Alabama Property and Casualty Practice Exam

In the event XYZ Manufacturing's boiler explodes and causes significant damage, which statement is NOT true?

1. The fire damage is covered by XYZ's Equipment Breakdown coverage

2. The explosion damages the building

3. Smoke damage is included in the loss

4. Water damage from firefighting efforts is covered

The correct answer is: The fire damage is covered by XYZ's Equipment Breakdown coverage

The statement regarding Equipment Breakdown coverage is not accurate in this scenario because Equipment Breakdown policies specifically cover mechanical breakdowns or failure of equipment due to internal malfunctions. While damage directly caused by the explosion might be covered under a standard property insurance policy, not all fire damage stemming from an explosion is automatically covered under Equipment Breakdown. This is especially true if the damage occurs as a consequence of the explosion rather than a breakdown of the equipment itself. In contrast, the other statements about the explosion damaging the building, including smoke damage in the loss, and coverage for water damage from firefighting efforts are typically covered under commercial property insurance policies. These policies generally provide comprehensive coverage for various types of losses resulting from explosions, including physical damage to the property, the effects of smoke, and incidental damage caused during the emergency response to the incident, such as water damage from firefighting efforts.