boiler and machinery coverage part, including:

1. Business interruption provides coverage for loss due to a total or partial interruption of business as a result of an accident to an insured object

2. Extra expense coverage functions just as it does under commercial property insurance

3. Consequential damage provides indemnity for the actual loss of insured property due to spoilage resulting from lack of power, light, heat, and refrigeration at described premises caused by an accident to an insured object

Farm Property Coverage

This coverage part is available to be added to the CPP to cover an insured’s farm exposures. It includes its own declarations page. Either a standard or special form may be added to provide coverage.

Ten coverage sections are included in either form, providing a combination of property and liability protection. The ten sections are:

1) Coverage A Dwelling

• This section covers the dwelling and any attached structures. It also covers materials used to maintain the farm. Coverage is allocated on a replacement cost basis.

2) Coverage B Other Private Structures

• This section covers unattached structures up to specified limits.

3) Coverage C Household Personal Property

• This coverage is the equivalent of personal property coverage under a homeowners policy.

4) Coverage D Loss of Use

• This section covers additional living expenses similar to the homeowners policy.

5) Coverage E Scheduled Farm Personal Property

• This section covers all of the farmer’s itemized personal property used for farming purposes.

6) Coverage F Unscheduled Farm Personal Property

• Coverage is provided for all unscheduled items of farm personal property on the premises.

7) Coverage G Other Farm Structures

• Coverage is provided by this section for structures on the farm not used for dwelling purposes such as fences and grain silos.

8) Coverage H Bodily Injury and Property Damage Liability

• Custom farming operations are excluded when receipts exceed the limit shown in the policy. Many policies use a low threshold (such as $2,000), but the exact amount varies by insurer.

9) Coverage I Personal and Advertising Injury Liability

• Coverage provided by this section is almost identical to Coverage B in a CGL policy.

10) Coverage J Medical Payments

• Applicable payments are covered as long as they are reported within 3 years of occurrence.

Additional forms may be added to the Farm Coverage Part, including the mobile agricultural machinery and equipment form and the livestock form (when livestock are the only property owned).

The insured may select a cause of loss form to attach to the Farm Property Coverage Part. The form specifies the perils insured against. These forms are similar in scope to the cause of loss forms available under the Commercial Property Coverage Part (basic, broad, and special).

The conditions, definitions, and exclusions of the Farm Property Coverage Part are similar to the corresponding sections of the Commercial Property Coverage Part.

Lesson Summary

Boiler and Machinery Coverage provides property and liability protection for accidents to insured objects, with standard exclusions.

Farm Property Coverage under CPP covers farm exposures with sections for dwelling, structures, personal property, and liability.

Chapter Vocabulary

Definitions

Boiler & Machinery or Equipment Breakdown

Coverage for the failure of boilers, machinery, and other electrical equipment. Benefits include (1) property of the insured, which has been directly damaged by the accident; (2) costs of temporary repairs and expediting expenses; and (3) liability for damage to the property of others. Coverage also includes inspection of the equipment.

Commercial Farm and Ranch

A commercial package policy for farming and ranching risks that includes both property and liability coverage. Coverage includes barns, stables, other farm structures, and farm inland marine, such as mobile equipment and livestock.

Crop Insurance

Protection against damage to growing crops from hail, fire, or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield-reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.

Custodian

An employee or other person who has possession of an insured’s property on premise.

Farmowners Insurance

Farmowners insurance sold for personal, family, or household purposes. This package policy is similar to a homeowners policy in that it has been developed for farms and ranches and includes both property and liability coverage for personal and business losses. Coverage includes farm dwellings and their contents, barns, stables, other farm structures, and farm inland marine, such as mobile equipment and livestock.