ADJUSTERS INTERNAT IONAL . COM 5 A D J U S T I N G T O D A Y insurance available under that name. In other words, if covered property that is branded or labeled merchandise is damaged through a breakdown, the insurer may take all or any part of that property at an agreed or appraised value. The named insured, however, has to do certain things as conditions warrant, such as stamp the insured property with the word “salvage.” 10. Contingent business income and extra expense or extra expense only. The base limit is $500,000. Each of the above coverages can be written subject to a separate limit or included as part of the base limit for direct damage (property damage) to covered property. Since “covered property” coverage not only encompasses property owned by the named insured but also property damage to property in the insured’s care, custody or control, and over which the named insured is legally liable, it is important that the limits be selected wisely. If a $500,000 base limit is selected and the other coverages are designated in the declarations as being included, coverage will hinge on how much is left after paying for damage to property the named insured owns or has in its care, custody or control. One of the perennial sources of confusion within the realm of property insurance, which includes equipment breakdown, is the difference between expediting expenses and extra expenses. For a more comprehensive discussion of both subjects, refer to the article on page 10 of this issue. Exclusions With the expansion of equipment breakdown insurance, it is only natural to see the number of exclusions likewise increase. Currently, there are 21 exclusions. About six of these apply because the losses can be handled by property insurance. The other exclusions apply unless the coverages are selected under this policy. What can be referred to as new exclusions are those that also have been added to other property and liability policies, namely, fungus, wet rot and dry rot. The coverage is excluded whether loss or damage is caused directly or indirectly from an exclusion and also from a concurrent cause; that is, an exclusion applies regardless of any other cause or event that contributes concurrently or in any sequence to the loss. It also does not matter whether the loss event results in widespread damage or affects a substantial area. The 21 exclusions, as they appear in the ISO form EB 00 20—equipment breakdown protection coverage form—are as follows: 1. Ordinance or law. (If coverage is not purchased, this exclusion applies.) It excludes the increase in loss from the enforcement of any ordinance, law, regulation or ruling which restricts or regulates the repair, replacement, alteration, use, operation, construction, installation, clean-up or disposal of “covered property.” 2. Earth movement, including but not limited to earthquake, landslide, land subsidence, mine subsidence or volcanic action. What is not clear here is whether this exclusion applies solely to natural movement or includes human movement as well. 3. Water. This includes flood, surface water, mudflow, mudslide, water that backs up from sewers, and water that discharges or leaks from a sprinkler system or domestic water piping. 4. Nuclear hazard. 5. War or military action. 6. Explosion. (This cause of loss is commonly covered by commercial property policies. But property policies do not cover explosion from steam boilers, electric steam generators, steam piping, steam turbines, steam engines, gas turbines or moving or rotating machinery when the explosion is caused by centrifugal force or mechanical breakdown.) To the extent this type of equipment is covered by the equipment breakdown policy, this exclusion will apply, unless endorsed to the contrary. 7. Fire or combustion. Including fire and combustion that result in, occur at the same time as, or ensue from the breakdown. Fire or combustion would be covered by the commercial property policy. 8. Fungus, wet rot and dry rot. This exclusion was introduced with the 2006 amendments. If a breakdown occurs, coverage will apply to the resulting breakdown. 9. Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. The rationale for this exclusion, also introduced in 2006, which applies to property
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