A fire in one part of a building causes a short circuit that damages a computer in another part of the building. The damage to the computer is which type of loss?

• A. Direct loss
• B. Consequential loss
• C. Proximate loss
• D. Negligent loss

Answer: (B)

This tests the idea of direct versus indirect (consequential) losses in property insurance. A direct loss is physical damage to property caused by the peril itself—like the computer being burned by flames. Here, the computer is damaged not by direct contact with the fire, but as a result of a short circuit that the fire triggers somewhere else. That chain shows an indirect consequence of the fire, i.e., a consequential loss. The other terms don’t fit: a negligent loss would require fault by someone, and proximate loss isn’t a separate loss category in this context. So the damage to the computer is best described as a consequential (indirect) loss.