Alabama Property and Casualty Practice Exam

The boiler at XYZ Manufacturing is destroyed in a factory fire. Under which coverage is this loss covered?

1. XYZ's Commercial Property coverage

2. XYZ's Equipment Breakdown coverage

3. XYZ's Inland Marine coverage

4. None of the above

The correct answer is: XYZ's Commercial Property coverage

The loss of the boiler at XYZ Manufacturing due to a factory fire is covered under their Commercial Property coverage. This type of coverage provides protection for physical damage to property owned by a business, which includes buildings, equipment, inventory, and other personal property used in the course of business operations. Commercial Property insurance typically includes coverage for fire damage, making it applicable in this situation where the boiler was destroyed in a fire. This form of insurance would address the loss of the physical asset, and the costs associated with replacing or repairing the boiler, thereby ensuring that the business can continue its operations with minimized financial impact. While Equipment Breakdown coverage specifically pertains to the malfunction or failure of machinery and equipment due to sudden and accidental breakdowns, it would not apply in this case as the loss occurred due to a fire. Inland Marine coverage is generally intended for goods in transit or specific types of movable equipment and does not typically cover property damage resulting from a fire at a fixed location. The option of "None of the above" does not apply because the loss is indeed covered under Commercial Property coverage.