Equipment Breakdown, Spoilage, Off Premises

1. Equipment Breakdown, Spoilage, Off Premises • The webinar will begin shortly. • There is no audio at this time. • This presentation is being recorded for your viewing pleasure at a future date. • The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right. • The PowerPoint presentation is also available under ‘Materials’. • You will receive the course number for your state near the end of class. • Use the ‘chat’ window for questions on the content. • 100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

2. Audio Welcome to your Insurance Community University 2 • All of you are currently on mute • Un-mute your own system • Telephone Option • Select Telephone on your screen • Dial in the PIN number so that your number becomes active • Microphone and/or Speaker Option • You can use this option if you have a headset that you use with your computer

3. Participation & Chat Window 3 • You will receive information from the monitor via the ‘Chat’ window.  • Please locate window in the control panel • Q & A is welcomed during the presentation and at the end of the presentation • You will find the question box on your control panel • Write your question in that box • and send it to the presenter/organizer • The presenter will take those • questions in the order submitted

4. DOI Requirements = Hand is down 4 • When you see a slide with the hand up symbol, touch the “hand” icon on your control panel • Click ONCE only • If you do not raise your hand, the monitor will be in contact with you in the chat box  • If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times

5. Polling 5 Throughout the class we will be conducting periodic polls We need 100% participation on the polls The polls are intended to check participation but also to create discussion topics throughout the presentation

6. Forms To Complete for CE 6 • After class ends • Return attendance form • Proctors – return your form to email address • Email address is in chat window or in email sent to you today

7. DOI Requirements 7 We will file your hours with the DOI after the completion of this webinar and we have received the attendance form. You have 48 hours to return the form You will be sent a Certificate of Attendance/Completion by email.  Please retain this for your records for five years.

8. Internet Disruption If the presenter looses internet connection STAY ON THE LINE The administrators will communicate with you

9. Internet Failure If the internet fails and all participants are kicked off line by Go To Training or other source then the seminar will be terminated You will receive instructions by email as to how we will proceed This is a precautionary notice, only

10. This class is being recorded Available in the University Does NOT qualify for CE

11. Test YOUR Knowledge After class you will receive a quiz flash on today’s topic

12. Your Instructor Today Laurie Infantino, CIC, AFIS, CISC, ACSR, CISC, CRIS President and Co-Founder of The Insurance Community Center

13. Course Objectives Review the exclusions and limitations in the Commercial Property forms that create the need to purchase Equipment Breakdown Coverage Review Spoilage on EB and Property Review EDP vs EB and the off premises exposures both direct and indirect Review the Equipment Breakdown form

14. Let’s Begin with a Claim

15. Blast at O.C. Eatery Kills 1, Injures 5 : Victims: Debris and darkness trap the injured, who mourn the death of prized bartender. Los Angeles Times August 02, 1993

16. El Torito Grill A Blast that killed one man and injured five others caused by an exploding boiler. Pressure built up inside the boiler and the only way to relieve it was to explode. It shot the boiler through the roof like a missile.

17. El Torito Grill The explosion occurred to the El Torito located in Newport Beach, California in Fashion Island Shopping Center. The El Torito was located across an access road from the shopping center. The explosion demolished the restaurant’s equipment room knocked down a wall to an adjoining wall to the men’s locker room and killed Antonio De Santiago, a bartender who was changing his cloths at the time.

18. El Torito Grill The building inspector said the building permit was issued 21 year ago. He suspected that the problem may have been twofold: a plugged pressure relief valve and a malfunction in the unit designed to shut off the gas supply when the boiler got too hot.

19. El Torito What really happened? The maintenance person removed the safety valve from the unit causing pressure to build up with the resultant explosion.

20. Polling Question #1 On an Equipment Breakdown Form is there coverage for the damage to the Boiler?

21. Polling Question #2 Is there coverage for the damage to the building that El Torito occupies?

22. Polling Question #3 Is there coverage for the damage done to Fashion Island located across the street?

23. Polling Question #4 Is there coverage for the damage to the customer’s vehicle that El Torito’s valet parked in the El Torito lot?

24. Polling Question #5 Is there coverage for the death of Antonio De Santiago?

26. Course Objective #1Review the exclusions and limitations in the Commercial Property forms that create the need to purchase Equipment Breakdown Coverage.

27. My Hawaiian Vacation

28. Typical QuestionAir Conditioning Units on a Building Question: Why do we have to have an Equipment Breakdown Policy to cover air conditioning units on a building? Answer: The units are covered under building coverage but ONLY for the perils of the policy

29. The Purpose Of Equipment Breakdown Insurance The purpose of this coverage is to provide coverage for perils that are excluded or not covered in Commercial Property Policies.

30. The Purpose Of Equipment Breakdown Insurance Special Form has exclusions that necessitate EB coverage On a “named perils” policy EB coverages are not within the listing of covered perils

31. Four Major Areas of ExclusionsM.E.S.S. Mechanical Electrical Steam Boilers Exploding Spoilage

32. Four Major Areas of Exclusions

33. Polling Question #6 See Slide

34. Electrical Exclusion 80% of all claims are from electrical or air conditioning equipment. http://www.jrfco.com/INSURANCEPRODUCTS/EquipmentBreakdown/tabid/190/Default.aspx

35. Electrical Exclusion The majority of Equipment Breakdown losses The majority of losses include the element of Business Income. Business Income losses can exceed the amounts of the direct damage

36. Electrical Exclusion in Property We will not pay for: Artificially generated electric current, including electric arcing, that disturbs electrical devices, appliances or wires. But if loss or damage by fire results, we will pay for that resulting loss or damage

37. Mechanical Exclusion We will not pay for: Mechanical Breakdown including rupture or bursting caused by centrifugal force. However, this does not apply to any resulting loss or damage caused by elevator collision

38. Steam Boiler Exclusion We will not pay for: Explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control. But if loss or damage by fire or combustion explosion results, we will pay for that resulting loss or damage. We will also pay for loss or damage caused by or resulting from the explosion of gases or fuel within the furnace of any fired vessel or within the flues or passages through which the gases of combustion pass.

39. Spoilage Exclusion There is no specific “spoilage” exclusion in the standard ISO forms. There is, however, language in the form that constitutes a “spoilage” exclusion along with “inherent vice”. Discussed in more detail in Learning Objective #2

40. Other Exclusions or Limitations in the Commercial Property Forms Building Ordinance Business Income Off Premises discussed in Objective #3

41. Ordinance or Law Exclusion: The enforcement of any ordinance or law: (1)Regulating the construction, use or repair of any property: or (2)Requiring the tearing down of any property including the cost of removing its debris. This exclusion is found in “almost” all property type forms including EB; EQ; Flood; DIC and more. Each type of policy must be endorsed to cover the Ordinance or Law coverage incurred as a result of the “perils” of that policy.

42. Ordinance or Law An air conditioning motor burned out in a high-rise, senior citizen's apartment building.  Ninety-plus degree temperatures necessitated setting up four rented "spot coolers."  Overtime was required to get the motor back on line.Property Damage: $ 83,557Extra Expense: $ 16,794 Additional Cost to bring the facility up to code

43. Ordinance or Law Look to response if it is only building or equipment, as well In Commercial Property the only coverage available is for “Building Ordinance” none for equipment Some policies contain limited coverage automatically Verify Business Income Response under Equipment Breakdown Coverage

44. Business Income Business Income is a coverage part in Commercial Property Business income is as important for an equipment breakdown loss. Nearly half of all equipment breakdown claims now include an element of loss of business income or incurred extra expenses. Losses are more difficult to measure

45. Course Objective #2 Review the need for “Spoilage” Coverage offered in Property Insurance and Equipment Breakdown

46. Spoilage Exclusion There is no specific “spoilage” exclusion in the standard ISO forms. There is, however, language in the form that constitutes a “spoilage” exclusion along with “inherent vice”.

47. “Spoilage” Exclusion We will not pay for: Decay, deterioration, changes in temperature, rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself: (a) Dampness or dryness of atmosphere; (b) Changes in or extremes of temperature

48. Spoilage The Spoilage exclusions give rise to the need for specific coverage referred to as Spoilage, Consequential, or Refrigeration Loss depending on the form. Spoilage coverage can be provided on both the Equipment Breakdown Form and the Commercial Property Forms. There is a significant difference in the coverages provided under each of the forms.

49. A control failed on a medical clinic's refrigerator, causing the temperature to dive into single-digit temperatures.  Drugs, which normally are stored between 36 to 43 degrees, had to be discarded. Polling Question #7

50. There was a temperature spike in a warehouse storing radish seeds. Spike caused the radishes to germinate and the entire crop was lost. Polling Question #8