cause of loss" or building glass breakage, we will pay for the loss or damage caused by that "specified cause of loss" or building glass breakage. Comments: (1) I think there are 2 key points that should be considered in understanding the intent of this (and similar) exclusions. First, note the context of the occurrences in Exclusion B.2.d. (1)-(7). Mechanical breakdown is included among similar types of losses that are usually the result of some sort of inherent defect, or gradual, long-term deterioration or damage, such as wear and tear, [2.d.(1)], and rust, corrosion, deterioration, latent defect, etc. [2.d.(2)], and so forth. The strong and clear intent of these exclusions seems directed at internal failures, and not those caused by outside forces or events. An excellent argument supporting this view is effectively made by a court ruling on the application
of the mechanical breakdown exclusion in a case involving damage to contractor’s equipment. [The policy is a proprietary form similar to ISO coverage form.]
The "Perils Insured" clause, which must be broadly construed in favor of coverage, insures against "all risks... from any external cause... except as hereinafter excluded." Clause 7(c) is, like clause 2(c), susceptible to two interpretations. It purports to exclude losses "caused by... structural or mechanical... breakdown or failure...." If this exclusion were interpreted broadly, it might be found to exclude losses arising from external causes as well as from inherent defect. Such a reading would restrict the effect of the "Perils Insured" clause by excluding from coverage almost every imaginable loss which results in failure of the equipment to function. Because most casualties to contractor's equipment may be expected to impair its function to some degree, such an interpretation renders the insurance clause nearly meaningless and the insurance nearly worthless.
Louisiana Agent 20