(September 2022)
This document is a repository of articles and analyses that relate to earlier editions of this program and coverage form. Refer to the following for an analysis of the current coverage form.
Related Article: BP 00 03–Businessowners Coverage Form Analysis
While the Insurance Service Office (ISO) has begun to file changes to their programs (including the Businessowners Policy) with increasing frequency, many subscribers choose to operate on their own timetable. In other cases, some companies may decide to remain with one edition of the program and modify it as needed with independent filings. Regardless, it is often helpful to have information on older editions. This article discusses differences between the ’96 and ’92 editions of the BOP. The items in boldface type are the ’96 changes.
1) The word “fixtures” has been revised to include outdoor fixtures, and outdoor fixtures need not be permanently installed to be covered.
Affected Paragraph(s)
· A.1.a. (2) through (4) Businessowners Standard Property Coverage Form BP 00 01
· A.1.a. (2) through (4) Businessowners Special Property Coverage Form BP 00 02
· A.a.(2) through (3) of Condominium Association Coverage Form BP 17 01
2) The policy now includes leased personal property for which “you” have a contractual responsibility to insure.
Office machines, computers and other leased equipment contracts often require that the lessee insure the equipment for the duration of the lease. The limit of insurance is not increased as a result of this change, so an underinsurance penalty could arise if coverage is not increased to reflect this change. Note also, that other changes to the 1996 Businessowners Program introduce an 80% to value requirement in order for the replacement cost provisions of the policy to apply, so if limits are not increased to reflect this increase in coverage, actual cash value coverage may be inadvertently triggered.
Affected Paragraph(s)
· A.1.b.(new paragraph 2) Businessowners Standard Property Coverage Form BP 00 01
· A.1.b.(new paragraph 2) Businessowners Special Property Coverage Form BP 00 02
· A.a.(2) through (3) of Condominium Association Coverage Form BP 17 01
3) Bullion is not covered under the Businessowners Standard Property Coverage Form unless added through Burglary and Robbery Optional Coverage (where bullion is listed as covered for up to $2,500). Wording is changed to make this clearer.
Included in the Businessowners Special Property Coverage Form is $2,500 protection. Similar revisions have been made to make clear that bullion coverage is only available in Burglary and Robbery coverage.
Affected Paragraph(s)
· A.2.b. and G.4.d.(3)(b) Businessowners Standard Property Coverage Form BP 00 01
· A.2.b. and A.4.d.(2) Businessowners Special Property Coverage Form BP 00 02
4) Satellite dishes are now excluded from
coverage (technically they are antennae).
Limited coverage is now provided under coverage extensions under outdoor property for up to $1,000 per loss.
Affected Paragraph(s)
· A.2.e. Businessowners Standard Property Coverage Form BP 00 01
· A.2.e. Businessowners Special Property Coverage Form BP 00 02
· A.5.c. Businessowners Standard Property Coverage Form BP 00 01
· A.6.c. Businessowners Special Property Coverage Form BP 00 02
5) Debris removal is increased from $5,000 to $10,000.
Affected Paragraph(s)
· A.4.a. (4) Businessowners Standard Property Coverage Form BP 00 01
· A.5.a. (4) Businessowners Special Property Coverage Form BP 00 02
6) Preservation of property extended from 10 days to 30 days after the property is first moved to protect it from further damage.
Affected Paragraph(s)
· A.4.b. Businessowners Standard Property Coverage Form BP 00 01
· A.5.b. Businessowners Special Property Coverage Form BP 00 02
7) Ordinary payroll under business income is limited to 60 days from the date of physical loss.
Previously, ordinary payroll was included in the 12-month business income grant of coverage. This change is due to recent catastrophes where it was felt that some insureds had little incentive to discontinue ordinary payroll expense or reduce the loss. The definition of ordinary payroll is the same as is found under the Business Income Payroll Limitation Form CP 15 10. Specific positions or individuals normally included within ordinary payroll can be removed from ordinary payroll by an entry on the declarations page.
Affected Paragraph(s)
· A.4.d. Standard Property Coverage Form BP 00 01
· A.5.f. Businessowners Special Property Coverage Form BP 00 02
8) Increase Personal Property Off Premises from $1,000 to $5,000.
Affected Paragraph(s)
· A.5.b. Businessowners Standard Property Coverage Form BP 00 01
· A.6.b. Businessowners Special Property Coverage Form BP 00 02
9) Extended Business Income coverage for up to 30 days is added as an additional coverage.
Extended business income pays for the reduction of business income that continues even after the property is repaired or rebuilt and operations are resumed.
Example: Country Fryville Restaurant’s kitchen caught fire earlier in the year. Four months later, Fryville reopens. However, its patrons have become used to other restaurants. Even after a gala reopening, the Fryville does not have the customer traffic it did before the fire. Extended business income pays the difference between what was normally earned during the 30 days after reopening and what was actually earned.
Affected Paragraph(s)
· A.4.d. (new paragraph 2) Businessowners Standard Property Coverage Form BP 00 01
· A.4.f. (new paragraph 2) Businessowners Special Property Coverage Form BP 00 02
10) For Business Income Coverages, a 72-hour waiting period from the time of direct physical loss to when the period of restoration begins. However, no waiting period applies to extra expense.
Essentially a 72-hour deductible has been incorporated into the business income portion of the policy. The full twelve months coverage is also reduced by that 72-hour deductible.
The “time of direct physical loss” is not defined. Questions arise as to when this “time” begins: at the inception of the event that causes the loss--i.e., fire first damages the roof, the windstorm lifts the first shingle or the earthquake first cracks a rafter, or at the end of the event--when the fire is extinguished, when the storm ends, 168 hours after the first tremor in an earthquake. The loss begins the moment the business operation is interrupted by a covered cause of loss. The “period of restoration” or the covered period of loss begins 72 hours later.
Affected Paragraph(s)
· H.3.a. (new paragraph 2) Businessowners Standard Property Coverage Form BP 00 01
· H.3.a. (new paragraph 2) Businessowners Special Property Coverage Form BP 00 02
11) Redefines your premises (if you are a tenant) to add all routes of access to the described premises, and your personal property in the open (or in a vehicle) within 100 feet under the Business Income portion of the form.
For the cause of loss—order of civil authority—this change represents a restriction in coverage from the previous form.
Example: Your store is inside a mall. The main entrance, 150 feet away from your store, is damaged. By order of civil authority your store can’t open until the entrance is repaired. You will not have business income coverage because this entrance is now part of your premises and loss caused by order of civil authority must occur at a place other than your premises.
Affected Paragraph(s)
· A.4.d. (new paragraph 2) Businessowners Standard Property Coverage Form BP 00 01
· A.5.f. (new paragraph 2) Businessowners Special Property Coverage Form BP 00 02
12) The cause of loss “collapse” in the Businessowners Special Property Coverage Form is expanded to include loss or damage to personal property as the result of the collapse of other personal property.
Example: Shelving within a warehouse collapses. As a result, the goods on the collapsed shelf are damaged and other shelving falls after being hit by the collapsing shelf.
Affected Paragraph(s)
· A.5.d. (new paragraph 2) Businessowners Special Property Coverage Form BP 00 02
13) Exclude windfall profits from business income losses
In the wake of a disaster, the cost and demand for basic necessities and building supplies often soar. Businesses damaged during the disaster will be unable to participate in the boom. The policy will not pay for the net income that would have likely been earned as a result of an increase in business due to favorable conditions created by a covered cause of loss to customers or on other businesses. Therefore, business income benefits will be calculated on what the customer would have earned under normal and expected conditions. Defining the difference between what might have occurred if the disaster had not happened is a daunting proposition. Adjusters will need to hire economists to determine the probable financial condition of the affected community. The impact has to be based upon factors that existed immediately prior to the loss. These conditions then need to be placed into an economic model for claims payment. Such payments will have to consider local, regional and national business conditions. Another problem created by this new concept is the problem of catastrophe serendipity. In other words, how a catastrophe experienced by one party actually improves another party’s condition.
Example: A tornado damages half of Corntowne and leaves the other half undamaged. In the damaged half is Lumber City, which is destroyed. Lumber City’s competitor, Plank Palace, is located in the undamaged end of town. Plank Palace’s business increases five-fold and earns extraordinary profits. When Lumber City finally resumes business, the Plank Palace runs a sale (with this newfound cash reserve) designed to put Lumber City out of business and, in fact, does.
Affected Paragraph(s)
· A.4.d. (1) Businessowners Standard Property Coverage Form BP 00 01
· A.5.f. (1) Businessowners Special Property Coverage Form BP 00 02
14) Adding to Business Income and Extra Expense Coverage—actions caused by civil authority that prevent access to your described premises for a covered cause of loss to property other than at your described premises. Coverage for business income begins 72 hours immediately following the civil authority’s action and will extend for a maximum of 3 consecutive weeks. Coverage for extra expense will have no waiting period.
This coverage currently exists in the Commercial Property Business Income Forms. (Effective with the September 1, 1995 Commercial Property Revisions, coverage will include the 72-hour waiting period and increase the period for coverage from two weeks to three.)
Example: There is a riot a block away. Police make your business close its doors and cordon off your block. Nobody is allowed back for 5 days. After the 72-hour waiting period, your business will have 2 days of coverage. If you were able to load your truck and transport goods to another location you rented for a few days, the extra expense of moving and the rental would be covered without any waiting period.
Affected Paragraph(s)
· A.4.g. Businessowners Standard Property Coverage Form BP 00 01
· A.5.i. Businessowners Special Property Coverage Form BP 00 02
15) Adding Money Orders and Counterfeit Currency Coverage for a limit of $1,000.
Example: A covered business’s clerk accepts four $100 counterfeit bills from a customer who purchases a television. After the insurer deducts the business’s $250 deductible, it reimburses the business $150. The costs the business incurs from investigating and prosecuting the counterfeiter and convincing the police that the store employee is not the counterfeiter are not covered.
· A.4. Businessowners Standard Property Coverage Form BP 00 01
· A.5. Businessowners Special Property Coverage Form BP 00 02
16) Adding Forgery and Alteration Coverage for $2,500.
Coverage exists for outgoing financial instruments only. Outgoing instruments can include your checks or promissory notes that are forged or altered (by other than you or an employee). Additional coverage included (subject also to the $2,500 limit) is the reasonable cost of defending your refusal to honor a suspected forged instrument.
Example (1): An additional zero is added to your $30 check, thus making the forged check $300. After the deductible of $250, the policy will pay $50.
Example (2): A stranger presents a check for a $1,000 refund, supposedly issued by your Massachusetts store. You are in California and the Massachusetts store is closed. You refuse to honor the check because you are suspicious of the signature. The next morning you determine that the check is genuine, but the check presenter sues you for failure to honor the check in a timely manner. The cost of court and legal expenses is $5,000. After the $250 deductible, the policy will pay $2,500.
Affected Paragraph(s)
· A.4. (new paragraph i) Businessowners Standard Property Coverage Form BP 00 01
· A.5. (new paragraph k) Businessowners Special Property Coverage Form BP 00 02
17) Clarification of the Government Action Exclusion. As an exception to that exclusion, covering loss or damage caused by or resulting from destruction ordered by a civil authority to prevent a fire’s spread.
Examples: (1) Knock down a series of frame sheds on your property to create a fire break from a wind driven brush fire. (2) Push your loaded trailer away from the loading dock of your burning building. The trailer falls on its side during the relocation, damaging a load of computers inside. Subject to the deductible and applicable policy limits, the contents of the vehicle would be covered. (3) Not covered. Brush-clearing you do to prevent the possible spread of fire in the future (no imminent loss).
Affected Paragraph(s)
· B.1.c. Businessowners Standard Property Coverage Form BP 00 01
· B.1.c. Businessowners Special Property Coverage Form BP 00 02
18) Language clarification: for losses involving earth movement, volcanic action, power failure, water, electrical apparatus, water discharge, steam apparatus, mechanical breakdown, if a fire results, then the resulting fire damage is covered.
Problems in interpreting ensuing loss required the language change. The intent has always been to deny payment for the collapse of half of the building caused by the earthquake, while allowing payment for the other half of the building that burned down when a gas main caught fire as a result of the earthquake. Unfortunately, this change will still not clear up all controversy. Often the earthquake will cause the greatest damage, and fire will burn up the remains. The question of cause and origin of the damage is left to forensic engineers who must determine the cause and extent of damage for a court of law.
Affected Paragraph(s)
· Exclusions: Businessowners Standard Property Coverage Form BP 00 01
· Exclusions: Businessowners Special Property Coverage Form BP 00 02
19) Back up or overflow of sump pumps is
not covered.
Back up of sewers and drains has consistently been excluded. Sump pump back-up and/or malfunction are now also excluded. Coverage cannot be purchased by any standard Businessowners Policy Program Endorsement.
· B.1.g. (3) and B.2.c Businessowners Standard Property Coverage Form BP 00 01
· B.1.g. (3) and H.6.c Businessowners Special Property Coverage Form BP 00 02
20) You must now take reasonable care to protect your property from further damage even if the damage was caused by an excluded cause of loss. In addition, the insured is now required to keep a record of all expenses necessary to protect covered property for consideration in the claim settlement. Prior to this, the insured was only required to maintain records of expenses for emergency and temporary repairs.
This makes sense. For example, you are not covered for earthquake, and the earthquake creates a hole in your wall. You wait three days before patching the hole; meanwhile, thieves have taken merchandise and vandals have spray- painted the inside of your office. The resulting theft (special form only) and vandalism would not be covered. If, however, the thieves and vandals had pried open the makeshift plywood wall you bolted on, there would be coverage for the resulting theft (special form only) and vandalism.
Affected Paragraph(s)
· E.3.a. (4) Businessowners Standard Property Coverage Form BP 00 01
· E.3.a. (4) Businessowners Special Property Coverage Form BP 00 02
21) The Businessowners Policy will now include an insurance-to-value feature. Coinsurance has not been and will not be added to the Businessowners Policy but if at the time of the loss, the limit of insurance on the lost or damaged property is not at least 80% of the replacement value of that covered property, then the claim will be adjusted on the greater of: actual cash value basis, the amount actually spent to repair or replace the damaged property, or the proportion of the ratio of the applicable limit of insurance to 80% of the cost of repair or replacement.
Example: Use the same formula as you would to establish the existence of a coinsurance penalty: Take the coverage that was carried and divide by what should have been carried. Multiply the result by the loss. If the insurance to value is less than 80%, the loss will be paid at ACV.
(For simplicity, assume no deductible.) The building replacement cost at the time of the fire loss is $100,000. The building limit of liability is $70,000. The loss is $50,000 to a 15-year old roof on a replacement cost basis.
Scenario 1: The insured pays $50,000 to replace the roof.
Scenario 2: The insured does not rebuild.
Calculations required for both examples:
a. ACV: A roof typically depreciates over a 20-year period. A 15-year old roof is 75% depreciated. $50,000 x .25 = $12,500.
b. Cost to replace: $50,000.
c. The proportion of the ratio of the applicable limit of insurance to 80% of the cost to repair or replace: The amount of insurance that should be carried is $100,000 x .80 or $80,000. Applying the formula 70,000/80,000 x 50,000 calculates $43,750 as the proportional loss.
Scenario 1: We pay the greater of a, b, or c, so the insured would be reimbursed for the full $50,000 replacement cost because he rebuilt.
Scenario 2: Since the insured did not rebuild, we are left only with options a and c, and the greater option is c, thus the payment to the insured will be $43,750.
Affected Paragraph(s)
· E.6.d. (1)(c) (eliminated), E.6.d. (1)(a) (added) Businessowners Standard Property Coverage Form BP 00 01
· E.6.d. (1) (c) (eliminated), E.6.d. (1) (a) (added) Businessowners Special Property Coverage Form BP 00 02
22) Changes to end the “period of restoration” under the business income coverage at the date when business is resumed at a new permanent location or when the described premises should be repaired with reasonable speed and similar quality.
This change is aimed at tenants rather than owners. If the tenant occupied building is extensively damaged and the tenant decides to re-open two doors down in a new storefront, then the period of restoration ends when the tenant moves to a new permanent location. The policy does not require relocation, but if the insured waits until the old building is repaired, the clause requiring reasonable speed and similar quality will apply to the “period of restoration.”
Affected Paragraph(s)
· H.3.b. Businessowners Standard Property Coverage Form BP 00 01
· H.3.b. Businessowners Special Property Coverage Form BP 00 02
23) Editorial changes to add titles to
exclusions a. through q.
Affected Paragraph(s)
· B. Exclusions (a-q) Businessowners Standard Property Coverage Form BP 00 01
· B. Exclusions (a-q) Businessowners Special Property Coverage Form BP 00 02
24) Eliminate paragraph A.1.d. and add to paragraph F.15.b referencing “property damage” definition.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part changes.
25) Add the word administered to the phrase “first aid administered at the time of an accident” in the Medical Expenses coverage part.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part. The intent is to restrict coverage under medical payments to first aid costs actually administered at the time of the accident, and not at some future time or date or as a result of later complications from the injury.
Affected Paragraph(s):
· A.2.b. Businessowners Liability Coverage Form BP 00 06.
26) Adding coverage for fire damage legal liability to that building temporarily occupied by the insured with the permission of the owner.
Example: The owner of FanGlasstic makes and sells decorative glassware. Before the holidays, she rents a temporary kiosk in the Shoptowne Mall. One day a clerk knocks over a Bunsen burner used for glass blowing and causes extensive smoke damage to the mall’s ceiling tiles.
Example: Another employee of FanGlasstic has set up an exhibit of the company’s Neon Signs at a hotel’s exhibition hall. The employee unknowingly overloads the circuit and an electrical fire breaks out. The fire destroys yards of carpeting, chairs and several neighboring exhibits.
Since both employees are legally liable for the fire damage, fire legal liability coverage would apply.
Affected Paragraph(s):
· B.1. (c-i and k-n) Businessowners Liability Coverage Form BP 00 06.
27) Mobile equipment is covered while indirectly involved in the preparation of a prearranged racing, speed or demolition event, but no coverage exists while the mobile equipment is used during, in the practice for, or while being prepared for these events.
Example: You are a racecourse owner. During a practice for a race, a fueling truck (considered mobile equipment for this example) ruptures when struck by debris from a crash. It catches fire and explodes. Coverage is not available for bodily injury and property damage to track visitors from the exploding fuel truck. On the other hand, you are the same track owner with a forklift in one of the warehouse buildings. The forklift is not used in the practice or preparation of a race, it is merely used inside the warehouse to lift and move stock. There is coverage when the forklift accidentally drops the load it is lifting onto a customer who is in the warehouse to pick up a part.
These changes are designed to parallel language revisions in 12/93 Commercial General Liability Coverage Part.
Affected Paragraph(s):
· B.1.h.(2) Businessowners Liability Coverage Form BP 00 06.
28) The Professional Services Exclusion has been updated to eliminate the following services from coverage: any kind of medical, dental, therapeutic, or health advice or instruction, therapeutic service, service treatment, advice or instruction for appearance, skin enhancement, hair removal or replacement, or personal grooming.
Remedy: Purchase medical, dental, health, dietary or beautician professional liability.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part changes.
Affected Paragraph(s):
· B.1.j. (4-6) Businessowners Liability Coverage Form BP 00 06.
29) “Employee” is redefined to include a “leased worker” which is now also defined. Further changes clarify that it is not the policy’s intent to cover (named insured) partners as employees for property damage to employee’s (the partner’s) property while in the care, custody or control of the named insured.
“Leased workers” are workers leased to an insured by a labor-leasing firm to perform duties related to the covered business. But “leased workers” do not include “temporary workers.”
“Temporary workers” are workers who are furnished to an insured to substitute for permanent “employees” on leave or to meet seasonal or short-term workload conditions.
It appears that for the condition “leased worker” to apply, the individual must be leased by a labor-leasing firm and the individual must be performing the duties, of a permanent or at least long-term employee. However, a leased employee who is a replacement for a permanent employee on leave (vacation, medical?) does not appear to qualify as a leased worker. Another scenario that fails to qualify for leased worker status is a situation where the leased employee is simply doing work to meet increased demand.
Note: The policy does not include a definition for a labor-leasing firm, but it presumably is a business either licensed to do business as a labor leasing firm, or one that prepares some form of lease or agreement to accomplish the leasing arrangement).
The policy fails to define short-term workload conditions. Would leasing an engineer to design parts for a job slated to last one year be a short-term workload? Under replacement, if an employee is permanently and totally disabled, would that leased replacement employee be considered as an employee for the purpose of this policy?
Leasing firms generally hire the employee, pay the employee’s FICA, Unemployment OASHDI, and other taxes. Some will even provide health and pension benefits. The leasing firm then leases the employee to another firm on a cost--plus basis. The advantage to the lessee is generally a lower salary and employee benefits cost, and the fact that hiring and firing liability is limited only to the terms of the leasing arrangement and not to other labor laws. Thus, small firms with temporary needs or uncertain contracts can lease employees without having to deal with the cost of eliminating staff that is no longer necessary after the contract expires or is not renewed.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part. Affected Paragraph(s):
· C.2.Businessowners Liability Coverage Form BP 00 06.
30) Add the word “offense” to “Duties in the event of Occurrence, Offense, Claim, or Suit” in “personal injury” and “advertising injury” coverage.
Some alleged personal injuries and advertising offenses can be cured or minimized prior to the filing of any claim or suit by the injured party. Acquainting the insurance company with a situation can help to reduce or eliminate costly lawsuits.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part changes.
Affected Paragraph(s):
· E.2. Businessowners Liability Coverage Form BP 00 06.
31) Add coverage for leased workers for liability to third parties caused while performing duties for the insured as lessee.
As previously discussed, the defined term “leased worker” is added to the definition of employee, while “temporary worker” is not. See changes 29, 34, and 36 for more details.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part changes.
Affected Paragraph(s):
· B.1.e., B.2.d., C.2.a., C.2.b., C.3.a. Businessowners Liability Coverage Form BP 00 06.
32) Adding a definition for “executive officer” which is defined as a person holding any of the officer positions created by your charter, constitution, by-laws, or any other similar governing document.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part.
Affected Paragraph(s):
· C.1.c., and C.2.a Businessowners Liability Coverage Form BP 00 06.
· Also added to the Hired Auto and Non-owned Auto Liability Endorsement BP 04 04.
33) Clarification that an “insured contract” does not include a premises lease that indemnifies another for damage by fire to the premises while rented to you or temporarily occupied by you with the permission of the owner.
Actually, this broadens coverage to allow for coverage for fire liability to rented premises when required by contract.
Another change narrows the railroad exclusion from indemnifying “any person or organization” to “a railroad” for construction or demolition damages that occur within 50 feet of any railroad property. Thus, a business that contracts with a municipality to do road work under a railroad bridge will have an “insured contract” with the municipality, but not to the railroad.
Affected Paragraph(s):
· F.8.a. Businessowners Liability Coverage Form BP 00 06.
34) Adding a definition for “leased worker” means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. “Leased worker” does not include a “temporary worker.”
A leased worker is also not an independent contractor who “leases” himself/herself to the business. The leased worker must be an employee of another firm, not self-employed.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part. Affected Paragraph(s):
· F.9. Businessowners Liability Coverage Form BP 00 06.
35) Redefines the word “you” to broaden eligibility to participate in arbitration to any insured.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part.
Affected Paragraph(s):
· F. 16. a. Businessowners Liability Coverage Form BP 00 06.
36) Introducing the defined word “temporary worker” as a person who is furnished to you as a substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions.
The phrase furnished to you implies that another entity is providing an employee, such as a temporary employment firm, state job agency, etc. What is not clear is whether a person hired off the street, the son of an employee, etc., who is not connected with another firm and who is hired on a temporary basis is also a temporary employee. For seasonal businesses like ice cream parlors that hire from a local school’s summer jobs program, there is no standard endorsement available to add these “temporary employees” back as covered employees. Therefore, these “temporary employees” are not considered insureds under the contract and if sued would have no coverage under the policy.
These changes are designed to parallel language revisions in the 12/93 Commercial General Liability Coverage Part changes.
Affected Paragraph(s):
· F.17. Businessowners Liability Coverage Form BP 00 06.
37) A new endorsement that will provide a 1%, 2% or 5% windstorm or hail deductible is being introduced.
The peril of wind (hurricane, storms) is difficult to insure in many regions of the country. One-way coverage can be made palatable to the insurance company and affordable to the insured is to increase the insured’s participation in a loss. Flat deductibles take a larger chunk of coverage away from insureds with lower valued property, and don’t do enough to reduce exposure with high valued property. This new wind or hail percentage deductible applies separately for each building (multiple buildings); the building and personal property (one building); and personal property for each building (multiple buildings); and personal property in the open.
New--BP 03 12 05 95--Windstorm or Hail Percentage Deductibles Endorsement
Affected Paragraph(s)
New windstorm or hail plan filed to account for the change. Each state or wind affected area will see different impacts depending upon the extent of the wind problem.
38) Valuable Papers and Records - Electronic Media Endorsement BP 04 05 has been re-titled as Valuable Papers and Records, for electronic media is now covered under the Businessowners Special Form Computer Coverage Endorsement BP 04 34.
For those customers who have the BP 04 05 endorsement and need media and other computer coverage, look now to BP 04 34. Review customer accounts to make sure there are no inadvertent gaps in coverage as a result of this endorsement change.
39) Townhouse Associations Endorsement BP 04 08 has been revised to clarify that the property covered by this endorsement is real property, not personal property.
This is simply a clarification of intent.
40) Additional Insured - Engineers, Architects or Surveyors Endorsement BP 04 13 is revised. By changing the phrase “your work” to “ongoing operations performed by you or on your behalf,” the endorsement now covers engineers, architects, or surveyors as additional insureds but only for ongoing operations, not completed operations.
There is no endorsement available for completed operations coverage for additional insureds.
41) BP 04 17 Employment-Related Practices Exclusion language has been reorganized to focus the exclusion upon the person who has been refused employment or has been terminated or has been involved in any harassment. The exclusion applies also to the spouse, child, parent, brother, or sister of the affected person.
The exclusion is clarified as to intent, and now extends to relatives of the affected individual. Previous language applied the exclusion to the act of non-hiring or firing, not to the affected individual.
42) The Protective Safeguard Endorsement (interline) IL 04 15 has been withdrawn and a new endorsement, BP 04 30, is introduced. Various language changes were made to help enforce the exclusion of coverage when fire or security systems are not maintained.
Similar changes were made in the 10/91 Commercial Fire and Allied Lines Forms.
43). Introduction of two computer coverage endorsements (one for use with the standard property form, and one for the special property form).
Electronic data processing hardware is covered (by schedule) up to a maximum of $100,000 and includes programmable equipment, printers, faxes, and modems that are used with hardware. Software includes tapes, disks, the data on the disks, backups, and programming records (hard copy of computer code) for use with your hardware. Software coverage is limited to 25% of hardware unless a separate limit for software is shown. This broad coverage is for risks of direct physical loss, mechanical breakdown, and electrical currents artificially generated. Business Income coverage is extended from the underlying policy, but for the broadened perils provided by this endorsement. Remember that the 72-hour waiting period will also apply to business income (not extra expense) losses. Higher deductibles are available for breakdown and artificially generated electrical currents. Laptops temporarily away from the premises (not permanently installed in vehicles, aircraft, boats) are covered (using the underlying policy limit as a maximum) for up to $5,000.
· BP 04 33 Businessowners Standard Form Computer Coverage
· BP 04 34 Businessowners Special Form Computer Coverage
44) Ordinance or Law Coverage Endorsement BP 04 35 has been introduced. Like the coverage available under the Commercial Property Coverage Part, this endorsement covers three situations caused by the operation of building laws - (1) to the undamaged portion of the building, (2) the cost of demolition, and (3) the increased cost of construction.
The limit of insurance for (1), the undamaged portion of the building is not increased as a result of adding this endorsement. For (2) and (3), separate limits of insurance must be added.
45) A new endorsement BP 04 37 Exclusion - Personal and advertising injury has been introduced.
This endorsement is intended for those businesses with broader than expected personal and advertising injury exposure - i.e., radio, television, newspapers, publishers. If this endorsement is added, seek Media Professional Liability Coverage from the specialty markets.
46) A Medical Expense Exclusion Endorsement, BP 04 38, has been introduced.
Excludes all non suit medical expense coverage, except first aid.
47) BP 04 39 - Abuse or Molestation Exclusion is introduced.
Designed for businesses with above average molestation potential (daycare, private nursery schools, etc.). Such acts are excluded from coverage. Also excluded are negligent employment, investigation, supervision, report to proper authority, or retention of the individual who caused the act.
48) Coverage for injury to leased employees is added by endorsement BP 04 40.
Employee leasing firms generally provide workers compensation coverage for the employees they lease to client businesses. However, there may be circumstances where such a person is considered to be an employee of both the leasing firm and the insured. This endorsement covers both “leased employees” and “temporary employees” for employers' liability. This endorsement is advised for insureds who employ only leased employees and who have no workers compensation policy. It may also be appropriate for businesses that have employees who travel. Some states discourage employee leasing with restrictive laws, and coverage may be necessary for these situations.
What will follow is a comparison of the Businessowners Policy Program (Special Form) offered by the Insurance Services Organization (ISO) and the Businessowners Special Policy offered by the American Association of Insurance Services (AAIS). Keep in mind that neither AAIS nor ISO is in the business of SELLING insurance—both companies provide forms that insurance companies can use to structure their policies.
We will follow the format of the AAIS form and summarize the differences at each point.
The AAIS policy begins with a Table of Contents. The Table of Contents lists what you will find when you look through the form. It also states in the Table of Contents that any endorsements applying to this specific form will be listed on the “Declarations.” It also tells the reader that words found in quotation marks or bold type have special meaning, or specific definitions. ISO has no similar Table of Contents.
Next, in the AAIS policy, there is an Agreement section that tells the policyholder that as long as the policyholder makes the required premium payments, AAIS will provide the coverage described in the policy.
Although the wording is a little different, both AAIS and ISO tell policyholders that the policyholder is not at liberty to transfer the policy to anyone without the Company’s (the insurance company using either the AAIS or ISO form) written consent. In the ISO version, an exception is listed here that pertains to the death of the individual named insured. The ISO policy prohibits transfer of the policy EXCEPT when in the case of DEATH of an individual named insured. The same provision appears later in the AAIS form under “Other Property Coverage Conditions.”
Both forms provide for the insured (“you” or the named insured in AAIS; the first Named Insured only in ISO) to cancel the policy by giving a written notice with a future cancellation date. AAIS (“We”) reserves the right to cancel the policy (or any policy part) by sending written notice to the last known mailing address of the insured (“you”) with proof of mailing as sufficient proof that a cancellation notice was sent. Both forms allow for cancellation with ten (10) days notice for non-payment of premium. In the AAIS form, if AAIS (“we”) cancels the policy for any other reason, the AAIS form reads that the insured (“you”) will receive notice AT LEAST 30 days before the cancellation is effective.
The ISO form has five conditions under which the policy may be canceled with five (5) days written notice delivered to the first Named Insured. These conditions are:
· The building has been vacant for 60 days or more. Exceptions to the 60-day vacancy clause are such conditions as when the building is unoccupied due to the season (presumably the insuring company will know about this during underwriting and accept this as a condition).
· When the building has been damaged by a covered loss and no provisions have been made for permanent repairs, or permanent repairs have not started in the 30-day period following the initial loss payment.
· When a government authority has declared the building unfit or there is an outstanding demolition order, or the building has an outstanding order to vacate.
· When fixed and salvageable items are being (or have been) removed from the building and no replacements are being made. If the items are being removed for renovation or remodeling, this does not apply.
· When the insured fails to furnish necessary utilities (heat, water, sewer service, or electricity) for 30 consecutive days or more unless such failure is due to seasonal unoccupancy, or when the insured fails to pay property taxes that are due and taxes have been outstanding for more than one year past the date due unless there is a grounded dispute with the taxing authority.
The AAIS form states that return premium will be calculated according to “our” (AAIS) rules and that the refund will be refunded in a reasonable time. ISO does not address the refund issue in this part of the form.
The AAIS form says that any change or waiver of “terms” must be issued by “us” in writing to be valid. ISO says that the first Named Insured (only) is authorized to make changes in the terms of the policy with “our” consent. It further states that the terms of the policy can only be changed by endorsement that will then become part of the policy.
AAIS states that if the “terms” of the policy conflict with any applicable state statutes where the premises in the policy are located, the “terms” of the contract will be changed to conform to the state statute. The ISO form does not have a clause addressing this issue.
AAIS states that if there is a loss, “you” must be cooperative and do what the insurance company asks “you” to do according to the contract. ISO also states that the first Named Insured must cooperate, but their clause is located in the “Duties in the Event of Loss” section.
Both AAIS and ISO state that “we” may examine or audit “your” books and any records relating to the business at any time during the policy period and within or up to three years after the policy has expired.
Both companies reserve the right (but are not obligated) to make inspections and survey the properties at any time, give reports, and in ISO’s form, recommend changes. Both forms state that their reports or recommendations do not warrant that the operations are safe, healthful or in compliance with any laws, codes, etc.
This clause refers to the adoption of revisions of forms that would broaden the policy without additional premium.
Both policies state that the broadened coverage will automatically apply to the policy. In the AAIS version, this also applies if the changes are made effective 60 days before the effective date of the policy; in the ISO form, the same clause applies for 45 days preceding the effective date.
Both forms allow for coverage to be void if “you” or any insured conceals or misrepresents material facts concerning the policy, the property that is being covered, the interest in the covered property, or a claim under the policy.
In the AAIS form, this means the persons or organizations named as the insured in the “Declarations”; ISO refers to the Named Insured shown in the “Declarations” when using “you” and “your.” No significant difference here.
AAIS refers to the company providing coverage; ISO refers to the company providing insurance.
In the AAIS form, the “basic territory” is: The United States of America and its possessions, Canada and Puerto Rico. In the ISO form, ISO uses the term “coverage territory” in the Property General Conditions and ISO defines it as: The United States of America (which includes its territories and possessions), Puerto Rico and Canada. No significant difference between the two forms.
In the AAIS form this is defined as all pages labeled “Declarations” including “Supplemental Declarations” or “Schedules” pertaining to the policy. No similar definition is found in ISO.
AAIS defines this as the amount of coverage that applies. ISO lists no similar definition.
AAIS defines “money” as currency, coins, bank notes (in current use), travelers checks and “money” held for sale. ISO defines “money” as currency, coins, bank notes in current use and having a face value, and travelers’ checks, register checks and “money” orders held for sale to the public.
AAIS defines “pollutant” as any solid, liquid, gaseous, thermal or radioactive irritant or contaminant. This includes acids, alkalis, chemicals, fumes, smoke, soot, vapor and waste. Waste is further defined to include materials that are to be disposed of, recycled, reclaimed, or reconditioned. AAIS also includes electrical or magnetic emissions, whether visible or not, and sound emissions. ISO defines “pollutant” as any solid, liquid, gaseous, or thermal irritant or contaminant that includes smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled or reclaimed. ISO does not include electrical, magnetic and sound emissions in the definition of “pollutants.”
AAIS defines this as the reasonable (not defined) amount of time it should take to resume “your” normal business activities at the described premises. The time starts from the date of loss caused by the covered peril and ends on the date the property should be rebuilt, repaired or replaced. This “period of restoration” is not limited by the expiration date of the policy. The “period of restoration” does not include any increase in time due to the enforcement or any ordinance, law or decree that regulates or requires the construction, use, repair, or demolition of any property; the testing, evaluating, observing, or recording of the existence, level, or effects of “pollutants”; or, the clean up, removal, contaminant, treatment, detoxification, or neutralization of any “pollutants.”
Please note that the definition of “period of restoration” under the ISO form has changed for business income coverage (not extra expense). The “period of restoration” now begins 72 hours after a suspension of “your” “operations” due to direct physical damage to covered property by a covered cause of loss and ends when the property at the described premises should be repaired, rebuilt, or replaced with reasonable (not defined) speed and similar quality or the date when business is resumed at a new permanent location. ISO added the 72-hour waiting period and the second part of the definition in 1996. The second part is to account for a tenant who has a loss and then starts his business at a new location with no intention of returning to the previous location. When this happens, the tenant (the insured) actually is restored before the “period of restoration” would normally have been considered to be over. The period does not include any extra time for enforcement of any ordinance or law that regulates the construction, use, or repair, or that requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or in any way respond to or assess the effects of “pollutants.”
The expiration date does not affect the “period of restoration” in either policy.
AAIS does not include “money” in the definition of “securities.” “Securities” are defined as negotiable and nonnegotiable instruments that stand for “money” or other property. Tokens, tickets, revenues, other stamps in current use, or evidence of debt (such as receipts) used with credit cards are all considered as “securities.”
ISO also does not include “money” in the definition of “securities.” “Securities” are defined as negotiable and non-negotiable instruments or contracts that represent “money” or other property. Tokens, tickets, revenue, or other stamps (whether represented by actual stamps or unused value in a meter) in current use, or evidence of debt issued with credit or charge cards if the cards are not issued by “you” are all considered to be “securities.”
AAIS defines “sinkhole collapse” as the sudden settlement or collapse of earth supporting the covered property into subterranean voids created by the action of water on limestone or a similar rock formation. It does not include the cost of filling the sinkhole or the value of the land.
ISO defines “sinkhole collapse” as the sudden sinking or collapse of land into empty spaces underground caused by or created by the action of water on limestone or dolomite. It does not include the cost of filling sinkholes or the sinking or collapse of land into manmade underground cavities. In the ISO form, the definition is included in the specified causes of loss.
AAIS lists the “specified perils” as aircraft, civil commotion, explosion, falling objects, fire, hail, leakage from fire extinguishing equipment, lightning, riot, “sinkhole collapse,” smoke, sonic boom, vandalism, vehicles, “volcanic action,” water damage, weight of ice, snow and sleet and windstorm. All are covered except as excluded or limited.
ISO calls the same perils “Specified Causes of Loss” and includes the following: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; “sinkhole collapse”; “volcanic action”; falling objects; weight of snow, ice or sleet; water damage.
AAIS does not include loss to personal property in the open, or to the interior of buildings, or structures or personal property that is inside buildings or structures from falling objects unless the exterior of the roof or walls is first damaged by a falling object.
ISO does not include loss or damage to personal property in the open; or the interior of a building or structure, or property that is inside a building or structure from falling objects, unless the roof or an outside wall of the building or structure is first damaged by a falling object.
AAIS defines water damage when water is suddenly and accidentally discharged or water leaks or steam is created as a direct result of breaking or cracking of a part of the system or of the appliance containing the water or steam.
ISO defines water damage as when water is accidentally discharged or leaks or creates steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam.
AAIS defines “terms” as all provisions, limitations, exclusions, conditions and definitions that apply. ISO has no similar definition for the word “terms.”
In the 1997 revisions, ISO has added a new definition for valuable papers and records. There currently is no similar definition in the AAIS BOP. The new definition is as follows:
Valuable papers and records—the inscribed, printed or written documents; manuscripts; and records. This also includes abstracts, books, deeds, drawings, films, maps or mortgages. Not included are “money,” “securities,” converted data, programs or instructions used in data processing operations, nor does it include any of the materials that the data is recorded on. This definition was added in the most recent revision.
In the AAIS form, “volcanic action” is defined as airborne volcanic blast or airborne shock waves. Also included is ash, dust or particulate matter including lava flow. It does not include the cost to remove ash, dust, or particulate matter that does not cause direct physical loss to the covered property.
ISO defines “volcanic action” in the Volcanic Eruption exclusion. It is defined as direct loss or damage resulting from the eruption of a volcano when the loss or damage is caused by airborne volcanic blast or airborne shock waves. It also includes ash, dust, particulate matter or lava flow. It also does not cover the cost to remove ash, dust or particulate matter that does not cause direct physical loss of or damage to covered property.
AAIS does not have a particular definition of “operations.” ISO defines it as “your” business activities that occur at the described premises.
The AAIS form states that direct loss to property covered under Coverage A and Coverage B caused by a covered peril will be covered. (“We” cover direct physical loss.) The ISO form states that direct physical loss of or damage to covered property at the premises described in the “Declarations” caused by or resulting from any covered cause of loss will be covered.
AAIS—Covered are buildings and structures with a “limit” shown in the “Declarations.” Included in this are:
· completed additions
· fixtures
· outdoor fixtures (not further defined)
·
personal property owned by “you” which is used
to maintain/service the described premises. This includes items such as air
conditioning equipment, fire extinguishing apparatus, outdoor furniture and
floor coverings and appliances for refrigerating, cooking, dishwashing
and laundering.
Also included are additions under construction or alteration and repairs to the building or structure, along with materials, equipment, supplies and temporary structures on or within 100 feet of the described premises used for making additions, alterations or repairs to the building or structure if not covered by other insurance. “Your” personal property in apartments or rooms furnished by “you” as a landlord is also covered.
ISO’s heading is A. Coverage. ISO’s first category is 1. Covered Property. Covered in this policy are the following types of property for which a Limit of Insurance is shown in the “Declarations”:
· the building and structures at the premises described in the “Declarations”
· completed additions
· permanently installed fixtures, machinery and equipment
· outdoor fixtures, (the definition for this was revised in 1996 to include outdoor fixtures and it clarified that outdoor fixtures need not be permanently installed to be covered), machinery and equipment that is a permanent part of the described building or structure
· “your” personal property in apartments or rooms furnished by “you” as a landlord
· personal property used to maintain or service the building or premises that “you” own which includes fire extinguishing equipment, outdoor furniture, floor coverings and appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering
· additions under construction including alterations and repairs to the buildings or structures
· materials, equipment, supplies and temporary structures on or within 100 feet of the described premises that are used for making additions, alterations or repairs to the buildings or structure
In 1996, ISO added coverage for leased personal property for which “you” have a contractual responsibility to insure. No such provision is found in the AAIS form.
AAIS defines business personal property as property within the building and structures that is described on the “Declarations” or if it is in the open or in vehicles on or within 100 feet of the described premises and for which a “limit” is shown on the “Declarations.” This property includes:
· “your” interest in personal property of others in “your” care, custody or control to the extent of “your” legal liability, plus the cost of “your” labor, material and services
· “your” interest as a tenant in improvements to the described business or structure including fixtures, alterations, installations or additions:
· to a building or structure that “you” occupy but do not own (a building that “you” rent)
· made or acquired at “your” expense that cannot be legally removed by “you”
ISO defines business personal property as property that “you” own that is used in “your” business, property of others that is in “your” care, custody or control but only to the extent that “you” are liable, (note that ISO no longer uses “legally liable”), plus the cost of labor, materials or services furnished or arranged by “you” on personal property of others. Business personal property also includes tenant’s improvements and betterments such as fixtures, alterations, installations, or additions that are:
· made a part of the building that “you” do not own but that “you” occupy; or,
· that “you” acquired or paid for but cannot legally remove.
ISO makes provision that there is coverage for leased personal property that the insured has a contractual responsibility to protect with insurance.
Both AAIS and ISO have a section entitled “Property Not Covered.” Again, we will follow the order of the AAIS form and make notes where there are differences.
AAIS introduces their section by reaffirming that property listed is not covered under either Coverage A—Buildings or Coverage B—Business Personal Property. It also clarifies that limited coverage for some of the property listed can be found under “Additional Coverages” or “Extensions of Coverage.”
The first item listed under Property Not Covered includes antennas, fences and signs. Again, there is the disclaimer that states, “except as listed under Additional Coverages” there is no coverage for:
· outdoor radio, television, satellite, dish-type or other antennas, or their masts, towers or lead-in wiring
· fences
·
signs
In 1996, ISO also made the clarification that satellite dishes and related apparatuses are not covered. Technically, they are antennae. ISO also offers the disclaimer that unless coverage is provided in the “Outdoor Property Extension” or “Outdoor Signs Optional Coverage,” there is no coverage for:
· outdoor fences, radio or television antennas, including their lead-in wiring, satellites, masts or signs (other than signs attached to buildings), trees, shrubs or plants
The ISO form includes coverage for signs attached to buildings while the AAIS form does not. In the ISO form, this item is addressed under “Property Not Covered” item (e).
The second item listed under the AAIS form is bullion. Simply put, bullion is not covered. The ISO form no longer shows bullion as property not covered since it is covered, but later limited to $2,500 as property subject to limitation. Under the Standard Form, the only way to get coverage for bullion is to add the Burglary and Robbery Optional Coverage.
The third item under both forms is contraband. Both forms state that contraband or property during illegal transportation or trade is not covered.
The fourth item in both forms addresses land. AAIS begins by stating that the following are not covered:
· land (this includes the land upon which the property sits)
· underground or surface water
· growing crops or lawns
ISO states very simply that land (including the land upon which the property sits), water, growing crops and lawns are not covered.
The fifth item in the AAIS form addresses lottery tickets. The AAIS form specifically states that lottery tickets not held for sale are not covered. The ISO form does not have this specific exclusion.
The sixth item in the AAIS form addresses “money” and “securities” separately. It specifically states that bullion, lottery tickets not held for sale (listed again), bullion, “money” and “securities” are not covered. ISO addresses this in item (b) as discussed before. The ISO form does not cover bullion, “money” or “securities.”
The seventh item in the AAIS form addresses trees, shrubs and plants. Here it is stated that unless coverage is provided under Extensions of Coverage, there is no coverage for trees, shrubs, plants, grain, hay, straw or other crops, when indoors. ISO addresses this point in 2 (d) and (e), discussing land, crops and lawns in (d) and trees, shrubs and plants in (e).
The eighth item in the AAIS form addresses vehicles and aircraft. In the ISO form this item is covered first in item (a). The AAIS form states that not covered are aircraft, vehicles and self-propelled machines required to be licensed for use on public roads. The ISO form states essentially the same exclusion, using the language: aircraft, automobiles, motortrucks and other vehicles subject to registration by the Bureau of Motor Vehicles.
The ninth and final item listed under both forms is watercraft. Both the AAIS and ISO forms exclude any type of watercraft, including motors, equipment and accessories while afloat.
Boilers
AAIS has the above heading while ISO lists its limitations under Item (4) Limitations. Both forms use this section to clarify certain restrictions on coverage and make clear certain items that are not covered under the respective forms. Both companies begin this section with Boilers. In both forms there is the familiar boiler exclusion stating the coverage is not available for loss to steam boilers, steam pipes, steam turbines, or steam engines caused by any event within the equipment itself (with the exception of explosion of gas or fuel in a firebox or combustion chamber). No coverage is available in either form for loss due to an explosion of gases and fuel within any receptacle. For hot water heaters or hot water boilers in the AAIS policy the ONLY condition or occurrence within the equipment that IS covered is explosion.
Furs
The second limitation in the AAIS form and item (d) in the ISO form addresses the theft of furs. Both forms limit coverage for the theft of furs, fur garments, or garments trimmed with fur to the same limit of $2,500.
Glass Breakage
The third limitation in the AAIS form and item (b) in the ISO form addresses glass breakage. Both forms limit glass breakage to $100 for any one pane, multiple plate insulating unit, shutter, etc., and $500 for any one occurrence. This limitation in both forms does not apply to loss or damage by “Specified Perils” (AAIS) or the “Specified Causes of Loss” (ISO) except vandalism.
The ISO form excludes or removes exterior glass (only) from the glass limitation, thus making it covered. Under Additional Coverages in the ISO form, Exterior Building Glass is provided at replacement cost, up to the building limit. This is only available as an option in the AAIS form.
Glassware/Fragile Articles
The fourth limitation in the AAIS form and item (c) in the ISO form addresses the breakage of glassware and fragile items such as china, statues, porcelain, bric-a-brac, etc. Loss to items such as these are covered only if the loss is a result of a “Specified Peril” (AAIS) or “Specified Causes of Loss” (ISO). Both forms state that this exclusion does not apply to:
· glass that is part of a building or structure (interior or exterior)
· containers or bottles held for sale
· photographic or scientific lenses or instruments
Jewelry, Watches, Jewels, Pearls, Precious Stones And
Metals
The fifth item in the AAIS form and item (d) in the ISO form limits coverage for jewelry, watches, jewels, pearls, precious stones and metals. ISO lists bullion, gold, silver and platinum specifically, but presumably this is the same in AAIS using the language “gold, silver or other precious metals.” Both forms limit coverage for the aforementioned items to $2500 in one occurrence. However, if jewelry or watches are worth less than $100 per item, this limitation does not apply.
Missing Property
The sixth item in the AAIS form excludes coverage for Missing Property. This item is listed as (d) 3. in the ISO form. Both forms exclude coverage for property that is simply “missing” without any evidence or explanation as to how it disappeared. This includes merchandise found missing when taking inventory. The ISO form states that this limitation does not apply to the Optional Coverage for Money and Securities. The AAIS form does not include this exception, but if Optional Money and Securities Coverage is selected, it will override this exclusion as well.
Patterns, Dies, Molds, Models and Forms
The seventh item in the AAIS form lists a limitation for patterns, dies, molds, models and forms. This limitation in the ISO form is listed under (d) 3. Both forms limit coverage for the aforementioned items due to loss or damage by theft to $2,500.
Personal Property in the Open
The eighth item in the AAIS form and item (h) in the ISO form deal with Personal Property Left in the Open. Both forms state that there is no coverage for property in the open damaged by rain, snow, sleet, or ice. Under item (h) 4. in the ISO form, it also excludes coverage for loss that results from the transfer of property due to unauthorized instructions. The AAIS form does not contain this exclusion.
Both forms contain a section entitled “Additional Coverages.”
The AAIS form begins with “Collapse.” “Collapse” is found in the ISO form under Additional Coverages, item D. AAIS states that loss caused by direct physical loss involving a structure or building (or a part of that structure or building) is caused by any of the following: a “specified peril” (covered the same as in the Property Coverages), decay that is hidden, insect or vermin damage that is hidden, the weight of business personal property or people, the weight of rain that collects on a roof, or the use of defective materials or methods in the course of construction, remodeling, or renovation if the “collapse” occurs during the course of construction, remodeling or renovation.
If otherwise covered under Property Coverages, no coverage is available for the following types of property, unless the loss is a direct result of the “collapse” of a building or structure: outdoor radio, television, satellite, antennas including masts, towers, lead-in wiring; outdoor awnings, canopies or their supports; fences, gutters and downspouts; yard fixtures; outdoor swimming pools, piers, wharves or docks; diving platforms found on beaches or appurtenances; retaining walls; foundations; or, walks, roadways or other paved surfaces.
In 1996, ISO revised its “collapse” section. It defined what specified causes of loss contribute to the all-encompassing word “collapse.” Under ISO, covered causes of “collapse” for direct physical loss to covered property (building or business personal property) by the “collapse” of a building or any part of a building include: “specified causes of loss,” hidden decay, hidden insect or vermin damage, weight of people or business personal property, weight of rain that collects on a roof, and use of defective construction material if the “collapse” occurs during construction, remodeling, or renovation.
If the building construction, renovation or remodeling has been completed and the ensuing “collapse” is caused by any one of the following: “specified causes of loss,” hidden decay, hidden insect or vermin damage, weight of people or business personal property, or weight of rain that collects on a roof, then there will be coverage even if defective construction materials used during construction, remodeling or renovation contributed to the “collapse.”
If the building, or part of the building does not “collapse,” but instead, personal property inside a building collapses, then there will be coverage if the damage is caused by any one of the following causes of loss: “specified causes of loss,” hidden decay, hidden insect or vermin damage, weight of people or business personal property, or weight of rain that collects on a roof. Use of defective construction material is covered as well, but only if the “collapse” occurs during construction, remodeling, or renovation.
Awnings, gutters and downspouts, yard fixtures, outdoor swimming pools, piers, wharves, docks, beach or diving platforms or appurtenances, retaining walls, walks, roadways and other paved surfaces are covered only for the following causes of “collapse” loss: hidden decay, hidden insect or vermin damage, weight of people or business personal property, weight of rain that collects on a roof, and use of defective construction material if the “collapse” occurs during construction, remodeling, or renovation. The loss must be a direct result of the “collapse” of a building or structure to the property. This list of property is not covered for collapse caused by the “specified causes of loss” or breakage of building glass.
Both forms specify that “collapse” does not include settling, cracking, shrinking, bulging or expanding. AAIS has three classes of property that do not appear in the ISO form: outdoor radio, television, satellite, dish-type or other antennas including masts, towers or lead-in wiring; foundations; and fences.
Debris removal is listed second on the AAIS form and under D. a. on the ISO form.
The AAIS form covers removal of the debris left by covered property if it is damaged by a covered peril. It does not include the cost to extract “pollutants” from land or water or to remove, restore or replace polluted land or water. The Limit of Insurance for debris removal is 25% of the amount “we” pay for the direct physical loss. “We” will not pay more for loss to property and debris removal combined than the “limit” for the damaged property. An additional $5,000 is available when the cost of debris removal exceeds 25% of the amount paid for the direct physical loss or when the loss to property and debris removal combined exceeds the “limit” for the damaged property. No expenses will be paid unless they are reported in writing within 180 days from the date of direct physical loss to the covered property.
The ISO form covers “your” expenses to remove the debris of covered property damaged by a covered cause of loss that occurs during the policy period. Debris removal expenses are only paid if reported in writing to the insurance company within 180 days of the date of direct physical loss or the end of the policy period, whichever is earlier. The covered loss must occur during the policy period, but the expenses to remove the debris can be incurred up to 180 days after the loss, as long as these expenses are reported in writing.
No coverage is available to extract “pollutants” from either land or water or to replace that land and water with clean and non-polluted fill or water. However, there is coverage for $10,000 to extract “pollutants” from land or water in Pollutant Clean Up and Removal.
The Limit of Insurance for debris removal is 25% of what is paid for the loss to property damaged in the covered cause of loss, plus the deductible. An additional $10,000 is available if the Limit of Insurance for both direct damage and debris removal is exhausted, or if the debris removal exceeds the 25% limitation. Understand that except for the available additional $10,000 coverage per location per occurrence, debris removal will not increase the Limit of Insurance under the policy. Coverage is per occurrence, so the $10,000 coverage will not be added to building coverage and again to business personal property coverage. There is no standard BOP endorsement available to increase coverage. (Note: The ISO BOP endorsement, BP 04 35—Ordinance or Law Coverage, will provide demolition coverage, but only for the part of the building undamaged by the insured peril, but demolished because of the enforcement of an ordinance or law.)
Note that the ISO form pays for debris removal expense if it is reported within 180 days of loss or the end of the policy period. AAIS does not make that distinction in their form.
Both AAIS and ISO handle the fire department service charge the same. If assumed by prior contract or required by local ordinance, a fire department service charge of up to $1,000 is available. The fire department must be asked to respond to a threat of or actual covered cause of loss.
Both the AAIS and ISO form will cover up to $5,000 for each premises (that is described on the Declarations) to allow for the increased costs of a covered loss including debris removal expense which results from the enforcement of an ordinance or law that requires the construction, use or repair of any property or the demolition of any property (all or part of it) not damaged by a covered peril. Under “Perils Excluded,” Ordinance or Law does not apply to this Additional Coverage.
Both forms allow for a nominal $10,000 to extract “pollutants” from land or water only at the described premises and only if the discharge, dispersal, seepage, migration, release, or escape of “pollutants” is caused by or results from a covered cause of loss that occurs during the policy period. In the ISO form, “you” have up to 180 days following the covered cause of loss or the end of the policy period (whichever is earlier) to report the loss in writing to the insurance company. The AAIS form does not state that the expenses must be reported within 180 days of the end of the policy period. The $10,000 coverage is a maximum aggregate during any twelve-month period. (Once the limit of $10,000 is exhausted, regardless of the number of claims, there is no coverage and there is no standard endorsement under the BOP to reinstate the aggregate or to increase the coverage above $10,000.)
AAIS refers to this as “Removal” and under the ISO form, this is referred to as “Preservation of Property.” Both forms cover this the same way except for the number of days allowed after the property is moved. In the AAIS form, when property is threatened by a covered cause of loss, the policy allows for the removal of that property to any other location for up to 10 days after the property is first moved. The property being moved does not have to first sustain damage, nor does the building or structure where the property was originally housed have to suffer any damage. Removal is virtually an all risk peril, for once the property is threatened by an insured peril, virtually anything that happens to the property either in transit or in storage is covered. In the ISO form, you can move property to another location for up to 30 days.
The AAIS form allows for the tearing out and replacing of any part of the building/structure when it is necessary to repair damage to the system or appliance from which water or another substance escapes. Loss must be caused by water, other liquids, powder, or molten material.
Under the ISO form, water, liquid, powder, or molten material damage is covered by this insurance. The cost to tear out walls, floors and such to reach and repair the fluid system or appliance is covered. The damage to the faulty system is not covered, and the damage the escaping fluid causes must be from a covered cause of loss.
Under the AAIS form, $2,500 is allowed for loss to outdoor radio, television, satellite, dish-type or other antennas including their masts, towers, and lead-in wiring; fences; or signs, caused by a covered peril. Loss to fences is limited to the perils of aircraft, civil commotion, explosion, fire, lightning or riot. Total coverage for trees, shrubs and plants is limited to $1,000 with an internal “limit” of $250 per tree, shrub or plant.
Up to $2,500 coverage is available for “your” outdoor fences, radio and television antennas, satellite dishes and detached signs, including debris removal, for the following causes of loss: fire, lightning, riot or civil commotion, or aircraft. Additional coverage is not available by any standard BOP endorsement.
In the ISO form under Coverage Extensions, up to $2,500 coverage is available for “your” outdoor trees, shrubs and plants including debris removal, for the following causes of loss: fire, lightning, riot or civil commotion, or aircraft. However, there is only $500 available for any one tree, shrub or plant. No standard BOP endorsement is available to provide additional coverage for outdoor trees, shrubs or plants.
Note that this coverage extension only applies to OUTDOOR trees, shrubs and plants. Indoor trees, shrubs and plants that are not growing crops or lawns are covered for risks of direct physical loss and are included within the business personal property limits as indicated on the Declarations. Many office buildings have significant indoor landscaped atriums; others maintain greenhouses to care for other interior or exterior landscaping needs.
ISO has coverage if someone alters any of “your” checks, drafts, promissory notes, bills of exchange, or other written promise of payment that can be converted only to “money,” whether issued by “you” or “your” agent or issued by someone who impersonates “you” or “your” agent. There is coverage for up to $2,500. Included within the $2,500 limit are the reasonable costs to defend “you” against suits by those who claim “you” refused to pay the note(s), check(s), draft(s), etc.; however, the insurance company first has to agree in writing to defend “you” before defense coverage will apply. AAIS has no similar coverage.
Both forms allow for extensions of coverage that is an additional amount of insurance that applies to losses at the described premises caused by a covered peril. The ISO form states that unless otherwise indicated, the extensions apply to property located in or on the building described in the Declarations or in the open or in a vehicle within 100 feet of the described premises.
Both AAIS and ISO allow for Building Property Off-Premises for $5,000. The ISO form coverage is for loss to covered property if it is temporarily at locations that “you” do not own, control, rent, or lease. This coverage also applies while business property is in transit. Losses are covered only within the basic territory. If a vehicle is left unattended, in order for a “theft” loss to be covered, there must be visible evidence of forced entry.
The AAIS form will cover 25% of the “limit” shown on the Declarations for Building Property for newly acquired buildings. The coverage will not exceed $250,000 to each building or structure acquired during the policy period. Losses are covered only within the coverage territory. Coverage applies for 30 days from the date the building or structure is acquired or when it is reported to the company, whichever occurs first, and the coverage will not extend beyond the policy period. Additional premium will be due from the date that “you” acquire the property or the date that construction is started. ISO has no coverage for newly acquired buildings.
AAIS allows for $1,000 for loss to “your” outside trees, shrubs or plants. The only perils covered are aircraft, civil commotion, explosion, fire, lightning, or riot. Only $250 is allowed for any one tree, shrub or plant. Debris removal is included within the per tree/shrub/plant limit.
In the ISO form, up to $2,500 coverage is available for “your” outdoor trees, shrubs and plants including debris removal, for the following causes of loss: fire, lightning, riot or civil commotion, or aircraft. These perils apply to all outdoor property in the ISO form; however, there is only $250 available for any one tree, shrub or plant.
Provided by ISO only, is coverage for loss as the result of the good faith acceptance of “money” orders and counterfeit currency is covered up to $1,000 for any one loss. “Money” orders must be U.S. or Canadian Post Office or Express Company, or a National or State or Canadian chartered bank “money” order that is not paid upon presentation to the issuer. “Money” must be U.S. or Canadian paper currency. The exchange must be for merchandise, “money,” services, or as part of a normal business transaction. The policy deductible applies to covered “money” order and counterfeit currency losses.
Under the AAIS and ISO forms, coverage is for personal effects owned by “you,” “your” officers, “your” partners, or “your” employees. However, the AAIS policy will pay $100 per person, up to $500, for loss. The ISO policy will pay up to $2,500 for each covered premises.
AAIS will pay up to $20,000 for loss to Business Personal Property at each location acquired. Coverage applies for 30 days in the basic coverage territory or until “you” report the acquired location, as long as it is within the policy period. Additional premium will be charged from the date the location is acquired.
Under the ISO Form, there is $100,000 coverage for personal property at any location “you” acquire. Personal property can be property that has moved from a location on the Declarations to the newly acquired location. Coverage applies for the lesser of 30 days after acquisition or construction begins at the new premises or “you” report the values to “us.” “You” owe premiums from the day “you” acquire the personal property, not the day “you” first report. Acquisition generally implies permanence or near permanence; therefore, acquisition is limited to purchase or a lease of indefinite duration, a life tenancy, or 99 years (usually considered to be permanent). Acquisition is the day “you” gain title to or begin construction at the newly acquired property. Gaining title to does not always mean full possession.
AAIS pays up to $5,000 for loss to personal property while it is temporarily at locations “you” do not own, control, rent, or lease. Losses are only covered within the basic territory. Property in transit is included in this coverage. Theft coverage from unattended vehicles is not included unless the vehicle is securely locked and there is visible evidence of forced entry.
Under the ISO form, the same coverage applies. No statement is included regarding theft from unattended vehicles. Business Personal Property Off Premises is covered up to $5,000 while in transit or temporarily at a location “you” DO NOT own, lease or operate. This extension of coverage does not apply to otherwise excluded personal property, or to “money” and “securities.”
In the AAIS form, there is coverage for $2,500 of property of others in “your” care, custody or control. This coverage is for the benefit of the owners of the personal property.
ISO covers personal property of others in “your” care, custody and control while on “your” described premises or within 100 feet thereof as part of the business personal property coverage.
In the AAIS form, up to $1,000 is available at each described premises after a covered cause of loss for the cost to research, replace or restore information on lost or damaged valuable papers, including those for which duplicates do not exist.
In the ISO form, up to $5,000 is covered at a described premises and $2,500 for off premises.
In the ISO form, up to $5,000 is covered at a described premises and $2,500 for off-premises on the following loss or damage that results from a covered, direct physical damage loss to the insured’s record of accounts receivable; the amounts owed the insured by the insured’s customers that the insured is unable to collect; if the insured must take out loans to offset the amounts they cannot collect during the time the insured is waiting for this coverage to pay, any interest on those loans is covered; any above-normal collection expenses the insured incurs because of the covered loss; any other reasonable expenses or costs that the insured incurs while re-establishing records of accounts receivable after a covered loss.
The AAIS policy will provide coverage during the “restoration period” when normal business activities are interrupted by direct physical loss to real or personal property at the described premises, in the open, or in vehicles or within 100 feet thereof. Damage must be by a covered peril. Damage must occur during the policy period. The policy will pay for loss of earnings and extra expenses incurred within a consecutive twelve-month period following the date of direct physical loss or damage to property. When a “Limit” of Insurance is shown for the AAIS Coverage C, the policy will not pay more for earnings and extra expenses combined than the limit shown in Coverage C. With the ISO form, please note that the definition of “period of restoration” has changed for business income coverage (not extra expense). The “period of restoration” now begins 72 hours after a suspension of “your” “operations” due to direct physical damage to covered property by a covered cause of loss.
AAIS’s policy will cover the actual loss of net income (net profit or loss before income taxes), payroll expense, interest, and other operating expenses that are normally incurred and earned by “your” business. Only necessary expenses are paid during the “restoration period.” Payroll and other expenses are paid insofar as it is necessary to resume normal business activities with similar quality and service that had existed before the loss.
Nothing is paid if the loss gets bigger because “you” fail to reasonably try to resume “your” business activities. This would include making use of another facility or replacing or leasing personal property to mitigate damages. If “you” do not resume business activities as soon as possible, or at all, the loss payment will be valued based on how much time it would have taken to resume “your” normal business activities as soon as possible. To determine how much will be paid for a loss, “we” look at the experience “your” business had before the loss and what would have probably happened had there been no loss.
ISO defines Business Income as the net income (profit or loss before income taxes) that would have been earned or incurred had no loss taken place and the continuing, normal operating expenses incurred. This includes payroll. In 1996, ISO introduced a 72-hour waiting period for Business Income Coverage. This waiting period does not apply to Extra Expense. The proportional business income deductible under the 72-hour program often will have a greater financial impact upon the average business than other property deductibles. For example, if a business without any seasonal peaks and valleys has an annual business income need of $500,000, this converts to an average of $1,370 a day or a total uninsured 72-hour loss of $4,110. This same $500,000 annual business income need changes for a hardware store that has a loss in the spring, where during a three-month peak season the business traditionally earns 60% of its annual revenue; the loss (500,000 x .60 x 90 days) equates to $3,333 per day or a $10,000 deductible. A three-day deductible for a business that has peak seasons revolving around short-term events such as spring break, local fairs or events, auto races, or triple crown horse races could lose a majority of annual revenue during the 72-hour waiting period. No standard BOP endorsement is available to buy down the 72-hour deductible.
AAIS covers the necessary extra expenses that “you” incur to resume “your” normal business activities as soon as possible. Extra expenses are covered only during the “restoration period.” Expenses are covered to repair, replace or restore property but only insofar as they will reduce the loss that would otherwise be paid under this coverage. If there is an increase in the loss because “you” fail to make a reasonable effort to get the business going again, there is no payment for the increase. This includes making use of other locations and other property to help reduce the loss. If “you” do not resume business activities as soon as possible, or at all, the loss payment will be valued based on how much time it would have taken to resume “your” normal business activities as soon as possible. To determine how much will be paid for a loss, “we” look at the experience “your” business had before the loss and what would have probably happened had there been no loss. The salvage value of any property bought for temporary use will be deducted from the amount of loss determined for extra expense.
The ISO form covers the same necessary extra expenses with a few language differences. ISO does not have the clause that states that expenses will not be paid if the insured does not make a reasonable effort to get the business going again. Clearly, however, they seek to avoid or minimize the suspension of business operations. ISO also does not mention anything about salvage value of the property bought for temporary use. The intent is to keep the insurance at an indemnification level.
Both forms provide for no coverage for damage to or loss of electronic information (data) beyond the greater of 60 consecutive days from the date of the loss or no coverage from the time “you” could have reasonably repaired, rebuilt or replaced the damaged property at the described premises. Electronic information is media, programs, or records for electronic data processing or electronically controlled equipment including files, tapes, discs, drums, or cells.
The AAIS form excludes the expenses to put out a fire.
Both forms exclude any increase in loss due to the suspension, lapse or cancellation of any license, lease or contract unless the suspension, lapse or cancellation is directly caused by the suspension/interruption of business activities—if such is the case, such loss will be covered during the period that “you” are restoring “your” business. No other losses as a consequence will be covered.
If there is a delay due to strikes or protests in rebuilding, repairing, or replacing the property or in resuming “your” normal activities, neither form will cover any loss that results.
AAIS specifically excludes any unnecessary expenses that are not necessary during the “restoration period.”
Interruption by Civil Authority
Coverage is included when access to the described premises is specifically denied by an order of civil authority. The actual damage must occur elsewhere and be a covered peril. AAIS limits the extension to two consecutive weeks from the date of the order. AAIS does not have a waiting period. The ISO form covers the business income loss and necessary extra expense loss caused by the action of civil authority that prohibits excess to the described premises because a covered cause of loss occurs somewhere other than the described premises. Business income coverage begins 72 hours after the action of the civil authority (not the time the covered cause of loss occurs) and ends a maximum of three weeks later.
Alterations and New Buildings
The AAIS form extends coverage and includes loss caused by damage to additions or alterations; new buildings or structures whether completed or under construction; and, if within 100 feet of the described premises, machinery, equipment, supplies, or building materials. If normal business operations are delayed, the “restoration period” will begin from the time “your” normal business activities would have begun had no loss occurred.
Newly Acquired Locations
AAIS extends coverage up to $100,000 for loss caused by damage to property at locations “you” acquire. The loss must occur within the basic territory and loss must be by a covered peril. ISO has no similar coverage.
Period of Extension
AAIS extends coverage to cover loss on the earlier of the date that the property that was damaged is rebuilt, repaired, or replaced until the end of 30 consecutive days (unless otherwise stated in the “Declarations”), or the date that normal business can reasonably be resumed had no loss occurred.
Extended Business Income Coverage under the ISO form is new and begins only after “your”
“operations” resume after a suspension of “operations” by a covered cause of
direct physical loss. Coverage is designed to help the business that does not resume “operations” at the same
pace it would have before the loss occurred. Thirty days is the maximum coverage
period available under extended business income, but that period can be less than
30 days and will end on the day “you” COULD restore “your” “operations” with
reasonable speed to the level which would generate the business income amount
that would have existed if no direct physical loss or damage had occurred.
There is another limitation within the policy to consider. Extended Business
Income does not apply to loss of business income incurred as a result of
unfavorable business conditions caused by the impact of the covered cause of
loss in the area where the described premises are located.
Under the AAIS form, the perils covered apply to Coverage A (Buildings), Coverage B (Business Personal Property), and Coverage C (Loss of Income). Risks of direct physical loss are covered unless the loss is limited or caused by a peril that is excluded. The ISO form covers risks of direct physical loss unless the loss is excluded in their Section B (Exclusions) or limited in Limitations.
Neither form pays for loss caused by order of any civil authority, including seizure or destruction of property by order of governmental authority. (The AAIS form also uses confiscation and quarantine in the definition.) Both forms will pay for destruction of property by civil authority to prevent the spread of fire, unless the fire is caused by a peril not covered in the form itself.
Neither form pays for loss caused by any earth movement other than “sinkhole collapse.” If loss or damage by fire or explosion results, both forms will pay for the resulting loss or damage. The AAIS form includes volcanic eruption and resulting mudflow or mudslide in the exclusion; ISO includes it in the Water exclusion. ISO also covers the breakage of building glass that results from volcanic eruption; in the AAIS form, it is not included. Both forms consider volcanic eruptions that occur within a 168-hour period as a single loss and state that volcano action does not include the cost to remove ash, dust or particulate matter that does not cause direct physical loss of or damage to covered property.
Both forms exclude nuclear reaction or radiation and any radioactive contamination regardless of the cause. If a loss or damage by fire results, both forms will pay for the resulting loss or damage.
Both forms pay up to $5,000 for loss or increased cost caused by the enforcement of any code, ordinance or law which regulates the use, construction, or repair of any building or structure or which requires the demolition of any building or structure including the cost of removing its debris.
Both AAIS and ISO forms have endorsements to increase coverage.
Neither form pays for loss due to failure of power or other utility service to the described premises if the failure occurs away from the described premises. However, if following the power failure there is a resultant loss by a covered peril or covered cause of loss on the described premises, it will be covered.
Neither form pays for loss caused by water. Water includes flood, surface water, waves, tides, tidal waves, overflow of any body of water including their spray, all whether driven by wind or not; water backup from sewers or drains; and water below ground level that seeps, flows, or presses in through or into foundations, walls, floors, paved surfaces, basements, doors, windows, or other openings. If loss by fire, explosion or sprinkler leakage results, the resulting loss or damage is covered. ISO and AAIS both exclude mudslide and mudflow. ISO addresses it in the water exclusion; AAIS addresses it in the Earth Movement or Volcanic Eruption section. AAIS also excludes coverage for water damage to swimming pools, septic tanks and other structures. ISO does not specifically address that issue.
Neither form pays for loss caused by war. War includes declared, undeclared, or civil war; warlike action by a military force or by military personnel; and insurrection, rebellion, revolution, action taken by governmental authority in hindering or defending against any of these. AAIS reinforces the nuclear exclusion here by stating that the discharge of a nuclear weapon is not covered, even if the discharge is accidental.
In both forms, weather conditions are excluded only if weather conditions contribute in any way with civil authority, earth movement, nuclear hazard, ordinance or law, utility failure, water, or war. Any resulting loss caused by a covered cause of loss is covered unless that loss itself is excluded.
In both forms, there is no payment for loss caused by nesting or infestation by insects, birds, rodents or other animals; also, no coverage for discharge or release of waste products or secretions from the same. The AAIS form goes on to state that if breakage of building glass occurs, caused by a “specified peril,” it will be covered.
In both forms, except as provided for in Additional Coverages—Collapse, there is no other coverage. If loss caused by a covered peril or covered cause of loss results at the described premises, the resulting loss or damage will be paid.
In both forms, no loss caused by contamination or
deterioration is covered. This includes rust, corrosion, fungus, decay, hidden
or latent defects or any quality in property that caused it to damage or
destroy itself. The AAIS form goes on to state that if breakage of building
glass occurs, which is caused by a “specified peril,” it will be covered.
In both forms there is no coverage for loss caused by criminal or dishonest acts by “you,” “your” partners, employees, directors, trustees, authorized representatives, or anyone to whom “you” entrust the property for any purpose. This exclusion applies whether a person is acting alone or in collusion with others and whether or not it occurs during the hours of employment. Both forms state that the exclusion does not apply to acts of destruction by “your” employees, but theft by employees is not covered.
The AAIS form states that loss relating to one or more of the following is not covered: an act, error or omission (negligent or not); land use; design, specification, construction, workmanship, installation or maintenance of property; planning, zoning, development, siting, surveying, grading or compaction; or maintenance of property whether on or off the described premises. Also not covered is any defect, weakness, inadequacy, fault, or unsoundness in materials used in construction or repair, whether on or off the described premises; any cost to make good an error in design; or a data processing error or omission in programming or giving improper instructions. There is also no coverage for loss to Business Personal Property caused by deficiency or defects in design, specifications, materials, or workmanship, or loss caused by latent or inherent defects. Any resulting loss caused by a covered peril is covered unless the resulting loss itself is excluded.
ISO excludes negligent work as well. Not covered is faulty, inadequate, or defective planning, zoning, development, surveying, siting, design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction. Materials used in repair, construction, renovation, remodeling or maintenance of part or all of any property on or off the described premises is not covered.
The differences in the two forms relate to items that AAIS specifically excludes, such as coverage to pay for the cost to correct a design error which is not specified in the ISO form. AAIS also specifically excludes coverage for a loss resulting from a data processing error or omission and loss to Business Personal Property caused by defects in design or workmanship or by inherent vice. The AAIS form does go on to cover any resulting loss caused by a covered peril, unless the resulting loss is excluded.
In the ISO form, an exception is made in the exclusion for criminal, fraudulent or dishonest acts. The exclusion does not apply to carriers for hire with respect to accounts receivable and valuable papers and records.
In both forms, coverage for on-premises power failure will be limited, for there is no coverage for injury to property as a result of the lack of or too much of artificially generated electrical currents. Loss of phase, electric arcing, brown outs, wiring damage and mechanical breakdown, etc., are not covered. However, if there is a resultant fire, it will be covered.
Neither form covers loss due to explosion of steam boilers, pipes, turbines, or engines that “you” own or lease or that “you” are responsible for having under control. If a fire or combustion explosion results, the loss that it creates will be covered.
There is no coverage for loss caused by water, other
liquids, powder, or molten material that leaks or flows from plumbing, heating,
air-conditioning systems, or appliances caused by or as a result of freezing
unless “you” use reasonable care to maintain heat in the building or structure
or you drain the equipment and turn off the supply if heat is not maintained.
This exclusion does not apply to fire protective systems.
Both forms exclude loss for mechanical breakdown which
includes rupture or bursting caused by centrifugal force. The AAIS form states
that any breakage of building glass or loss which results from mechanical
breakdown and is caused by a “specified peril” will be covered.
Both forms exclude loss caused by seepage, release, discharge,
or any escape of “pollutants” unless caused by a “specified peril” or a
“specified cause of loss.” Resulting damage caused by a “specified peril” or
“specified cause of loss” will be covered.
In the AAIS form, there is no payment for loss caused by or
resulting from seepage or leakage that takes place over a period of time from
within a plumbing, heating or air conditioning system or appliance. ISO does
not address this specifically in their form.
Neither form pays for settling, cracking,
shrinking, bulging or expanding. Both forms provide
for glass breakage resulting from the settling, cracking, shrinking
and bulging or a loss caused by a “specified peril” or “specified cause of
loss.”
Loss due to smog is specifically excluded in both forms.
Loss caused by smoke, vapor or gas from industrial operations or agricultural smudging is specifically excluded in both forms.
Both forms exclude loss to personal property due to dampness, dryness or change in the atmosphere or changes in temperature. Any resulting breakage of building glass or loss caused by a “specified peril” or “specified cause of loss” is covered.
AAIS refers to this loss as voluntary parting; ISO refers to this loss as false pretense. In both forms, there is no coverage for voluntarily parting with or giving title to any possession to another by fraudulent scheme, trick, or device.
There is no coverage in either form for wear and tear, marring, or scratching. If loss or damage by a “specified peril” or “specified causes of loss” results, that resulting loss or damage will be paid as well as building glass breakage.
In the ISO form only, some additional exclusions apply, but only to the accounts receivable and “valuable papers and records” coverage extension. They are as follows: no coverage for electrical or magnetic injury, disturbance, or erasure of electronic recordings that is caused by either a programming error or faulty machine instructions; nor by faulty installation or maintenance of data processing equipment or component parts (there is coverage, however, for any direct loss or damage that is caused by lightning).
No coverage is provided for the loss or damage to “valuable papers and records” that is caused by the following: errors or omission in processing and/or copying, unless it results in fire or explosion, in which case there is coverage for the direct loss caused by the fire or explosion; wear, tear, gradual deterioration, or latent defect.
No coverage is provided for the loss or damage to accounts receivable that is caused by the following: loss or damage that occurred because of alteration, falsification, concealment, or destruction of records done to try and conceal a wrongful giving, taking, or withholding of “money,” “securities,” or other property; in other words, there is no coverage if the loss or damage was intentionally done to cover a crime or illegal act; loss or damage that results from a bookkeeping, accounting, or billing error or omission; loss or damage that needs an audit of records or inventory computation to prove that loss or damage exists.
Both forms require that the police be notified if a law may have been broken and that prompt notice be given in the event of a claim including a description of the property involved.
Both forms require that
“you” take all reasonable steps to protect the property from further damage. If
possible, set the damaged property aside so that it can be examined. Keep
accurate records off all expenses incurred for emergency or temporary repairs
so that they can be considered in the settlement of the claim. “You” must keep accurate records of the cost of
these repairs, but keep in mind that these repairs will not increase the Limit
of Insurance in either form. Neither form will pay for repairs nor emergency
measures to property that has not yet been damaged by an insured peril.
The company will also not pay for subsequent loss to the repairs unless
damage is done by a covered cause of loss. If the company requests, “you” must
provide a complete inventory of the damaged and undamaged property, including
quantities, costs, values and the amount of loss
claimed. The cost to prepare these inventories can be expensive, especially if
all records were lost in the fire or other damage. If “you” have records of
property inventory, values and loss, including any tax
records, bank records, computer records, paper records, or other documents,
“you” must be willing to produce these records as often as the insurance
company reasonably requests, and allow the company to make copies of these
books and records. “You” must exhibit damaged property as often as the
insurance company reasonably requests and must allow the insurance company to
take samples of the damaged or undamaged property. Samples are important to
determine the extent of loss to certain property where the amount of loss may
not be obvious.
Signed and sworn proof of loss must be submitted within 60 days of the insurance company’s request. If an ISO form, the insurance company will supply necessary claim forms that list the information that will be needed. AAIS lists in the form what information will be needed. The proof of loss includes time, place, circumstance of the loss, other policies that may cover, the names of all who have interest in the covered property, changes in title of covered property that have occurred during the policy period, detailed repair or replacement estimates of covered property, available plans and specifications of buildings or structures, and an inventory of damaged and undamaged covered property, including detailed quantity, description, cost, actual cash value, and amount of loss. The AAIS form states that if a loss is less than $10,000 and less than 5% of the total limit, no inventory is necessary.
“You” must cooperate with the insurance company in performing all acts required by the policy. Lack of cooperation for reasonable requests can be grounds for claim denial.
Failure to resume all or part of “your” “operations” as quickly as possible could be grounds for denying further payments in business income, extra expense and other loss situations. If “you” have no intent to resume operations, the company should be notified as quickly as possible so that the company pays according to appropriate policy provisions. Even if “you” intend not to resume business, business income will pay for the loss of income as the result of suspension of operations after a covered cause of loss during a “period of restoration” that is agreed upon by the company and the insured. The appraisal process can be invoked for business income losses as well.
If the insurance company desires, “you” must submit to examination under oath as often as reasonably required, and answers to questions must be sworn statements. If the company desires, individuals involved may be questioned separately and not in the presence of any others. (Prevents story collusion.) “You” can’t take legal action against the company until there has been full compliance with all policy terms and “you” must take any legal action within two years of the date of the direct physical loss.
The AAIS form states that voluntary payments cannot be made except at “your” expense, nor can “you” assume any obligations, offer rewards, or incur any other expenses unless they are to protect property from further damage.
In both forms, unless indicated otherwise on the Declarations (or in the “Declarations”), the value of covered property (building and personal property) will be calculated according to replacement cost.
Replacement cost cannot exceed the cost to repair or replace with similar materials on the same site used for the same purpose. Replacement cost will not apply if the destroyed or damaged property is not replaced. “You” may make a claim for loss or damage based on actual cash value before the damaged property is repaired or replaced and later turn in the difference for replacement cost (once the property has been repaired or replaced) as long as “you” notify the company of “your” intent to do so within 180 days.
Certain property is not eligible for replacement cost. In both forms, these items include household contents—except personal property in apartments or rooms furnished by “you” as landlord; manuscripts; objects such as art, antiques, rare items, statues; used or secondhand merchandise held for sale or kept in storage.
Glass is valued based upon the cost of replacement with safety glazing material when required by a law, code or an ordinance.
The value of “money” is based on its face value and “securities” is based on the actual value at the close of business on the day that the loss is discovered. Valuable paper and record coverage (including electronic or magnetic media) is based on the cost of blank materials for reproducing the records and the cost of labor to transcribe or copy the records. This does not include prepackaged software programs—it will be valued at replacement cost.
Tenants’ improvements and
betterments will be based on replacement cost if repairs or replacements are
made promptly (ISO) or in a reasonable period of time (AAIS). Tenants’ improvements that are not replaced after
a loss are valued as a pro-rata portion of original cost as it bears to “your”
current lease. The formula involves dividing the number of days between the
date of loss and the end of the lease by the number of days from the date of
the installation to the expiration date of the loss, multiplied by the original
cost of the tenants’ improvements. (If the lease has a renewal option, use the
last date in the option as the new expiration date.) If repairs are made at the
expense of others, there is no payment under this policy.
The AAIS form makes two more distinctions in how losses are calculated. These distinctions are not specifically found in the ISO form. If a part of an item that consists of several parts is damaged or lost, the policy will pay only on the value of the lost or damaged part or the cost to repair or replace it. If an item is damaged or lost that is a part of a pair or set, the loss will be considered proportionate value; it will not be considered as a total loss of the pair or set.
Insurable Interest/Financial Interest
Both forms state that no more than “your” financial or insurable interest in any property will be covered.
Deductible
For most losses, the only
part of a loss that will be paid is the amount above the deductible shown on
the Declarations. For employee dishonesty, exterior glass, interior glass,
“money” and “securities,” and outdoor signs, the deductible is $250 for AAIS
and $500 for ISO (ISO does have a $250 deductible buy-back). No deductible applies
to Fire Department Service Charge or Business Income and Extra Expense
coverages.
NOTE: In 1996, ISO added a new endorsement that will provide a 1%, 2%
or 5% windstorm or hail deductible. AAIS has no such endorsement.
Loss Settlement Terms
Subject to the terms set forth in the policy, “we” have the option of paying the value of the lost or damaged property, or of paying the cost to repair or replace the property or the limit stated in the policy. ISO also reserves the right to take all or any part of the property at an agreed or appraised value.
Insurance Under More
Than One Coverage
Both forms state that if
two or more of the policy’s coverages apply to the same loss or damage, no more
than the actual claim or loss will be paid.
Insurance Under More Than
One Policy
The AAIS form states that the Company will pay the percentage of any loss that this policy limit bears to the total limits available under all policies covering the same property if the policies all have the same terms, conditions and provisions as this form. If there is another policy covering the same loss that has different terms, conditions and provisions, then the AAIS form will be excess of the policy, regardless of whether it is collectible.
The ISO form states that the policy is excess over any other insurance regardless of whether it is collectible.
Automatic Increase
Both forms allow for an automatic increase on buildings with the limit shown on the Declarations. In the AAIS form, this increase also applies to personal property.
Seasonal Increase
Both forms allow for a 25% seasonal increase to account for seasonal variations in Business Personal Property. In both forms the policyholder must be insured to at least 100% of the average monthly value over the past 12 months for the seasonal increase coverage to apply.
In the AAIS form, it states that if the insured has been in business less than 12 months, the policyholder must be insured to 100% of value during the entire time that the business has been in operation.
LOSS PAYMENT
Options
Both forms state that if there is a loss or damage, the company may pay the value of the loss; pay the cost to repair or replace; rebuild, repair or replace the property with similar property; or, take the damaged property and pay an agreed or appraised value.
Both companies have 30 days after receiving proof of loss to tell the policyholder of their intentions regarding loss payment. Both companies will pay the loss after there has been an agreement reached regarding the amount of the loss and an appraisal award has been made.
AAIS stipulates that the company settles all losses with “you.” ISO states that the insured must comply with all of the terms of the policy before receiving loss payment.
Property of Others
If the loss involves property of others, those losses will be adjusted with and paid to either “you” or the owner of the property. AAIS and ISO both reserve the right to defend “you” if the owner of the property sues “you” at “our” expense.
Appraisal
In both forms, either party has the right to demand an appraisal if there is a disagreement regarding the loss. Both parties must select and pay for their own appraisers. The two appraisers will choose a third. If they can’t agree on the third appraiser, then a judge of the court will choose the third. Each appraiser writes down an estimate of the values. If they do not agree, then the third appraiser (the umpire) will decide. Each party will pay for their own appraiser and then bear the costs of the umpire equally. In the AAIS form, it states that both parties must select an appraiser within 20 days of receipt of a written demand. The AAIS form states that a written settlement agreement is binding on all parties and the ISO form states that a decision agreed to by any two will be binding.
Benefit to Others
This clause in both forms
states that if someone else has possession of covered property, they will not
benefit from this insurance.
Control of Property
If someone other than “you” (or not under “your” direction or control) performs any act of neglect, it will not affect this insurance. ISO goes on to stipulate that if any policy conditions have been breached at an insured location and a loss occurs at a location where policy conditions had not been breached, then the coverage for a loss will not be affected.
Death of an Individual
Named Insured.
In both forms, if “you” die, the rights and duties will pass to “your” legal representative or to the person having temporary custody of “your” property.
Mortgage Provisions
In both forms, a mortgageholder includes a trustee. If a loss occurs to the building, the loss will be paid to the mortgagee and “you” as their interest appears. In the case of more than one mortgagee, they will be paid in order of precedence. Both forms stipulate that coverage is void for the insured if it is the insured’s act or negligence that causes a loss but will continue in force for the mortgagee. Both companies allow for ten days notice of cancellation if “we” cancel the policy for non-payment of premium and 30 days notice if “we” cancel for any other reason. In the case of non-renewal, both companies will give notice to the mortgagee ten days before the expiration date of the policy.
Both forms state that if the mortgagee has started an action such as foreclosure, the mortgageholder still has the right to receive loss payment. ISO stipulates three conditions under which the mortgageholder is entitled to receive payment for the loss. The mortgageholder must pay premiums due under this policy, submit a proof of loss statement (signed and sworn) within 60 days, and notify “us” of any change in ownership, occupancy or substantial change in risk. The AAIS form states that “we” may request payment of the premium from the mortgagee if “you” fail to pay the premium. Both forms state that if the mortgagee is paid for a loss where the insurance might have been void, then their right to collect is transferred to the insurance company. The mortgageholder still has a right to collect the remainder of the mortgage debt from “you.” The insurance company may also pay the mortgagee the remaining principal and accrued interest and then receive a full assignment of the mortgagee’s interest.
Recoveries
In both forms, if property is recovered by either party after loss payment has been made, prompt notification must occur. If “you” decide to keep the property, “you” must return the money paid out for the loss. Any recovery expenses or the expenses to repair the recovered property will be paid subject to the Limit of Insurance. The AAIS form has a provision that if the loss was paid at an amount less than the amount agreed to due to factors such as the deductible or another limiting clause of the policy, the recovery amount will be pro-rated between the company and the insured based on their interests in the property.
Subrogation
AAIS has a subrogation paragraph that states that if “we” pay a loss, then “we” have the right to require that “you” assign to “us” any right of recovery against others up to the amount that was paid. “You” may waive “your” right to recover in writing after a loss only as to someone insured under the property coverages; “your” tenant; a business firm controlled by “you”; or, a business firm that owns or controls “your” business.
Suits Against “Us”
No suit to recover any loss may be brought against “us” unless the terms have been fully complied with and action is begun within two years following the loss. The AAIS form goes on to state that if an applicable law makes this limitation invalid, then suit must begin within the shortest period permitted by law.
AAIS form: If the structure is vacant or unoccupied for more than 60 consecutive days or for the usual or incidental unoccupancy period for the described premises (whichever is longer), no loss will be paid for vandalism, theft, attempted theft, breakage of building glass, sprinkler leakage (unless “you” have protected the system against freezing), or water damage. For any loss not excluded, the payment will reduce by 15%.
Unoccupied means that operations or customary activities have been suspended but personal property has not been removed. Vacant is when it is not occupied and the occupants have moved, leaving the structure empty or with very little business personal property.
ISO considers a building vacant for tenants when the building, unit, or suite rented or leased to the insured does not have enough business personal property to conduct customary operations. For Building Owners, the building is vacant when 70% or more of the total square footage is not rented or is not used to conduct normal, or customary operations. Note that the term “unoccupancy” is no longer used with reference to vacancy. Other than definitions, the exclusion or limits on coverage is the same.
In both forms, buildings or structures under construction are not considered to be vacant or unoccupied.
ISO devotes a section to premiums. It first states that the First Named Insured is responsible for the payment of all premiums and will receive the return premiums. It also states that the premiums and forms for each renewal, continuation, or anniversary date will be based on the rates, rules and forms in effect at that time. With the company’s consent, the insured may continue the policy by paying a premium for each successive one-year period. This premium must be paid prior to the anniversary date and determined by the current rates and rules. If no premium is paid, the policy expires on the first anniversary date that no premium has been received. If there are changes during the year, they may not be shown in the Declarations and they may require additional premium based on current rules and rates.
AAIS addresses renewal forms and continuations in Endorsement BP-336.
Employee Dishonesty
In both forms, “we” cover direct loss or damage to business personal property including “money” and “securities” that results from dishonest acts by any of “your” employees, either acting alone or with others with the intention of causing loss or damage or to gain financial benefit. Not included are earned salaries, commissions, bonuses, fees, profit sharing or any other employee benefit.
The most that will be paid in either form is the limit shown on the “Declarations” or Declarations for any one occurrence. All loss or damage caused by one or more persons or which involves a single act or a series of related acts is considered to be one occurrence.
In both the AAIS and the ISO form, the only excluded perils that apply to employee dishonest are civil authority, nuclear hazard and war.
In both forms, no payment is made if “you” or any of “your” partners, officers or directors act alone or with others to commit a dishonest act. There is also no payment if the only form of proof is dependent upon an inventory computation or a profit and loss computation.
ISO stipulates that this coverage does not apply to any employee immediately upon discovery by “you” or by any of “your” partners, officers, or directors who are not in collusion with the employee, of any dishonest act committed by that employee before or after being hired by “you.” ISO also stipulates that all loss or damage must be sustained during the policy period and that regardless of the length of time the policy remains in force or of the amount of the premiums that are paid, there is no cumulative limit from year to year.
The discovery period in both forms is one year from the end of the policy period.
The AAIS form stipulates that they will not cover losses occurring outside of the coverage territory except as provided in the Supplemental Employee Dishonesty Coverage nor will they pay legal expenses or indirect losses.
Supplemental Employee Dishonesty Coverage
The AAIS form provides coverage for a loss caused by an employee who is out of the basic coverage area on a temporary basis for no longer than 90 days. This is not an additional amount of insurance.
If an act took place during a previous policy and would have been covered by the prior policy, then both forms will cover it if the discovery is made during the current policy. This does not increase the limit and the new form will only cover “you” up to the amount of the old policy or “your” current limits—whichever is less.
Both AAIS and ISO stipulate that “you” must keep records so that the company can ascertain “your” loss.
Exterior
Glass/Interior Glass
Exterior glass that is owned by “you” or is in “your” care, custody or control, and which is on the basement or ground floor level of a building or structure (unless coverage for all floors is shown as a separate limit), is covered for both AAIS and ISO. ISO stipulates that lettering and ornamentation is included in this coverage. This coverage includes the casing and frames if damaged by a loss, boarding up after a loss, the temporary plates, and expenses to remove or replace obstructions. Civil Authority, Nuclear Hazard and War are the only exclusions that apply to this optional coverage. The AAIS form states that this optional coverage supersedes all limitations in the policy that apply to exterior glass. The ISO form includes Exterior Glass as a basic coverage, not as an option.
The ISO form excludes loss or damage caused by wear and tear, hidden or latent defect, corrosion or rust.
ISO provides for coverage on interior glass as an optional coverage that may be purchased.
Money and Securities
AAIS covers “money” and “securities,” bullion and lottery tickets that “you” own, hold, or for which “you” are legally liable. ISO does not exclude lottery tickets, but definitely does not cover bullion. ISO also states that they will pay for loss of “money” and “securities” used in “your” business while at a bank or savings institution, within “your” living quarters or the living quarters of any employee (who has use and custody at the time), at the premises described in the Declarations, or in transit between any of these places. The perils covered in both forms are theft, disappearance and destruction. Neither form will pay for loss from accounting or mathematical errors nor omissions or property contained in any “money” operated device unless there is a continuous record located within the device.
AAIS excludes loss from an unattended vehicle unless there is visible evidence of a forced break-in. They also stipulate that Automatic and Seasonal Increases do not apply to this coverage. ISO excludes loss if the property is given or surrendered in any exchange or purpose.
In both forms, the most that will be paid in any one loss will be shown in the Declarations. The limits apply to an act or a series of related acts involving one or more persons. Accurate records are required so verification of the amount of loss is possible.
Outdoor Signs
In both forms, direct loss or damage to outdoor signs owned by “you” or in “your” care, custody or control are covered. Neither form provides coverage for civil authority, nuclear hazard, war, mechanical breakdown, wear and tear, or deterioration. ISO lists hidden or latent defects as an exclusion, while AAIS lists loss caused by electrical currents.
The most that either form will pay is the amount shown on the Declarations for Outdoor Signs. The provisions of this optional coverage supersede all limitations in the policy that apply to Outdoor Signs.
Mechanical Breakdown
The ISO form contains an option to provide coverage for loss to covered property caused by an accident to an object owned by the named insured or which is in the named insured’s care, custody or control.
“You” and “Yours”
In the AAIS form, this refers to the person, persons or organization named as the insured on the “declarations.” ISO defines it as the First Named Insured shown on the Declarations.
“We” and “Us”
In both forms, this refers to the company providing the coverage or insurance.
“Advertising
Injury”
In both forms, “advertising injury” means injury arising out of one or more of the following offenses—oral or written publication of material that slanders or libels a person or organization; that disparages a person or organization’s goods, products or services; or that violates a person’s right of privacy. It also includes misappropriation of advertising ideas or style of doing business or any infringement of title, slogan, trademark or trade name.
AAIS includes in the definition that injury does not apply to “bodily injury,” “property damage,” or “personal injury.”
“Auto”
In both forms, it means a land motor vehicle, trailer or semi-trailer designed for use on public roads. It also includes attached machinery and equipment.
The ISO form specifically excludes mobile equipment covered in the AAIS form.
“Basic Territory”
This definition is included only in the AAIS form. ISO includes the same definition in its “Coverage Territory” which is defined as the USA including its territories and possessions, Puerto Rico and Canada.
“Bodily Injury”
In both the AAIS and ISO forms, it is defined as any bodily harm, sickness or disease sustained by a person. It includes death that results. AAIS excludes coverage for mental or emotional injury, suffering or distress that does not result from physical injury. This is not specifically excluded in the ISO form.
“Coverage Territory”
In the AAIS form, it references coverage in the “basic territory” and then goes on to include international waters or airspace only if “bodily injury,” “property damage,” “personal injury” or “advertising injury” occurs in the course of travel to or from the basic territory.
In the ISO form, this means the USA including its territories or possessions, Puerto Rico and Canada. It also includes the same clause regarding international waters and airspace.
Both forms include the world if the injury or damage is a result of goods or products originally made or sold in the “coverage territory” (ISO) or the “basic territory” (AAIS). This also includes the actions of a person who normally resides in the “coverage territory” or the “basic territory” but who is away for a short time (not defined in either form) on business. This applies only if the insured’s liability has been determined in a suit or “we” have agreed to a settlement.
“Damages”
AAIS provides a definition; ISO does not. In the AAIS form, this is defined as “money” (compensation) for a person who claims to have suffered an injury.
“Declarations”
AAIS provides a definition; ISO does not. In the AAIS form, this means all pages that are labeled “declarations,” “supplemental declarations,” or “schedules” that are pertinent to the policy.
“Employee”
In both forms, this includes a leased worker and excludes a temporary employee.
“Impaired property”
In both forms, it means tangible property other than “products” or “your work” whose value has been decreased because it includes “products” or “your work” that is (or believed to be) deficient or dangerous or because “you” failed to carry out the terms of a contract. It also means that the property can be restored if it is repaired, replaced, adjusted or removed or “you” can correct it by fulfilling the terms of “your” contract.
“Insured”
The definition of “Insured” in the ISO form is not found in the Definitions section, but rather in its own policy section titled: “Who Is An Insured.”
Both forms define this as an individual (“you”) and spouse with respect only to the conduct of a business in which “you” are the sole owner. If the business is a partnership, “you” are an insured along with your partners. Spouses are also insured but only with respect to the conduct of the business. Executive officers and directors are covered if the business is a corporation but only when operating within the scope of their duties as officers and directors. Stockholders are included but only with respect to their liability as stockholders.
The ISO form addresses limited liability companies in the definition of Who Is An Insured but the AAIS form addresses this type of entity only via endorsement. Both similarly consider the named insured, its members and managers to be insureds in a limited liability company.
Both forms include a person or organization with the exception of “you” or “your employee” while acting as “your” real estate manager; your legal representative if “you” die during the policy period; a person who has legal custody of your property for liability arising out of the use of that property until a legal representative is appointed.
When “you” give someone permission to operate “your” mobile equipment, it covers “your” employee in the course of employment but not a fellow employee injured in the course of employment. ISO goes on to extend this exclusion to include any consequential loss to the injured employee’s family. It also covers any other person or organization that is legally liable for the conduct of such person but only for the liability arising out of the operation of the equipment and if no other insurance covers the liability.
No person or organization is an “insured” for “property damage” to property that is owned by, rented to, in the charge of, or occupied by “you” or an employer of any person who is a defined insured as listed above in bold letters.
None of “your” “employees” for acts within the scope of their employment by “you”—not including “your” executive officers—are insured for “bodily injury,” “personal injury,” and “advertising injury” to “you” or to a fellow “employee.”
Also not covered is “property damage” to property that is owned by, rented to or loaned to “employees” or any of “your” partners or members and their spouses if “you” are a joint venture or a partnership.
The AAIS form states that if a named insured has a majority interest in a newly formed organization, it is insured for up to 90 days after the formation if there is no other insurance available. Further on, it goes on to state specifically that the organization is no longer an insured after 90 days or at the end of the policy period, whichever is sooner. The insurance does not apply to any “bodily injury” or “property damage” or “personal injury” or “advertising injury” that occurred prior to the acquisition
Both forms exclude insurance that relates to the conduct of a current or past partnership or joint venture that is not shown on the “Declarations” (AAIS) or as a Named Insured in the Declarations (ISO).
“Leased Worker”
Both AAIS and ISO define “leased worker” as any person leased to the insured by agreement with a labor leasing firm in which the person will perform the duties relating to the conduct of the insured’s business. This does not include any “temporary workers.”
“Limit”
AAIS includes a definition
for “limit.” It is defined as the amount of coverage that applies. ISO has no
similar definition.
“Loading or Unloading”
This is defined as the
movement of property after it is removed from the departure point for transit
by “auto,” aircraft or watercraft, continues while it is in or on whichever
type of transportation, and ends when the property has been removed from the
vehicle at its final destination point.
This includes movement
(while loading or unloading) by a hand truck or any mechanical device only when
attached to the vehicle.
“Occurrence”
Both forms define this as
an accident or repeated exposure to the same harmful conditions over a period
of time.
“Personal Injury”
Both forms define this as
injury (not including “bodily injury”) which arises out of one or more of the
following offenses: oral or written publication that slanders, libels or disparages
a person or organization or their goods, products or services; or that violates
a person’s right of privacy; false arrest, detention or imprisonment; malicious
prosecution; or wrongful entry, eviction or invasion of the right of private occupancy
of a room, dwelling or premises that a person occupies, by or on behalf of its
owner, landlord or lessor. The AAIS form also specifically excludes injury
related to “property damage” and “advertising injury.”
“Products-Completed Work Hazard”
In both forms, this
includes all "bodily injury" and "property damage" arising
out of "your product" or "your work" except products that
are still in your physical possession; or work that has not yet been completed
or abandoned. The "bodily injury" or "property damage" must
occur away from premises you own or rent, unless your business includes the
selling, handling or distribution of "your
product" for consumption on premises you own or rent.
"Your Work"
In both forms, "your
work" will be deemed completed at the earliest of the following times:
when all the work called for in your contract or at the site has been completed
if your contract calls for work at more than one site; or when that part of the
work done at a job site has been put to its intended use by any person other
than another contractor or subcontractor working on the project. It also means
work that may need service, maintenance, correction, repair
or replacement, but which is otherwise complete, will be treated as complete.
Products-Completed Operations
does not include “bodily injury” or “property damage” which arises out of the
transportation of property (unless related to loading and unloading) or the
presence of tools, uninstalled equipment or abandoned or unused materials.
“Products” or “Your Product”
Both forms define this as
any goods, products (other than real property) that is manufactured, sold,
handled, distributed or disposed of by the insured; or
others trading under the insured’s name; or any party whose business or assets
the insured has acquired; containers
(excluding vehicles), materials, parts or equipment furnished in connection
with such goods or products. The definition also includes warranties or representations made with respect to the fitness,
quality, durability, performance or use of the
product; the providing of or failure
to provide warnings or instructions.
Not included are vending
machines or other property rented to or located for the use of others but not
sold.
“Property Damage”
In both forms, “property
damage” is both the physical injury to tangible property, including all
resulting loss of use of that property, as well as the loss of use of tangible
property that has not been physically injured. Loss of use is considered to
have occurred at the time of the injury or “occurrence” that caused it.
“Temporary Worker”
Both forms define this as
any person who is furnished to the insured as a temporary substitute for a
permanent “employee.” ISO also stipulates for an employee on leave or to meet a
seasonal or short-term workload condition.
“Terms”
The AAIS form includes a
definition of all provisions, limitations, exclusions, conditions
and definitions that apply to the Liability coverage. ISO has no similar
definition.
“Your Work”
Both forms define this as work or operations performed by or on
behalf of the insured; materials, parts or equipment furnished in connection
with such work or operations. This also includes warranties or representations
made with respect to the fitness, quality, durability, performance
or use of the work; and the providing of or failure to provide warnings or
instructions.
In the AAIS form, the
coverages are divided into five categories. The AAIS form states that “we” will
pay all sums that it is legally bound to pay as “damages” due to “bodily
injury” or “property damage.” The damages must be caused by an “occurrence”
which takes place in the “coverage territory” and all damages or injuries must
take place during the policy period.
In the ISO form, the
insurer agrees to pay the sums for damages, up to the limits stated in Section
D—Liability and Medical Expenses Limits of Insurance, for covered occurrences
of “bodily injury,” “property damage,” “personal injury,” and “advertising
injury” that the insured becomes legally obligated to pay. The insurer has the
right and the duty to defend any “suit” for those damages. The insurer may at
any time and at the insurer’s discretion, investigate any “occurrence” or
“offense” or settle any claim or “suit.” The insurer is no longer obligated and
the insurer’s right and duty to defend ends when the Limit of Insurance is spent in payments of
judgments, settlements or medical expenses.
ISO wording clarifies that defense is for the insured only and that the insurer has no duty to defend the insured for any “suit” for damages that this insurance does not cover. This wording makes clear that it is not the intent of this insurance policy to provide defense for claims or suits not otherwise covered and should relieve any ambiguity with respect to when defense is available and when it is not.
The AAIS form does not
specify that damages from bodily injury include the cost of care, loss of
services and death. The ISO form specifically addresses this.
In this section, the ISO
form stipulates that if property damage occurs that is loss of use of property
not actually physically injured, it is considered to have occurred at the time
of the occurrence that caused the loss of use. AAIS addresses this same issue
in the definition of “property damage.”
Medical Payments/Medical Expenses
In both forms, the insurer
agrees to pay the reasonable medical expenses, regardless of fault, for “bodily
injury” caused by an accident, as long as the specified limit per person is not
exceeded. Neither negligence nor liability has any relationship to this coverage and none need be proved. The accident must have
occurred on premises the insured owns or rents or on ways next to those premises,
or as a result of the insured’s operation. For example, medical expenses to a
passerby, when a masonry contractor accidentally drops a brick from the second
floor of a building under construction, are covered.
In addition, the accident
must take place in the “coverage territory” and during the policy period.
Note that only those
expenses that have occurred and have been reported to the insurer within one
year of the accident are covered. The ISO form states that the injured person
must be willing to submit to examinations at the expense of the insurer, by a
physician of the insurer’s choice, as often as the insurer reasonably requires.
The AAIS form has this same stipulation in the “What You Must Do in Case of
Loss” section.
Medical expenses include
first aid administered at the time of the accident, necessary medical,
surgical, X-ray and dental services, including prosthetic devices and
ambulance, hospital, professional nursing and funeral
services.
The AAIS form includes the
cost of eyeglasses in medical payments coverage.
Products-Completed Liability
As mentioned before, ISO
addresses this coverage under Business Liability (Principal Coverages listed
above). This clause states that “we” will pay all sums which an “insured” is
legally obligated to pay as “damages” which are a result of “bodily injury” or
“property damage” which arises out of the “products-completed operations work
hazard.” The damage must be caused by an occurrence that takes place in the
“coverage territory” and it must occur during the policy period.
FIRE LEGAL LIABILITY
In both forms, the fire
legal liability limit is the most the insurer will pay under the Business
Liability Coverage for all covered “property damage” losses from
any one fire or explosion, to premises rented to or temporarily occupied
by the insured with permission of the owner.
In the AAIS form, it states
that all exclusions that are otherwise applicable to “property damage” do not
apply to fire legal liability. There are certain exclusions which involve
liability arising out of any contract or agreement to indemnify a person or
organization for damage by fire to the premises; the rendering (or failure to
render) professional service except as covered under Incidental Medical
Malpractice Injury Coverage; or liability which arises out of property damage
that is expected, directed or intended by the “insured”
or that is resultant of intentional or malicious acts by the “insured.”
In the ISO form, Fire Legal
Liability is provided as an exception to the following exclusions: alcoholic
beverages; workers compensation; bodily injury to employees and families; pollution;
aircraft, autos and watercraft; transportation and mobile equipment; war;
property damage to property owned, sold, given away, loaned to the insured;
property in the insured’s care; property damage to the insured’s products;
property damage to the insured’s work; and, property
damage to impaired property.
PERSONAL INJURY/ADVERTISING INJURY
In both forms, this
insurance applies to “personal injury” and “advertising injury” and the policy
clarifies that “personal injury” and “advertising injury” are two distinct and
separate items. “Personal injury” other than advertising, publishing, broadcasting or telecasting done for the insured, is covered
for offenses resulting from the insured’s business operations, as are
“advertising injury” for offenses that result from advertising the insured’s
goods, products or services. Offenses must be committed in the territory
defined during the policy period.
CONTRACTUAL LIABILITY
Damages for “bodily injury”
or “property damage” that result from liability the insured has assumed in a
contract or agreement are not covered unless either the contract or agreement
is considered to be an “insured contract” and the “bodily injury” or “property
damage” occurred after the contract or agreement was executed; or, the insured would have been liable even if the contract
or agreement would never have occurred.
Both forms cover (in the ISO form the following
defines “insured contract”): lease of premises, a sidetrack agreement, any easement or license agreement, except in connection with
construction or demolition operations on or within 50 feet of a railroad.
They also cover an obligation, as required by
ordinance to indemnify a municipality, except in connection with work for a
municipality.
An elevator maintenance agreement is covered.
Covered is that part of any other contract or
agreement pertaining to your business under which you assume the tort liability
of another party to pay for "bodily injury" or "property
damage" to a third person or organization. Tort liability is a liability
that would be imposed by law in the absence of any contract or agreement. This
does not include that part of any contract or agreement that indemnifies any
person or organization for "bodily injury" or "property
damage" arising out of construction or demolition operations, or within 50
feet of any railroad property and affecting any railroad bridge or trestle,
tracks, roadbeds, tunnel, underpass or crossing.
Supplemental; coverage is
available for that part of any contract or agreement that indemnifies an
architect, engineer or surveyor for injury or damage arising out of preparing, approving or failing to prepare or approve maps, drawings,
opinions, reports, surveys, change orders, designs or specifications. Also
included is the act of giving directions or instructions, or failing to give
them, if that is the primary cause of the injury or damage, under which the
insured, if an architect, engineer or surveyor,
assumes liability for an injury or damage arising out of the insured's rendering
or failure to render professional services.
Also covered is any past of
a contract or agreement that indemnifies any person or organization for damage
by fire or explosion to premises rented or loaned to you.
The ISO form also provides additional coverage as follows: damages for "bodily injury" or "property damage" including the defense of such, that result from liability the insured has assumed in a contract or agreement are not covered unless either the contract or agreement is considered to be an "insured contract" and the "bodily injury" or "property damage" occurred after the contract or agreement was executed; or, the insured would have been liable even if the contract or agreement would never have occurred. Defense is covered as long as all other conditions are met and the insured is obligated to provide defense in the “insured contract.” Covered are reasonable attorney fees and necessary litigation expenses for defense for a civil or alternative dispute resolution proceeding that this insurance applies to.
INCIDENTAL MEDICAL MALPRACTICE INJURY
In the AAIS form, “bodily
injury” for the rendering or failure to render the following services is
covered: medical, surgical, dental, x-ray or nursing services or treatment, or
the furnishing of food or beverages in conjunction with these services; drugs
furnished or dispensed or medical, dental or surgical
supplies or appliances.
Excluded from this are any
expenses that an “insured” incurs for first aid treatment given to others when
an accident occurs or if the insured or the indemnitee is in the business of
providing any of the services in the preceding paragraph.
ISO has no similar coverage
except as it relates to pharmacists in a retail druggist or drugstore
operation.
MOBILE EQUIPMENT
In both forms, “Mobile Equipment" means the
following types of land vehicles, including any attached machinery or
equipment: bulldozers, farm machinery, forklifts and other vehicles designed
for use principally off public roads; vehicles maintained for use solely on or
next to premises you own or rent; vehicles that travel on crawler treads;
vehicles, whether self-propelled or not, on which are permanently mounted power
cranes, shovels, loaders, diggers or drills, road construction or resurfacing
equipment such as graders, scrapers or rollers.
Vehicles not described that are not self-propelled
and are maintained primarily to provide mobility to permanently attached
equipment of the following types: air compressors, pumps
and generators; including spraying, welding, building cleaning, geophysical
exploration, lighting and well servicing equipment, cherry pickers and similar
devices used to raise or lower workers, or vehicles not described maintained
primarily for purposes other than the transportation of persons or cargo.
Self-propelled vehicles with the following types
of permanently attached equipment are not "mobile equipment" but will
be considered "autos": equipment designed primarily for snow removal,
road maintenance (not for construction or resurfacing), street cleaning, cherry
pickers and similar devices mounted on automobile or truck chassis and used to
raise or lower workers and air compressors, pumps and generators, including spraying,
welding, building cleaning, geophysical exploration, lighting and well servicing
equipment.
In the AAIS form, mobile equipment also includes
coverage for concrete mixers that are not the mix-in-transit type.
DEFENSE COVERAGE/COVERAGE EXTENSION
The supplementary payments
apply to any claim or “suit” the insurer defends. The ISO form clarifies that
supplementary payments also apply to any claim or “suit” the insurer
investigates or settles.
They are as follows:
All expenses the insurer
incurs; this item also clarifies that the Limit of Insurance is not reduced by
the insurer’s expenses.
If a bail bond is required
because of accidents or traffic law violations because of the use of any
vehicle covered by the Bodily Injury Liability Coverage, up to $250 ($500 in
the AAIS form) is available for the cost of such bonds. Special notation is made
to clarify that the insurer is not responsible for furnishing these bonds.
Cost of any bonds needed to
release attachments are provided for, if the amount of
the bond is within the applicable policy limit. Again, clarification is made
that the insurer is not responsible for providing these bonds.
If the insurer requests the
insured to participate in any investigation or defense, reasonable expenses are
provided for the insured. This includes any actual loss of earnings, up to $100
a day for AAIS and $250 a day for ISO, if the insured
must take time off from work.
All costs taxed against the
insured in the “suit.” In cases where the court assesses the costs and expense
of the trial against the negligent party, this supplementary payment can
provide extensive benefits, over and above the policy limits.
Insurer will pay
prejudgment interest awarded against the insured for the part of the judgment
the insurer pays. However, if the insurer offers to pay the Limit of Insurance,
no prejudgment interest based on the period of time after the offer is made
will be paid by this policy.
Interest on the amount of
the judgment that has accrued after the judgment has been entered, but before
the insurer has paid the judgment or the policy limits, is covered in full.
In addition to the above,
ISO offers some interesting defense coverage as follows:
In those cases where an insured and an indemnitee of the insured are both party to a “suit” the insurer is defending, the insurer will defend both parties (the insured and indemnitee of the insured) if all of the following conditions are met: the “suit” against the indemnitee is one where the insured has assumed the liability for the indemnitee with an “insured contract”; this insurance policy provides coverage for the liability assumed by the insured; the “insured contract” and the liability of the insured to the indemnitee is such that the insured has agreed to assume either the defense or the cost of defense of the indemnitee; there can be no conflict of interest between the insured and the indemnitee with reference to the “suit”; both the insured and the indemnitee ask the insurer to conduct and control the defense of the indemnitee and both agree that the same counsel can defend both; the indemnitee must agree in writing to: cooperate with the insurer in the investigation, settlement or defense of the “suit”; send the insurer immediately any and all copies of demands, notices, summonses or legal papers the indemnitee received in connection with the “suit”; notify any other insurer that may also offer the indemnitee coverage; cooperate with the insurer in coordinating any other applicable insurance coverage that is available for the “suit”; provide written authorization to obtain records and information about the “suit”; provide written authorization to conduct and control the defense of the indemnitee for the “suit.”
As long as all of the conditions are met, the insurer will cover attorneys’ fees and litigation expenses that the insurer incurs, as well as necessary litigation expenses incurred by the indemnitee that the insurer has requested. These expense payments are not considered awards or payment of damages and therefore are not subject to the limits of insurance. The insurer’s obligation to defend the indemnitee and pay for expenses end when either the insurer has paid the applicable limit of insurance in judgments or settlements or the above stated conditions are no longer met.
WHO IS AN INSURED
Both AAIS and ISO have similar definitions and clarifications as to who is covered as insureds. However, ISO also has the following:
If the insured is a limited liability company, then the insured and the members and managers are covered but only with respect to conduct of the insured business. In order to make the CGL applicable to businesses that conduct their operations as a limited liability company, new wording has been added to provide for this. A limited liability company is a hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand, have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals. Who is an Insured now specifically refers to limited liability companies and provides coverage for such.
Throughout the section on Who is an Insured, references are made to clarify the intent of coverage for managers and members of limited liability companies.
Also different in the ISO form: "Employees" are not insured with respect to their rendering or failing to render professional health care services, except for retail druggist or drugstore operations. Retail druggist or pharmacists in retail drugstore operations are covered for the professional health care services.
Other cases where the "employee," any partner or member (if the insured is a partnership or joint venture), or any member if the insured is a limited liability company, is not considered an insured, include "property damage" to any property that is owned, occupied, used by, rented to; in the care, custody or control of; or over which there is physical control by the insured, employees of the insured, or any partners or members of the insured.
Contractual Liability
In the AAIS form, the
exclusions apply to “bodily injury,” “property damage,” “personal injury,” or
“advertising injury” liability which is assumed by the insured under a contract
or an agreement. The ISO form exclusions apply to “bodily injury” or “property
damage” for which the insured is obligated to pay damages when there is a
contract or an assumption of damages.
Damages for “bodily injury”
or “property damage” that result from liability the insured has assumed in a
contract or agreement are not covered unless either the contract or agreement is
considered to be an “insured contract” and the “bodily injury” or “property
damage” occurred after the contract or agreement was executed; or, the insured would have been liable even if the contract
or agreement would never have occurred.
Liquor Liability
In both policies, for any
insured in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages, “bodily injury”
or “property damage” is excluded if it results from the following:
1) causing or contributing to the intoxication of
any person
2) furnishing alcoholic beverages to a person
under the legal drinking age; or furnishing alcoholic beverages to a person
under the influence of alcohol
3) any statute, ordinance or regulation that
relates to the sale, gift, distribution or use of
alcoholic beverages
This exclusion does not
apply to host liquor situations for insureds that are not in the business of
selling, manufacturing, distributing, serving or
furnishing alcohol. Business lunches, parties and social functions sponsored by
the insured are covered for host liquor liability unless there is a statute, ordinance
or regulation relating to the particular event.
Workers Compensation and Similar Laws
The wording of this (and
the following) exclusion in each of the two policies basically states that this
insurance does not apply to any requirement or obligation that the insured must
assume resulting from any Workers Compensation, Disability Benefits,
Unemployment Compensation or similar types of laws.
The extent of this exclusion and the one that follows, is to prevent double
indemnification for injuries that should be covered under Workers Compensation
and Employers Liability Policies.
Employers Liability
Excluded is any “bodily injury” to an employee of the insured, or the spouse, child, parent, brother or sister of that employee, as a consequence or result of employment of that employee by the insured or performance of duties necessary and relating to the conduct of the insured’s business. This exclusion applies whether the insured is liable as an employer or in any other capacity, or whether the insured is obligated to share damages with or repay someone else, who must pay damages because of the injury.
Pollution
To get a better
understanding of what pollution is, look at the final paragraph of this
exclusion in each of the policies, where pollutants are defined to mean any
solid, liquid, gaseous or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemical and waste. Waste also includes those
materials that may be meant to be, but have not yet been, recycled, reconditioned or reclaimed.
The AAIS form also includes
in its definition of pollutants any electrical or magnetic emissions.
Excluded is any “bodily
injury” or “property damage” that arises out of the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or escape of
pollutants that are at or from any premises, site or location that is now or
ever was at any time owned, occupied, rented or loaned to any insured; that are
at or from any premises, site or location that is now or ever was at any time
used by or for any insured or others, for the handling, storage, disposal,
processing or treatment of waste; which are or were at any time transported,
handled, stored, treated, disposed of or processed as waste by or for any
insured or any other party for whom you are or may be legally liable; at or
from any premises, site or location that the insured or any contractors or
subcontractors working directly or indirectly on behalf of any insured are
working or performing operations and where any pollutants are brought on or to
that premises, site or location by any insured, contractor or subcontractor
working directly or indirectly on behalf of any insured; at or from any
premises, site or location that the insured or any contractors or
subcontractors working directly or indirectly on behalf of any insured are
working or performing operations to test for, monitor, clean up, remove,
contain, treat, detoxify, neutralize or in any way respond to or assess the
effect of pollutants.
ISO has added back some limited pollution coverage as follows: in the past, contractors who brought pollutants onto the job site in any form had no coverage for any resultant pollution that may have occurred under the CGL. Currently, limited pollution is provided to those contractors who bring mobile equipment onto the job site which may accidentally leak or spill gasoline, oil or hydraulic fluids and cause pollution damages as a result. Coverage only applies if the fluids are necessary for the operation of the equipment and are not meant to be discharged in any way. The current pollution coverage is of benefit to contractors and property owners alike.
Different in the AAIS form
is the treatment or placement of the exclusion of coverage for bodily injury or
property damage within the products-completed work hazard. Since AAIS treats it
as a separate coverage, the exclusion is not necessary in the ISO form. AAIS
lists it as a specific separate exclusion in the exclusions section.
Aircraft, “Auto” or Watercraft
For both insurances, this
is defined as any “bodily injury” or “property damage” resulting from the
ownership, maintenance, use or entrustment to others, of any aircraft, “auto”
or watercraft. This includes the ownership of, loan or
rental of, operation of or “loading and unloading,” by or to any insured. There
are exceptions when some liability will be covered for aircraft, “auto” or
watercraft.
If the watercraft is on
shore on a premises that you own or rent, liability coverage is extended for
non-owned watercraft that is less than 26 feet long and which is not being used
to carry persons or property for a charge. A non-owned “auto” while it is being
parked on or next to premises the insured owns or rents would have liability
coverage extended if it is not owned, rented or loaned
to any insured, and while it is parked on or next to the insured’s premise.
Liability assumed under an “insured contract” pertaining to the ownership,
maintenance or use of aircraft or watercraft is a covered liability exposure.
Any “bodily injury” or “property damage” that results from the operation of
cherry pickers or similar devices mounted on automobile or truck chassis and
used to raise or lower workers or equipment such as air compressors, pumps and generators, including spraying, welding, building
cleaning, geophysical exploration, lighting and well-servicing equipment is not
excluded.
Mobile Equipment
“Bodily injury” or
“property damage” resulting from the transport of “mobile equipment” by an
“auto” owned or operated by, rented by or loaned to
any insured; or mobile equipment used in, while practicing for, or being
prepared for any pre-arranged racing, speed, demolition or stunt activity.
War
No “bodily injury” or “property
damage” for any liability assumed under a contract or agreement, resulting from
any act, incident or condition of war, whether
declared or undeclared, is covered. War is clarified to include in its
definition such acts as civil war, insurrection, rebellion
or revolution.
Professional Services
No “bodily injury,”
“property damage,” “personal injury,” or “advertising injury” is covered under
this insurance from either the rendering or failing to render any type of
professional service. In the AAIS form, the exclusion for professional services
has one exception, which is liability covered under Incidental Medical
Malpractice Injury Coverage.
The ISO form contains an
exception for the services of a retail druggist or drugstore. In the ISO form,
nine specific examples of professional services are listed; however, please
note that the policy clarifies that these examples include, but are not limited
to, these items:
·
any type of
legal, accounting or advertising services
·
any
preparation of or failure to prepare or approval or failure to approve maps,
drawings, opinions, reports, surveys, change orders, designs
or specifications
·
any
supervisory, inspection or engineering service
·
any service,
treatment, advice or instruction that is medical,
surgical, dental, x-ray or nursing
·
any type of
health or therapeutic service, treatment, advice or
instruction
·
any type of
service, advice or instruction to enhance appearance
or skin or to remove or replace hair or for personal grooming
·
any optometry
or optical or hearing aid service which also includes any related prescribing,
preparing, fitting, demonstration or distribution of ophthalmic lenses, similar
products or hearing aid devices
·
any ear-piercing
services (note that ISO also excludes body piercing)
·
any service
in the practice of pharmacy; but this exclusion does not apply to an insured
whose operations include those of a retail druggist or drugstore
AAIS does not
list any examples, but the above exposures are excluded in their form.
Neither form
extends coverage for property damage to:
·
property
owned, rented or occupied by the insured
·
premises
sold, given away or abandoned by the insured if the property damage arises out
of any part of the premises. Note, however, that this exclusion does not apply
if the premises are the insured's work (as in the case of a real estate agent)
and were not occupied, rented or held for rental by
the insured
·
property
loaned by the insured, except for liability assumed under a sidetrack agreement
·
personal
property in the insured's care, custody or control;
except for liability assumed under a sidetrack agreement
·
the
particular part of real property on which the insured or any contractors or
subcontractors working on the insured's behalf are performing operations, if
the property damage arises out of the operations; except for liability assumed
under a sidetrack agreement
·
the particular
part of any property that must be restored, repaired
or replaced because the insured's work was incorrectly performed, except for
liability assumed under a sidetrack agreement. Further, this exclusion does not
apply to property damage included in the “products-completed operations
hazard.”
“Property
damage” to any premises the insured sells, gives away, or abandons is not
covered if the damage arises out of any part of those premises. The one
exception to this portion of the exclusion is if it is the business of the
insured to sell property (as in the case of a real estate agent) and the
insured never occupied, rented or held for rental that
property or premises. Note that only “property damage” is excluded from
coverage for previously owned premises.
If “property
damage” results to any part of real property where the insured, including any
contractor or subcontractor working directly or indirectly on behalf of the
insured, is performing operations, insurance does not apply. Also, that part of
the property that must be restored, repaired or
replaced because the work of the insured was incorrectly performed is not
covered, unless the “property damage” is included in the “products-completed
operations hazard.”
Damage to Your Product
“Property
damage” to the insured’s product because of damage caused by that product or
any part of it, is not covered.
Damage to Your Work
“Property
damage” to the insured’s work or any part of it, that is also covered in the
“products-completed operations hazard,” is excluded. The exception to this
exclusion is when that work has been performed on the insured’s behalf by a
subcontractor.
Damage to Impaired Property or Property not
Physically Injured
“Property
damage” to “impaired property” or property not physically damaged which is a
result of either a defect, inadequacy or dangerous condition in the insured’s
product or work, or which has been caused by a delay or failure of the insured
or anyone acting on the insured’s behalf in the performance of the terms of a
contract or agreement, is not covered by either form.
Recall of Products, Work
or Impaired Property
Damages for any loss, cost
or expense, whether incurred by the insured or by others, because of loss of
use, withdrawal, recall, inspection, repair, replacement, adjustment, removal
or disposal of the insured’s product, the insured’s work, or “impaired
property,” is excluded when withdrawn, recalled or removed because of a known
or suspected defect, deficiency, inadequacy or dangerous condition. Basically,
if the insured knows or has reason to suspect that a product, work or property is defective or could cause injury or
danger, there is no coverage for the expense and cost of the recall, repair or
removal.
“Personal
Injury” and “Advertising Injury”
·
Offenses of
either oral or written publications, done by or at the direction of the
insured, that the insured knew were false.
·
Offenses of
either oral or written publications, whose first publication took place prior
to the beginning of the policy period.
·
Offenses as a
result of willful violation of a penal statute or ordinance committed by or
with the consent of the insured.
·
Offenses or
damages the insured has assumed in a contract or agreement are excluded, unless the insured would have had that liability
regardless of the contract or agreement. In the AAIS form, this exclusion also
appears, but it appears as exclusion number one under the exclusions that apply
to “bodily injury,” “property damage,” “personal injury,” and “advertising
injury.”
In addition to the above exclusions, ISO has added the following: excluded are any actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants. Also excluded are any loss, cost or expense or any claim or suit by or on behalf of a governmental authority for damages that result from a request, demand or order to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond to or assess the effect of pollutants. Both of these items in their entirety are new and have been added to the coverage form. Because of the wording of the personal injury liability coverage previously contained in the liability coverage, attempts have been made in litigation to force coverage for various types of pollution losses under the guise of trespass, wrongful entry or invasion of the right of private occupancy. It was never the intent of the personal injury or advertising injury coverage to provide for any pollution damages or clean-up costs. Therefore, wording has been added to the effect that no coverage exists for any pollution exposure that may arise out of personal injury or advertising injury wording.
The AAIS form has “personal injury” exclusions for the commonly defined “employment-related practices liability” exposures. These exclusions are not found under “personal injury” in the ISO form. Excluded in AAIS is any “bodily injury” or “property damage” from refusal to employ; from termination of employment; from coercion, demotion evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination, sexual misconduct; or any consequential bodily injury.
“Advertising Injury”
·
Any breach of
contract, other than misappropriation of advertising ideas under an implied
contract, is not covered.
·
Offenses that
result from failure of goods, products or services to
comply with the advertised quality or performance, are not covered.
·
Damages as a
result of the incorrect description of the price of goods, products
or services.
APPLICABLE TO MEDICAL EXPENSES COVERAGE
“Bodily injury” expenses for
the following are not covered in both forms:
·
to any
insured
·
to any
employee or person hired to work for or on behalf of the insured or a tenant of
the insured
·
to any person
injured in the part of the premises that the person normally occupies
·
to any person,
whether or not that person is considered an employee, if that person is
otherwise covered under a Workers Compensation, Disability Benefits Law or a similar type of law
·
to any person
while taking part in athletics
·
to any loss
or injury otherwise covered under the “products-completed operations hazard”
·
to any loss
or injury excluded under business liability coverage
·
to any loss
or injury due to war whether declared or undeclared, any act or condition
incidental to war, including civil war, insurrection, rebellion
or revolution. The AAIS form excludes coverage for liability arising out of
war; therefore, the exclusion under the liability section carries on to Medical
Payments Coverage.
The AAIS form
also excludes the following:
·
payment of
medical expenses to club members if the named insured is a club
·
payment of
medical expenses to guests of a hotel, motel or
tourist cabin if it is owned and operated by or on behalf of the named insured
·
payment of
medical expenses to students or campers if they are enrolled in a program led
by or at a facility that is owned by the insured or on the insured’s behalf
·
payments of
medical expenses to patients or inmates if they are being treated or kept in a
facility owned or operated by the insured
WHAT MUST BE DONE IN CASE OF LOSS/DUTIES IN THE
EVENT OF OCCURRENCE, CLAIM OR SUIT
The insured
must notify the insurer as soon as practicable of any “occurrence” or offense
that may result in a claim. That notice should include as much information as
possible, such as:
·
How, when and
where the “occurrence” or offense took place.
·
The names and
addresses of both the injured persons and any potential witnesses.
·
The nature
and location of any injury or damage resulting from the “occurrence” or
offense.
When a claim
or “suit” is brought against any insured, the insured must:
·
Immediately
record the specifics of the claim or “suit,” as well as the date received (ISO
lists this provision; it does not appear in the AAIS form).
·
Notify the
insurer as soon as practicable.
The insured
is obligated to make sure the insurer has written notice of the claim or “suit”
as soon as practicable.
Unfortunately,
the term “practicable” is not defined in the policy. This particular term is
used to allow the insured a reasonable amount of time to accomplish the conditions
of the policy; however, the lack of clarity can result in disputes. It is to
the insured’s advantage to use urgency in notification to the insurer and compliance
with the conditions of the coverage forms.
All involved
insureds must:
·
Immediately send
to the insurer, copies of any demands, notices, summonses or legal papers
received in connection with any claim or “suit”;
·
Give
authorization to the insurer to obtain records and other information;
·
Cooperate
with the insurer in the investigation, settlement or defense of the claim or
“suit”;
·
At the
insurer’s request, assist in the enforcement of any right against any party
which may be liable to the insured because of injury or damage that this
insurance also applies to. Basically, it is the insured’s duty and obligation
to assist in every way possible to notify, authorize, cooperate
and protect the rights of the insurer in defending and settling all claims and
“suits.”
Insureds are not authorized
to make any voluntary payment, assume any obligation or
incur any expense, other than first aid, without the insurer’s consent. To do
so without consent may be to do so at
that insured’s own expense. The insured must not jeopardize or compromise
the position of the insurer in any way.
The AAIS form has a section
regarding loss under the medical payments portion of the form. If there is a
medical payments loss, either the injured person or a person acting on the
injured person’s behalf should give written proof of claim along with
permission for the insurance company to obtain medical records. Upon request,
the injured party must submit to medical exams by doctors of the insurance
company’s choice as often as reasonably required.
HOW MUCH WE PAY/LIABILITY AND MEDICAL EXPENSES LIMITS OF INSURANCE
The most the insurer is
obligated to pay are the Limits of Insurance shown in the Declarations, no
matter how many insureds are covered, or how many claims are made
or “suits” are brought, or how many persons or organizations make claims or
bring “suits.”
The Liability and Medical
Expenses Limit shown in the Declarations is the maximum the policy will pay for
any one “occurrence” of an event, regardless of the
number of claims that result from that “occurrence” for “bodily injury,”
“property damage,” or “medical expenses”; or the total loss to any one party
from an “occurrence” of “personal injury” or “advertising liability.”
The medical expense limit
is the maximum amount that would be paid for each person and is subject to the
liability and medical expenses limit for any one occurrence.
The fire legal liability
limit is the most the insurer will pay under the Business Liability Coverage
for all covered “property damage” losses from any one fire or
explosion, to premises rented to or temporarily occupied by the insured
with permission of the owner. (ISO’s form has a base amount of $50,000 of fire
legal liability but this can be increased as an option. The AAIS form has a
limit of $50,000 with no option to increase.)
The most that will be paid
for the total accumulation of all “occurrences” of the “products-completed
operations hazard” in any one policy period is the liability and medical
expenses limit. The most that will be paid for the total accumulation of all
other “occurrences” of “bodily injury,” “property damage,” “medical expenses,”
“personal injury,” or “advertising liability” in any one policy period is twice
the liability and medical expenses limit. This limitation does not apply to
losses covered by the fire legal liability limit.
Bankruptcy
Even if the insured or the
estate of the insured becomes bankrupt or insolvent, the insurer is still
obligated under this coverage part and is not relieved of any responsibilities.
Insurance Under More Than One Policy/Other Insurance
The AAIS form is primary
insurance except in a few instances. If there is other insurance, there’s a
shared response to an eligible loss. If the other insurance dictates
contribution by equal shares, “we” will pay the same amount as the other insurers
until the lowest applicable “limit” is met or until the loss is paid in full.
If part of the loss remains outstanding, “we” will pay the same amount as the
other insurance until the loss is fully paid or “our” policy limits are exhausted.
If the other insurance does
not provide for equal share contribution, the loss will be paid up to “our”
“limit” but no more than that proportion of the loss to which the applicable
“limit” under the policy for such loss bears to the total applicable “limit” for
all insurance against the loss. If it is excess, the company will pay the
amount of the loss that is excess of what an insurer would pay for the loss.
They will also pay any deductibles and retentions.
AAIS stipulates that
Commercial Liability Coverage is excess (regardless of whether it is primary,
excess, contingent or on any other basis provides fire, extended coverage,
builders risk, installation risk, or similar coverage) for “your work”; or fire
insurance for premises rented to “you.” It is also excess if there is a loss
due to the maintenance or use of aircraft, “autos” or watercraft which may be
covered by the policy. When this happens, if the other insurer has a duty to
defend, then the AAIS form will have no duty to defend. If no other insurer defends,
then the AAIS form will. They will then be entitled to the “insured’s” rights
against all other insurers. The form will pay the share of the loss that
exceeds the sum of the total amount that all other insurance would pay for the
loss if this insurance did not exist; and including the total of all
deductibles and self-insured amounts required by the other insurance. If there
is a remaining loss, it will be shared with any other insurance that is not
described in this excess insurance provision and was not bought specifically to
apply in excess of the “limits” shown in the “Declarations.”
ISO very clearly states
that if more than one policy exists, its policy becomes an excess policy. If
other insurance applies, this policy will be excess of that other insurance,
whether collectible or not. Liability Insurance is excess over any other
insurance that insures for direct physical loss or damage. If there is other
insurance, “we” will not pay the defense costs that the other company should pay.
If the other company refuses to defend, “we” have the option to do so, and if
“we” do, “we” assume “your” rights under the other policy to go after the other
insurer. ISO also states that Business Liability Coverage is excess over any
other insurance that insures for direct physical loss or damage and that when
the insurance is excess, ISO has no duty to defend any claim or “suit” that
another insurer has an obligation to defend. If no other insurer has a duty to
defend, ISO will do so but will be entitled to the insured’s rights against all
those other insurers.
Motor Vehicle Financial Responsibility Certification/Financial
Responsibility Laws
In both forms, if this
policy is used as proof of financial responsibility as required under any
financial responsibility law, the “bodily injury” and “property damage”
liability will comply with the provisions of the law to the extent of the
coverage and Limits of Insurance required by that law.
Premium
In the AAIS form, if a
premium is considered a deposit premium, the final premium will be determined
at the end of each audit period by an audit.
Separate Insureds/Separation of Insured
Other than the Limits of
Insurance or any rights and duties that have been provided only to the first
Named Insured, insurance applies to each Named Insured as if it were the only
Named Insured, and separately to each insured that a claim or “suit” is brought
against.
Subrogation
Under the AAIS form, if a
loss is paid under the Commercial Liability Coverage, an assignment of any right
of recovery may be required. “You” may not impair these rights and may waive
“your” right to recover in writing before an “occurrence” takes place.
For ISO Businessowners
liability (not medical payments) “you” must make sure that the company has the
rights to recover all payments made under the policy, and help “us” enforce
these rights. “You” must not do anything to impair these rights.
Suit Against Us/Legal Action Against Us
No party has the right
under this coverage part to either join the insurer as a party or bring the
insurer into any “suit” for damages from an insured, or to sue the insurer
unless all of its term have been fully complied with.
The insurer may be sued by
a party to recover an agreed settlement or final judgment against an insured
obtained in an actual trial, but the insurer is not liable for damages that are
not covered by the terms of this coverage part or that part which exceeds the
applicable Limit of Insurance. An agreed settlement is defined as a settlement
and release of liability signed by the insurer, the insured and the claimant or
legal representative of the claimant.
The Nuclear Energy
Liability Exclusion is only intended to exclude coverage for “bodily injury” or
“property damage” liability when an insured is covered for this exposure under
a Nuclear Energy Liability Policy issued by one of the Nuclear Energy Liability
Insurance pools. Otherwise, the insured would have coverage under the BOP
Liability Coverage Form for any “bodily injury” or “property damage” arising
from “nuclear hazards” or hazardous properties of “nuclear material.”
NOTE: This section contains defined words relative to this section only and
relating specifically to nuclear energy. Defined words are in quotation marks.
Definitions of those words are found at the end of this section.
The endorsement amends
insurance provided under the Liability Coverage Form to exclude “bodily injury”
or “property damage” liability.
When an insured is also an
insured under a Nuclear Energy Liability Policy issued by the Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Association of Canada, or any of their successors, or would be an
insured under any policy but for its termination upon the exhaustion of its
limit of liability or resulting from the “hazardous properties” of “nuclear
material,” then any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any amendments. In
addition, the insured would be entitled to indemnity from the US government, or
any of its agencies, under any agreement between any person or organization and
the government.
With respect to any medical
payments coverage, the policy would likewise exclude coverage for expenses
incurred with respect to “bodily injury” resulting from the “hazardous
properties” of “nuclear material” and arising out of the operation of a “nuclear
facility” by any person or organization. The AAIS form also excludes payment
for expenses which result from the operation of a “nuclear facility” and the
hazardous properties of “nuclear material.”
With respect to the
Business Liability Coverage Form, coverage would also be excluded for “bodily
injury” or “property damage” resulting from the “hazardous properties” of
“nuclear material,” if such material is at any “nuclear facility” owned by, or
operated by or on behalf of, an insured or has been discharged or dispersed
from such facility; the “nuclear material” is contained in “spent fuel” or
“waste” at any time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or the “bodily injury” or “property
damage” arises out of the furnishing by an insured of service, materials, parts
or equipment in connection with the planning, construction, maintenance,
operation or use of any “nuclear facility.”
If the facility is located
within the U.S., its territories or possessions or Canada, the exclusion
applies only to “property damage” to such facility.
Basically, the intent of
the above paragraphs is to avoid the stacking of “limits” of insureds covered
under nuclear pools and to require the “nuclear facility” operator to look to
the Nuclear Liability Pool Policy or to the nuclear property pool for coverage.
“Byproduct Material” has the meaning given in the Atomic Energy Act
of 1954 or any of its amendments, but that meaning is not detailed in this exclusion.
“Hazardous properties” include radioactive, toxic
or explosive properties. “Nuclear facility” means any nuclear reactor; any
equipment or device designed for:
1) separating the isotopes of uranium or plutonium
2) processing or utilizing spent fuel
3) handling, processing
or packaging waste
4) any equipment or device used for the
processing, fabricating or alloying of special
“nuclear material” if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is
located consists of or contains more than 25 grams of plutonium or uranium 233
or any combination thereof, or more than 250 grams of uranium 235
5) any structure, basin, excavation, premises or place prepared or used for the storage or
disposal of waste
The “nuclear facility” also includes the site on which any of the
foregoing is located, all operations conducted on such site and all premises used
for such operations.
“Nuclear material” means source material, “special nuclear material”
or “by-product material.”
“Nuclear reactor” is any apparatus that has been designed for or
used to sustain nuclear fission in a self-supporting chain reaction or to
contain a critical mass of fissionable material.
“Property damage” includes all forms of radioactive contamination of
property.
“Source material” has the meanings given in the Atomic Energy Act of
1954 or any of its amendments, but that meaning is not detailed in this
exclusion.
“Special nuclear material” has the meanings given in the Atomic
Energy Act of 1954 or any of its amendments, but that meaning is not detailed
in this exclusion.
“Spent fuel” is any fuel element or component, either solid or liquid,
which has been used or exposed to radiation in a “nuclear reactor.”
“Waste” is any “waste” material that contains “by-product material”
other than the tailings or “wastes” produced by the extraction or concentration
of uranium or thorium from any ore processed primarily for its “source
material” content; and is a result of the operation by any party of any “nuclear
facility” included under the first two paragraphs of the definition of “nuclear
facility.”
This comparison outlines and highlights the similarities and differences between the American Association of Insurance Services (AAIS) Businessowners Special Policy and the Insurance Services Office (ISO) Businessowners Program (BOP) policy. In order to provide an easy to read side-by-side comparison, the descriptions are more limited than in a standard policy review.
Note: This comparison follows the AAIS policy format.
|
BUSINESSOWNERS PROGRAM (BOP) ANALYSIS: AAIS BP 0200 01 04 Vs. ISO BP
00 03 01 06 |
||
|
Section |
AAIS Special BOP |
ISO BOP |
|
Common policy conditions
|
|
|
|
Applies to the entire policy |
Located at the beginning of the policy |
Located at the end of the policy |
|
Assignment |
Not permitted |
Same |
|
Cancellation |
Refers to state specific amendatory endorsement |
By the insured at any
time |
|
Change, modification, or waiver of policy terms |
Must be in writing and issued by the company to be valid |
Must be part of the policy |
|
Conformity with statute |
If any part of the policy conflicts with a statute or state law, the policy is amended to conform to the statute. |
No similar statement |
|
Cooperation |
The insured must cooperate with the insurance company in performing all acts required by the policy. |
Similar but addressed separately in the property and liability conditions. |
|
Examination of books and records |
The insurance company can examine records that pertain to the policy during the policy period and up to 3 years after it expires. |
Same |
|
Inspections |
The insurance company may conduct inspections but doing so does not warrant the health or safety of the premises. |
Similar right extends to rating, advisory or similar organizations. Inspections mandated by law, such as elevator and boiler inspections, are warranties. Includes surveys. |
|
Liberalization |
Broadened coverage applies up to 60 days before the policy effective date or during the policy period if no charge is made for the broadened coverage. |
Same, except the period is only 45 days prior to the policy effective date. |
|
Misrepresentation, concealment or fraud |
Any willful concealment
or misrepresentation of a material fact by any insured voids the policy. |
Fraud by a named
insured voids the policy. |
|
Premium |
This is not in this section. A premium provision is in the liability conditions. |
Premium is paid by the
first named insured. |
|
Premium audit |
This is not in this section. It is part of the premium provision in the liability conditions. |
If the premium indicated on the declarations is an advance premium, the entire policy is subject to audit, not just the liability portion. |
|
Transfer of rights of recovery against others to us |
This is not in this section. It is part of subrogation in both the property and liability sections. |
Refer to the property and liability subrogation sections in this comparison. |
|
Transfer of your rights and duties under this policy |
This is not in this section. The same wording is in the property condition that applies to the death of an individual named insured. |
No transfer is permitted unless an individual named insured dies. |
|
Common policy
definitions |
|
|
|
You and your |
The insured indicated on the declarations. It can be a person or an organization. |
Same. The policy states that these terms refer to the insured named on the declarations. |
|
We, us, and our |
The insurance company that provides the coverage |
Same. The policy states that these terms refer to the insurance company that provides coverage. |
|
Basic territory |
The United States of America, its territories and possessions, Canada and Puerto Rico |
Same but referred to as the coverage territory. The property coverage territory is defined in the property general conditions. The liability coverage territory is defined in the liability conditions. |
|
Computers |
Hardware the insured owns or that is in its custody, including software |
Defined for property only. Includes all computers and peripherals with no mention of ownership. |
|
Data records |
Electronic files, documents and information stored on media |
Similar but called electronic data. Defined for property only |
|
Declarations |
Any page labeled declarations, supplemental declarations or schedules that applies to the policy |
Not a defined term |
|
Fungus or related perils |
Fungus, mold, mildew, protists, wet and dry rot, bacteria and materials released by a fungus |
Similar definition for property but called fungi. The definition does not include protests. |
|
Hardware |
A network of electronic machine components that accepts instructions, processes information and produces results |
Included in the definition of computer |
|
Limit |
The coverage amount that applies |
Not a defined term |
|
Media |
Instruments used with hardware that contain data records and information |
Included in the definition of electronic data |
|
Pollutants |
Two-part definition: |
|
|
Programs and applications |
Purchased data tools and information stored on media or installed in hardware |
Not a defined term |
|
Proprietary programs |
Operating applications specifically developed for the insured and stored on media or installed in hardware |
Not a defined term |
|
Software |
Media, data records, programs, applications and proprietary programs |
Not a defined term |
|
Terms |
Policy provisions, limitations, exclusions, conditions and definitions that apply |
Not a defined term |
|
Property coverages |
|
|
|
Additional property
definitions |
|
|
|
Computer hacking |
Unauthorized intrusion into and/or disruption of a computer, web site or computer network |
Not a defined term |
|
Computer virus |
An undesirable and destructive electronic code introduced into a computer or system, intended for and resulting in damage |
Not a defined term |
|
Dependent locations |
Contributing, recipient, leader and manufacturing locations operated by others that the insured depends on |
Defined in the business income from dependent property additional coverage section |
|
Employee |
Any natural person working for and paid by the insured including leased workers subject to some restrictions |
Defined in the employee dishonesty optional coverage section |
|
Insured |
The person, persons, entities or organizations indicated as the insured on the declarations |
Not a defined term |
|
Money |
Currency, coin and bank notes in current use, travelers checks and money orders held for sale |
Same |
|
Restoration period |
The reasonable amount of time needed to resume normal business activities after a loss, subject to time limitations and restrictions beginning 72 hours after the physical loss or damage |
Referred to as the period of restoration. Similar definition |
|
Securities |
Instruments other than money that represent money or property |
Same |
|
Sinkhole collapse |
Earth collapsing into a space created by the action of water on a rock formation. It does not include the value of the land or costs to fill it. |
Included in the
definition of specified perils. Similar definition. |
|
Specified perils (subject to certain exceptions and exclusions) |
Aircraft, civil commotion, explosion, falling objects, fire, hail, leakage from fire fighting gear, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action, water damage, weight of ice, sleet and snow and windstorm |
Same but referred to as specified causes of loss |
|
Valuable papers and records |
Any written or printed document, including software, but excluding money and securities |
Similar |
|
Volcanic action |
All volcanic activity except clean-up costs for ash and dust that do not cause physical damage to covered property |
Defined in the earth movement exclusion. Similar |
|
Counterfeit Money |
Not a defined term |
An imitation of money intended to defraud and deceive |
|
Manager |
Not a defined term |
Director of a limited liability company |
|
Member |
Not a defined term |
Owner of a limited liability company |
|
Operations |
Not a defined term |
Business activities conducted at the designated location |
|
Stock |
Not a defined term |
Merchandise held in storage or for sale, raw stock, items in process, finished stock and packing and shipping supplies |
|
Property Covered |
|
|
|
Coverage A–Buildings |
Buildings, structures and completed additions, permanently installed machinery and equipment, indoor and outdoor fixtures and building service personal property. If not covered elsewhere, building repairs and additions, materials used for repairs and additions, landlord personal property and building glass |
Same |
|
Coverage B–Business Personal Property |
Owned personal property
used in the insured’s business inside buildings indicated on the
declarations, in the open or in or on a vehicle on or within 100 feet of the
described premises |
Same except personal property of others is not limited to that for which the insured is legally liable |
|
Business personal property (continued) |
The use interest in
improvements made to a non-owned building or acquired at the insured’s
expense that cannot be removed if the insured leaves. |
|
|
Property not covered
|
|
|
|
Accounts receivable |
Not covered |
Same |
|
Antennas, fences and signs |
Fences, radio and television antennas, towers and signs not attached to buildings are not covered. |
Same |
|
Contraband |
Not covered |
Same |
|
Land, water, growing crops and lawns |
Not covered |
Same |
|
Lottery tickets |
Lottery tickets not held for sale are not covered. |
This property is not mentioned. |
|
Money and securities |
Not covered |
Same |
|
Trees, shrubs and plants |
This property, as well as grain, hay, straw or other crops outdoors, is not covered. |
Same |
|
Valuable papers and records |
The cost to reproduce valuable papers is not covered. |
Same |
|
Vehicles and aircraft |
Aircraft and vehicles requiring licensing for use on public roads are not covered. |
Aircraft and vehicles subject to motor vehicle registration laws are not covered. |
|
Watercraft |
Watercraft, its equipment and accessories are not covered when the watercraft is afloat. |
Same |
|
Computers installed in aircraft, watercraft or motorized vehicles other than mobile equipment |
This property is not mentioned. |
Not covered |
|
Electronic Data |
This property is not mentioned. |
Not covered except for stock consisting of prepackaged software |
|
Additional property
excluded and limitations |
|
|
|
Boilers |
Damage due to a condition
within a boiler or water heater is excluded. |
Same |
|
Furs |
$2,500 sub-limit applies for theft of furs or fur garments. |
Same but limit also applies to fur-trimmed garments |
|
Glassware and fragile articles |
Excludes breakage except for damage resulting from specified perils. The exclusion does not apply to building glass, glass containers held for sale or instrument lenses. |
Same |
|
Interior of building or structure |
Loss or damage to the interior by outside weather conditions is excluded, unless the conditions first create an opening in the building that let the weather conditions in, or due to thawing of snow, sleet or ice in the building. |
Same |
|
Jewelry, watches, jewels, pearls, precious stones or metals |
$2,500 sub-limit applies for loss by theft. Includes watch movements, bullion, gold, silver and other precious alloys. This limitation does not apply to watches and jewelry worth $100 or less each. |
Same |
|
Missing property |
Missing property is not covered if there is no physical evidence or explanation for the loss |
Same |
|
Patterns, dies, molds, models or forms |
$2,500 sub-limit applies for loss by theft |
Same but does not apply to models |
|
Personal property in the open |
Loss or damage to personal property in the open due to rain, snow, ice or sleet is excluded. |
Same |
|
Unauthorized transfer of property |
Property transferred to a person, place or other premises based on unauthorized instructions is not covered. |
Same |
|
Additional coverages
|
|
|
|
Antennas, fences or signs |
$2,500 limit on radio
and television antennas, towers, related equipment and attached signs |
Radio and television antennas, towers, signs not attached to buildings and fences are covered for a $2,500 sub-limit for limited causes of loss. |
|
Collapse |
Coverage applies for both buildings and personal property on a limited and specific basis. Does not apply to buildings in imminent danger of collapse |
Same |
|
Counterfeit money or money orders |
$1,000 limit for loss resulting from accepting fraudulent paper currency or money orders |
Same but also covers fraudulent money, not simply paper currency. Limit is a sub-limit. |
|
Debris removal |
25% of the physical loss amount plus an $10,000 additional if needed |
Same |
|
Fire department service charges |
$1,000 limit |
Same but $2,500 sub-limit |
|
Forgery |
$2,500 limit |
Same but limit is a sub-limit. |
|
Glass |
Covers costs to repair or replace glass frames, board up openings and remove obstructions to repair the glass |
Same |
|
Increased costs–ordinance or law |
$10,000 limit per building |
Same |
|
Inventory and appraisal expenses |
$2,500 limit |
Not covered |
|
Limited fungus and related perils |
$15,000 limit |
Same but limit is a sub-limit |
|
Lock and key replacement |
$1,000 limit |
Not covered |
|
Pollutant clean-up and removal |
$10,000 limit per location and policy annual aggregate |
Same |
|
Recharge of fire extinguishing equipment |
$5,000 limit |
Same but limit is a sub-limit |
|
Removal |
Covers insured property threatened by a covered peril and moved, while in transit and at the temporary location 30 days |
Same but uses the words covered cause of loss instead of peril |
|
Tearing out and replacing |
Covers costs to tear out and replace part of the structure to repair leaking systems or appliances. Excludes costs to repair the leaking object itself, unless it is a fire extinguishing system or the loss cause is freezing. |
Same |
|
Electronic data |
This term is not mentioned. |
$10,000 sub-limit |
|
Extensions of
Coverage–Coverage A–Buildings |
|
|
|
Building property–off premises |
$5,000 limit for building service property in transit and at other locations |
Same but $10,000 limit |
|
Newly acquired buildings |
$250,000 limit for 30 days after construction begins or the date the building is acquired |
Same |
|
Trees, shrubs and plants |
$2,500 limit for limited perils coverage. $500 sub-limit per tree, shrub or plant, including debris removal costs |
Same |
|
Extensions of Coverage–Coverage
B–Business Personal Property |
|
|
|
Accounts receivable |
$10,000 limit on
premises |
Same |
|
Business personal property–acquired locations |
$100,000 limit at newly acquired location for 30 days |
Same |
|
Business personal property–off premises |
$5,000 limit for personal property In transit or off premises |
Same but $10,000 limit |
|
Personal effects |
$2,500 limit per premises for personal effects, other than tools, of the insured, officers, partners and employees |
Same but theft is not covered |
|
Valuable papers and records |
$10,000 limit on
premises |
Same |
|
Coverage C–Loss Of Income |
|
|
|
Earnings |
Covered for up to 12 months |
Same |
|
Earnings–limit |
Actual loss sustained basis but specific limit may be chosen as an option |
Same but no option for specific limits |
|
Earnings–payroll |
Payroll included to the extent needed to resume operations |
Payroll included for 60 days with the option to extend or increase it |
|
Extra Expenses |
Covered only to the extent that they reduce the earnings loss |
Same |
|
Coverage C–Loss of
income |
Provides coverage during the restoration period when normal business activities are disrupted by direct physical loss or damage to covered property by an insured peril. |
Similar but uses the words covered cause of loss instead of peril |
|
Earnings |
Pays the insured's actual loss of net income and other continuing operating expenses under normal circumstances after a loss. |
Similar |
|
Extra Expenses |
Pays necessary expenses incurred to resume or continue normal business activities to the extent possible. |
Similar |
|
Exclusions And
Limitations–Coverage C–Loss Of Income |
|
|
|
Fire extinguishing |
Expenses to extinguish a fire are not covered. |
Same |
|
Leases, licenses, contracts or orders |
Lapses or cancellations of any of these do not increase the restoration period. |
Same |
|
Software |
No payment for loss of earnings caused by direct loss to software after 60 days. |
$10,000 limit for interruption of computer operations |
|
Strikes, protests and other interference |
Restoration period is not increased because of strikes or protests. |
Same |
|
Unnecessary expenses |
Unnecessary expenses are not covered. |
Same |
|
Loss Of Income
Coverage Extensions |
|
|
|
Alterations and new buildings |
Coverage extends to include additions, alterations and new buildings on the same premises. |
Coverage applies only to the designated premises, not building. As a result, no extension is needed. |
|
Fungus and related perils |
30 days coverage as a result of occurrence of a covered peril except fire or lightning. |
Same |
|
Interruption by civil authority |
Coverage for three weeks after a 72-hour waiting period ends. |
Same |
|
Period of loss extension |
30-day extension period beyond the restoration period. |
Same |
|
Additional Loss Of Income Coverages |
|
|
|
Earnings from dependent locations |
$5,000 limit for loss of business income due to covered loss at a dependent property after a 72-hour waiting period ends. |
Same |
|
Newly acquired locations |
$100,000 limit at a newly acquired location for 30 days. |
Not covered |
|
Interruption of computer operations |
This term is not mentioned. |
$10,000 limit |
|
Perils Covered |
|
|
|
Risks of direct physical loss or damage unless limited or excluded |
Same |
Same |
|
Perils excluded |
|
|
|
Civil authority |
Excluded |
Same |
|
Earth movement or volcanic eruption |
Excluded |
Same |
|
Fungus or related perils |
Excluded |
Same |
|
Nuclear hazard |
Excluded |
Same |
|
Ordinance or law |
Excluded |
Same |
|
Utility failure |
Excluded |
Same |
|
War and military action |
Excluded |
Same |
|
Water |
Excluded |
Same |
|
Weather |
Excluded |
Same |
|
Additional
exclusions |
|
|
|
Animals |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
Same |
|
Collapse |
Excluded except for the coverage provided under additional coverage–collapse. |
Same |
|
Computer virus or computer hacking |
Excluded |
Same |
|
Contamination or deterioration |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
Same |
|
Criminal, fraudulent, dishonest or illegal acts |
Excluded except for acts of destruction by employees. |
Same |
|
Defects, errors or omissions |
Excluded |
Same |
|
Electrical Currents |
Excluded |
Same |
|
Explosion |
Explosion of steam boilers and steam devices is excluded unless caused by gas or fuel in a firebox, combustion chamber or flue. |
Same |
|
Freezing |
Excluded unless heat is maintained or the system is drained and turned off if heat is not maintained. Does not apply to computers. |
Same |
|
Mechanical breakdown |
Excluded except for resulting glass breakage or loss caused by a specified peril. Does not apply to computer hardware. |
Same except it does not apply to computers. |
|
Neglect |
Excluded |
Same |
|
Pollutants |
Only losses caused by specified perils are covered. |
Same |
|
Seepage |
Excluded |
Continuous seepage or leakage covered only if continues beyond 14 days. |
|
Settling, cracking, shrinking, bulging or expanding |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
Same |
|
Smog |
Excluded |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
|
Smoke, vapor or gas |
Excluded |
Same |
|
Temperature / humidity |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
Same |
|
Voluntary parting |
Excluded |
Same |
|
Wear and tear, marring and scratching |
Excluded except for resulting glass breakage or loss caused by a specified peril. |
Same |
|
Consequential losses |
No similar exclusion |
Excludes delay, loss of use and loss of market. |
|
Installation, testing and repair |
No similar exclusion but this coverage is not provided |
Excludes damage to computers or records due to errors in installation, testing or repair except for loss due to ensuing fire or explosion. |
|
Errors or omission |
No similar exclusion but this coverage is not provided |
Covers damage due to errors or omissions in programming except for loss due to fire or explosion. |
|
Accounts receivable exclusion |
No similar exclusion but this coverage is not provided |
Includes three exclusions that apply to accounts receivable. |
|
Certain computer-related losses |
No similar exclusion |
This is the Year 2000 (Y2K) exclusion. |
|
What must be done in
case of loss |
|
|
|
Notice |
Promptly notify the insurance company. Notify the police if caused by a crime. |
Same |
|
Protect property |
Must protect property. The insurance company covers expenses to do so. |
Same |
|
Proof of loss |
Submit written form within 60 days after the insurance company requests it. |
Same |
|
Examination under oath |
Submit as insurance company requires. |
Same |
|
Records |
Produce records and allow the company to make copies as and when requested. |
Same |
|
Damaged property |
Make damaged and undamaged property available for examination. |
Same |
|
Volunteer payments |
Such expenses are not paid except for the ones made to protect property. |
Same |
|
Abandonment |
Property may not be abandoned to the insurance company without its consent. |
Same |
|
Intent to continue business |
Insured must resume operations as soon as possible. |
Same |
|
Valuation of property losses |
|
|
|
Replacement cost |
This applies to most building and personal property items if insured to at least 80% of replacement value and if actually repaired or replaced. |
Same |
|
Actual cash value |
If this valuation option is selected, building and personal property is valued at the actual cash value on the date of loss minus depreciation. |
Same |
|
Property not eligible for replacement cost |
Household contents, except a landlord's property, manuscripts, art objects, personal property of others and used goods held for sale. |
Same |
|
Glass |
Includes safety glazing to the extent required by law. |
Same |
|
Hardware |
Hardware replaced is valued at replacement cost. Hardware not replaced is valued at actual cash value. Partial losses are restored to pre-loss condition. |
Same |
|
Loss to parts |
Covers the value of only the lost part and not the loss of value to the entire item. |
Not specifically addressed |
|
Money |
Valued at its face value. |
Same |
|
Pairs or sets |
Valued at the loss of value to the entire pair or set, not just the value of the lost item. |
Not specifically addressed |
|
Securities |
Based on the value at the close of business on the date of loss. |
Same |
|
Software–data records |
The cost of reproduction from duplicates or the appropriate expenses required, if duplicate copies do not exist. |
Not specifically addressed |
|
Software–media |
The cost to repair or replace with similar material and quality. |
Same |
|
Software–programs and applications |
The cost to reinstall from licensed discs or the cost of the most current program if licensed discs are not available. |
Not specifically addressed |
|
Software–proprietary programs |
The cost of reproduction from duplicates or the appropriate expenses required if duplicate copies do not exist. |
Not specifically addressed |
|
Tenant's improvements |
Replacement cost or the remaining value based on a portion of the original cost and the remaining term of a lease. |
Same |
|
Valuable papers and records |
Cost of blank materials and the labor required to transcribe |
The cost of restoration if restored. The cost of blank materials if not restored. |
|
How much we pay |
|
|
|
Insurable interest |
Pays only the insured's insurable interest in the covered property. |
Covers only the insured's financial interest in the property |
|
Deductibles– |
Glass or one of the
optional property coverages–the amount indicated on the declarations |
Money, securities,
employee dishonesty, outdoor signs & glass are subject to the optional
coverage/glass deductible. |
|
Loss settlement terms |
Pays the lesser of the valuation amount, the cost to repair or replace or the applicable limit. |
Same |
|
Insurance under more than one coverage |
Does not pay more than the amount of loss sustained. |
Same |
|
Insurance under more than one policy |
Pays its proportion if policy terms are identical. Pays as excess over the amount of the other policy if they are not. |
Pays as excess over the amount due from the other policy. |
|
Accounts receivable |
Payment is for the lesser of the total sums due minus certain deductions, the cost to reconstruct records or the policy limit. |
Pays based on a specific formula. |
|
Automatic increase |
Increases the limit by the percentage indicated on the declarations. |
Same |
|
Seasonal increase |
Limit is automatically increased 25% if the business personal property limit is at least 100% of the average values for the last 12 months. |
Same |
|
Outdoor signs attached to buildings |
Not addressed |
$1,000 sub-limit per occurrence |
|
Loss payment |
|
|
|
Our options |
The company's options are to pay the value of damaged property, the cost to repair or replace it, the cost to repair or rebuild with similar property or to take the property at the agreed value. |
Same |
|
Your losses |
Payment must be made within 30 days after receipt of a sworn proof of loss and an agreement is reached on the amount of loss. |
Same |
|
Property of others |
Losses are adjusted with either the property owner or the named insured. The insurance company may defend suits brought by the property owner. |
Same |
|
Additional conditions
|
|
|
|
Appraisal |
If valuation is disputed, an appraisal must be requested in writing. Each party selects an appraiser within 20 days. They then select an umpire within 15 days. Disagreements are submitted to the umpire. |
Same but does not include any time limits |
|
Benefit to others |
Insurance does not benefit any party having custody of the property. |
Same |
|
Control of property |
Acts of neglect by other parties does not affect coverage. |
Same |
|
Death of an individual named insured |
The named insured's rights and duties pass to its legal representative having proper temporary custody of the property. |
Same |
|
Mortgage provisions |
Standard provisions apply. |
Same |
|
Policy period |
As indicated on the declarations. |
Same |
|
Recoveries |
Each party must notify the other of recoveries or payments. If the insured wants the recovered property, it must return the claim payment it received. |
Same |
|
Subrogation |
The insurance company secures all of the insured's subrogation rights that it did not waive before a loss. The insured can waive rights after a loss only to another insured, tenant, or to an owned or controlled business. |
Same |
|
Suit against us |
All policy terms must be met and suit brought not later than two years after the date of loss. |
Same |
|
Vacancy and unoccupancy restrictions |
Property vacant over 60 days is not covered for loss due to theft, glass breakage, vandalism, or water damage. Loss payments are reduced 15% for all other covered losses. |
Similar |
|
Optional property
coverages |
|
|
|
Employee dishonesty |
Covered if a limit for it appears on the declarations. |
Same. Some differences involving application of policy level exclusions. |
|
Money and securities |
Covers money,
securities, lottery tickets and bullion. |
Covers money and
securities |
|
Outdoor signs |
Outdoor signs are covered for the limit shown with restricted policy exclusions. |
Same except different restricted policy exclusions apply. |
|
Mechanical breakdown |
Not covered |
Limited boiler and machinery coverage applies. |
|
Commercial Liability
Coverages |
|
|
|
Additional definitions
|
|
|
|
Advertisement |
A public notice or announcement offering the insured's goods or services to potential customers. |
Same |
|
Auto |
Vehicles designed for use on public roads including any attached machinery. |
Similar |
|
Bodily injury |
Bodily harm, sickness or disease, including death. Does not include mental or emotional injury or suffering or distress that does not result from a physical injury. |
Same except does not address the terms mental or emotional injury. |
|
Coverage territory |
The basic territory |
Same. However, worldwide coverage is included for personal and advertising injury via the Internet. |
|
Covered contract |
Includes specific types of lease, easement, sidetrack, licensing or maintenance contracts and agreements. Excludes most contracts that indemnify others. |
Similar to the definition of an insured contract. |
|
Damages |
Money provided to persons who sustain covered injuries. |
Not a defined term |
|
Designated insured |
Individuals listed in Section A of the definition of insured and any employee authorized to give or receive notices of occurrences or claims. |
Not a defined term |
|
Employee |
Includes regular and leased workers. Excludes temporary workers. |
Same |
|
Executive officer |
Any person in an officer position as provided for in the company charter, by-laws or similar documents. |
Same |
|
Impaired property |
Property made less useful because of actions or lack of actions by the insured that can be restored by taking certain actions or by performing specific duties. |
Same |
|
Insured |
Includes the insured, its partners and their spouses, other organizations and their directors. Also includes real estate managers, legal representatives or others handling an estate, mobile equipment operators and employees and volunteers with some limitations. |
Same |
|
Leased worker |
A person leased from a labor-leasing firm under a contract to perform duties related to the business of the insured. Does not include temporary workers. |
Same |
|
Loading or unloading |
Begins when property is moved from the point of origin and ends when removed from the vehicle at the destination. |
Same |
|
Mobile equipment |
Certain types of propelled and non-propelled land vehicles, including all attached machinery and equipment, subject to a number of definitions, eligibility criteria and limitations. |
Same |
|
Occurrence |
An accident including repeated exposure to the same condition. |
Same |
|
Personal and advertising injury |
Includes slander, libel, disparagement, violation of the right to privacy, false arrest, harmful prosecution and a landlord's invasion of a tenant's rights. |
Similar |
|
Products/completed work hazard |
Bodily injury or property damage that occurs off site and after another party takes control of the product. On-site consumable products are covered. It includes bodily injury and property damage from work completed off site. |
Same. Referred to as the products-completed operations hazard. |
|
Products |
Goods transferred from the insured to another party, including warranties, packaging, containers and instructions. Vending machines not held for sale and real property are not products. |
Essentially the same definition but referred to as your product. |
|
Property damage |
Injury to or destruction of tangible property and/or loss of use of the property. |
Same |
|
Short-term rented premises |
Premises rented to an insured for seven days or less, including the contents of such premises. |
Not a defined term |
|
Suit |
A civil or administrative proceeding alleging injury or damage to which coverage allegedly applies. Includes arbitration or alternative dispute resolution proceedings. |
Same |
|
Temporary worker |
A person hired as a substitute for an employee. |
Same. Also includes persons hired to assist in short-term situations. |
|
Volunteer worker |
A person who gives time, performs services and acts at the insured's direction in a defined range of duties but who receives no compensation for time worked or for services donated. |
Anyone working as an employee but not receiving compensation from any source |
|
Your work |
Work done by or for the insured, including warranties, all materials and equipment needed for that work and instructions. |
Same |
|
Commercial Liability
Coverages |
|
|
|
Coverage L–Bodily
injury liability and property damage liability insuring agreement |
Pays amounts the insured is legally obligated to pay as damages due to bodily injury or property damage covered by this insurance. Must be caused by an occurrence that takes place during the policy period and in the coverage territory. Coverage does not apply to occurrences that begin before the coverage effective date. |
Same |
|
Exclusions |
|
|
|
Professional services |
Coverage does not apply for professional acts. |
Same |
|
Employment related practices |
Coverage does not apply to bodily injury, property damage or consequential bodily injury due to employment related practices. |
Not excluded. Use BP 04 17–Employment-Related Acts Exclusion to exclude coverage. |
|
War |
War or any condition of war is excluded. |
Same |
|
Intentional acts |
Loss or damage due to the insured's directed or intentional acts is excluded, except for reasonable force used to protect people or property. |
Same |
|
Contractual liability |
No coverage for liability the insured assumes, other than the liability that exists without a contract or agreement or for liability assumed under a covered contract. |
Same |
|
Racing and related activities |
Coverage does not apply to liability arising from the use of mobile equipment in any stunt activity or contest. |
Same but including the word "prearranged" could mean that coverage applies in spontaneous situations. Excludes only bodily injury and property damage. |
|
Autos, aircraft or watercraft |
Coverage does not apply to injury or damage arising out of any use of autos, aircraft, or watercraft, subject to five specific exceptions. |
Same |
|
Liquor liability |
No coverage for injury or damage for which the insured may be liable due to any action involving alcoholic beverages but only if the insured is in the liquor business. |
Same |
|
Pollution |
No coverage for liability arising out of any action involving pollutants of any kind, subject to certain specific narrowly defined exceptions. |
Same but provides limited coverage for bodily injury due to pollutant problems with cooling and dehumidifying equipment or hot water heaters. |
|
Employer’s liability |
Coverage does not apply to bodily injury to an employee during the course of employment or for consequential injury to any relative of that employee. |
Same |
|
Workers compensation and related laws |
No coverage for any bodily injury for benefits the insured must provide under workers compensation, disability benefits, unemployment compensation or similar laws. |
Essentially the same. No coverage for any obligation under any of these laws. |
|
Damage to owned property |
No property damage coverage for property the insured owns, occupies or rents except as required for a short term rented premises. |
Similar. Essentially the same. |
|
Damage to property sold, given away or abandoned |
No coverage for property damage to premises sold, given away or abandoned unless it was the insured’s work and the insured never occupied or rented it. |
Same |
|
Property loaned by you |
Coverage does not apply to property damage to property loaned by the insured, except with respect to liability assumed under a sidetrack agreement or with respect to a short term rented premises. |
Same |
|
Property of others in your care, custody or control |
Property damage coverage on property in the insured's care, custody or control is excluded, except with respect to liability assumed under a sidetrack agreement or with respect to a short-term rented premises. |
Same |
|
Damage to real property while being worked on |
No coverage for real property being worked on if the damage is due to the insured’s work, except for liability assumed under a sidetrack agreement. |
Same |
|
Damage to products |
Property damage to the insured’s product that arises from the product is excluded. |
Same |
|
Damage to property you are working on unless the work is done by subcontractors |
Property damage to the insured’s work if it is due to the insured’s work is excluded. Coverage does apply if subcontractors perform the work. |
Same |
|
Property not physically damaged |
No coverage for property damage to property not physically damaged but that still cannot be used because the insured failed to perform or the work is defective or unsafe. Does not apply if the condition is due to a sudden and accidental injury to property after it is put to use. |
Same |
|
Recall expense |
Coverage does not apply to loss or expense due to a product recall. |
Same |
|
Bodily injury arising from personal and advertising injury |
Bodily injury arising out of personal and advertising injury is excluded. |
No similar exclusion |
|
Electronic data |
No similar exclusion |
Excludes damages because electronic data cannot be used or accessed. |
|
Distribution of material in violation of statutes |
No similar exclusion |
No coverage due to violation of various state “do not call” or similar statutes. |
|
Coverage M–Medical payments insuring agreement |
The insurance company pays reasonable medical costs of others incurred and reported within one year after the loss or event. |
Same |
|
Exclusions |
|
|
|
Medical expenses excluded under liability coverages |
Medical expenses for bodily injury excluded under Coverage L are also excluded under this coverage. |
Same |
|
Insureds |
Coverage does not apply to medical expenses due to bodily injury to any insured, except for volunteer workers. |
Same |
|
Independent contractors |
No coverage for medical expenses due to injury to a person the insured hires to do work for an insured or a tenant of an insured. |
Same |
|
Normally occupied premises |
No coverage for medical expenses of a person injured on premises the insured owns or rents that the injured person normally occupies. |
Same |
|
Athletic activities |
Medical expenses for a person injured during any sporting or athletic activities are excluded. |
Same |
|
Products/completed work |
There is no coverage for medical expenses for bodily injury included in the products/completed work hazard. |
Same. Referred to as products/completed operations. |
|
Club members |
Coverage does not apply to medical expenses for injuries to club members if the insured is a club. |
No similar exclusion |
|
Guests at hotels, motels or tourist courts |
No coverage for medical expenses due to an injury to a guest of a hotel, motel or tourist court owned or operated by the insured or by others on its behalf. |
No similar exclusion |
|
Workers compensation and similar laws |
No coverage for medical expenses the insured must provide under workers compensation, disability benefits, unemployment compensation or similar laws. |
Same |
|
Campers, students, inmates or patients |
Medical expenses for students, campers, patients or inmates of facilities the insured owns or operates or operated by others on its behalf are excluded. |
No similar exclusion |
|
Coverage O–Fire legal liability insuring agreement |
Covers property damage to buildings or parts of buildings rented or loaned to the insured caused by a fire or explosion for which the insured is legally liable. This coverage is subject to a separate limit. |
Not a separate listed coverage. Coverage is provided in the limits section and as an exception to the property damage exclusions. It is subject to a separate limit and the only covered cause of loss is fire. |
|
Exclusions |
|
|
|
Liability assumed under contract |
No coverage for liability assumed by contract or agreement to indemnify any other party for premises damaged by fire. |
Not applicable. No similar exclusion |
|
Professional services |
Coverage does not apply to property damage arising out of rendering or failing to render any professional service. |
Not applicable. No similar exclusion |
|
Intentional acts |
Property damage due to intentional acts done or directed by the insured is excluded. |
Not applicable. No similar exclusion |
|
Coverage P–Personal and advertising injury liability insuring
agreement |
Pays amounts an insured is legally obligated to pay for damages due to personal and advertising injury covered by the insurance. It must be caused by an offense arising from business operations committed in the coverage territory during the policy period. |
Not a separate
coverage. Included with bodily injury and property damage coverage. Similar
but adds these limitations: |
|
Professional services |
No coverage for acts arising out of rendering or failing to render any professional service. |
Same |
|
Employment-related practices |
Coverage does not apply to acts arising out of any employment-related practices or consequential injury resulting from any employment practices, regardless of the insured's capacity or obligation to reimburse others. |
No similar exclusion. Coverage must be excluded by a separate endorsement. |
|
War |
Injury caused in any way by war or by a condition of war is excluded. |
Same |
|
Intentional acts |
No coverage for injury arising out of intentional acts directed by the insured. |
Same |
|
Criminal acts |
Coverage does not apply for injury arising out of a criminal act committed or directed by the insured. |
Same |
|
Contractual liability |
Injury due to liability assumed by the insured, other than liability that exists without a contract or agreement, or for liability assumed under a covered contract, is excluded. |
Same |
|
Knowingly publishing false information |
No coverage for injury arising out of oral or written publications known to be false and done by the insured, or that took place before the policy inception date. |
Similar |
|
Breach of contract |
Coverage does not apply to injury due to breach of contract unless it was an implied contract. |
Similar |
|
Goods failing to meet advertised quality |
Injury arising out of the failure of goods to perform as advertised is excluded. |
Similar except that it excludes both personal injury and advertising injury. |
|
In the advertising, broadcasting, publishing or telecasting business |
There is no coverage for injury arising out of an offense committed by an insured in the advertising, broadcasting, publishing or telecasting business. Coverage does apply to false arrest, malicious prosecution and willful eviction. |
Similar. It also excludes providing web site search engines for others. |
|
Incorrect description of price |
Coverage does not apply to injury arising out of an incorrect price. |
Similar |
|
Pollution |
Injury arising out of pollution or pollution clean-up expenses is excluded. |
Same |
|
Infringement of copyright and other intellectual property rights |
There is no coverage for injury arising out of the violation of intellectual property rights, trademark, trade secret, patent rights or copyright infringement. It des not apply to violation or infringement of copyright, slogan or trade dress rights in an advertisement. |
Similar. Personal injury or advertising injury coverage applies only if part of the insured’s advertisement. |
|
Electronic chat rooms |
Coverage does not apply to injury arising out of chat rooms, bulletin boards or other forums the insured owns or controls. |
Personal injury or advertising injury arising from an activity on an insured-sponsored chat room is excluded. |
|
Use of other’s names in email or domain names |
Injury arising out of use of the name or product of others without their permission on any electronic medium with the intent to mislead potential customers of another business is excluded. |
There is no personal injury or advertising injury coverage if a tactic is used to mislead customers of another business. |
|
Supplemental
payments |
Defense is provided in addition to the limits. The insurer has the right and duty to defend suits and to settle claims or suits as it deems appropriate. Alternative dispute resolution proceedings are considered suits. There is no obligation to defend once the limit is paid. Eight specific items are paid. |
Same |
|
What must be done in
case of loss |
|
|
|
Notice |
Notice of an occurrence or the possibility of one occurring must be given to the insurance company or its agent promptly and include as much detail as possible. |
Same |
|
Cooperation |
The insured must cooperate with the insurance company in investigating or settling claims or in defending suits. |
Same |
|
Volunteer Payments |
The insured must not make any payments or assume any obligations, except at its own cost, other than for first aid rendered. |
Similar |
|
Other Duties |
If a claim is made or a suit is brought against any insured, all legal documents must be sent to the insurance company and records or other information made available to it. The insured must also cooperate with and assist the company in everything relating to settling claims and resolving lawsuits. |
Similar but the insured must record the details and notify the company. There are no requirements concerning the insured’s assistance except for the enforcement of rights. |
|
How much we pay |
|
|
|
Limits on the declarations |
The limits indicated are the most paid and are not affected by number of insureds, injuries, suits or claims. Medical payments made are not an admission of fault. |
Same but no corresponding statement concerning admission of fault under medical payments. |
|
General aggregate |
The general aggregate limit is the most paid during the policy term for the total of damages under bodily injury, property damage, personal and advertising injury and medical expenses under medical payments. |
Same. The aggregate limit is two times the liability and medical expenses limit. |
|
Products/completed work hazard aggregate limit |
This limit is the most paid for all such damages. |
Same. The aggregate limit is two times the liability and medical expense limit. |
|
Occurrence limit |
This is the most paid for all damages under all coverages and medical expenses under medical payments coverage. |
Same |
|
Fire legal liability limit |
The maximum limit is $50,000 and is not subject to an aggregate. This limit can be increased. |
Same except the limit must appear on the declarations and is subject to the policy aggregate limit. |
|
Medical expense limit |
The most paid for medical expenses for any one person is the medical payments limit indicated on the declarations. |
Same |
|
Application of the aggregate limit |
The aggregate limit applies to the 12-month period beginning with the inception date unless the policy period is less than 12 months. The aggregate limit applies to a policy period greater than a year. |
Same |
|
Additional conditions
|
|
|
|
Bankruptcy |
The insurance company's obligations are not affected by the insured's bankruptcy. |
Same |
|
Insurance under more than one policy |
This outlines when the policy is primary and when it is excess. |
A similar condition is in the general conditions. One additional condition is that the policy is excess when the insured is named as an additional insured on another insurance policy. |
|
Knowledge of bodily injury or property damage |
Knowledge of bodily injury or property damage occurs at the earliest time that a suit or claim is received, when a claim or potential claim is reported to the insurance company, or when any insured is aware of any situation where a claim may occur or is occurring. |
Same but is in the insuring agreement instead of in the conditions. |
|
Premium |
Premiums are based on audits done after policy expiration, except for flat premium charges. Based on the audit results, the insured pays additional premium due when an invoice is received. If the earned premium is less than the deposit, the insured receives a refund, subject to any policy minimum premiums. The insured must maintain records relating to final audit earned premium computations. |
This is in the general conditions. As a result, it applies to both property and liability coverages. |
|
Separate insureds |
Coverage applies separately to each insured named in a claim or suit but this does not affect the total policy limits. |
Same. The first named insured has specific rights and responsibilities spelled out in this policy and those still apply. |
|
Subrogation |
The insurance company can require an assignment of rights of recovery. If the insured impairs those rights, the company is not required to pay. However, the insured can waive rights of recovery against others in writing before a loss occurs. |
Located in the general conditions. As a result, the condition applies to the entire policy |
|
Suit against us |
The insured may not sue the insurance company until all relevant policy provisions are met and the amount of the insured’s liability determined by a final judgment or written agreement. |
Similar |
|
Nuclear energy
liability exclusion |
|
|
|
Exclusion |
Nuclear material and nuclear facilities are not covered. |
Same |
|
Nuclear energy liability exclusion definitions |
Hazardous properties, nuclear material, source material, special nuclear material, by-product material, spent fuel, waste, nuclear facility, nuclear reactor and property damage are specifically defined within this exclusion. |
Same |
COMPARE: ISO BP 00 03 01 10 TO AAIS BP 0200 01
04
This comparison outlines and highlights the similarities and differences between the Insurance Services Office (ISO) Businessowners Coverage Form and the American Association of Insurance Services (AAIS) Businessowners Special Policy. For the purpose of an easy to read side-by-side comparison, the descriptions are much more limited than in a standard policy analysis.
Note: This comparison follows the ISO Businessowners Coverage Form format.
|
COMPARE:
ISO BP 00 03 01 10 TO AAIS BP 0200 01 04 |
|
||
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Introduction
|
Explains
provisions that reduce coverage, rights, duties and what is and is not
covered. Defines "you," "your," "we,"
"us," and "our." Refers to special words and phrases in
definitions |
Similar
but does not define these terms because they are in Common Policy Definitions
|
|
|
Agreement
|
Not a part
of the coverage form |
Explains
that coverage is provided subject to the named insured paying the required
premium |
|
|
Section
I–Property Coverage |
|
|
|
|
Buildings
|
As described
|
Same |
|
|
Business
Personal Property |
As described |
Same |
|
|
Property
Not Covered |
|
|
|
|
Aircraft
and motor vehicles subject to registration |
Excluded
|
Same |
|
|
Money
and securities |
Excluded
|
Same |
|
|
Contraband
and property illegally transported or traded |
Excluded
|
Same |
|
|
Land,
water, growing crops and lawns |
Excluded
|
Same |
|
|
Outdoor
fences, antennas, signs, trees, shrubs and plants |
Excluded
|
Same |
|
|
Watercraft
and their equipment |
Excluded
|
Same |
|
|
Accounts,
bills, food stamps, other evidences of debt, accounts
receivable and valuable papers and records |
Excluded
|
Does not
mention other evidences of debt |
|
|
Computers
in aircraft and motor vehicles subject to registration other than stock |
Excluded
|
Not
mentioned |
|
|
Electronic
data other than stock of prepackaged software |
Excluded
|
Not
mentioned |
|
|
Animals,
except as stock inside buildings |
Excluded
|
Not
mentioned |
|
|
Lottery
tickets not held for sale |
Not
mentioned |
Excluded
|
|
|
Covered
Causes Of Loss |
Risks of
direct physical loss unless excluded or limited |
Same but
includes damage in addition to loss |
|
|
Limitations
|
|
|
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Steam
boilers, pipes, engines and turbines damage from
explosions in furnaces, flues and passageways |
Covered |
Same.
Refers to fireboxes and combustion chambers |
|
|
Hot
water boilers and other water heaters caused by conditions inside them |
Covered |
Same |
|
|
Missing
property |
Excluded
except for optional coverage for money and securities |
Same.
Also includes employee dishonesty |
|
|
Property
transferred based on unauthorized instructions |
Excluded
|
Same |
|
|
Damage
inside buildings caused by rain, snow, sleet, ice, sand
or dust |
Excluded
with exception for building damage that permits these objects to enter |
Same |
|
|
Animals |
Excluded
except if caused by specified causes of loss or breakage of building glass |
Not
mentioned |
|
|
Fragile
articles except building glass, containers of property for sale and photo or
scientific instrument lenses |
Excluded
except if caused by specified causes of loss or breakage of building glass |
Same |
|
|
Loss or
damage by theft on furs, fur garments, watches and
jewelry over $100 each, precious stones, bullion, gold, silver, platinum,
patterns, dies, molds and forms |
$2,500
sub-limit |
Same.
Also includes models |
|
|
Additional
Coverages |
|
|
|
|
Debris
removal |
25% of
the amount of physical loss plus $10,000 if needed |
Same |
|
|
Preservation
of property at other premises |
Covered
for 30 days |
Same.
Referred to as Removal |
|
|
Fire
department service charge |
$2,500
limit |
$1,000
limit |
|
|
Collapse
|
Limited coverage for both buildings and personal
property |
Similar |
|
|
Water
damage, other liquids, powder or molten material
damage |
Covers costs to tear out and replace part of the structure to repair leaking systems or appliances |
Same.
Referred to as Tearing Out And Replacing |
|
|
Business
income |
Covers actual loss sustained for up to 12 months during the restoration period |
Same |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Extra
Expense |
Covers expenses to avoid or reduce the time of any suspension of operations |
Same |
|
|
Pollutant
cleanup and removal |
$10,000 limit per location and annual aggregate |
Same |
|
|
Civil
authority |
Business income coverage begins 72 hours after the order at a location one mile or less away and lasts four weeks |
Same except time period is 30 consecutive days and no restriction on distance |
|
|
Money
orders and counterfeit money |
$1,000 limit for loss resulting from accepting money orders not paid when presented and counterfeit money |
Same but refers to counterfeit paper currency |
|
|
Forgery
or alteration |
$2,500 limit subject to conditions |
Same with similar conditions |
|
|
Increased
cost of construction |
$10,000 limit per building or structure subject to conditions |
Referred to as Increased Costs–Ordinance Or Law. Same limit, similar conditions |
|
|
Business income from dependent properties |
$5,000 limit subject to numerous conditions |
Referred to as Earnings From Dependent Locations. Same limit, similar conditions |
|
|
Glass expenses |
Covers costs to repair or replace glass frames, board up openings and remove obstructions to repair glass |
Same |
|
|
Fire extinguisher systems recharge expense |
$5,000 limit |
Referred to as Recharge Of Fire Extinguishing Equipment. Same limit |
|
|
Electronic data |
$10,000 limit per occurrence and annual aggregate |
Not mentioned |
|
|
Interruption of computer operations |
$10,000 limit per occurrence and annual aggregate, subject to numerous conditions |
Not mentioned |
|
|
Limited coverage for fungi, wet rot or dry rot |
$15,000 limit per occurrence and annual aggregate, subject to numerous conditions |
Referred to as Limited Fungus And Related Perils. Same limit, similar conditions |
|
|
Inventory and appraisal expenses |
Not mentioned |
$2,500 limit |
|
|
Lock and key replacement |
Not mentioned |
$1,000 limit |
|
|
Coverage Extensions |
|
|
|
|
Newly acquired or constructed buildings |
$250,000 limit for up to 30 days after construction begins or the date acquired |
Same |
|
|
Business personal property at newly acquired or constructed locations |
$100,000 limit for up to 30 days after the date acquired or construction begins |
Same |
|
|
Personal property off premises |
$10,000 limit at non-owned locations or while in transit |
$5,000 limit |
|
|
Outdoor property |
$2,500 limit except $1,000 limit on any one tree, shrub or plant for limited causes of loss |
Similar but $500 on any one tree, shrub or plant |
|
|
Personal effects |
$2,500 limit, excluding tools used in the business and loss or damage by theft |
Same but no theft exclusion |
|
|
Valuable papers and records |
$10,000 limit at described premises/$5,000 at other locations |
Same limits |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Accounts receivable |
$10,000 limit at described premises/$5,000 at other locations |
Same limits |
|
|
Building property–off premises |
Not mentioned |
$5,000 limit excluding theft from unattended vehicles |
|
|
Exclusions |
|
|
|
|
Ordinance or law |
Excluded |
Same |
|
|
Earth movement |
Excluded |
Similar. Does not apply to computers |
|
|
Governmental authority |
Excluded |
Similar |
|
|
Nuclear hazard |
Excluded |
Similar |
|
|
Utility services |
Excluded |
Similar. Does not have electronic data exception |
|
|
War and military action |
Excluded |
Similar but supersedes the Nuclear Hazard Exclusion |
|
|
Water |
Excluded |
Similar but does not mention storm surge, mudslide, mudflow or waterborne material. Does not apply to computers |
|
|
Certain computer-related losses |
Excluded |
No corresponding exclusion |
|
|
Fungi, wet rot or dry rot |
Excluded |
Similar. Does not apply to computers |
|
|
Virus or bacteria |
Excluded |
Bacteria excluded in Fungi exclusion. Virus not mentioned |
|
|
Additional Exclusions |
|
|
|
|
Electrical apparatus |
Excluded |
Similar but less detailed |
|
|
Consequential losses |
Excluded |
No corresponding exclusion |
|
|
Smoke, vapor, gas |
Excluded |
Same. Does not apply to computers |
|
|
Steam apparatus |
Excluded |
Similar |
|
|
Frozen plumbing |
Excluded |
Similar. Does not apply to computers |
|
|
Dishonesty |
Excluded |
Similar |
|
|
False pretense |
Excluded |
Same |
|
|
Exposed property |
Excluded |
Same |
|
|
Collapse |
Excluded except for coverage provided under Additional Coverage–Collapse |
Similar. Does not apply to computers |
|
|
Pollution |
Excluded |
Similar |
|
|
Neglect |
Excluded |
Similar |
|
|
Wear and tear |
Excluded |
Similar. Does not apply to hardware losses resulting from mechanical breakdown |
|
|
Rust, other corrosion, decay, deterioration, hidden or latent defect |
Excluded |
Similar. Does not apply to hardware losses resulting from direct physical damage by a covered peril to air-conditioning systems that services the hardware |
|
|
Smog |
Excluded |
Same. No exceptions for specified perils or glass breakage. Does not apply to computers |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Nesting, infestation or discharge of waste products by insects, birds, rodents or other animals |
Excluded. If it results in a specified cause of loss or breakage of building glass, coverage applies to the resulting loss or damage. |
Same except that it does not apply to hardware |
|
|
Mechanical breakdown |
Excluded. Does not apply to computer breakdown |
Similar |
|
|
Damage to personal property by humidity, temperatures, marring or scratching |
Excluded |
Similar. Does not apply to hardware losses resulting from direct physical damage by a covered peril to air-conditioning systems that services the hardware |
|
|
Errors or omission |
Excluded |
No corresponding exclusion |
|
|
Installation, testing, repair |
Excluded |
No corresponding exclusion |
|
|
Electrical disturbance |
Excluded |
No corresponding exclusion |
|
|
Continuous or repeated seepage or leakage of water |
Excluded |
Similar. Does not mention of how long the seepage must last to be excluded |
|
|
Weather conditions |
Excluded. If it results in a covered cause of loss, coverage applies to the loss or damage it causes. |
Same |
|
|
Acts or decisions |
Excluded. If it results in a covered cause of loss, coverage applies to the damage it causes. |
No corresponding exclusion |
|
|
Negligent work |
Excluded. If it results in a covered cause of loss, coverage applies to the damage it causes. |
Similar |
|
|
Computer virus or computer hacking |
No corresponding exclusion |
Excluded |
|
|
Settling, cracking, shrinking, bulging or expanding |
Excluded as part of the collapse exclusion and coverage provided within the collapse additional coverage |
Excluded except as caused by specified perils and breakage of building glass |
|
|
Additional Exclusion |
|
|
|
|
Loss or damage to products |
Excluded |
No corresponding exclusion |
|
|
Business Income And
Extra Expense Exclusions |
|
|
|
|
Delay in resuming operations due to strikers or other persons |
Excluded |
Same |
|
|
Suspension, lapse or cancellation of licenses, leases or contracts |
Excluded with exceptions |
Same |
|
|
Any other consequential loss |
Excluded |
No corresponding exclusion |
|
|
Software |
Not mentioned |
Limited to 60 days coverage for damaged software |
|
|
Unnecessary Expenses |
Not mentioned |
Unnecessary expenses are covered |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Fire Extinguishing |
Not mentioned |
Loss Of Income Coverage does not pay for putting out a fire |
|
|
Accounts Receivable Exclusions |
|
|
|
|
Altering, falsifying, concealing or destroying to conceal wrongful acts |
Excluded |
Same |
|
|
Bookkeeping, accounting or billing errors or omissions |
Excluded |
Same |
|
|
Losses that require audits or inventories to prove their existence |
Excluded |
Same |
|
|
Programming related issues |
Not mentioned |
Excluded except for lightning losses |
|
|
Limits Of Insurance |
|
|
|
|
Per occurrence |
The limit of insurance on the declarations |
No corresponding entry |
|
|
Outdoor signs attached to buildings |
$1,000 per sign |
No corresponding entry |
|
|
Additional amounts of insurance |
Applies to all coverage Extensions, Fire Department Service Charge, Pollutant Cleanup And Removal, Increased Cost Of Construction, Business Income From Dependent Properties, Electronic Data and Interruption Of Computer Operations |
Refer to extension and additional coverage to determine if its limit is an addition. |
|
|
Building limit–automatic increase |
8% or the percentage on the declarations |
Same but a percentage must be entered on the declarations |
|
|
Business personal property limit–seasonal increase |
25% or another percentage on the declarations |
Same but no option other than 25% |
|
|
Deductibles |
|
|
|
|
Payment per occurrence |
The amount of loss that exceeds this deductible amount on the declarations |
Same |
|
|
Optional coverages |
The amount of loss that exceeds this deductible amount on the declarations |
Similar. Glass is part of the optional deductible |
|
|
No deductible |
Fire Department Service Charge, Business Income, Extra Expense, Civil Authority and Fire Extinguisher Systems Recharge Expense |
Fire Department Service Charges, Business Income, Extra Expense, Civil Authority, Lock And Key Replacement, Inventory And Appraisal Expenses, Recharge Of Fire Extinguishing Equipment |
|
|
Property Loss Conditions |
|
|
|
|
Abandonment |
Property cannot be abandoned to the insurance company |
Similar |
|
|
Appraisal |
If valuation is disputed, an appraisal must be requested in writing. Each party selects an appraiser. They then select an umpire. Disagreements are submitted to the umpire. No time limits for selections |
Similar. Appraisers must be selected within 20 days and the umpire within 15 days. |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Duties in the event of loss or damage |
Notify the police if caused by a crime. |
Same |
|
|
|
Promptly notify the insurance company and describe the affected property. |
Same |
|
|
|
Describe how, when and where the loss or damage occurred |
Similar |
|
|
|
Protect property. The insurance company covers expenses to do so. |
Same |
|
|
|
Inventory and quantify damaged and undamaged property. |
Same |
|
|
|
Make damaged and undamaged property available for examination and allow samples to be taken. Produce records and allow the company to make copies as and when requested. |
Same |
|
|
|
Submit detailed written proof of loss within 60 days after the insurance company requests it. |
Same |
|
|
|
Cooperate with the insurance company's investigation and settlement. |
Same |
|
|
|
Resume all or part of operations promptly |
Same |
|
|
|
Submit to the insurance company's examination under oath as required. |
Same |
|
|
Legal action against us |
All policy terms must be met and suit brought not later than two years after the date of loss. |
Same |
|
|
Loss payment |
The company's options are to pay the value of damaged property, the cost to repair or replace it, the cost to repair or rebuild with similar property, or to take the property at the agreed value. |
Same |
|
|
|
The company states its intentions within 30 days of receiving the proof of loss. |
Same |
|
|
|
The company pays only the named insured's financial interest in the property. |
Same |
|
|
|
The company pays the lesser of the limit of insurance, the cost to replace on the same site with similar material for the same purpose, or the amount actually spent for repair or replacement if the limit was at least 80% of the full replacement value of the property at the time of loss. |
Same |
|
|
|
If the limit does not meet the criteria above, the company pays the lesser of the limit of insurance, the property's actual cash value, or the proportion equal to the ratio of the limit to 80% of the cost to repair or replace. |
Same |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
|
The named insured may settle on an actual cash value basis and claim replacement cost within 180 days afterwards. |
Same |
|
|
|
Losses are not paid on a replacement cost basis until the property is repaired or replaced and unless it is done as soon as reasonably possible. |
Same |
|
|
|
Costs to rebuild, repair or replace do not include increased costs due to enforcement of ordinances or laws. |
Same |
|
|
|
Actual cash value applies to used or second-hand merchandise, property of others (unless contractually obligated otherwise), household contents, manuscripts and a variety of art, antiques, and rare articles. |
Similar |
|
|
|
Glass is valued at the cost to replace it with safety glazing material if required by law |
Same |
|
|
|
Tenant's improvements are valued at the replacement cost or the remaining value based on a portion of the original cost and the remaining term of a lease. |
Same |
|
|
|
Under Optional Coverages, money is valued based on its face value and securities on their value at the close of business the day the loss is discovered. |
Same |
|
|
|
Accounts receivable amounts that cannot be accurately established at the time of loss are determined by a formula. |
Similar |
|
|
|
Payment for loss or damage to property of others is only for the account of its owners. |
Similar |
|
|
|
The insurance company has the option to defend the named insured against suits by owners of property and does so at its own expense. |
No corresponding provision |
|
|
|
Payment is made within 30 days after the company receives the proof of loss, the named insured complies with all terms, and the amount of loss is agreed to or determined by an appraisal award. |
Same |
|
|
|
Party walls are walls that separate and are common to adjoining buildings owned by different parties and loss adjustment involving them is explained. |
No corresponding provision |
|
|
Recovered property |
Explains what both parties must do if property paid for in a settlement is subsequently recovered |
Similar |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP 0200
01 04 |
|
|
Resumption of operations |
Business income and extra expense losses are reduced as operations can be resumed somewhat or completely. |
Similar |
|
|
Vacancy |
Property vacant over 60 days is not covered for loss due to vandalism, breakage of building glass, water damage, theft, attempted theft, or sprinkler leakage if the system has not been protected against freezing. Loss payments for all other covered losses are reduced 15%. |
Similar. Also refers to unoccupancy |
|
|
Property General Conditions |
|
|
|
|
Control of property |
Coverage is not affected by acts or neglect of any person that the named insured does not control or direct. |
Similar |
|
|
Mortgageholders |
Standard mortgageholders provisions apply |
Same |
|
|
No benefit to bailee |
Insurance does not benefit any party that has custody of the property. |
Same |
|
|
Policy period, coverage territory |
The period is on the declarations. The territory is the United States of America, its territories and possessions, Puerto Rico and Canada. |
Same |
|
|
Hardware |
No corresponding provision |
Hardware replaced is valued at replacement cost. Hardware not replaced is valued at actual cash value. Partial losses are restored to pre-loss condition. |
|
|
Loss to parts |
No corresponding provision |
Covers the value of only the lost part, not the loss of value to the entire item |
|
|
Pair or set |
No corresponding provision |
Valued at the loss of value to the entire pair or set, not just the value of the lost item |
|
|
Software–data records |
No corresponding provision |
The cost to reproduce from duplicates or the appropriate expenses required if duplicate copies do not exist |
|
|
Software–media |
No corresponding provision |
The cost to repair or replace with similar material and quality |
|
|
Software–programs and applications |
No corresponding provision |
The cost to reinstall from licensed discs or the cost of the most current program if licensed discs are not available |
|
|
Software–proprietary programs |
No corresponding provision |
The cost to reproduce from duplicates or the appropriate expenses required if duplicate copies do not exist |
|
|
Optional Coverages |
|
|
|
|
Outdoor signs |
Covers all outdoor signs at the described premises |
Similar |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP 0200
01 04 |
|
|
Money and securities |
Covers money and securities |
Covers money, securities, lottery tickets and
bullion
|
|
|
Employee dishonesty |
Covered |
Similar |
|
|
Equipment breakdown protection coverage |
Covers mechanical breakdown or electrical failure to pressure, mechanical or electrical machinery or equipment. |
No corresponding coverage |
|
|
Property Definitions |
|
|
|
|
Computer |
Programmable electronic equipment and associated peripheral equipment that stores, retrieves and processes data, but not the kind used to operate production equipment and machinery |
Similar but less detailed. Does not refer to production equipment or machinery |
|
|
Counterfeit money |
Imitation of real money intended to deceive and to be taken as genuine |
Not a defined term |
|
|
Electronic data |
Information, facts or computer programs used with computer software that is used with electronically controlled equipment |
Not a defined term |
|
|
Fungi |
Any type of fungus, mold, mildew or their by-products |
Similar. Also includes protests, algae, slime mold, wet rot, dry rot, bacterium and a number of related chemicals, matter and compounds |
|
|
Manager |
A director of a limited liability company |
Not a defined term |
|
|
Member |
An owner of a limited liability company to the extent of its membership interest. Members may be managers. |
Not a defined term |
|
|
Money |
Currency, coins and bank notes with a face value in current use and travelers checks, register checks and money orders available for sale to the public |
Similar. Does not refer to face value or register checks |
|
|
Operations |
Business activities at described premises |
Not a defined term |
|
|
Period of restoration |
The time needed to resume normal business activities beginning 72 hours after direct loss |
Similar |
|
|
Pollutants |
Standard ISO definition |
Similar. Also includes visible or invisible electrical, magnetic, or electromagnetic fields and sound. Standard AAIS definition |
|
|
Securities |
Instruments that represent money but are not |
Same |
|
|
Specified causes of loss |
Fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from fire extinguishing devices, sinkhole collapse, volcanic action, falling objects, weight of snow, ice or sleet, and water damage |
Same |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Stock |
Merchandise held for sale, raw materials, goods in process, and finished products. Also includes packing or shipping supplies |
Not a defined term |
|
|
Valuable papers and records |
Documents, manuscripts and records |
Same but also includes software |
|
|
Data records |
Not a defined term but similar to electronic data |
Electronic files, documents and information stored on media |
|
|
Declarations |
Not a defined term |
Any page labeled declarations, supplemental declarations or schedules that applies to the policy |
|
|
Hardware |
Not a defined term but similar to computer |
A network of electronic machine components that accepts instructions, processes information and produces results |
|
|
Limit |
Not a defined term |
The amount of coverage that applies |
|
|
Media |
Not a defined term but included in electronic data |
Instruments used with hardware that contain data records and information |
|
|
Programs and applications |
Not a defined term but included in electronic data |
Not a defined term but included in electronic data |
|
|
Proprietary programs |
Not a defined term but included in electronic data |
Operating applications specifically developed for the named insured and stored on media or installed in hardware |
|
|
Software |
Not a defined term but included in electronic data |
Media, data records, programs, applications, and proprietary programs |
|
|
Computer hacking |
Not a defined term |
Unauthorized intrusion into and/or disruption of a computer, web site or computer network |
|
|
Computer virus |
Not a defined term |
An undesirable and destructive electronic code introduced into a computer or system, intended for and resulting in damage |
|
|
Dependent location |
Similar but defined in Additional Coverages–Business Income From Dependent Properties |
Contributing, recipient, leader and manufacturing locations operated by others that the insured depends on |
|
|
Employee |
Not a defined term for property but is under Liability And Medical Expenses Definitions |
Same. Does not include short-term or temporary workers |
|
|
Sinkhole collapse |
Not a separately defined term. Included in the definition of specified causes of loss. Specifically excludes collapse into man-made spaces |
Earth collapsing into a space created by the action of water on a rock formation. Does not include the value of land or costs to fill it |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Volcanic action |
Not a separately defined term but is defined in the Earth Movement exclusion |
All volcanic activity except clean-up costs for ash and dust that do not cause physical damage to covered property |
|
|
Section II–Liability Coverages |
|
|
|
|
Business Liability |
Covers bodily injury, property damage or personal and advertising injury. Includes insurance company duty to defend suits seeking such damages |
Similar |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Coverage Extension–Supplementary Payments |
Covers payments the insurance company makes to investigate or defend claims. Do not reduce the limit of insurance |
Same |
|
|
Expenses the insurance company incurs |
Covered |
Same |
|
|
Costs of bail bonds |
Covered up to $250 |
Same but covered up to $500 |
|
|
Cost of bonds to release attachments |
Covered |
Same |
|
|
Reasonable expenses the insured incurs to investigate or defend a claim or suit |
Covered. Includes insured's actual loss of earnings up to $250 per day |
Same |
|
|
Court costs taxed against the insured in a suit |
Covered but excludes attorneys’ fees or expenses taxed against the insured |
Same. No exception for attorneys’ fees |
|
|
Prejudgment interest awarded against the insured on the part of the judgment the company pays |
Covered |
Same |
|
|
Interest on the full amount of a judgment that accrues before it is entered, up to the limit |
Covered |
Same |
|
|
Indemnitees of the insured named in a suit for defense coverage |
Covered |
No corresponding provision |
|
|
Medical Expenses |
|
|
|
|
The insurance company pays reasonable medical costs of others injured on the premises or because of operations |
Covered |
Same |
|
|
Business Liability Coverage Exclusions |
|
|
|
|
Expected or intended injury |
Excluded |
Same |
|
|
Contractual Liability |
Excluded |
Same |
|
|
Liquor liability |
Excluded |
Same |
|
|
Workers compensation and similar laws |
Excluded |
Same |
|
|
Employer's liability |
Excluded |
Same |
|
|
Pollution |
Excluded |
Similar |
|
|
Aircraft, auto or watercraft |
Excluded |
Similar |
|
|
Mobile equipment |
Excluded |
Similar. Addressed by two separate exclusions |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
War |
Excluded |
Same but also includes concurrent causation language |
|
|
Professional services |
Excluded. Also excludes supervising of professional services |
Similar. Does not mention specific professions or of supervising activities |
|
|
Damage to property |
Excludes property damage to certain types of property, subject to specific exceptions |
Similar. Addressed by six separate exclusions |
|
|
Damage to your product |
Excluded |
Similar |
|
|
Damage to your work |
Excluded |
Same |
|
|
Damage to impaired property or property not physically injured |
Excluded |
Same |
|
|
Recall of products, work or impaired property |
Excluded |
Similar |
|
|
Personal and advertising injury |
Excludes intentional violations of rights |
Similar |
|
|
Excludes publishing of information known to be false |
Similar |
||
|
Excludes publishing first done prior to policy period |
Similar |
||
|
Excludes contractual liability |
Similar |
||
|
Excludes most breaches of contract |
Similar |
||
|
Excludes quality guarantees in advertising |
Similar |
||
|
Excludes incorrect pricing in advertising |
Similar |
||
|
Excludes
all acts committed by insureds in advertising, broadcasting, publishing,
telecasting, web-site design or Internet businesses |
Similar |
||
|
Excludes
pollution |
Similar |
||
|
Excludes
any treatment of pollutants expenses |
Similar |
||
|
Excludes
electronic chatrooms or bulletin boards the insured hosts, owns or controls |
Similar
but also excludes chatrooms or bulletin boards the insured can update |
||
|
Excludes
copyright, patent, trademark, trade secret or other intellectual property rights
infringement |
Similar |
||
|
Excludes
unauthorized use of another's name or product in the named insured's e-mail
address, domain name or metatag to mislead potential customers of others |
Similar |
||
|
Electronic data |
Excludes damages from corruption of, or inability to access or manipulate electronic data |
No corresponding exclusion |
|
|
Criminal acts |
Excludes personal and advertising injury due to the insured’s criminal acts |
Same |
|
|
Recording and distribution of material or information in violation of the law |
Excludes acts or omissions in violation laws about recording or distribution of material |
No corresponding exclusion |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Damage to premises rented to you |
Covered for fire in certain situations |
Similar |
|
|
Employment exclusion |
Must attach BP 04 17 to exclude |
Excludes refusal to employ, termination of employment, and other negative personnel actions |
|
|
Medical Expenses Exclusions |
|
|
|
|
Excludes any insured except volunteer workers |
Same |
||
|
Excludes persons hired to work for or on behalf of any insured or its tenant |
Same |
||
|
Excludes persons injured on owned or rented premises that they normally occupy |
Same |
||
|
Excludes injuries covered under workers compensation, disability benefits or similar laws |
Same |
||
|
Excludes injuries during physical exercises, games, sports or athletic contests |
Similar. Only states athletic activities |
||
|
Excludes injuries included in the products-completed operations hazard |
Similar |
||
|
Excludes injury or damage covered by Business Liability Coverage |
Same |
||
|
No corresponding exclusion |
Excludes club members |
||
|
No corresponding exclusion |
Excludes guests of a hotel, motel or tourist court |
||
|
No corresponding exclusion |
Excludes students, campers, patients or inmates |
||
|
Nuclear Energy Liability Exclusion |
|
|
|
|
Exclusion |
Excluded |
Same |
|
|
Nuclear energy liability exclusion definitions |
Defined |
Same |
|
|
Who Is An Insured |
|
|
|
|
Individuals |
Same |
||
|
Partnerships or joint ventures |
Same |
||
|
Limited liability companies |
Same |
||
|
Other organizations |
Same |
||
|
Trusts |
Same |
||
|
Volunteers and employees |
Similar |
||
|
Real estate managers |
Same |
||
|
After the insured dies |
Same |
||
|
Persons or organizations not listed are not insureds |
Same |
||
|
No corresponding definition |
Users of mobile equipment with permission |
||
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Liability And Medical Expenses Limits Of Insurance |
|
|
|
|
Limits on the declarations |
The most paid and unaffected by number of insureds, injuries, suits or claims |
Same but also states that medical payments made are not an admission of fault |
|
|
Liability and medical expenses limit |
The most paid for the total of all damages in a single occurrence or that any one person or organization sustains in single offense. The most paid for medical expenses by one person is the medical expenses limit. |
Similar |
|
|
Damage to premises rented to you |
The most paid when caused by fire to rented premises. No default limit |
Similar but $50,000 default limit can be increased. Not subject to the aggregate |
|
|
Aggregate limits |
Products-completed operations hazard aggregate is two times the liability and medical expenses limit |
Products-completed operations hazard aggregate must be entered on declarations |
|
|
General aggregate limit is two times the liability and medical expenses limit. |
General aggregate must be entered on the declarations |
||
|
Application of the aggregate limit |
Applies to 12-month period with exceptions |
Same |
|
|
Liability And Medical Expenses General
Conditions |
|
|
|
|
Bankruptcy |
The insurance company's obligations are not affected by bankruptcy or insolvency of the insured or its estate |
Same but does not refer to the insured's estate |
|
|
Duties in the event of occurrence, offense, claim or suit |
|
|
|
|
Notify the insurance company |
Similar. Adds that notice must also include the insured's name and the policy number |
||
|
Record and notify the company |
Similar |
||
|
Cooperate with the company |
Similar |
||
|
No payment on company’s behalf |
Similar |
||
|
Legal action against us |
The insurance company is not a party to any suit. The insured can sue only within designated time frame and after conditions are met. |
Similar |
|
|
Separation of insureds |
Coverage applies separately to each insured named in a claim or suit but this does not affect the total policy limits. |
Same |
|
|
Liability And Medical Expenses Definitions |
|
|
|
|
Advertisement |
Defined |
Same |
|
|
Auto |
Defined |
Similar but does not refer to the various laws |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Bodily injury |
Defined |
Similar but excludes mental or emotional injury or suffering or distress not resulting from a physical injury. |
|
|
Coverage territory |
Defined |
Similar but does not include the reference to worldwide coverage for personal and advertising injury via the Internet |
|
|
Employee |
Defined |
Same |
|
|
Executive officer |
Defined |
Same |
|
|
Hostile fire |
Defined |
No similar definition |
|
|
Impaired property |
Defined |
Same |
|
|
Insured contract |
Defined |
Similar to Covered Contract |
|
|
Leased worker |
Defined |
Same |
|
|
Loading or unloading |
Defined |
Same |
|
|
Mobile equipment |
Defined |
Same |
|
|
Occurrence |
Defined |
Similar |
|
|
Personal and advertising injury |
Defined |
Similar |
|
|
Pollutants |
Defined |
No similar definition |
|
|
Products-completed operations hazard |
Defined |
Similar. Referred to as products/completed work hazard |
|
|
Property damage |
Defined |
Same |
|
|
Suit |
Defined |
Similar. Includes administrative proceedings |
|
|
Temporary worker |
Defined |
Same |
|
|
Volunteer worker |
Defined |
Similar but also states that it does not include employees, leased workers or temporary workers |
|
|
Your product |
Defined |
Similar |
|
|
Your work |
Defined |
Same |
|
|
Damages |
No similar definition |
Money provided to persons who sustain covered injuries |
|
|
Designated insured |
Described in the insuring agreement but not defined |
Individuals listed in Section A of the definition of insured and any employee authorized to give or receive notices of occurrences or claims |
|
|
Short-term rented premises |
Described in property damage exclusions |
Premises rented to an insured for seven days or less, including the contents of such premises |
|
|
Section III–Common Policy Conditions
(Applicable To Section I–Property And Section
II–Liability) |
|
|
|
|
Cancellation |
By the named insured at any time |
Refers to state specific amendatory endorsement |
|
|
Section |
ISO BP 00
03 01 10 |
AAIS BP
0200 01 04 |
|
|
Changes |
Must be made part of the coverage form |
Same |
|
|
Concealment, misrepresentation or fraud |
Voids coverage |
Similar |
|
|
Examination of your books and records |
Required |
Same |
|
|
Inspections and surveys |
Permitted |
Same |
|
|
Insurance under two or more coverages |
Does not pay more than the amount of loss or damage sustained |
Same |
|
|
Liberalization |
Applies for changes during the policy period and 45 days prior to policy issuance |
Same except the period is 60 days |
|
|
Other insurance |
Property is excess if there is other insurance. It is primary for liability except when first party coverage applies or when the insured has additional insured status on another policy. |
Property pays its proportion if policy terms are identical. Pays as excess over the amount of the other policy if they are not. Liability is similar to ISO. |
|
|
Premium
audit |
Permitted |
Similar
but only liability is subject to audit |
|
|
Transfer of rights of recovery against others to us |
Required |
Similar |
|
|
Transfer of your rights and duties under this policy |
Not permitted |
Same |
|
The current Businessowners
Program by the Insurance Service Office (ISO) is the 2002 edition. While it’s
likely that many ISO subscribers have or will use the latest program, not all
insurance companies use ISO forms. Some companies ask ISO to file forms, rules,
and loss cost adjustments for them; other companies file for themselves. Further,
even those companies that are full ISO subscribers may choose to ignore or
delay use of the most recent edition. For reference’s sake, we offer this
article that discusses two earlier editions of the BOP. This comparison will
focus only on the differences (printed in bold type) between the ’97 and ’96
editions.
b. Business Personal Property
Business personal property is located in or on buildings at the described premises, in the open, in vehicles, or within 100 feet of the described premises, and includes the following types of property:
(2) Personal property belonging to others that is in the care, custody and control of the insured. The BOP protects the
insured’s interest including labor at the insured’s rate for anyone involved in
the process, and the raw materials consumed. The insurable interest includes
power, chemicals and any other services expended or provided (as long as a
definite value can be determined).
“Legally” has been removed from this paragraph.
Previously it read “the amount for which you are legally liable.” The removal
of this word was done to make clear that coverage for property of others is on
a direct basis, with no regard to negligence by the insured.
(4) If a contract for leased personal property requires a covered
person to insure that leased property, it is protected by the BOP. Common
leased personal property includes computers, photocopiers, printing equipment,
machine tools, and diagnostic equipment.
The wording of this provision makes it clear that
there is coverage for leased personal property that the insured has a
contractual responsibility to protect.
Bullion has been
removed from the list of property not covered because under the special form
there is limited coverage for bullion up to $2,500.
The following two items are
included as additional coverages in the 1997 version:
l. Increased Cost of Construction
(1) If and only if
the buildings covered under this policy are on a replacement cost basis, this
Additional Coverage applies.
(2) Should a covered
building be damaged by a covered cause of loss, there is coverage for any
increased cost that the insured incurs in order to comply with the requirements
of any applicable ordinance or law regarding repair, rebuilding
or replacement of damaged parts of that building. This coverage is subject to
the limitations stated in paragraphs (3) through (9).
(3) In order for the
increased cost of construction coverage to apply to a loss, the applicable
ordinance or law must:
·
regulate
construction or repair of buildings; or
·
establish zoning
or land use requirements; or
·
apply to the described
premises; and
·
be in force at
the time of the loss.
·
the insured was
required to comply with the law or ordinance prior to the loss; in other words,
a law or ordinance that the insured would have had to comply with whether or
not there had been a loss; or
·
the insured failed
to comply with the law or ordinance.
(5) This Additional
Coverage does not provide for any costs that are required by ordinance or law
for the testing, monitoring, clean up, removal, containment, treatment,
detoxification, neutralization, or any action that in any way responds to or
assesses for the effects of “pollutants.”
(6) The maximum
Increased Cost of Construction limit for each covered building is $5,000. The
$5,000 is an additional amount, supplementing the stated Limit of Insurance.
(7) Payments are not
made until the property is actually repaired or replaced (this may be either at
the described or another premises). In addition, there is no coverage unless the
repairs or replacement are made as soon as reasonably possible after the loss.
Although the phrase “as soon as reasonably possible” is not defined, it cannot
exceed two years. This time limit may be extended by the insurer, but the
permission must be in writing.
Whether the property
is repaired or replaced, the most that will be paid is the cost that would have
been incurred had it been repaired or replaced at the same premises. An
exception is made when the law or ordinance requires relocation. In this
instance, coverage applies to the actual costs incurred.
Of course, since the
maximum limit is so modest, the exception is unlikely to be meaningful.
(8) An interesting
clarification is made under this item. If the insured is requesting payment and
meets all criteria under this Additional Coverage for Increased Costs of
Construction, to the extent of the terms and conditions stated within this
coverage, there is no conflict with the Ordinance or Law Exclusion.
(9) Another
clarification is made. Any payment made under this coverage is an additional
amount, over and above the limit of insurance stated in the declarations and is
therefore not subject to the Loss Payment Property Loss Condition. In other
words, the amount of building coverage requested by the insured does not have
to reflect this amount nor will the insured by penalized for not adding the
additional $5,000 in coverage to the limit of insurance.
m. Exterior Building Glass
(1) Coverage is for
the direct physical loss of or damage to exterior glass. Such glass must also
be a component of a covered building and at a covered premise. This includes
any lettering or ornamentation to that glass. The glass must be owned by the
insured or in the insured’s care, custody, or control. Eligible expenses include:
·
costs to board up
any openings or put in temporary plates (as needed to protect the property from
the elements and additional damage or loss);
·
costs to repair
or replace encasing frames; and
·
costs to remove
or replace obstructions.
(2) The only exclusions that apply to this coverage from either the
Covered Causes of Loss or Exclusions sections are:
·
earth movement
·
governmental
action
·
nuclear hazard
·
war and military
action
·
water
(3) There is no coverage for any loss or damage that is either caused
by or results from any of the following:
·
wear and tear
·
hidden or latent
defect
·
corrosion or rust
(4) The amount available for this coverage is the building limit of
insurance shown in the declarations for the covered building at the covered
premises.
If the insured is a tenant and no building limit is shown, the amount
listed in the declarations for Tenant’s Exterior Building Glass Limit of
Insurance applies.
a. Personal Property at Newly Acquired
Premises
The
amount of coverage for personal property has been increased from $10,000 to
$100,000.
b. Business Personal Property Off Premises
The
limit on this coverage was increased from $1,000 to $5,000.
c. Outdoor Property
The
amount of coverage available in this extension has been increased from $1,000
to $2,500 and the sub-limit for any one tree, shrub, or plant has been
increased from $250 each to $500 each.
d. Personal Effects
This
amount of coverage has been increased from $1,000 to $2,500.
e. “Valuable Papers and
Records”
This Coverage Extension
was added in the ’97 revision.
(1) Business personal property coverage is extended to direct physical damage or loss to “valuable papers and records” which are either owned or in the care, custody, or control of the insured, as long as the loss or damage is from a covered cause of loss. This includes the cost to research lost information when there are no duplicates.
(2) There is no coverage for samples, nor for property that is sold but being held for delivery. There is also no coverage for property in storage at a location away from a covered premises.
(3) The maximum amount of coverage available for any one occurrence at a covered location is $5,000 unless the insured has purchased a higher amount and that higher amount is shown in the declarations. If the loss occurs at a location not covered or described in the declarations, the maximum amount available is $2,500.
(4) None of the section B. Exclusions in this coverage form apply except the following (which do apply):
· governmental action
· nuclear hazard
· war and military action
· dishonesty
· false pretense
· the entire paragraph B. 3.
· the accounts receivable and “valuable papers and records” exclusions.
f. Accounts Receivable
This Coverage Extension
was added in the ’97 revision.
(1) Business personal property may be extended to cover accounts receivable. Covered is any of the following that are a result of a covered, direct physical damage loss to the insured’s record of accounts receivable:
· the amounts owed the insured by the insured’s customers that the insured is unable to collect;
· if the insured must take out loans to offset the amounts, they cannot collect during the time the insured is waiting for this coverage to pay, any interest on those loans is covered;
· any above-normal collection expenses the insured incurs because of the covered loss;
· any other reasonable expenses or costs that the insured incurs while re-establishing records of accounts receivable after a covered loss.
(2) The maximum amount of coverage available for any one occurrence at a covered location is $5,000 unless the insured has purchased a higher amount and that higher amount is shown in the declarations. If the loss occurs at a location not covered or described in the declarations, the maximum amount available is $2,500.
(3) None of the section B. Exclusions in this coverage form apply except the following (which do apply):
· governmental action
· nuclear hazard
· war and military action
· dishonesty
· false pretense
· the entire paragraph B. 3.
· the accounts receivable and “valuable papers and records” exclusions.
a. Ordinance or Law
Wording
was added to make sure that this exclusion for the enforcement of an ordinance
or law applies, even when the building has not been damaged.
f. Dishonesty
This
exclusion does not apply to carriers for hire, with respect to accounts
receivable and “valuable papers and records.”
k. Other Types of Loss
The
following wording changes have been made to the items covered under this
exclusion:
’97 Edition wording:
(2) Rust, corrosion, fungus, decay,
deterioration, hidden or latent defect or any quality, fault, or weakness, in
covered property that cause it to damage or destroy itself is excluded.
Previous Edition wording:
(2) Corrosion, decay, fungus, mildew deterioration, rot, rust, or any
fault, weakness, or hidden or latent defect in covered property that cause it
to damage or destroy itself is excluded.
’97 Edition exclusion added for “Settling, cracking, shrinking, or
expansion.”
Where the later edition states:
“Dampness
or dryness of atmosphere are not covered,” the previous edition stated,
“Changes in temperature or humidity that cause damage are excluded.”
5. Accounts Receivable And “Valuable Papers and
Records” Exclusions
This
additional exclusion was introduced in the ’97 revision. Coverage was
prohibited for the following:
a.
electrical or magnetic injury, disturbance, or erasure of electronic recordings
that is caused by either a programming error or faulty machine instructions; nor by faulty installation or maintenance of
data processing equipment or component parts.
There
is coverage, however, for any direct loss or damage that is caused by
lightning.
c.
for the loss or damage to accounts receivable that is caused by the following:
(1) loss or damage that occurred because of alteration, falsification,
concealment, or destruction of records done to try and conceal a wrongful
giving, taking, or withholding of “money,” “securities,” or other property; in
other words, there is no coverage if the loss or damage was intentionally done
to cover a crime or illegal act;
(2) loss or damage that results from a bookkeeping, accounting, or
billing error or omission;
(3) loss or damage that needs an audit of records or inventory
computation to prove that loss or damage exists.
The minimum basic
deductible was increased from $250 to $500. A maximum $500 deductible applies
for Exterior Building Glass, “money” and securities, employee dishonesty,
interior glass, and outdoor signs. Any deductible paid under these coverages
also acts to satisfy the regular policy deductible.
3. Duties in the Event of Loss or Damage
Wording
has been added under paragraph (4) stating that during and after an insured
loss, the insured must take steps to protect covered property from further
damage of any kind.
a.
The company will have the following options for the payment of any loss:
· pay the value,
· pay the cost to repair or replace,
· rebuild with like kind and quality (wording has been added to clarify that no increased cost because of the enforcement of an ordinance or law is covered) to the extent practicable and within a reasonable time,
No coverage exists for any additional
costs that must be incurred to comply with any ordinance or law regulating the
construction, use or repair of the property.
Item #8 was introduced
with the ’97 revision.
(8) For accounts receivable only:
(a) Whenever the insured is unable to accurately establish the amount of accounts receivable that is outstanding at the time of loss, the insurer will determine the total of the average monthly amounts for the last 12 months immediately preceding the month that the loss occurred in. The insurer will also adjust that total for any normal fluctuations that usually occur, based on any demonstrated variance from the average for that month.
(b) Certain amounts will be deducted from the total established in (8) (a) above. The items that will be deducted include any amount for which there has been no loss or damage; the amount of the accounts the insured is able to re-establish or collect; the amount for probable bad debts the insured is normally unable to collect; and any unearned interest and service charges.
9.
Vacancy
a.
Description of Terms
This section was changed in the ’97
revision. “Unoccupancy” is no longer used with reference to vacancy.
The
following definitions apply to vacancy:
(1) For Tenants: if the building, unit, or suite rented or leased to
the insured does not have enough business personal property to conduct
customary operations, it is vacant.
(2) For Building Owners: the building is vacant when 70% or more of the
total square footage is not rented or is not used to conduct normal or
customary operations.
Buildings
under construction or renovation are not vacant.
2. Interior Glass
Interior glass can be
extensive in multi-story office buildings, in doors, office partitions,
laboratories, and atriums.
a. Under the optional coverage,
interior glass is covered for a separately defined risk of physical loss
coverage as long as it is permanently installed within the interior walls, floors,
or ceilings of a covered building or structure and as long as the following
also occur:
(2) the glass must be
located on the ground floor or in the basement of the covered building. In order
to provide interior glass coverage on all floors, the declarations must be
endorsed accordingly to show all floors;
(3) the glass must be
owned by the insured or if owned by others, it must be in the insured’s care,
custody, or control.
b. The following costs are
covered if deemed necessary:
· expenses to put up temporary plates, or to board up openings;
· cost to repair or replace encasing frames; and
· cost to remove or replace obstructions.
c. The exclusions found in
the sections on Causes of Loss and section B. Exclusions do not apply except
the following (which do apply):
· governmental action,
· nuclear hazard,
· war and military action
d. There are four (4)
additional exclusions that do apply. They are:
· wear and tear,
· hidden or latent defect,
· rust, or
· corrosion.
e. This Optional Coverage
supersedes any other limitation in this policy that may apply to interior glass
coverage.
3.
“Period of restoration” begins 72
hours after the time of direct physical loss for business income (immediately
for extra expense) and ends on the date that property SHOULD be repaired with
reasonable speed and similar quality; or the date when the business is resumed
at a new permanent location. Does not include any increased period due to the
enforcement of law, or pollution assessment, testing, clean up, or removal.
Revised wording states that the
expiration date of the policy does not affect the “period of restoration.”
7. “Valuable papers and records” are inscribed, printed, or written documents; manuscripts;
and records. This also includes abstracts, books, deeds, drawings, films, maps or mortgages. Not included is “money,” “securities,”
converted data, programs, or instructions used in data processing operations,
nor does it include any of the materials that the data is recorded on. This definition was added in the ‘97
revision.
1. BUSINESS LIABILITY
New wording clarifies that
defense is for the insured only and that the insurer has no duty to
defend the insured for any “suit” for damages that this insurance does not
cover. This wording makes clear that it is not the intent of this insurance
policy to provide defense for claims or suits not otherwise covered and should
relieve any ambiguity with respect to when defense is available and when it is
not.
Later, under business
liability, the form explains that bodily injury damage includes three items:
care, loss of services, or death, of any party that is a result of the bodily
injury that occurred.
Note: The ’96 version contained a paragraph with respect to clarification on the coverage for “property damage” resulting from loss of use of tangible property, however, that paragraph was deleted.
d. Coverage Extension--Supplementary
Payments
The
seven supplementary payments apply to any claim or “suit” the insurer defends, investigates, or settles. Previously,
supplementary payments were applicable only to claims or suits the insurer
defended.
If
the insurer asks the insured to participate in any investigation or defense,
reasonable expenses are provided for the insured. This includes any actual loss
of earnings, up to $250 a day, if
the insured must take time off from work. This is up from the previous $100 a
day cap.
In
those cases where an insured and an indemnitee of the insured are both party to
a “suit” the insurer is defending, the insurer will defend both parties if all
of the following conditions are met:
a.
the insured has assumed the liability under an “insured contract”
b.
the liability assumed by the insured is eligible for coverage under the BOP.
Example: Coverage would not apply if the insured assumed
liability for operating an aircraft since that exposure is excluded.
c.
the “insured contract” obligates the insured to either defend the other party
or to pay the other party’s defense costs;
d.
there can be no conflict of interest between the insured and the indemnitee
with reference to the “suit”;
e.
both the insured and the indemnitee ask the insurer to conduct and control the
defense of the indemnitee and both agree that the same counsel can defend both;
f.
the indemnitee must agree in writing to be subject to the same conditions that
apply to the insured, such as cooperating in the claim or legal process,
promptly notifying the insurer of any legal papers, telling the insurer about
the existence of any other coverage, allowing the insurer to secure needed
records and authorize the insurer to handle the defense.
As
long as all of the conditions are met, the insurer will cover attorneys’ fees
and litigation expenses that the insurer incurs, as well as necessary
litigation expenses incurred by the indemnitee that the insurer has requested.
These expense payments are not considered awards or payment of damages and
therefore are not subject to the limits of insurance.
The
insurer’s obligation to defend the indemnitee and pay for expenses end when
either the insurer has paid the applicable limit of insurance in judgments or settlements or the above stated conditions are no longer
met.
1. APPLICABLE TO BUSINESS LIABILITY COVERAGE
b. Contractual Liability
Exclusion
Damages for “bodily injury”
or “property damage” including the
defense of such, that result from liability the insured has assumed in a
contract or agreement are not covered unless either the contract or agreement
is considered to be an “insured contract” and the “bodily injury” or “property
damage” occurred after the contract or agreement was executed; or, the insured
would have been liable even if the contract or agreement would never have
occurred. Defense is covered as long as
all other conditions are met and the insured is
obligated to provide defense in the “insured contract.” Covered are reasonable
attorney fees and necessary litigation expenses for defense for a civil or
alternative dispute resolution proceeding that this insurance applies to.
f. Pollution Exclusion
In the past, contractors who brought pollutants onto
the job site in any form had no coverage for any resultant pollution that may
have occurred under the CGL. Currently, limited pollution coverage is provided
to those contractors who bring mobile equipment onto the job site which may
accidentally leak or spill gasoline, oil, or hydraulic fluids and cause
pollution damages as a result. Coverage only applies if the fluids are
necessary for the operation of the equipment and are not meant to be discharged
in any way. The current pollution coverage is of benefit to contractors and
property owners alike.
j. Professional Services Exclusions
No “bodily injury,”
“property damage,” “personal injury,” or “advertising injury” is covered under
this insurance from either the rendering or failing to render of any type of
professional service. Nine specific examples of professional services follow;
however, please note that the policy clarifies that these examples include, but
are not limited to these items:
· any ear or body piercing services;
p.
“Personal Injury” and “Advertising Injury” Exclusions
· Any actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants.
· Any loss, cost, or expense or any claim or suit by or on behalf of a governmental authority for damages that result from a request demand or order to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond to, or assess the effect of pollutants. Pollutants are defined using the same wording as Coverage A.
The previous personal
injury liability coverage wording resulted in attempts to force coverage for
various types of pollution losses under the guise of trespass, wrongful entry,
or invasion of the right of private occupancy. It was never the intent of the
personal injury or advertising injury coverage to provide for any pollution
damages or clean-up costs. Therefore, wording was added to bar coverage for any
pollution exposure that may arise out of personal injury or advertising injury.
Executive officers and directors of the covered business are all considered insureds, but only with respect to their duties. Stockholders of the insured are also insureds but only with respect to their liability as stockholders. Also considered to be insureds are “employees” of the insured but only for acts while performing the duties of and in the scope of their employment.
Throughout the section on Who is an Insured, references are made to clarify the intent of coverage for managers and members of limited liability companies. Specifically, it denies coverage for losses involving professional health care services and property damage to any property that is owned, occupied, used by, rented to, in the care, custody or control of, any party that qualifies as an insured. However, there is coverage for loss involving health services IF the BOP covers a retail druggist or pharmacy.
The ’97 edition of the BOP
added a condition on premium audits. It states that the policy may be audited
at the end of a designated period. The audit is intended to check the accuracy
of the initial policy premium. The insured is obligated to:
·
permit the
insurer to perform the audit
·
maintain adequate
records so that the correct premium can be determined
·
pay any
additional premium determined by the audit.
The insurer is obligated,
if necessary, to refund any premium.
The following is a brief description of each of the changes the Insurance Service Office (ISO) has filed in most jurisdictions with an edition date of July 2002. Not all insurance companies use ISO forms. Some companies ask ISO to file forms, rules, and loss cost adjustments for them; other companies file for themselves. You will need to find out from each of your companies whether or not revisions or new forms will be adopted, and on what date the form, rule or loss cost adjustment will become effective.
ISO has merged the Businessowners Special Property Coverage Form, (BP 00 02), The Businessowners Liability Coverage Form (BP 00 06) and the Common Conditions (BP 00 09) into the Businessowners Coverage Form (BP 00 03). This analysis will compare the coverage changes that occurred along with the forms’ merger. The Businessowners Standard Property Coverage Form is no longer available, but there is an endorsement available to change the Cause of Loss from all risks of physical damage to named perils.
a. Building
Personal Property owned by landlord and in common areas has been added.
b. Business Personal Property
Exterior building glass is added with no limitation if:
· The named insured is a tenant
· There is no building coverage on the declarations
· The glass is owned or in the care, custody or control of the named insured
This has been added because exterior glass is now also covered under the building with no limitation due to the removal of the glass limitation later in the policy. This paragraph recognizes that tenants often are responsible for the glass even though they do not own the building.
2. Property Not Covered
Accounts receivables and valuable papers are not covered except as provided elsewhere in the policy. This eliminates all confusion as to where coverage is to be picked up.
Computers permanently installed or designed to be installed on aircraft, watercraft, or other vehicles, unless stock, are not covered. This reinforces the aircraft, watercraft, etc., exclusion.
4.a.(5)
There is no coverage for damage to the interior of a building caused by rain,
snow, ice, sand, dust, or sleet unless there is exterior building damage first
or the damage is the result of ice thawing on the building. While this is a restriction, it is more of a clarification since
leaving windows or doors open would be considered negligent and would have
limited coverage in the Conditions section.
4.b. The glass limitation has been eliminated. This means that the glass is covered as building coverage and included in the limit of insurance for building. The deductible also applies.
a. Debris Removal
This section has been rewritten for clarity. An enhancement to this coverage is that the time limit for reporting is 180 days after the loss. The additional requirement that the report must be made before the end of the policy period has been eliminated. In addition, two examples have been provided to help explain the debris removal additional coverage.
d. Collapse
This coverage has been revised significantly.
1.There is new clarity in what is considered collapse. There are 4 paragraphs describing collapse.
(a) Abrupt falling down or caving in such that the building cannot be occupied is collapse
(b) If the building is in danger of collapse it has NOT collapsed
(c) if part of the building is standing it has NOT collapsed even if it has separated
(d) If the building or part of the building is cracking, bending or similar actions, but is still standing, it has NOT collapsed
2. Hidden decay and hidden insect damage remain covered causes of collapse provided the insured was not aware of their presence PRIOR to the collapse.
3. Personal property collapse coverage has changed location moving from (2) to (4) and has been expanded to clarify intent but coverage is not significantly altered. Basically, the rules that apply to the building also apply to the personal property. Marring and scratching is now specifically listed as not covered under collapse.
l. Increased Cost of Construction
The limit has increased from $5,000 to $10,000. If the buildings are blanketed, the $10,000 is per damaged building.
m. Business Income from Dependent Property
This is added for a limit of $5,000 unless increased on the declarations page.
n. Exterior Building Glass
This has moved from m. to n. and is changed to Glass Expense. Since full glass coverage is now provided in the form, exterior building glass additional coverage is no longer necessary. However, this coverage provides for the temporary plates to board up and also to remove obstructions.
o. Fire Extinguisher Systems Recharge Expense Coverage
Coverage is added for $5,000.
a. Newly Acquired or Constructed Property
This coverage extension has been modified to provide coverage for both building and personal property. The limit for the Building is $250,000 and for Personal Property it’s $100,000.
e. "Valuable Papers and Records"
This limit has been increased from $5,000 at described locations to $10,000, and from $2,500 at non-described locations to $5,000.
f. Accounts Receivable
This limit has been increased from $5,000 at described locations to $10,000, and from $2,500 at non-described locations to $5,000.
A new sentence is added to the lead-in paragraph that states that the exclusions apply even if the loss event results in widespread damage or affects a substantial area.
1.b. Earth Movement
Earth Movement is defined in 4 paragraphs:
· Earthquake including sinking, rising or shaking
· Landslide, including sinking, rising or shaking
· Mine subsidence with or without active mining
· Earth sinking (other than sinkhole collapse), rising, shifting, including soil conditions which cause problems with foundations. Soil conditions include expansion, contraction, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground.
NOTE: The additional wording in item 4 is significant and should be reviewed with the insured. This is the first reference specifically to soil conditions. The volcanic eruption portion of this exclusion is unchanged.
1.e. Power Failure
This exclusion does not apply to loss to "computers" and "electronic media and records." This is a broadening of coverage since it is now providing computer coverage similar to what was previously provided under BP 04 34.
1.h. Certain Computer-Related Losses
This new exclusion replaces BP 10 04 Exclusion – Certain Computer-Related Losses.
2.a. Electrical Apparatus
Wording has been added to provide this coverage for computers if caused by an occurrence or interruption or power on or within 100 feet of the premises. This works with the Power Failure Exclusion enhancement to provide the computer coverage previously provided in Endorsement BP 04 34.
2.k. Neglect
This new exclusion holds the insured
responsible for taking reasonable means to save and preserve property from
further damage at or after the loss. This has always been the case but the language was in the conditions section rather
than the exclusion portion of the policy.
Three new Exclusions are added. They
are all applicable to the computer and electronic enhancement provided by the
broadening of the Power Failure Exclusion and the Electrical Apparatus
Exclusion. The new exclusions are:
·
2.m.
Errors or Omissions
·
2.n.
Installation, Testing, Repair
·
2.o.
Electrical Disturbance
The result of adding these exclusions should be that of equalizing the coverage previously provided under withdrawn form BP 04 34, Businessowners Special Form Computer Coverage.
4. Business Income and Extra Expense Exclusions
The term suspension is defined within this exclusion and is applicable only to this exclusion. It means partial slowdown or complete cessation of operations that result in part of the premises being untenable. This is new to the form.
5. Accounts Receivable Exclusion
This exclusion was previously applicable to two classes of property, Accounts Receivable and Valuable Papers. The limitations that had been applicable to Valuable Papers are not part of the new Errors or Omissions, Installation, Testing and Repair and Electrical Disturbance exclusions so there is no reason to have a separate Valuable Papers exclusion. The Accounts receivable exclusion is still necessary, so that portion of the exclusion remains unchanged.
The deductible has been changed due to the Glass changes. There remain two deductibles on the declarations page. The first is for the main coverages and the second applies to Optional Coverage/Glass. This method permits a lower amount for Money and Securities, Employee Dishonesty, Outdoor Signs and Glass, while encouraging a larger amount on the rest of the policy.
5. Electronic Media and Records Limitation
The paragraph defining Electronic Media and Records is removed since the term is now defined in the definitions section of the form.
6. Loss Payment
A number of small changes are being made to this section of the form:
d.(1) is amended to limit the cost of rebuilding at a new premises to the cost that would have been incurred at the original premises.
d.(1)(d) adds wording to allow claims for less than $2,500 to be handled as replacement cost whether or not the repair or replacement is complete.
d.(3)(b) is amended to limit coverage to the liability the named insured has based on written contract with the person who owns the property.
d.(6) valuable papers valuation includes the cost of restoration or replacement, including cost of data entry, re-programming, computer consultation services and all media use for information storage. If they are not restored, cost of blank material is to be used. This condition was reworded in order to provide more guidance on how to calculate such losses.
9. Vacancy Loss Condition
This has been changed to explain that 31% or more of a building must be occupied if it is not to be considered vacant. The previous wording stated that 70% or more of the building must be vacant. This is not a real change, just a half full/half empty look at the explanation of vacant.
Interior Glass
There is no longer a need for special
interior glass coverage since there is no longer a glass limitation. This
coverage has therefore been eliminated.
Employee Dishonesty
This coverage has been amended to more closely match Commercial Crime Employee Dishonesty Form.
The most significant change is the addition of the phrase "sustained
during the policy period." Prior wording only required that the loss be
discovered within one year from the end of the policy period.
Mechanical Breakdown
A minor editing change was made.
Computer - is now a defined term because of the introduction of various computer coverages into the form.
Counterfeit - is defined to be consistent with the Commercial Crime Forms.
Electronic media and records - is defined because of the introduction of various computer coverages into the form.
Manager and Member - are now defined because of the addition of Limited Liability Companies as forms of business.
Stock - is newly defined.
Valuable Papers and Records - is revised to include electronic media and records.
1. BUSINESS LIABILITY
The "Montrose" amendments are being introduced for the first time to the BOP. These amendments were mandatory on all Commercial General Liability policies starting in 1999 and have been recently incorporated into the CG 00 01. Now, as a part of this major revision, the same wording is being introduced to the BOP. This is a major restriction of coverage in certain states. The main thrust of the wording is that there is no coverage for occurrences or claims known by any insured prior to policy period.
"Personal Injury" and "advertising Injury" are now combined as one term "Personal and Advertising Injury." The new term is defined in Definitions section.
EXCLUSIONS
1. APPLICABLE TO BUSINESS LIABILITY COVERAGE
f. Pollution Exclusion
It would be surprising if there was not a pollution exclusion change. The latest program edition brings five changes. All were also made in the Commercial General Liability Policy.
1) The definitions of "pollutants" and "hostile fire" have moved to the Definitions section of the policy. No actual change was made to the terms’ meaning.
2) Coverage is provided for injury due to heating equipment fumes, vapors, soot, or smoke and coverage is provided for a contractor even if the building owner is added as an additional insured to his policy.
3) Clarifies that "for whom you are legally responsible” only applies to "any person or organization" not to any insured.
4) Provides coverage for injury due to the escape of fumes from materials brought onto the premises by contractors.
5) Clarifies that paragraph (2) does not exclude coverage for property damage that would be covered elsewhere except for that exclusion.
g. Aircraft, Auto, or Watercraft
Two changes have occurred to this exclusion. The first matches a change in the CGL while the second is an extension of coverage for the Businessowners Policy only.
1) The exclusion is clarified to state that this exclusion does not apply to negligence by lack of supervision, hiring practices, etc. Basically, if injury is due to aircraft, auto or watercraft, there is no coverage unless an exception in the exclusion.
2) The non watercraft coverage is being revised from 26 to 51 feet.
j. Professional Services Exclusions
A very important change has been made in this exclusion. Item (9), which excluded professional services for pharmacies but provided coverage for retail drugstores and druggists, has been changed to state that ALL pharmacies are excluded from professional coverage. Endorsement BP 08 06, Limited Pharmacists Liability Coverage, must be attached for coverage.
k. Damage to Property is revised to match the CGL. There are two
changes:
1. There is no coverage for expenses that the insured may incur to fix the property to prevent damage.
2. Coverage is provided for premises rented by the insured for less than 7 days.
p. "Personal Injury" and "Advertising Injury"
Exclusion
This is another constantly changing section. The exclusion matches the CGL and the changes are:
· Formatting for readability and combination of the terms.
· Newly added exclusion (1) stating that violation of a right and that inflicts injury is not covered.
· Exclusion (4) is a revision of "willful violation" to damage "arising out of a criminal act.” This wording clarifies the intent of the prior wording.
· Exclusion (9) refer to activities on the Internet. There is no coverage for an insured whose business is web designing or who is an Internet provider, but there is latitude for those who have Websites.
Volunteer workers are now covered as additional insureds but only in the conduct of the insured’s business.
Paragraph 4. Aggregate Limits has been rewritten. Wording has been changed to clarify intent, but the main change is the increase of the products completed operations aggregate. The revised limit is now equal to twice the amount of the BOP’s Liability and Medical expense limit.
4. Legal Action Against Us has been slightly changed to recognize that many claims do not have an actual trial, so that wording has been eliminated.
1. Item 1., "Advertisement" is added as a defined term. This includes reference to both standard media and the Internet. An important exception for most insureds is that the part of any website that is informational only is not considered advertisement. The wording is interesting since only the part of the website that is attempting to attract customers is advertisement. A question might be raised as to why a business concern would have a website if NOT to attract customers.
2. Item 4., "Coverage Territory" is expanded to provide worldwide coverage for personal or advertising injury provided it took place through the internet and the damages were determined in the U.S., Puerto Rico or Canada.
3. Item 7., "Hostile Fire" is added. The definition is the same the one used in the BOP’s Pollution Exclusion.
4. Item 14., "Personal and advertising injury" is added as one definition and the separate definitions of "Personal Injury" and "Advertising injury" are eliminated. This definition is more than the combination of the two definitions; it also expands the coverage to include consequential bodily injury
5. Item15., "Pollutants" is added. The definition is the same that was used in the Pollution Exclusion.
6. Item 17., "Property Damage" is revised to state that Electronic data is not tangible property in this insurance. It then further defines what constitutes electronic data.
7. Item 20., "Volunteer Worker" is added as a definition. The key is that the individual is not an employee and receives no fee, salary or other compensation for the services they render.
8. Item 21., "Your product" definition is cleaned up with no coverage impact.
9. Item 22., "Your work" definition is cleaned up with no coverage impact.
E. INSPECTIONS AND SURVEYS
Paragraph 2 of this condition state that the company is not obligated to make inspections, surveys, or recommendations. It also states that if inspections are made, the company does not warrant that the premises are safe or that they comply with state law. This paragraph was added more than 10 years ago due. It was introduced to respond to lawsuits brought against companies for allowing unsafe conditions to exist. This protection is necessary but went a little too far. In paragraph 4, the insurance company now recognizes that certain inspections, in particular boilers, pressure vessels and elevators, are obligations. In other words, IF an insurer inspects such items and finds problems, the insurer does have a duty to warrant their safety or their compliance.
H. OTHER INSURANCE
Many additional insureds can be added to the Businessowners policy so the Other Insurance section is revised to explain what insurance is primary. Following the tradition of the ISO CGL, the policy with the additional insurance endorsement is primary and the insured's regular policy is responds on an excess basis.
J. PREMIUM AUDIT
The policy now states that the due date for premiums audit is the date shown on the bill as the due date. A fairly simple statement, but it is important to bring the policy up to standard accounting practices.
This is a brief description of the changes the Insurance Services Office (ISO) made to the Businessowners Program (BOP) policy filed in most jurisdictions with the January 2006 edition compared to the July 2002 edition. Keep in mind that not all insurance companies use ISO forms. Some request that ISO file the forms, rules and loss cost factors for them while others do the filing themselves. You must determine which, if any, of your companies adopts the latest revisions and the date the forms, rules and loss cost factors are effective and in use.
2. Property Not Covered
i. Electronic data is covered only in the electronic data additional coverage.
c. Fire Department Service Charge
The previous limit of $1,000 is increased to $2,500.
h. Pollutant Clean Up And Removal
The requirement that expenses be reported to the insurance company before the policy expiration date no longer applies. The new requirement is that expenses must be reported within 180 days after the date of loss.
j. Money Orders And Counterfeit Money
In addition to covering counterfeit currency, coverage is broadened to include counterfeit money, as defined.
p. Electronic Data
This is a new coverage. It is needed because the policy now excludes electronic data. A $10,000 annual aggregate policy limit is available for this property.
q. Interruption Of Computer Operations
This is the business income/extra expense coverage that applies after an electronic data direct damage loss. A $10,000 annual aggregate policy limit applies.
r. Limited Coverage For Fungi, Wet Rot, Dry
Rot And Bacteria
This coverage is offered because it is excluded elsewhere in the policy. A $15,000 annual aggregate policy limit applies at all locations and for all types of property.
b. Personal Property Off Premises
This coverage is broadened to include any covered property. The previous limit of $5,000 is increased to $10,000.
1.e. Power Failure
The definition of power failure is broadened to include both a reduction in supply and a lack of capacity.
1.i. Fungi, Wet Rot, Dry Rot And Bacteria
Loss or damage caused by or resulting from fungi, wet rot, dry rot or bacteria is excluded, except for the limited coverage provided in the Additional Coverages section of the policy.
2.p. Continuous Or Repeated Seepage Or Leakage
Of Water
There is no coverage for loss or damage caused by or resulting from water that seeps or leaks for more than 14 consecutive days.
5. Electronic Media And Records Limitation
This condition is completely removed and no longer applies.
6. Loss Payment
The valuable papers and records loss payment condition is now in the valuable papers additional coverage section of the policy.
Employee Dishonesty
The definition of employee is revised and amended to match
the definition used is most crime coverage forms.
Counterfeit money replaces the definition of counterfeit currency. This means coverage is broadened to include money as defined in addition to counterfeit currency.
Electronic data replaces "electronic media and records" throughout the policy.
Fungi is a new definition due to the new additional coverage and exclusion in the policy that applies to it.
Valuable Papers and Records is revised to eliminate electronic media and records coverage.
1. Exclusions Applicable To Business Liability
Coverage
f. Pollution Exclusion
The one pollution exclusion change matches a similar change in the Commercial General Liability Coverage Form. Coverage now applies to injury, loss or damage sustained due to smoke, fumes, vapor or soot from either cooling or dehumidifying equipment, as well as from hot water heaters.
g. Aircraft, Auto Or Watercraft
The mobile equipment exception is modified because of the revised definition of auto and due to coverage not applying to any mobile equipment subject to state laws or statutes requiring or involving vehicle registration and/or financial responsibility.
i. War
A completely new total war exclusion replaces the previous war exclusion that involved liability imposed by a contractual obligation.
p. Personal Injury And Advertising Injury
Exclusion
The previous exclusion relating to criminal acts is removed and is now a separate stand-alone exclusion.
q. Electronic Data
Loss or damage due to or resulting from a loss or corruption of electronic data is excluded.
r. Criminal Acts
This exclusion for personal and advertising injury arising from a criminal act is removed from the Personal And Advertising Injury exclusions and is now a separate, stand-alone exclusion.
s. Distribution Of Material In Violation Of
Statutes
This new exclusion responds to various state “Do not call” statutes.
The exception paragraph for exclusions is amended to exclude loss or damage due to explosion. Property damage caused by or resulting from fire is covered but loss or damage due to explosion is not. This matches the coverage provided in the Commercial General Liability Coverage Form.
2. Exclusions Applicable To Medical Expenses
Coverage
e. The athletic exclusion is modified and clarified to exclude injury sustained by persons while practicing, instructing or participating in athletic activities. The types of athletic activities are broadened to include any physical exercises, games, sports or athletic contests.
h. The war exclusion is removed. It is no longer needed since the Businessowners Liability Coverage now excludes war.
3. Mobile equipment subject to financial responsibility laws is removed and no longer applies.
The damage to premises rented to you limit is now subject to either the general aggregate or the products and completed operations aggregate, based on the nature of a loss and a determination of which aggregate limit applies.
3. The condition applying to financial responsibility laws is removed and no longer applies.
2. Auto is changed to include any mobile equipment subject to financial responsibility laws.
12. Mobile Equipment is changed to exclude any mobile equipment subject to financial responsibility laws.
This comparison highlights the similarities and differences between the AAIS BOP product and the ISO BOP product. In order to provide an easy to read side-by-side comparison, the descriptions are more limited than in a standard policy review.
|
AAIS BP 200 ED.1.0 Vs. ISO BP 00 03 07 02 |
||
|
Policy Section |
AAIS Special BOP BP 200 Ed 1.0 |
ISO BOP BP 00 03 07 02 |
|
Common Conditions (Applies to Property and
Liability) |
Located at the beginning of the policy |
Located at the he end of the policy |
|
Common Conditions Assignment |
Not permitted |
Not permitted |
|
Common Conditions Cancellation |
1. Any time by the insured 2. 10 days for nonpayment 3. 30 days for other reasons Return premium by insurer rules |
1. Any time by the insured 2. 5 days for vacant, damaged or unsafe 3. 10 days for nonpayment 4. 30 days for all others Return pro-rata if insurer cancels but less if insured cancels |
|
Common Conditions Change, Modification, or
Waiver of Policy Terms |
Must be by the insurer and in writing. |
Must be part of the policy |
|
Common Conditions Conformity With Statute |
If anything in the policy conflicts with the statutes of the state, the policy will conform to the statutes of the state. |
No statement |
|
Common Conditions Cooperation |
The insured must cooperate with the insurer in performing all acts required by this policy. |
Handled separately in the Property and Liability Conditions |
|
Common Conditions Examination of Books and
Records |
Insurer can examine records for up to 3 years after loss |
Same |
|
Common Conditions Inspections |
The insurer may inspect but does not warrant the health or safety of the premises. |
Same but extends the right to any rating, advisory or similar organization. Any inspections made to comply with state statutes, such as elevator and boiler inspections are a warranty. |
|
Common Conditions Liberalization |
Broadening of the policy that occurred up to 45 days prior to the policy effective day or during the policy period applies provided there is no premium charge. |
Same except that 60 days are granted instead of 45 days. |
|
Common Conditions Misrepresentation,
Concealment, or Fraud |
1. Any willful concealment or misrepresentation by any insured of a material fact voids the policy. 2. Any false swearing or fraud by any insured voids the policy. |
1. Fraud by the named
insured voids the policy. 2. Any intentional concealment or misrepresentation of material fact by any insured voids the policy. |
|
Common Conditions Premium |
No mention |
Premium is due from the
first named insured. Renewal premium is recomputed based on current rates Policy can be continued at anniversary date provided premium is received prior to anniversary Additional premium may be due if additional exposures occur during year. |
|
Definitions – Prop. You and your |
An insured listed on the Declarations page. Can be a person or any organization. |
Policy states that these terms refer to insured named on the Declarations. |
|
Definitions – Prop. We, us, and our |
The insurer that provides the coverage |
Policy states that these terms refer to the insurer that provides the coverage. |
|
Definitions – Prop. Basic territory |
The United States of America, its territories and possessions, Canada, and Puerto Rico |
Same but called coverage territory. |
|
Definitions – Prop. Declarations |
Any page labeled declarations, supplemental declarations, or schedules as long as they apply to the policy |
Not a defined term |
|
Definitions – Prop. Limit |
The applicable coverage amount |
Not a defined term |
|
Definitions – Prop. Money |
Any currency, coins, bank notes plus traveler’s checks and money orders held for sale. |
Same |
|
Definitions – Prop. Pollutant |
Two-part definition a. Spells out what is considered a pollutant and includes waste. b. Emissions that are electrical, magnetic or sound and are either visible or invisible. |
Same as a. except no reference to radioactive and no part b. |
|
Definitions – Prop. Restoration period |
The time from when the loss occurs to when the insured should be back
into operations. No extra time permitted even if due to enforcement of any ordinance, law, or decree. |
Similar but coverage doesn’t start until 72 hours after time of loss. |
|
Definitions – Prop. Securities |
Any instruments, except money, representing money or property. |
Same |
|
Definitions – Prop. Sinkhole collapse |
Earth collapsing into a space created by water-action on a rock formation. Land value or fill-in costs are not included. |
Defined within the specified perils definition. Very similar. Does not cover collapse into manmade spaces such as mines. |
|
Definitions – Prop. Specified perils (with exceptions and exclusions) |
Aircraft; civil commotion; explosion; falling objects; fire; hail; firefighting equip; leakage, lightning; riot; sinkhole; smoke; sonic boom; vandals; vehicles; volcanoes; water damage; wt. of ice/snow, and windstorm |
Same |
|
Definitions – Prop. Terms |
The provisions, limitations, exclusions, conditions, and definitions. |
Not a defined term |
|
Definitions – Prop. Volcanic action. |
All volcanic activity except clean up cost of ash and dust that doesn’t cause physical damage to the property. |
Defined within the Earth Movement Exclusion. Wording is very similar. |
|
Definitions – Prop. Computer |
Not a defined term |
The computer and all peripherals |
|
Definitions – Prop. Counterfeit |
Not a defined term |
An imitation intended to deceive |
|
Definitions – Prop. Electronic media and records |
Not a defined term |
The software that goes with the computer plus the hard copy used for entry of data |
|
Definitions – Prop. Manager |
Not a defined term |
LLC director |
|
Definitions – Prop. Member |
Not a defined term |
LLC owner |
|
Definitions – Prop. Operations |
Not a defined term |
Business activities to be covered under Business Income |
|
Definitions – Prop. Stock |
Not a defined term |
Includes raw stock, items in progress and finished stock; packing and shipping supplies |
|
Definitions – Prop. Valuable papers and records |
Not a defined term |
Not money and securities but other important documents |
|
Property Covered – Building |
Buildings, additions (completed and in-progress),
indoor and outdoor fixtures, machinery and
equipment. Insured’s personal property such as floor coverings, certain
appliances, supplies and materials to repair, maintain or alter building. Insured’s personal property in furnished apartments. |
Same except personal property in furnished common areas are covered if the insured is a landlord |
|
Property Covered - Business Personal Property |
Owned
Personal property used in the insured’s business located in a building listed
on the declarations, in the open on the premises, in a vehicle on the
premises or within 100 feet of the described premises. Insured’s
interest (such as cost of labor, materials and
service) in property of others and the legal liability for the property. Cost of improvements made to a non-owned building at the insured’s expense but the insured cannot remove. |
Same but does not mention the insured’s interest in property of other. Includes Exterior Glass if not covered under Building. |
|
Property Not Covered - Antennas, Fences and Signs |
Radio and TV antennas and towers are not covered. Fences and signs are not covered |
Same except signs attached to buildings are covered. |
|
Property Not Covered Bullion |
Not covered |
Covered but subject to $ 2,500 theft limitation |
|
Property Not Covered Contraband |
Illegal property or property used or obtained illegally not covered |
Same |
|
Property Not Covered Land, Water, Crops, Lawn |
Land, water, growing crops and lawns not covered |
Same |
|
Property Not Covered Lottery Tickets |
Lottery tickets not held for sale not covered |
Not mentioned |
|
Property Not Covered Money and Securities |
Money and Securities are not covered |
Same |
|
Property Not Covered Trees, Shrubs and Plants |
Trees, shrubs, plants, grain, hay, straw or other crops not covered. |
Same, except no mention of hay, straw and other crops. |
|
Property Not Covered Vehicles and Aircraft |
Aircraft and machines that must be licensed for use on public roads are not covered. |
Aircraft and vehicles subject to motor vehicle registration are not covered. |
|
Property Not Covered Watercraft |
Any watercraft and equipment and accessories are not covered while afloat. |
Same |
|
Property Not Covered Accounts receivables, bills, evidences of debt |
Evidences of debt are considered securities and therefore, not covered. |
Not covered property except in extensions of coverage |
|
Property Not Covered Computers installed in aircraft, watercraft or motorized vehicles other than mobile equipment |
Not mentioned |
Not covered property unless stock. |
|
Excluded/Limited Prop. Boilers |
No coverage if damage due to boiler or water heater condition. Flue/firebox/chamber explosion is covered |
Same |
|
Excluded/Limited Prop. Furs |
$2,500 max -theft of furs or fur garments |
Same but limit also applies to fur trimmed garments |
|
Excluded/Limited Prop. Glass Breakage |
Max. $100/pane and $500 per occurrence for glass breakage |
No limitation |
|
Excluded/Limited Prop. Glassware and Fragile Articles |
Fragile items are restricted to specified perils |
Same |
|
Excluded/Limited Prop. Jewelry, Watches, Jewels, Metals |
$2,500 limit on theft of jewelry, watches and similar items. Does not apply to watches and jewelry worth less than $100 per item |
Same |
|
Excluded/Limited Prop. Missing Property |
Not covered for losses of missing property where there Is no physical evidence of loss |
Same |
|
Excluded/Limited Prop. Patterns, Molds, Dies, Models, Forms |
$2,500 limit on patterns, dies, molds, models or forms |
Same except models not limited. |
|
Excluded/Limited Prop. Pers. Prop. in the Open |
outdoor personal property damaged by weather |
Same |
|
Excluded/Limited Prop. Interior damage due to outdoor elements |
No limitation |
No coverage unless building damaged or experiences thawing |
|
Add’l Cov., Com’l Prop Collapse |
Covered for hidden decay, insects, wt of people or personal property, wt of rain on roof, defective material or methods but only during the construction |
Similar but defines collapse to exclude imminent danger of collapse. Specifically addresses personal property that collapses without a building collapse |
|
Add’l Cov., Com’l Prop Debris Removal |
25% of physical loss plus $5,000 |
Same, except plus $10,000 – per location |
Add’l Cov., Com’l PropFire Department Service Charges |
$1,000 |
$1,000 |
|
Add’l Cov., Com’l Prop Increased Cost due to Ordinances/Law |
$5,000 |
$10,000 |
|
Add’l Cov., Com’l Prop Pollutant Clean up or Removal |
$10,000 per premises |
$10,000 per location |
|
Add’l Cov., Com’l Prop Removal |
Direct loss to prop. Moved threat of covered loss. Applies in transit and at new location for 10 days. |
Same, but coverage is up to 30 days at new location. |
|
Add’l Cov., Com’l Prop Tearing out and Replacing |
Cost to tear out and replace part of the structure in order to repair leaking system or appliance. Excludes cost of fixing the leak unless fire extinguishing system or caused by freezing. |
Same |
|
Add’l Cov., Com’l Prop Antennas, Fences and Signs |
Max. $2,500 coverage for radio and TV antennas, towers and signs. Fences are covered for up to $2,500 for limited perils |
Radio and TV antennas, towers, signs (not attached to buildings) and fences are covered up to $2,500 for limited perils. |
|
Add’l Cov., Com’l Prop Money Orders and Counterfeit Paper |
Not covered |
Up to $1,000 per loss |
|
Add’l Cov., Com’l Prop Forgery and Alteration |
Not covered |
Up to $2,500 per loss |
|
Add’l Cov., Com’l Prop Glass expense |
Covered in glass breakage limitation |
Expense of putting up temporary plates and removing obstructions. No specific limit. |
|
Add’l Cov., Com’l Prop Fire Extinguisher Recharge Expense |
Not covered |
Up to $5,000 to recharge extinguishers or system following a discharge |
|
Cov. Ext. Com’l Prop Building property off premises |
$5,000 for building property in transit and off site |
Not covered |
|
Cov. Ext. Com’l Prop Newly Acquired Buildings |
25% of bldg. limit-$250,000 max for 30 days after construction start or acquisition date |
Same except no 25% limitation |
|
Cov. Ext. Com’l Prop Trees, Shrubs and Plants |
$250 per tree, shrub, plant up to $1,000 total for limited perils |
Same but cap is $2,500 |
|
Cov. Ext. Com’l Prop Personal Effects |
$100/person, $500 per premises for personal effects of insured, officers, partners, employees |
Same, but no per person cap and maximum limit is $2,500. No coverage for theft. |
|
Cov. Ext. Com’l Prop Personal Property – Acquired Locations |
$20,000 at newly acquired location for 30 days |
Same except limit is $100,000 |
|
Cov. Ext. Com’l Prop Personal Property Off Premises |
$5,000 for personal property In transit or off premises |
Same |
|
Cov. Ext. Com’l Prop Pers. Property of Others |
$2,500 for personal property of others |
Coverage included with Business Personal Property |
|
Cov. Ext. Com’l Prop Valuable Papers |
$1,000 for cost of research and other expenses to replicate |
Same except $10,000 on premises and $5,000 off premises limits |
|
Cov. Ext. Com’l Prop Accounts Receivables |
Records are covered for the cost of blank material and the labor to transcribe a copy of the records, if there is a duplicate |
$10,000 on premises and $5,000 off premises for loss to accounts receivables. |
|
Loss of Income - Earnings |
Up to 12 consecutive months |
Same |
|
Loss of Income - Earnings cont. |
Actual loss sustained (a limit may be shown) |
Same but no limit |
|
Loss of Income - Earnings cont. |
Payroll is paid as necessary to resume operations |
60 days payroll – can be extended If part of occupied building is damaged to hinder operations at insured space in building coverage continues. |
|
Loss of Income - Earnings cont. |
No consideration for partial occupancy. No statement regarding missed business opportunity |
No coverage for missed business opportunities |
|
Loss of Income – Extra Expense |
Covered only to extent it reduces the Earnings loss |
Same |
|
Loss of Income Limitations/Exclusions- Electronic Information |
Up to 60 days coverage for earnings loss due to electronic
info |
Same |
|
Loss of Income Limitations/Exclusions: Fire extinguishing |
No coverage for expenses to put out the fire |
Same |
|
Loss of Income Limitations Leases, licenses, contracts, orders |
Lapse or cancellation of lease, license, contract don’t increase restoration |
No exclusion |
|
Loss of Income Limitations Strikes, protests, interference |
Strikes or protests do not increase restoration period |
Same |
|
Supp’l Loss of
Income Alterations and New buildings |
Coverage is extended to include additions, alterations and new buildings on same premises |
Coverage is limited only to premises. No need for the extension |
Supp’l Loss of Income
Interruptions by civil authority |
Two weeks covered due to order of civil authority |
Three weeks coverage AFTER a 72-hour deductible |
|
Supp’l Loss of
Income acquired locations |
$100,000 coverage at newly acquired location for 30 days |
No coverage |
Supp’l Loss of Income
Period of loss extension |
30 days extension beyond restoration period |
Same |
Supp’l Loss of Income
Business Income from Dependent Properties |
No coverage |
$5,000 limit for loss of business income due to covered loss at dependent property |
Supp’l Loss of Income
Business Income from Dependent Properties |
No coverage |
$5,000 limit for loss of business income due to covered loss at dependent property |
Perils Covered
Risks of physical loss unless limited or excluded |
Same |
Same |
|
Com’l Prop Exclusions Civil Authority |
Excluded |
Excluded |
|
Com’l Prop Exclusions Earth Movement or Volcanic Eruption |
Excluded |
Excluded |
|
Com’l Prop Exclusions Nuclear Hazard |
Excluded |
Excluded |
|
Com’l Prop Exclusions Ordinance or Law |
Excluded |
Excluded |
|
Com’l Prop Exclusions Utility Failure |
Excluded |
Excluded |
|
Com’l Prop Exclusions Water |
Excluded |
Excluded |
|
Com’l Prop Exclusions War |
Excluded |
Excluded |
|
Com’l Prop Exclusions Weather Conditions |
Excluded |
Excluded |
|
Com’l Prop
Exclusions Animals |
Excluded except for specified perils and glass breakage |
Same |
|
Com’l Prop Exclusions Collapse |
Excluded except the coverage in the Additional coverage of Collapse |
Same |
|
Com’l Prop
Exclusions Contamination or Deterioration |
Excluded except for specified perils or glass breakage |
Same |
|
Com’l Prop Exclusions Criminal, Fraudulent, Dishonest Acts |
Excluded except destructive acts by employees are covered. |
Excluded except destructive acts by employees are covered |
|
Com’l Prop Exclusions Defects, Errors and Omissions |
Excluded |
Excluded |
|
Com’l Prop Exclusions Electric Currents |
Excluded |
Excluded |
|
Com’l Prop Exclusions Explosion |
Exclude explosion of steam boilers and devices unless gas or fuel causes the explosion |
Same |
|
Com’l Prop Exclusions Freezing |
Excluded unless care taken to maintain heat or drain equipment |
Same |
|
Com’l Prop
Exclusions Mechanical Breakdown |
Excluded except for specified perils or glass breakage |
Same except computers have coverage |
|
Com’l Prop
Exclusions Release of pollution |
Only coverage for specified perils |
Same |
|
Com’l Prop Exclusions Seepage |
Excluded |
No similar exclusion |
|
Com’l Prop Exclusions Smog |
Excluded |
Excluded except for specified perils and glass breakage |
|
Com’l Prop Exclusions Settling, cracking, shrinking, bulging or expanding |
Excluded except for specified perils or glass breakage |
Same |
|
Com’l Prop Exclusions Industrial smoke, vapor or gas |
Excluded |
Same |
|
Com’l Prop Exclusions Changes in temperature or humidity |
Excluded except for specified perils or glass breakage |
Same |
|
Com’l Prop Exclusions Voluntary parting or trickery |
Excluded |
Same |
|
Com’l Prop Exclusions Wear, tear, marring, scratching |
Excluded except for specified perils or glass breakage |
Same |
|
Com’l Prop Exclusions Consequential Losses |
No exclusion |
Delay, loss of use, loss of market excluded |
|
Com’l Prop Exclusions Neglect |
No exclusion |
Damage to property caused by neglect after a loss is excluded |
|
|
|
Com’l Prop Exclusions Installation, Testing, Repair |
No exclusion (also no coverage provided in form) |
Damage to computer or records due to errors in installation, testing or repair excluded except for fire or explosion |
|
|
|
Com’l Prop Exclusions Errors or omission |
No exclusion (also no coverage provided in form) |
Damage due to errors or omissions in programming except for fire or explosion |
|
|
|
Com’l Prop Exclusions Accounts receivable exclusion |
No exclusion (also no coverage provided in form) |
3 exclusions relating to accounts receivables |
|
|
|
Com’l Prop Exclusions Certain Computer-Related Losses |
No exclusion |
This is the “year 2000” exclusion. |
|
|
|
Loss Duty Prompt notice |
Prompt insurer notice and police notice if a crime |
Same |
|
|
|
Loss Duty Protection of property |
Must protect property-insurer covers expense |
Same |
|
|
|
Loss Duty Proof of loss |
Submit written proof within 60 days of request by insurer |
Same
|
|
|
|
Loss Duty Examination |
Submit to examination under oath |
Same
|
|
|
|
Loss Duty Records |
Produce records and permit copies as requested |
Same |
|
|
|
Loss Duty Inspection of damaged and undamaged property |
Produce damaged and undamaged property for review |
Same |
|
|
|
Loss Duty No volunteer payments |
No expenses paid except for protection of property. |
No Condition
|
|
|
|
Loss Duty No right to abandon |
Same |
Same
|
|
|
|
Loss Duty Continuation of operations |
Same |
Same
|
|
|
|
Loss Valuation Replacement Cost |
Most Building and Personal Property when actually repaired or replaced |
Same unless limit is less than 80% of replacement cost – then at actual cash value |
|
|
|
Loss Valuation Property valued at Actual Cash Value |
Household contents, manuscripts, object of art, personal property of others, used goods for sale |
Same |
|
|
|
Loss Valuation Property that may be valued as Actual Cash Value |
If ACV option is selected, building and personal property is valued at ACV |
Same |
|
|
|
Loss Valuation Plate glass |
Includes safety glazing
required by law
|
Same |
|
|
|
Loss Valuation Damaged part |
Only pay the value of the damaged or lost part |
No statements |
|
|
|
Loss Valuation Money |
Valued at face value |
Same |
|
|
|
Loss Valuation Pairs or sets |
Proportion of loss to total value |
No statement |
|
|
|
Loss Valuation Securities |
Value at the close of business day on day of loss |
Same |
|
|
|
Loss Valuation Tenants improvements |
Replacement cost or the remaining value based on lease |
Same |
|
|
|
Loss Valuation Valuable Papers |
Cost of blank materials and labor to transcribe |
Cost of restoration if restored. If not, cost of blank materials. |
|
|
|
Loss Valuation Accounts Receivables |
Not covered |
Specific formula to follow |
|
|
|
How Much Is Paid Insurable interest |
Only insurable interest of named insured |
Only the financial interest of the named insured |
|
|
|
How Much Is Paid Deductibles (As stated on the Declarations, except items listed in this table) |
Employee Dishonesty, Exterior Glass, Interior Glass, Money and Securities and Outdoor Signs always at $ 250 Fire Department Service Charge and Loss of Income have NO deductible |
Money, Securities, Dishonesty, Outdoor Signs & Glass subject to the Opt. Coverage/Glass Ded. Fire Dept. Service Charge, Civil Authority and Fire Ext. –No ded. Loss of Income has a 72-hour deductible |
|
|
|
How Much Is Paid Loss Settlement Terms |
The lesser of the valuation amount, the cost to repair or replace or the limit on the policy |
Same |
|
|
|
How Much Is Paid Insurance under more than one coverage |
Pay no more than loss sustained |
Same |
|
|
|
How Much Is Paid Insurance under more than one policy |
Proportional payment if terms identical. If not, excess over the amount of the other |
Excess over the amount due from the other |
|
|
|
How Much Is Paid Automatic Increase |
Increase by percent on declarations |
Same |
|
|
|
How Much Is Paid Seasonal increase |
25% automatic increase if business personal property limit is 100% of last 12 months average value |
Same |
|
|
|
How Much Is Paid Outdoor signs attached to buildings |
Not covered |
$1,000 limit per occurrence |
|
|
|
How Much Is Paid Electronic Media and Records |
Not covered |
60-day maximum time period |
|
|
|
Loss Payment – Prop Payment Options |
Pay the cost of repair, rebuild, or take away property at agreed value. Insurer option |
Same |
|
|
|
Loss Payment – Prop Your losses |
Payment to be made within 30 days after the sworn proof of loss and agreement on amount of loss |
Same |
|
|
|
Loss Payment – Prop Property of Others |
Adjust with prop. owner or named insured. Also, may defend suits brought by property owner. |
Same |
|
|
|
Other Prop. Conditions Appraisals |
If disagreement over valuation, written demand must be made for appraisal then each must select own appraiser within 20 days who then must select an umpire within 15 days. If no agreement, submit differences to umpire. |
Same but without time indications |
|
|
|
Other Prop. Conditions Benefit to Others |
No benefit to anyone having custody of property |
Same |
|
|
|
Other Prop.
Conditions Control of Property |
Act or neglect by others does not impact coverage |
Same |
|
|
|
Other Prop. Conditions Death of an Individual Named Insured |
Rights and duties pass to legal representative |
Same |
|
|
|
Other Prop. Conditions Mortgage Provisions |
Standard provision |
Same |
|
|
|
Other Prop. Conditions Recoveries |
Parties must notify each other if recoveries or payment. If insured wants recovery, must return claim payment. |
Same |
|
|
|
Other Prop. Conditions Subrogation |
Insurer secures subrogation rights unless waived prior to loss. Can waive rights to another insured, tenant, and owned or controlled business. |
Same |
|
|
|
Other Prop. Conditions Suit against the insurer |
All terms must be met and brought within 2 years of loss |
Same |
|
|
|
Other Prop. Conditions Vacant buildings |
Limited causes of loss if property is vacant for more than 60 consecutive days. Also covered losses are reduced by 15%. |
Similar |
|
|
|
Optional Prop. Covs. Employee Dishonesty |
Covered if limit on declarations |
Same with some differences regarding applicability of policy level exclusions |
|
|
|
Optional Prop. Covs. Exterior Glass |
Covered for basement or ground floor glass. |
No limitation – full coverage in policy so no separate coverage |
|
|
|
Optional Prop. Covs. Interior Glass |
Covered for basement or ground floor glass |
No limitation – full coverage in policy so no separate coverage |
|
|
|
Optional Prop. Covs. Money and Securities |
Covers money, securities, lottery tickets and bullion Inside bank or owned premises Outside is anywhere else but unattended vehicles are not covered without visible evident of forced entry Limit is on declarations Restricted exclusions |
Covers money and securities Outside is anywhere else – not restricted. Same No change in applicability of exclusions |
|
|
|
Optional Prop. Covs. Outdoor Signs |
Outdoor signs are covered for limit shown with restricted policy exclusions |
Same except different restricted policy exclusions |
|
|
|
Optional Prop. Covs. Mechanical Breakdown |
Not covered |
Limited boiler and machinery coverage |
|
|
|
Definitions – Liab. You and Your |
An insured listed on the Declarations page. Can be a person or any organization. |
Not part of the definitions section but at the beginning of the policy it states that these terms are referring to the Named Insured on the Declarations. |
|
|
|
Definitions – Liab. We, us, and our |
The insurer that provides the coverage |
The policy states these terms refer to the insurer providing coverage. |
|
|
|
Definitions – Liab. Advertising Injury |
Slander, libel, disparagement, violation of privacy.
Taking another’s ideas or style. Infringing of others copyright or other identifying ways |
Similar wording but is included in “personal and advertising injury” definition. |
|
|
|
Definitions – Liab. Auto |
Vehicles designed for public road use including attached machinery |
Similar |
|
|
|
Definitions – Liab. Basic Territory |
The United States of America, its territories and possessions, Canada, and Puerto Rico |
No definition |
|
|
|
Definitions – Liab. Bodily Injury |
Incl. BI, sickness, and disease including death. Does not include mental or emotional injury. |
Same except no mention of mental or emotional. |
|
|
|
Definitions – Liab. Coverage Territory |
Basic territory Travel in waters or airspace to and from basic territory World for products and activities of basic territory Employees on short trips suits in basic territory |
Same except includes worldwide coverage for personal and advertising injury on the internet. |
|
|
|
Definitions – Liab. Damages |
Money for a person suffering injury |
Not a defined term |
|
|
|
Definitions – Liab. Declarations |
Any page labeled declarations, supplemental declarations, or schedules as long as they apply to the policy |
Not a defined term |
|
|
|
Definitions – Liab. Employee |
Includes leased workers and excludes temporary workers |
Same |
|
|
|
Definitions – Liab. Impaired property |
Means property that the insured broke but can be fixed by the insured performing their duties |
Same |
|
|
|
Definitions – Liab. Insured |
Insd., partners and spouses. other organizations & their directors, Real estate
mgrs, legal reps or others handling estate. Mobile equip. ops. Employees with limitations Newly acquired operations up to 30 days. Partnerships or joint ventures not cov unless listed |
Same except volunteer workers and limited liability companies are included and there is no coverage for newly acquired or formed until listed in the Declarations. |
|
|
|
Definitions – Liab. Leased worker |
Someone leased under contract but not temporary |
Same |
|
|
|
Definitions – Liab. Limit |
The applicable coverage amount |
Not a defined term |
|
|
|
Definitions – Liab. Loading or unloading |
Begins when moved from the starting point and ends when it leaves the vehicle at the end point |
Same |
|
|
|
Definitions – Liab. Occurrence |
An accident including repeated exposure to same condition |
Same |
|
|
|
Definitions – Liab. Personal Injury |
Slander, libel, disparagement, violation of privacy,
false arrest, Harmful prosecution, Landlord invasion of tenants rights |
Similar wording but is included in “personal and advertising injury” definition. |
|
|
|
Definitions – Liab. Products/Completed work Hazard |
Bodily injury/property damage that happens off site and after another person possesses the product. (On-site consumable products are included.) Bodily injury/property damage from completed work that happens off site. |
Same |
|
|
|
Definitions – Liab. Products |
Goods that transfer from insured to another including warranties, packaging and containers and instructions. Vending machines not for sale and real property are NOT products. |
Called “your product” but same definition |
|
|
|
Definitions – Liab. Property Damage |
Injury or destruction of tangible property and/or loss of use of the property. |
Same |
|
|
|
Definitions – Liab. Temporary Workers |
A person hired as a substitute for an employee |
Same, but also includes persons hired to aid a short-term situation. |
|
|
|
Definitions – Liab. Terms |
The provisions, limitations, exclusions, conditions, and definitions. |
Not a defined term |
|
|
|
Definitions – Liab. Your work |
The work done by or for the insured including warranties, all materials and equip. needed for that work and instructions |
Same |
|
|
|
Definitions – Liab. Executive Officer |
Not a defined term |
Any person in an officer’s position as stated in the company charter, by-laws or similar document. |
|
|
|
Definitions – Liab. Volunteer Worker |
Not a defined term |
Anyone working as an employee but does not receive compensation from any source. |
|
|
|
Bodily Injury
/Property Damage Liability |
Sums insured is legally obligated to pay for damages due to BI or PD covered by the insurance. Must be caused by occurrence that happens during the policy period in the coverage territory. |
Same except Max. paid is explained in limits of liability section, BI or PD happening before policy period and continues into current policy period not covered. |
|
|
|
Medical Payments |
The insurer pays reasonable medical costs incurred and reported within a year. |
Same. |
|
|
|
Products/Completed
Work |
Sums insured is legally obligated to pay for BI or PD caused by products/completed operations and covered by the insurance. Must be caused by occurrence that happens during the policy period in the coverage territory |
Not a separate coverage |
|
|
|
Fire Legal
Liability |
Property damage to buildings (or parts of buildings) rented or loaned to the insured if caused by fire or explosion and the insured is legally liable. Subject to separate limit. Not subject to many of the Property Damage Exclusions. |
Same coverage PLUS property damage to building or personal property of others is covered up to Damage to Premises Rented to You Limit provided the rental period is less than 7 days and the damage is not caused by fire or explosion. Not a separate coverage. Refer to Damage to Property exclusion and the Limits of Insurance. |
|
|
|
Personal/Advertising
Injury Liability |
Sums insured is legally obligated to pay for damages due to Personal Injury covered by the insurance. Must be caused by offense from the business, excluding advertising, publishing, broadcasting or telecasting, or Advertising Injury for an offense committed in the course of advertising goods and services |
Not a separate Coverage. Included with bodily injury and property damage. Similar but add the following limitations: Right and duty to defend but only if coverage is applicable and ends when limit is paid. Most to be paid is explained in limits of liability section |
|
|
|
Supplemental Covs. Contractual |
Coverage is provided for liability assumed in a lease, easement or license, municipal ordinance, sidetrack agreement, elevator maintenance agreement others made in course of business where tort liability is assumed. Does not include activities within 50 feet of railroad property, indemnifies architects, engineers or surveyors for professional services, or fire damage to premises rented to insured. |
Same but there is no defined supplemental coverage. Refer to Section B. Exclusions – b. Contractual and Section F. Liability and Medical Expense Definition – 9. Insured Contract to fine the coverage. Any defense costs are part of the overall damages – not part of supplementary payments defense |
|
|
|
Supplemental Covs. Incidental medical malpractice injury |
Bodily injury for improper rendering or failure to render medical or related services. Neither the insured nor the employee providing the services can be in the business of providing such care. |
No mention of coverage. Professional exclusion appears to exclude any coverage. |
|
|
|
Supplemental Covs. Mobile equipment |
BI or PD resulting from the described mobile equipment. There is no coverage for non- mobile equipment vehicle transporting the mobile equipment. If any covered mobile equipment is required to have uninsured motorist, no fault or other motor vehicle insurance, the required limits are provided. |
Same but must refer to Section B. Exclusion h. Mobile Equipment and Section F. Liability and Medical Expense Definitions – 12. Mobile Equipment for coverage. Same but must refer to Section E. Liability and Medical Expense General Conditions – 3. Financial Responsibility Laws |
|
|
|
Supplemental Covs. Defense Costs |
Defense provided in addition to limits. The insurer has right/duty to defend suit and to settle claims or suits as appropriate. Alternative dispute resolutions are considered suits. No defense once the limit has been paid. There are 8 items specified that are paid. |
Same except the right/duty to defend only applies if coverage is applicable. Loss of earnings max. is $250 per day v. $100. Bail bond max is $250 v. $500. Separate set of provisions if an indemnitee (additional insured) of the insured is named in a suit. |
|
|
|
Exclusions - Liability Contractual |
Only coverage provided is that which is in place without the contract and that available Under Contractual Liability Coverage. |
Same |
|
|
|
Exclusions –
Liability Professional |
No professional coverage except that provided in Incidental Medical Malpractice Injury Coverage |
No professional coverage but only BI and PD excluded. |
|
|
|
Exclusions – Liability Racing |
No coverage for mobile equipment racing or preparing for a race, speed, pulling or pushing event, demolition derby or stunt activity. |
Same except the word prearranged is added which could offer coverage for spontaneous situations. Only BI and PD excluded |
|
|
|
Exclusions – Liability Mobile equipment |
No coverage for the transport of mobile equipment by owned, rented or leased auto. |
Same but only BI and PD excluded |
|
|
|
Exclusions – Liability Auto, aircraft, or watercraft |
No coverage for ownership, operation, supervision, maintenance, use entrusting, loading or unloading of auto, aircraft, or watercraft except for 5 exceptions. |
Very similar except the non-watercraft can be up to 51 feet instead of 26 and only BI and PD are excluded. |
|
|
|
Exclusions – Liability Liquor Liability |
No coverage for anyone in the business of manufacturing, selling, serving or distributing liquor, for damage relating to intoxication or furnishing liquor to underage or intoxicated persons or violating state liquor statutes. |
Same, except only BI and PD are excluded. |
|
|
|
Exclusions – Liability War |
No coverage for any type of war or condition of war. |
Same, but only BI and PD are excluded and it applies only to liability assumed under a contract. |
|
|
|
Exclusions – Liability Intentional acts |
No coverage for BI or PD due to directed or intentional acts by the insured unless due to reasonable force used to protect property or people. |
Same |
|
|
|
Exclusions – Liability Products (except for Coverage N) |
Limits products/completed operations coverage to that under separate coverage. |
No separate coverage but coverage is the same |
|
|
|
Exclusions – Liability Pollution |
No BI or PI for pollution unless due to hostile fire. Pollutants have a two-part definition: a. Spells out what is considered a pollutant and includes waste. b. Emissions that are electrical, magnetic or sound and are either visible or invisible. |
Same but also provides coverage for accidental spills from mobile equipment operating systems, fumes from heating systems, and limited non-owned. Pollutants definition is the same as a. except no reference to radioactive and no part b. |
|
|
|
Exclusions – Liability Employer’s Liability |
No BI or PI to employee during course of employment and no consequential injury to any relative of employee. |
Same but only BI excluded |
|
|
|
Exclusions – Liability Workers compensation |
No coverage for any BI or PI if benefits are provided required coverage such as workers compensation, disability benefits, occupational disease, unemployment compensation or similar laws. |
No coverage for any obligation under the mentioned laws. |
|
|
|
Exclusions – Liability Employment related practices |
No coverage for BI or PI due to employment related practices nor any consequential BI or PI. |
No exclusion in the policy – but BP 04 17 can be used to exclude. |
|
|
|
PI and AI Exclusions Willful violation of ordinance, statute, or regulation |
No coverage for PI or AI due to willful violation of ordinance, statute or regulation caused by insured or with his consent. |
Similar |
|
|
|
PI and AI Exclusions False information printed knowingly |
No coverage for PI or AI due to publication of material known to be false or which was published prior to the policy period |
Similar |
|
|
|
PI and AI Exclusions Breach of contract |
No coverage for AI due to breach of contract unless the contract was implied. |
Similar except both PI and AI are excluded |
|
|
|
PI and AI Exclusions Failure of goods to meet advertised quality |
No coverage for failure of items to meet advertised performance |
Similar except both PI and AI are excluded |
|
|
|
PI and AI Exclusions In the business of advertising, broadcasting, publishing or telecasting |
No coverage for AI from insured in the business of advertising, broadcasting, publishing or telecasting. |
Similar except both PI and AI are excluded. Also excludes providing others websites’ search engines. There is still coverage for false arrest, malicious prosecution and willful eviction. |
|
|
|
PI and AI Exclusions Incorrect description of price |
No coverage for AI due to incorrect price |
Similar except both PI and AI are excluded. |
|
|
|
PI and AI Exclusions Pollution |
No coverage for AI or PI due to pollution or clean-up expenses |
Same |
|
|
|
PI and AI Exclusions Criminal Act |
Not mentioned |
No coverage when committed by insured or at their direction |
|
|
|
PI and AI Exclusions Electronic chat room |
Not mentioned |
No PI or AI coverage for activity on a sponsored chatroom. |
|
|
|
PI and AI Exclusions Infringement of copyright and other intellectual property rights. |
Not mentioned |
PI or AI coverage ONLY if part of the insured’s advertisement. |
|
|
|
PI and AI Exclusions Use of another’s name in email or domain names |
Not mentioned |
No PI or AI is covered if a tactic to mislead another’s customer base |
|
|
PD ExclusionsDamage to owned property |
No coverage for PD to owned, rented or occupied premises except Fire Legal Liability |
Similar |
|
|
|
PD Exclusions Damage to property sold, given away or abandoned |
No coverage for PD to premises sold, given away or abandoned unless it was the insured’s work and never occupied or rented out by insured |
Same |
|
|
|
PD Exclusions Property loaned by you |
No coverage for PD to property loaned to insured except assumed sidetrack liability |
Same |
|
|
|
PD Exclusions Property of others in your care, custody or control |
No coverage for PD to property in care, custody or control of insured except assumed sidetrack liability |
Same |
|
|
|
PD Exclusions Damage to property while being worked on |
No coverage for real property being worked on if damage is due to insured’s work except assumed sidetrack liability. |
Same |
|
|
|
PD Exclusions Faulty workmanship |
No coverage for damage due to insured’s faulty work unless covered under the Prod/CO hazard or assumed sidetrack liability |
Same |
|
|
|
PD Exclusions Damage to products |
No coverage for PD for the insured’s product if it arises from the product. |
Same |
|
|
|
PD Exclusions Damage to property you are working on unless the work is done by subcontractor |
No coverage for PD to the insured’s work if it is due to the insured’s work. If a subcontractor performs the work, there is coverage. |
Same |
|
|
|
PD Exclusions Property not physically damaged |
No coverage for PD when there is no physical damage to property but it cannot be used because of the insured’s failure to perform or the work is defective or unsafe. This does not apply if the condition is from a sudden and accident injury to property after put to use. |
Same |
|
|
|
PD Exclusions Recall expense |
No coverage for loss or expense due to a recall. |
Same |
|
|
|
Med Pay Exclusions Insured |
No medical payments to insureds |
Same except volunteers are covered even when insureds |
|
|
|
Med Pay Exclusions Anyone hired by the insured |
No medical payments to individuals hired by insured or tenants to do work. |
Same |
|
|
|
Med Pay Exclusions Any tenant while in portion leased |
No medical payments for tenants injured in their own space |
Same |
|
|
|
Med Pay Exclusions Athletic activities |
No medical payments for persons taking part in athletic activities |
Same |
|
|
|
Med Pay Exclusions Products/completed operations |
No medical payments for product/completed operations hazard |
Same |
|
|
|
Med Pay Exclusions Member of the club |
No medical payments to club members |
No exclusion |
|
|
|
Med Pay Exclusions Hotel, motel or tourist courts guests |
No medical payments for hotel, motel or tourist court guests |
No exclusion |
|
|
|
Med Pay Exclusions Workers compensation |
No medical payments for those eligible for WC or similar laws |
Same |
|
|
|
Med Pay Exclusions Campers, students, inmates or patients |
No medical payments for campers, students, patients or inmates in facilities owned by insured |
No exclusion |
|
|
|
Med Pay Exclusions Excluded under business liability coverages |
Lead in language to section states that all BI exclusions apply. |
Specific exclusion in place |
|
|
|
Med Pay Exclusions War |
No separate exclusion; would not be covered because not covered under BI. |
War is not covered. |
|
|
|
Loss Duties Notice |
Prompt notice of an occurrence to insurer or agent. Notice to include: name, policy number, details around claim and names and addresses of witnesses and potential claimants |
Similar |
|
|
|
Loss Duties Cooperation |
All insured involved must cooperate in performance of duties in the policy |
Similar |
|
|
|
Loss Duties Volunteer Payments |
Insureds must not make payments or assume any obligation except at their own cost. |
Similar |
|
|
|
Loss Duties Other Duties |
Promptly send claim or suit-related documents to the insurer. If asked, insured to assist during settlement, go to court, and in other ways. Medical payments require a written proof of claim, access to medical records and willingness to have a medical exam. |
Similar but must record specifics and notify insurer. No specifics provided concerning insured’s assistance except for the enforcement of rights. |
|
|
|
How Much Is Paid – Liab. Limits on the declarations page |
Stated limits are max. to be paid, unaffected by number of insureds, injuries, suits or claims. Med. Payment is not admission of fault. |
Same, except no med. pay statement. |
|
|
|
How Much Is Paid –
Liab. The General Aggregate |
General Aggregate Limit is most to be paid during the policy period for the sum of damages under Bodily Injury and Property Damage, and Personal Injury/ Advertising Injury and medical expenses under Medical Payments. The limit is on the Declarations. |
Same. The aggregate limit is twice that of Liability and Medical Expenses Limit. |
|
|
|
How Much Is Paid – Liab. Products/completed ops aggregate limit |
Aggregate Limit is most paid for all such damages. The limit is on Declarations. |
Same. The aggregate limit is twice the Liability and Medical Expense Limit. |
|
|
|
How Much Is Paid –
Liab. Occurrence Limit |
Limit is the most paid for all damages under all coverages and medical expenses under Medical Payments. |
Same |
|
|
|
How Much Is Paid – Liab. Fire Legal Liability Limit |
Max. $50,000 (aggregate N/A) Limit can be increased. |
Same except there must be a limit shown on the Declaration. |
|
|
|
How Much Is Paid – Liab. Applicability of Aggregate Limit |
Aggregate applies to 12 mo. period starting with date of inception unless the policy period is less than 12 months. If term is longer than a year, aggregate is also extended. |
Same |
|
|
|
Conditions – Liability Bankruptcy |
There is no change in the policy due to bankruptcy |
Same |
|
|
|
Conditions – Liability Insurance Under More Than One Policy |
This policy is primary unless the other coverage is fire, extended coverage, builders’ risk, installation risk or coverage for the insured work or for loss due to maintenance or use of aircrafts, autos or watercraft. |
Similar but is also excess when the insured is an additional insured on another policy. |
|
|
|
Conditions – Liability Insurance Under More Than One Policy cont. |
Other insurance does not reduce liability. |
Similar but is also excess when the insured is an additional insured on another policy. |
|
|
|
Conditions – Liability Insurance Under More Than One Policy cont. |
If other insurance is primary, insurers share loss by contribution until limit is gone. If other policy does not follow contribution, insurer will pay no one other than its portion. |
No mention |
|
|
|
Conditions – Liability Insurance Under More Than One Policy cont. |
If excess, insurer has no duty to defend. If it does defend, it gains insured’s subrogation rights, but insurer will pay only excess over the sum that should have been paid by primary carriers. The remaining loss is to be shared with any other excess insurer other than actually purchased “excess insurance.” |
Similar |
|
|
|
Conditions – Liability Motor Vehicle Financial Responsibility Certification |
The policy will conform to the law and limits if certified as proof of financial responsibility under any motor vehicle law. |
Same |
|
|
|
Conditions – Liability Premium |
If premiums are deposits, the final premium is determined at period-ending audits. Insured must pay additional premium or receive refund. Insured must keep and share records help compute final premium. |
Same except the premium must be called Advance premium on the declarations. |
|
|
|
|
|||
|
Conditions – Liability Separate Insureds |
The coverage applies separately to each insured named in a claim or suit. This does not impact the limits. |
Same. The first named insured has some specific rights and responsibilities spelled out in this policy and those still apply. |
|
|
|
Conditions – Liability Subrogation |
The insurer can require an assignment of recovery rights. If the insured impaired those rights, the insurer is not liable to pay under the Liability Coverage. However, the insured is granted the right to waive rights or recovery provided it was PRIOR to the occurrence. |
Same except the insured rights are transferred to the insurer without the insurer requesting. |
|
|
Suit Against Us |
Insured can’t sue the carrier until a) meeting all relevant policy provisions and b) the amt. of insured’s liability has been found by final judgment or written agreement. |
Similar |
|
|
|
Nuclear
Energy Liability Exclusion |
Nuclear material and nuclear facilities are not covered under this policy. |
Same |
|
|
|
Nuclear
Energy Exclusion Definitions |
Hazardous properties, nuclear material, source material, Special Nuclear Material, By-product Material, Spent Fuel, Waste, Nuclear Facility, Nuclear Reactor, Property Damage all have special definitions within the Nuclear Exclusion. |
Same |
|
|
Covered within this analysis is ISO Businessowners Coverage
Form BP 00 03. In order to make this analysis more manageable, we’ve produced
it in the following parts:
Part A – BOP Definitions through Coverage Extensions. You
are here
Part B – BOP Exclusions through Property Definitions.
Part C – BOP Liability through Common Policy Conditions.
ISO
BUSINESSOWNERS COVERAGE FORM (BP 00 03)
The ISO BOP has changed again. This time the BOP begins to
fulfill its potential as the commercial Homeowners policy by merging three
forms into one. This analysis will review the ISO Businessowners Coverage form
BP 00 03 which incorporates and revises the BP 00 02, BP 00 06
and BP 00 09.
ISO filed the changes to the BOP Program based upon a July
1, 2002 effective date. The affected forms and
endorsements bear a 07 02 revision date.
NOTE: Bold sections
indicate where language changes have occurred as the BP 00 02, BP 006 and BP
00 09 were merged into the BP 00 03.
DEFINITIONS
"You" and "Your"
are the Named Insured on the declarations.
"We," "us," and "our" refer
to the company providing the coverage.
Defined words are in quotation marks.
PROPERTY
A.
COVERAGE
Property has to suffer a direct physical loss to be
covered. Direct physical loss does not include either consequential or
indirect loss. Consequential loss is covered in the section on Business Income
(Time Element). Indirect losses, such as losses due to recall of product after
a tampering scare or products recalled to fix
defects, are not covered.
Insurance is not provided for any loss of value to undamaged parts of a product that has been damaged by a covered cause of loss. Covered Property must be described on the declarations.
Property described as covered property only qualifies for coverage if it is damaged directly by a covered cause.
1. Covered Property
A Limit of Insurance must be shown on the declarations for
each type of property to be covered.
Naturally, qualifying property is affected by the policy’s
Property Not Covered section. In other words, even if a class of property
appeared on a declarations with an insurance limit, the coverage would not
apply unless the property was the type that is mentioned as eligible for
protection.
Example: The declarations for the BP policy held by Karen’s Krafthowse includes the following:
Property Insurance Limit
’02 Cadillac Escalade $73,500
In this case, no coverage exists because the luxury auto is not eligible for coverage under the BOP.
a.
Buildings
Buildings and structures are covered only if located on the
premises described on the declarations. While it is not necessary to list the
individual buildings on a particular premises, it is important to make sure
that the premises is fully described. The premises may be described by street
address or by geographic reference. However, it must be distinguishable enough
for an adjuster to attest to its unique existence. An inaccurate description
of premises may result in denial of coverage.
Structures (as opposed to building property) refer to
garages, sheds, outbuildings, and other real property that is not attached to
buildings.
(1)
Completed additions are covered, whether they are
attached to buildings or structures. However, to be covered under this section
of the coverage form, they must be completed. A little further on, we will
find that additions under construction may be included if they are not covered
by other insurance. When an addition is completed, its value must be added to
the building limit.
(2)
Fixtures, which include outdoor fixtures, are
also covered. The word fixtures implies permanence;
therefore, wooden picnic table and chairs and other moveable items would not
be considered fixtures. Permanent fountains, streetlights, sprinkler
irrigation systems, and the like would be considered fixtures. Keep in mind,
though, that property in the open is not covered for the perils of rain, snow,
ice, or sleet.
(3) Machinery
and equipment are considered to be building
property if they have been installed as a permanent part of a building or
structure.
It is important to distinguish between buildings and
personal property. Under ISO’s rating structure, personal property usually
carries a higher base rate. A conversation between underwriting and an agent
(verified by loss control) can generally resolve what qualifies as building
property and what should be classified differently.
Examples: the following are illustrations of permanently installed
machinery and equipment:
·
non-portable heating and air
conditioning equipment
·
machinery with a special foundation
that is poured before installation
·
machinery which, though potentially
moveable, would require building modifications in order to be removed from the
premises.
If large, high-valued equipment is added to the building,
selecting adequate insurance coverage is vital since the BOP has separate
Limits of Insurance for buildings and business personal property.
(4) A
named insured’s personal property located in an apartment, rooms, or common
areas furnished by the named insured as a landlord is also eligible for coverage.
While coverage is not provided for the
condominium association, protection is available by adding endorsement BP 17
01. Landlord implies a lease or long-term rental that is executed by a written
contract. Landlord property can include appliances not already considered to
be part of the building, furniture, clothing and bedding, cookware, and consumable
supplies including food. However, property owned by a motel, hotel, or bed and
breakfast does not qualify as Landlord Property.
(5) A
named insured’s personal property that is used to maintain or service a
covered building, structure, or the premises is also covered property. Maintenance or service property includes fire
extinguishing equipment, outdoor furniture, and appliances used for
refrigeration, ventilating, cooking, and dishwashing. Outdoor furniture
includes lawn and garden tractors, snow removal equipment (as long as it is
not subject to motor vehicle registration), and water hoses. Subject to motor
vehicle registration means that a vehicle, because of its use, is required by
state or federal law to be registered or licensed. Such registered vehicles
are not covered under the BOP.
Fire extinguishing equipment includes fire extinguishers
and other portable fire extinguishing equipment that is not a permanent part
of the building (permanent sprinkler, Ansul and Halon systems are covered
under the policy’s fixture section). Refrigeration, ventilation, cooking,
dishwashing, and laundering equipment for the service of the covered building
are insured. Employee cafeteria, refrigeration, cooking, dishwashing, and
laundry equipment would be considered part of the building. Hotel guest,
patient, or other customer facilities, such as restaurants or laundries, would
not be considered part of the building.
(6) If
not covered by other insurance, building additions are insured while under
construction. Renovations or repairs to existing
buildings or structures are also covered as long as they are not insured under
other policies. While this is a solid coverage feature, it could harm an
insured.
Example: An insured’s restaurant is covered by a BOP and the building,
with a replacement cost of $1 million, has an insurance limit of $830,000.
While an addition was being built, the wiring in the existing building overloads
and a fire breaks out, causing $100,000 in damages. While normally the loss
could be adjusted on a replacement cost basis, the value of the addition was
$150,000. The adjuster has to tell the restaurant owner that, at the time of
the loss, his building had a replacement cost of $1,150,000. Therefore, a
coinsurance penalty must be assessed since the insurance limit of $830,000 was
lower than the required 80% of replacement cost valuation.
Materials, equipment, supplies and
temporary structures used in construction, renovation or repair of existing
structures or buildings (including additions) are covered only if located
within 100 feet of the described premises. Supplies intended for new buildings
or structures are not covered and cannot be added by any standard BOP
endorsement. Coverage for new construction can generally be obtained from
Builders Risk Insurance Forms.
The described premises is the entire amount of land that is included in the legal description of the premises identified on the declarations. If the land is extensive and/or consists of many different, distinct parcels, a better legal description of the property may be required. Descriptions of property title can be obtained from the local, city or county abstract office, or Property Title Insurance Company. The latter source is valid only if the property has remained unchanged since the purchase of the Title Insurance. Property closing documents often give the legal description of the policy and include the phrase "also known as” (alternative address or name), such as 123 Main St., Cavendish Farms, etc. Using the "also known as" phrase can suffice if there is proper documentation.
The premises for a tenant is usually described in a lease document. The document may restrict the premises to within or without the walls of the designated suite, office, or property. It may include common areas adjacent to or remote from the actual address being rented and may include storage or warehouse areas in non-contiguous areas.
NOTE: Quite a wide variety of property is classified as building property. Again, while it’s good that coverage is flexible, an insured has to be aware of its impact on insurance to value requirements.
The replacement cost of each item listed above is to be included in the limit of liability for buildings so that an appropriate rate may be charged. If, at the time of loss, the limit listed on the declarations equals at least 80% of the actual value, then, as of that date, there is replacement cost coverage up to the limit. However, if the limit of insurance is less than 80%, the policy reverts to actual cash value payment for the loss.
b. Business
Personal Property
Business personal property can be in or on buildings at the
described premises, in the open, in vehicles, or within 100 feet of the
described premises, and includes the following types of property:
(1) Personal property that is owned by the named insured
and used in the named insured's business. This personal property includes
stock, furniture and other equipment. Stock can
include animals that are held for sale. Personal property that is not used in
the business is not included within the definition.
Example: A fire destroys a restaurant’s kitchen and adjacent
pantry/storage area. A custom racing bike valued at $2,500 is also destroyed.
The restaurant owner rode the bike to and from his home and kept the bike in
the storage area. The BOP would not provide coverage for this item of personal
property. If insurance is written under a BOP to cover property located on the
insured's residence premises (dwelling, garage, outbuilding), care should be
taken to make sure that adequate insurance is maintained for both the
individual's personal property, and business personal property.
(2) Personal property belonging to others that is in the
named insured's care, custody and control. Such
property must be located on or within 100 feet of the described premises.
Examples:
·
the named insured's dry cleaners’
bailee exposure (furs limited to $2,500 by theft-see BOP Property Coverages Limitations),
and
·
appliances and lawn and garden
equipment of others the named insured is repairing or modifying.
When property of others is repaired, improved, processed, modified or enhanced, the labor material and services
provided by the named insured are considered insurable personal property.
Examples:
·
screen printing slogans on a
customer's tee shirts,
·
adding fragrance to a shampoo,
·
repairing a lawnmower, and
·
packaging product for others
All of the above are examples of processes where the named
insured has coverage for the value added by their services. The named
insured's insurable interest includes the labor at a rate for anyone involved
in the process, and the raw materials consumed, including power, chemicals and
any other services expended or provided for which a value can be determined.
(3) When the named insured is a tenant, improvements to the building or
structures the named insured occupies but does not own, are covered. However,
eligibility is granted only if the improvements:
·
are made or acquired at the named
insured’s expense and
·
are of the kind that the named insured
cannot legally removed when the premises is vacated.
Improvements are limited to fixtures,
alterations, installations, or additions.
Improvements do not include personal property a
tenant-insured acquires that must remain with the building property;
such as free-standing refrigerators or non-fixed shelving. Improvements can be
to the occupied structure, garages or any outbuildings.
Common improvements include false ceilings, internal walls, light fixtures,
improved wiring, telephone switching systems, cooking equipment, HVAC improvements,
carpeting, built-in shelving, and common renovations such as new roofs by a
tenant who has a lengthy lease. Improvements paid for by the landlord are not
covered, and if improvements can be legally removed, they would be covered under
other business personal property provisions. Valuation of improvements is
based upon replacement cost if the property is actually replaced. If it is not
replaced, settlement is made according to the named insured's use interest.
This is based upon a pro-ration of the named insured’s original cost as it
relates to the length of time between the date of installation and the
expiration of the lease or any renewal option period.
(4) If the contract for leased personal property requires
the named insured to insure the property, the leased property is covered by
the BOP. Commonly leased personal property includes computers, photocopiers,
printing equipment, machine tools, and diagnostic equipment. Leased mobile
equipment or "autos" would not be covered as business personal property.
The word lease is not defined and generally a lease can be of any duration.
(5)
Exterior glass is covered under the Personal Property portion of the BOP if
there is no building coverage. The glass must be either owned by the named insured
or in "the named insured’s" care, custody
or control. This new coverage was added because there is no longer a building
glass limitation. All glass is covered as building property. However, if there
is no building coverage, but the insured is obligated to provide glass
coverage, this coverage provision will pick up the glass exposure. (0702
change)
2.
Property Not Covered
a.
Aircraft, automobiles, motor trucks, and other vehicles subject to motor
vehicle registration. As noted previously, mobile equipment
would be covered if it is not subject to motor vehicle registration
and it is used either to service the existing buildings or structures on the
described premises (or within 100 feet of the described premises) or to
renovate or modify the existing buildings or structures (including additions).
Stock of mobile equipment, as defined, would also be covered, but only when
located either on or within 100 feet of the premises. Firms that rent tools
and mobile equipment are better covered by a specialty form such as an Equipment
Leasing-Lessor Protection Policy. Refer to THE INSURANCE MARKETPLACE for
information on insurers and brokers offering this coverage.
Another coverage option would be the Building and Personal
Property Form, CP 00 10, combined with adequate inland marine coverages.
Automobile, boat, or aircraft sales, and manufacture or distribution exposures
should be covered by forms other than the BOP.
b. "Money" and "securities" as defined
are not covered unless protection is added by the Money and Securities or Employee
Dishonesty Optional Coverages.
c. Contraband or other forms of illegal property or trade
is excluded.
d. All land, water, growing crops, and lawns are ineligible
for coverage. There is no standard BOP endorsement to add such protection. BOP
eligible feed and grain stores would have coverage for stock that is stored
inside, but stock stored outside is not covered for sleet, hail, rain, or snow.
e. Outdoor fences, radio or television antennas including
their lead-in wires, masts, or towers, satellite dishes, signs (other than
signs attached to buildings), trees, shrubs or plants are excluded. Refer to
Coverage Extensions – Outdoor Property and Optional Coverage – Outdoor Signs
for some limited coverage. Signs attached to the building are afforded normal building
coverage if part of the building, or personal property coverage if owned by
you, or as tenant improvements if not owned by you. Limits for attached signs
are included within the policy limits. Note that coverage is only for signs
attached to buildings and not structures. Whether policy designers intended to
limit coverage only to signs attached to buildings and not other real property
one might classify as a structure is not clear. Most dictionaries will define
a structure as a building. Make sure that both underwriters and agents are
sure of what is to be covered and that the underwriter's file or policy
documents the coverage intent. Detached signs may be added (with a separate
declarations limit) through Optional Coverage - Outdoor Signs.
f. Coverage for watercraft including all equipment and
accessories is excluded while the watercraft is afloat. If the craft is on the
dock, on shore, or in the named insured’s showroom as stock, there is
coverage. (Remember there is no coverage for the perils of rain, sleet, snow,
or hail to property in the open.) As coverage is not available for watercraft
while afloat (owned or as stock), the BOP is inappropriate for marinas, most
boat dealers, and for the boats or yachts owned by a covered business. Coverage
is best obtained through companies that specialize in boat dealers and yards.
See THE INSURANCE MARKETPLACE, a publication of The Rough
Notes Company, Inc., for information on insurers, brokers, and agents who
handle Boat Manufacturers and Yards, Marina Operations and Boat Dealers,
Marine Hull Insurance, Marine Cargo Insurance, Marine Specialists Professional
Liability, Maritime Liability, and Yachts/ Pleasure Boats.
g.
Accounts, bills, food stamps, other evidences of
debt, accounts receivable or valuable papers are not covered except where
coverage is specifically provided elsewhere in the BOP. This limitation sets
the stage for covering of accounts receivable and valuable papers as an
extension of coverage that is found later in the policy. Though such wording
can be confusing, the intent is to avoid an insured’s ability to seek loss
coverage from more than one area of a policy.
h.
"Computers" that are installed in aircraft watercraft, motor truck
or other vehicles subject to motor vehicle registration are not covered. The
policy is being expanded to provide limited computer coverage, so this
limitation needed to be added to restrict coverage appropriately. This coverage
limitation does not apply to any "stock."
3.
Covered Causes of Loss
The BOP covers risks of direct physical loss caused by a
peril that is not excluded or otherwise limited. This places the insurer in
the position of proving that an excluded peril caused the loss. If the company
cannot, coverage exists. Direct physical loss does not include loss of use or
the loss in perceived value of goods in the marketplace after an otherwise
insured cause of loss.
Example: The own of Traktor Patch Lawn Supplies has recently
purchased a season's inventory of lawn tractors. The brand of tractor was just
given a negative rating from a consumer watchdog group because of a potential
fire hazard. A fire breaks out after a Traktor Patch clerk tries to start one
of the lawn tractors. The fire damages the shop and
the event is featured in the local news as an example of the quality problem.
Afterwards, no one can sell a single tractor even at a deep discount. The
damage caused by the tractor fire is covered, but the resulting loss of income
and perceived loss of value to the other tractors are not paid by the BOP.
4.
Limitations
a. The BOP does not pay for loss of or damage to:
·
(1) Steam boilers, steam pipes, steam
engines, or steam turbines caused by or resulting from any condition or event
inside such equipment. Excluded events include breakdown, seizing up, centrifugal
force explosions, overheating due to leaking fluids, electrical shorting,
improper installation, or improper maintenance or calibration causing
breakdown, centrifugal force explosion, or electrical shorting, etc. These can
be added by Optional Coverage Six, Mechanical Breakdown. A properly designed
boiler and machinery or machinery and equipment policy can provide even
broader protection. Such policies can include protection for production
machinery.
What is covered (and correspondingly
excluded from a Boiler and Machinery Policy) is boiler explosion resulting
from gases or fuel within the furnace of the boiler or flues, passages,
chimneys, and exhaust pipes that the gases of combustion pass. Coverage is for
damage to the boiler and for damage to other covered property.
Examples: The following items would be covered:
· A pilot light goes out on a boiler, but gas continues to fill the chamber. Sparks from the pilot light trying to re-ignite itself cause the boiler to explode.
· The boiler is improperly adjusted to allow the fuel mixture to become too rich. Unburned fuel accumulates in the chimney and explodes.
· The exhaust fan chain or belt falls off, and exhaust and fumes accumulate, causing the boiler to explode. (Note: damage caused by the belt fan falling off is not covered, but the resulting explosion is covered.)
(2) Any damage to hot water boilers or
other hot water heating systems by any cause of loss other than explosion is
not covered. Breakdown coverage can be added by Optional Coverage 6, Mechanical
Breakdown. Coverage for other causes of loss can be obtained through Boiler
and Machinery or Machinery and Equipment Insurance.
(3) Inventory shortage, or missing
property for which no physical evidence is available to show what happened to
the property, is not covered. This limitation does not apply to Optional
Coverage – Money and Securities.
Example: During the
quarterly inventory, 100 computer monitors are discovered to be missing.
Rechecking sales and deliveries confirm that the count of the missing monitors
is correct. No evidence of break-in, break-out or a forged sales slip is
found, and after extensive interviews, no "employee" has confessed
or has been implicated in the loss. There would be no coverage for this loss
since it lacks tangible evidence.
(4) No protection is provided by the
BOP for property that has been transferred to a person or to a place outside
the described premises on the basis of unauthorized instructions
Example: Felix has a
purchase order requesting that 250 cartons of cigarettes be sent to Miller
General Store. The purchase order did not have a required signature, but it’s
a busy day and Felix processes the order without checking. The delivery is
made and signed for and the invoice returned to purchasing. When payment is
requested, Miller denies making any order. Checking into signatures indicates
that the receipt was made by someone who did not work at Millers. No money
will be paid by Miller and no payment will be due from Felix’s insurance
company either.
(5) There is no coverage for damage to the interior of any building or
structure caused by rain, snow, sleet, ice, sand or
dust unless the building sustains damage through which the rain, snow, ice,
sand, or dust entered or the thawing of snow, ice or sleet caused the loss.
Example: Millie and May
were tenants and moved out of Pricey Woods Apartments. During their cleaning
they opened all of the windows to remove the fumes from the cleaning products.
They gave their keys to the manager and left. It was a hectic time due to holidays so it was week before the maintenance crew arrived
at the apartment to begin preparation for a new tenant. During that time a
major rainstorm had come through and the carpeting was drenched. Mildew had
settled in and the wallboard and windowsills were
ruined. Since there was no exterior damage, there is no coverage.
Example:
Lying in bed one evening, Sam feels a drop of water on his head, then another
and finally jumps up as the drops form a trickle and finally a stream. He
notices the water is coming from the ceiling. His landlord inspects the damage
and realizes that, while the ice on the roof is still pretty thick, the heat from
the building has thawed a patch. Due to the upper level
ice pack, the water has no place to go and is forced through the ceiling.
Since this is caused by the thawing of snow and ice, there could be coverage
for the ceiling damage.
IMPORTANT
CHANGE – The previous limitation for exterior glass has been removed.
b. Fragile items such as glassware, statuary, marbles, chinaware and porcelains are only covered for specified
causes or building glass breakage. Glass that is part of the exterior or
interior of the building, CONTAINERS of property held for sale and
photographic or scientific instrument lenses are not subject to this
limitation.
Examples: A shelf of a general store collapses due to the weight of
business personal property, tumbling merchandise onto the floor. Ceramic
figurines worth $700 and glass soft drink bottles worth $1,000 are smashed.
The ceramic figurines are not covered, as collapse is not a "specified
cause of loss." The glass soft drink bottles are covered, for collapse is
a covered peril, and there is no special sub-limit (beyond what is limited for
other personal property) for glass containers of property held for sale.
c. Furs, fur garments, garments trimmed with fur are
limited for the peril of theft to $2,500 coverage. Jewelry, watches, watch
movements, jewels, pearls, precious and semi-precious stones, bullion, gold,
silver, platinum, and other precious alloys or metals are limited for the
peril of theft to $2,500 of coverage. Jewelry and watches worth less than $100
apiece are not subject to this limitation and therefore have full coverage for
theft.
Example: McCarty’s Department store suffered a “smash and grab”
incident that took less than a minute. The perpetrator used a bar to break
through the glass to grab two handfuls of watches from the display case. He
ran out and was not caught. The owners checked the inventory and location of
merchandise and determined that 5 watches valued at $500 were taken, 10
watches valued at $75 were missing and 12 watches valued at $50 were gone.
Because the lower priced items had been in the top shelf, the insured could
have complete coverage (subject to deductible and policy limits).
Broader coverage for jewelry and furs for the peril of theft is available, but not by any standard BOP endorsement. Some companies will provide broadened coverage for furs in a dry cleaners bailee endorsement to the BOP or offer increased limits on jewelry. Jewelry coverage is available through a Jewelers Block Policy. See THE INSURANCE MARKETPLACE, a publication of The Rough Notes Company, Inc., for markets for Jewelers Block Coverage.
Fur stock is covered by the Furriers Block Policy. Bailees coverage for furs belonging to others is handled by the Furriers Customer Policy. Unfortunately, if the need for jewelry and fur coverage is greater than $2,500, but less than what is warranted for the cost of a Furriers or Jewelers Block Form, no standard ISO endorsement is available either to increase coverage in the (non-BOP) Building and Personal Property Form (CP 00 10) combined with the Cause of Loss Form (CP 10 30) endorsement.
Patterns, dies, molds and forms are subject to a limitation
of $2500 for the peril of theft.
5.
Additional Coverages
a. Debris Removal - When a physical loss occurs, debris is left behind. The insured needs coverage to clear the debris away. This relatively simple concept has become one of the more heated points of discussion under the Property policy, as insureds desperately attempt to find coverage for pollution. Debris removal was never intended to be a cleanup policy but because of the simplicity of the coverage, the language was found to cover significant losses.
The coverage is explained in four paragraphs. Each paragraph builds on the prior paragraph. The first paragraph provides the following:
1) Actual debris removal expenses are subject to the following:
· The named insured must incur the expense
· The debris must be from Covered Property
· The Covered Property must have been damaged by a Covered Cause of Loss
· The loss must have happened during the covered policy period
· The expenses must be reported within 180 days of the direct physical loss
Example: Sara’s Shoppe is destroyed when a tornado rips through town. The expense to remove the debris is $5,000. Since the insured must incur the cost, the property is covered; a tornado is a covered cause of loss and the loss happened during the policy period. There should be coverage, provided Sara reports the expense within 180 days.
This paragraph is subject to the limitations in paragraphs 3 and 4.
2) This is not a
pollution coverage policy. This paragraph states that there is no coverage for
the removal of “pollutants” from land or water OR for the removal, restoration
or replacement of polluted land or waters.
Example: Sara’s property has a pond. The tornado deposited paint and other toxic chemicals into the pond. There will be no coverage to clean the pond based on this exclusion.
Two important points are made here. First – there MUST be a direct loss in order to claim debris removal expense. Second – the debris removal expense is capped based on the limit of the loss.
3) This paragraph relates back to paragraph 1. This paragraph provides for the basic limits while paragraph 4 provides additional limits. There are two distinct limitations:
a) The total payment for a direct loss (not just the debris removal) will be the lesser of the following:
- The actual physical loss or damage PLUS Debris removal expense or,
- - The Limit of Insurance for the Covered Property.
b) The total payment for debris removal is the lesser of the following:
- The amount to be paid for physical loss PLUS deductible TIMES 25%or
- - The actual debris removal expense.
Example: Sara has $50,000 coverage on the policy and the loss for direct physical damage is $50,000. Since the total payment for debris removal and direct loss is limited to the limit of insurance, Sara would not receive the debris removal payment based on this paragraph.
4) This paragraph provides an additional limit of insurance for debris removal if one of the caps (?) in paragraph 3 was hit. The limit is $10,000. Under this provision, the total payment for a direct loss, including debris removal, is the actual physical loss or damage (plus Debris Removal expense) or the Covered Property’s insurance limit (plus $10,000 Debris Removal Additional Coverage), whichever is the least expensive option.
Example: Sara would have coverage for $50,000 and up to $10,000
debris removal. Since the removal expense is only $5,000, Sara’s loss would be
paid.
b) The total payment for debris removal is the lesser of the sum of the amount to be paid for physical loss (including deductible) TIMES 25% PLUS $10,000, or the actual debris removal expense.
Example: Since Sara’s debris removal expense is limited by the actual debris removal expense, she will not receive any more than the $10,000.
The BOP form
includes two examples to explain the coverage in greater detail. This should
provide more clarity, particularly regarding the deductible and the occurrence
basis.
b.
Preservation of Property
When property is threatened by a covered cause of loss, the
policy allows for the removal of that property to any other location for a
period of up to 30 days after the property is first moved. The property being
moved does not have to first sustain damage, nor does the building or
structure where the property was originally housed have to suffer any damage.
Removal is virtually an all risk peril, for once the
property is threatened by an insured peril, virtually anything that happens to
the property either in transit or in storage is covered.
Example: A hurricane threatens. The retail store loads its trucks
with merchandise to take to a second warehouse outside of the storm's path. In
the fog, the truck is involved in an accident, rolling over and damaging
$100,000 worth of removed goods. Coverage applies.
Example: A fire damages the roof. Desks and other furnishings are removed to a storage warehouse. Ten days later an earthquake collapses the storage warehouse upon the furnishings, causing $30,000 in damage. Coverage applies.
Example: A tornado sweeps through town wiping out all commercial buildings, including all possible storage facilities. Forty-five days after the salvageable goods are moved to a self-storage building 50 miles away, a fire sweeps through the self-storage building, causing $75,000 in damage. There is no coverage because the temporary removal is limited to 45 days after the property is moved. To solve the coverage gap for periods exceeding 30 days, add the removal site as an additional location until the property can be permanently relocated.
c. Fire
Department Service Charge
If assumed by prior contract or required by local
ordinance, a fire department service charge of up to $1,000 is available. The
fire department must be asked to respond to a threat of or actual covered
cause of loss.
Example: The neighboring fire department, by prior written contract
with the insured and the city, must respond to any call to the named insured’s
property. The charge is $500 per response. Coverage is available even if there
is no damage to the property, i.e., threat of loss from a neighboring brush
fire.
Example: In an unendorsed BOP, the fire department is called and responds to damage caused to the named insured’s building by earthquake (an excluded peril). However, when the building collapsed, it cut the gas main, and leaking gas caused fire to erupt after the fire department was called, destroying the remaining undamaged property. Because the fire department was asked to respond to the earthquake, there is no fire department service charge coverage available, even though there would be coverage for the property damaged as a result of the ensuing fire.
d. Collapse
The doctrine of concurrent causation holds that an all risk policy must pay if a loss to property is
attributable to two causes, one excluded by the policy and one covered. By application
of this concept, coverage has been found for earth movement, flood and other
specifically excluded events. The BOP, in an effort to avoid the problems of
concurrent causation, has defined what "specified causes of loss"
contribute to the all-encompassing word collapse. The 07 02 version of this limitation attempts to clarify what is meant
by collapse.
As
regards buildings,
·
Collapse means the building has fallen down suddenly or it
has caved in. Once the collapse has occurred, the building cannot be occupied
as intended.
·
If the building is in danger of falling down or caving in,
it is not in a state of collapse.
·
If part of the building is still standing, that part is not
in a state of collapse.
·
If a standing
building is bulging, sagging, bending, leaning, settling, shrinking, or
expanding, it is not in a state of collapse.
The collapse must be caused by:
(a) a "specified cause of
loss" or glass breakage
(b)
Decay that cannot be seen - provided the insured didn't know about it prior to
loss
(c)
Vermin or insect damage that cannot be seen, provided the insured didn't know
about it prior to the collapse
(d) Weight of people or property
(e) Weight of rain on the roof
(f) Use of defective material or methods, if the collapse occurs during construction
However, if the collapse happens AFTER construction is
complete, the collapse must be in part due to items (a)-(e). Collapse damage
involving awnings, gutters and downspouts, yard fixtures, outdoor swimming
pools, piers, wharves and docks, retaining wails, walks,
roadways, paved surface beach or diving platforms are only covered under items
(b)-(f) above and only if the loss is due to the collapse of a building insured
under the policy.
Example: Major has decided to retire and sell the store he has owned for 65 years. He has a realtor/appraiser come to the store to provide an estimate of the price to charge. While inspecting the property, the appraiser realizes that the building is in imminent danger of collapsing. She notifies Major that the building is not in a condition to be sold and is about to collapse. He notifies his insurance company and they deny the loss since the building has not yet collapsed.
If the building,
or part of the building, does not collapse, but instead personal property
inside a building collapses, then there will be coverage if the damage is
caused a "specified causes of loss," hidden decay, hidden insect or
vermin damage, weight of people or business personal property, or weight of
rain that collects on a roof. Use of defective construction material is covered
as well, but only if the collapse occurs during the course of construction,
remodeling, or renovation.
Example: Major is wondering what to do next when his cat jumps off the top of a shelf. Suddenly the shelf collapses. The shelf and all items on it are destroyed. Major turns this claim in and finds full coverage, after the deductible.
Collapse does not include settling, cracking, shrinking, bulging or expansion. These causes of loss are usually associated with earth movement and flood, which are both excluded causes of loss. These causes of loss also usually apply to foundations, walkways and other surface and sub-surface structures. The settling, bulging or cracking of a building's support beams or walls can be a significant cause of loss; however, the building or wall must collapse before coverage can apply.
There is no standard endorsement available to enhance the
coverage provided for the covered cause of loss-collapse.
e.
Water Damage, Other Liquids, Powder or Molten Material
Damage
Water, liquid, powder or molten
material damage is covered since it is not excluded. However, this extension
provides coverage for the previously undamaged property that must be torn out
to repair the fixtures that are allowing the water, liquid, powder
or molten material to escape and cause the damage.
Example: A leak occurs on the 2nd floor. Water leaks
through the ceiling to the first floor, causing extensive damage. All of the
damage is covered but, in order to stop the damage, the undamaged plaster must
be ripped away on the 2nd floor. The leak is not easily isolated and a considerable amount of demolition is
necessary before the leaky pipe is located and repaired. The insured will be
paid not only for the water-damaged property, they
will also be paid for the destruction and repair of the walls. The only part
of the loss not covered is the pipe. This will be paid for by the insured.
f.
Business Income
(1) Business income coverage within
the BOP program is very simple. There are no extra worksheets to complete and
no coinsurance to worry about. The insured does not even have to select a
limit or a time period. Instead, coverage is available for the actual loss
sustained for interruption of the named insured’s "operations"
during the "period of restoration" that occurs within 12 consecutive
months following the date of direct physical loss or damage. While the direct
physical loss or damage must occur during the policy period, the "period
of restoration" may extend beyond the end of the policy period.
The concept of actual loss sustained
is sometimes referred to as unlimited or no-limit business income. These terms
are not correct. While there is no set dollar limit, there is a limit to the
coverage. Coverage is limited to how much the business would have earned during
the "period of restoration" had it not been damaged by the covered
cause of loss. The use of the term unlimited or no-limit can cause the same
problems as the term all risk. Use of these terms may give the insured a false
impression that he or she has a virtually unlimited amount of money at his/her
disposal.
“Period of restoration” is defined in the BOP. One important feature is that it does not begin until 72 hours after the suspension of operations. This establishes a time period deductible that has no dollar limitation.
Suspension of operations must be the result of direct damage to property (does not say covered property) at the described premises. Further, the damage must be created by a Covered Cause of Loss.
Example: A fire begins at 8:00 a.m. at Jones Hardware, just after the first shift arrives. Everyone ceases work at 8:15, but the fire rages until 4:45 that evening. Though the fire progressively damages the building and, with each passing moment extends the necessary period of restoration, under the suspension of "operations" provision, the time of interruption begins at 8:15 - the start of the fire, and not 4:45 - the conclusion of the peril's interrupting wrath.
Example: The identical inception of physical loss interpretation of time of direct physical loss or damage can be applied to perils that take longer to occur such as floods, hurricanes, and earthquakes. Our insured carries the BOP earthquake endorsement (BP 10 03). Assume the earthquake's first movement occurs on Tuesday, but does not damage the business, and there is no loss of income. On Thursday at 8:00 a.m. (within 72 hours) a second tremor collapses the insured's building. The business income loss will begin at 8:00 a.m., on Thursday, the moment that the damage (time of direct physical damage) causes interruption of "operations," not the moment when the peril is first recorded as occurring. From the moment of interruption of "operations," there is a 72-hour waiting period before coverage can begin.
The proportional business income deductible under the 72-hour program often will have a greater financial impact upon the average business than other property deductibles.
Example: A business without any seasonal peaks and valleys has an annual business income need of $500,000, which converts to an average of $1,370 a day or a total uninsured 72-hour loss of $4,110. Now take this same $500,000 annual business income need for a hardware store that has a loss during the spring where during a three-month peak season the business traditionally earns 60% of its annual revenue. The loss (500,000 x .60 x 90 days) now equates to $3,333 per day or a $10,000 deductible. A three-day deductible for a business that has peak seasons revolving around short-term events such as spring break, local fairs or events, auto races, or a Triple Crown horse race could lose a majority of annual revenue during the 72-hour waiting period. No standard BOP endorsement is available to buy down the 72-hour deductible.
For business income purposes, if you
are a tenant, the named insured’s premises not only includes that part of the
building you actually occupy, but all routes within the building that give
access to the described premises and the named insured’s personal property in
the open or in a vehicle within 100 feet of the described premises.
Example: Ohio
Valley Dental is located above Van’s Drug store. There is a door which is just
inside the drug store that is used to gain access to Ohio Valley. A fire
occurs at Van’s and, although there is no damage to Ohio Valley Dental, the staircase
access is eliminated. Since this is considered premises, there is coverage for
Ohio Valley Dental.
Business income means net income (net profit or loss before income taxes) that would have been earned or incurred and the continuing normal operating expenses that continue after a loss. Business income includes utilities, rent, mortgage, and payroll. Not covered are supplies normally consumed in "the named insured’s" "operations" and other expenses that do not continue after the loss. However, net income does not include any amount that would likely have been earned as a result of an increase in the volume of business caused by the impact of the covered cause of loss on customers or on other businesses.
Example: Lumberyard A had the misfortune of being located directly in the path of a tornado. Lumberyard B’s location was far from the path of the tornado. After the tornado, Lumberyard B raised prices and had an incredibly profitable season. However, Lumberyard A was closed during the sales season which included the opportunity to supply material for the repairs faced by customers who also suffered property damage from the tornado.
Business income losses are adjusted with an eye toward the future. What would Lumberyard A have earned had it been open for business during the "period of restoration"? Let's assume there was no tornado and Lumberyard A simply burned down. The adjuster would look at the history of earnings, the state of the local and national economy during the "period of restoration," and the company's historical peaks and valleys during the same period. An estimated income loss would be determined and paid. While examining the local economy, the adjuster will have to discount the supply and demand pricing that B is charging that is generating huge profits. The intent of Business Income coverage has always been to put a business back into the same condition it was before the loss. This coverage philosophy means that strange economic twists that occur with disasters may have to be ignored.
Ordinary payroll coverage is provided
but is limited to the actual loss sustained for a period of up to 60 days
following the date of direct physical loss or damage (unless a greater number
of days appears in the declarations).
Officers, executives, department
managers, or employees under contract are not considered to be ordinary
payroll. Other employees or positions can be taken out of the ordinary payroll
classification if the position(s) or the individual employee(s) are identified
on the declarations.
Ordinary payroll expenses include
payroll, employee benefits (if directly related to payroll), an insured’s FICA
payments, union dues paid by the named insured, and Workers Compensation
premiums. Employee benefits directly related to payroll include state
unemployment compensation premiums, state disability income benefit premiums,
employer contributions to employee pension plans (based on the amount of
payroll), and other benefits the employer incurs as an expense as a percentage
or formula related to employee payroll. It is not clear what other benefits
are included as ordinary payroll expense.
Company health insurance premiums that
are not directly related to payroll, such as payments covering an employee’s
dependents, are not considered to be ordinary payroll expenses. These Health
Insurance expenses would be considered normal expenses that are not related to
ordinary payroll. Therefore, the company could continue to pay for the Health
Insurance premiums of ordinary payroll employees after the 60-day benefit
period for ordinary payroll. This may be important for those firms with a
large ordinary payroll staff that, if the ordinary payroll
"employees" were to be laid off, could cause cancellation or
modification of a favorable Health Insurance plan (2). Extended business
income coverage begins only after "the named insured’s"
"operations" resume after being suspended by a covered cause of
direct physical loss. This portion of the BOP’s coverage is designed to help
the business resume "operations" at the same pace it would have been
had the loss not occurred.
Example: Smith
Hardware, a downtown store, suffers a devastating fire. Two months later, the
Smiths find a substitute location and begin "operations." However,
during the period that Smith's operations are suspended, regular customers
have had to go to the mega-mall at the edge of town. When
"operations" resume at Smith Hardware, the Smiths have far less
traffic and sales than before the fire. The difference between what the Smiths
would have normally earned in covered business income and what they actually
earned will be paid by the insurer.
Thirty days is the maximum coverage
period available under extended business income, but that period can be less
than 30 days and will end on the day you COULD restore "operations"
to the level which would generate a normal level of business income.
There is another limitation within the
policy to consider: Extended Business Income does not apply to loss of income
that comes from unfavorable business conditions caused by the covered cause
loss in the area where the described premises are located.
Example: Our insured is
the only florist in an Arizona town devastated by monsoons. Within two months,
our insured is back in business, but selling only half the flowers she did
before the loss. How much of the florist's reduced business is due to the
monsoons that raced through town? What economic factors must an adjuster
consider to assess the demand for flowers? The BOP
language says that just because a common event causes economic loss to the
local area, that event does not hold any special significance in the
adjustment of the loss. This wording recognizes that the covered business,
regardless the loss, would still have sustained the economic loss faced by its
community.
Example: Focus again on
our florist, but this time eliminate the monsoons. Instead, the flower shop
burns to the ground, while hundreds of miles away, a hurricane wipes out the
season's flower crop. Flower prices skyrocket and people in the florist's community
no longer purchase from the shop.
A question arises in such a situation.
The extended business income provision does not exclude loss of business
income as a result of unfavorable business conditions in a remote location. In
light of this, should the impact be part of a loss adjustment?
The mechanics surrounding a
"period of restoration" might validly consider:
·
external factors that may influence
normal business activities,
·
historical business results from a
recent, similar time period,
·
relevant pre-loss business trends.
We must understand that a distant
disaster or economic hiccup can affect the economic future of a business just
as greatly as a local disaster. This clause recognizes that a local disaster
is not an extension of the insured's loss. Therefore, the local disaster is no
different than any other economic factor that may, coincidentally, affect the
business during its restoration.
Extended business income is not
subject to the Limits of Insurance and will extend the actual loss sustained
limit of up to 12 months by an additional 30 days. Again, the loss must occur
during the policy period, but the extended business income can continue after
the policy has expired.
g.
Extra Expense
In many instances, a loss only creates a short suspension
of operations. However, even a brief interruption can result in extraordinary
expenses. Necessary extra expenses are those incurred during the "period
of restoration" as a result of a covered cause of loss directly damaging
property at the described premises. The described premises includes personal
property located in the open or which is in a vehicle that is within 100 feet
of the described premises. Extra expense can involve costs incurred to avoid
or minimize the suspension of business either at the described premises or at
a replacement or temporary premises. These extra expenses include relocation
expenses and costs to equip and operate the replacement or temporary
locations. Such costs are eligible for coverage even if there is no suspension
of operations.
Example: B&G Auto Parts burns to the ground on Sunday. By Monday morning at 9:00 a.m., their parts supplier has two semi-trailer loads of stock parked at B&G's parking lot, and B&G never loses a minute of sales time. However, the extra expense of expediting the delivery of two semi-loads is $10,000 and the cost to rent and power these trailers costs $100 per day. There is nothing in policy language to say that these extra expenses must be less than the actual loss of business income the named insured would have sustained in the event of a total suspension of business. Insurance companies generally are willing to pay for extraordinary extra expenses for a company that is aggressively attempting to remain in operation, for the overall net costs during the "period of restoration," rather than a complete suspension of operations during the same time period.
Extra expense may also involve costs to minimize the suspension of business if the named insured cannot continue "operations." These extra expenses include repairing or replacing any property, or researching, replacing, or restoring the lost information on damaged valuable papers and records. These expediting expenses are only paid if they help reduce an eligible business’ income loss.
Example: Patterson Printing burns to the ground. Without presses, they are unable to operate, and their business is suspended. They order new presses, but it will take six months for their delivery. Patterson produces extremely high-quality goods and cannot operate with used equipment that has not been given a like-new overhaul. No company can deliver overhauled used equipment within six months. However, if Patterson Printing will pay a $10,000 premium to move up the waiting list and $15,000 in air freight, they can have their presses in three months. The insurance company agrees, for each month of suspension will cost them $50,000. By reducing the suspension by three months, the company has saved $150,000 less the $25,000 in expediting expenses. Patterson gets paid for the first three months of suspension and gets into business three months earlier, helping them to retain more customers.
Example: Aardvark Abstracting and Title Search loses most of its records in a fire. Within two days they find permanent new office space and, since most of their time is spent in the county office reviewing deed and property records, they can continue operations virtually uninterrupted. However, the fire burned twenty years’ worth of copies of title records they had made over the years from county records. A computer tape was made of customers and kept off site, while back title pages had been copied. Recopying title pages will cost one dollar per page and many hours of research. Unfortunately, there is little or no coverage, because the "period of restoration" began (for extra expense only) the moment fire first interrupted the business and ended when the business was resumed at the permanent replacement location; also, the cost to research the reconstruction of valuable papers is limited to $5,000 (coverage extension for valuable papers and records-cost of research).
As it is with business income coverage, extra expense must occur within the 12 consecutive months immediately following the date of direct physical loss or damage. Further, there is no set limit of insurance for extra expenses. Any covered extra expense must be incurred during the "period of restoration." Remember that the BOP language gives the insurer some say in interpreting the restoration period.
Example: W & W Dry Cleaning suffers a lightning loss to its line of dry-cleaning machines. The business is suspended for a week until alternate facilities can be rented during a night shift. The loss of income incurred during the suspension is covered. Rent is paid for the alternate facilities and use of the machines and extra wages are paid for the workers to work the night shift. Both of these extra expenses are covered initially. W & W can replace their machines with one of two identically operating models from two manufacturers. Model A can be installed in six weeks. Model B cannot be installed for eight weeks. W & W decides to order Model B. The insurance company determines that the "period of restoration" is the six weeks it will take to restore operations with the perfectly functional Model A. Therefore, the extra expenses incurred by W & W during the additional two weeks beyond the "period of restoration" are not covered by the policy.
h. Pollutant Clean Up and Removal
A nominal $10,000 is available to cover the cost to extract "pollutants" from land or water. This coverage only extends to land or water at the described premises. Another requirement is that the discharge, dispersal, seepage, migration, release, or escape of "pollutants" results from a covered cause of loss occurring during the policy period. Any pollution loss must be reported to an insurer in writing. The named insured must report the loss within 180 days following the loss or by the end of the policy period (whichever is earlier). The $10,000 coverage is a maximum aggregate during any twelve-month period. Once the limit of $10,000 is exhausted, coverage ends. The aggregate limit is not affected by the number of claims. There is no endorsement under the BOP to reinstate the aggregate or to increase the coverage above $10,000. Under the non-BOP Commercial Property Program, endorsement CP 04 07 is available to increase the Building and Personal Property Form, CP 00 10, limit above $10,000; however, few companies offer this endorsement.
For pollution coverage options, refer to THE INSURANCE
MARKETPLACE, a publication of The Rough Notes Company, Inc., for markets
providing this coverage. Suggested policies include Environmental Impairment
Liability, Pollution Cleanup Indemnity, and Underground Fuel Tank Pollution Liability.
i.
Civil Authority
Civil authority can be an indirect cause of business income
loss and extraordinary expenses. A government unit could prohibit access to
the described premises because a covered cause of loss occurs nearby. This
situation would be covered. Business income coverage begins 72 hours after the
action of the civil authority (not the time the covered cause of loss occurs)
and ends a maximum of three weeks later.
Example: A riot two blocks away begins on Tuesday at 9:00 p.m. civil
authorities shut down all entries to the area the next morning at 8:00 a.m.
and close the streets that access the insured’s 24-hour convenience store. The
looting continues and the streets remain closed until Saturday morning at 6:00
a.m. During that time the insured has been unable to find suitable inventory
or a place to operate temporarily outside of the riot zone. The loss each hour
is calculated at $145. Though the riot began at 9:00 p.m. on Tuesday, the
action of civil authority doesn't begin until 8:00 a.m. on Wednesday, and the
72-hour waiting period begins then and lasts until 8:00 a.m. on Friday.
Coverage is available for the 22 hours of interrupted business between 8:00
a.m. on Friday and 6:00 a.m. on Saturday. Total loss paid is $3,190. Total
loss incurred is $13,360.
Extra expense coverage begins immediately after the action
of civil authority and ends on the latter of 3 weeks after the time of action
or when "the named insured’s" business income coverage ends.
Business income coverage is subject to the 72-hour waiting
period, and the "period of restoration" doesn't begin until the 73rd
hour after a covered cause of loss; therefore, extra expense can continue for
three weeks and three days during an extraordinary period of prohibited access.
Lengthy prohibited access situations occur as a result of catastrophe such as
the fires in Denver, Colorado, the riots in Los Angeles, Hurricane Andrew in
Florida, tornadoes, earthquakes, and bombings.
Actions of civil authority business income and extra
expense coverages are subject to the actual loss sustained rules and are not
subject to the Limit of Insurance. All other business income definitions apply
to civil authority coverage.
j.
Money Orders and Counterfeit Paper Currency
Loss resulting from an insured’s good faith acceptance of
money orders and counterfeit currency are covered up to $1,000 for any one
incident. Money orders must not be paid upon presentation to the issuer. The
exchange must be for merchandise, "money," services or as part of a
normal business transaction. The policy deductible applies to covered money
order and counterfeit currency losses.
Examples:
·
An insured’s clerk accepts a counterfeit
$50 bill that is found and destroyed by the bank. The loss is less than the
$500 deductible but otherwise is a covered cause of loss.
·
Able Pharmacy and Check Cashing cashes
a Counterfeit U.S. Post Office money order for $1,000. Five hundred dollars is
paid after the $500 deductible.
No standard BOP endorsement exists to increase coverage
above $1,000. Additional coverage is generally not available in other standard
ISO commercial property or crime forms. Why? The exposure created by the
acceptance of large amounts of counterfeit currency is generally only found in
situations where substantial amounts of money change hands, such as at banks
and casinos. Employees of such businesses are generally trained to spot or
have equipment to help them spot counterfeit currency. Check cashing services
may have a greater exposure to loss.
Specialty coverage can be found from specialty companies,
for markets offering this protection, refer to The Rough Notes Company, Inc.
publication, THE INSURANCE MARKETPLACE.
k.
Forgery and Alteration
This coverage offers protection when someone alters an insured’s
checks, drafts, promissory notes, bills of exchange, or other written promise
of payment that can be converted only to "money." There is coverage
for up to $2,500. The coverage applies to instruments that are issued by the
named insured, the named insured’s agent or by someone who impersonates the
named insured or his agent.
Note: Converted to "money" means it cannot be redeemed
for merchandise, such as a coupon or a merchandise-only credit against
returned defective or unacceptable goods.
Included within the $2,500 limit are the reasonable costs
to defend the named insured against suits by those who claim a refusal to pay
the note(s), check(s), draft(s), etc.; however, the insurance company first
has to agree in writing to defend the named insured before defense coverage
applies. Forgery coverage only applies to checks issued by an insured. Checks
forged by a customer are not covered under this insurance. A customer must be
impersonating the named insured or its agent. Incoming check forgery coverage
is generally not available in the standard markets. Special programs with high
deductibles and steep premiums have been created by Lloyds and other specialty
firms.
l. Increased Cost of Construction
Any insured that could be subject to the Americans with Disabilities Acts (ADA) and the array of similar local, state and federal ordinances should be happy with this coverage. Such regulations, though typically “grandfathered” until significant renovation takes place, can have a substantial impact on the amount of a loss.
These ordinances and codes are well-meaning, helpful to many people and their cost is easily absorbed when designed into new construction. However, updating existing structures following a partial loss can add a substantial cost to the rebuilding and this updating is NOT covered by the basic BOP.
Example: The Mainville church was very proud that their building had been standing for over 100 years and, thanks to regular maintenance, was still in wonderful condition. Unfortunately, there was a grease fire that got out of hand in the basement and more than one-third of the building was destroyed. The church was determined to rebuild but they anticipated a problem due to recent ordinances that they would be required to meet.
1) The first thing
to know is that this Additional Coverage is ONLY available if Replacement Cost
Optional coverage applies. In order to obtain this coverage, the covered
property must be insured to a minimum of 80% of its replacement value. If the
insurance limit at the time of loss is less than 80% then the policy will be
settled at actual cash value and the increased construction cost coverage
would not be applicable.
2) This paragraph
provides the basic coverage that is then modified by paragraphs 3 through 9.
Increased construction costs coverage applies when the following three events
occur:
·
Covered Property
has been damaged by a Covered Cause of Loss
· Increased costs are incurred in the course of repair, rebuilding or replacement of damaged parts of the Covered Property
· The increased costs are incurred in order to comply with enforcement of an ordinance or law
Example: The loss for Mainville was due to lightning and windstorm. Because more than a third of the Church was damaged, Mainville’s ordinances will result in additional construction costs in order to achieve compliance. Their major obstacle is that the sanctuary is located on the main floor with a handicap ramp, but their Sunday school classes are held in their basement and it has no handicap accessibility. Their $210,000 direct loss is now accompanied by an additional cost of $42,000 to add access to their basement.
3) The ordinance or law referenced in paragraph 2 must meet the following requirements:
· It must regulate the construction or repair of buildings or establish zoning or land use requirements at the described premises
· It must be in force at the time of loss
Example: The village of Mainville had been considering an additional ordinance at the time of the Mainville church loss. The village enacted the new ordinance prior to issuing a building permit to the church. The new ordinance changed the grade on the handicap ramp to the extent that the Mainville handicap ramp will no longer meet code. The insurance company will not assist with this added cost since the ordinance went into effect AFTER the loss.
4) The insurance
company is not going to pay for costs that are due to an ordinance or law that
an insured should have complied with before the occurrence of a loss.
Example: The Village of Mainville and the Mainville church had long argued about the gutters on the building and their flow into the sewer system. Mainville church refused to comply with the village rules and the Village was not ready to close a church over gutters. However, now they have stated that no building permits will be issued until the gutters are changed. The insurance company will not respond to this additional cost.
5) The Businessowners Policy is not a pollution form and to make sure everyone understands this, Additional Coverage does not extend to costs associated with the enforcement of ordinance or laws requiring the insured or others to test for, monitor, cleanup, remove, contain, treat, detoxify or neutralize, respond or assess “pollutants.” This Additional Coverage is NOT a backdoor for pollution coverage.
6) This paragraph establishes the
limit of coverage. The limit is $10,000
per damaged building and it is an additional amount of insurance. In other
words, the $10,000 limit may be paid without affecting the BOP’s other
insurance limits.
7) This paragraph
provides that:
a) Insureds have
many options after a loss. One of those options is to choose not to rebuild or
repair. If that option is selected, no amount is due under the increased
construction cost Additional Coverage. Sometimes the insured needs time to
consider the many options available. They also need time to secure additional
funding, obtain bids, and complete construction. This provision, while
recognizing the need to make allowances, still creates an expectation of reasonable
progress and all construction must be completed within 2 years of the loss
date. Note: this period may be
extended in writing.
b) The insurance company doesn’t care if the repairs are made at the existing location or if built at a new location. The same limit is available.
Example: Mainville church had been growing out of their existing location and, with the new expenses coming due to the necessity of meeting current code, the trustees decided to start a building fund and rebuild at a new location rather than patching up the current location. The insurance company will pay the amount of loss and the increased cost of construction, even though at a new location.
c) Some ordinances or laws require that the insured actually relocate its operations to a new location. If that is the case, the limit will apply to the new construction. Commercial ventures located in residential areas are often zoned out after a loss if zoning has been introduced to a community. Unfortunately, while the increased construction cost coverage is helpful, its limit will likely be too modest to adequately cover such costs.
8) Because of the potential for confusion between this coverage and the BOP’s Ordinance or Law Exclusion, this paragraph states that this Additional Coverage is not subject to the exclusion.
9) Increased Costs of Construction due to ordinance or law costs are NOT covered any where in the policy except under this additional coverage. There is NO coverage under the BOP’s Loss Payment Property Loss Condition. This paragraph intends to avoid a perception that more than one part of the BOP will respond to a loss involving increased construction costs.
m.
Business Income From Dependent Properties
Companies
do not operate in a vacuum. If a supplier or a customer suffers a loss, then
the insured will suffer a loss of income until that supplier or customer
either returns or is replaced. This coverage provides for that situation. The
limitation is $5,000 but it can be increased on the declarations page. In
order for coverage to exist, the following must occur:
1) The loss suffered by the dependent property must be due
to a Covered Cause of Loss
Example: Myrle’s fabric shop receives most of its fabric
from Berline Textiles. There is a flood at Berline’s Textile, causing supplies
to cease. Myrle’s policy does not include flood coverage. Myrle turns in a
claim because of loss suffered from the dependent property and it is denied
because Myrle does not have food coverage.
2) If the insured can resume operations, even partially,
without the customer or supplier, then the insured must do so
3) If the insured chooses not to resume as quickly as
possible, any loss payment will be adjusted to what it would have been if
operations had been resumed
Example: Instead of Berline’s
having a flood, they had a fire. Myrle’s fabric shop is eligible for coverage.
However, Myrle anticipates a down time of 3 weeks and plans a vacation. She
discovers that Berline’s can resume shipping after just 1 week but has already
made her plans. She will be paid for the 1 week but not the additional 2
weeks.
There
are four types of dependent properties:
1. provides services or material to the insured
Example: Any franchise restaurant that must buy from a set
supplier
2. purchases the insured’s services or products
Example: A “just on time” supplier to automobile
manufacturing plant
3. manufactures product on behalf of the insured
Example: A manufacturing plant that provides a store brand
for Wal-Mart
4. helps attract customers to the insured
Example: A major department store in a mall while the named
insured is a small novelty shop that is adjacent to the anchor store
·
The definition of Business income for this coverage is the
same as the definition under the Business income Additional Coverage.
n.
Glass Expenses
The
elimination of the glass limitation has expanded coverage on glass to the full
policy limits. However, there are some items that need to be specifically addressed
regarding glass coverage provided by this portion of the BOP:
1) Temporary boarding or plates are covered if repair of
glass is delayed.
2) The expense of removing obstructions when repairing and
replacing the glass is covered except for the removing or replacing of window
displays.
o. Fire
Extinguisher Systems Recharge Expense
This
coverage provides an additional $5,000 (per occurrence) to pay for recharge of
fire extinguishers and fire extinguishing systems. It also pays for the damage
that occurs due to the accidental discharge of the system. However, if the
discharge occurs during testing, there is no coverage at all.
Example:
The manual discharge for the Ansul system was located right next to the phone
at the insured snack and grill. One day Angie, the snack shop’s assistant
manager, was talking with her boyfriend. She became distracted and absentmindedly
pulled the handle, setting off the automatic extinguishing system over the set
of deep fryers. There will be coverage for the recharge and the cleanup
necessary to return the store to normal.
6.
Coverage Extensions
Coverage extensions are in addition to the limit of
insurance on the declarations and apply to property in or on the building
listed on the declarations (except for personal property off premises or at
newly acquired locations), in the open or in a vehicle within 100 feet of the
described premises.
a. Newly
Acquired Or Constructed Property: a major change has
occurred in the 0702 edition with the addition of building coverage to newly acquired
property, so the name has been changed. There are now three parts where once
there was one. Building Coverage may be extended to:
1) Newly constructed buildings on the described premises while being
built; and
2) Newly acquired buildings located off premises provided they are
intended for similar use to other building on the Declarations or as warehouse.
This coverage is for a maximum of $250,000 per building.
Example: Moe’s
Sandwich Shop has been offered the opportunity to purchase the dry cleaners
across the street. Although the businesses are quite different, Moe’s son has
convinced him that he will be able to handle it. The deal is handled as a
contract sale. Two days later, as Moe and son are reviewing the operation, a
fire breaks out. The loss is substantial. The prior owner no longer has
coverage and Moe just found out that, since the two businesses are not similar,
there is no coverage here either.
3) Business Personal Property - extends coverage to Business Personal
Property under three different circumstances. The first is to Business
Personal Property (whether newly acquired or not) that is at a location the
named insured has just acquired. The second is Business Personal Property
(whether newly acquired or not) that is in a building that has been newly
built or newly acquired at an existing location. The last is Business Personal
Property that is newly acquired at a premises that is currently described on
the Declarations.
Example: Sheila decided to totally renovate the interior of her office building. The cost would be $50,000 but it could be amortized. The fixtures are purchased and delivered and waiting on installation when a tornado rips through the building. Thanks to this coverage, she can cover both the old furnishings which were still installed and the new fixtures.
Period
of Coverage - This extended insurance is only good until the policy expires,
the named insured reports the values or 30 days, whichever is less. However,
while the coverage may be as much as 30 days, this is not free coverage. The
insured will be expected to pay a premium starting on the date of acquisition
or start of construction.
Why is
this such an important coverage if the insured must pay additional premium?
Basically, because it offers peace of mind. Many businesspeople buy property
without consulting their insurance agent. This 30-day cushion of coverage allows
the insured plenty of time to report new property without being without
coverage.
c.
Business Personal Property Off Premises
There is coverage up to $5,000 while such property is
either in transit or is temporarily at a location that is not owned by an
insured. Further, an insured loses this coverage if the property is kept at a
location he or she leases or operates. This extension of coverage does not
apply to otherwise excluded personal property, or to "money" and
"securities," “accounts
receivables” or “valuable papers and records.”
In transit can be between any location you own, lease or operate, or one you have no connection with.
Transportation is not limited to ground transportation; it can include air and
water transportation. Keep in mind, however, that coverage is limited to the
USA and its possessions, territories, Puerto Rico, and Canada, and while in
transit between points in the coverage territory. In the air or on the sea in
transit to Hawaii would be covered. One might think that with the
proliferation of modems and faxes there would be coverage for electronic
transportation-high tech theft or virus damage to goods sent via phone lines -
but that coverage is generally only available by a properly endorsed data
processing policy.
For most small retailers, $5,000 may be adequate insurance.
Beware, however, the problems that Bills of Lading pose. F.O.B. Point of
Origin means that the shipper is not responsible for damage from the moment
the shipment is loaded onto the truck or ship. F.O.B. Destination means that
the shipper is responsible for damage until the shipment is unloaded at the
destination. Federal law also limits ICC regulated carriers and other
shipper's liability from acts of God (earthquake or flood make the bridge
collapse and the truck plunges into the river), acts of public enemy
(terrorist groups or other armed militia), acts of or the exercise of public
authority (customs seizure, quarantine or detour which delays shipment),
negligence of the shipper (the company that sold you the goods does not pack
the goods properly for the transportation company), and inherent vice (food
spoils, iron rusts, or animals can die from unknown causes). Unless a value or
limit is declared for the shipped items, transportation companies may limit
the amount recoverable after a covered loss (the Interstate Commerce Act only
requires that common carriers furnish security of not less than $5,000 per vehicle
or an aggregate of $10,000 per casualty). Even small retailers may have
extraordinarily large shipments prior to their peak seasons. If a limit larger
than $5,000 coverage is required for goods transported by others, purchase
increased limits from the shipping company. If higher limits are needed on the
named insured’s vehicles, seek a Motor Truck Cargo Policy Form.
c.
Outdoor Property
Up to $2,500 coverage is available for the named insured’s
outdoor fences, radio and television antennas, satellite dishes, and detached
signs, including debris removal, for the following causes of loss: fire,
lightning, riot or civil commotion, or aircraft. Additional coverage is not
available by any standard BOP endorsement. For those businesses requiring
additional coverage for television and radio antennas and satellite dishes,
Endorsement CP 14 50, Radio or Television Antennas is
available. The non-BOP Building and Business Personal Property Form, CP 00 10,
excludes satellite dishes from coverage. Fences may be covered by the
commercial property endorsement CP 14 10, Additional Covered Property.
The named insured’s outdoor trees, shrubs and plants are
covered for up to $2,500 for the following causes of loss: fire, lightning,
riot or civil commotion, or aircraft. However, there is only $500 available
for any one tree, shrub or plant. No standard BOP
endorsement is available to provide additional coverage for outdoor trees, shrubs or plants. (Coverage in excess of $500 per tree,
shrub or plant can be purchased by using the non-BOP Building and Business
Personal Property Form, CP 00 10, and adding the CP 14 30 Outdoor Trees,
Shrubs and Plants endorsement which adds coverage for scheduled trees, shrubs and plants. A limit of liability is shown applicable
to each item. The insured may exclude the vehicle cause of loss.)
Note that this coverage extension only applies to OUTDOOR
trees, shrubs and plants. Indoor trees, shrubs and
plants that are not growing crops or lawns are covered for risks of direct
physical loss and are included within the business personal property limits as
indicated on the declarations. Many office buildings have significant indoor
landscaped atriums; others maintain greenhouses to care for other interior or
exterior landscaping needs.
d.
Personal Effects
Personal effects owned by the named insured, officers,
partners, members, managers or employees are covered
for up to $2,500 per premises. This limit is a part of the Personal Property
limit and is not a separate amount of coverage. This coverage does not include tools or equipment
used in the business and does not
include the peril of theft.
Example: Robert’s office was quite a sight to behold. The golf and
sports memorabilia seemed to occupy the entire space. When a fire ripped
through the building, his memorabilia was destroyed. Subject to the other
insurance clause in this policy and his Homeowners policy and the valuation
clause in this policy, there will be coverage. However, any payment will be
proportionate to the other claims in the office.
e.
"Valuable Papers and Records"
1) Business personal property coverage
is extended to direct physical damage or loss to "valuable papers and
records" which are either owned or in the care, custody, or control of
the insured, as long as the loss or damage is from a covered cause of loss.
This includes the cost to research lost information when there are no duplicates.
2) There is no coverage for samples,
or for property that is sold but being held for delivery. There is also no
coverage for property in storage at a location away from a covered premises.
3) The maximum amount of coverage
available for any one occurrence at a covered location is $10,000 unless the insured has purchased a higher amount and
that higher amount is shown in the declarations. If the loss occurs at a
location not covered or described in the declarations, the maximum amount
available is $5,000.
4) None of the section B. Exclusions
in the BOP apply to this coverage extension, with important exceptions
existing for the following (which do apply):
·
governmental action
· nuclear hazard
· war and military action
· dishonesty
· false pretense
· the entire paragraph B. 3.
f.
Accounts Receivable
1) Business personal property may be
extended to cover accounts receivable. Protection exists for any of the following
situations. However, they must involve a direct physical damage loss to the
insured’s record of accounts receivable:
·
the amounts owed the insured by the
insured’s customers that the insured is unable to collect;
· if the insured must take out loans to offset the amounts, they cannot collect during the time the insured is waiting for this coverage to pay, any interest on those loans is covered;
· any above-normal collection expenses the insured incurs because of the covered loss;
· any other reasonable expenses or costs that the insured incurs while re-establishing records of accounts receivable after a covered loss.
2) The maximum amount of coverage
available for any one occurrence at a covered location is $10,000 unless the insured has purchased a higher amount and that
higher amount is shown in the declarations. If the loss occurs at a location
not covered or described in the declarations, the maximum amount available is $5,000.
(3) None of the section B. Exclusions
in this coverage form applies except the following (which do apply):
·
governmental action
· nuclear hazard
· war and military action
· dishonesty
· false pretense
· the entire paragraph B. 3.
·
the accounts receivable exclusion
Note:
Readers viewing an electronic version of this article are reminded to go back
to this article’s opening to access links to the other parts of the BOP
analysis.
Covered within this analysis is ISO Businessowners Coverage
Form BP 00 03. In order to make this analysis more manageable, we’ve produced
it in the following parts:
Part A – BOP Definitions through Coverage Extensions.
Part B – BOP Exclusions through Property Definitions. You
are here
Part C – BOP Liability through Common Policy Conditions.
B.
Exclusions
1. The doctrine of concurrent causation holds that a policy
must pay if a loss to insured property is attributable to two causes, one
excluded by the policy and one covered. By application of this concept,
coverage has been found for earth movement, flood, and other specifically
excluded events. To eliminate the problem of concurrent causation, the BOP
makes three very specific statements in paragraph 1:
·
The company will not pay for loss or
damage caused by any of the sources of loss listed in the exclusions section.
·
The loss or damage will not be covered
regardless of any sequence or contributing occurrences.
·
The loss or damage is not covered even if there was
widespread damage to a large area.
This language only applies to the following 8 exclusions:
a.
Ordinance or Law
The enforcement of any ordinance or law that regulates the
construction, use or repair of any property, or requires the tearing down of
any property including the cost of removing its debris, whether the property
has been damaged or not.
Example: Millie’s Fine Furniture has been located in the heart of
town for as long as anyone can remember. Its frame structure is quite
noticeable amid the concrete and brick surrounding it. One night during a
night of looting, a Molotov cocktail is thrown into the display window
igniting the upholstered furniture and the building. The fire department was
unable to respond quickly so more than 60% of the building was destroyed.
Millie’s family wants to rebuild just the same as before BUT there is a local
ordinance now in effect that requires all buildings to be of concrete or
better construction. Thanks to this exclusion, the family will have only the
amount of money to restore the building to the frame construction; they will
be required to pay for the upgrade.
The Ordinance or Law Coverage Endorsement, BP 04 35, can be
written to provide coverage for the above claim.
b.
Earth Movement
The 0702 edition
itemizes the type of earth movement that is not covered. The list is more
detailed but is essentially the same list found in previous BOP editions.
However, more detail provides less room for ambiguity that could therefore
result in a reduction of coverage for the insured. Earth Movement is now
broken into 5 separate items.
(1) Earthquake is the first item and includes ANY sinking, rising or shifting of the earth.
2) Next is Landslide that also includes ANY sinking, rising or shifting of the earth.
3) The Midwestern states have problems with Mine Subsidence so that is
excluded, whether the mine was manmade or made naturally. There is no coverage
if the mine has ceased operation or is still in operation.
This coverage may be purchased separately. In some states the coverage
MUST be offered in certain counties. There are specific laws that state the
coverage that must be offered, the price that may be charged and the manner in
which coverage must be offered. If a policy is written to cover property in
Illinois, Indiana, Kentucky, Pennsylvania or West Virginia, the state laws
should be carefully reviewed.
(4) Sinkhole collapse IS covered but any other earth sinking is not.
Any risking, shifting, erosion or contraction expansion are not covered. Water
under the surface of the ground and poor soil conditions are not covered. An
important amendment to this is that if fire or explosion occurs due to any
earth movement, then there is coverage.
Example: Prairie Town has gas lines running right underneath its main street. One day a slight earthquake struck the town causing little damage to the mainly frame structures. Unfortunately, the gas lines were not built to withstand the impact and the gas lines cracked and an explosion occurs. The local drugstore, florist, hardware store and bank were all destroyed due to ensuing fire. The loss due to the ensuing fire would be covered.
(5) Volcanic eruption is not covered EXCEPT if there is fire, building glass breakage, or Volcanic Action. Volcanic Action includes the airborne blast and shockwaves, the different types of dust, ash and similar matter thrown up by the volcano and lava flow. However, it DOES NOT include moving the dust, ash and similar matter if they don’t cause direct physical loss or damage to the described premises.
Volcanoes tend to be very messy, erupting over a number of days. The policy states that all activity within 168 hours is one occurrence. This is very important to the insured in regard to the deductible. Instead of multiple deductibles, due to multiple events, there is only one deductible applicable in that 168 hours. Volcanic eruption can be covered by BOP Earthquake Endorsement (BP 10 03).
c.
Governmental Action
Property seized or destroyed by government authority is not
covered. Customs seizures, zero tolerance DEA drug confiscation, or property
seized as evidence in a trial that loses value because of the length of its
confinement are situations where no coverage will apply. No standard BOP or
Commercial Property Endorsement exists to provide coverage.
For markets related to customs confiscation, see The Rough
Notes Company, Inc. publication THE INSURANCE MARKETPLACE and review Custom
Bonds or Custom Brokers and Freight Forwarders.
However, property lost or damaged by acts of government
authority at the time of a fire to prevent the spread of the fire is covered.
Example: The Treetop Resort was nestled in the trees near a
national park. A fire started in the park and was heading towards town. In order
to make a fire break, the first department chose to clear a path that included
Treetop. The loss would be covered since the fire was imminent and the civil
authority chose the action.
d.
Nuclear Hazard
Nuclear hazards are excluded. This exclusion also applies
to contamination by any nuclear material, including fallout, spills,
radiation, radon gas, and uranium in the soil. However, if fire occurs, the resulting
fire damage is covered
e.
Power Failure
No coverage exists when the off-premises utility, power
line, power station, or transformer that supplies power fails. Any on-premises
power failure is covered. On-premises means the buildings and land included in
the definition of the described premises. (Coverage does not apply to power
failure within 100 feet of the described premises.) This on-premises coverage
would be limited to direct damage only – no consequential damage such as
spoilage.
Spoilage coverage can be added by endorsement BP 04 15.
If the off-premises power failure does result in any other
covered cause of loss, the damage caused by that other cause of loss is
covered. The most common covered causes of loss associated with power failure
include fire, explosion, and glass breakage. (Under the non-BOP Commercial
Property Program Off-Premises Services Direct Damage endorsement, CP 04 17,
coverage is extended to off-premises utility interruption.)
The 07
02 edition adds the wording from the now withdrawn BP 04 34 – ISO Business
owners Special Form Computer Coverage to this exclusion. Therefore, there is
coverage for loss or damage to computers and electronic media and records.
f. War
and Military Action
This includes war, civil war, insurrection, rebellion,
attack, and defense by any government using military personnel or other
agents. War and its many forms have been excluded for years; however, the new
cause of loss, terrorism, has many implications. If the act of terrorism is
proved to be that performed by someone who is an agent of another country,
there is no coverage. If the terrorism is a random act by individuals who have
an ax to grind, is done with criminal intent or by unbalanced people who are
not connected with any sovereign state, government authority or other
authority using military personnel or agents, then there appears to be coverage.
State chapters of so-called militia groups are not part of any governmental
entity and, therefore, there is coverage for their terrorist acts (assuming
they are acting alone and without the assistance of an agent or operative of a
sovereign state).
Note: In many states, this policy provision may be superceded by
a specific terrorism endorsement.
g.
Water
This includes damage by flood, surface water, waves, tides,
tidal waves, overflow of any body of water or their spray, all whether driven
by wind or not, mudslide or mud flow, water that backs up or overflows from a
sewer, drain or sump, or water under the ground, surface pressing on, or
flowing through foundations, walls, floors, paved surfaces, basements whether
paved or not, doors, windows, other openings.
However, if the cause of loss fire, explosion
or sprinkler leakage result, then coverage is provided for the damage caused
by the fire, explosion or sprinkler leakage. Coverage for flood and its other
associated causes of loss cannot be provided by any standard BOP endorsement.
Coverage for backup of sewers and drains and sump pumps may be offered by some
companies. Federal Flood Insurance is available to provide limited amounts of
coverage to eligible property.
h.
Certain Computer-Related Losses
The Year 2000 computer scare was followed by the introduction of exclusions for similar software snafus (problems caused by difficulty with handling dates, etc.). The wording in this exclusion is identical to the wording found in BP 10 04 04 98, Exclusion of Certain Computer Related Losses. Although the common terminology for the exclusions were the Y2K exclusions, the term Y2K was never used in the endorsement except as an example and is therefore applicable still. There is no coverage for the failure, malfunction or inadequacy of any computer, computer application, computer operation system, computer network, microprocessor or any other computerized part or any other product dependent on computers due to the inability to accept a date or time.
There is also no coverage for anything done by the insured
to fix the problem described above. If this inability of the computer to accept
time or date results in a loss due to “specified cause of loss,” there is
coverage for that loss.
Example: The program that controls the sprinkler system at the
Food Warehouse was not programmed to accept the date 2/29. Therefore, on
2/29/2004 it automatically opens due to the failsafe device inside the
program. Since the sprinkler system was activated at 12:01 a.m., the
building’s contents are drenched by the time the employees arrive for work.
Since the policy has Sprinkler Leakage coverage, the loss will be covered.
2. Not
covered is any loss or damage that is caused by or results from any of the following:
Unlike exclusion 1 above, the listed exclusions under 2 do
not have the same restrictive language. What this means is that if the
proximate cause of loss is a covered cause of loss, then the actions of
subsequent and companion excluded cause of loss will not have any bearing upon
the claim. If the fire caused the mechanical breakdown of a running machine,
coverage will apply because the proximate cause of
the loss is fire. Breakdown is a result of the fire's damage. The same applies
with rust after accidental sprinkler leakage.
a. Electrical
Apparatus
Artificially generated electrical currents, including
electric arcing, that disturbs electrical devices, appliances
or wires; however, if fire results, the damaged caused by the fire is covered.
The 07
02 edition incorporates the language from the ISO Businessowners Special Form
Computer Coverage Endorsement BP 04 34, such that loss or damage to computers
due to artificially generated electrical current is covered if the actual
occurrence happens off-premises. Damage
to boilers and related objects due to artificially generated electrical
currents is available in Optional Coverages-Mechanical Breakdown. Coverage for
electrical currents artificially generated is available through a boiler and
machinery or machinery and equipment policy — BM 00 25.
b.
Consequential Losses
Business income is a form of consequential loss that is
covered. Not covered are delay, loss of use or loss of market. There is no
standard BOP endorsement available to provide this coverage. Companies, even
specialty companies, will rarely offer this coverage.
c.
Smoke, Vapor or Gas
Smoke, vapor or gas from agricultural smudging or industrial
operations is another excluded source of loss. Industrial firms and
incinerators release harsh acids and chemicals into the air, bleaching or
chipping paint or damaging plastic and rubber products. Agricultural smudging
operations used to deter insects or keep crops from freezing can release
greasy smoke that can discolor paint and do other damage to nearby buildings. Losses
caused by smog, smoke, vapor or gas from industrial operations or agricultural
smudging is excluded. No standard BOP endorsement to provide coverage exists.
d.
Steam Apparatus
Explosions of steam boilers, steam pipes, steam turbines,
or steam engines (owned by or leased to the named insured) are excluded unless
caused by the explosion of gas or fuel in a firebox, combustion chamber or
flue. Resulting fire damage is covered.
Examples:
·
A boiler explodes because an improper
fuel mixture causes gas to accumulate beyond the capability of the boiler to
contain the combustion. This damage would be covered.
·
A boiler cracks, overheats and bursts
into flames. Damage to the cracked boiler is excluded, but damage caused by
the ensuing fire is covered.
· A steam pipe bursts, ruining thousands of dollars of inventory. Not covered.
· The boiler runs out of water and cracks and explodes, damaging the boiler room walls. Not covered.
The Optional Coverage for Mechanical Breakdown can cover
most sudden and accidental breakdowns of boilers and similar objects. Boiler
explosion can also be covered by a boiler and machinery policy.
e.
Frozen Plumbing
Losses caused by frozen plumbing, heating, air conditioning, and other appliances from water, liquids, powders, and molten materials are not covered. This is the case unless reasonable care has been taken by the named insured to maintain heat in a building or structure or the named insured has drained the equipment and turned off the supply if the heat is not maintained. This exclusion does not apply to fire protective systems that discharge in freezing conditions. There is no standard BOP endorsement to add back this coverage. (See also the Property Loss Conditions — Vacancy for an expanded water damage exclusion for property vacant or unoccupied for 60 days or more.)
f.
Dishonesty
Criminal, fraudulent or dishonest
acts - whether done alone or in collusion
with others by the named insured to others who have interest in the insured
property, to anyone whom the insured entrusts property, and the insured’s
partners, officers, members, managers, directors, or trustees are excluded.
Destruction or malicious damage by the named insured’s employees is covered,
but not theft.
Example: An insured owns a machine shop that uses union employees.
The machinists go on strike and several disgruntled strikers break windows at
your building. This loss is covered.
Example: Two employees of StampStuf Collector’s Bin break into and
rob the safe of money, securities and other property.
This loss, committed by employees, would be excluded.
Coverage for employee dishonesty is available when a limit
of insurance is indicated on the declarations for optional coverage
Employee Dishonesty - The
BOP employee dishonesty coverage does not define the word employee. Companies
are seeking non-traditional methods for getting the work done — leasing,
temporary firms, part-timers, job sharers, and subcontractors. Make sure that
there are no surprises at claim time. Make sure that the insurance company understands
and is willing to cover the types of people who work at or with the firm. This
exclusion does not apply to carriers for hire, with respect to “accounts
receivable” and "valuable papers and records."
g.
False Pretense
Coverage for voluntarily parting with or giving title to
any possession to another by fraudulent scheme trick or device is an excluded
peril. No standard BOP endorsement is available to provide coverage. Few
insurance companies will cover this exposure in any insurance property line.
The exception is the False Pretense Endorsement, CA 25 03, available under the
garage policy and used primarily for car dealers.
h.
Exposed Property
Rain, snow, ice, or sleet damage to personal property in
the open. No standard BOP endorsement is available to provide coverage, and
few companies have developed an endorsement to add coverage.
i.
Collapse
Collapse by any other reason than defined under Additional
Coverages — Collapse is excluded unless the collapse results in a covered
cause of loss and then only for damage that is caused by that covered cause of
loss. No standard BOP endorsement is available to improve the collapse cause
of loss.
j.
Pollution
Loss caused by or as a result of the release or migration
of "pollutants" is excluded unless the escape is caused by a
"specified cause of loss." If the pollution results in damage that
is a "specified cause of loss" then the damage caused by that
"specified cause of loss" will be covered.
Example: A sprinkler deluges the acid tank below, causing the acid
tank to overflow. The resulting acid damage destroys floors and equipment.
Damage caused directly by the sprinkler leakage is covered, as well as the damage
caused by the pollutant.
Example: An oil spill ignites the building. Damage caused by the
oil spill is not covered, but damage by the subsequent fire is covered.
In the BOP section titled: Pollutant Clean Up and Removal,
a nominal $10,000 is available to extract "pollutants" from land or
water only at the described premises and only if the discharge, dispersal,
seepage, migration, release, or escape of "pollutants" is caused by
or results from a covered cause of loss that occurs during the policy period.
There is no standard BOP endorsement available to improve coverage.
Under the non-BOP Commercial Property Program, endorsement
CP 04 07 is available to increase the Building and Personal Property Form, CP
00 10, limit above $10,000; however, few companies offer this endorsement.
For markets providing pollution coverage options, see THE
INSURANCE MARKETPLACE, a publication of The Rough Notes Company, Inc.
Suggested policies to review include Environmental Impairment Liability,
Pollution Cleanup Indemnity, and Underground Fuel Tank Pollution Liability.
k.
Neglect
The
policy conditions have always stated that the insured must take steps to protect
property from further loss. Now, the wording has been strengthened and added
to the exclusions. Basically, if the insured chooses not to take reasonable
steps to protect and preserve property during and following a loss, the company
will not pay for any resulting damage.
Example:
Fred is home watching game 7 of the NBA finals. The first half was hard on his
team but they are making a strong comeback. A
neighbor calls to let him know that he sees smoke coming from his furniture
store next door. Fred chooses to ignore the situation and continues to watch
the game. When the neighbor doesn’t see Fred or hear sirens, he calls the fire
department himself, in order to protect his own property. Fred hears the sirens but the game is very tight and he can’t be pulled
away. Because Fred doesn’t arrive with the keys, the fire department must axe
down the door in order to fight the fire. After the game is over, Fred visits
his store and calls the insurance company to notify them of the loss. However,
due to information gained from the fire marshal, a substantial portion of the
claim is denied due to Fred’s failure to help protect his store.
l.
Other Types of Loss
Paragraphs (1) through (7) are excluded causes of loss but,
if a "specified cause of loss" or glass breakage occurs, the
subsequent loss by the "specified cause of loss" or glass breakage
is covered.
(1) Wear and Tear. Normally not
covered by any policy. This is a risk of doing business situation and not
covered by insurance.
(2) Rust, corrosion, fungus, decay,
deterioration, hidden or latent defect or any quality, fault, or weakness, in
covered property that cause it to damage or destroy itself is excluded.
Example: Paints
in cans will harden over time, other goods fade when exposed to sun, and iron
objects will rust when exposed to moisture.
(3) Smog.
Example: The
smog damages the outside of buildings and corrodes them. This is not a covered
item and is part of the routine maintenance in areas of smog.
(4) Settling, cracking, shrinking, or
expansion.
(5) Animal, bird, insect, or vermin
damage is excluded for the following causes of loss: nesting damage, discharge
or release of waste products or secretions, infestation (i.e., termites or rat
consumption or contamination of food or grain).
Example: A deer
crashes through a glass window causing damage to the window and interior
property. There would be coverage. If the deer had decided to take up
residence in the building, there would be no coverage for the damage that would
occur with the deer living on premises.
(6) The mechanical breakdown or
rupturing or bursting by centrifugal force of any object is excluded.
Mechanical breakdown of boilers or similar objects is covered by the
Mechanical Breakdown Optional Coverage. A Boiler Machinery Policy or Machinery
and Equipment Policy can extend coverage to production machinery.
Example: The following
would not be covered:
·
A punch press requiring 440 current
loses 1/4 of its electrical phase and releases the cycle prematurely onto a
customer's die, damaging it and warping the punch press
·
The lack of lubrication causes an
engine to seize up
·
The governor breaks on a machine, the
engine over revs and the flywheel bursts, damaging both the machine and
surrounding walls and windows.
(7) Dampness or dryness of atmosphere is not covered. Changes in
temperature or humidity that cause damage are excluded. Coverage for certain
spoilage losses can be added through BOP endorsement BP 04 15.
Example: The following
would not be covered: A grocery store employee accidentally shuts off the
freezer electrical circuit and all the frozen fish thaws and spoils.
(8) Marring and
scratching are excluded. No standard BOP endorsement is available to add
coverage. Normal use causing scratches to tables is excluded; however,
scratches caused by a light fixture that falls upon the table would be
covered.
The
next three exclusions are new to the 0702 edition. All three were on the ISO
Businessowners Special Form Computer Coverage Endorsement BP 04 34. Since the
coverage for the BP 04 34 has been added into the Policy form, the exclusions
must also be added.
m.
Errors or Omissions
Any
error or omission in programming, processing, or storing as part of electronic
media and record or in any computer operation or in processing valuable papers
and records are excluded. However, there is coverage for direct physical
damage by resulting fire or explosion.
n.
Installation, Testing, Repair
Any
error or deficiency in any aspect of the named insured’s computer, including
electronic media record is excluded. However, there is coverage if there is
resulting fire or explosion.
o.
Electrical Disturbance
Magnetic
injury, disturbance or erasure of electronic media and records (unless
provided under coverage extension) is excluded. However, there is coverage for
direct loss by lightning.
3. The
following perils are excluded from coverage if they cause loss or damage.
However,
even though the peril itself is not covered, if the excluded peril triggers a
loss involving a covered peril, then the BOP will respond to that damage.
a.
Weather Conditions
If a weather condition contributes to a cause of loss that
is otherwise excluded in paragraph #1 exclusions (ordinance or law,
earthquake, government action, nuclear, power failure, war, water), then the
damage caused by the resulting weather condition is also not covered. Weather
includes wind, rain, hail, snow, heat, and cold. This exclusion is intended to
eliminate concurrent causation coverage. (See paragraph #1 in B. Exclusions for
a discussion of concurrent causation.) There is no standard BOP endorsement
that will provide coverage.
Example: Heavy late winter rains start a flood which begins to
undermine the foundation, causing bulging of the wall. The rain turns to ice
and the weight of ice collapses the building. Damage attributable to the flood
is excluded, but the resulting damage caused by the weight of ice is covered
if the company agrees that the roof would have collapsed even if the
supporting walls had not been weakened by the flood.
b. Acts
or Decisions
Acts or decisions that are made or not made by any person,
group or organization or governmental body are not covered.
Example: The city council is urged by the Corps of Engineers to
designate several sections of their border as “No Building” areas. The council
chooses to ignore the advice, embracing a chance to gain additional tax
revenues from new building projects in those same areas. A couple of years
later a serious flood occurs in the parts of town the Corps advised to
prohibit building. Federal disaster relief for the flooded property is denied
due to the council’s decision to ignore the Corps’ warning.
c.
Negligent Work
Faulty, inadequate or defective
planning, zoning, development, siting, surveying, design, specifications,
workmanship, repair, construction, renovation, remodeling, grading, and
compaction, or materials used in repair, construction or remodeling, and maintenance
to any property on or off premises.
Examples:
The following would not be covered:
·
Property mistakenly built upon
wetlands is torn down.
·
Inadequate roof supports cause the
roof to bow.
·
A weld in the conveyor system is weak
and cracks — sending twenty newly manufactured computers crashing to the
floor.
Coverage for errors in design of property built for or sold
to others can usually be found in professional liability coverages. Coverage
for other latent defects and the tendency of goods to self-destruct is not
available under any standard BOP endorsement.
4.
Business Income and Extra Expense Exclusions
a. The following items are not covered.
(1) This exclusion applies to both
extra expense and business income coverages. Delay in resuming "operations"
after strikers at the location of the rebuilding cause delay in building or
replacing property damaged by a covered cause of loss is not covered. Striker
interference at other locations (including the named insured’s own) that delay
the resumption of the named insured’s operations is covered.
Examples:
·
Teamsters across the country strike
and shut down the delivery of wood construction materials, causing an increase
of three weeks to the "period of restoration" - covered.
Construction workers for the contractor you hired to rebuild go on strike and
picket the named insured’s premises, delaying the rebuild by four weeks — not
covered.
·
The named insured’s employees who are
working at a second shift at another location (not the one being repaired)
strike to protest the increase in work hours. An extra expense claim becomes
an interruption claim — covered.
·
The same second shift employees are
working in an undamaged portion of the building that is being repaired. They
strike and convert the extra expense claim into an interruption claim — not
covered.
(2) Property losses can often cause
the suspension of licenses, leases or contracts. If
the suspension is caused directly by the suspension of "operations"
by a covered cause of loss, then the loss that affects the named insured’s
business income during the "period of restoration" is covered. No
standard BOP endorsement is available to extend coverage.
Example: The named insured
is penalized $300 a day by contract by the supplier for each day he went
beyond deadline in completing the contract (the contract has not been
suspended or canceled) — not covered.
Example: The named insured’s
liquor license is suspended until the building is rebuilt. The license cannot
be used at any substitute location; therefore, the insured will have a
complete suspension of operations until the "period of restoration"
ends — covered.
Example: An
insured’s favorable lease may be canceled if it will take more than two months
to rebuild the building. The insured finds a substitute location at $400 per
month more than the favorable lease. The additional $400 would be covered both
by this provision and the extra expense provision for the "period of
restoration"; however, the "period of restoration" ends in six
months, and the favorable lease would have lasted another two years. The two
years of extra $400 per month lease payments are not covered. (Refer to CP 00
60 Leasehold Interest Coverage Form under the non-BOP Commercial Property
Program for coverage for favorable leases.
b. Consequential losses other than those caused by business
income or extra expense suspension of "operations" are excluded.
c. Suspension can
mean either the partial slowdown or the complete stopping of activities. It
also means the partial or complete untenability of a building.
Example: The Golden Age Apartment has 6 units. A fire occurs in
units 1 and 2 and is contained due to firewalls. The remaining 4 units remain
occupied. The business income would pay for the loss of income for the 2 units
even though the remaining units are occupied.
5.
Accounts Receivable Exclusion
The 07
02 edition eliminates two parts of this exclusion that dealt with electronic
disturbance and computer concerns. It also eliminates all reference to
valuable papers. The following exclusions apply only to
the accounts receivable coverage extension.
a. loss or damage that occurred
because of alteration, falsification, concealment, or destruction of records
done to try and conceal a wrongful giving, taking, or withholding of
"money," "securities," or other property. In other words,
there is no coverage if the loss or damage was intentionally done to cover a
crime or illegal act, loss or damage that results from a bookkeeping,
accounting, or billing error or omission.
c. loss or damage that needs an audit
of records or inventory computation to prove that loss or damage exists.
C.
Limits of Insurance
1. The limit of insurance on the declarations is the
maximum amount paid in any one occurrence. Occurrence is not defined, but
generally means an event or a continuous and uninterrupted series of events
that causes a loss.
2. Outdoor signs attached to the building are covered for
up to $1,000. Outdoor detached signs are not covered unless an amount of
insurance is added for Optional Coverages — Outdoor Signs. Outdoor Signs
Optional Coverage can also increase the $1,000 limit for outside attached
signs. Indoor attached signs are subject to the building limit; indoor
detached signs are subject to the business personal property limit.
3. The coverage extensions (fire department service charge,
and pollution cleanup) are all coverages that are in addition to the Limits of
Insurance listed on the declarations. Therefore, for example, even if the
Limit of Insurance for personal property is exhausted, the fire department
service charge limit is still available.
4.
Building Limit - Automatic Increase
The limit on building insurance will automatically increase
by the annual percentage selected on the declarations. What actually happens
is that the increase is pro-rated over the course of a policy year. A number
of choices in automatic increase percentages are available. The formula is as follows.
(Limit) x (% of increase) x (# days since the beginning of
the year) divided by (365).
Example: The Limit of Insurance is $300,000, the automatic increase
percentage is 4%, and it is the 100th day of the policy year. Plugged into the
formula: $300,000 x .04 x 100 divided by 365 = $3,287. The Limit of Insurance
is $303,287 on the 100th day of the policy period.
5.
Business Personal Property Limit - Seasonal Increase
The insured will be able to increase the limit of insurance
for business personal property by 25% at the time of loss PROVIDED the limit
of insurance on the declarations page represents 100% of the average monthly
values during the lesser of the 12 prior months or the amount of time the
business has been in operation.
This is a perk given to encourage the insured to protect
the property at its full value. Seasonal variations are evident in almost all
businesses and there is a tendency to insure on the basis that the loss will
occur when stock is at its lowest. By offering this automatic peak season, the
insured is encouraged to insure properly, knowing that there is additional
coverage for that peak time period. Many businesses have peak seasons. Toy
stores have a peak sales season between November and January. However, toys
may be in the store long before the peak sales system actually begins and, in
a disappointing year, long after the season is over. Hardware stores have a
major season in the spring and a minor season in the fall. Bridal shops –have
theirs in the summer. Stock is purchased as far in advance as a year. Where is
it stored? Who is responsible for it? The advantage that the Businessowners
Policy seasonal increase coverage has over the peak season type endorsement is
that there is no pre-defined period of time for the peak season. So, if an
insured has sales that are greater than expected and she has to order more
inventory after the traditional selling season, there will be coverage for the
additional property. The flexibility of the seasonal increase coverage is also
its limitation, for the coverage trigger revolves around maintaining an
adequate amount of insurance.
Example: On January 1, an insured estimates that his average
monthly values of business personal property (everything — inventory,
furniture, fixtures, machinery, equipment, and improvements and betterments)
will be $100,000. This is based upon last year's sales volume, plus 5% for
inflation and 5% for sales growth. However, if inflation is 6% and sales
growth is 10%, the insured will not only have less insurance than he needs but
will be unable to capitalize on the 25% automatic increase in coverage since
the property would be insured for less than 100% of the average value for the
preceding 12 months.
To be eligible for this additional coverage, an insured
would have to over-insure at the beginning of the year or increase coverage
during the year to fulfill the policy condition. (Unfortunately, there is no
personal property automatic increase endorsement to eliminate this inherent
weakness.) The automatic increase provision should never be sold as a
guarantee or as a way to decrease the amount of insurance because you have an
automatic 25% additional anyway. The coverage is a cushion that is only
available to businesses that are properly insured.
D.
Deductibles
Deductibles in property insurance are quite simple. The
insured puts their money first and then the insurance company starts to pay.
There are three possible scenarios if coverage exists and there is a
deductible
1. The loss is less than the deductible. Then the insurance
pays nothing and the insured pays all.
Example: Deductible = $1,000 Loss = $250 Limit = $50,000
Insured will pay $250 and insurance company will pay
nothing.
2. The loss is more than the deductible but less than the
limit of insurance. Then the insured pays their deductible
and the insurance company pays the difference.
Example” Deductible - $1,000 Loss = $10,000 Limit = $50,000
Insured will pay $1,000 and insurance company will pay
$9,000
3. The loss is more than the limit of insurance. Then the
insured is still responsible for their deductible and the company will pay the
limit of insurance. The insured will then have to pay the remaining loss that
exceeds the limit of insurance
Example: Deductible $1,000 Loss = $55,000 Limit = $50,000
Insured will pay $1,000 deductible plus $4,000
underinsurance and insurance company will pay $50,000.
The BOP
declarations will now have two different deductibles. The first will be the
standard deductible. The second will be for Optional Coverage/Glass Deductible.
The insured may choose to have a higher deductible on building and personal
property while keeping a lower one on glass, money and securities, employee
dishonesty and outdoor signs. The deductible is not a separate deductible, but
instead will be included toward the total deductible if the loss extends to
building and personal property.
Example:
The insured has a $1,000 building deductible but only $500 deductible on
optional coverages. There is a fire loss and a $500
deductible is applied to the outdoor sign. That means that the insured only
has to pay $500 more to satisfy the building deductible.
There
is no deductible applicable to fire department service charge, business
income, extra expense, civil authority and fire
extinguisher system recharge expense.
E.
Property Loss Conditions
1.
Abandonment
The insured can't abandon the property to the insurance
company.
Example: Fire burns the building. The EPA is investigating
and the named insured would like to just get rid of the problem. The one
option they do not have is to just let the insurance company take it.
2.
Appraisal
The appraisal process is an alternative dispute resolution method.
The process is simple. If the named insured and the insurance company disagree
upon the amount of loss (not the whether the loss is covered), then either one
can make a written demand for an appraisal. The named insured hires a
competent appraiser, and so does the insurance company. The two appraisers
hire an umpire. The appraisers will determine the value of the property and
the amount of the loss. If the two appraisers can't agree within a reasonable
period of time, then the umpire is asked to add a second vote to untie the
process. Each appraiser is paid by the party who hired the appraiser, and the
umpire's expense is paid equally by both the named insured and the insurance
company. Even after the appraisal, the company has the right to deny the claim,
but if the claim is to be paid, the decision of the appraisal is binding on
both parties.
3. Duties
in the Event of Loss or Damage
The named insured has certain duties in the event of loss.
a. An insured has several important
obligations to meet after a loss occurs
(1) Notify the police if a law may
have been broken. This clause presumes that the insured knows that a law has
been broken. Insureds may not want to involve the police with minor
neighborhood vandalism problems, but to be covered for the damage, police
notification is required.
For theft, employee dishonesty
(especially when the employee dishonesty optional coverage is added), arson
and other crimes, police notification is imperative. Unfortunately, some
employers will decline to notify police if valued employees are involved in
minor dishonesty losses. Many dishonesty claims start small
and the amount of loss grows as the actions of the employee are further
investigated. The company could deny any claim if the employer tries to
protect the employee by not notifying the police, and employee dishonesty
coverage immediately becomes void for future dishonest acts by an employee
once any dishonesty is discovered by the employer.
(2) The named insured must give the
company prompt notice of the claim, including a description of the property
involved. Prompt notification is not defined, but an unreasonable delay could
cause the company to deny the claim for non-cooperation.
(3) Give the company details of how,
when and where the loss or damage occurred. This does not have to be in
writing, but a signed proof of loss will be required at a later date.
(4) During and after an insured loss,
the named insured must take steps to protect covered property from further
damage of any kind. The reasonable
repairs and emergency measures you take to protect the property against
further damage by covered perils will be paid. The named insured must keep accurate
records of the cost of these repairs, but keep in mind that these repairs will
not increase the Limit of Insurance. The company, however, will not pay for
repairs or emergency measures to property which has not yet been damaged by an
insured peril. The company will also not pay for subsequent loss to the
repairs unless damage is done by a covered cause of loss.
Example: The cost of and
labor to board up windows in the advance of a hurricane — not covered.
Example: Repairs to the
plywood made during the eye of the hurricane to replace pieces that were shorn
off during the initial phase of the storm — covered.
Example: The
cost of the sandbags purchased to protect the property from flood damage when
flood is not an insured peril — not covered.
Example: The
cost of the plastic sheet applied to prevent rain from entering the roof after
damage done by a hailstorm — covered.
Example: The
earthquake damage to repairs made as the result of prior tornado damage — not
covered.
If possible, you must set aside the damaged property and keep it in good order for the company to examine. Examination of the loss is crucial to determine the cause and origin of the loss and missing evidence may cause investigators to conclude that arson may be involved. If an arson investigation uncovers alleged or possible insured involvement, not only will the police become involved and the newspapers will report, but the cost of counter-investigation and court defense is expensive and not covered by insurance.
(5) If the company requests, the named
insured must provide a complete inventory of the damaged and undamaged
property, including quantities, costs, values, and the amount of loss claimed.
The cost to prepare these inventories can be expensive, especially if all
records were lost in the fire or other damage.
(6) If the named insured has records
of property inventory, values and loss, including any
tax records, bank records, computer records, paper records, or other
documents, then the named insured must be willing to produce these records as
often as the insurance company reasonably requests, and must allow the company
to make copies of these books and records.
The named insured must exhibit damaged
property as often as the insurance company reasonable requests and must allow
the insurance company to take samples of the damaged or undamaged property.
Samples are important to determine the extent of loss to certain property
where the amount of loss may not be obvious.
(7) Signed and sworn proof of loss
must be submitted within 60 days of the insurance company's request. The
insurance company is obligated to supply the necessary forms. The proof of
loss usually includes: time, place, circumstance of
the loss, other policies that may cover, the names of all who have interest in
the covered property, changes in title of covered property that have occurred
during the policy period, detailed repair or replacement estimates of covered
property, and an inventory of damaged and undamaged covered property,
including detailed quantity, description, cost, actual cash value, and amount
of loss. Any available bills, receipts, and other documents that substantiate
inventory must be included. What happened? How did it happen? When and where
did it happen? Who owns or has an interest in the property and did the named
insured purchase any other insurance that may also cover the property? Did
title to property pass or was title altered in any way, i.e., liens,
conditional sale, bill of sale, installment, contract of installation? Take an
inventory; estimate the value of, the cost to repair,
the actual cash value, and what the named insured believe is the amount of
"the named insured’s" loss. Separate the damaged goods from the
undamaged goods and be prepared to supply the insurance company with any documents
that will help prove the amount of "the named insured’s" loss. If
the named insured have no documents, the named insured must find a way of
inventorying "the named insured’s" property to prove "the named
insured’s" loss.
(8) The named insured must cooperate
with the insurance company in performing all acts required by the policy. Lack
of cooperation for reasonable requests can be grounds for claim denial.
(9) Failure to resume all or part of
"the named insured’s" "operations" as quickly as possible
could be grounds for denying further payments in business income, extra expense and other loss situations. If the named insured
have no intent to resume operations, the company should be notified as quickly
as possible so that the company pays according to appropriate policy
provisions. Even if the named insured intends not to resume business, business
income will pay for the loss of income as the result of suspension of
operations after a covered cause of loss during a "period of restoration"
that is agreed upon by the company and insured. The appraisal process can be
invoked for business income losses as well.
b. If the insurance company desires,
the named insured must submit to examination under oath as often as reasonably
required, and answers to questions must be sworn statements. If the company
desires, individuals involved may be questioned separately and not in the
presence of any others. (Prevents story collusion.)
4.
Legal Action Against Us
The named insured can't take legal action against the
company until there has been full compliance with all policy terms and the
insured must take any legal action within two years of the date of the direct
physical loss.
Both parts of this clause cause problems. First, the named
insured may have a case against the company for unreasonable requests for
information or delays. Sometimes the only way to get action is to ask a judge
whether the insurer has complied with policy provisions and if it has
reasonable requests. Unreasonable delays by the insurance company may be
rewarded with punitive damages. Second, the two-year limitation on suit may be
overridden by state law, and individual state endorsements are often necessary
to adjust the limit.
5.
Limitation - Electronic Media and Records
This limitation is applicable to Business Income only.
The time period to restore electronic media and records is
limited to the longer of the time it takes to rebuild and replace the other
property lost or damaged, or 60 days.
This recognizes that there can be a considerable downtime
due to computer damage after a fairly minor loss, but it also limits the
coverage too.
Example: The computer burns in a fire and is replaced in three
days. However, the media must be re-created and takes 90 days. Only 60 days of
business income loss is paid.
Example: The mainframe computer burns in a fire and takes 90 days to replace. Replacing the software also takes 90 days. Ninety days coverage interruption is available for the media.
Example: Software is stolen by burglars. There is no other damage. While the software is being re-programmed, the company rents another company's operating system, which performs similar processes but costs more to operate than their proprietary system. The "period of restoration" is determined to be 100 days. Since this is an extra expense loss and not a business income loss, there is no 60-day limitation.
The definition of Electronic media and records, which used to be part of this limitation, has been moved to the Definitions section of the policy.
6. Loss
Payment
a. The company will have the following
options for the payment of any loss:
·
pay the value,
Example: If it will take
an additional six months to replace the XYZ printing press with another XYZ
printing press, and an equivalent FGH machine tool is immediately available.
The company may pay only for the FGH press. Further loss or expense as the
result of the insured insisting upon the replacement with an XYZ press may not
be covered.
b. The insurance company must give the
named insured notice of intent on how the named insured will be paid within 30
days of the receipt of a properly prepared and duly executed sworn proof of
loss.
c. The named insured will not be paid
for more than "the named insured’s" financial (insurable) interest
in the property damaged.
Example: When
the named insured relinquishes title, they no longer have insurable interest
unless they are a lien or mortgageholder.
Example: A
building in which the named insured shares an undivided 50/50 interest with
another partner not insured by this policy burns. "The named
insured’s" financial interest is 50% of the final loss payment.
d. (1)(a) Replacement cost valuation
applies ONLY when, at the time of the loss, the Limit of Insurance is 80% or
more of the full replacement cost of the property. Replacement cost is limited
to the smaller of:
·
the Limit of Insurance,
· the cost to repair or replace the damaged property on the same premises with other property of comparable material and quality and used for the same purpose,
· or, the amount actually spent to repair or replace the policy.
If the decision is made to build on a premises other
than the described premises, the cost
is limited to the expense of rebuilding at the described premises.
Example: The policy for Marv’s Hunting Shop was written 10 years ago with a limit of $150,000. Every year it has been renewed with a modest 4% increase, so that the current limit is $222,000. A fire destroys the building and the appraiser determines the replacement cost is $225,000. Since Marv has kept up the replacement cost increases, there is full coverage available for the loss.
Example: Marv has been noticing that the zip codes of most his customers are about 5 miles away from his current location, so he decides to rebuild closer to the customer basis. The cost will add about $10,000 to the rebuilding cost. The insurance company will not cover the $10,000.
Example: Marv rebuilds and the cost is $225,000 plus the $10,000 increase
due to new location. The insurance company pays $222,000 – the limit of the
policy.
d(1)(b) If the Limit of Insurance is
inadequate for replacement cost coverage, the greater of the following will be
paid: the actual cash value (replacement cost at the time of the loss less
depreciation); or the proportion of the Limit of Insurance after the
deductible and without depreciation as it relates to 80% of the cost to
repair; or the amount actually spent to repair or replace the damaged property
- all subject to the Limit of Insurance.
Example: Marv’s Hunting
Shop mentioned above had an agent who always requested that the policy be
renewed “as is.” After 10 years Marv was still carrying $150,000 coverage on
the building. After the fire, Marv was a little dismayed with the coverage.
The appraised value of the property was $225,000. In order to have replacement
cost coverage, Marv would need to have a $180,000 limit. Since he is
underinsured, he will have to accept either Actual Cash Value or 80% of the
cost to repair the property. The 80% is $180,000 and, since that is greater
than the limit of insurance of $150,000, Marv will receive the policy limit IF
HE REPAIRS or REPLACES. Unfortunately, Marv may not be able to rebuild and, in
that case, would only receive the Actual Cash Value.
d(1)( c) The decision can always be
made to not rebuild right away and just accept the actual cash value
settlement. However, if the named insured plans to rebuild, he must notify the
company within 180 days after the loss.
d(1)(d) Payment is not given under
replacement cost valuation until the property is repaired or replaced. The one exception is when the loss is less
than $2,500. In that case settlement will be made prior to completion.
d(2) The named insured can exercise
the option to have the policy issued on an actual cash value basis by so
indicating on the declarations page.
d(3) The following property is covered
on an actual cash value basis:
·
Used or second-hand merchandise held
in storage or for sale;
·
Property of others unless there is a contract
which specified the insured’s liability for the items. Then valuation is based on the contract but not to exceed the lesser
of the replacement cost or the limit of insurance;
· Household contents except personal property in apartments or rooms furnished by you as a landlord;
· Manuscripts;
· Works of art, antiques or rare articles, including etchings, pictures, statuary, marbles, bronzes, porcelains, and bric-a-brac.
Used items that are not quite antiques
can still be more valuable than their actual cash value. Fine arts will
require special coverage.
d(4) Glass is covered for the cost of
replacement with safety glazing material when required by law. This is the
only standard ordinance or law coverage in the BOP.
d(5) Tenants' improvements will be valued
at replacement cost if repaired promptly and at the named insured’s expense.
Tenants' improvements that are not
replaced after a loss are valued as a pro-rata portion of original cost as it
bears to "the named insured’s" current lease. The formula involves
dividing the number of days between the date of loss and the end of the lease
by the number of days from the date of the installation to the expiration date
of the loss, multiplied by the original cost of the tenants' improvements. (If
the lease has a renewal option, use the last date in the option as the new
expiration date.) If repairs are made at the expense of others, there is no
payment under this policy.
Example: A loss occurs on
the 200th day of a one-year lease. Improvements of $5,000 were made on the
first day of the lease. There is no lease renewal option. 365-200 = 165 days
remaining in the lease. There are 200 days between the date of installation
(day 1) and the date of loss. 165/200 = .825 (percentage of remaining lease).
.825 x $5,000 = $4,125, which is the amount of loss payment before the
application of any deductible.
d(6) Valuable papers and records
including paper, disks, tape, or other electronic media will be valued on the
cost of blank materials for reproducing the records and the labor to
transcribe or copy the records.
Example: Blank disks cost
$100. It takes 3 hours of labor at $10 per hour to load tape backups onto the
computer. Total payment is $130 before the application of any deductible.
Pre-packaged software will be valued by the same replacement cost/actual cash
value formula discussed in (1) above.
d(7) Optional coverages have their own
valuation schemes.
"Money" is valued at its
face value. Numismatic property, such as old coins or gold coins that are
traded, not based upon face value but gold content, will only be adjusted for
loss based upon their face value. There is no standard BOP endorsement that
will provide coverage for collections or gold coins. Extensive gold holdings
will need special coverage.
If the gold or silver coin is held within
a bank safe deposit box, check with the banks for limits on coverage. If held
with a gold or silver broker, check with the broker on available coverage. Few
insurance companies provide endorsements or separate policies for gold or
silver investment coins.
The value of "Securities" is
determined at the closing price at the close of business on the day the loss
is discovered.
Example: The bearer bond
is valued at $100 on the date of loss — 1/1/03. At the time the loss is paid, the
class of bonds trades at $65 per bond. $100 per bond is paid.
Example: The bearer bond is valued at $100 on the date of loss 1/1/03. At the time the loss is paid, the class of bonds trades at $125 per bond. $100 per bond is paid.
d(8) For accounts receivable only:
(a) Whenever the insured is unable to
accurately establish the amount of accounts receivable that is outstanding at
the time of loss, the insurer will determine the total of the average monthly
amounts for the last 12 months immediately preceding the month that the loss
occurred in. The insurer will also adjust that total for any normal
fluctuations that usually occur, based on any demonstrated variance from the
average for that month.
(b) Certain amounts will be deducted from
the total established in (8) (a) above. The items that will be deducted
include any amount for which there has been no loss or damage; the amounts of
the accounts the insured is able to re-establish or collect; the amount for
probable bad debts the insured is normally unable to collect; and any unearned
interest and service charges.
e. Payment for loss or damage to personal property of
others will only be for the account of the owners of the property. The company
will adjust the loss with the owners, and if the owners of the property are
paid by the company, then this will satisfy "the named insured’s"
claim against the company for property of others. The company will not pay
more than the owner's financial interest in the property.
f. If the owner of the property sues the named insured, the
company can defend the named insured if they wish and
any defense is at the company's expense.
Example: The customer's riding lawn mower is in for repairs the
same time that the named insured’s building burns to the ground. The insurance
company offers and pays $1,000, the actual cash value it is required to pay.
The customer is not happy and demands an additional $1,000 and sues the
insured. The company will probably not pay the additional $1,000, but if they
wish to defend the named insured, they will do so at their expense. The named
insured cannot pursue the company for more "money." The named
insured will have to pay the difference out of the named insured’s own policy.
A bailees policy can often provide broader coverage. There
is no standard bailees form and each company will have different requirements.
For information on various bailee markets, look for Bailees Customers'
Insurance in The Rough Notes Company, Inc., publication of THE INSURANCE
MARKETPLACE.
g. The company has 30 days to pay the named insured after
receiving the sworn proof of loss from the named insured provided, they have
complied with all policy terms and everyone has come
to an agreement on the amount of payment or an appraisal award has been made.
7.
Recovered Property
Either the named insured or the company may recover
property. If either recovers property, the other must be given prompt notice.
Recovered property can be property taken from burglars by police, or property
for which salvage as been paid to the named insured or the company. If the
company pays for the claim, and the named insured recovers the property, the
company is entitled to the salvage or recovered value of what they paid the
named insured after the named insured subtracts their cost of recovery. If the
company receives salvage that is more than the loss paid to the insured, the
company can keep the difference.
8.
Resumption of Operations
If the named insured can resume "the named
insured’s" operations using salvaged or damaged property either at
"the named insured’s" premises or elsewhere, the business income
loss will be reduced to the extent that they can continue operations. The
wording implies that whether they want to or not, if they can resume
operations with damaged goods, the company will only pay business income
losses as if they have resumed operations. The question revolves around
interpretation. Back office machines that are dented
or otherwise unsightly, but are safe to operate and produce adequate results,
are one situation where the company will not pay for "the named
insured’s" refusal to resume operations. However, if the company feels
that the named insured can resume their retail operations by holding a fire or
salvage sale, and the insured refuses, the company can refuse to pay for the
additional business income loss.
If the insured can return "operations" to normal
more quickly than expected, then coverage for extra expense will end on the
earlier date.
9. Vacancy
Insurance companies are interested in insuring ongoing
businesses. All pricing is based on an active occupancy. Therefore, if
property is vacant, there is a considerable surcharge in the pricing. Since
vacancy is often only discovered after a loss, the Loss Conditions severely
limit coverage if the vacancy has not been stated in advance.
Before any restrictions can be imposed, the insurance
company must define exactly what they mean by vacancy. The 0702 edition does a slight turnaround by defining what IS vacant
versus what is NOT vacant.
If the policy is for a tenant, the only part of the building
that can be reviewed is the part the tenant occupies. The part the tenant
occupies is vacant IF there is not enough business personal property to
conduct customary operations.
Example: Friendly Deli occupies 1/3 of the McMillan building. The
2/3 tenant, Felix the Cat Groomers, moved out and the building owner is
searching for a tenant. The search is now in the 9th month. A small
fire occurred in the vacant portion of the building and the smoke traveled into
Friendly Deli’s space, causing a significant loss. Friendly Deli’s loss would
not be compromised due to vacancy even though the building may be considered
vacant.
If the building owner or general lessee is the policy
owner, the entire building is considered in determining vacancy. The building
is considered vacant UNLESS at least 31% of the TOTAL square footage is:
(i) Rented to a lessee or sub-lessee and used by the lessee
or sub-lessee to conducts its customary
operations and/or
(ii) Used by the building owner to conduct customary operations.
A key word is customary. If the lessee, sub-lessee or
building owner are retailers and that is their customary operations, trying to say the building is being used for
storage is not going to circumvent the vacancy definition.
Buildings under construction or renovation are not
considered vacant. Just as the named insured might try to stretch the
non-vacancy a little, the insurance company may try to treat a building that
is vacant for a good reason under this clause. If the building or area has
been temporarily vacated for major renovation work and the tenant will return
as soon as the work is completed, the building is not vacant.
Example: The Jones Office Complex was having problems with tenants.
There were four separate buildings. Building # 1 was fully occupied by one
tenant. Building # 2 was occupied by one shop that accounted for only 20% of
the space. The rest of the building had been vacant for over 6 months.
Building #3 was occupied by multiple tenants but had 15% vacant. Building #4
had just been rented out subject to the completion of major renovation work. A
contract had been signed and the renovation had started.
A major storm came through and damaged all of the
buildings. Based on the Vacancy definition, Building
# 1 and # 3 are not vacant and full coverage will be considered. Building # 2
is vacant and will be subject to a vacancy penalty. Since Building # 4 is
being renovated, it is not considered vacant at this point and no vacancy
penalty should be exacted.
Now that vacancy has been defined, the vacancy condition
can be stated. If the building where loss or damage occurs has been vacant
(see definition above), for MORE THAN 60 CONSECUTIVE days before the loss:
1) The insurance company will pay NOTHING if the loss was
caused by any of the following:
a) Vandalism
b) Sprinkler leakage, unless the system was protected
against freezing
c) Building glass breakage
d) Water damage
e) Theft
f) Attempted theft
Note that sprinkler leakage is covered if the system is
protected against freezing but this doesn’t apply to
water damage.
2) The insurance company will reduce any loss amount by 15%
if caused by any Covered Cause of Loss not listed in 1) above.
Example:
Building # 3 in the Jones Office Complex Center example above would be penalized
15% because the loss had been caused by storm damage and not one of the listed
Causes of Loss.
F.
Property General Conditions
1.
Control of Property
Acts or negligence of others who are not the named insured
or under "the named insured’s" direction or control do not affect
the insurance coverage for "you."
Example: A disgruntled former employee burns down the named
insured’s building. Rioters break windows on the named insured’s property and
steal goods of others. There would be coverage.
Also, if the named insured breaches the conditions of the
policy at any one location, coverage at other locations is not affected.
Example: "The named insured’s" partner burns down the
named insured’s headquarters building. No coverage will apply. However, on the
same night in an unrelated incident, a car skids off the road and slams into
the wall of the named insured’s second location, damaging the wall. Coverage
will apply at the second location.
2.
Mortgageholders
Mortgageholders (and trustees) have certain rights. The
mortgageholder has the right to reimbursement for losses that the named
insured has voided through misrepresentation, fraud, or criminal activity like
arson. Even if the mortgageholder has started foreclosure, the right to receive
loss payment continues. The mortgageholder must be listed in the declarations
and will be made in order of precedence, as interests may appear. Mortgageholder
precedence in property law has to do with which mortgage is filed first as a
deed amendment. In order to prevent legal problems, it is wise to confirm with
the insured which mortgageholder should be listed first, second or third. The
first mortgageholder expects to be paid first, and the second understands they
will be paid after the first mortgageholder is indemnified.
If the claim payment is denied to "you," then the
mortgageholder can receive the loss payment due them if they:
·
at the company's request, pay any
premium that the named insured has failed to pay, and
·
submit the signed sworn proof of loss
within 60 days of "the named insured’s" failure to do so, and
·
notify the company of any changes in
ownership, occupancy or substantial change in risk known to the
mortgageholder.
If the mortgageholder is aware of certain changes in
ownership or substantial increase in risk and doesn't notify the insurance
company, they, too, will not be covered under this policy. If the
mortgageholder lets the policy lapse, the mortgageholder doesn't get paid.
Once the mortgageholder takes over the reins of the policy, the mortgageholder
is subject to all clauses of the policy.
The mortgageholder also has the right to be notified 30
days in advance of any company-initiated cancellation except non-payment of
premium or non-renewal, which will carry a 10-day mortgageholder notification.
If a mortgageholder is paid under a loss that is void for "you,"
then the insurance company has the right to collect its loss payment from
“you,” but this does not affect the mortgageholder's right to the remainder of
"the named insured’s" mortgage debt. The policy also allows the
insurance company to pay off the mortgageholder and become the mortgageholder
itself. This might prove to be worthwhile to a company that feels it can earn
more interest income on the mortgage in relationship to its current investments
or whoever can sell the mortgage for a premium.
3. No
Benefit To Bailee
This policy will not benefit anyone having custody of any
covered property other than the insured.
4.
Policy Period, Coverage Territory
a. The policy period is shown on the
declarations. Generally, the policy period will be one or three years, and the
inception of the policy will be 12:01 a.m. of the date shown on the
declarations.
b. Coverage territory is the USA, its
possessions and territories, Puerto Rico, and Canada. Property is covered
while in transit between points in the coverage territory. Transit can include
air, land or water and transit to Hawaii, Guam, Puerto Rico, and Alaska that
requires travel over international water is covered. If, however, there is an
intervening stop in a country not included in the coverage territory, then
there is no coverage once the plane leaves the ground, or the boat leaves the
dock. There is coverage for land transportation until the personal property is
either loaded upon the boat or the plane takes off. Understand that standard
in-transit coverage is limited to $1,000. Motor truck cargo or transportation
coverage may be necessary.
G.
Optional Coverages
Optional coverages must first have limits
or the appropriate item checked on the declarations for the coverage to apply.
1.
Outdoor Signs
This includes all outdoor signs at the described premises,
owned by the named insured or in their care, custody
or control. At the described premises does not mean within 100 feet of or away
from the premises.
Signs away from the designated premises are best covered by
a Sign Inland Marine Form. CP 14 40 Sign Endorsement under the non-BOP
Commercial Property Form generally extends coverage to signs on one of the
designated premises and is generally not appropriate for signs away from the
premises.
Under the BOP optional coverages, signs are covered for
separately defined risks of physical loss coverage, excluding only the
following causes of loss: governmental action, nuclear hazard, war, wear and tear, hidden or latent defect, rust, corrosion, or
mechanical breakdown. Governmental action is an important exclusion, for most
municipalities have ordinances regulating the use and placement of signs, and
many require sign bonds for signs that hang over public thoroughfares,
sidewalks and rights of way or exceed a certain size or height.
Signs are only covered for the limit on the declarations,
and the outdoor sign coverage previously granted by Outdoor Property no longer
applies when this optional coverage is added. In other words, if the sign(s)
are valued at $3,000, don't subtract the $1,000 coverage originally granted in
the policy and set the limit at $2,000; set the limit at $3,000.
There is no limitation as to the construction of the sign,
including wood, metal, neon, glass, plastic, or other materials. Glass and
neon glass are covered for breakage and vandalism. Signs associated with vacant
buildings are subject to the vacancy clause; therefore, sign glass breakage
and vandalism are not covered if attached to a vacant building. Detached signs
are not subject to the same vacancy restriction.
Note:
The Interior Glass Optional Coverage was eliminated with the 07 02 edition.
2.
Money and Securities
"Money" and Securities optional coverage is
similar to one of the current Crime Program Forms.
Coverage is for the theft, disappearance and destruction of
"money" and "securities" used in the named insured’s
business while at a bank or savings institution, while within the living
quarters of the named insured and their partners or employees, or any
employees who have custody of the property at the named insured’s designated
premises, or in transit between any of these places.
“At the bank or savings institution” is not defined and can
be interpreted broadly to mean while in the bank, at the drive through, at the
external night deposit drop, or at the external ATM. An ATM at a remote
location from the actual bank building could be interpreted to be an extension
of the bank or savings institution. In other words, ATMs may be considered to
be branches of the financial institution. “Within the living quarters” of
"the named insured’s" employee can present problems.
Example: The employee takes the night deposit to the bank and
finds that the drop is out of order. She takes the "money" home but
leaves the goods in her car overnight. The car is broken into
and the deposits are stolen. Are the goods still in transit (the intended
destination has not yet been reached) or are the goods no longer in transit and
not within the living quarters of the employee? Coverage may not exist, for
generally the only legitimate reason that money is at the home of an employee
is as a temporary stop in transit to allow the employee to deposit the money
at an appropriate financial institution the next morning when the institution
opens. Employees who stop anywhere in between to accomplish anything other
than delivery of the money or securities could be opening up to question
whether the money was in transit to the financial institution or living quarters.
The policy does not specify a direct route, but significant deviation could be
grounds for denial of a claim, or investigation into whether the claim was
actually an employee dishonesty claim, not covered by the Money and Securities
Optional Coverage.
The following causes of loss are not covered: accounting or
arithmetical errors or omissions, giving or surrendering property in any
exchange or purchase, and other limitations and exclusions in the policy that
may also apply to property other than "money" or
"securities." There are no standard BOP endorsements to add this
coverage.
Example: The cash register tape does not equal the cash register
cash box ($200 short on a total tape of $600) and the cash box does not
balance to the tape and original balance. The clerk left the machine for a
moment while customers were around. No evidence of theft is found, but theft
is presumed. This would be covered.
Example:
The books don't balance, but nobody
can figure out why. No coverage. You sell a color television for $400, deliver
to the customer and two days later the check bounces and the customer can't be
found. This would not be covered.
Property contained in vending machines, arcade machines or
any other "money" operated devices are not covered unless the amount
of "money" deposited is recorded by a continuous recording
instrument in the device. This limitation is not found under the base policy.
In addition to excluding coverage for "money"
from certain devices, the products contained within these devices (soda,
snacks, etc.) are also excluded. However, because of other policy limitations,
unless the device is on the designated premises, there will be no coverage.
The BOP Form is not appropriate for companies that supply arcade machines to
others or have vending machines scattered around the city. There is no
standard endorsement under the Theft, Disappearance or Destruction Form, CR 00
04, for vending or arcade machine money coverage.
For markets providing insurance for vending machines and
video arcades, see The Rough Notes Company, Inc. publication THE INSURANCE
MARKETPLACE. Look under Vending Machine Floater, or Video Games/Arcade Centers.
No matter how many people are involved in the claim, or
whether the act is singular or a series of acts, all are considered one
occurrence.
The named insured must keep records of all
"money" and "securities." This does not mean that the
named insured has to record the serial number of every bill that crosses the
named insured’s threshold, but they must have cash register tapes, computer
reports, logs, and sales slips to verify loss. Information identifying the
issuer, serial number, date, and complete description of the
"security" should be maintained in a separate location from the
security. It is always wise to have securities, especially negotiable
securities, stored in a safe deposit box or other secure place.
4.
Employee Dishonesty
Some
slight changes are made with the 0702 edition. All are done to more closely resemble the ISO Commercial Crime Forms.
a. The insurance company will pay for direct
loss of Business Personal Property and money and securities due to dishonest
acts committed by employees acting alone or in collusion with others (not the
insured or partner), provided that the intent was to cause the insure to have
a loss and to provide benefit to the employee or other persons or
organizations.
It is important to note that the loss
can be to either money or securities OR Business Personal Property. The most
common loss is through inventory theft, yet this is often the most overlooked
coverage feature. While it is vital that insureds be aware of their money
exposure by utilizing countersignatures, regular audits, balancing of the
books by someone other than the person who deposits, the insured must also
have close checks on purchase orders and inventory control.
“Employee” as used in this Optional
Coverage is not a defined term. This could lead to misunderstanding at the
time of loss if the insured leases employees or uses temporary help. While the
policy will construe to the benefit of the insured, the company should be made
aware if the insured uses regular contract employees and temporary. The
insured should also include the number of contract and temporary employees on
any application for insurance.
The last section of a. indicates that
the INTENT must be to cause loss to the insured and FINANCIAL benefit to
either the employee or someone else. Malicious mischief would therefore not be
covered since there is no intent of financial benefit.
b, The policy
does not cover loss or damage due to dishonest acts by the insured, partners
or members whether acting alone or in collusion. It also does not coverage
dishonest acts by managers or directors or employees (except as in a. above)
while in collusion or acting alone.
If the only proof of the loss is due
to inventory computation or a profit and loss computation, there is no
coverage.
c. The limit of insurance is stated on
the Declarations page and is for any one occurrence.
d. Loss or damage caused by one or more
persons or involving a single act or a series of acts
is considered one occurrence.
e, If a loss is covered under the current policy and also by a
prior, cancelled or terminated policy that the insurance company had issued to
the insured, the most that will be paid is the largest amount under a single
policy. Basically, this prohibits stacking of limits from a variety of
policies due to a series of acts.
Furthermore, the company will pay for
only the damage sustained though acts committed during the Policy Period. No mater how many years the policy is in effect, the limits
are not cumulative.
Example: Floyds
Meat Market has the best steaks available. Only the best are
sold. For the last 10 years Ernie, the head butcher, has taken steaks home
with him at least once a week, without notifying his employer. One Sunday he
realized that this was wrong behavior and confessed to his employer. Based on
the confession, Floyd realizes that Ernie has stolen $6,000 of steaks each
year for the past ten years. His claim to his company was $60,000 since he has
been with the same company the whole time. Due to this limitation, the most
Floyd will receive is $6,000.
f. The Employee Dishonesty coverage is
cancelled to a specific employee as soon as the insured, partners, member,
managers, officer or director (not in collusion with
the employee) is aware of dishonest acts committed by the employee before or after the employee is hired.
Example: Floyds Meat
Market really likes Ernie and wants to keep him as an employee. The policy
permits this but if Ernie commits any other dishonest act, there is NO
COVERAGE. Even if Floyd did not report Ernie’s action, there would be no
future coverage because Floyd is aware of the situation.
g. Loss or damage must be sustained during the policy period and discovered not
later than one year after the end of the policy period.
h. If the named insured suffered a
loss in a prior policy period but did not discover it until the discovery
period on the prior policy had expired, this policy will cover it PROVIDED:
(1) There has been no break in
coverage from the prior policy
(2) The loss or damage would have been
covered under this policy if it had been in effect at the time of loss.
Example: John’s Pizza and
Deli has had a policy in effect since the inception of the business 10 years
ago. The dates are 1/1-1/1. Employee Dishonesty has always been a part of the
coverage. Two years ago, they employed Joanne as a cook. During the time she
was employed, 1/14/2001 – 7/13/2002, John noticed a strange pattern in the
inventory. He couldn’t prove anything but felt that somehow Joanne was taking
inventory. She left on her own and in June 2003, she was arrested in
connection with theft at another pizza place. Since she was a first-time
offender, she confessed all prior crimes, including her thefts at John’s. John
reported the crime as a claim to the company who had the 1/1/2002-1/1/2002
policy period. They denied the claim. Then he forwarded the claim to the
current carrier, and coverage was accepted.
i. The insurance in h. above is limited
to the lesser of the limits on the current policy or the limits on the policy
when the loss occurred.
5.
Mechanical Breakdown
Mechanical breakdown caused by an accident is covered for
certain kinds of objects. An accident is a sudden and accidental breakdown of
the object or a part of the object. At the time the breakdown occurs, it must
manifest itself by physical damage to the object that necessitates repair or
replacement. Accidents are not depletion, deterioration, corrosion, erosion,
wear and tear, leakage at any valve, fitting, shaft seal, gland packing, joint
or connection, breakdown of any vacuum tube, gas tube or brush, breakdown of
any electronic computer or electronic data processing equipment, breakdown of
any structure or foundation supporting the object or any of its parts, the
functioning of any safety or protective device, or the explosion of gases or
fuel within the furnace of any object or within the passages through which the
gases of combustion pass (covered under the base BOP).
Objects are extensively defined in the form. In summary,
they include boilers and pressure vessels, including hot water boilers, steam
boiler piping and fittings including city steam connections, feed water piping
between boilers and/or feed water pumps, air conditioning units 80,000 BTUs or
greater, including connecting piping and coils, vessels heated directly or indirectly
that are part of an absorption or co-generation, or generator system,
compressors, pumps, controls, and fans associated with covered air conditioners.
An object is not considered a hot water heater if it is not
a pressure boiler, boiler settings (foundations), insulation or refraction,
electrical, reciprocating or rotating apparatus in the boiler; in covered air conditioning
units, any vessel, cooling tower or other source of cooling water or piping
leading to or from the cooling water, or wiring
leading to or from the unit. No object is covered for any accident while the
object is being tested.
Objects must be owned by the named insured or in "the
named insured’s" care, custody or control and must be at the described
premises (in or outside the building). Objects and accidents do not include
damage to any computer or data processing system or to any production machinery.
Finally, if the object is found to be in or exposed to a
dangerous condition, any inspector employed by the insurance company can
immediately suspend coverage by mailing written notice to "the named
insured’s" address or to the address where the object is located. The
suspension will carry a pro-rata refund of premium.
H.
Property Definitions
1. “Computer” – means any electronic equipment
that can be programmed to store, retrieve and process
data. All equipment that is necessary to support the function is included. An
exception is production type machinery and equipment.
2.
“Counterfeit” – means an imitation which is intended to deceive and be
mistaken for the original
3. “Electronic
media and records” – Media, Data, programs and software
that is owned by the insured or licensed by the insured and used in the
business.
4.
“Manager “– a director of a limited liability company
5.
“Member” – an owner of a limited liability company
6.
"Money" means currency and coin having a face
value and travelers checks, register checks and money orders held for sale to
the public.
7. "Operations"
means "the named insured’s" business activities occurring at the
described premises.
8. "Period of
restoration" begins 72 hours after the time of direct physical loss
for business income (immediately for extra expense) and ends on the date that
property SHOULD be repaired with reasonable speed and similar quality; or the
date when the business is resumed at a new permanent location. It does not
include any increased period due to the enforcement of law, or pollution
assessment, testing, clean up, or removal.
There
is no coverage for increases due to the enforcement of ordinances which
regulate construction or which require pollutants
monitoring, testing or neutralizing.
9. "Pollutants"
are any solid, liquid, gaseous, thermal irritant or contaminant including
smoke, vapor, soot, fumes, acids, alkalis, chemicals, and wastes (including
products that are to be recycled, reconditioned or
reclaimed). Recycling generally means taking the waste and passing it through
the manufacturing cycle again, extracting useful materials from waste, or
reconditioning the product. Reconditioning can include the stripping of
furniture (and antiques) for refinishing or used clothing that is used, patched or otherwise reworked. Reclaimed goods can include
parts extracted from other waste - car parts taken from wrecks and either used
as is or painted, rewound, ground, etc. The BOP is not an appropriate policy
for people who recycle or sell used materials that need to be processed or
extracted from other non-usable materials to prepare them for resale.
10. "Securities"
means negotiable and non-negotiable instruments representing "money"
or other property, including tokens, tickets, revenue, and other stamps (or
unused in a meter), evidences of debt (charge slips)
used in charge cards not issued by “you,” but not "money" itself.
11. "Specified Causes
of Loss" are fire, lightning, explosion, windstorm, hail, smoke,
aircraft, vehicles, riot or civil commotion, vandalism, leakage from fire
extinguishing equipment, sinkhole collapse, volcanic action, falling objects
(not to property in the open or to the interior of or property inside a
building unless the wall or roof is first damaged by a falling object), weight
of ice, snow, or sleet, or water damage (only as a result of breaking apart or
cracking of any part of a system or appliance containing water or steam, but
not a sump system).
Note: Collapse is not a specified cause of loss. Collapse more
broadly covers falling objects.
Sinkhole collapse is a sudden collapse of earth due to the
action of water creating holes or caverns in limestone or other rock
formations. Sinkholes are often created by subterranean rivers, excessive flow
of water after rains that seep into the ground or burst pipes that cause
subsidence of the land. The cost of filling the land, or the land itself, is
not covered by the policy. Sinkhole collapse is not mine subsidence.
Mine subsidence results from the collapse of underground
mine shafts and tunnels. Often, the surface of the earth will sag or collapse
as near-surface mine shafts collapse or shift. Losses often resemble those of
earthquakes or sinkhole collapse and can include a range of damage from minor
shifting, through foundation damage to a total collapse of surface structures.
12.”
Stock” – items held in storage or for sale, raw material and in-process or
finished goods including packing and shipping supplies.
13.
"Valuable papers and records" – are inscribed, printed, or written
documents; manuscripts; and records. This also includes abstracts, books,
deeds, drawings, films, maps or mortgages. Not
included is "money," "securities," converted data,
programs, or instructions used in data processing operations, nor does it
include any of the materials that the data is recorded on. This definition was
added in this revision.
Note: Readers viewing an electronic version of this article are reminded to go back to this article’s opening to access links to the other parts of the BOP analysis.
Covered within this analysis is ISO Businessowners Coverage
Form BP 00 03. In order to make this analysis more manageable, we’ve produced
it in the following parts:
Part A – BOP Definitions through Coverage Extensions.
Part B – BOP Exclusions through Property Definitions.
Part C – BOP Liability through Common Policy Conditions. You
Are Here
ISO
BUSINESSOWNERS COVERAGE FORM (BP 00 03)
The ISO BOP has changed again. This time the BOP begins to
fulfill its potential as the commercial equivalent of the Homeowners policy by
merging three forms into one. This analysis will review the ISO Businessowners
Coverage form BP 00 03 which incorporates and revises the BP 00 02, BP 00 06 and BP 00 09.
ISO filed the changes to the BOP Program based upon a July
1, 2002 effective date. The affected forms and
endorsements bear a 07 02 revision date.
NOTE: Bold sections
indicate where language changes have occurred as the BP 00 02, BP 006 and BP
00 09 were merged into the BP 00 03.
ISO BUSINESSOWNERS
LIABILITY
This coverage is on an occurrence basis only, no
claims-made coverage is currently available for the ISO Businessowners Policy.
If a claims-made coverage form is needed, consideration should be given to a
Commercial General Liability Policy (CGL) using Claims-Made Commercial General
Liability Coverage Form, CG 00 02, instead of an ISO BOP. The liability is
similar in content to the CGL. Unlike the CGL, which needs a separate
endorsement for the Nuclear Energy Liability Exclusion, IL 00 21, the BP 00 03
contains this exclusion and all pertinent definitions, within the coverage
form. There are other differences between the CGL and the BOP liability
coverage form relating mainly to the grouping of the coverages themselves,
although the content of the coverage is basically very similar. For example:
the CGL is arranged into three distinct coverage parts, Coverage A for
"bodily injury" and "property damage," Coverage B for
"personal and advertising injury," and Coverage C for medical expenses.
In the BOP Liability Coverage Form, all three coverages are contained in one
coverage section for business liability. Each of the three coverage parts in
the CGL have their own set of exclusions, but the BOP has one comprehensive
set of exclusions for the entire business liability section.
Additional differences exist between the BOP Liability
Coverage and the CGL. One difference is the specific exclusion in the BOP
Liability Coverage Form for professional liability. Another is the newly
formed or acquired provision in the CGL which is not provided for in the BOP
Liability Coverage Form. The BOP has a condition regarding financial
responsibility laws that pertains to automobile financial responsibility that
the CGL does not have. However, the BOP does not have the liability conditions
in the BOP Liability Coverage Form with respect to Other Insurance, Audits,
Representations, or When the Insurer Does Not Renew. These are contained in
the BOP General Policy Conditions.
A.
COVERAGES
1. BUSINESS
LIABILITY
1. a. Under this coverage part, an insurer obligates itself
to pay for damages related to covered occurrences of "bodily
injury," "property damage," and "personal and advertising
injury." Any payment is subject to the policy limits as well as to
whether the insured has a legal obligation. The insurer is also responsible
for defending an insured against all valid suits. This important obligation is
accompanied by an insurer’s freedom to properly investigate claims and, when
it sees fit, to offer a settlement. However, an insurance company does not
have an unlimited responsibility to provide a defense. If a claims payment or
settlement uses up the insurance limit that applies to a given loss, their
obligation ends.
Defense coverage is for the insured. The insurer
has no duty to defend the insured for any "suit" for damages that
are not eligible for insurance coverage. This wording makes clear that it is
not the intent of this insurance policy to provide defense for claims or suits
not otherwise covered and should eliminate any confusion (ambiguity) with
respect to when defense is available.
Example: An insured is covered by an ISO BOP Liability Coverage
Form with a limit of $1,000,000. Through the insured's negligence, an explosion
occurs that injures many people and damages several other premises. Each
injured person and property owner file separate claims for injury or damage.
The insurer makes settlements with the injured persons. Once the $1,000,000
limit has been completely exhausted, the insurer is no longer under any
obligation to provide legal defense for the remaining lawsuits filed against
the insured.
At the present time, ISO has not developed any forms for
the BOP Program to amend, modify, or eliminate the limit. However, the CGL has
available endorsements to modify limits. If these types of endorsements are
needed, consideration should be given to providing a CGL Policy instead of the
ISO Businessowners Policy.
One final paragraph applies with respect to the insurer's
obligations under this insurance coverage:
The insurer does not have any other obligation under this
insurance to provide or perform any other acts or services, or make any other
payments of expenses or sums, unless specifically listed in the section regarding
Coverage Extension - Supplementary Payments.
1. b. (1)(a) This insurance applies only to occurrences of
"bodily injury" and "property damage" that take place in
the "coverage territory." An example would be an insured who has a
foreign operation in Hong Kong. In this case, the products are both
manufactured and distributed in Hong Kong. Under the definition of
"coverage territory," there is no coverage. On the other hand,
should the products be manufactured in the U.S. but sold in Hong Kong, this would
fit the definition of covered territory, as would products manufactured in
Hong Kong, but sold in the U.S.
At the present time, no standard ISO endorsements are
available for either the BOP or the CGL to broaden, restrict or otherwise
modify the coverage territory. This would have to be done with either special
manuscript endorsements by the individual insurer or by placing coverage
through specialty carriers. See The Rough Notes Company, Inc. publication THE
INSURANCE MARKETPLACE for further information regarding specialty carriers.
1. b. (1)(b) The insurance applies only to occurrences of
"bodily injury" and "property damage" that take place
during the policy period. In a case where the actual occurrence of the loss
resulting in damages happened prior to the inception of the policy, there is
no coverage for that loss under the occurrence policy, even if the claim for
damages was made during the policy period.
This
new paragraph adds wording to the policy similar to the CGL. This is commonly
called the Montrose wording that was first introduced in the 90s as a
mandatory amendment to the CGL and recently was added into the CG 00 01.
1.b.(1)
( c) If any insured or employee authorized by the named insured has knowledge
of an occurrence prior to the current policy period, there is no coverage under
the current policy. Also, any continuation, change or resumption of bodily
injury or property damage during the current policy period, will be considered
to have been known prior to the policy period.
1.
b. (2)(a)(b) This insurance applies to
"personal advertising injury," provided it is caused by an offense
due to the business and the offense was COMMITTED in the coverage territory
during the policy period. Note the word committed as opposed to occurred or
occurrence. This makes this coverage very different for the bodily injury and
property damage. Occurrence has a long history of controversy while committed
is much clearer and, rather than becoming a defined term, the BOP relies on
the word’s plain meaning.
2.
1.c This new section is part of the Montrose amendment. It
states that the bodily injury and property damage that was not known prior to
the policy period (meaning it would be covered under this policy) would also
include the continuation, change or resumption of the bodily injury or
property damage after the end of the policy period.
1.d.
This is a continuation of the Montrose amendments. The date of knowledge of
bodily injury or property damage is at the earliest of the following:
(1)
The insured or authorized employee reports to the insurance
company
(2)
The insured or authorized employee receives a written or
verbal demand or claims for damages
(3)
The insured or authorized employee becomes aware by other
means that bodily injury or property damage has occurred.
1.e. This section explains that bodily injury damages
include three items: care, loss of services, or death of any party that is a
result of the bodily injury that occurred.
The BOP Liability Coverage contains coverage for the
"products/completed operations hazard," as does the CGL Policy.
However, the BOP does not contain any endorsements to limit, modify, or in any
way exclude this coverage. The CGL Policy does. Endorsements are available in
the CGL to delete coverage for specific products of the insured, specific work
of the insured, to delete the coverage entirely or otherwise modify the
"products/completed operations hazard." Some of the endorsements
available are CG 21 04, Exclusion-Products/Completed Operations Hazard, CG 21
33, Exclusions-Designated Products, CG 21 34, Exclusion-Designated Work, CG 22
36, Exclusion-Products and Professional Services (Druggists), CG 22 37,
Exclusion-Products and Professional Services (Optical and Hearing Aid
Establishments). If these types of endorsements are needed, consideration
should be given to providing a CGL Policy instead of the ISO BOP.
1.f.
Coverage Extension-Supplementary Payments
Seven supplementary payments are provided for; these are in
addition to the limits stated in Section D-Liability and Medical Expenses
Limits of Insurance. The supplementary payments apply to any claim or
"suit" the insurer defends, investigates,
or settles. They are as follows:
·
All expenses the insurer incurs; this
item also clarifies that the Limit of Insurance is not reduced by the insurer's
expenses.
·
If a bail bond is required because of
accidents or traffic law violations due to the use of any vehicle covered by
the Bodily Injury Liability Coverage, up to $250 is available for the cost of
such bonds. Special notation is made to clarify that the insurer is not
responsible for furnishing these bonds. The costs of any bonds needed to
release attachments are provided for, if the amount
of the bond is within the applicable policy limit. Again, clarification is
made that the insurer is not responsible for providing these bonds.
·
If the insurer requests the insured to
participate in any investigation or defense, reasonable expenses are provided
for the insured. This includes any actual loss of earnings, up to $250 a day, if the insured must
take time off from work.
·
All costs taxed against the insured in
the "suit." In cases where the court assesses the costs and expense
of the trial against the negligent party, this supplementary payment can
provide extensive benefits, over and above the policy limits.
·
Insurer will pay prejudgment interest
awarded against the insured for the part of the judgment the insurer pays.
However, if the insurer offers to pay the Limit of Insurance, no prejudgment
interest based on the period of time after the offer is made will be paid by this
policy.
·
Interest on the amount of the judgment
that has accrued after the judgment has been entered, but before the insurer
has paid the judgment or the policy limits, is covered in full.
In some cases, an insured and a party the insured has
agreed to reimburse for their payments for damages (an indemnitee) are both
sued. If the suit involves an eligible loss, the insurer will defend both
parties. However, the defense is subject to all of the following
conditions:
a. the "suit" against the
indemnitee is one where the insured has assumed the liability for the
indemnitee with an "insured contract";
b. the BOP provides coverage for the liability
assumed by the insured;
c. the "insured contract"
and the liability of the insured to the indemnitee are such that the insured
has agreed to assume either the defense or the cost of defense of the indemnitee;
d. there can be no conflict of interest
between the insured and the indemnitee with reference to the "suit";
e. both the insured and the indemnitee
ask the insurer to conduct and control the defense of the indemnitee and they
agree to their mutual defense;
f. the indemnitee must agree in writing
to:
·
cooperate with the insurer in the
investigation, settlement or defense of the "suit";
As long as all of the conditions are met, the insurer will
cover attorneys’ fees and litigation expenses that the insurer incurs, as well
as necessary litigation expenses incurred by the indemnitee that the insurer
has requested. These payments are not considered awards or payment of damages and
therefore not subject to the limits of insurance.
The insurer’s obligation to defend the indemnitee and pay for
expenses end when either the insurer has paid the applicable limit of
insurance in judgments or settlements or the above
stated conditions are no longer met.
2.
MEDICAL EXPENSES
2. a. (1)(2) The has a duty to pay the medical expenses
related to accidental "bodily injury." The accident must have
occurred on premises that are owned or rented by an insured. Accidents that
happen on ways next to the owned or rented premises are also eligible for
coverage. Finally, accidents due to an insured's operations or activities are
also eligible.
2. a. (3)(a) In addition, the accident must take place in
the "coverage territory," and during the policy period.
2. a. (3)(b)(c) Note that only those expenses that have
occurred and have been reported to the insurer within one year of the accident
are covered. In addition, the injured person must be willing to submit to
examinations at the expense of the insurer, by a physician of the insurer's
choice, as often as the insurer reasonably requires.
2. b. (1)(2)(3) The payments will be made without regard to
fault. All expenses must be reasonable. Medical expenses include first aid
administered at the time of the accident, necessary medical, surgical, X-ray
and dental services, including prosthetic devices and ambulance, hospital,
professional nursing, and funeral services.
The CGL Policy has available an endorsement to delete the
Medical Expense Coverage for a small premium credit (CG 21 35,
Exclusion-Coverage C-Medical Payments). The BOP Liability Coverage Form does
not have an equivalent. If it is necessary to delete this coverage for any
reason, consideration should be given to writing this on a CGL Policy.
B. EXCLUSIONS
1.
APPLICABLE TO BUSINESS LIABILITY COVERAGE
The following items are excluded from coverage under this
insurance:
a.
Expected or Intended Injury
Except for any "bodily injury" that may result
from reasonable force needed by any insured to protect or defend himself,
another person his property, any expected or intentional damage" is not
covered.
The purpose of this exclusion is to protect insurers from
responding to damages or injuries that an insured deliberately caused. This
exclusion is in the public interest to make sure an insured is not using the
insurance contract for gain (such as theft), or to inflict injury to
competitors, or to be used as an instrument of revenge or cause any other
purposeful harm.
The expected and intended wording is constantly challenged
and clarified in court cases across the country. The challenges typically seek
coverage for intentional acts with unintended consequences. In other words,
while a person may have meant his or her action, they did not mean for another
person or property to be damaged or they didn’t
intend the level or type of damage.
Example: Paula’s Perfume Shoppe is insured by a BOP. One morning,
Paula has had it with a homeless person who hangs around the front of her
store, scaring customers. After asking the person to leave, Paula gives the
person a slight shove. Paula watches in shock as the person loses her balance
and stumbles. She is severely injured when her head strikes a mail deposit box
and then the concrete sidewalk. When sued, Paula’s carrier denies coverage.
While Paula never meant to hurt anyone, the injuries began with her little
shove.
Cases that are now before state supreme courts may have
impact on this exclusion and should be watched carefully over the next few years.
There are no current ISO endorsements available to buy back or delete this
exclusion.
b.
Contractual Liability
This exclusion provides some coverage while eliminating
other elements of coverage so it must be carefully reviewed to understand how
coverage applies. The first sentence of the exclusion states that the
insurance does not apply to damages which the insured is obligated to pay
because of a contract or agreement. The rest of the exclusion states that
there is coverage under two different scenarios.
·
If there would have been coverage for
the damage if no contract was in place. This is a very logical extension
because the wording preserves the BOP’s coverage intent.
·
The contract meets the definition of
an “insured contract” and was in place PRIOR to the occurrence.
Here is where things become very complicated. The coverage
section goes on to state that all reasonable expenses to defend a suit that
was filed because of a contractual obligation are considered to be damages.
This applies only when the contract states that providing a legal defense is
included in the contractual obligation. This means that such defense costs are
included in the limit of liability.
Example: Mary and Bob entered into a lease agreement. As part of
lease, Bob agreed to assume Mary’s liability and to also defend her in case of
litigation. During the term of the lease, a furnace blows up and two persons
are seriously injured. The furnace is owned by Mary
but Bob’s insurance will respond along with defense up to the point of Bob’s
limit of liability. After Bob’s insurance is exhausted, Mary or her insurer
will have to handle the suit.
c.
Liquor Liability
For any insured in the business of manufacturing,
distributing, selling, serving, or furnishing alcoholic beverages,
"bodily injury" or "property damage" is excluded if it
results from the following:
(1) causing or contributing to the
intoxication of any person;
(2) furnishing alcoholic beverages to
a person under the legal drinking age; or furnishing alcoholic beverages to a
person under the influence of alcohol;
(3) any statute, ordinance or
regulation that relates to the sale, gift, distribution, or use of alcoholic
beverages.
This exclusion does not apply to host liquor situations for
insureds that are not in the business of selling, manufacturing, distributing,
servicing, or furnishing alcohol. Business lunches, parties and social
functions sponsored by the insured are covered for host liquor liability
unless there is a statute, ordinance or regulation relating to the particular
event.
Example: The insured, a medical supplies distributor, holds a
company sponsored Christmas party, where the insured serves alcoholic
beverages at no charge. Or the insured, a printing operation, that takes a
client to lunch and pays for a bottle of wine to go with lunch. These types of
situations are covered should loss or injury occur to the clients or guests as
a result of the alcohol consumed.
Example: The company sponsored a fund-raiser by holding a
"Casino Night." The fund-raiser included betting and gambling
devices, food, and alcoholic beverages for a charge. The company did not
obtain the necessary permits and licenses. A patron who had been served
alcohol was injured on his way home. Because this situation was subject to
several state and local statutes and ordinances, coverage was not available
under this insurance.
Additional coverage is available for liquor liability
coverage under the BOP by the use of three endorsements. BP 04 88 – Liquor Liability – totally eliminates this exclusion. BP 04
89 – Liquor Liability Coverage – is
similar to the Liquor liability policy and has its own common cause limit. BP
04 19 – Amendment –Liquor Liability Exclusion – Exception for Scheduled
Activities provides coverage for scheduled activities. BP 04 18, Amendment-Liquor Liability
Exclusion has been withdrawn.
d.
Workers Compensation and Similar Laws
This insurance does not apply to any requirement or
obligation that the insured must assume resulting from any Workers
Compensation, disability benefits, unemployment compensation, or similar types
of laws.
The extent of this exclusion and the one that follows, is
to prevent double indemnification for injury that should be covered under
Workers Compensation and Employer’s Liability Policies.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty Workers Compensation situations,
refer to the section for Workers Compensation in THE INSURANCE MARKETPLACE,
published by The Rough Notes Company, Inc.
e.
Employer's Liability
The BOP’s liability protection bars coverage for
"Bodily Injury" suffered by an insured’s employee when the injury is
related to his work duties. The exclusion extends to an employee’s relatives
(spouse, children, parents and siblings).
This section also attempts to make it clear that the
exclusion applies whether the insured is liable as an employer or in any other
capacity, or whether the insured is obligated to share damages with or repay
the party who is found to be responsible for any damages. This is a particularly important clarification because of the
widespread use of contractors, subcontractors, independent contractors, or
leased employees and much of the uncertainty with respect to who is
responsible.
One other important note revolves around monopolistic
states where Workers Compensation is provided or required, but coverage for
Employer’s Liability is either not required or available. This situation could
create a major gap in the insured's coverage. Many insurers in such states
have developed manuscript or company endorsements and programs to add the
Employer’s Liability to the BOP. An ISO version is not currently available.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty Employer’s Liability situations,
refer to the section for Workers Compensation in THE INSURANCE MARKETPLACE,
published by The Rough Notes Company, Inc.
f.
Pollution
To get a better understanding of what pollution is, we will
first look at the final paragraph of this exclusion where pollutants are
defined to mean: any solid, liquid, gaseous, or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
and waste. Waste also includes those materials that may be meant to be, but have
not yet been recycled, reconditioned, or reclaimed.
ISO has attempted to use a very broad definition for this
exclusion. ISO further attempts to make the pollution exclusion as
comprehensive as possible by excluding virtually every type of potential occurrence.
Notice in the following that there is no reference to pollution being
accidental or gradual.
Incidents of pollution are not covered by this insurance,
with three exceptions:
·
Bodily injury due to fumes, vapor, smoke
or soot from building heating equipment
·
Bodily injury or property damage that the contractor is
held liable for provided the liability is due to a contractual relationship
between the owner of the premises and the contractor. The contractor must have
never owned, rented or occupied the premises. The
owner must be named as an additional insured on the contractor’s policy for
the contractor’s ongoing operations on the owner’s premises.
·
Bodily injury or property damage due
to a hostile fire.
(1) Excluded are any "bodily
injury" or "property damage" that arises out of the actual,
alleged or threatened discharge, dispersal, seepage, migration, release, or
escape of pollutants;
(a) that are at or from any premises,
site, or location that is now or ever was at any time owned, occupied, rented,
or loaned to any insured;
(b) that are at or from any premises,
site, or location that is now or ever was at any time used by or for any
insured or others, for the handling, storage, disposal, processing, or
treatment of waste;
(c) which are or were at any time
transported, handled, stored, treated, disposed of, or processed as waste by
or for any insured or any other party for whom you are or may be legally liable;
(d) any place where the insured or
contractors working for the insured are performing operations if the
pollutants are brought on site in connections with the operations BUT there is
coverage if:
(i)The pollutant release is due to the
escape of fuel, lubricants or fluids needed to operate mobile equipment
provided they escape from the vehicle part that was meant to hold, store or receive them. The escape must be unintentional.
(ii) The pollutant release is due to gases, fumes or vapors
from materials brought into a building by the insured or contractors. The
materials must be in connection with operations to be performed on the
building by the insured or contractors.
(iii) The pollutant release is due to
a hostile fire.
(e) Any place where the insured or
contractors working for the insured are performing operations if the operations
involve any type of treatment or testing, accessing, etc., for the effect of
pollutants.
(2)(a)(b) Also excluded are any
judgments, suits, awards, fines, or penalties as a result of the Environmental
Protection Act (EPA) or on behalf of the EPA. To clarify this, the coverage
forms indicate this insurance does not apply to any loss, cost, or expense
resulting from any request, demand or order requiring the insured or any other
to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize,
or in any way respond to or assess the effect of pollutants. The exclusion
further states that insurance does not apply to any claim or suit by or on
behalf of a governmental authority for damages because of any of the above
stated circumstances. However, this
paragraph does not apply to any “property damage” liability that the insured
would have had except for the governmental request.
ISO has
introduced 5 pollution related endorsements: BP 04 90 – Pollution Exclusion –
Limited Exception for a Short-Term Pollution Event, BP 04 91 – Pollution
Exclusion – Limited Exception for Designated Pollutants, BP 04 92 – Total
Pollution Exclusion, BP 04 93 – Total Pollution Exclusion With
a Building Heating Equipment Exception And A Hostile Fire Exception, BP 04 94
– Limited Pollution Liability Extension.
Should the insured have exposure to pollution liability for
the ownership, operations, use, or maintenance of underground tanks, as in the
case of a retail gasoline station, a separate UST Policy may be issued to deal
with this exposure.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty pollution situations, refer to the
section for Environmental Risks in THE INSURANCE MARKETPLACE, published by The
Rough Notes Company, Inc.
g.
Aircraft, "Auto" or Watercraft
Any "bodily injury" or "property
damage" resulting from the ownership, maintenance, use or entrustment to
others, of any aircraft, "auto," or watercraft. This includes the
ownership of, loan or rental of, operation of, or
"loading and unloading," by or to any insured.
Example: The owner of Mikey’s Marine & Sauna also owned a
sailboat that promoted the store (it had the store’s logo, phone number and
Website on the main sail). One weekend Mikey rented it to some of his employees.
Unfortunately, the sailboat was poorly maintained and
employees were injured when the watercraft sank. This loss would not be covered.
By extension, any aircraft, including an airplane, hang
glider, balloon, ultra-light, helicopter, etc., that is owned or rented by the
insured, is not covered.
This
exclusion applies even if there are allegations of negligence or other
wrongdoing in the supervision, hiring, employment, training or monitoring of
others if the occurrence involved the ownership, maintenance, use or
entrustment to other of aircraft, auto or watercraft. Exceptions to the exclusion (items that are covered) are:
(1) watercraft while on shore on
premises you own or rent. An example would be a boat in storage for the winter
that poses an attractive nuisance exposure to neighboring children;
(2)(a)(b) nonowned watercraft that is
less than 51 feet long and not
being used to carry persons or property for a charge;
(3) nonowned "auto" while it
is being parked on or next to premises the insured owns or rents. This means
an "auto" that is not owned, rented, or loaned to any insured, while
being parked on or next to the insured's premises. An example would be a valet
exposure;
(4) liability assumed under an
"insured contract" pertaining to the ownership, maintenance or use
of aircraft or watercraft; as in the case where the insured needs to charter
an emergency flight for business purposes, and the charterer requires a
hold-harmless agreement;
(5) any "bodily injury" or
"property damage" that results from the operation of cherry pickers
or similar devices mounted on automobile or truck chassis and used to raise or
lower workers or equipment such as air compressors, pumps
and generators, including spraying, welding, building cleaning, geophysical
exploration, lighting, and well servicing equipment. For example, a specially
modified pickup truck carrying well drilling equipment accidentally striking
the side of a building and causing damage while maneuvering into place over a
well, would have coverage.
For those insureds who own, rent, lease, charter, or
operate any aircraft, watercraft or "auto," many different liability
policies are available to address each of those needs. Only one ISO BOP
endorsement is available to modify the "auto" portion of the
exclusion. Coverage for Hired Auto and Nonowned Auto Liability, BP 04 04, may
be added.
The CGL Policy has available an endorsement to provide
coverage for Boats, CG 24 12. However, the BOP Liability Coverage Form does
not have an equivalent ISO endorsement at this time. If there is a specific need
to cover boats under the Liability Coverage Form, then consideration should be
given to converting the coverage from the ISO Businessowners Policy to a
Commercial Package Policy to accomplish this.
For insurers and brokers that have access to coverage for a variety of difficult, unusual or specialty aviation, auto, truck, boat, or watercraft situations, refer to the sections for Aircraft, Automobiles, Trucks, Recreational Vehicles or for Marine Risks in THE INSURANCE MARKETPLACE, published by The Rough Notes Company, Inc.
h.
Mobile Equipment
"Bodily injury" or "property damage"
resulting from the transport of "mobile equipment" by an
"auto" owned or operated by, rented, or loaned to any insured; or mobile equipment used in, while
practicing for, or being prepared for any pre-arranged racing, speed,
demolition, or stunt activity.
Example: A plumbing contractor hauling a backhoe on a trailer
behind an owned truck to the job site would not be covered when the hitch on
the trailer snaps and overturns, causing damage to the vehicles traveling
behind the trailer and backhoe. The Automobile Liability Policy of the towing
vehicle should respond to any liability for a trailer being towed or for
mobile equipment being transported by that vehicle.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty mobile equipment situations, refer
to the section for Inland Marine Risks in THE INSURANCE MARKETPLACE, published
by The Rough Notes Company, Inc.
i. War
No "bodily injury" or "property damage"
for any liability assumed under a contract or agreement, resulting from any act,
incident or condition of war, whether declared or
undeclared, is covered by the BOP Liability Coverage Form. War is clarified to
include in its definition such acts as civil war, insurrection, rebellion, or
revolution.
Example: An insured manufactures guided missiles. The missiles are
purchased by country X who requires, in a purchase agreement, that the insured
guarantee the accuracy within one meter. When country X invades country Y, the
missiles miss their targets, causing extensive damage to country Z. There is
no coverage.
This exclusion has, naturally, been affected by the
availability of new endorsements that address loss involving terrorist acts.
Any coverage impact by this provision will be substantially affected by
endorsement of either a full or limited exclusion of the terrorism peril.
j.
Professional Services
No "bodily injury," "property damage,"
"personal,” and advertising injury" is covered under this insurance
from either rendering or failing to render any type of professional service.
Nine specific examples of professional services follow; however, please note
that the policy clarifies that these examples include, but are not limited to,
these items:
·
any type of legal, accounting or
advertising services;
Note: There is
no longer any coverage for druggist liability. If coverage is desired, the
separate form BP 08 06 – Limited Pharmacists Liability Coverage must be
purchased. This coverage is still not as broad as was previously offered. The
key change is that some states are expanding the privileges of the druggist to
include writing of prescriptions. This expansion provides a much higher level
of professional responsibility on the druggist and this coverage is not being
expanded to cover it.
Many insurers offer Professional Liability Supplements to
their BOPs to cover professional liability exposures. The applicable insurer
must be contacted to determine the availability of such coverage as this
analysis does not cover insurer-specific endorsements.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty Professional situations, refer to
the sections for Professional, Errors & Omissions, and Malpractice in THE
INSURANCE MARKETPLACE, published by The Rough Notes Company, Inc.
k.
Damage to Property
"Property damage" to any property owned, rented, loaned to or occupied by the insured or for any personal property in the care, custody or control of the insured, is ineligible for coverage under the BOP. The policy is intended to protect the insured for negligence and tort liability to others. It does not apply to damages or injury to the insured. The coverage limitation reinforces the insured’s responsibility to maintain their own premises and properties in good condition and use reasonable care to prevent damage or injury.
Note: If liability is assumed in a sidetrack agreement for property loaned to the insured or for personal property in the care, custody or control of the insured, the exclusion does not apply, so there is coverage.
The standard provisions for the policy contain the following major exclusions.
This insurance does not apply to property damage to:
(1) property owned, rented or occupied by the insured, including costs or expenses incurred for the repair or modification of such property for ANY REASON;
(2) premises sold, given away or abandoned by the insured, if the property damage arises out of any part of the premises.
(3) property loaned to the named insured;
(4) personal property in the insured's care, custody or control;
(5) the particular part of real property on which the insured or any contractors or subcontractors working on the insured's behalf are performing operations, if the property damage arises out of the operations; or
(6) the particular part of any property that must be restored, repaired or replaced because the insured's work was incorrectly performed.
There are four very important exceptions to the above six exclusions.
The first is that
exclusions k.(1), k.(3) and k.(4) don't apply to "property
damage"(other than damage by fire) to premises, and contents of the premises,
rented to the named insurance for 7 or less days. A separate limit of
insurance applies to Damage To Premises Rented to You
– see Paragraph D. Liability and Medical Expenses Limit of Insurance in
Section II Liability.
Second, is that exclusion k.(2) does not apply if the premises are "your work," meaning that the named insured performed operations or work on the premises, and that the premises was never occupied, rented or held for rent by the named insured. This is important particularly to homebuilders. Since they build and sell homes, if this exclusion stood, there would be no coverage once the home was sold. However, it should be noted, that if the named insured used the home as a model home, this exclusion would apply.
Third, exclusions k.(3),k.(4), k(5) and k.(6) do not apply to sidetrack agreements. A sidetrack agreement is between the owners of a premises and a railroad with respect to a railroad sidetrack (transfer or access track) that is located on the premises of the insured. The railroad will allow use of the sidetrack as long as the property owner guarantees access by the railroad to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the railroad and property owner.
Example: The insured is a distributor of large appliances. A railroad track passes next to the premises of the insured. The insured feels that sales could increase, expenses could be reduced and overall growth may occur if the railroad would build a sidetrack into the insured’s warehousing area to load and unload directly into the railroad car, saving shipping and trucking time. The railroad agrees to the arrangement on condition of 24-hour access to the sidetrack by the railroad and guarantees that the property owner will protect the track from vehicle damage, limit vehicle access and hold the railroad harmless for any collision or injury during loading and unloading. Railroad Sidetrack Agreements are covered contracts.
Fourth, exclusion k.(6) does not apply to "property damage" included in the "products and completed operations hazard."
l.
Damage to Your Product
"Property damage" to the insured's product
because of damage caused by that product or any part of it, is not covered.
Example:
The insured manufactures gas furnaces.
A furnace malfunctions and catches fire, destroying the furnace. While the
damage to the area surrounding the furnace is covered, there is no coverage
for the furnace.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty product situations, refer to the
section for Products Liability in THE INSURANCE MARKETPLACE, published by The
Rough Notes Company, Inc.
m.
Damage to Your Work
"Property damage" to the insured's work or any
part of it, that is also covered in the "products/completed operations
hazard," is excluded. The exception to this exclusion occurs when that
work has been performed on the insured's behalf by a subcontractor.
Example: The insured repairs the electrical wiring in a building
and the wiring is incorrectly done; there is no coverage. However, if the
repair of the wiring was done by a subcontractor of the insured and not the
insured, coverage would apply.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty product situations, refer to the
section for Products Liability in THE INSURANCE MARKETPLACE, published by the
Rough Notes Company, Inc.
n.
Damage to Impaired Property or Property Not Physically Injured
"Property damage" to "impaired
property" or property not physically damaged which is a result of either
a defect, inadequacy, or dangerous condition in the insured's product or work,
or which has been caused by a delay or failure of the insured or any one acting on the insured's behalf in the performance
of the terms of a contract or agreement, is not covered by the Liability
section of the BOP. Wording is added to clarify that the exclusion does not
apply if the loss of use of other property is the result of sudden or
accidental injury to either the insured's product or work, after it is being
used as intended. Two examples to help illustrate this exclusion follow.
Example: The insured is a manufacturer of switches to turn a
variety of products on and off. A batch of defective switches was sold to
other manufacturers to incorporate into their product. When installed, the
other product would not turn on. The other manufacturers' products have been
impaired as a result of the insured's defective product but are otherwise
undamaged. This is an excluded loss and there is no coverage.
Example: The insured agrees to have the artwork completed for a
client’s brochure by a stated deadline. The deadline arrives and the artwork
is not complete. There is no physical injury to any property
but the client loses potential income from being unable to distribute the
brochure. This loss is not covered by the BOP Liability Coverage Form.
There is currently no standard ISO endorsement available to
buy back this coverage or delete this exclusion.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty product situations, refer to the section
for Products Liability in THE INSURANCE MARKETPLACE, published by The Rough
Notes Company, Inc.
o.
Recall of Products, Work or Impaired Property
Damages for any loss, cost or
expense, whether incurred by the insured or by others, because of loss of use,
withdrawal, recall, inspection, repair, replacement, adjustment, removal, or
disposal of the insured's product, the insured's work, or "impaired
property" are excluded when withdrawn, recalled, or removed because of a
known or suspected defect, deficiency, inadequacy, or dangerous condition.
Basically, if the insured knows or has reason to suspect that a product, work,
or property is defective or could cause injury or danger, there is no coverage
for the expense and cost of the recall, repair, or removal.
Example: Jane’s small electric contractor business, Elektrik Chiks,
has had to go back to a wiring job for a local high school. Elektrik Chiks did
the wiring on a new computer lab that was just added by the school. Jane
received a notice from her supplier that the material used to insulate the
wiring has a defect. The material was contaminated by foreign debris, which will
cause the insulation to harden and crack after a few months’ use. Jane and her
crew have to strip out all of the wiring with the defective casing. Since Jane
knew nothing of the defect, her BOP handles the costs related to stripping out
and replacing the defective work.
There is currently no standard ISO endorsement available to
buy back this coverage or delete this exclusion.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty product situations including
recall, refer to the section for Products Liability in THE INSURANCE
MARKETPLACE, published by The Rough Notes Company, Inc.
p.
"Personal and "Advertising Injury"
Personal
injury and advertising injury are now combined. The exclusions have been
rewritten and the definition redone to recognize this change. Currently, there is no coverage for:
(1) Any who insured
causes or directs another to violate the rights of another having knowledge
that it would inflict personal and advertising Injury.
(2) Any oral or written publication done by
or at the direction of the insured if the insured knew that it was false.
(3) Any oral or written publications, whose
first publication took place prior to the beginning of the policy period. An
incorrect story was first published on December 20, but the policy did not go
into effect until January 1. No coverage exists under this policy.
(4) Any criminal act committed by or with the consent of the insured.
(5) Any damages the insured has assumed in a contract or agreement are excluded, unless the insured would have had that liability regardless of the contract or agreement.
Example: A celebrity who agrees to an interview for publication by the insured but insists on a written agreement in which the insured promises not to slander or libel the celebrity. This liability would have existed whether or not there was a contract or agreement.
(6) Any breach of contract, other than misappropriation of advertising ideas under an implied contract, is not covered.
Example: An insured contracts to run an advertisement in their magazine the month prior to a special sale held by a client. The client sues for breach of contract when the advertisement is run the month after the sale. There is no coverage for breach of contract.
(7) Any failure of goods, products or services to comply with the advertised quality or performance, are not covered.
Example: A customer sued when the diet supplement products guaranteed weight loss of 10 pounds and the customer gained weight. The BOP’s coverage would not apply.
(8) Any damages as a result of the incorrect description of the price of goods, products or services.
Example: A customer sued a newspaper when they lost revenue as a result of an advertisement in which the newspaper misprinted the price by incorrectly placing the decimal. No coverage exists for this loss.
(9) Acts committed by insureds whose business is to:
(a) advertise, broadcast, publish, or telecast.
(b) design or help with content of Websites for others
(c) provide internet search, access, service or content
This exclusion
does not apply to Items 14.a. b., and c., in the definition of Personal and
Advertising Injury.
It is important
to note that placing framed or links or advertising on the internet is not
considered the business of advertising, broadcasting, publishing
or telecasting.
(10) Any release or escape of pollutants at any time.
(11) Any expenses relating to a request to cleanup or any claims by a governmental body to cleanup or test or access for pollutants.
(12) Any injury due to insured hosted
Internet bulletin board or chat room.
(13) Any infringement of
copyright, patent, trademark trade secret or intellectual property rights.
(14) Any misleading of another’s potential
customer by using someone else’s name or product in any domain name, email
address or similar tactic.
For insurers and brokers that have access to coverage for a
variety of difficult, unusual or specialty advertising situations, refer to
the section for Professional Liability in THE INSURANCE MARKETPLACE, published
by The Rough Notes Company, Inc.
There’s a final clarification in the BOP Liability Coverage
Form Exclusions section. It is an exception involving exclusions C-Liquor
Liability, D-Workers Compensation and Similar Laws, E-Employer’s Liability,
F-Pollution, G-Aircraft, "Auto" or Watercraft, H-Mobile Equipment,
I-War, K-Damage to Property, L-Damage to Your Product, M-Damage to Your Work,
N-Damage to Impaired Property or Property Not Physically Injured, and O-Recall
of Products, Work or Impaired Property. These
exclusions do not apply to a premises damaged by fire or explosion. However,
such losses must occur while the insured is renting or is temporarily occupied
by the insured. Further, the insured must be using the premises with an owner’s
permission. A separate limit is provided for this coverage.
2.
EXCLUSIONS APPLICABLE TO MEDICAL EXPENSES COVERAGE
"Bodily Injury" expenses for the following are
not covered:
·
to any insured, except volunteer workers;
Example: One of
the partners in the partnership shown as the first named insured slips and falls
on ice on the front steps of the building and needs X-rays to determine if
anything was broken. This is not covered under medical payments.
Example: A painter hired by the insured to paint his building and his rental dwelling is not covered under medical payments when he falls from a ladder and breaks his wrist.
Example: The tenant of the insured falls down the stairs in the tenant’s own apartment and is injured. Medical payments do not apply.
Example: A small fire burns the hand of an employee while on the job, coverage under medical payments does not apply.
Example: Lyle’s Linguini-to-Go sponsors a little league team where one child breaks a leg when she slides into home plate. The medical payments coverage does not apply.
Example: An appliance manufactured by the insured catches fire from faulty wiring and burns a consumer's fingers. Coverage under the medical payments is not available.
Example: An employee of the insured becomes angry and hits a customer, breaking his nose. Coverage does not apply under medical payments.
The CGL Policy has available an endorsement to delete the
Medical Expense Coverage for a small premium credit (CG 21 35,
Exclusion-Coverage C-Medical Payments). The BOP Liability Coverage Form does
not have an equivalent. If it is necessary to delete this coverage for any
reason, consideration should be given to writing this on a CGL Policy.
3.
APPLICABLE TO BOTH BUSINESS LIABILITY COVERAGE AND MEDICAL EXPENSES COVERAGE-NUCLEAR ENERGY
LIABILITY EXCLUSION
The Nuclear Energy Liability Exclusion is only intended to
exclude coverage for "bodily injury" or "property damage"
liability when an insured is covered for this exposure under a Nuclear Energy
Liability Policy issued by one of the Nuclear Energy Liability Insurance
pools. Otherwise, the insured would have coverage under the BOP Liability
Coverage Form for any bodily injury or property damage arising from nuclear
hazards or hazardous properties of nuclear material.
Note: This section defines several words which apply only
to the nuclear hazard and the terms appear in the BOP with quotation marks.
The endorsement amends insurance provided under the BOP
Liability Coverage Form to exclude "bodily injury" or "property
damage" liability coverage under the following circumstances:
(1) for a loss involving anyone who is
also an insured under a Nuclear Energy Liability Policy issued by the Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Association of Canada (including their successors).
This exclusion is not affected by such a policy’s termination or exhaustion of
Limits; or
(2) any loss resulting from the
"hazardous properties" of "nuclear material" including:
(a) any entity’s obligation to maintain
financial protection in compliance with the Atomic Energy Act of 1954 (and its
amendments); or with respect to any insured’s entitlement to indemnity from
the US government (including its agencies or affiliated entities).
(b) any medical payments coverage
related to nuclear activity
(c) any Business Liability loss
related to "hazardous properties" of "nuclear material,"
if:
·
such material is at any "nuclear
facility" owned by, or operated by or on behalf of an insured or has been
discharged or dispersed from such facility;
·
the "nuclear material" is contained
in "spent fuel" or "waste" at any time possessed, handled,
used, processed, stored, transported, or disposed of by or on behalf of an
insured; or
·
the bodily injury or property damage
arises out of the furnishing by an insured of service, materials, parts or equipment in connection with the planning,
construction, maintenance, operation, or use of any "nuclear facility."
If the facility is located within the U.S., its territories
or possessions or Canada, the exclusion applies only to property damage to
such facility.
The intent of the above paragraphs is to avoid stacking of
limits of insureds who are covered under nuclear pools and require the
"nuclear facility" operator to look to the Nuclear Liability Pool
Policy or to the nuclear property pool for coverage.
The following definitions are for words used in this
exclusion:
"By-product Material" has the meaning given in
the Atomic Energy Act of 1954 or any of its amendments, but that meaning is
not detailed in this exclusion.
"Hazardous properties" include radioactive, toxic or explosive properties.
"Nuclear facility" means:
·
(a) any nuclear reactor;
The nuclear facility also includes the site on which any of
the foregoing is located, all operations conducted on such site and all
premises used for such operations.
"Nuclear material" means source material,
"special nuclear material" or "by-product material."
"Nuclear reactor" is any apparatus that has been
designed for or used to sustain nuclear fission in a self-supporting chain
reaction or to contain a critical mass of fissionable material.
"Property damage" includes all forms of
radioactive contamination of property.
"Source material" has the meanings given in the
Atomic Energy Act of 1954 or any of its amendments, but that meaning is not
detailed in this exclusion.
"Special nuclear material" has the meanings given
in the Atomic Energy Act of 1954 or any of its amendments, but that meaning is
not detailed in this exclusion.
"Spent fuel" is any fuel element or component,
either solid or liquid, which has been used or exposed to radiation in a
nuclear reactor.
"Waste" is any waste material that contains
"by-product material" other than the tailings or wastes produced by
the extraction or concentration of uranium or thorium from any ore processed
primarily for its "source material" content; and is a result of the operation
by any party of any "nuclear facility" included under the first two
paragraphs of the definition of "nuclear facility."
C. WHO
IS AN INSURED
1. If the declarations designate the insured to be:
(a) an individual, then the insured
and spouse are insureds, for the conduct of any business that the insured is sole
owner.
Example: A sole
proprietorship selling farm produce that is owned by Mr. John Insured. Both
Mr. and Mrs. John Insured are insureds. Also, Mr. John Insured has an
additional sole proprietorship where, as an individual, he makes wood kitchen
cabinets. Again, both Mr. and Mrs. John Insured are insureds; however, in the
carpentry business he owns as a partnership with his brother, no coverage
exists under this policy.
(b) a partnership or joint venture,
then the insured, members, partners, and their spouses are all insureds, but
only with respect to the conduct of the business of the insured.
Example: Mr. John Insured
and Mr. Joe Insured are partners in a carpentry business; both partners and
their spouses are covered for their carpentry operations, however, no coverage
is provided for the sole proprietorships, and no other partnerships that
either partner is involved in is covered.
(c) a limited liability company, then
the insured and the members and managers are covered but only with respect to
conduct of the insured business.
A limited liability company is a
hybrid between a partnership and a corporation. The operation of the limited
liability company is handled by managers on behalf of members who, on one hand,
have the protection of a corporation in that personal assets are protected and
only company assets can be assessed. On the other hand, the income and profit
that is earned by the limited liability company is not taxed against the company
but is the obligation of the members as individuals. Who is an Insured now
specifically refers to limited liability companies and provides coverage for such.
(d) if the insured is any organization
other than a partnership, joint venture, or limited liability company, then
the insured, "executive officers," and directors of the insured are
all considered insureds, but only with respect to their duties as officers and
directors of the insured. Stockholders of the insured are also insured but
only with respect to their liability as stockholders. Outside interests,
operations, and exposures of the "executive officers," directors, or
stockholders are not covered.
2. a. (1)(a)(b)(c) Also considered to be insureds are “volunteers” while performing work for the
named insured and "employees" of the insured, (except "executive
officers" of partnerships, joint ventures or limited liability companies
and managers of limited liability companies), but only for acts while
performing the duties of and in the scope of their employment to the insured.
Excluded is any "bodily injury" or "personal and advertising
injury" an "employee" or “volunteer”
causes to the insured, partner or member of the
insured, or to a co-"employee." Also excluded are any damages to any
spouse, child, parent, brother, or sister of a co-"employee" because
of injury caused by the "employee" to the co-"employee."
Both of the "employee" and co-"employee" exclusions apply,
even if the insured is required to share damages with someone else or to reimburse
another party for damages the other party may have paid.
The above exclusions regarding injuries caused by one
"employee" to another or to the insured, partners, owners, and so
forth, have become very relevant. In light of the many incidents of shootings
and other acts of vengeance, in recent history, the content of this exclusion
is important. Should this type of incident occur, coverage is not provided by
this insurance either to the
injured person or to the spouse or family of the injured person who may suffer
financial or emotional injury from the incident.
Throughout Section II - Who is an Insured, references are
made to clarify the intent of coverage for managers and members of limited
liability companies:
·
2. a. (1)(d) "Employees" and
“volunteers” are not insured with
respect to their rendering or failing to render professional health care
services Note that the exception for
druggists has been removed.
Three other circumstances exist where other entities are
considered to be insureds. These are:
·
2.b. any party (excluding “volunteers” and "employees"),
while acting as a real estate manager of the insured;
These clarifications are broad coverage to the insured for
exposures that are normal to any business operation and can be expected in a
commercial venture. There is another category of insured that is created
involving mobile equipment.
·
3. When "mobile equipment"
is registered to the insured under any motor vehicle registration law, any
person driving that equipment on a public highway with the insured's permission
becomes an insured. Further, any party that has responsibility for the
driver’s conduct is an insured for liability for the equipment’s operation.
Such a person loses status as an insured if other coverage applies to the
loss.
·
3. a. b. Excluded is any "bodily
injury" to a co-"employee" of the driver of the equipment, nor
is there coverage for any "property damage" to property owned,
rented, in the charge of, or occupied by the insured or the employer of those
persons insured. This exclusion provides consistency with other exclusions in
other sections and clarifies that circumstances of injury to fellow employees
are excluded under this insurance. Also, it provides consistency and clarification
is the exclusion regarding damage to property of the insured or property in
the insured's care, custody, or control, by either the insured or others
working on the insured's behalf. Several BOP endorsements are available to add
other interests to the Liability Coverage Form.
D.
LIABILITY AND MEDICAL EXPENSES LIMITS OF INSURANCE
1. The most an insurer is obligated to pay are the Limits
of Insurance shown in the declarations. This limit is not affected by how many
insureds are covered, or how many claims are made or
"suits" are brought. Neither is the limit impacted by the number of
parties who file "suits."
Example: Lara and Prentiss Greatkuple, DBA “Hairy Essentials,” are
sued by a longtime customer. The client was getting into a chair when the back
of the chair broke, violently slamming the customer backwards. The client
suffered a concussion, various cuts and a broken
back. The customer filed two lawsuits: one naming Lara and the other naming
Prentiss. The Greatkuples report the loss to their insurer, including the paperwork
on the two suits. Their insurer tells them that they’ll handle the action, but
their $1 million policy limit is the most that will be available for both
suits.
2. The Liability and Medical Expenses Limit shown in the
declarations is the maximum the policy will pay for any one occurrence of an
event, regardless of the number of claims that result from that occurrence for
"bodily injury," "property damage," or "medical
expenses," or the total loss to any one party from any "personal and
advertising” offense.
Example: A BOP Liability Coverage Form has a liability and medical
expenses limit of $1,000,000. The insured is a manufacturer who experiences an
explosion while a group is touring their premises, resulting in bodily injury
to a number of the tourists. The total number of claims is 25 and the total
value of all claims submitted is $5,000,000. The policy only provides
$1,000,000 resulting from that occurrence, subject to the aggregate limit. The
insured would have to respond to the remaining $4,000,000 in some other
fashion.
The medical expense limit is the maximum amount that would
be paid for each person, and subject to the liability and medical expenses
limit for any one occurrence.
Example: A policy has a $5,000 medical expense limit per person,
and a liability and medical expenses limit of $1,000,000. The insured is a
printer who accidently injured 25 tourists visiting the facility. One
"bodily injury" loss was already paid for that same
"occurrence" to a seriously injured visitor for $900,000. The most
medical expense that would be paid for any one person is $5,000. The total
liability and medical expenses limit remaining after payment of the $900,000
"bodily injury" loss is $100,000, so if after capping the most for
any one tourist at $5,000, only $100,000 of the $125,000 would be paid by the
policy.
3. The Damage to
Premises Rented to You limit is the most the insurer will pay under the
Business Liability Coverage for all covered "property damage" losses
from any one fire or explosion, to premises rented to
or temporarily occupied by the insured with permission of the owner.
Example: The Damage to
Premises Rented to You limit is $50,000 and a loss occurs while the
insured is renting a premises, in which the operations of the insured cause a
fire that burns down the building for a total loss of $250,000. The Damage to Premises Rented to You limit
will only pay the $50,000 limit.
4.(a)The most that will be paid for the total accumulation
of all "occurrences" of the "products/completed operations
hazard" in any one policy period is twice
the liability and medical expenses limit. (b) The most that will be paid
for the total accumulation of all other "occurrences" of
"bodily injury," "property damage," "medical
expenses," and “personal and advertising injury” offense in any one
policy period is twice the liability and medical expenses limit. This
limitation does not apply to losses covered by the Damage to Premises Rented to You limit.
A clarification was made on how to apply the Limits of
Insurance. The limits apply separately to each annual 12-month policy period,
starting at the inception of the policy. If there is any remaining period of
less than 12 months, the limits apply separately to the period also, unless
the policy was extended for that period, in which case, the extended period is
part of the preceding policy period for purposes of application of the limits.
Example: The insured starts with a policy that was originally
issued with January 1 to January 1 inception and expiration dates. In the second
policy period, the insured requests that the policy expiration be extended
from January 1 until July 1 to match the insured's accounting year. The policy
limits apply separately to the first annual 12-month policy period of January 1
to January 1. They also apply separately to the second policy period which has
been extended and is now 18 months long, from January 1, extended past the
following January 1 to July 1. From that point, the annual 12-month period of
July 1 to July 1 will each have their own separate application of policy
limits.
At the present time, ISO has not developed any forms for the BOP Program to amend, modify, or eliminate any of the limits, including the aggregate limit. However, the CGL has available endorsements to do so. If these types of endorsements are needed, consideration should be given to providing a CGL Policy instead of the ISO BOP.
E.
LIABILITY AND MEDICAL EXPENSES GENERAL CONDITIONS
1. Bankruptcy
Even if the insured or the estate of the insured becomes
bankrupt or insolvent, the insurer is still obligated under this coverage part
and not relieved of any responsibilities.
2. Duties in the
Event of Occurrence, Offense, Claim or Suit
a. The insured must notify the insurer as soon as
practicable of any "occurrence" or offense that may result in a
claim. As much as possible, that notice should include:
(1) How, when and where the
"occurrence" or offense took place;
(2) The names and addresses of both
the injured persons and any potential witnesses;
(3) The nature and location of any
injury or damage resulting from the "occurrence" or offense.
b. When a claim or "suit" is brought against any
insured, the insured must:
(1) Immediately record the specifics
of the claim or "suit" as well as the date received;
(2) Notify the insurer as soon as
practicable.
The insured is obligated to make sure the insurer has
written notice of the claim or "suit" as soon as practicable.
Unfortunately, the term practicable is not defined in the
policy. This particular term is used to allow the insured a reasonable amount
of time to accomplish the conditions of the policy, however, the lack of
clarity can result in disputes. It is to the insured's advantage to use
urgency in notification to the insurer and compliance with the conditions of
the coverage forms.
c. All involved insureds must:
(1) Send immediately to the insurer,
copies of any demands, notices, summonses, or legal papers received in
connection with any claim or "suit";
(2) Give authorization to the insurer
to obtain records and other information;
(3) Cooperate with the insurer in the
investigation, settlement or defense of the claim or "suit";
(4) At the insurer's request, assist
in the enforcement of any right against any party which may be liable to the
insured because of injury or damage that this insurance also applies to. Basically,
it is the insured's duty and obligation to assist in every way possible to
notify, authorize, cooperate, and protect the rights of the insurer in
defending and settling all claims and "suits."
d. Insureds are not authorized to make any voluntary payment,
assume any obligation or incur any expense, other
than first aid, without the insurer's consent. To do so without consent may be
to do so at that insured's own expense. The insured must not jeopardize or compromise
the position of the insurer in any way.
3. Financial
Responsibility Laws
(a) under this provision, If the BOP
is used as proof of financial responsibility, its "bodily injury"
and property damage" coverage will conform in order to comply with the law.
However, the conformity is only according to what’s necessary to meet the
coverage and limits that is required by that law.
(b) the policy’s "mobile
equipment" coverage will provide any legally mandated liability,
uninsured motorists, underinsured motorists, no-fault, or other coverage. Again,
the protection is limited to whatever are the required limits for those
coverages.
The above recognizes that the BOP serves the interest of
the insured and the greater public interest by being flexible to the point
that it meets certain coverages that can vary according to location.
4. a. b. Legal
Action Against Insurer-No party has the right under this coverage part to
either join the insurer as a party or bring the insurer into any
"suit" for damages from an insured; or to sue the insurer unless all
of its terms have been fully complied with.
The insurer may be sued by a party to recover an agreed
settlement or final judgment against an insured, but the insurer is not liable
for damages that are not covered by the terms of this coverage part or that
part which exceeds the applicable Limit of Insurance. An agreed settlement is
defined as a settlement and release of liability signed by the insurer, the
insured, and the claimant or legal representative of the claimant.
Separation
of Insureds
a. b. Other than the Limits of Insurance or any rights and
duties that have been provided only to the first Named Insured, insurance
applies to each Named Insured as if it were the only Named Insured; and separately
to each insured that a claim or "suit" is brought against.
F.
LIABILITY AND MEDICAL EXPENSES DEFINITIONS
This
section contains defined words which are in quotation marks.
Below is an alphabetical list of the 22 defined words or
phrases that are found and which apply to the BOP’s
Part F.
1.
“Advertisement” - is a broadcast message to the general public or market
segments about goods, products, services that are offered in an attempt to
attract customers. Notices that are placed on the Internet or on Websites are
included in this definition. However, any notice must have the intent of
attracting customers for the insured’s goods, products
and services.
2. "Auto" is a land motor vehicle, trailer or
semi-trailer designed for travel on public roads, including any attached machinery
or equipment, but this definition does not include vehicles otherwise defined
as "mobile equipment."
3. "Bodily
injury" is bodily injury, sickness or
disease, including death from any of these, experienced by a person.
4. "Coverage
territory"
a. The United States of America, its territories and
possessions, Puerto Rico and Canada;
b. international waters or airspace except when in the
course of travel or transportation, other than transportation to and from
places listed above;
c. (1)(2)(3) worldwide when the injury or damage results
from goods or products made or sold by the insured in a territory described
above; or if the injury or damage results from activities of a person whose
home is in the territory described above, but the person is away for a short
time on business of the insured; or if
there is a “personal and advertising injury” offense due to the Internet. Worldwide
coverage only exists if the insured's responsibility to pay damage is
determined by a "suit" filed in the coverage territory or a settlement.
5. "Employee"
includes a "leased worker" but does not include a "temporary
worker."
6. "Executive
officer" is a position of officer of the insured, created by the
insured's by-laws, charter, or similar document.
7. “Hostile fire” is
a fire that breaks out from where it was supposed to be. Note – this
definition was in the property damage exclusions but was moved here for
consistency.
8. "Impaired
property" is tangible property, excluding any product or work of the
insured, that has lost full or partial use because:
(a) it contains a product or work of the insured that is
either known or thought to be defective, deficient, inadequate, or dangerous
and if that property can be restored by repair, replacement, adjustment, or
removal of the product or work of the insured; or if
(b) the insured has failed to fulfill the terms of a
contract or agreement and the property can be restored by the insured
fulfilling the terms of that contract or agreement.
9. "Insured
contract" is:
a. a contract for a lease of premises, except for that part
of the contract that agrees to indemnify for fire damage to any premises that
is leased, rented or temporarily occupied by the insured;
b. a sidetrack agreement;
c. an easement or license agreement, except in connection
with construction or demolition operations on or within 50 feet of a railroad;
d. any obligation required by ordinance to indemnify a
municipality, except when in connection with work for a municipality;
e. an elevator maintenance agreement;
f. that part of any contract or agreement relating to the
insured's business (including an indemnification contract with a municipality
for work performed for that municipality), in which the insured assumes the
tort liability of another party to pay for "bodily injury" or
"property damage" to a third party. Tort liability is the liability
imposed by law, with or without a contract or agreement.
f. (1) However, excluded is any part of any contract or
agreement that indemnifies a railroad for losses that result from construction
or demolition within 50 feet of any railroad property, or that affects any
railroad bridge, trestle, track, roadbed, tunnel, underpass
or crossing.
f. (2)(a)(b) Also excluded are any parts of any contract
that indemnifies an architect, engineer or surveyor for losses resulting from preparing
or approving or failing to prepare or approve maps, drawings, opinions,
reports, surveys, change orders, designs, or specifications; or for giving or
failing to give directions or instructions, if that is the main cause of
injury or damage.
f. (3) If the
insured is an engineer, architect, or surveyor, then also excluded is any loss
from liability the insured has assumed for the insured's rendering or failing
to render the professional services discussed above, as well as the additional
services of supervisory, inspection or engineering.
10. "Leased
worker" is any person leased to the insured by agreement with a labor
leasing firm in which the person will perform the duties relating to the
conduct of the insured's business. This does not include any "temporary
workers."
11. "Loading or
unloading"
a. the handling or movement of property onto or into any
aircraft, watercraft, or "auto";
b. while on or in any aircraft, watercraft, or "auto";
c. until delivered, it is the handling or movement of
property off of or from any aircraft, watercraft, or "auto";
however, excluded is the movement of property by mechanical devices other than
a hand truck or those attached to the aircraft, watercraft, or
"auto."
12. "Mobile
equipment" is any of the following types of land vehicles, including
attached machinery or equipment:
a. bulldozers, farm machinery, forklifts and other vehicles
designed for off-road use;
b. vehicles solely for use on or next to the premises owned
or rented by the insured;
c. vehicles that travel on crawler treads;
d.(1)(2) vehicles used to provide mobility for permanently
mounted power cranes, shovels, loaders, diggers, drills, road construction, or
resurfacing equipment such as graders, scrapers or rollers;
whether or not the vehicle is self-propelled;
e.(1)(2) vehicles not previously described and not
self-propelled and used to provide mobility for the following permanently
attached equipment: cherry pickers or similar devices used to raise or lower
workers or equipment such as air compressors, pumps and generators, including
spraying, welding, building cleaning, geophysical exploration, lighting, and
well servicing equipment;
f.(1)(a)(b)(c)(2)(3) vehicles not previously described and
used for purposes other than transporting persons or cargo. Self-propelled
vehicles with the following permanently attached equipment, however, will be
considered as "autos": equipment designed for snow removal, road
maintenance (but not construction or resurfacing), street cleaning, cherry
pickers or similar devices mounted on an automobile or truck chassis and used
to raise or lower workers or equipment such as air compressors, pumps and
generators, including spraying, welding, building cleaning, geophysical exploration,
lighting, and well servicing equipment.
13. "Occurrence"
is an accident, which includes continuous or repeated exposure to the same
harmful condition.
14. "Personal
injury and Advertising Injury" is any injury including
consequential "bodily injury"
resulting from any one or more of the following:
a. false arrest, detention or
imprisonment:
b. malicious prosecution;
c. wrongful eviction, entry or invasion of the right of
privacy of a room, dwelling or premises that a person occupies with permission
of owner, landlord or lessor;
d. oral or written publication of material that slanders or
libels a party or disparages that party's goods, products, or services;
e. oral or written publication of material that violates a
party's right of privacy;
f. use of someone else’s idea in advertisement;
g. infringement of copyright, title
or slogan in advertisement.
15. “Pollutants” are
any solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste. Waste includes materials to be recycled, reconditioned
or reclaimed.
16. a. (1)(2) "Products/completed
operations hazard" includes all "bodily injury" and
"property damage" that occurs away from any premises owned or rented
to the insured and resulting from the product or work of the insured, except
those products still in the insured's physical possession or work that has not
yet been completed or abandoned.
b. (1)(2)(3) Work is considered completed as soon as one of
the following occurs: either all the work in the insured's contract has been
completed; or all of the work done at the site has been completed if the
contract calls for work at more than one site; or that part of work done at a
site has been put to its intended use by any party other than a contractor or
subcontractor working on the same project. Work that is otherwise complete,
but may need service, maintenance, correction, repair, or replacement, is
considered completed.
c. Excluded from this hazard is:
(1) transportation of property, unless
injury or damage arises out of a condition in or on a vehicle created by
"loading or unloading" of it by an insured;
(2) the existence of tools, uninstalled
equipment or abandoned or unused materials.
17.a.b. "Property
damage" is both the physical injury to tangible property, including
all resulting loss of use of that property, as well as the loss of use of
tangible property that has not been physically injured. Loss of use is
considered to have occurred at the time of the injury or
"occurrence" that caused it.
Electronic data is not considered tangible property. Electronic data is
information or programs stored, used, created or
transmitted from computers or any other type of device.
18.a.b. "Suit"
is a civil proceeding that alleges damages for injury or offenses covered
by this insurance. It also includes any arbitration proceeding or other
alternative dispute resolution proceedings, where such damages are claimed and
to which the insured must submit with insurer consent.
19. "Temporary
worker" is any person who is furnished to the insured to substitute
for a permanent "employee" on leave or to meet a seasonal or
short-term workload condition.
20. “Volunteer
worker” is not an employee but someone who donates work and acts at the
direction of the named insured. No fee or other compensation can be made to
the person by an insured or any other organization if they are to remain a
volunteer.
21. "Your product"
is:
a. (1)(a)(b)(c) any goods or products (other than real
property) that are manufactured, sold, handled, distributed, or disposed of by
the insured; or others trading under the insured's name; or any party whose
business or assets the insured has acquired;
a.(2). containers (excluding vehicles), materials, parts,
or equipment furnished in connection with such goods or products; and also
includes:
b(1). warranties or representations made with respect to
the fitness, quality, durability, performance, or use of the product;
b(2). the providing of or failure to provide warnings or
instructions.
c. not included are vending machines or other property
rented to or located for the use of others but not sold.
22. "Your
work" is:
a(1). work or operations performed by or on behalf of the insured;
a(2). materials, parts or equipment furnished in connection
with such work or operations;
and also includes: b(1) warranties
or representations made with respect to the fitness, quality, durability,
performance, or use of the work; b(2) the providing of or failure to provide
warnings or instructions.
SECTION
III COMMON POLICY CONDITIONS (APPLICABLE TO SECTION I – PROPERTY AND SECTION
II – LIABILITY)
A.
CANCELLATION
·
The first named insured can cancel the
policy. The first named insured is the entity shown on the declarations and
the first named insured has the right to make changes, pay the premium, receive and make cancellation. Choosing the correct first
named insured is important both for communication purposes and to make sure
that rights are properly protected.
Example: A prestigious department store moves out of a mall insured by Conservative Mutual. Since that was the mall's anchor store, taking up 70% of the retail space, Conservative sends the mall a five-day cancel notice.
All cancellation notices must state
the effective date of cancellation and are sent to the first named insured,
and any premium refunds are sent to the first named insured. Proof of mailing
is sufficient proof of notice (unless superseded by state law requiring
certified mail or other form of postal verification).
Any premium refunds are sent to the
first named insured. Proof of mailing is sufficient proof of notice (unless
superseded by state law requiring certified mail or other form of postal verification).
B.
CHANGES
The policy contains all the agreements and terms and can
only be changed or waived by an endorsement that is issued and made a part of
the policy.
C.
CONCEALMENT, MISREPRESENTATION AND FRAUD
The policy is void if the named insured or any other
insured intentionally conceals or misrepresents a fact concerning the policy,
the covered property, the named insured’s interest in the covered property, or
a claim under this policy. Fraud can occur before, during or after the policy
period.
D.
EXAMINATION OF YOUR BOOKS AND RECORDS
"The named insured’s" books may be audited or
examined during and up to three years after the end of the policy period.
E.
INSPECTIONS AND SURVEYS
A variety of states noticed that insurance companies were
regularly going into buildings making inspections. This came to the attention
of legislators and attempts were made to have the industry become the watchdog
for various safety and health issues. This paragraph is the insurance
company’s reply.
1. The company has the right to make
surveys and inspections at any time. These reports may be given to the named
insured and recommendations may be made to improve conditions.
2. The inspections
that are made are not required and are meant solely to determine insurability
and premiums. There is nothing in the inspection that warrants that a premises
meets safety or health requirements or that it is in compliance
with local, state or federal ordinances or regulations.
3. Everything in paragraphs 1 and 2 that
relates to the company also relates to any rating bureau or other advisory
service
4. Paragraphs 1 and 2 do not apply to certification made
relative to boilers, pressure vessels and elevators.
The reason for the addition of paragraph 4 is that the
boiler and machinery inspections and elevator inspections are unique in the
insurance industry and actually do act as certification of the safety of the
equipment.
F.
INSURANCE UNDER TWO OR MORE COVERAGES
If the loss is covered by two or more policy provisions,
then the loss will be paid only once. (No double coverage.)
G.
LIBERALIZATION
If within 45 days of the inception date of the policy or
during the policy period, "we" adopt revisions to the insurance
form, and no additional premium is required, the policy will be immediately
broadened. (i.e., the company adopts the form, but hasn't had a chance to
reprint.) Most form changes are adopted for policies written on or after a
specific date, sometime in the future.
H.
OTHER INSURANCE
1.If other insurance applies, this
policy will be excess of that other insurance, whether collectible or not.
2. a. b. Liability Insurance is excess over any other
insurance that insures for direct physical loss or damage or other primary
insurance where the named insured has been added be additional insured
endorsement.
If there is other insurance, the company will not pay the
defense costs that the other company should pay. If the other company refuses
to defend, the company has the option to do so, and if the company does, they
assume "the named insured’s" rights under the other policy to go
after the other insurer.
I.
PREMIUMS
The first named insured is responsible for all premium payments
and returned premium will be sent to the first named insured. Premiums shown
on the declarations are for rates effective at the time of policy issue.
Renewal rates are subject to change. With the company’s consent, the policy
will continue in force year after year if the named insured pays the premium
prior to the anniversary date of the policy, but any rate changes will be
reflected in that renewal premium, and any forms changes will apply.
Changes in "the named insured’s" operations (change in what they do, who they are, or how what they acquire affects them), or exposure during the policy period may require additional premium charge. Rates and rules for these changes will apply as of the effective date of the change, not the rules and rates in effect as of the policy inception date.
J.
PREMIUM AUDIT
Now that contractors may be added to the BOP, this new
condition has been added to allow for a premium audit provision for
contracting risks.
1. If this policy is on an audit basis, the premium shown
in the declarations is an advance premium and the final premium will be
calculated by the insurer when actual exposures have been determined.
2. The initial premium that is shown as an advance premium
is actually a deposit premium. At the end of the audit period, the actual
earned premium is calculated. Once calculated, the first named insured is
obligated to pay any additional premium due upon receipt of such notice and if
the advance premium is greater than the actual, the first named insured will
receive any refund or return premium.
The due date is the date shown as the due date on the bill.
3. The first named insured is the party responsible for keeping
record of the information the insurer needs to calculate the actual earned
premium and is required to send that information to the insurer whenever
requested.
K.
TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO US
The named insured can waive the rights of recovery prior to
the loss, if in writing. The named insured must not do anything to impair the
company's rights to recovery after a loss. After a loss, the named insured can
only waive the rights to recovery if the named insured controls or owns the business
or if the business owns or controls the named insured or if the individual or
business is "the named insured’s" tenant. The named insured can
accept normal Bills of Lading that limit the liability of carriers. (Watch for
non-standard Bills of Lading.)
For ISO Businessowners liability (not medical payments) the named insured must make sure that the company has the right to recover all payments made under the policy, and help "us" enforce these rights. The named insured must not do anything to impair these rights.
L.
TRANSFER OF YOUR RIGHTS AND DUTIES UNDER THIS POLICY
The named insured can't transfer the rights under this policy without the insurance company’s agreement. However, a practical consideration has to be made should an insured die. Upon "the named insured’s" death, "the named insured’s" rights and duties are transferred to "the named insured’s" legal representative. The representative holds status as an insured only while acting within the scope of duties as legal representative. Until "the named insured’s" legal representative is appointed, anyone having proper temporary custody of "the named insured’s" property assumes "the named insured’s" rights.
Note: Readers viewing an electronic version of this article are reminded to go back to this article’s opening to access links to the other parts of the BOP analysis.
This is the analysis of the Insurance Services Office (ISO) BP 00 03–Businessowners Program (BOP) Coverage Form. It is done in three separate parts in order to make it more manageable.
Part A–Policy Lead-In Language through Property Coverage Extensions.
You are here!
Part B–Property Exclusions through Property Definitions.
Part C–Liability Coverages through Common Policy Conditions.
The July 2002 edition of the ISO Businessowners policy combined three coverage forms together into one large package. The January 2006 edition included a number of editorial changes that naturally follow a major change like the July 2002 edition. In addition, a number of changes were needed to standardize terms and align the wording of this policy with the wording in other commercial insurance coverage forms and policies. Finally, some coverage restrictions and broadened coverages are found throughout the form.
NOTE: This analysis is of the January 2006 edition. Changes from the
previous edition are in bold print.
You and Your mean the named insured indicated on the declarations.
We, us and our refer to the insurance company providing coverage.
Note: Refer to Who Is An Insured to understand how insured applies under the Liability section.
A. Coverage
Covered property must sustain direct physical loss or damage by a covered cause of loss in order for coverage to apply. Direct physical loss or damage does not include any consequential or indirect loss. Consequential loss is covered in the section on business income. Indirect losses, such as losses due to recall of a product after a tampering scare or recall of products to repair defects, are not covered.
Coverage does not apply to any loss of value to the undamaged parts of a product damaged by a covered cause of loss. Covered property must be listed and described on the declarations and is covered only if it sustains direct physical loss or damage from a covered cause of loss.
1. Covered Property
Each type of property insured must have a limit indicated on the declarations, subject to it not being property of a kind otherwise excluded. Even if a class or type of property appears on the declarations accompanied by a limit of insurance, coverage does not apply unless it is eligible for coverage and not otherwise excluded or limited.
Example: The BOP declarations for the policy issued to Karen’s Krafthowse includes the following:
Property: 2008 Cadillac Escalade
Limit: $83,500
In this case, coverage does not apply because automobiles do not qualify as covered property under the BOP.
a. Buildings
Note: As opposed to buildings, structures means garages, sheds, outbuildings and other real property not attached to buildings.
Note: Property in the open is not covered for loss or damage caused by rain, snow, ice or sleet.
Note: Examples of permanently installed machinery and equipment include non-portable heating and air-conditioning equipment, machinery that must be placed on a special foundation and machinery that cannot be removed without significantly modifying the building.
Example: The insured’s restaurant is covered by a BOP. The building's replacement cost is $1,000,000 and is insured for $850,000. During construction of a building addition, the wiring in the existing building overloads and the resulting fire causes $100,000 in damage. The value of the nearly complete addition is $150,000. The loss would normally be adjusted on a replacement cost basis. However, the adjuster informs the insured that the building replacement value at the time of loss was $1,150,000. As a result, a coinsurance penalty is applied to the loss because the $850,000 limit is less than 80% of the total replacement cost values at risk.
Note: Most new construction is written using builders risk coverage forms or policies.
Described premises means all the land included in the legal description of the premises indicated on the declarations. If it is extensive or consists of a number of different and distinct parcels, a better legal description of the property may be required. Complete legal descriptions of property titled to the insured can be obtained from the city, town or county abstract office or from a property title insurance company. However, this option is valid only if the ownership of the property is unchanged from when the title insurance was purchased. Mortgage closing documents often give the legal description of the property and include “also known as” to represent an alternative address or name. An example is "123 Main Street, Cavendish Farms, etc." Using such a phrase is sufficient if there is suitable proper documentation.
Tenant premises are usually described in a lease document or contract. This document may restrict the definition of premises to the part inside or outside the walls of the designated suite, office or property. It may also include common areas adjacent to or remote from the actual address being rented. In addition, it may also include storage or warehouse areas in non-contiguous areas.
Note: Many different types of property can be included as building property. This is good because the coverage must be flexible enough to address exposures that might otherwise be overlooked. On the other hand, the insured must be aware of the potential impact on insurance-to-value requirements. The replacement cost of each type of property listed above must be included in the building limit for proper premium determination. If the limit on the declarations at the time of a covered loss equals at least 80% of the full replacement value, replacement cost coverage applies up to the policy limit. If it is less, the loss is adjusted with a coinsurance penalty or possibly on an actual cash value basis.
b. Business Personal Property
Covered business personal property can be in or on buildings situated at the described premises, in the open, in or on vehicles, or within 100 feet of the described premises. It includes:
Example: A fire destroys a restaurant’s kitchen and the adjacent pantry and storage area. A custom racing bicycle valued at $7,500 is also destroyed. The restaurant owner rides the bike to and from his home and keeps it in the storage area when not in use. The bicycle is not covered business personal property under the BOP.
Examples: The named insured's dry cleaners bailee exposure or appliances belonging to others in the named insured's possession for repairs.
Note: Labor, material and services the named insured provides on property of others it has to perform work on is considered insurable personal property. This includes screen-printing slogans on a customer’s tee shirts, adding fragrance to a shampoo, repairing a lawnmower or packaging products for others. These examples represent processes where coverage applies for the value added by the named insured’s services. Its insurable interest includes labor at a rate for anyone involved in the process and the raw materials consumed, including power, chemicals and any other services for which a value can be established.
Note: Improvements are not personal property that a tenant-insured acquires and takes with it when it vacates the premises, such as movable refrigeration units or non-fixed shelving. Improvements can be made to the occupied structure, garages or any outbuildings. Some common improvements are false ceilings, interior walls, lighting fixtures, upgraded electrical wiring, telephone switching systems, cooking equipment, heating, ventilating and air conditioning systems, carpeting, built-in shelving and common renovations such as a new roof by a tenant with a lengthy lease. It does not include, and coverage does not apply to, improvements the landlord pays for. Improvements that can legally be removed are covered under other business personal property coverage provisions. Improvements are valued at replacement cost if actually replaced. If not, the loss settlement is based on a formula incorporating the named insured's use interest in the property. This formula pro-rates its original cost as it relates to the length of time between the date of installation and the expiration of the lease or any renewal option period.
2. Property Not Covered
Note: Coverage only applies to signs attached to buildings. It does not apply to signs attached to structures. Coverage for detached signs may be added by indicating a separate limit on the declarations using Optional Coverage–Outdoor Signs.
Note: Since coverage does not apply to watercraft while afloat, either owned or held for sale as stock, the BOP should not be used to cover marinas, most boat-dealers or for owned boats or yachts. Coverage for those exposures and operations should be purchased from companies that write policies specifically for boat dealers and boat yards.
3. Covered Causes Of Loss
The BOP covers risks of
direct physical loss or damage to covered property by a covered cause of loss
not otherwise excluded or limited. With this approach, the insurance company
must cite the exclusion or limitation that eliminates coverage. Coverage
applies if the insurance company cannot prove that the loss is excluded. Direct
physical loss or damage does not include any loss of use or the perceived loss
in value of goods in the marketplace after an otherwise covered cause of loss
occurs.
Example: The owner of Traktor Patch Lawn Supplies recently purchased a season’s inventory of lawn tractors. The brand of tractor received a negative rating from a consumer watchdog group because of the potential for fire. A fire breaks out after a Traktor Patch clerk tries to start one of them. The fire damages the shop, becomes a local news feature and is used as an example of the quality problem of that brand. After this event, Traktor is unable to sell a single tractor, even when offering large discounts. The damage caused by the tractor fire is covered but the resulting loss of income and perceived loss of value to the other tractors is not.
4. Limitations
a. The BOP does not pay for loss of or damage to:
Note: Boiler explosion resulting from gases or fuel within the furnace of the boiler or flues, passages, chimneys and exhaust pipes through which the combustible gases pass is covered. Loss or damage to the boiler and loss or damage to other covered property is covered.
Examples where coverage applies include:
Example: The quarterly inventory reveals 100 computer monitors missing. Rechecking sales and deliveries confirms that this number is correct. No evidence of a break-in, a breakout or forged sales slips is found and, even after a series of extensive interviews, no employee confesses or is implicated in the loss. This loss is not covered because there is no tangible or physical evidence to back up the loss.
Example: Felix has a purchase order for 250 cartons of cigarettes to be sent to Miller General Store. The purchase order did not have the required signature but it’s a busy day and Felix processes the order without checking. The delivery is made, signed for and the invoice returned to purchasing. When payment is requested, Miller denies making any order. When the signatures are checked, the signature on the receipt does not belong to anyone who works at Miller. Miller is not obligated to make any payment to Felix and neither is Felix’s insurance company.
Example: Millie and May were tenants and moved out of Pricey Woods Apartments. While cleaning the empty apartment, they opened all the windows to release the fumes from the cleaning products they used after which they turned in their keys to the building manager and left. Things were hectic due to the holidays and it was a week before the maintenance crew arrived at the apartment to begin preparing it for a new tenant. During that week, a major rainstorm drenched the carpeting. Mildew set in and ruined the wallboard and windowsills. This damage was not covered because the rain entered through the window but the exterior of the building was not damaged.
Example: Sam is lying in bed one evening and a drop of water lands on his head. The drop becomes a trickle and then a stream. He discovers that the water is coming from the ceiling. His landlord inspects the damage and realizes that, while the ice pack on the roof is still pretty thick, the heat from the building has thawed a small patch of it. As a result, the water has no place to go and is forced down through the ceiling. Since this situation is due to the thawing of snow and ice, coverage may apply for the ceiling damage.
b. Fragile property like glassware, statuary, marble, chinaware and porcelains is covered for only specified causes of loss or breakage of building glass. However, glass that makes up part of the exterior or interior of the building, glass containers of property held for sale and photographic or scientific instrument lenses are not subject to this limitation.
Example: A shelf in the general store collapses due to the weight of business personal property and a variety of merchandise tumbles to the floor. Ceramic figurines valued at $700 and glass soft drink bottles worth $1,000 are broken. The ceramic figurines are not covered because collapse is not a specified cause of loss. The glass soft drink bottles are covered because collapse is a covered peril and no special sub-limit applies to glass containers of property held for sale, other than what is limited for other personal property.
c. Theft coverage for patterns, dies, molds and forms, furs, fur garments and fur-trimmed garments, jewelry, watches, watch movements, jewels, pearls, precious and semi-precious stones, bullion, gold, silver, platinum and other precious alloys or metals is also limited to $2,500. However, jewelry and watches worth less than $100 apiece are not subject to this limitation and full coverage applies.
Example: McCarty’s Department Store was involved in a smash and grab incident that took less than a minute. The perpetrator broke through the display case glass and grabbed two handfuls of watches. He escaped and eluded capture. The owners checked the inventory and location of the merchandise and determined that five watches valued at $500 each were taken, ten watches valued at $75 each were missing and twelve watches valued at $50 each were gone. Because the lower-priced items were on the top shelf, the insured may be almost completely covered, subject to the deductible and policy limits.
Also, see The Insurance Marketplace, a publication of The Rough Notes Company, Inc., for insurance markets that write jewelers block coverage.
5. Additional Coverages
a. Debris Removal
Debris usually remains after a physical loss occurs and coverage to clear the debris away is needed. This relatively simple concept has become one of the more heated areas of discussion with respect to property coverage because of attempts to find coverage for pollution losses in it. Debris removal is not meant to be a cleanup policy. However, because the coverage is so simple, its language has unintentionally covered significant losses.
The coverage provided is explained in four paragraphs. Each paragraph builds on the paragraph before it.
(1) The first paragraph covers actual debris removal expenses subject to the following:
Example: A tornado destroys Sara’s Shoppe. The debris removal expense is $5,000. Since Sara must incur the cost of removal, the property is covered. Since tornadoes are covered causes of loss and the loss occurred during the policy period, coverage applies if Sara reports the expense within 180 days after the date of loss.
(2) This paragraph is subject to the limitations in paragraphs (3) and (4). Since this is not pollution coverage, there is no coverage for removal of pollutants from land or water or for removal, restoration or replacement of polluted land or waters.
Example: The tornado deposited paint and other toxic chemicals in a pond on Sara’s property. There is no coverage to clean the pond because of this exclusion.
(3) This paragraph relates back to paragraph (1) and provides the basic limits. The last paragraph below provides additional limits, subject to two distinct limitations:
Example: Sara has a $50,000 limit and the direct physical loss amounts to $50,000. Since the total payment for debris removal and direct loss is limited to the insurance limit, Sara does not receive the debris removal payment based on this paragraph.
(4) This paragraph provides an additional $10,000 for debris removal if one of the limitations in paragraph (3) above is reached. With this provision, the total payment for a direct loss, including debris removal, is the actual physical loss or damage, plus debris removal expense, or the covered property’s insurance limit plus $10,000 debris removal additional coverage, whichever is the least expensive option.
Example: Sara has coverage for $50,000 and up to $10,000 for debris removal. Since the removal expense is only $5,000, Sara’s entire loss is paid.
The total payment for debris removal is the lesser of the total of the amount paid for physical loss, including deductible, multiplied by 25% plus an additional $10,000, or the actual debris removal expense whichever is less.
Example: Since Sara’s debris removal expense recovery is limited by the actual debris removal expense, she receives only the $5,000 of actual debris removal expense.
The BOP form includes two examples to explain the coverage in greater detail and to make it clearer, especially the deductible and the occurrence basis.
b. Preservation Of Property
If covered property is
threatened by a covered cause of loss, it may be removed to any other location
for up to 30 days. Neither the property moved nor the building where it was
originally stored must sustain damage for coverage to apply. Removal is
virtually all-risk insurance, because once the property is threatened by an
insured peril, virtually anything that happens to the property either in transit
or in storage is covered.
Examples:
c. Fire Department Service Charge
If assumed by a prior contract
or if required by a local ordinance, coverage is available for fire department
service charges up to $2,500. Higher
limits are available, if indicated on the declarations. The fire
department must be asked to respond to the threat of or to an actual covered
cause of loss.
Example: Based on a written contract between the insured and the city, the fire department must respond to any call to the named insured’s property. The fire department charges $500 for each response. Coverage applies even if the property is not damaged, such as to threats of loss from a neighboring brush fire.
Example: In an unendorsed BOP, the fire department is called and responds to damage caused to the named insured’s building by an earthquake, an excluded cause of loss. When the building collapses, one of the collapsed walls cuts the gas main. A spark ignites the leaking gas and a fire destroys the remaining undamaged property while the fire department is on its way. Because the fire department was asked to respond to the earthquake, the coverage provided by the fire department service charge does not apply, even though coverage applies to the property damaged as a result of the ensuing fire.
d. Collapse
The doctrine of concurrent causation holds that an all-risk policy must pay if a loss to property is attributable to two causes, one excluded by the policy and the other covered. By applying this concept, coverage has been found for earth movement, flood and other specifically excluded events. In an effort to avoid the problems of concurrent causation, the BOP defined the specified causes of loss that apply to the coverage provided for collapse.
(1) Regarding buildings:
Example: Major decides to retire and sell the store he owned for 55 years. He has a realtor/appraiser come to the store to estimate the price he should charge for the business. While inspecting the property, the appraiser realizes the building is in imminent danger of collapse. He informs Major of the building's condition and that it may soon collapse. Major notifies his insurance company but it denies coverage because the building has not actually collapsed.
(2) Collapse must be caused by:
(3) Coverage applies to collapse damage involving awnings, gutters and downspouts, yard fixtures, outdoor swimming pools, piers, wharves and docks. It also applies to retaining walls, walks, roadways, paved surfaces and beach or diving platforms caused by one of the factors listed under (2) above, except for a covered specified cause of loss or glass breakage, and only if the loss is due to the collapse of a covered building.
(4) Regarding personal property, if the building or a part of the building does not collapse but personal property inside the building collapses, coverage applies only if the damage is due to a specified cause of loss. This also includes loss caused by hidden decay, hidden insect or vermin damage, weight of people or business personal property or weight of rain that collects on a roof. Coverage also applies to use of defective construction material but only if the collapse occurs during the course of construction, remodeling or renovation.
Example: Major wonders what to do next. His cat suddenly jumps off a shelf, the shelf collapses and both it and all the property on it are destroyed. This claim is covered, after the deductible is applied, because the decay in the wall caused the shelf to separate from the wall.
Collapse does not include settling, cracking, shrinking, bulging or expansion. These causes of loss are usually associated with earth movement and flood, both of which are excluded causes of loss. These causes of loss also usually apply to foundations, walkways and other surface and sub-surface structures. Settling, bulging or cracking of building support beams or walls can be a significant cause of loss but the building or wall must collapse before coverage applies.
(5) This additional coverage does not increase the limits of insurance on the declarations. There is no standard endorsement available to broaden the coverage provided for the Covered Cause Of Loss–Collapse.
e. Water Damage, Other Liquids, Powder Or
Molten Material Damage
Loss or damage due to water, liquids, powder or molten material damage is covered because it is not excluded. However, this extension provides coverage for previously undamaged property that must be torn out to repair the fixtures allowing the water, liquid, powder or molten material to escape and cause the damage.
Example: A leak occurs on the second floor. Water leaks through
the ceiling to the first floor and causes extensive damage. All damage is
covered but the undamaged plaster on the second floor must be ripped away in
order to find, stop and repair the leak. Unfortunately, the leak is hard to find and a great deal of plaster must be removed to locate
and repair the leaky pipe. Coverage applies to both the property damaged
caused by water and for the destruction and repair of the walls. The part of
the loss not covered is the repair of the pipe itself. The insured bears that
cost.
f. Business Income
The business income coverage provided by the BOP program is very simple. No extra worksheets must be completed and concern over coinsurance is unnecessary. It does not even involve selecting a limit or a time period. Coverage applies to the actual loss sustained for interruption of the insured’s operations during the period of restoration that occurs within 12 consecutive months after the date of direct physical loss or damage that occurs during the policy period. While the direct physical damage must occur during the policy period, the period of restoration may extend past the expiration date.
While the concept of actual loss sustained is sometimes referred to as unlimited or no-limit business income coverage, these terms are technically incorrect. While there is no dollar limit, coverage is limited to the amount the business would have earned during the period of restoration if not for the damage caused by the covered cause of loss. Terms like “unlimited” or “no-limit” can create the same problems as the term “all-risk.” These terms may give the false impression that unlimited amounts are available and at the insured's disposal.
The defined period of restoration does not begin until 72 hours after normal business operations are suspended because of the occurrence of a covered cause of loss. This approach establishes a deductible expressed in terms of time without a dollar limitation. Operations must be suspended because of direct physical loss or damage to property at the described premises due to a covered cause of loss.
Example: A fire starts at Jones Hardware at 8:00 a.m., just after the first shift arrives. Work ends at 8:15 a.m. but the fire rages for more than eight hours, finally ending at 4:45 p.m. Under the suspension of operations provision, even though the fire progressively damages the building and extends the necessary period of restoration, the interruption begins at 8:15 a.m., when the fire started, not at 4:45 p.m., when it ended.
Example: The same interpretation of when a loss begins can apply to causes of loss that take longer to occur, such as floods, hurricanes and earthquakes. The policy includes BP 10 03–Earthquake Endorsement. There is no loss of income if the first earthquake tremor that occurs on Tuesday does not damage the business. However, a tremor on Thursday at 8:00 a.m., which is within 72 hours of the first movement, causes the insured's building to collapse. The business income loss begins at 8:00 a.m. on Thursday, the moment that the direct physical damage interrupted operations, not the moment when the earthquake covered cause of loss first occurred. A 72-hour waiting period after operations are interrupted applies before coverage begins.
Note: The proportional business income deductible under this 72-hour waiting period arrangement may have a greater financial impact on the average business than other property deductibles.
Example: A business with no seasonal peaks and valleys needs $500,000 of annual business income coverage. This converts to an average of $1,370 per day or a total uninsured 72-hour loss of $4,110. If a hardware store needing the same amount of coverage derives 60% of its annual income in the spring and sustains a loss at that time of the year, its deductible is almost $10,000, based on $500,000 x .60 ÷ 90 days = $3,333 per day.
A three-day deductible for a business with peak seasons involving short-term events such as spring break, local fairs or events, auto races or a Triple Crown horse race could lose much of its annual revenue during the 72-hour waiting period. The BOP does not have a standard endorsement that reduces the 72-hour waiting period deductible.
For business income purposes, the premises of an insured tenant includes the part of the building it actually occupies as well as all routes inside the building that provide access to that premises. It also includes the insured’s personal property in the open or in or on a vehicle within 100 feet of the described premises.
Example: Ohio Valley Dental is located on the floor above Van’s Drugstore. A door just inside the drugstore leads up a flight of stairs to Ohio Valley's premises. A fire at Van’s does not damage Ohio Valley Dental but access to its premises is denied because of damage to Van's and the staircase. Ohio Valley is covered because the staircase is considered part of its premises.
Business income means net income. This is the net profit or loss before income taxes that would have been earned plus the continuing normal operating expenses that continue after a loss. Business income includes utilities, rent, mortgage and payroll. Supplies normally consumed in the named insured’s operations and other expenses that do not continue after the loss are not covered. Net income does not include amounts that may have been earned as a result of an increase in the business's volume as a result of the impact of the covered cause of loss on customers or on other businesses.
Example: Lumberyard A was located directly in the path of an oncoming tornado but Lumberyard B was located far from it. After the tornado, Lumberyard B was able to raise its prices and have an incredibly profitable season. On the other hand, Lumberyard A was closed during the sales season which included the opportunity to supply material for the repairs faced by customers who also suffered tornado damage to their properties.
Business income losses are adjusted with an eye to the future. What would Lumberyard A's earnings have been if it was open for business during the period of restoration? Let’s assume there was no tornado and Lumberyard A simply burned down. The adjuster looks at its earnings history, the state of the local and national economy during the period of restoration and the company’s historical peaks and valleys during the same period. This evaluation results in an estimated income loss amount that is paid. When examining the local economy, the adjuster discounts the supply and demand pricing that Lumberyard B charges to generate its huge profits. Business income coverage is intended to put a business back into the same condition it was in before the loss. This coverage philosophy means that strange economic twists that occur with disasters are ignored.
Ordinary payroll coverage is provided but is limited to the actual loss sustained for a period of up to 60 days following the date of the direct physical loss or damage, unless a different number of days are indicated on the declarations.
The pay of officers, executives, department managers or employees under contract is not treated as ordinary payroll. Other employees or positions can be removed from the ordinary payroll classification if the position(s) or the individual employee(s) are identified on the declarations.
Ordinary payroll expenses include payroll, employee benefits directly related to payroll, an insured’s FICA payments, union dues the named insured pays and workers compensation premiums. Employee benefits directly related to payroll include state unemployment compensation premiums, state disability income benefit premiums and employer contributions to employee pension plans, based on the amount of payroll and other benefits the employer incurs as an expense as a percentage or formula related to employee payroll. It is not clear what other benefits are included as ordinary payroll expense.
Company health insurance premiums not directly related to payroll, such as payments covering an employee’s dependents, are not treated as ordinary payroll expenses. These health insurance expenses are considered normal expenses not related to ordinary payroll. In this case, the company could continue to pay the health insurance premiums of ordinary payroll employees after the 60-day benefit period for ordinary payroll. This could be an important consideration for businesses with a large staff made up of ordinary payroll. If an employer had to lay off the ordinary payroll employees, it could cause cancellation or modification of a favorable health insurance plan.
Extended business income coverage begins only after the insured’s operations resume after a suspension due to a covered physical loss or damage. This coverage is designed to help the business resume operations at the same pace it would have had if there was no loss.
Example: Smith Hardware is located downtown and experiences a devastating fire. It finds a substitute location from which it resumes operations two months later. However, during the period its operations are suspended, regular customers take their business to the big box hardware operation at the edge of town. When Smith Hardware's operations resume, customer traffic is down and sales are lower than before the fire. Because of the extended business income, the insurance company pays the difference between what Smith normally earns in covered business income and what it actually earned.
The maximum coverage period available under Extended Business Income is 30 days. However, if the time needed to resume operations is less, it ends on the day the insured could restore operations to the level that generates the normal level of business income.
Another limitation to consider is that Extended Business Income does not apply to loss of income due to unfavorable business conditions caused by the covered cause of loss in the same area where the described premises is located.
Example: Rosie is the only florist in an Arizona town devastated by torrential rains. Within two months, Rosie is back in business, but sells only half the flowers she did before the loss. How much of Rosie's reduced business is due to the rain? What economic factors must an adjuster consider when assessing the demand for flowers?
The BOP states that simply because a common event causes economic loss to the local area, that event does not hold any special significance in the loss adjustment. This wording recognizes that the covered business would sustain the same economic loss faced by its community whether a loss occurred or not.
Example: Continuing with Rosie, eliminate the torrential rains. The flower shop burns to the ground instead and a hurricane wipes out the season’s flower crop hundreds of miles away. Flower prices skyrocket and the people in Rosie's community no longer purchase from her shop.
There is a question in such a situation. The extended business income provision does not exclude loss of business income as a result of unfavorable business conditions in a remote location. In view of this, should that impact be part of a loss adjustment?
The mechanics surrounding a period of restoration might validly consider external factors that may influence normal business activities, historical business results from a recent or similar time period, and relevant pre-loss business trends.
A distant disaster or economic hiccup can affect the economic future of a business as much as a local disaster. This clause recognizes that a local disaster is not an extension of the insured’s loss. As a result, local disasters are no different than any other economic factor that may coincidentally affect the business during its restoration.
Extended business income is not subject to the limits of insurance and extends the actual loss sustained limit of a maximum of 12 months by an additional 30 days. The loss must occur during the policy period but the extended business income can continue after the policy expires.
g. Extra Expense
In most cases, a loss creates only a short suspension of operations. However, even a brief interruption can result in extraordinary expenses. Necessary extra expenses are those incurred during the period of restoration resulting from a covered cause of loss that directly damages property at the described premises. This includes personal property located in the open or in or on a vehicle within 100 feet of the described premises. Extra expense can involve costs incurred to avoid or minimize the suspension of business at either the described premises or at a replacement or temporary premises. These extra expenses include relocation expenses and costs to equip and operate the replacement or temporary locations. Such costs are eligible for coverage even if operations are not suspended.
Example: B&G Auto Parts burns to the ground on Sunday. By Monday morning at 9:00 a.m., its parts supplier has two semi-trailer loads of stock parked at B&G’s parking lot and B&G doesn't lose even a minute's sales time. However, the extra expense of expediting the delivery of two semi-trailer loads is $10,000 and the cost to rent and power these trailers is $100 per day.
Nothing in the policy language says these extra expenses must be less than the actual loss of business income the insured would have sustained if business operations were totally suspended. Insurance companies are usually willing to pay for extraordinary extra expenses for a company aggressively attempting to keep operating instead of completely suspending operations during the same time period.
Extra expense may also involve costs to minimize the suspension of business if operations cannot continue. These extra expenses include repairing or replacing any property or researching, replacing or restoring the lost information on damaged valuable papers and records. These expediting expenses are paid only if they reduce the income loss of the insured business.
Example: Patterson's Printing burns to the ground. It cannot operate without presses and operations are suspended. Patterson orders new presses but delivery will take six months. Patterson produces extremely high-quality goods and cannot operate with used equipment that has not been overhauled. No supplier has overhauled used equipment available sooner than six months. However, the presses can be delivered in only three months if Patterson pays a $10,000 premium to move up the waiting list and $15,000 in airfreight charges. The insurance company agrees to this because each month of suspension costs them $50,000. By reducing the period of suspension by three months, the company saves $150,000 less the $25,000 in expediting expenses. Patterson is paid for the first three months of suspension and gets back into business three months sooner, helping it retain its customers.
Example: Aardvark Abstracting and Title Search loses most of its records in a fire. It finds permanent new office space within two days. Because most of its time is spent in the county office reviewing deed and property records, it can virtually continue operations without interruption. However, the fire destroyed 20 years’ worth of copies of title records made from county records. A computer tape was made of customers records and kept off site, while back title pages had been copied. Recopying title pages costs $1 per page and many hours of research. There is little or no coverage in this situation because the period of restoration for extra expense begins only at the moment fire first interrupts the business and ends when business resumes at the permanent replacement location. In addition, the cost to research the reconstruction of valuable papers is limited to $5,000, the coverage extension for valuable papers and records.
As with business income coverage, extra expenses must occur within the 12 consecutive months immediately after the date of direct physical loss or damage. In addition, there is no set limit of insurance for extra expenses. Any covered extra expense must be incurred during the period of restoration. The language in the BOP gives the insurance company some flexibility in interpreting the meaning and duration of the restoration period.
Example: W&W Dry Cleaning sustains a lightning loss to its line of dry-cleaning machines. Business is suspended for a week until alternate facilities can be rented during a night shift. The loss of income incurred during the period of suspension is covered. Rent is paid for the alternate facilities and use of the machines and extra wages are paid for the workers to work the night shift. Both of these extra expenses are initially covered. W&W can replace its machines with one of two identically operating models from two manufacturers. Model A can be installed in six weeks. Model B requires eight weeks to install. W&W decides to order Model B. The insurance company determines the period of restoration to be the six weeks needed to restore operations with the perfectly functional Model A. As a result, the extra expenses W&W incurs during the additional two weeks beyond the period of restoration using Model B are not covered.
h. Pollutant Cleanup And Removal
A nominal limit of $10,000 covers the cost to extract pollutants from land or water. This coverage applies only to land or water at the described premises. Another requirement is that the discharge, dispersal, seepage, migration, release or escape of pollutants result from a covered cause of loss that occurs during the policy period. Any pollution loss must be reported to an insurer in writing within 180 days following the loss.
Note: The 01 06 edition removes the restriction that the loss must be reported prior to the end of the year in which the loss occurs.
The $10,000 limit is also the maximum aggregate policy limit during any 12-month period. Coverage ends once this limit is exhausted. The aggregate limit applies regardless of the number of claims. There is no BOP endorsement currently available that reinstates the aggregate or increases this limit.
i. Civil Authority
Acts of civil authority can be indirect causes of business income loss and extraordinary expenses. A government unit can prohibit access to the described premises because a covered cause of loss occurs nearby. Situations like this are covered. Business income coverage begins 72 hours after the action of the civil authority, not at the time the covered cause of loss occurs and ends not more than three weeks later.
Example: A riot two blocks away from the insured begins on Tuesday at 9:00 p.m. Civil authorities shut down all access to the area the next morning at 8:00 a.m., including the streets that offer access to the insured’s 24-hour convenience store. The looting continues and the streets remain closed until Saturday morning at 6:00 a.m. During that time, the insured could not find suitable inventory or a place to conduct temporary operations outside the riot zone. The loss amount is calculated at $145.00 per hour. While the riot began at 9:00 p.m. on Tuesday, the action of civil authority did not begin until 8:00 a.m. on Wednesday. The 72-hour waiting period begins at that time and lasts until 8:00 a.m. on Friday. Coverage is available for only the 22 hours of interrupted business between 8:00 a.m. on Friday and 6:00 a.m. on Saturday. The total paid loss is $3,190 but the total incurred loss is $13,360.
Extra expense coverage begins immediately after the action of civil authority and ends three weeks after the time of the civil action or when the named insured’s business income coverage ends, whichever occurs first.
Business income coverage is subject to the 72-hour waiting period. The period of restoration does not begin until the 73rd hour after a covered cause of loss occurs. As a result, extra expense can continue for three weeks and three days during an extended period of prohibited access. Lengthy prohibited access occurs in cases of catastrophes, such as brush fires in the plains states, riots in urban settings, hurricanes along the Gulf coast and tornadoes, earthquakes and bombings nearly anywhere else.
Business income and extra expense coverages resulting from the actions of civil authority are subject to the actual loss sustained rules and are not subject to the limit of insurance. All other business income definitions apply to coverage for acts of civil authority.
j. Money Orders And Counterfeit Money
Loss resulting from an insured’s good faith acceptance of money orders and counterfeit money is covered for a limit of up to $1,000 in any one incident. Money orders must not be paid upon presentation to the issuer in order for coverage to apply. The exchange must be for merchandise, money, services or as part of a normal business transaction. The deductible applies to covered money order and counterfeit currency losses.
Examples:
There is no standard BOP endorsement available to increase the $1,000 limit. Additional coverage is generally not available in other standard ISO commercial property or crime forms. The reason is that the exposure created by accepting large amounts of counterfeit money generally exist only in situations where large amounts of money are exchanged, such as at banks and casinos. Their employees are usually trained to spot or have equipment to help them uncover counterfeits. Check cashing services also have a significant exposure to this kind of loss.
Some specialty insurance companies offer coverage for these exposures. Refer to The Insurance Marketplace, a publication of The Rough Notes Company, Inc., for a list of companies that offer this coverage.
k. Forgery Or Alteration
This coverage applies to
cases where another party alters an insured’s check, draft, promissory note,
bill of exchange or other written promise of payment to convert it to money.
The limit is $2,500. Coverage applies to instruments issued by the named
insured, its agent or someone who impersonates the named insured or its agent.
Note: Converted to money means it cannot be redeemed for merchandise, such as a coupon or a merchandise-only credit against returned defective or unacceptable goods.
The $2,500 limit includes the reasonable costs to defend the named insured against suits by those who claim it refused to pay the note, check or draft. However, the insurance company must first agree in writing to defend the insured before defense coverage applies. Forgery coverage applies only to checks the named insured issued and not to checks forged by a customer. A customer must impersonate the named insured or its agent. Incoming check forgery coverage is generally not available in standard markets. Checks include substitute checks as defined by the Check Clearing for the 21st Century Act. These substitute checks are treated as the original.
Lloyd's of London and other specialty carriers have developed special programs with high deductibles and substantial premiums. Higher limits on outgoing check forgery can be obtained by writing CR 00 21–Forgery Or Alteration.
l. Increased Cost Of Construction
This coverage should please any insured subject to the Americans with Disabilities Acts (ADA) and the vast array of similar local, state and federal ordinances or laws. Even though compliance can be grandfathered until significant renovations must take place, such regulations can have a substantial impact on the amount of a loss.
These ordinances and codes are intended for good, help many people and their costs are usually easily absorbed when incorporated in new construction. However, updating existing structures after a partial loss can add significant costs to the rebuilding process and the basic BOP does not cover this updating.
Example: Mainville Church was proud that its building was over 100 years old and still in wonderful condition, thanks to regular maintenance and repair. Unfortunately, a grease fire in the basement kitchen got out of hand and destroyed over a third of it. The church was determined to rebuild but it expected problems due to recent ordinances where compliance was mandatory.
(1) The first thing to know is that this additional coverage is available only if replacement cost coverage applies. That means the covered property must be insured to a minimum of 80% of its replacement value at the time of loss. If it is not, the loss is settled based on actual cash value and this coverage does not apply.
(2) This paragraph provides the basic coverage and is then modified by paragraphs (3) through (9) below. Increased cost of construction coverage applies when covered property is damaged by a covered cause of loss and increased costs are incurred to repair, rebuild or replace damaged parts of the covered property in order to comply with enforcement of an ordinance or law.
Example: The Mainville loss was due to lightning and windstorm. Since more than a third of the church was damaged, ordinances require additional construction costs in order to comply with them. While the sanctuary is located on the main floor with a handicapped ramp, the major obstacle is that Sunday school classes are held in the basement having no handicapped access. Providing such access adds $42,000 to the $210,000 direct damage loss.
(3) The ordinance
or law referred to in paragraph (2) above must regulate the construction or
repair of buildings or establish zoning or land use requirements at the
described premises and be in force at the time of loss.
Example: The village of Mainville had considered an additional ordinance at the time of the Mainville Church loss. The village enacted the new ordinance before issuing the building permit to the church. The new ordinance changed the grade on the handicapped ramp to the extent that the current Mainville ramp no longer meets code. The insurance company does not cover this additional cost, since the ordinance went into effect after the loss occurred.
(4) The insurance company does not pay for costs due to an ordinance or law the insured should have complied with before the loss occurred.
Example: For years, the village of Mainville and the Mainville Church disagreed about the gutters on the building and their flow into the sewer system. The church refused to comply with the village rules and the village was not ready to shut down a church over an issue as small as gutters. However, the village now refuses to issue a building permit until the gutters are changed. This additional cost is not covered.
(5) The BOP is not a pollution coverage form and this additional coverage does not apply to costs associated with the enforcement of ordinances or laws requiring the insured or others to respond in any way to pollutants. This additional coverage is not back door pollution coverage.
(6) This paragraph states that a $10,000 limit applies to each damaged building. Since this is an additional amount of insurance, it may be paid without affecting any other policy limits.
(7) Under this paragraph, the insurance company does not pay the increased cost of construction until the property is repaired or replaced at the same or another premises as soon as possible after the loss but not more than two years later. The insurance company may extend this time period but the extension must be in writing.
Note: The insurance company does not object to the repairs being made at the existing location or if incorporated into construction at a new location. The same limit is available.
Example: The Mainville Church congregation was outgrowing its existing location and the trustees decided to start a building fund and rebuild at a new location instead of incurring the costs and expenses to meet current codes. The insurance company pays the amount of loss and the increased cost of construction, even at a new location.
(8) Because of the potential for confusion between this coverage and the ordinance or law exclusion, this paragraph states that this additional coverage is not subject to the ordinance or law exclusion.
(9) Increased costs of construction due to ordinance or law costs are not covered except under this additional coverage. There is no coverage under the policy loss payments section dealing with property loss conditions. This paragraph eliminates any perception that any other coverage applies to losses involving increased construction costs.
m. Business Income From Dependent Properties
Businesses do not operate in a vacuum. If a supplier or a customer sustains a loss, the insured may also sustain a loss of income until that supplier or customer resumes operations or is replaced with another supplier or customer. This coverage responds to these situations. The $5,000 limit can be increased. Coverage applies if the following events occur:
(1) The loss sustained by the dependent property must be from a cause of loss covered under this policy. This additional coverage does not apply if the only loss is to electronic data. If an electronic data loss occurs in conjunction with other covered damage, this coverage ends when the other damage is repaired, rebuilt or replaced, even if electronic data is not restored.
Example: Myrtle’s fabric shop receives most of its fabric from Berline Textiles. Berline sustains flood damage and Myrtle's supplies of fabric ends. Myrtle’s policy does not include flood coverage but she turns in a claim because of her loss due to the loss at Berline. The claim is denied because Myrtle's policy does not include flood coverage.
(2) The named insured must resume some or all operations by using other sources or outlets if it can do so.
(3) If the named insured does not resume operations as quickly as possible, any loss payment is adjusted to the amount that reflects what it would have been if operations had resumed.
Example: Berline’s has a fire instead of a flood. In this case, Myrtle’s fabric shop is eligible for coverage. Since Myrtle anticipates a downtime of three weeks, she plans a vacation. She then learns that Berline’s can resume shipping after just one week but she has made her plans. Myrtle is paid for the one week but not for the additional two weeks.
(4) The four types of dependent properties:
Dependent properties must be in the coverage territory in order to qualify for coverage. The following coverage qualifications also apply:
n. Glass Expenses
o. Fire Extinguisher Systems Recharge Expense
This coverage provides an additional $5,000 for each occurrence to pay for recharge of fire extinguishers and fire-extinguishing systems and for damage that occurs due to the accidental discharge of the system. However, there is no coverage if the discharge occurs during installation or testing.
Example: The manual discharge for the automatic extinguishing system is located next to the telephone at the insured's snack and grill. Angie, the snack shop’s assistant manager, is using the telephone to talk to her boyfriend. She becomes distracted and inadvertently pulls the system handle, setting off the automatic extinguishing system over the deep fryers. Coverage applies for the recharge and the cleanup necessary to return the system to normal.
p. Electronic Data (01 06 addition)
This new coverage coincides with eliminating coverage for electronic
data under valuable papers and records coverage. Any coverage for electronic
data is limited to only this additional coverage.
If electronic data is corrupted or damaged by a covered cause of loss,
the insurance company pays to replace or restore the data. If it is not
restored, the company pays only for the cost of blank media similar to the
media on which the data had been stored.
Virus coverage is added to the other covered causes of loss. It
includes harmful code or other type of instruction introduced into the computer
or connected network with the intent to damage or destroy information or
disrupt the normal operation of the computer or network. There is no coverage
if the damage is caused by an employee or by other individual hired by the
insured to work on the computer or network.
The $10,000 limit is an annual aggregate that can be increased by
entering a higher limit on the declarations.
NOTE: The limit is not location specific. It is the total annual
policy aggregate limit, regardless of the number of locations or computers.
If a loss begins in one policy year and continues into another, all
loss is considered to have occurred in the year the loss first occurred.
This is very limited coverage. Insureds with larger computer exposures
should consider electronic data processing coverage.
q. Interruption Of Computer Operations (01 06
addition)
The electronic media and records limitation is eliminated with the
addition of this coverage. It was subject to a coverage period of 60 days
while this additional coverage is subject to a $10,000 annual aggregate limit.
This change may or may not be significant but it
should be noted.
This is the Business Income And Extra Expense
version of electronic data additional coverage with a very important
difference. This coverage is limited to only specified causes of loss instead
of the much broader causes of loss available for electronic data additional
coverage. These causes of loss are further restricted to exclude any
additional cause of loss added to the policy by endorsement. The causes of
loss include the same virus, code and instruction damage as outlined in
Electronic Data Additional Coverage above.
The $10,000 annual aggregate limit applies on an occurrence basis.
Coverage ends when the restoration period ends.
Coverage does not apply under any circumstances for business income or
extra expense that results because of an electronic data loss any broader than
as described in this additional coverage.
This is very limited coverage. Insureds having an actual electronic data
processing exposure should consider using electronic data processing coverage
forms because they usually contain income coverage.
r. Limited Coverage For Fungi, Wet Rot, Dry
Rot And Bacteria (01 06 addition)
(1) The coverage described in paragraphs (2) and (6) below applies
only if the fungi, wet rot, dry rot or bacteria
results from specified causes of loss, excluding fire or lightning, and only if
the loss occurs during the policy period. In addition, the insured must use
all reasonable means at the time of loss to protect the property from further
damage.
Note: Fire and lightning
is excluded because the fungi, wet rot, dry rot and
bacteria exclusion does not apply to the fire and lightning causes of loss.
(2) The insurance company pays for loss or damage due to the fungi,
wet rot, dry rot or bacteria.
(a) Covered property must sustain direct physical damage or loss caused by the fungi, wet rot, dry rot or bacteria. The cost to remove the fungi, wet rot, dry rot or bacteria is considered part of the direct physical damage loss.
(b) If a building or property must be torn out in order to reach the
fungi, wet rot, dry rot or bacteria, the cost to repair or replace such
damaged building or property is part of this coverage.
(c) The cost of any testing necessary after the removal, repair, restoration or replacement of damaged covered property is
covered but only if there is a reasonable belief that fungi, wet rot, dry rot
or bacteria is still present.
(3) The 12-month aggregate policy limit is $15,000, regardless of the
number of locations, premises or occurrences. If an
occurrence continues into the next 12-month period, no additional coverage
applies, since all damage from the occurrence is restricted to the time period
in which it was first discovered.
(4) The $15,000 limit is a sub-limit and not an additional amount of
insurance. If a loss is covered under this additional coverage and under another
coverage as well, the limit of insurance is capped at the limit of insurance
for the covered property. If a partial loss occurs involving covered property,
and this additional coverage also applies, this additional coverage can
increase the amount of payment but not by more than its $15,000 limit.
(5) This additional coverage does not increase or decrease water
damage, other liquids, powder or molten material
damage, or collapse additional coverages.
(6) This additional coverage also includes coverage for business
income and/or extra expense but only if the suspension of operations meets all
the requirements for coverage under the business income and/or extra expense
additional coverage.
(a) If the loss that caused the fungi, wet rot, dry rot
or bacteria does not force a suspension of operations, but the resulting
fungi, wet rot, dry rot or bacteria does, the loss is covered for up to 30
days.
Note: The days do not have to be consecutive.
(b) If the loss that caused the fungi, wet rot, dry rot
or bacteria forces a suspension of operations and prolongs the suspension,
coverage is provided for up to 30 days. This additional time can be for any
time during the suspension and the days do not have to be consecutive.
Special Note: Review these three new additional coverages very
carefully. They are very limiting and operate in conjunction with new
exclusions that are considered to be restrictions of coverage.
6. Coverage Extensions
Coverage extensions are in addition to the limits of insurance indicated on the declarations. They apply to property in or on the building indicated on the declarations, in the open or on or in a vehicle within 100 feet of the described premises unless modified.
a. Newly Acquired Or Constructed Property
(1) Building coverage may be extended to apply to newly constructed buildings on the described premises while being built and to newly acquired buildings located off premises if intended for use similar to that of other buildings or as warehouses. This coverage is limited to a maximum of $250,000 per building.
Example: Moe’s Sandwich Shop has the opportunity to purchase the dry cleaner across the street. Although the businesses are quite different, Moe’s son convinces him that he can handle it. The purchase is handled as a contract sale. As Moe and his son review the operation a few days later, a fire breaks out at the dry-cleaning location, resulting in a substantial loss. The previous owner no longer has coverage and Moe discovers that he doesn't either, because the businesses are not similar.
(2) Business personal property may be extended to apply to business personal property, both newly acquired or existing, at a newly acquired location or a newly constructed or acquired building at a described premises, or to newly acquired business personal property at a described premises. This coverage is limited to a maximum of $100,000 at each building.
Example: Sheila decides to totally renovate the interior of her office building. The cost is $50,000 but it can be amortized. The fixtures are purchased and delivered but, while awaiting installation, a tornado damages the building. Because of this coverage, she can cover both the old furnishings previously installed and the new fixtures as well.
(3) Period of coverage
These coverage extensions apply only until the policy expires, the named insured reports the values, or for 30 days, whichever is less. However, while the coverage may apply for as much as 30 days, it is not provided free of charge. The insured pays premium beginning on the date of acquisition or the start of construction.
Even though the named
insured must pay additional premium, this is important coverage because it
offers peace of mind. Businesspeople occasionally purchase property without
consulting their insurance agent immediately. This 30-day coverage cushion
provides sufficient time to report newly acquired property.
b. Business Personal Property Off Premises
A $10,000 limit applies while such property is either in transit or temporarily at a location the named insured does not own. However, this coverage does not apply if the property is kept at a location the named insured owns, leases or operates. This extension of coverage does not apply to property excluded elsewhere in the policy, money and securities, accounts receivable or valuable papers and records.
c. Outdoor Property
A $2,500 limit applies to the named insured’s outdoor fences, radio and television antennas, satellite dishes, and detached signs, including debris removal, but only for the fire, lightning, riot or civil commotion or aircraft causes of loss. Owned trees, shrubs and plants are limited to not more than $500 on any one tree, shrub or plant. There is no standard BOP endorsement available to increase this limit.
Note: This coverage extension applies only to outdoor trees, shrubs and plants. Trees, shrubs and plants located indoors and not considered growing crops or lawns are covered for risks of direct physical loss and are included in the business personal property limits indicated on the declarations. Many office buildings have large indoor landscaped atriums and others maintain greenhouses to care for other interior or exterior landscaping needs.
d. Personal Effects
A $2,500 limit per premises applies to personal effects owned by the named insured, its officers, partners, members, managers or employees. This limit is part of the personal property limit and is not a separate amount of insurance. This coverage does not include tools or equipment used in the business and excludes losses due to theft.
Example: Robert’s office was quite a sight to behold. His golf and sports memorabilia seemed to fill the entire space. When a fire seriously damaged the building, it also destroyed most of his memorabilia. Coverage applies, subject to the other insurance clause in the policy, his homeowners' policy and the valuation clause in this policy. However, any payment made is in proportion to the other claims in the office.
e. Valuable Papers And Records
Business personal property coverage extends to direct physical loss or damage to valuable papers and records either owned by or in the care, custody or control of the named insured caused by or resulting from a covered cause of loss, including the cost to research lost information when there are no duplicates. Coverage does not apply to samples or for property already sold being held for delivery or to property in storage at locations away from the covered premises.
The most paid for loss or damage in any one occurrence at a covered location is $10,000 unless a higher limit is indicated on the declarations. $5,000 is the most paid if a covered loss occurs at a location not covered or described on the declarations.
Loss or damage is based on the cost to replace the damaged or lost information. However, if the content of the valuable papers is not restored, the loss settlement is based on the replacement cost of only the blank material.
None of the Section B.
Exclusions apply to this coverage extension except for governmental action,
nuclear hazard, war and military action, dishonesty, false pretense, errors or omissions when copying or processing
valuable papers (01 06 change), weather conditions, acts or decisions and
negligent work.
f. Accounts Receivable
Business personal property coverage may be extended to include accounts receivable. Coverage applies to any of the following situations but must involve direct physical loss or damage to the insured’s records of accounts receivable by a covered cause of loss:
The most paid in any one occurrence at a covered location is $10,000 unless a higher limit is indicated on the declarations. $5,000 is the most paid if a loss occurs at a location not covered or described on the declarations.
None of the Section B. Exclusions apply to this coverage extension except for governmental action, nuclear hazard, war and military action, dishonesty, false pretense, weather conditions, acts or decisions, negligent work or the accounts receivable exclusion.
Note: Readers viewing the electronic version of this analysis should return to the beginning to access links to the other parts of the analysis.
This is the analysis of the Insurance Services Office (ISO) BP 00 03–Businessowners Program (BOP) Coverage Form. It is done in three separate parts in order to make it more manageable.
Part A–Policy Lead-In Language through Property Coverage Extensions.
Part B–Property Exclusions through Property Definitions. You are here!
Part C–Liability Coverages through Common Policy Conditions.
The July 2002 edition of the ISO Businessowners policy combined three coverage forms together into one large package. The January 2006 edition included a number of editorial changes that naturally follow a major change like the July 2002 edition. In addition, a number of changes were needed to standardize terms and align the wording of this policy with the wording in other commercial insurance coverage forms and policies. Finally, some coverage restrictions and broadened coverages are found throughout the form.
NOTE: This analysis is of the January 2006 edition. Changes from the
previous edition are in bold print.
1. The doctrine of concurrent causation holds that a policy must pay if a loss to insured property is attributable to two causes, one excluded by the policy and the other covered. By applying this concept, coverage has been found for earth movement, flood and other specifically excluded events. To eliminate the problem of concurrent causation, this paragraph makes three very specific statements:
This language applies to
the following nine exclusions.
a. Ordinance Or Law
The enforcement of any ordinance or law regulating the construction, use or repair of any property, or that requires tearing down any property, including the cost of removing its debris, whether the property has been damaged or not, is excluded.
Example: Millie’s Fine Furniture has been in the heart of downtown for as long as anyone can remember. Its frame structure is quite noticeable and distinct from the concrete and brick buildings surrounding it. During a night of looting, a Molotov cocktail thrown into the display window ignites both the upholstered furniture in it and the building. Because the fire department cannot respond quickly, the building is damaged to the extent of 60%. Millie’s family wants to rebuild so the building's appearance is the same as before but a local ordinance requires all buildings to be of concrete or better construction. Because of this exclusion, the family collects only the amount of money needed to restore the building to the original frame construction. It must pay the additional cost of the construction upgrade from its own funds.
BP 04 46–Ordinance Or Law Coverage can be written to cover the claim described above.
b. Earth Movement
The five separate categories of earth movement excluded are listed.
Note: Separate mine subsidence coverage may be purchased in some states and must be offered in certain counties in some of them. Legislation enacted in those states stipulates the coverage that must be offered to the insured, the price that may be charged and the manner in which coverage is written. The state laws concerning mine subsidence coverage on property in Illinois, Indiana, Kentucky, Pennsylvania or West Virginia must be reviewed carefully.
Note: An important exception to this exclusion is that coverage applies if fire or explosion occurs due to any earth movement but only for the loss or damage caused by the fire or explosion.
Example: Natural gas lines run beneath Prairie Town's main street. A slight earthquake occurs and causes comparatively little damage to the primarily frame structures. Unfortunately, the gas lines are not built to withstand such an incident and they crack, resulting in an explosion followed by a fire. The fire destroys the local drugstore, florist, hardware store and bank. The loss due to the ensuing fire is covered.
Note: Volcanoes are unpredictable and the damage caused varies considerably from one to another. Eruptions usually occur over a number of days. All activity within 168 consecutive hours is treated as one occurrence. This is very important to the insured with respect to the deductible because instead of multiple deductibles due to multiple events, only one deductible applies for any 168-hour period. Volcanic eruption can be covered using BP 10 03–Earthquake.
c. Governmental Action
Coverage does not apply to property a government authority seizes or destroys. Customs seizures, zero tolerance Drug Enforcement Agency (DEA) drug confiscation or property seized as evidence in a trial that loses value because of the length of its confiscation are examples of situations that are excluded. However, property lost or damaged by acts of government authority at the time of a hostile fire to prevent the spread of the fire is covered.
Example: The Treetop Resort was nestled in a grove of trees near a national park. A fire that began in the park headed towards town. In order to create a firebreak, the fire department cleared a path that included the Treetop property. This loss was covered because the fire and its threat were imminent and the action taken was by a civil authority.
There is no standard BOP
endorsement that covers acts of a government authority. For markets related to
customs confiscation, see The Insurance Marketplace, a publication of
The Rough Notes Company, Inc., and review the section on Custom Bonds or Custom
Brokers and Freight Forwarders.
d. Nuclear Hazard
Nuclear hazards, including nuclear reaction or radiation or radioactive contamination, are excluded, except for the damage caused by a fire that results from the nuclear hazard.
Note: This
exclusion also applies to contamination by any nuclear material, including
fallout, spills, radiation, radon gas and uranium in the soil.
e. Power Failure
There is no coverage for loss or damage when the off-premises utility, power line, power station or transformer that supplies power fails. However, coverage does apply to power failure on the premises, including lack of capacity and supply reduction (01 06 change). On-premises mean buildings and land included in the definition of the described premises. This coverage is limited to only direct damage and does not apply to any consequential damage, such as spoilage.
Spoilage coverage can be added using BP 04 15–Spoilage Coverage.
If an off-premises power
failure results in a covered cause of loss, the loss or damage from that cause
of loss is covered. The most common covered causes of loss associated with
off-premises power failure are fire, explosion and
glass breakage. Coverage is included for loss or damage to computers and
electronic data. Off-premises power
failure coverage can be added using BP 04 56–Utility Services–Direct Damage
and BP 04 57–Utility Services–Time Element.
f. War And Military Action
Coverage does not apply to war, undeclared war or civil war. This also includes insurrection, rebellion, revolution, usurped power or action taken by government against them as well as warlike action by military forces and actions or attack and defense by any government using military personnel or other agents.
Note: This exclusion does not
apply to acts of terrorism. This policy provision may be superseded by
a specific terrorism endorsement in some states.
g. Water
Loss or damage caused by or resulting from water is excluded. This includes damage by flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not. It also excludes mudslide or mudflow; water that backs up or overflows from a sewer, drain or sump, or water beneath the ground. Finally, surface water pressing on or flowing through foundations, walls, floors, paved surfaces and basements, whether paved or not, doors, windows and other openings is also excluded. However, if water damage results in fire, explosion or sprinkler leakage, coverage applies to the damage caused by the fire, explosion or sprinkler leakage.
Important Note: BP 01 59–Water Exclusion Endorsement is superseding this exclusion effective 1/1/09 in many states. This change is being made in all ISO commercial property coverages.
Note: There is no standard BOP endorsement that covers flood and related causes of loss. Some insurance companies offer coverage for loss or damage caused by backup of sewers and drains and sump pumps. The federally administered National Flood Insurance Program (NFIP) provides limited coverage for eligible property.
h. Certain Computer-Related Losses
The Year 2000 computer scare was followed by introduction of exclusions for similar software problems caused by difficulty with handling dates and time. Under this exclusion, there is no coverage for the failure, malfunction or inadequacy of any computer, computer application, computer operation system, computer network, microprocessor or any other computerized part, or any other product dependent on computers due to the inability to process dates or time. Coverage also does not apply to anything any insured does to correct any of these problems. If the failure of a computer to accept time or date results in a loss due to a specified cause of loss, coverage is available for the resulting damage from that loss.
Example: The program that controls the sprinkler system at the Food Warehouse is not programmed to accept the date 2/29. It automatically opens on 2/29/2008 due to the failsafe device inside the program. Since the sprinkler system is activated at 12:01 a.m., the building’s contents are drenched by the time the employees arrive for work. This loss is covered because the policy includes sprinkler leakage coverage.
i. Fungi, Wet Rot, Dry Rot and Bacteria (01 06 addition)
The presence, growth, spread or any other activity of fungi, wet rot,
dry rot or bacteria is excluded. However, if a
specified cause of loss results from any such activity, coverage applies to
the loss or damage caused by the specified cause of loss.
This exclusion does not apply when such activity results from either
fire or lightning or if covered under the Additional Coverage–Limited Coverage
For Fungi, Wet Rot, Dry Rot And Bacteria.
Example: A tornado blows the roof off George’s building. The top floor of the building is destroyed but damage to the first floor initially appears to be minimal. However, mold is discovered in the interior walls on the first floor two weeks later. The mold damage is not covered because of this exclusion. The only coverage available is under additional coverages, limited to $15,000 per policy for each 12-month period.
2. Loss or damage caused by or resulting from any of the following is excluded. This is different than the exclusions indicated above because these exclusions do not contain the same restrictive language. This means that if the proximate cause of loss is a covered cause of loss, the actions of subsequent and companion excluded causes of loss have no bearing on the claim. If fire caused the mechanical breakdown of an operating machine, coverage applies because the proximate cause of loss is fire. The breakdown is a result of the fire damage. The same applies with rust after an accidental sprinkler leakage incident.
a. Electrical Apparatus
Artificially generated electrical current and electric arcing that disturbs electrical devices, appliances or wires is excluded. However, loss or damage caused by a fire that results from artificially generated electrical current is covered. On the other hand, loss or damage to computers due to artificially generated electrical current is covered only if the actual occurrence takes place within 100 feet of the described premises or if a blackout or brownout is caused by an occurrence that takes place within 100 feet of the described premises. Coverage for damage to boilers and related objects due to artificially generated electrical currents is available in Optional Coverages–Mechanical Breakdown. Coverage for damage due to artificially generated electrical currents is available through equipment breakdown coverage forms.
b. Consequential Losses
Business income is a
covered form of consequential loss. However, coverage does not apply to
consequential losses consisting of delay, loss of use or loss of market. There
is no standard BOP endorsement that provides this coverage and most insurance
companies and specialty carriers do not offer it.
c. Smoke, Vapor, Gas
Loss or damage caused by or resulting from smoke, vapor or gas from agricultural smudging or industrial operations is excluded There is no standard BOP endorsement that provides this coverage.
Note: Industrial
firms and incinerators release harsh acids and chemicals into the air and
these bleach or chip paint or damage plastic and rubber products. Agricultural
smudging operations used to control insects or keep crops from freezing can
release greasy smoke that can discolor paint and cause other damage to nearby
buildings.
d. Steam Apparatus
Explosions involving
steam boilers, steam pipes, steam turbines, or steam engines owned by or
leased to the insured, or under its control, are excluded unless caused by the
explosion of gas or fuel in a firebox, combustion chamber or flue. If an
excluded explosion causes a fire or combustion explosion, the resulting fire
or combustion damage is covered.
Examples:
Note: Mechanical breakdown coverage insures most incidents of sudden and accidental breakdown of boilers and similar objects. Equipment breakdown coverage forms also cover boiler explosion.
e. Frozen Plumbing
Losses caused by frozen plumbing, heating, air conditioning and other appliances due to water, liquids, powders and molten materials are not covered. However, this exclusion does not apply if the insured maintains heat in a building or structure or drains the equipment and turns off the supply if it does not maintain heat. This exclusion does not apply to fire protective systems that discharge in freezing conditions. There is no standard BOP endorsement that provides this coverage.
Note: Refer to Property Loss Conditions–Vacancy to review a broad water damage exclusion for property vacant or unoccupied more than 60 days.
f. Dishonesty
Criminal, fraudulent or dishonest acts are excluded, whether the named insured carries them out alone or in collusion with others, for others having an interest in the insured property, for anyone to whom property is entrusted and for the named insured’s partners, officers, members, managers, directors or trustees. Destruction or malicious damage caused by the insured’s employees is covered but theft by employees is excluded.
Example: An insured owns a machine shop that employs union workers. The machinists go on strike and several disgruntled strikers break windows at the insured’s building. This loss is covered.
Example: Two employees of StampStuf Collector’s Bin break in and rob the safe of money, securities and other property. This loss is excluded because employees did it.
Employee dishonesty coverage is available when a limit of insurance is indicated on the declarations for optional coverage employee dishonesty.
Note: This exclusion does not apply to carriers for hire with respect to accounts receivable and valuable papers and records.
g. False Pretense
Coverage does not apply to voluntarily parting with or giving away title to any property because of a fraudulent scheme, trick or device. There is no standard BOP endorsement that provides this coverage. Only a few insurance companies are willing to insure this exposure in any property line of insurance. One exception is CA 25 03–False Pretense Coverage, available under the ISO garage policy and used primarily for automobile dealers.
h. Exposed Property
Damage to personal property in the open caused by or resulting from rain, snow, ice or sleet is excluded. There is no standard BOP endorsement that provides this coverage and few insurance companies write it.
i. Collapse
Collapse is excluded
except as provided under Additional Coverages–Collapse. However, if collapse
results in a covered cause of loss, coverage applies to the loss or damage
caused by that covered cause of loss. There is no standard BOP endorsement
that broadens the collapse cause of loss.
j. Pollution
Loss caused by or as a result of any escape of pollutants is excluded, unless the escape is caused by a specified cause of loss. In addition, if the pollution results in damage that is a specified cause of loss, the damage caused by that specified cause of loss is covered.
Example: A sprinkler opens over an acid tank and causes it to overflow, resulting in damage to floors and equipment. The direct damage caused by the sprinkler leakage is covered as well as the damage caused by the pollutant.
Example: An oil spill causes a fire in the building. The damage caused by the oil spill is not covered but the damage caused by the subsequent fire is.
Note: Pollutant cleanup and removal coverage is provided under Additional Coverages for a nominal limit of $10,000. It applies to costs incurred to extract pollutants from land or water only at the described premises and only if the escape is caused by or results from a covered cause of loss that occurs during the policy period. There is no standard BOP endorsement that broadens or improves on this coverage. ISO Commercial Property Program (CPP) CP 04 07–Pollutant Clean Up And Removal Additional Aggregate Limit Of Insurance increases the $10,000 limit provided under CP 00 10–Building And Personal Property Form but few insurance companies offer this endorsement.
For markets providing pollution coverage options, refer to The Insurance Marketplace, a publication of The Rough Notes Company, Inc. Suggested sections to review include Environmental Impairment Liability, Pollution Cleanup Indemnity and Underground Fuel Tank Pollution Liability.
k. Neglect
The policy conditions state that the insured must protect covered property from further loss. This exclusion supplements that condition by stating that the insurance company does not pay for any subsequent damage if the insured does not take reasonable steps to protect and preserve property during and after a loss.
Example: Fred is home watching game seven of the NBA finals. A neighbor calls to tell Fred that he sees smoke coming from Fred’s furniture store next door. Fred ignores the situation and continues to watch the game. When the neighbor doesn’t see Fred or hear emergency vehicles, he calls the fire department in order to protect his own property. Fred hears the sirens but the game is very tight and he can’t pull himself away from it. Because Fred doesn’t arrive with the keys, the fire department breaks down the door to fight the fire. When the game is over, Fred goes to the store and notifies the insurance company of the loss. However, based on information obtained from the fire marshal, the insurance company denies much of Fred's claim because he failed to protect his property.
l. Other Types Of Loss
Loss or damage by the following is also excluded. However, if a specified cause of loss or glass breakage occurs, the ensuing loss or damage caused by the specified cause of loss or glass breakage is covered.
Example: Paint in cans hardens over time, some goods fade when exposed to sunlight and iron objects rust when exposed to moisture.
Note: Fungus is removed from this
exclusion and now has its own exclusion. This is a major coverage restriction,
because exclusions under item 1 exclude any resulting damage, regardless of
the sequence of events.
Note: Smog is fog that has become mixed and polluted with smoke.
Example: Smog corrodes the exterior of the building. This is not a covered event and is part of routine maintenance in areas where smog is a problem.
Example: A deer crashes through a glass window and causes damage to both the window and to property inside. Coverage applies in this case. If the deer decides to take up residence in the building, there is no coverage for the damage resulting from the deer living on the premises.
Example: The following are not covered:
Example: If all the frozen fish thaw and spoil after a grocery store employee accidentally shuts off the freezer electrical circuit, the loss is not covered.
Note: If a loss excluded above is the proximate cause of a specified cause of loss or damage or glass breakage, coverage applies only for the loss or damage from the specified cause of loss or glass breakage.
m. Errors Or Omissions
Any errors or omissions relating to computer operations or electronic data programming, processing or storing are excluded, as well as errors or omissions in copying or processing valuable papers or records. However, coverage does apply to direct physical loss or damage due to a resulting fire or explosion, if the coverage form insures against these causes of loss.
n. Installation, Testing, Repair
Any error or deficiency in any part of the insured’s computer, including its electronic data, is excluded. However, coverage applies to any resulting fire or explosion if the coverage form insures against these causes of loss.
o. Electrical Disturbance
Magnetic injury, disturbance or erasure of electronic data is excluded, unless provided under a coverage extension. However, coverage applies for direct loss or damage caused by lightning.
p. Continuous or Repeated Seepage or Leakage of Water (01 06 addition)
Repeated or continual seepage or leakage of water for 14 or more days
is not covered. In addition, humidity, moisture or
vapor that occurs for 14 or more days is also excluded.
Example: A crack appears in the shower wall at General Testing and dripping water accumulates on the floor beneath the shower area. An investigation reveals that water had been accumulating for many weeks and was finally forced down through the ceiling. The repairs needed are not covered.
3. Loss or damage due to any of the following is excluded. However, if the excluded cause of loss triggers a loss involving a covered cause of loss, the ensuing loss or damage is covered.
a. Weather Conditions
If a weather condition contributes to a cause of loss otherwise excluded in the exclusions relating to ordinance or law, earth movement, governmental action, nuclear hazard, power failure, war and military action, water, certain computer-related losses and fungi, wet rot, dry rot and bacteria, the damage caused by the weather condition is also excluded. Weather is not defined but includes wind, rain, hail, snow, heat and cold.
Note: The purpose of this exclusion is to eliminate coverage under concurrent causation. There is no standard BOP endorsement that provides this coverage.
Example: Heavy late-winter rains start a flood that undermines the building foundation and causes a wall to bulge. The rain turns to ice and the weight of the ice collapses the building. The flood damage is excluded but the damage caused by the weight of ice is covered, provided the insurance company agrees that the roof would have collapsed even if the flood did not weaken the walls.
b. Acts Or Decisions
Acts or decisions made or not made by any person, group or organization or governmental body are excluded.
Example: The Corps of Engineers urged the city council to designate several sections of the city’s border as “no building” areas. The council ignored the advice and embraced a chance to gain additional tax revenues from new building projects in those areas. A serious flood occurs in those areas a few years later and federal disaster relief is denied because of the decision by the council to ignore the recommendations of the Corps of Engineers.
c. Negligent Work
Activities involving faulty, inadequate or defective planning, zoning, development, siting, surveying, design, specifications, workmanship, repair, construction, renovation, remodeling, grading and compaction, or materials used in repair, construction or remodeling, and maintenance to any property on or off premises are not covered.
Examples: The following are not covered:
Coverage for errors in design of property built for or sold to others is usually provided by professional liability policies. There is no standard BOP endorsement that covers other latent defect and the tendency of property to destroy itself.
4. Business Income And
Extra Expense Exclusions
a. The following are not covered:
(1) Any delay in resuming operations after strikers cause delays in building or replacing property damaged by a covered cause of loss is not covered. However, striker interference at other locations, including the insured’s own locations, that delays the resumption of the insured’s operations is covered.
Note: This
exclusion applies to both extra expense and business income coverages.
Examples:
(2) Property losses occasionally cause licenses, leases or contracts to be suspended. If the suspension is caused directly by the suspension of operations due to a covered cause of loss, the resulting loss that affects the insured’s business income during the period of restoration is covered. There is no standard BOP endorsement to extend this coverage.
Examples:
Consequential losses other than those caused by business income or extra expense suspensions of operations are excluded.
b. Suspension can mean either a partial slowdown or a complete cessation of activities. It also means buildings that are partially or completely untenable.
Example: The Golden Age Apartments building has six units. A fire
occurs in two units and is confined to them because of firewalls. The
remaining four units remain occupied. Business income coverage pays for the
loss of income for the two damaged units even though the other units remain
occupied.
5. Accounts Receivable Exclusion
These exclusions apply only to the accounts receivable coverage extension.
Example: Mandy set a fire at her employer’s office to conceal her false entries. The accounts receivables coverage for those wrongful entries is not covered but other legitimate entries are covered.
The limits of insurance on the declarations do not stand alone. This section explains exactly how they apply as well as how any special restrictions and extensions apply. The limits indicated on the declarations are not exactly what they seem. This section is intended to resolve any questions.
1. The limit of insurance indicated on the declarations is the most paid in any one occurrence. While occurrence is not defined, it generally means an event or a continuous and uninterrupted series of events that causes a loss.
2. Outdoor signs attached to the building are covered for up to $1,000. Detached outdoor signs are not covered unless a limit of insurance is added for Optional Coverages–Outdoor Signs. This coverage can also be used to increase the $1,000 limit for outdoor attached signs. Indoor signs attached to the building are subject to the building limit. Indoor signs not attached to the building are subject to the business personal property limit.
3. The additional coverage for pollution clean up and removal and fire department service charge and the limits for all coverage extensions apply in addition to the limits of insurance indicated on the declarations. For example, the fire department service charge limit is available even if the limit of insurance on business personal property is exhausted.
4. Building Limit–Automatic Increase
The limit on building insurance increases automatically by the annual percentage selected and indicated on the declarations. The increase is pro-rated over the course of the policy year. A number of automatic increase percentages are available. The formula for determining the amount of increase at any point in the policy term is:
Limit multiplied by the percentage of increase multiplied by the number of days since the beginning of the year divided by 365.
Example: The insurance limit is $300,000; the automatic annual increase percentage is 4% and it is the 100th day of the policy year. The formula is: $300,000 x .04 x 100 divided by 365 = $3,287. The insurance limit is $303,287 on the 100th day of the policy period.
5. Business Personal Property Limit–Seasonal Increase
At the time of loss, the limit of insurance for business personal property automatically increases by 25%. This is subject to the limit of insurance indicated on the declarations being equal to 100% of the average monthly values during the 12 previous months or the length of time the insured has been in business.
Note: This benefit encourages insuring the property for its full value. Seasonal variations exist in nearly every business and the normal tendency is to insure assuming that the loss will occur when stock values are at their lowest level. By offering this automatic peak season increase, the insured is encouraged to insure properly, knowing there is an additional limit for that peak time period. The advantage that the BOP policy seasonal increase coverage has over the peak season endorsement is that it has no defined peak season. As a result, if an insured has higher sales than it expected and must order additional inventory after the traditional selling season, coverage is available for the additional inventory. The flexibility of the seasonal increase is also a limitation, because the coverage is triggered by the insured maintaining an adequate amount of insurance.
Example: Perry’s personal property limit of insurance is $125,000. A fire loss in the amount of $130,000 occurs on 05/01/08. A review of the prior 12 months monthly values results in an average monthly value of $110,000. Because the average monthly value is less than the limit, Perry gets the benefit of the 25% seasonal increase. This means his limit is $125,000 X 1.25 = $156,250. This means his $130,000 is totally covered, after the deductible is applied.
Note: To be eligible for this additional coverage, the insured may need to over-insure at the beginning of the year or increase coverage during the year to comply with this condition. Unfortunately, there is no personal property automatic increase endorsement is available to eliminate this problem. The automatic increase provision should never be sold as a guarantee or as a way to decrease the amount of insurance simply because the insured has an automatic additional 25% amount available. This coverage cushion is available only to businesses properly insured to value.
Property insurance deductibles are simple. The insured first pays a specified amount of the loss and the insurance company pays the rest, up to the limit of insurance. There are three possible scenarios:
1. The amount of
loss is less than the deductible. The insured pays the entire amount and the insurance company pays nothing.
Example: The limit is $50,000; the deductible is $1,000 and the loss is $250. The insured pays $250 and insurance company pays nothing.
2. The loss is greater than the deductible but less than the limit of insurance. The insured first pays the deductible that applies and the insurance company pays the difference.
Example: The limit is $50,000; the deductible is $1,000 and the loss is $10,000. The insured pays $1,000 and insurance company pays $9,000.
3. The loss exceeds the limit of insurance. The insured is still responsible for the deductible and the company pays the limit of insurance. The insured then pays the remaining loss exceeding the limit of insurance.
Example: The limit is $50,000; the deductible is $1,000 and the loss is $55,000. The insured pays the $1,000 deductible and $4,000, the amount underinsured. The insurance company pays $50,000.
The BOP declarations provides for two different property deductibles. The first
is the standard deductible. The second is the deductible for Optional
Coverage/Glass Deductible. The insured may decide to have a higher deductible
on building and personal property and a lower one on glass, money and
securities, employee dishonesty and outdoor signs. This second deductible is
not a separate deductible. It can apply toward the total deductible if the
loss extends to include building and business personal property.
Example: The insured has a $1,000 building deductible and a $500 deductible on optional coverages. A fire loss occurs and a $500 deductible is applied to the outdoor sign. This means the insured pays only $500 more to satisfy the building deductible.
There is no deductible
on fire department service charge, business income, extra expense, civil authority and fire-extinguisher system recharge expense.
1. Abandonment
The insured cannot
abandon damaged property to the insurance company.
Example: The building burns down. The Environmental Protection Agency (EPA) investigates and the insured just wants to get rid of the problem and headaches. The insured does not have the option of simply giving the property to the insurance company.
2. Appraisal
The appraisal process is
one of several alternative dispute resolution methods and is fairly simple. If
the insured and the insurance company disagree on the amount of a covered
loss, either can make a written demand for an appraisal. Both the insured and
the insurance company hire their own independent and competent appraiser. In
turn, the two appraisers hire an umpire. The appraisers then determine the
value of the property and the amount of the loss. If they can’t agree on the
amount of a loss within a reasonable period of time, they ask the umpire to
resolve the issue. Each party pays its own appraiser. The insured and
insurance company each pay half of the expenses of the umpire. The insurance
company has the right to deny the claim even after the appraisal. However, if
the claim is covered, the decision of the appraisers is binding on both
parties.
3. Duties In The Event Of Loss Or Damage
a. The named insured has several important duties to perform and obligations to meet in the event of a loss.
Note: For theft losses, employee dishonesty, arson and other crimes, notifying the police is mandatory. Some employers are reluctant to notify police if valued employees are involved in minor dishonesty losses. Many dishonesty claims are small at first but grow as the employee's actions are investigated. Claims can be denied if the employer tries to protect the employee by not notifying the police. Employee dishonesty coverage for an employee is immediately void for that employee's future dishonest acts as soon as the employer determines that the employee committed a dishonest act.
Examples:
Note: If possible, damaged property must be separated from the undamaged and set aside. It must be kept in good order and be ready for the insurance company to examine. Examination is crucial to determine the cause and origin of the loss and missing evidence may cause investigators to consider that arson or some other cause is involved. If an arson investigation uncovers alleged or possible involvement by the insured, the police are involved, newspapers report the case and the higher costs of counter-investigation and court defense is not covered by insurance.
Note: The costs to produce this information can be high, especially if the records needed were destroyed as a result of the loss, and they are not included.
Note: The insured must exhibit damaged property as often as the insurance company reasonably requests and allow the insurance company to take samples of the damaged or undamaged property. Samples are important to determine the extent of loss to certain property where the amount of loss may not be obvious.
Note: A proof of loss is much more detailed than the initial notification of loss. In it, the insured discloses exactly what happened and what was damaged and substantiates the reason why the insurance is responsible to pay the loss and how much should be paid. This means the insured must submit proof as to the property that was damaged, the cause of loss that damaged it, and when and where the damage took place. All decisions made by the insurance company are based on this very important document.
b. If the insurance company requests, the insured must agree to examination under oath as often as reasonably required and to answer questions in the form of sworn statements. The insurance company may require that the individuals involved be questioned separately and not in the presence of other employees. This serves to prevent collusion and all parties telling the same story.
4. Legal Action Against Us
The insured cannot initiate legal action against the insurance company until all policy terms are met. In addition, any legal action must be taken within two years after the date of the direct physical loss.
Note: Both parts of this condition can cause problems. The insured may have a case against the company for unreasonable requests for information or delays. At times, the only way to get action is to ask a judge to determine if the insurer has complied with policy provisions and has made reasonable requests. The courts may impose punitive damage awards against an insurance company for unreasonable delays. In addition, the two-year limitation on filing suits may be overridden by state law. In those cases, individual state endorsements adjust the time limits.
5. Loss Payment
a. The insurance company has four options for paying a covered loss. It can pay the value of the property lost or damaged, pay the cost to repair or replace it, rebuild it with like kind and quality except for the amount of increased cost because of the enforcement of an ordinance or law to the extent practicable and within a reasonable time, or take any part of the property at the agreed or appraised value.
Example: It will take an additional six months to replace the XYZ printing press with another XYZ printing press but an equivalent FGH press is available immediately. The company may pay for only the FGH press. Further loss or expense due to the insured insisting on the replacement with an XYZ press may not be covered.
b. The insurance company must give the insured notice of how it intends to pay within 30 days after it receives a properly prepared and duly executed sworn proof of loss.
c. The insured does not receive more than its insurable financial interest in the damaged property.
Examples:
d. (1) Replacement cost
(a) Replacement cost valuation applies only when the limit of insurance is 80% or more of the full replacement cost of the property at the time of loss. Replacement cost is limited to the lesser of the limit of insurance, the cost to repair or replace the damaged property on the same premises with other property of comparable material and quality and used for the same purpose, or the amount actually spent to repair or replace the property.
Note: If the decision is to build at other than the described premises, the cost is limited to the expense of rebuilding at the described premises.
Example: The policy for Marv’s Hunting Shop was written ten years ago with a limit of $150,000. That amount increased by a modest 4% at each renewal and the current limit is $222,000. A fire destroys the building and the appraiser determines the replacement cost is $225,000. The loss is covered in full because Marv maintained the replacement cost increases.
Example: Marv notices that the ZIP codes of most of her customers are about five miles away from her current location. As a result, she decides to rebuild at a location closer to her customer base. This increases the building costs by about $10,000. The insurance company does not cover these additional building costs.
Example: Marv rebuilds and the cost is $225,000 along with the $10,000 increase due to the new location. The insurance company pays only the $222,000 policy limit.
(b) If the limit of insurance is insufficient for replacement cost coverage, the most paid is the larger of the actual cash value of the property, or the proportion of the limit of insurance to 80% of the replacement cost of the property multiplied by the cost to repair or replace, but not more than the limit of insurance.
Example: The Petula Office Building is insured with a limit of $150,000. Damage caused by a windstorm amounts to $20,000. An appraisal determines the replacement value of the building to be $250,000. Since $250,000 X .80 = 200,000, Petula is not covered for full replacement cost. Petula determines the most to be paid is either the actual cash value, calculated as $10,000 due to the age of the building or the proportion of the calculation of 150/200 = .75 X the $20,000 loss = $15,000.
(c) The insured can decide to not rebuild immediately and to just accept the actual cash value settlement. If it subsequently decides to rebuild, it must notify the insurance company within 180 days after the date of loss.
(d) (1) Payments under replacement cost valuation are not made until the property is actually repaired or replaced. The one exception is when the loss amount is less than $2,500, in which case the settlement is made on a replacement cost basis whether or not the repair or replacement is complete.
(2) On the other hand, the insured can have the policy issued on an actual cash value basis by making the appropriate entries on the declarations.
(3) Actual cash value always applies to the following property:
(4) Glass is valued at the cost of replacement with safety glazing material when required by law. This is the only standard ordinance or law coverage in the BOP.
(5) Tenant’s improvements are valued at replacement cost if repaired promptly and at the insured’s expense.
Note: Tenant’s improvements not replaced after a loss are valued as a pro rata portion of the original installation cost as it bears to the insured’s current lease. The formula involves dividing the number of days between the date of loss and the end of the lease by the number of days from the date of the installation to the expiration date of the lease, multiplied by the original cost of the tenant’s improvements. If the lease has a renewal option, the last date in the option is used as the new expiration date. No payment is made under the policy if repairs are made at the expense of others.
Example: A loss occurs on the 200th day of a one-year lease. $5,000 of improvements was made on the first day of the lease. The lease does not have a renewal option. 365 days less 200 days = 165 days remaining in the lease. There are 365 days between the date of installation and the end of the lease. 165 days divided by 365 days = .452 x $5,000 = $2,260. This is the loss payment amount before application of any deductible.
Note: The Valuable Papers And Records loss
payment conditions are now in the Valuable Papers And Records Coverage
Extension. (01 06 addition)
(6) Optional coverages are subject to separate specific valuation methods. Money is valued at its face value. Numismatic property, such as old coins or gold coins traded based on gold content instead of face value, is adjusted based on only the face value. There is no standard BOP endorsement that covers collections or gold coins. Extensive gold holdings require special coverage arrangements outside of the BOP.
Note: If gold or silver coins are in a bank safe deposit box, check with the bank for their coverage and limits. If held by a gold or silver broker, check with the broker on available coverage. Very few insurance companies provide endorsements or separate policies covering on gold or silver investment coins.
The value of securities is their closing price at the close of business on the day the loss is discovered.
Example: The bearer bond is valued at $100 on the date of loss, 01/01/09. When the loss is actually paid, the class of bonds trades at $65 per bond. The loss payment is based on the $100 per bond value on the date of loss.
Example: The bearer bond is valued at $100 on the date of loss, 01/01/09. When the loss is actually paid, the class of bonds trades at $125 per bond. The loss payment is based on the $100 per bond value on the date of loss.
(7) For accounts receivable only:
e. Payment for loss or damage to personal property of others is only for the account of the owner of the property. The insurance company adjusts the loss with the owner. If it pays the owner, doing so satisfies the insured’s claim against the company for property of others.
Note: Payment is not for more than the owner’s financial interest in the property.
f. If the property owner sues the insured, the insurance company can choose to defend the insured. In that case, any defense costs are at its expense.
Example: The customer’s riding lawn mower is in for repairs at the same time the named insured’s building burns to the ground. The insurance company offers and pays $1,000, the actual cash value of the mower, and the amount it is required to pay. The customer is unhappy, demands an additional $1,000 and then sues the insured. The company will probably not pay the additional $1,000 but can defend the insured at its own expense if it chooses to do so. The insured cannot seek more money from the company. The difference must be paid out of the insured's own funds.
Note: Bailees coverage on property of others is usually broader. Since there is no standard bailees form, each insurance company has different requirements. For information on various bailee markets, refer to Bailees Customers' Insurance in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
g. The insurance company has 30 days to pay the loss after receiving the insured's sworn proof of loss. This is as long as all policy terms were complied with, the parties agreed on the amount of payment or an appraisal award was made.
6. Recovered Property
Either the named insured or the insurance company may recover property. If one does, it must notify the other promptly. Recovered property can be property the police take from burglars or property for which salvage has been paid to the insured or the company. If the company pays the claim and the insured recovers the property, the company is entitled to the salvage or recovered value of what it paid after subtracting its recovery costs. If the company receives salvage amounting to more than the loss it paid the insured, it keeps the difference.
7. Resumption Of Operations
If the named insured can resume normal operations using salvaged or damaged property at either its premises or elsewhere, the business income loss is reduced to the extent that operations can be continued. The wording implies that if operations can be resumed using salvaged or damaged goods, the insurance company pays only the business income loss as if operations had been resumed, whether the insured wants to or not.
Note: Questions periodically arise as to what is considered reasonable for resumption of operations. Asking the insured to use dented or unsightly back-office machines that are safe to operate and that produce adequate results is a situation where the company may not pay if the insured refuses to resume operations. On the other hand, if the company believes that the insured can resume retail operations by holding a fire or salvage sale, but the insured believes it may affect the integrity of its label and reputation, it may have a case to demand payment of business income.
Extra expense coverage ends when the insured is able to resume normal operations.
8. Vacancy
Insurance companies are interested in insuring only ongoing businesses and their pricing contemplates an active occupancy. For this reason, vacant properties are subject to a significant rating surcharge. Since vacancy is not discovered until after a loss in many cases, the Loss Conditions restrict coverage if the vacancy is not disclosed in advance.
Before any restrictions are imposed, vacancy must be defined. The policy defines what vacancy is as well as what it is not. If the insured is a tenant, the only part of the building that can be evaluated is the part it occupies. The part occupied is vacant if there is not enough business personal property to conduct customary operations.
Example: Friendly Deli occupies 25% of the McMillan Building. Felix the Cat Groomer occupied the other 75% but moved out. The building owner is currently searching for a tenant to replace Felix. The search is now in the ninth month. A small fire occurs in the vacant portion of the building and the smoke causes a significant loss to Friendly’s space. Friendly Deli’s loss is not affected by the vacancy in the other part of the building, even though the building may be considered vacant.
If the building owner or general lessee is the policy owner, the entire building is considered in determining vacancy. The entire building is considered vacant unless at least 31% of the total square foot area is rented to a lessee or sub-lessee and used to conduct its customary operations and/or used by the building owner to conduct its customary operations.
The key word is customary. If the lessee, sub-lessee or building owner is a retail business, and that is the customary operation, trying to say the building is being used for storage does not circumvent the definition of vacancy.
Buildings under construction or being renovated are not considered vacant. Just as the insured might try to stretch the non-vacancy a little to gain coverage, the insurance company may attempt to treat a building under construction or being repaired as vacant in order to reduce or deny coverage. If the building is temporarily vacated for major renovation work, with the tenant intending to return as soon as the work is completed, the building is not vacant.
Example: The Jones Office Complex, consisting of four separate buildings, was having problems retaining its tenants. Building 1 was fully occupied by one tenant. Building 2 was only 20% occupied by a retail shop. The rest of the building had been vacant for more than six months. Building 3 had multiple tenants but was still 15% vacant. Building 4 had just been rented out subject to the completion of major renovation work. A contract had been signed and renovation was under way.
A major storm damaged all the buildings. Based on the definition of vacancy, Buildings 1 and 3 were not vacant and were fully covered. Building 2 was vacant and subject to a vacancy penalty. Since Building 4 was being renovated, it was not considered vacant at the time of loss and was not subject to a vacancy penalty.
Vacancy having been defined; the vacancy condition can be stated. If the building where loss or damage occurs is vacant for more than 60 consecutive days before the covered loss or damage, the insurance company pays nothing if the loss is caused by vandalism, sprinkler leakage (unless the system was protected against freezing), breakage of building glass, water damage, theft or attempted theft.
Note: Sprinkler leakage is covered only if the system is protected against freezing, but this does not apply to water damage.
The insurance company reduces any loss payment by 15% if caused by any covered cause of loss not listed above.
Example: Continuing the example above, the loss or damage to building 2 in the Jones Office Complex Center is penalized 15% because the loss was caused by storm damage and not by one of the excluded causes of loss listed.
1. Control Of Property
Acts or negligence of others who are not an insured or under the insured’s direction or control does not affect the insurance coverage.
Example: A disgruntled former employee burns down the insured’s building. Rioters break windows in the building and steal goods belonging to others. Coverage applies.
In addition, if the insured breaches one or more policy conditions at one location, coverage at other locations is unaffected.
Example: The named insured's partner burns down the named insured’s headquarters building. Coverage does not apply. In an unrelated incident on the same day, a car skids off the road, slams into the wall of the insured’s second location and damages it. Coverage applies for the damage at the second location.
2. Mortgageholders
Mortgageholders and trustees have certain rights. They have the right to be reimbursed for losses the insured voided through misrepresentation, fraud or criminal activity, such as arson. Even if foreclosure proceedings have begun, they still have the right to receive loss payments. Mortgageholders must be indicated on the declarations and loss payments are made in order of precedence and as the interests appear.
Note: Mortgageholder precedence in property law is based on which mortgage is filed first as a deed amendment. In order to prevent legal problems, confirming the order in which mortgageholders are presented with the insured is suggested. The first mortgageholder expects to be paid first and the second and subsequent mortgageholders are paid after the first mortgageholder is indemnified.
If a claim payment to the insured is denied, the mortgageholder can still receive the loss payment owed them if it pays any premium the insured failed to pay. If the insurance company requests, the mortgageholder should submit a signed and sworn proof of loss within 60 days after the insured fails to do so and notify the insurance company of any change in ownership, occupancy or substantial changes in risk that it knows of.
If the mortgageholder knows about certain changes in ownership or substantial increases in risk and does not notify the insurance company, its coverage is void. If it allows the policy to lapse, it is not paid. Once the mortgageholder takes control of the policy, it becomes subject to all policy clauses and conditions.
The mortgageholder also
has the right to 30 days advance notice of any company-initiated cancellation,
except for cases of nonpayment of premium or non-renewal, where a ten-day
notice applies. If a mortgageholder is paid for a loss that is void for the
insured, the insurance company has the right to collect the amount of its loss
payment from the insured. However, this does not affect the mortgageholder’s
right to the remainder of the insured’s mortgage debt. The policy also allows
the insurance company to pay off the mortgageholder and become the mortgageholder
itself. This might be beneficial to a company that believes it can earn more
interest income on the mortgage in relation to its current investments or sell
the mortgage for a premium.
3. No Benefit To Bailee
The policy does not benefit anyone having custody of any covered property other than the insured.
4. Policy Period, Coverage Territory
Note: Transit can include air, land or water and includes transit to Hawaii, Guam, Puerto Rico and Alaska involving travel over international waters. However, if an intervening stop in a country not included in the coverage territory occurs, there is no coverage once the plane leaves the ground or the boat leaves the dock. Coverage for land transportation applies until the personal property is either loaded on the boat or the plane takes off. Note that the standard transit coverage limit is $1,000. Motor truck cargo or another form of transportation coverage may be necessary when higher limits are needed.
Limits or appropriate checkmarks for optional coverages must be indicated on the declarations for coverage to apply.
1. Outdoor Signs
This includes all outdoor signs at described premises the insured owns or that are in its care, custody or control.
Signs at locations other than the designated premises should be insured under an inland marine sign form.
Under the BOP optional coverages, signs are insured for separately defined risks of direct physical loss or damage. The only exclusions are for governmental action, nuclear hazard, war, wear and tear, hidden or latent defect, rust, corrosion or mechanical breakdown.
Note: Governmental action is an important exclusion, because most municipalities have ordinances regulating the use and placement of signs. Many require sign bonds for signs that overhang public thoroughfares, sidewalks and rights of way or for those that exceed a certain size or height.
Signs are covered for the limit indicated on the declarations. The outdoor sign coverage otherwise provided by outdoor property does not apply when this optional coverage is added.
Example: If the value of a sign is $3,000, do not subtract the $1,000 limit provided in the policy and indicate a limit of $2,000 on the declarations. The limit on the declarations should be $3,000.
Note: There is no
limitation with respect to the construction of the sign. In addition, glass
and neon glass includes coverage for breakage and vandalism.
2. Money And Securities
a. Money and securities optional coverage is similar to the coverage provided in crime forms. Coverage applies to the theft, disappearance and destruction of money and securities the named insured uses in its business. It applies when the covered property is on the named insured's premises, at a bank or savings institution or while within the named insured's living quarters or those of its partners or employees. It also applies to any employee having custody of the property at a designated location or while in transit between any of these places.
Note: "At a bank or savings institution” is not defined. As a result, it is interpreted broadly to mean while in the bank, at the drive-through, at the outside night deposit drop or at the outside Automated Teller Machine (ATM). An ATM at a location away from the actual bank building could be construed as an extension of the bank or savings institution. In other words, ATM's may be considered as branches of the financial institution. Coverage within the living quarters of the insured’s employee can present loss adjustment problems, as can the term “in transit.”
Example: The employee takes the night deposit to the bank and finds the drop out-of-order. She decides to visit a friend and leaves the money in her car during the visit. The car is broken into and the money is taken.
Note: Employees making stops other than for proper delivery of the money or securities could open up a question as to whether the money was in transit to the financial institution or was in their living quarters. There is no requirement to take a direct route but a significant deviation could be grounds to deny a claim. A significant deviation could also lead to an investigation into whether the claim was actually an employee dishonesty claim not covered by the money and securities optional coverage.
b. Coverage does not apply to losses caused by or resulting from accounting or arithmetical errors or omissions, giving or surrendering property in any exchange or purchase and other limitations and exclusions in the policy that may also apply to property other than money or securities. There are no standard BOP endorsements to add these coverages.
Examples:
Note: Property in vending machines, arcade machines or any other money-operated mechanical or electronic device is not covered unless a continuous recording mechanism in the device records the amount of money deposited. This limitation is not found in the basic policy. In addition to excluding coverage for money from certain devices, products like drinks or snacks in these devices are also excluded. However, there is no coverage unless the device is situated on the designated premises. This is due to other policy limitations. The BOP is not appropriate for companies that supply arcade machines to others or that have vending machines at scattered locations.
c. The most paid for loss in any one occurrence is the limit indicated on the declarations for money and securities inside the premises, including banking premises, and outside the premises while anywhere else.
d. Regardless of the number of people involved in the claim, or whether the act is a single act or a series of acts, all losses are considered one occurrence.
e. The insured must keep accurate records of all money and securities to verify loss amounts.
Note: This
includes cash register tapes, computer reports, logs
and sales slips to verify a loss. Information that identifies the issuer,
serial number, date and complete description of a
security should be maintained at a different location than the location where
it is kept. All securities, especially negotiable securities, should be stored
in a safe deposit box or other secure place.
3. Employee Dishonesty
a. The insurance company pays for direct loss of business personal property and money and securities due to dishonest acts committed by employees. This applies whether the employee acts alone or in collusion with others but does not include the named insured or a partner if the intent was to cause the named insured to suffer a loss and to benefit the employee, other persons or other organizations. This section suggests that the intent must be to cause loss to the insured and financial benefit to either the employee or another party. As a result, malicious mischief is not covered, since there is no intent to benefit financially.
Note: The loss can involve money and securities or business personal property. The most common loss involves theft of inventory but this is frequently the most overlooked coverage feature. The insured must be aware of its money exposure by utilizing countersignatures, regular audits and balancing the books by someone other than persons making deposits to the account. It is also important to have arrangements in place to keep track of purchase orders and inventory.
b. Coverage does not apply to loss or damage due to dishonest acts by the named insured, its partners or members, whether acting alone or in collusion. It also does not cover dishonest acts by managers, directors or employees, except as provided for in a. above, while in collusion or acting alone. In addition, there is no coverage if the only proof of a loss is an inventory computation or a profit and loss calculation.
c. The most paid in any one occurrence is the limit of insurance indicated on the declarations.
d. Loss or damage caused by one or more persons, or those involving a single act or a series of acts, is considered one occurrence.
e. If a loss is covered under the current policy as well as by a prior, cancelled or terminated policy issued to the insured by the same or an affiliated insurance company, the amount paid is limited to the largest amount provided under a single policy, regardless of the number of years it was in effect. Limits are not cumulative from year to year.
Note: This
provision eliminates stacking of limits from two or more policies due to a
series of acts.
Example: Floyd’s Meat Market has the best steaks available. Ernie is the head butcher and took steaks home with him at least once a week for over ten years but never notified Floyd. Ernie finally recognizes the error of his ways and confesses to Floyd. Floyd suddenly realizes that Ernie has stolen $6,000 worth of steaks in each of the past ten years. His claim is for $60,000 since he has been with the same company the whole time. Since the limit of insurance is $10,000, the loss is capped at $10,000.
f. Employee dishonesty coverage is cancelled with respect to a specific employee as soon as the named insured or its partners, members, managers, officers or directors not acting in collusion with the employee become aware of dishonest acts the employee committed before or after being hired.
Example: Floyd at Floyd’s Meat Market really likes Ernie and wants to keep him as an employee. The policy permits this but coverage does not apply to Ernie if he commits any other dishonest acts. Even if Floyd did not report Ernie’s actions, Ernie is not covered in the future because Floyd knew about the situation.
g. Loss must be sustained during the policy period and discovered not later than one year after the end of the policy period.
h. If the insured
had a covered loss in a prior policy period but did not discover it until
after the discovery period on the prior policy expired, the current policy
provides coverage if there was no break in coverage from the prior policy and
the loss or damage would have been covered under the current policy had it
been in effect at the time of loss.
Example: The policy for John’s Pizza and Deli has been in force without break since the business started ten years ago. The policy dates are 1/1 to 1/1 of each year and it has always included employee dishonesty coverage. John hired Joanne as a cook two years ago. During the time she was employed, from 1/14/2008 to 7/13/2008, John noticed a strange pattern in the inventory. He couldn’t prove anything but suspected that Joanne was taking inventory. She ended her employment and was arrested in connection with theft at another pizza place in June 2009. She was a first-time offender and confessed to all previous crimes, including her thefts at John’s. John reported the crime as a claim to the company that provided coverage for the 1/1/2008–1/1/2009 policy period. The company denied the claim. He then forwarded the claim to the current carrier and its coverage paid the claim submitted.
i. The insurance in paragraph h. above is limited to the lesser of the limits on the current policy or the limits on the policy in effect when the loss occurred.
j. The definition of employee is different in this optional coverage.
When used in employee dishonesty, an employee is any natural person:
An employee does not include independent contractors. It also does not
include managers, directors or trustees unless they
are carrying out the duties of employees.
Note: ISO uses the term “natural person” in the definition above. A
natural person means a living, breathing individual. Unnatural person means an
entity, such as a corporation, having rights and obligations as defined in the
law.
Note: The definition of employee is added to the 01 06 edition to match the wording in the ISO crime coverage forms.
4. Mechanical Breakdown
Mechanical breakdown caused by an accident is covered for certain kinds of objects. An accident is a sudden and accidental breakdown of the object or a part of the object. At the time a breakdown occurs, it must manifest itself by physical damage to the object requiring repair or replacement. Accidents do not include depletion, deterioration, corrosion, erosion, wear and tear, leakage at any valve, fitting, shaft seal, gland packing, joint or connection, or breakdown of any vacuum tube, gas tube or brush.
Other accidents are not covered. These include breakdown of any electronic computer or electronic data processing equipment, breakdown of any structure or foundation supporting the object or any of its parts, the functioning of any safety or protective device, and the explosion of gases or fuel within the furnace of any object or within the passages through which combustion gases pass.
Objects have an extensive definition. Objects include boilers and pressure vessels, including hot water boilers, steam boiler piping and fittings, including city steam connections, feed water piping between boilers and/or feed water pumps and air-conditioning units 80,000 BTUs or greater. This also includes connecting piping and coils, vessels heated directly or indirectly making up part of absorption or co-generation or generator systems, compressors, pumps, controls and fans associated with covered air conditioning units.
The definition is clarified further by stating what an object is not. Pressure objects do not include objects not under pressure, boiler settings or foundations, insulation or refractory materials or electrical, reciprocating or rotating apparatus in or making up part of a boiler. Air conditioning does not include vessels, cooling towers or other sources of cooling water or piping leading to or from the source of the water or wiring leading to or from the unit. Under no circumstances is any object covered for any accident while the object is being tested.
Covered objects must be owned by the named insured or be in its care, custody or control. In addition, they must be inside or outside the building at the described premises. Objects and accidents do not include damage to any computer or data processing system or to any production machinery.
Finally, if an object is in or exposed to a dangerous condition, any insurance company inspector can immediately suspend coverage by sending written notice to the named insured at the address indicated on the declarations or to the address where the object is located. The suspension carries a pro rata refund of premium.
1. Computer means any electronic equipment that can be programmed to store, retrieve and process data, including all equipment needed to support the function. It does not include computers used to operate production machinery and equipment.
2. Counterfeit money is a fraudulent copy made to imitate the genuine article with the intent to defraud and to be taken as real money (01 06 change).
3. Electronic Data is an all-encompassing term. It means information, facts or programs on computer software. It includes media,
data, programs and software wherever and however stored.
There is no requirement that the insured must own it or that it must be on the
premises (01 06 change).
4. Fungi means any and every type of fungus, including any of the by-products produced or released by fungi. This includes, but is not limited to mold, mildew, spores, scents and byproducts (01 06 addition).
5. Manager means a director of a limited liability company.
6. Member means an owner of a limited liability company. Members may also serve as managers.
7. Money means currency, coin and bank notes in current use that have a face value. It also includes travelers' checks, register checks and money orders held for sale to the public.
8. Operations mean the named insured’s business activities that take place at the described premises.
9. Period of restoration begins 72 hours after the occurrence of direct physical loss or damage for business income coverage but immediately for extra expense. It ends on the date that property should be repaired with reasonable speed and similar quality or the date when the business is resumed at a new, permanent location. It does not include any increased period due to enforcement of law or pollution assessment, testing, cleanup or removal. It does not apply to increases due to enforcement of ordinances regulating construction or those requiring monitoring, testing or neutralizing of pollutants and is not affected by the policy expiration date.
10. Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and wastes. It also includes products to be recycled, reconditioned or reclaimed.
11. Securities means negotiable and non-negotiable instruments
representing money or other property. This includes tokens, tickets, revenue
and other stamps or unused postage in a meter, evidences
of debt such as charge slips used in charge cards the named insured did not
issue. It does not include money itself.
12. Specified causes of loss are fire, lightning, explosion,
windstorm, hail, smoke, aircraft, vehicles, riot or civil commotion, vandalism,
leakage from fire-extinguishing equipment and sinkhole collapse. It also
includes volcanic action and falling objects but not to property in the open
or to the interior of or property inside a building unless the wall or roof is
first damaged by a falling object. Finally, it includes weight of ice, snow or
sleet or water damage, only as a result of breaking apart or cracking of any
part of a system or appliance containing water or steam, but not including a
sump system.
It also includes sinkhole collapse, defined as the sudden collapse of earth due to the action of water creating holes or caverns in limestone or other rock formations. It does not include sinking into man-made underground spaces, such as mines or the costs of filling sinkholes or land that sinks or collapses into man-made underground spaces.
Falling objects does not apply to loss or damage to personal property in the open or to the interior of a building not damaged by a falling object.
Water damage is accidental release of water or steam due to the breaking apart of systems or appliances that contain water or steam.
13. Stock means goods held in storage or for sale, raw material, goods-in-process or finished goods, including their packing and shipping supplies.
14. Valuable papers and records means inscribed, printed or written documents, manuscripts and records. This also includes abstracts, books, deeds, drawings, films, maps or mortgages. It does not include money and securities. Note: All references to electronic records and media are removed from this definition (01 06 change).
Note: Readers viewing the electronic version of this analysis
should return to the beginning to access links to the other parts of the
analysis.
This is the analysis of the Insurance Services Office (ISO) BP 00 03–Businessowners Program (BOP) Coverage Form BP 00 03. It is done in three separate parts in order to make it more manageable.
Part A–Policy Lead-In Language through Property Coverage Extensions.
Part B–Property Exclusions through Property Definitions.
Part C–Liability Coverages through Common Policy Conditions.
The July 2002 edition of the ISO Businessowners policy combined three coverage forms together into one large package. The January 2006 edition included a number of editorial changes that naturally follow a major change like the July 2002 edition. In addition, a number of changes were needed to standardize terms and align the wording of this policy with the wording in other commercial insurance coverage forms and policies. Finally, some coverage restrictions and broadened coverages are found throughout the form.
NOTE: This analysis is of the January 2006 edition. Changes from the
previous edition are in bold print.
Commercial General Liability compared to Businessowners Liability
This section of the ISO BOP is similar to the ISO Commercial General Liability Coverage Form but with some important differences.
1. Business Liability
a. The insurance company pays damages to third parties related to covered occurrences of bodily injury, property damage and personal and advertising injury, subject to the policy limits and the insured's legal obligation to pay. It must also defend against all suits brought against the insured to which coverage applies. However, it does not have an unlimited responsibility to provide a defense. If a claims payment or settlement exhausts the insurance limit that applies to a given loss, the obligation to defend ends.
Note: Defense
coverage is for the insured's benefit. There is no duty to defend the insured
for any suit seeking damages not covered by the policy. This wording clarifies
the intent to provide defense only for claims or suits covered by the policy
and should eliminate any confusion or ambiguity with respect to when defense
is available.
Example: The ISO BOP provides liability coverage to an insured with a $1,000,000 limit. Because of the insured’s negligence, an explosion occurs that injures many people and damages several other premises. Each injured person and property owner files a separate claim for injury or damage. The insurer makes settlements with the injured persons. Once the $1,000,000 limit is completely exhausted, the insurer has no further obligation to provide legal defense for the remaining lawsuits filed against the insured.
The insurance company is not obligated to provide or perform any other acts or services, or to make any other payments of expenses or sums except for those under Coverage Extension–Supplementary Payments.
b. Insurance applies only to bodily injury and property damage events that occur in the coverage territory.
Example: The insured has a foreign operation located in Hong Kong and the products are both manufactured and distributed there. These products are not covered, based on the definition of coverage territory. On the other hand, products manufactured in the United States but sold in Hong Kong fits the definition of covered territory, as would products manufactured in Hong Kong and sold in the United States.
Insurance applies only to bodily injury and property damage occurrences that take place during the policy period. Occurrences that take place before the policy inception date are not covered under the occurrence policy, even if the claim is made during the policy period.
If any insured or authorized employee knows of an event that occurred before the current policy period, the current policy does not apply to that event. In addition, any continuation, change or resumption of bodily injury or property damage during the current policy period is considered known prior to the policy period.
Insurance applies to personal and advertising injury offenses that are related to the business and committed in the coverage territory during the policy period.
Note: "Committed" replaces the words "occurred" or "occurrence." As a result, this coverage is very different from the bodily injury and property damage coverage. "Occurrence” has a long controversial history while "committed" is much clearer. Rather than defining the term, the BOP relies on its plain meaning.
c. Bodily injury and property damage not known of by any insured or authorized employee prior to the policy period is covered. This includes any continuation, change or resumption of the bodily injury or property damage after the end of the policy period.
d. The date of knowledge of bodily injury or property damage is the earliest that the insured or an authorized employee reports it to the insurance company, the insured or an authorized employee receives a written or verbal demand or claim for damages or the insured, or an authorized employee becomes aware by any other means that bodily injury or property damage has occurred.
e. Bodily injury damages includes damages claimed for care, loss of services or death that results from the bodily injury.
f. Coverage Extension–Supplementary
Payments
(1) These payments apply to any claim or suit the insurance company defends, investigates or settles. They do not reduce the limit of insurance.
Note: The insurance company does not have to furnish these bonds.
Note: The insurance company does not have to furnish these bonds.
Note: In cases where costs and expense of the trial are assessed against the negligent party, this supplementary payment provides extensive benefits over and above the policy limits.
These payments do not reduce the limits of insurance. This provision
moved from the lead-in language to this section with no change in coverage (01
06 change).
(2) At times, the insured and a party it agrees to reimburse for its payments for damages, such as an additional insured, are both sued. If the suit involves a covered loss, the insurance company defends both the insured and this indemnitee, subject to the following conditions:
(3) If all of
these conditions are met, the insurance company covers attorneys’ fees and
litigation expenses it incurs as well as the necessary litigation expenses the
indemnitee incurs at the company's request. Since these payments are not
considered awards or payment of damages, they are not subject to the limits of
insurance. The company's obligation to defend the indemnitee and to pay for
expenses ends when it has paid the applicable limit of insurance in judgments
or settlements or the conditions above are no longer met.
2. Medical Expenses
a. The insurance company pays the medical expenses related to a covered bodily injury accident. The accident must occur on premises or on ways adjacent to premises the named insured owns or rents and result from its operations and activities. It must occur during the policy period and in the coverage territory and be reported to the insurance company within one year of the date of loss. The injured party must submit to examinations by physicians the company selects and at its expense as often as reasonably necessary.
b. Payments are made without regard to fault. All expenses must be reasonable. Medical expenses include first aid administered at the time of the accident, necessary medical, surgical, x-ray and dental services, including prosthetic devices and ambulance, hospital, professional nursing and funeral services.
1. Applicable To Business Liability Coverage
a. Expected Or Intended Injury
All expected or intentional bodily injury or property damage is excluded, except for bodily injury resulting from use of reasonable force to protect persons or property.
Note: This exclusion protects insurance companies from paying damages for injury or damage the insured causes deliberately. It is in the public interest and ensures that the insured does not use the coverage for personal gain, such as theft, to injure competitors, for revenge or for any other intentional harm. However, this wording is constantly challenged and clarified in court cases across the country. The challenges typically seek coverage for intentional acts that result in unintended consequences. In other words, the insured's action causes an unexpected and unintended result.
Example: Paula’s Perfume Shoppe is insured under a BOP. Paula has had it with a homeless man who hangs around the front of her store and frightens her customers. Paula asks the man to leave and then shoves him. Paula is shocked to see the man lose his balance, fall, strike his head on a mailbox and then again on the concrete curb. The man is seriously injured and sues Paula. Paula's insurance company denies coverage. Although Paula never meant to hurt the man, the injuries he sustained were the result of her little, but intentional, shove.
Numerous cases now before a number of state supreme courts may affect this exclusion. These should be watched carefully over the next few years to determine if the intent of the exclusion is upheld. There are no endorsements currently available to buy back or delete this exclusion.
b. Contractual Liability
This exclusion both
provides and excludes coverage and must be reviewed carefully for a thorough
understanding. The first sentence states that the insurance does not apply to
damages the insured is obligated to pay because of a contract or agreement.
The rest of the exclusion states that coverage does apply if coverage would
have applied if no contract was in effect or if the contract met the
definition of an insured contract and was in effect before the occurrence. At
this point it gets complicated and states that all reasonable expenses to
defend a suit filed because of this contractual obligation are considered
damages. This means that such defense costs are included in the limit of
insurance and not outside the limits, as provided for in the supplementary
payments. However, the defense costs can be part of the supplementary payments
if the terms of the indemnitee section of Supplementary Payments are met.
Example: Mary and Bob entered into a lease agreement. As part of the lease, Bob agreed to assume Mary’s liability but assuming defense costs in case of litigation was not mentioned. During the term of the lease, the furnace exploded and seriously injured two persons. Mary owned the furnace but Bob’s insurance responded up to the point of Bob’s limit of insurance. After Bob’s insurance was exhausted, Mary or her insurer had to handle the suit. If the contract was written to include defense costs, they could have been paid under Coverage Extension–Supplementary Payments.
c. Liquor Liability
Coverage does not apply to bodily injury or property damage for which any insured engaged in manufacturing, distributing, selling, serving or furnishing alcoholic beverages is liable because of causing or contributing to intoxication of any person, furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol, or in violation of any statute, ordinance or regulation involving selling, gifting, distributing or using alcoholic beverages
Note: This exclusion does not apply to liquor-related losses for any insured not engaged in the liquor business. Events such as business lunches, parties and social functions the insured sponsors are covered for host liquor liability unless an existing statute, ordinance or regulation relating to the particular event applies.
Examples:
Both examples are covered if the client or guest is injured as a result of consuming alcohol.
Example: The insured sponsored a fund-raiser by holding a Casino Night. The event included betting and gambling devices and food and alcoholic beverages were served for a charge. The insured did not obtain the necessary permits and licenses. A patron who was served alcohol was injured on his way home. Coverage applied if the patron sued, as long as the insured was not in the liquor business.
Note: The BOP has three different endorsements to provide additional liquor liability coverage. BP 04 88–Liquor Liability completely deletes this exclusion. BP 04 89–Liquor Liability Coverage is similar to the liquor liability policy and has its own common cause limit. BP 04 19–Amendment–Liquor Liability Exclusion–Exception For Scheduled Activities provides coverage for scheduled activities. BP 04 18–Amendment–Liquor Liability Exclusion was withdrawn from use.
d. Workers Compensation And Similar Laws
Insurance does not apply to any requirement or obligation the insured must assume due to any workers compensation, disability benefits, unemployment compensation or similar type of law.
Note: This and the next exclusion is intended to prevent double indemnification for injury that should only be covered under workers compensation and/or employers liability policies.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty workers compensation situations should refer to the workers compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
e. Employers Liability
Bodily injury an employee of the insured sustains in the course of that employment or performing duties related to the insured's business is excluded, regardless of the insured's liability as an employer or in any other capacity or any obligation to repay others who must pay damages because of the injury. This exclusion extends to the employee’s spouse, children, parents and siblings. It does not apply to liability the insured assumes under an insured contract.
Note: This clarification is particularly important because of the widespread use of a variety of contractors, subcontractors, independent contractors and leased employees and because of the uncertainty with respect to who is responsible.
Another important note involves monopolistic states where workers compensation coverage is provided or required but coverage for employers' liability is either not required or not available. This can create a significant coverage gap. Many insurers in such states developed manuscript or company endorsements and programs to add the employers' liability coverage to the BOP. ISO recently developed endorsements to address this issue.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty employer’s liability situations should refer to the workers compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
f. Pollution
ISO attempts to make this exclusion as comprehensive as possible by excluding virtually every type of potential occurrence. There is no reference to pollution being accidental or gradual. Simply stated, all pollution events are excluded, subject to some exceptions.
(1) Coverage does not apply to bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(2) Any judgments, suits, awards, fines or penalties resulting from Environmental Protection Act (EPA) enforcement or on behalf of the EPA are also excluded. In order to clarify the intent, it states that insurance does not apply to any loss, cost or expense resulting from any request, demand or order requiring the insured or any other party to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effect of pollutants. It further states that insurance does not apply to any claim or suit brought by or on behalf of a governmental authority for damages because of any of the circumstances stated above. However, this paragraph does not apply to any property damage liability the insured would have had except for the governmental request.
There are five pollution-related endorsements that can be used with the BOP.
An insured may have a pollution liability exposure due to
its owning, operating, using or maintaining
underground storage tanks, such as a retail gasoline station.
Insurers and brokers that provide coverage to a variety of difficult, unusual or specialty pollution situations should refer to the Environmental Risks section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
g. Aircraft, Auto Or Watercraft
The liability coverage provided excludes bodily injury or property damage resulting from the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft. This includes ownership of, loan or rental of, operation of, or loading and unloading by or to any insured.
Note: As a
result, airplanes, hang gliders, hot air balloons, ultra-lights or helicopters
the insured owns or rents are also excluded.
Example: The owner of Mike’s Marine & Sauna also owned a sailboat that promoted the store. The sailboat had the store’s logo, phone number and Web site displayed on the main sail. Mike rented the sailboat to some of his friends to use. Unfortunately, it was not maintained properly and Mike's friends were injured when it sank. This loss was not covered.
This exclusion applies even if allegations are present involving negligence or other wrongdoing in supervising, hiring, employment, training or monitoring of others, if the occurrence involves ownership, maintenance, use or entrustment to others of an aircraft, auto or watercraft.
This exclusion has a number of exceptions. Property covered includes:
Example: Teenagers use a boat stored behind a warehouse as a meeting place at night. One is injured trying to jump from the boat and the parents sue the warehouse owner for having an attractive nuisance exposure. Coverage applies.
Example: Michel’s has valet service. While driving a customer’s car on the premises, the valet strikes another vehicle. The customer sues Michel's and coverage applies.
Example: An employee is injured during a trip out of town. Lionel charters a plane to bring him back to a local hospital. The charter operator requires a hold harmless agreement before he will take off and bring the employee back. Coverage applies if a covered loss occurs.
Example: A pickup truck is modified to carry well-drilling equipment. The equipment accidentally strikes the side of a building and causes damage while being maneuvered into place over a well. Coverage applies to the damage to the building.
A number of different liability policies are available to cover the exposures of insureds that own, rent, lease, charter or operate aircraft, watercraft or autos. One BOP endorsement available to modify the auto portion of the exclusion is BP 04 04–Hired Auto And Non-Owned Auto Liability.
CG 24 12–Boats is an endorsement available for use with the ISO CGL coverage form to provide coverage for boats. There is no corresponding BOP endorsement at this time. If liability coverage on boats is required, consider writing the exposure under the ISO CGL coverage form instead of under the BOP.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty aviation, auto, truck, boat, or watercraft situations should refer to the Aircraft, Automobiles, Trucks, Recreational Vehicles or Marine Risks sections in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
h. Mobile Equipment
Bodily injury or property damage resulting from transporting mobile equipment by an auto owned or operated by or rented or loaned to any insured is excluded. This exclusion also applies to mobile equipment used in, while practicing for, or being prepared for any pre-arranged racing, speed, demolition or stunt activity.
Example: A plumbing contractor hauling a backhoe on a trailer behind an owned truck to the jobsite is not covered when the hitch on the trailer snaps and the trailer overturns, resulting in damage to vehicles following behind the trailer and backhoe.
Note: The automobile liability policy covering the towing vehicle should respond to any liability for a trailer being towed or for mobile equipment being transported by that vehicle.
Insurers and brokers providing
coverage on a variety of difficult, unusual or specialty mobile equipment
situations should refer to the Inland Marine Risks section in The Insurance
Marketplace, a publication of The Rough Notes Company, Inc.
i. War
There is no coverage for bodily injury, property damage or personal or
advertising injury resulting from war, warlike action by a military force,
including any actions by a government or sovereign using military personnel,
or insurrection, rebellion, revolution, usurping and any actions taken to
defend or hinder.
Note: The 01 06 edition brings this in line with the ISO CGL war exclusion.
Example: The insured manufactures guided missiles. Country X purchases the missiles and requires a purchase agreement from the insured that guarantees the accuracy of the missile within one meter. When Country X invades Country Y, the missiles completely miss their targets and cause extensive damage to Country Z. This situation is not covered.
Note: This exclusion is affected by new endorsements available to address losses involving terrorist acts. Any coverage impact by this provision is substantially affected by endorsement of either a full or limited exclusion of terrorism causes of loss.
j. Professional Services
There is no coverage for bodily injury, property damage or personal and advertising injury due to rendering or failing to render any type of professional service. Nine specific professional services are listed.
Note: The policy states that these are examples but that they are not the only professional services excluded.
Note: There is no coverage for druggist's liability. If coverage is desired, BP 08 06–Limited Pharmacists Liability Coverage must be added. This coverage is still not as broad as the coverage previously offered because some states are expanding the privileges and approved duties of druggists to include writing prescriptions. These broadened duties impose a much higher level of professional responsibility on the druggist and this coverage has not been similarly broadened to address those duties.
Note: A number of insurance companies offer professional liability supplements or coverage endorsements to their BOP policies to cover various professional liability exposures. Each insurer should be contacted to determine the coverages it provides. This analysis does not cover insurance company-specific endorsements and coverage forms.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty professional situations should refer to the Professional, Errors & Omissions and Malpractice sections in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
k. Damage To Property
This exclusion combines all property damage-specific exclusions in one place. The goal is to clarify that this coverage is not first-party coverage for the insured's benefit. In addition, this coverage is not intended to be a substitute for good quality workmanship.
This insurance does not apply to property damage to:
(1) Property the named insured owns, occupies or rents, including the costs or expenses incurred for the repair or modification of such property for any reason
(2) Premises the named insured sells, gives away or abandons, if the property damage arises out of any part of such premises
(3) Property loaned to the named insured
(4) Personal property in the insured’s care, custody or control
(5) That part of real property where the named insured, or contractors or subcontractors working on its behalf, are performing operations, if the property damage arises out of those operations
(6) That part of any property requiring restoration, repair or replacement because the named insured’s work was done incorrectly
There are four important exceptions to these exclusions:
Note: This is especially and critically important to homebuilders. Since they build and sell homes, if this exclusion stands, there is no coverage once the home is sold. However, if the insured uses the home as a model home or office, this exclusion applies.
Note: A sidetrack agreement is between the owner of a location or premises and a railroad concerning a railroad transfer or access track located on the named insured's premises. The railroad allows use of the sidetrack as long as the property owner guarantees the railroad's access to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specific hold-harmless conditions between the railroad and property owner.
Example: The insured distributes large appliances. A railroad track passes next to its premises. The insured is certain sales would increase, expenses would drop and overall growth would occur if the railroad would build a sidetrack into the insured’s warehousing area. This would allow the insured to load and unload directly into rail cars and save shipping costs and truck transportation time. The railroad agrees to the arrangement, subject to a condition of having 24-hour access to the sidetrack. The railroad also requires guarantees from the property owner that the track will be protected from vehicle damage, vehicle access will be limited and the insured will hold the railroad harmless for any collision or injury that occurs during loading and unloading. Note that railroad sidetrack agreements are included as covered contracts in the policy.
l. Damage To Your Product
Coverage does not apply to property damage to the insured’s product because of damage caused by it or any part of it.
Example: The insured manufactures gas furnaces. A furnace malfunctions, catches fire and is destroyed. The damage to the area around the furnace is covered but there is no coverage for the furnace itself.
Insurers and brokers
providing coverage on a variety of difficult, unusual or specialty product
situations should refer to the Products Liability section in The Insurance
Marketplace, a publication of The Rough Notes Company, Inc.
m. Damage To Your Work
Property damage to the named insured’s work or any part of it also covered in the products/completed operations hazard is excluded. It has an exception for work performed by subcontractors on the named insured's behalf.
Example: The insured repairs electrical wiring in a building. The wiring is done incorrectly and there is no coverage. However, coverage applies if a subcontractor on working on behalf of the insured does the wiring work.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty product liability situations should refer to the Products Liability section in The Insurance Marketplace, a publication of the Rough Notes Company, Inc.
n. Damage To Impaired Property Or Property
Not Physically Injured
Coverage does not apply to property damage to impaired property or property not physically damaged due to either a defect, inadequacy or dangerous condition in the named insured’s product or work or caused by a delay or failure of the named insured, or any party acting on its behalf, in performing the terms of a contract or agreement. This exclusion does not apply if the loss of use of other property is the result of a sudden or accidental injury to either the named insured’s product or work after being put to its intended purpose.
Example: The insured manufactures switches for a variety of products that turn them on and off. It sells a batch of defective switches to other manufacturers to incorporate into their products. However, those products did not operate correctly after the defective switches were installed in them. As a result, those products were impaired because of the insured’s defective product, but were otherwise undamaged. This loss is excluded and coverage does not apply.
Example: The insured agrees to complete the artwork for a client’s brochure by a specific date. The date comes and goes and the artwork is not done. There is no physical injury to any property but the client loses potential income because the brochure could not be distributed. This loss is also excluded and coverage does not apply.
Note: There is no standard ISO endorsement currently available to buy back this coverage or delete this exclusion.
Insurers and brokers
providing coverage on a variety of difficult, unusual or specialty product
liability situations should refer to the Products Liability section in The
Insurance Marketplace, a publication of The Rough Notes Company, Inc.
o. Recall Of Products, Work Or Impaired Property
There is no coverage for any damages claimed for loss, cost or expense the named insured or others incur when its product, work or property is withdrawn or recalled. Damages not covered are loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal. This exclusion applies when the recall is due to a known or suspected dangerous defect, deficiency, inadequacy or condition in the product. There is no established criteria or protocol with respect to who calls for the recall or withdrawal.
Note: There is no standard ISO endorsement currently available to buy back this coverage or delete this exclusion.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty product liability situations, including recall, should refer to the Products Liability section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
p. Personal And Advertising Injury
Personal injury and advertising injury are combined. There is no coverage for:
Example: An incorrect story was first published on December 29. The policy inception date was January 1. There is no coverage.
Example: A celebrity agrees to an interview with the insured that will be published. The celebrity insists on a written agreement in which the insured promises not to slander or libel the celebrity. This liability exists whether there is a contract or agreement or not.
Example: A retail store contracts with a magazine to run an advertisement in its magazine the month before a special sale at the store. The store sues for breach of contract when the advertisement is run the month after the sale. There is no coverage for breach of contract.
Example: A customer gained weight after using a diet supplement that guaranteed a weight loss of at least ten pounds and sued the manufacturer of the supplement. There is no coverage in this case.
Example: A customer sues for lost revenue when a newspaper makes an error in printing the price of a product in an advertisement. The error involves the incorrect placement of a decimal point. Coverage does not apply.
Note: Placement of frames, links or advertising on the Internet is not considered the business of advertising, broadcasting, publishing or telecasting.
Insurers and brokers providing coverage on a variety of difficult, unusual or specialty advertising situations should refer to the Professional Liability section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
q. Electronic Data (01 06 addition)
There is no coverage for any damages due to corrupted electronic data
or electronic data that cannot be used for some reason. This exclusion defines
electronic data. It is similar to the definition in the Property Definitions
section and means most media, data, programs and
software wherever and however stored.
r. Criminal Acts (01 06 addition)
Coverage does not apply to personal and advertising injury as a result
of a criminal act the insured commits or directs.
Note: This exclusion is
not really new. It moved here as a stand-alone exclusion from the personal and
advertising section, exclusion p. The wording is unchanged from the previous
edition.
s. Distribution Of Material In Violation Of
Statutes (01 06 addition)
Bodily injury, property damage or personal and advertising injury caused by or resulting in any way by violations or alleged violations of the Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003 or any other similar law that limits distribution of material is excluded.
Note: A final exception applies with respect to certain exclusions in the BOP Liability Coverage Form Exclusions section. The exception involves:
These exclusions do not apply to premises damaged by fire. The 01 06 edition removes explosion as a cause of loss. However, such losses must occur while the named insured rents or temporarily occupies the premises. In addition, the insured must use the premises with the owner's permission. This coverage has a separate limit.
2. Applicable To Medical Expenses Coverage
There is no coverage for bodily injury expenses:
Example: One of the partnership's partners indicated as the first named insured slips and falls on ice on the front steps of the building and needs x-rays to determine if anything is broken. This expense is not covered.
Example: A painter the insured hires to paint its building and rental dwelling falls from a ladder and breaks his wrist. The medical expenses resulting from the fall are not covered.
Example: A tenant in one of the apartment units in a building the insured owns falls down the stairs in his apartment and is injured. This coverage does not apply to that tenant's medical expenses resulting from the fall.
Example: An employee sustains burns on his hands as a result of a small fire while he is on the job. This coverage does not apply to this loss.
Note: This exclusion applies to athletic
activities. The previous exclusion description of athletic activities was
vague and only required that a person be injured while taking part in athletics.
This edition is much more specific (01 06 change).
Example: Lyle’s Linguini-To-Go sponsors a Little League team. A child breaks her leg when sliding into home plate. This coverage does not apply to the expenses from the injury.
Example: An appliance the insured manufactured catches fire due to faulty wiring and burns a consumer’s fingers. This coverage does not apply to this loss.
Example: One of the insured's employees becomes angry, strikes a customer and breaks his nose. This coverage does not apply to this loss.
Note: The war exclusion is removed from the medical payments exclusions because war is now excluded under the Business Liability section (01 06 change).
3. Applicable To Both Business Liability Coverage And Medical Expenses Coverage–Nuclear Energy Liability Exclusion
The insurance coverage provided by the BOP liability coverage excludes bodily injury or property damage liability coverage:
The following special terms are defined:
1. By-product material has the meaning given it in the Atomic Energy Act of 1954 or any amendatory law.
Note: This exclusion does not provide that meaning.
2. Hazardous properties include radioactive, toxic or explosive properties.
3. Nuclear facility is a nuclear reactor and equipment
designed or used to separate uranium or plutonium isotopes or for spent fuel
processing, utilization or waste handling or processing or packaging. It also
includes equipment or devices used in special nuclear material processing, fabricating or alloying, if the total amount of such
material at any time consists of or contains more than 25 grams of plutonium
or uranium-233, or any combination thereof, or more than 250 grams of
uranium-235. Any structure, basin, excavation, premises
or place prepared or used to store or dispose of waste is also included, along
with the site on which all such operations are conducted and all premises used
for such operations.
4. Nuclear material is source material, special nuclear material or by-product material.
5. Nuclear reactor is any apparatus designed or used to sustain
nuclear fission in a self-supporting chain reaction or to contain a critical
mass of fissionable material.
6. Property damage is all forms of radioactive contamination of property.
7. Source material has the meaning given in the Atomic Energy Act of 1954 or as amended.
Note: That meaning is not provided in this exclusion.
8. Special nuclear material has the meaning given in the Atomic Energy Act of 1954 or as amended.
Note: That meaning is not provided in this exclusion.
9. Spent fuel is any solid or liquid fuel element or component that was used or exposed to radiation in a nuclear reactor.
10. Waste is waste material that contains by-product material. By-product
material does not include tailings or wastes produced by the extraction or
concentration of uranium or thorium from any ore processed primarily for its
source material content. Waste also includes any waste material that result
when any person or organization operates any nuclear facility included under
the first two paragraphs of the definition of nuclear facility.
1. The declarations indicate the types of entities that can be designated
as the named insured. Each type of entity has a different group of parties
that are considered insureds and the conditions under which they are insureds.
a. If the named insured is an individual, the individual is the named
insured as well as the named insured's spouse. However, this is not an
all-inclusive situation. Their status as insureds is limited to operations of
the business for which the named insured is the sole owner.
Example: Mr. John,
a sole proprietor, sells farm produce. Both he and Mrs. John are insureds. In
addition, Mr. John is the sole proprietor in another venture in which he makes
wood kitchen cabinets. Here again, both he and Mrs. John are insureds.
However, if he and his brother owned the carpentry business as a partnership, coverage
would not apply to the partnership.
b. If the named insured is a partnership or joint venture, the partnership
or joint venture is an insured. In addition, the members
and partners of the named insured along with their spouses are insureds. Their
status as insureds is limited to operations of the named insured's business.
Example: Mr. John and Mr. Joe are partners in a
carpentry business. Both partners and their spouses are insureds with respect
to the conduct of the carpentry business. However, none of them are insureds
under this coverage form for any personal exposures or for any other business
activities.
c. If the named insured is a limited liability company, the limited
liability company is an insured. In addition, members of the company are
insureds but only with respect to the conduct of the named insured's business.
The named insured's managers are also insureds but only to the extent of their
specific duties as managers.
Note: A limited liability company is a hybrid form of business somewhere between a partnership and a corporation. Managers operate a limited liability company on behalf of its members. Members have the protection of a corporation, in that personal assets are protected, and only company assets can be assessed. On the other hand, the income and profit earned by the limited liability company is not taxed against the company but is the obligation of its members as individuals.
d. If the named insured is any other organization, it is an insured. In
addition, the executive officers and directors are insureds but only to the
extent of their duties as such. Stockholders are also insureds
but their status is limited to the extent of their liability as stockholders.
2. The following are also insureds:
a. Volunteer workers but only when performing duties related to the named
insured's business. Employees, excluding executive officers and managers of a
limited liability company, are insureds within the narrow range of activities
in the scope of their employment or while conducting the named insured's business.
Volunteers and employees are not insureds for bodily injury or personal and
advertising injury:
Volunteers and employees described above
are also not insureds for property damage to property owned, occupied, used
by, rented to, in the care, custody or control of, or over which any insured
exercises physical control for any reason.
b. Any party other than an employee or volunteer acting as the named insured's
real estate manager
c. Any party having proper temporary legal custody of the property of a deceased
named insured but only with respect to liability arising out of or caused by
maintenance or use of that property and until a proper legal representative is
appointed
d. A properly appointed legal representative for a deceased named insured
but only while carrying out its duties as the legal representative
Note: The legal representative assumes all of the deceased named insured's
rights and duties. This goes beyond the standard insured status and extends to
rights to cancellation, conditions and other elements assigned only to named
insureds.
These clarifications provide broad coverage to the insured for exposures normal to any business operation that can be expected in a commercial venture. A final clarification is that any current or past partnerships, joint ventures or limited liability companies not indicated in the named insured section of the declaration are not insureds (01 06 addition).
A number of endorsements are available to add other interests to the BOP liability coverage.
1. The most the insurance company pays are the limits of insurance
indicated on the declarations, subject to the following rules. This is
regardless of the number of insureds, claims made, suits brought or number of
parties making claims or bringing suits.
Example: A longtime customer sued Lara and Prentiss Greatkuple D/B/A Hairy Essentials. She was getting into a chair when the back of it broke and she fell to the floor. She sustained a concussion, various cuts and a broken back. She filed two different lawsuits. One named Lara and the other named Prentiss. The Greatkuples reported the loss and provided all the relevant paperwork on the two suits to their insurer. The insurer informed them that it would defend the lawsuits but the $1,000,000 policy limit was the most available for both suits.
2. The liability
and medical expenses limits indicated on the declarations are the most paid
for any one event or occurrence. This is regardless of the number of claims
that result from it for bodily injury, property damage or medical expenses, or
the total loss to any one party from any personal and advertising offense.
Example: Melvin’s Bakery has a BOP with a liability and medical expenses limit of $1,000,000. Melvin is leading a group tour of the bakery and an explosion occurs that injures many of the tour group members. Twenty-five claims for damages amounting to $5,000,000 are submitted to the insurer. The policy limit of $1,000,000 applies to the occurrence and is subject to the aggregate limit. The insured is responsible for the remaining $4,000,000 claimed.
The medical expenses limit is the most paid to each person and is subject to the liability and medical expenses limit for any one occurrence.
Example: Melvin’s Bakery's medical expenses limit is $5,000. The claims adjusters settled the cases quickly. One late claim for medical expenses only was filed after the $1,000,000 limit was paid. Even though the amount claimed was less than $5,000, it was denied because the $1,000,000 limit was exhausted.
3. The Damage To Premises Rented To You Limit is the most the insurance company pays under business liability for all covered property damage losses for any single premises rented to an insured. It also represents the maximum available to pay for any single fire loss to premises the named insured rents or temporarily occupies with the owner’s permission. Payments under the damage to premises rented to you limit are subject to the each occurrence limit.
Example: The damage to premises rented to you limit is $50,000. The insured's operations at such a premises cause a fire that completely burns down the building. The total loss is $250,000. The damage to premises rented to you limit of $50,000 is all that the insurer pays.
4. Aggregate Limits
The damage to premises rented to you limit is subject to either the
products/completed operations aggregate or the all
other aggregate, whichever applies (01 06 addition).
Note: This coverage was not subject to an aggregate in previous
editions.
The application of the limits of insurance is clarified. The limits apply separately to each annual 12-month policy period, beginning with the inception date of the policy. If any period of less than 12 months remains, the limits apply separately to that period as well, unless the policy is extended for that period. In that case, the extended period is part of the preceding policy period for purposes of application of limits.
Example: The insured begins with a policy originally issued from January 1 to January 1 of each year. In the second policy period, it requests that the policy expiration date be extended to July 1 in order to match its accounting year. The policy limits apply separately to the first annual 12-month policy period of January 1 to January 1. They also apply separately to the second policy period now extended to 18 months, from January 1, past the next January 1 to July 1. After that, each annual 12-month policy period of July 1 to July 1 has separate policy limits.
Note: ISO has not developed any endorsements for use with the BOP program to amend, modify or delete any of the liability limits, including the aggregate limit, at the present time. However, endorsements are available for use with the CGL policy to do so. The insured should consider writing a CGL instead of the BOP if limits must be modified.
1. Bankruptcy
If the insured or the insured's estate becomes bankrupt or insolvent, the insurance company is not relieved of its obligations under this coverage form.
2. Duties In The Event Of Occurrence,
Offense, Claim Or Suit
The named insured has a number of duties to
perform if a claim or demand for coverage occurs:
3. Legal Action Against Us
Under this
coverage form, no party has the right to join the insurance company in any
manner, bring the company into a suit claiming damages from an insured, or sue
the company unless all its terms and conditions have been completely met and
complied with.
The insurance company can be sued to recover
on an agreed settlement or on a final judgment against the insured. However,
it is not liable for damages not subject to payment under the terms of the
coverage form or that are more than the applicable limit of insurance. An agreed
settlement is a settlement and release of liability signed by the insured, the
insurance company and the claimant or the claimant's legal representative.
4. Separation of Insureds
Other than the limits of insurance and any rights and duties that apply specifically to the first named insured, this insurance applies to each named insured as if it is the only named insured and separately to each insured against whom claim is made or suit is brought.
Examples:
Defined words are used throughout the policy. Restricting their meaning
to the definition in the policy provides the means for all parties involved
with the policy to have a clearer understanding of the coverage intended.
1. Advertisement is a notice published or broadcast to the general public or specific market segments concerning the named insured's goods, products or services, done with the intent of attracting customers or supporters. Published notices include material placed on the Internet and other electronic forms of communication. Advertising notices on websites includes only the information about the named insured's goods, products or services for the purpose of attracting customers or supporters.
2. Auto is a land motor vehicle, trailer or semi-trailer designed for travel on
public roads. It includes any attached machinery or equipment. It does not
include mobile equipment. It also includes any land vehicle subject to financial responsibility
laws or motor vehicle registration rules.
Note: The 01 06 edition eliminates liability coverage for mobile
equipment subject to financial responsibility laws or vehicle registration
rules. Coverage for this kind of mobile equipment must be obtained through an
automobile policy.
3. Bodily injury is bodily injury, sickness or disease
sustained by a person. This includes death resulting from bodily injury, sickness or disease at any time.
4. Coverage territory is the United
States of America, its territories and possessions, Puerto Rico
and Canada. This includes international waters or airspace, subject to the
injury or damage occurring during travel or transportation between any of
these places.
Coverage territory includes other parts of
the world, subject to the injury or damage arising out of the following, and
subject to the insured's responsibility to pay damages being determined in a
suit based on the merits in the territory described above or in a settlement
the insurance company agrees to:
5. Employee includes leased workers but not temporary
workers.
6. Executive officer is a person occupying any officer position
created by the named insured's charter, constitution, by-laws
or similar governing documents.
7. Hostile fire is a fire that becomes uncontrollable or
burns outside of its intended receptacle
8. Impaired property is tangible property that cannot be used or
is less useful because it includes a portion of the named insured's product or
work known or thought to be dangerous, inadequate, defective
or deficient. It also involves situations where the named insured has not
satisfactorily completed the terms of a contract or agreement. This is subject
to the property actually being capable of being restored to use by repair,
replacement, adjustment or removal of the named insured's product or work, or
by the named insured fulfilling the terms of the contract or agreement.
9. Insured contract means:
a. Leases of premises, except for that part of the contract that
agrees to indemnify for fire damage to any premises the named insured leases,
rents or temporarily occupies
b. Sidetrack agreements
Note: A sidetrack agreement is a contract between the owners of a premises
and a railroad with respect to a railroad transfer or access track on the
insured property owner's premises. The railroad agrees to let the insured use
the sidetrack as long as the railroad is guaranteed access to it and the owner
agrees to certain conditions concerning maintenance of the property. These
agreements may also contain specific hold harmless agreements between the
property owner and the railroad.
c. Easement or license agreements, except those connected with construction
or demolition operations on or within 50 feet of a railroad
d. Obligations to indemnify a municipality required by ordinance, except
those connected with work for that municipality
e. Elevator maintenance contracts
f. Insured contract
also includes the part of any other contract or agreement that applies to the
named insured's business where the named insured assumes the tort liability of
another party to pay for bodily injury or property damage to a third person or
organization. This includes contracts or agreements that indemnify a municipality
in conjunction with work done for the municipality. It does not include any
part of a contract or agreement:
Note: Tort liability is
liability already imposed by law when there is no contract or agreement.
10. Leased worker is a person the named insured leases from a
labor-leasing firm under a written contract or agreement to perform duties related
to conduct of the named insured's business. Leased workers are not the same as
temporary workers.
11. Loading or unloading is
the handling of property after being moved from where it is taken for
transportation on aircraft, watercraft or autos,
while in or on those conveyances and while being removed from them at the
final delivery location. It does not include movement of property by means of
a mechanical device, other than a hand truck, not attached to the aircraft,
watercraft or auto.
12. Mobile equipment includes certain
land vehicles and machinery or equipment attached to
them. Examples are:
Mobile equipment no
longer includes land vehicles subject to financial responsibility laws or
motor vehicle registration rules. This type of mobile equipment is now
considered auto and coverage is available only under
an auto policy (01 06 change).
13. Occurrence is an accident. It includes continuous or
repeated exposure to essentially the same harmful conditions.
14. Personal and advertising injury is injury, including consequential bodily injury, arising out of one or more of the following offenses:
15. Pollutants are any solid, liquid, gaseous or thermal
irritant or contaminant. This includes smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste. Waste includes
materials to be recycled, reconditioned or reclaimed.
16. Products/completed operations hazard includes all bodily injury and property damage
that occurs away from premises or locations the named insured owns or rents
and arising out of its products or work, except:
Note: Work that is essentially complete except for still requiring some service,
maintenance, correction, repair or replacement is
treated as complete.
The products/completed operations hazard does not include bodily injury
or property damage arising out of:
17. Property damage is:
Note: Electronic date is not considered tangible property. It means
information, facts or programs stored as or on, created or used on or transmitted
to or from computer software or any other media used with electronically
controlled equipment.
18. Suit is a civil proceeding alleging damages for
bodily injury, property damage or personal and advertising injury covered by
this insurance. It includes arbitration and other alternative dispute
resolution proceedings in which such damages are claimed being submitted to by
the insured with the insurance company's consent.
19. Temporary
worker is any person
furnished to the named insured to substitute for a permanent employee
temporarily away from the business or to meet seasonal or short-term workload
conditions.
20. Volunteer worker is a person not employed by the named insured but who donates his or her work and acts at the direction of and within the scope of duties prescribed by the named insured. Volunteer workers are not paid a fee, salary or other compensation by the named insured or any other party for the work performed.
21. Your product:
This is not real property. It means goods or products the named insured
or any party trading under the named insured's name manufactures, sells,
handles, distributes or disposes of. This also includes any party whose
business or assets have been acquired by the named insured. In addition, it
includes the containers, materials, parts or
equipment furnished as part of the covered goods or products. Containers do
not include vehicles.
It also includes warranties or representations made concerning the
fitness, quality, durability, performance or use of
the named insured's product. These are very important parts of a product. An
even more important part may be the warnings and instructions provided with
the product. These can be not only the warnings and instructions that were
included but also the ones that should have been and were not. It does not
include vending machines or other property rented to or located for use by
others but not sold.
22. Your work means work or operations done by the named insured, or on behalf of the named insured, and materials, parts or equipment furnished in connection with such work or operations. It includes warranties or representations made concerning the fitness, quality, durability, performance or use of the named insured's product. These are very important parts of the work. An even more important part may be the warnings and instructions provided with the work. These can be not only the warnings and instructions that were included but also the ones that should have been and were not.
The BOP is a combination
of several coverages. Most have their own coverage descriptions, definitions,
causes of loss and conditions. The two areas all coverages share in common are
the declarations and the common policy conditions.
A. Cancellation
The first named insured person or organization indicated on the declarations can cancel the policy. It also makes policy changes, pays premiums, receives cancellation notices and requests cancellation. It is important to select the correct first named insured both for communication purposes and to be certain that all rights are properly protected.
The insurance company can cancel the policy with five days’ advance written notice under the following circumstances:
Example: A prestigious department store moves out of a mall insured by Conservative Mutual. That store was the mall anchor and took up 70% of the retail space. As a result of the move and the resulting vacancy, Conservative Mutual sends the mall five days notice of cancellation.
Cancellation for nonpayment of premium requires ten days’ advance written notice. Cancellation for any reason other than as listed above requires 30 days’ advance written notice.
All cancellation notices are sent to the first named insured and must state the effective date that cancellation takes effect. The first named insured also receives any premium refunds. Proof of mailing is sufficient proof of notice, unless this condition is superseded or replaced by a state law requiring certified mail or some other form of postal verification.
B. Changes
The policy contains all the agreements and terms between the parties and can be only be changed or waived by endorsements the insurance company issues and makes part of the policy.
C. Concealment, Misrepresentation Or Fraud
The policy is void if the named insured or any other insured intentionally conceals or misrepresents a material fact concerning the policy, the covered property, interests of any insured in the covered property or a claim under the policy. Fraud can occur before, during or after the end of the policy period.
D. Examination Of Your Books And Records
The insurance company
can examine or audit the insured’s books as they relate to the insurance
provided under this policy any time during the policy period and up to three years
afterwards.
E. Inspections And Surveys
A number of states noted that insurance companies regularly went into buildings to make inspections. This drew the attention of legislators who attempted to have the industry become the watchdog for various safety and health issues. This paragraph represents the insurance industry's response.
F. Insurance Under Two Or More Coverages
If two or more policy coverages apply to a given loss, only the actual loss amount is paid.
Note: This eliminates double coverage and duplicate loss payments.
G. Liberalization
If the insurance company adopts revisions that broaden coverage during the policy period, or within 45 days before the start of the policy period that do not require additional premium, the broadened coverage immediately applies to the policy.
Note: Any restrictions similarly adopted at the same time do not apply.
H. Other Insurance
If other insurance covering the same loss or damage applies, this policy is excess over the amount due from that other insurance, whether it can be collected or not.
Liability insurance is excess over any other insurance that insures for direct physical loss or damage, or any other primary insurance under which the named insured has been added as an additional insured.
If there is other insurance, the insurance company does not pay defense costs that the other company should pay. If the other company refuses to defend, the company has the option to do so. If it does, it assumes the rights of the insured under the other policy to proceed against the other insurer.
I. Premiums
The first named insured is responsible for paying all premiums due and receiving all return premiums. Premiums indicated on the declarations are based on rates in effect at the time the policy was issued and renewal rates are subject to change. The policy can continue in force year after year, subject to insurance company approval, if the named insured pays the premium prior to the policy anniversary date. However, any rate changes are reflected in that renewal premium and any policy forms changes apply.
Changes in the named insured’s operations or exposures, such as what it does or who it is, during the policy period may require an additional premium charge. Rates and rules for these changes apply as of the effective date of the change and not the rules and rates in effect at policy inception.
J. Premium audit
K. Transfer Of Rights Of Recovery Against
Others To Us
The insured can waive rights of recovery against other parties in writing prior to the loss. However, it cannot do anything after a loss to impair the company’s rights to recovery. The named insured can waive its rights to recovery after a loss only if it controls or owns the business, if the business owns or controls the named insured or if the individual or business is the named insured's tenant. The named insured can accept normal bills of lading that limit the liability of carriers without restricting its insurance.
Note: Nonstandard bills of lading should be scrutinized carefully.
With respect to liability coverage, but not medical payments, the insured must ensure that the insurance company has the right to recover all payments made and help it enforce those rights. The insured may not impair those rights.
L. Transfer Of Your Rights And Duties Under
This Policy
The named insured may not transfer its rights under the policy without the insurance company’s written agreement. However, practical considerations apply when an individual named insured dies. When that happens, the named insured's rights and duties transfer to his or her legal representative. The representative has insured status only while acting within the scope of its duties as a legal representative. Anyone having proper temporary custody of the deceased named insured’s property assumes the named insured's rights until a proper legal representative is appointed.
Note: Readers viewing the electronic version of this analysis should return to the beginning to access links to the other parts of the analysis.
BP 00 03–BUSINESSOWNERS COVERAGE FORM ANALYSIS
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Index Lead-In Language Section I–Property A. Coverage B. Exclusions C. Limits Of Insurance D. Deductibles E. Property Loss Conditions F. Property General Conditions G. Optional Coverages H. Property Definitions Section II–Liability A. Coverages B. Exclusions C. Who Is An
Insured D. Liability And
Medical Expenses Limits Of Insurance E. Liability And
Medical Expenses General Conditions F. Liability And
Medical Expenses Definitions Section III–Common Policy Conditions (Applicable To Section I–Property And Section II–Liability) |
BP 00 03–BUSINESSOWNERS COVERAGE FORM
The 07 02 edition of the ISO Businessowners policy combined three coverage forms together into one large package. The 01 06 edition included a number of editorial changes that naturally follow a major change like the 07 02 edition. In addition, a number of changes were needed to standardize terms and align the wording of this policy with the wording in other commercial insurance coverage forms and policies. Finally, some coverage restrictions and broadened coverages were added. The 01 10 edition makes changes necessitated by industry changes and new technologies.
NOTE: This
analysis is of the 01 10 edition. Changes from the previous edition are in
bold print.
LEAD-IN LANGUAGE
You and Your mean the named insured on the declarations.
We, us and our refer to the insurance company providing coverage.
Note: Refer to Who Is An Insured to understand how insured applies under the Liability section.
Words and phrases with special meanings are defined. Property definitions are at the end of Section I–Property. Liability And Medical Expenses Definitions are in Paragraph F. in Section II–Liability.
SECTION I–PROPERTY
A. Coverage
The insurance company pays for direct physical loss or damage due to a covered cause of loss to covered property at covered locations listed on the declarations.
Note: This does not include consequential or indirect losses. Some indirect losses are covered in the section on business income. However, some indirect losses are not covered at all, such as losses due to recall of a product after a tampering scare or recall of products to repair defects.
1. Covered
Property
In order for a type of property to be covered, a limit for it must be on the declarations. Even when there is a limit for a class or type of property, coverage does not apply unless it is eligible and not otherwise excluded or limited.
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Example: The declarations for the BOP issued to Karen’s Krafthowse includes the following: Property: 2011 Cadillac Escalade Limit: $93,500 In this case, coverage does not apply because automobiles are not eligible for coverage. |
a.
Buildings
Note: While each building at a particular location does not have to be listed, a complete description of the covered premises is suggested. Street addresses may be sufficient or a clear geographical reference may also be required. Described premises means all land included in the legal description of the premises on the declarations. This is necessary so that a claims adjuster has no questions as to the existence of the risk. A poor or inaccurate description of the location or premises involved could lead to a denial of coverage.
Note: As opposed to buildings, structures means garages, sheds, outbuildings and other real property not attached to buildings.
Note: Property in the open is not covered for loss or damage caused by rain, snow, ice or sleet.
Machinery and equipment is treated as building property if properly installed as a permanent part of a building or structure. Examples include non-portable heating and air-conditioning equipment, machinery that must be placed on a special foundation and machinery that cannot be removed without significantly modifying the building.
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Example: Robert's Restaurant is insured under a Businessowners Coverage Form. The building's replacement cost is $1,000,000 and is insured for $850,000. During construction of an addition, the wiring in the existing building overloads and the resulting fire causes $1,000,000 in damage. The value of the nearly complete addition is $150,000. While the loss would normally be adjusted on a replacement cost basis, the adjuster informs Robert that the building replacement value at the time of loss was $1,150,000. As a result, an underinsurance penalty is applied to the loss because the $850,000 limit is less than 80% of the total replacement cost values at risk. |
Note: Most new construction is written using builders risk coverage forms or policies.
Note: Many different types of property can be included in building. This is an advantage because the coverage must be flexible enough to address exposures that might otherwise be overlooked. On the other hand, the named insured must be aware of the potential impact this has on insurance-to-value requirements. The replacement cost of each type of property must be included in the building limit in order to properly calculate the premium. If the limit at the time of a covered loss equals at least 80% of the full replacement value, replacement cost coverage applies up to the limit. If it is less, the loss is adjusted with an underinsurance penalty or possibly on an actual cash value basis.
b.
Business Personal Property
Covered business personal property can be in or on buildings situated at the described premises, in the open, in or on vehicles, or within 100 feet of it. It includes:
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Example:
A fire destroys Robert's Restaurant’s kitchen and the adjacent pantry
and storage area. It also destroys a custom-built racing bicycle valued at
$7,500. Robert rides the bike to and from his home and keeps it in the
storage area when not in use. The bicycle is not covered as business
personal property. |
Note: Labor, material and services the named insured provides on property of others it performs work on is covered. Examples are screen-printing slogans on customers' tee shirts, adding fragrance to shampoo, repairing lawnmowers, or packaging products for others. These are processes where coverage applies for the value added by the named insured’s services. Its insurable interest includes labor at a rate for anyone involved in the process and the raw materials consumed, including power, chemicals, and the value of any other services.
Note: Improvements are not personal property that a tenant-insured acquires and takes with it when it vacates the premises, such as movable refrigeration units or non-fixed shelving. Improvements can be made to the occupied structure, garages or any outbuildings. Some common improvements are false ceilings, interior walls, lighting fixtures, upgraded electrical wiring, telephone switching systems, cooking equipment, heating, ventilating and air conditioning systems, carpeting, built-in shelving, and common renovations such as a new roof by a tenant with a long-term lease. It does not include, and coverage does not apply to, improvements the landlord pays for. Improvements that can legally be removed are covered under other business personal property coverage provisions. Improvements are valued at replacement cost if actually replaced. If not, the loss settlement is based on a formula incorporating the named insured's use interest in the property. This formula pro-rates its original cost as it relates to the length of time between the date of installation and the expiration of the lease or any renewal option period.
2. Property
Not Covered
Coverage
does not apply to the following:
a. Aircraft, automobiles, motor trucks and other vehicles subject to motor vehicle registration laws or statutes This means that mobile equipment used to service the existing buildings or structures on the described premises or to renovate or modify the existing buildings or structures including additions is covered but ONLY if not subject to any motor vehicle registration laws. Stock of mobile equipment held for sale is also covered, subject to it being on the insured premises or within 100 feet of it.
b. Money and securities, unless covered under the money and securities or employee dishonesty optional coverage
c. Contraband and any other illegal property, including legal property in the course of illegal transportation or trade
d. Land, water, growing crops and lawns. However, eligible feed and grain stores have coverage for stock stored inside the building. Stock stored outside is not covered for physical loss or damage caused by sleet, hail, rain or snow.
e. Outdoor fences, radio or television antennas, including their lead-in wiring, masts or towers, satellite dishes, signs other than signs attached to buildings and trees, shrubs or plants. Coverage Extensions–Outdoor Property and Optional Coverage–Outdoor Signs provides limited coverage for some of this property. Signs attached to the building are covered if they are part of the building for up to $1,000.
Note: Coverage applies to signs attached to buildings but not to signs attached to structures. Coverage for detached signs may be added by entering a separate limit on the declarations using Optional Coverage–Outdoor Signs.
f. Watercraft, its equipment and accessories while afloat. However, coverage applies if the watercraft is on a dock, on shore, or in the named insured’s showroom as stock. Coverage does not apply to loss or damage caused by rain, sleet, snow or hail to covered property in the open.
Note: Since coverage does not apply to watercraft while afloat, either owned or held for sale as stock, this coverage form should not be used to cover marinas, most boat-dealers, or for owned boats or yachts. Coverage for those exposures and operations should be purchased from companies that write policies specifically for boat dealers and boat yards.
g. Accounts, bills, food stamps, other evidences of debt, accounts receivable or valuable papers and records. Some coverage is provided under extensions of coverage elsewhere in the policy. This exclusion sets the stage for providing coverage for accounts receivable and valuable papers as such an extension of coverage. This wording is intended to exclude coverage from more than one area of the policy.
h. Computers installed in aircraft, watercraft, motor trucks or other vehicles subject to motor vehicle registration laws.
Note: Computers held as stock are covered.
i. Electronic data, except as provided for under Additional Coverages–Electronic Data.
i. Electronic data. Item p. under Additional Coverages provides limited coverage.
Note: Prepackaged programs considered stock are covered.
j. Animals but there are two exceptions.
Animals owned by others that the named insured boards are covered. Animals the
named insured owns that are considered stock are covered but only while inside
the building (01 10 addition).
Note: Coverage on excepted animals is very limited. Refer to Limitation b. (1).
3. Covered
Causes Of Loss
Coverage applies to risks of direct physical loss or damage to covered property by a covered cause of loss not otherwise excluded or limited.
Note: This approach requires the insurance company to cite the exclusion or limitation that excludes coverage. There is coverage if the insurance company cannot prove that the loss is excluded. Direct physical loss or damage does not include any loss of use or the perceived loss in value of goods in the marketplace after an otherwise covered cause of loss occurs.
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Example:
The owner of Traktor Patch Lawn Supplies recently purchased the season’s
inventory of lawn tractors. The brand of tractor received a negative rating
from a consumer watchdog group because of the potential for fire. A fire
broke out after a salesman tried to start one, resulting in damage to the
shop. The loss became a local news feature and was used as an example of
that brand's quality problem. After this event, Traktor was unable to sell a
single tractor, even after it offered large discounts. The damage caused by
the tractor fire was covered but the resulting loss of income and perceived
loss of value to the other tractors was not. |
4.
Limitations
a. The insurance company does not pay for loss of or damage to:
Note: Examples of excluded events include breakdown, seizing up, centrifugal force explosions, overheating due to leaking fluids, electrical shorting, improper installation, or improper maintenance or calibration causing breakdown, centrifugal force explosion, or electrical shorting. Coverage is available in this coverage form under either Optional Coverage 4. Equipment Protection Coverage or with separate equipment breakdown protection coverage.
Note: Damage to the boiler, pipes, engines, or turbines caused by an explosion of gases or fuel within the furnace of the boiler, flues, passages, chimneys and exhaust pipes that combustible gas passes through is covered.
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Examples: These are examples of covered explosions. A pilot light on a boiler goes out but gas continues to fill the chamber. Sparks from the pilot light trying to re-ignite itself cause the boiler to explode. The boiler's adjustment is incorrect, allowing the fuel mixture to become too rich. Unburned fuel accumulates in the chimney and explodes. The exhaust fan drive belt falls off, exhaust and fumes accumulate, and the boiler explodes. The damage caused by the belt fan falling off is not covered but loss or damage to the boiler caused by the explosion is. |
Note: Breakdown coverage can be added with Optional Coverage 4.–Mechanical Breakdown. Coverage for other causes of loss is available under equipment breakdown protection coverage forms and policies.
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Example: The quarterly inventory reveals 100 computer monitors missing. Rechecking sales and deliveries confirms that this number is correct. There is no evidence of a break-in, a break out, or forged sales slips and, even after a series of extensive interviews, no employee confesses or is implicated in the loss. This loss is not covered because there is no tangible or physical evidence to back up the loss. |
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Example: Felix has a purchase order for 250 cartons of cigarettes to be sent to Miller General Store. The required signature is missing but it’s a busy day and Felix processes the order without checking. The delivery is made, signed for, and the invoice returned to purchasing. When payment is requested, Miller denies making any order. When the signatures are checked, the signature on the receipt does not belong to anyone who works at Miller. Miller is not obligated to pay Felix and neither is Felix’s insurance company. |
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Example: Millie and May were tenants and moved out of Pricey Woods Apartments. While cleaning the empty apartment, they opened all the windows to release the fumes from the cleaning products they used after which they surrendered their keys to the building manager and left. Things were hectic due to the holidays and it was a week before the maintenance crew arrived at the apartment to begin preparing it for a new tenant. During that week, a major rainstorm drenched the carpeting. Mildew set in and ruined the wallboard and windowsills. Pricey Wood's damage was not covered because the rain entered through the window but the exterior of the building was not damaged. Example: Sam is lying in bed one evening and a drop of water lands on his head. The drop becomes a trickle and then a stream. He discovers that the water is coming from the ceiling. His landlord inspects the damage and realizes that, while the ice pack on the roof is still pretty thick, the heat from the building has thawed a small patch of it. As a result, the water has no place to go and is forced down through the ceiling. Since this situation is due to snow and ice thawing, coverage may apply for the ceiling damage. |
b. Coverage does not apply to the
following property unless caused by or resulting from a specified cause of
loss or breakage of building glass: (01 10 addition)
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Example: A shelf in Sam's Sundries collapses due to the weight of business personal property and items tumble to the floor. Ceramic figurines valued at $700 and glass soft drink bottles worth $1,000 are broken. The ceramic figurines are not covered because collapse is not a specified cause of loss. The glass soft drink bottles are covered because collapse is a covered peril and no special sub-limit applies to glass containers of property held for sale, other than what is limited for other personal property. |
c. Theft coverage for the following types of property is limited:
Note: Jewelry and watches valued at less than $100 apiece are not subject to this limitation.
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Example:
McCarty’s Department Store was involved in a smash and grab incident
that took less than a minute. The perpetrator broke through the display case
glass and grabbed two handfuls of watches. He escaped and eluded capture.
The owners checked the inventory and location of the merchandise and
determined that five watches valued at $500 each were taken, ten watches
valued at $75 each were missing and twelve watches
valued at $50 each were gone. Because the lower-priced items were on the top
shelf, the insured may be almost completely covered, subject to the
deductible and policy limits. |
In addition, see The Insurance Marketplace, a publication of The Rough Notes Company, Inc., for insurance markets that write jewelers block coverage.
5.
Additional Coverages
a. Debris Removal
Debris usually remains after a physical loss occurs, resulting in the need for coverage to clear it away. This relatively simple concept has become one of the more heated areas of discussion with respect to property coverage because of numerous attempts to find coverage for pollution losses in it. Debris removal is not meant to be cleanup coverage. However, because the coverage is so simple, its language has unintentionally covered significant losses.
Debris removal coverage is explained in four paragraphs. Each paragraph builds on the one before it.
(1) The first paragraph covers actual debris removal expenses subject to the following:
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Example: A tornado destroys Sara’s Shoppe. The debris removal expense is $5,000. Since Sara must incur the cost of removal, the property is covered. Since tornadoes are covered causes of loss and the loss occurred during the policy period, coverage should apply if Sara reports the expense within 180 days after the date of loss. |
Note: Paragraph (1) is subject to paragraph (3) and (4)
(2) This paragraph is subject to the limitations in paragraphs (3) and (4). This is not pollution coverage. Removal of pollutants from land or water, or removal, restoration, or replacement of polluted land or waters is excluded.
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Example: The tornado deposited paint and other toxic chemicals in a pond on Sara’s property. There is no coverage to clean the pond because of this exclusion. |
(3) This paragraph relates to paragraph (1) and provides the basic limits. Paragraph 4 below provides additional limits, subject to two distinct limitations:
(a) The total payment for a direct loss (not just
the debris removal) will be the lesser of the following:
(b) The total payment for debris removal is the
lesser of the following:
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Example:
Sara has a $50,000 limit and the direct physical loss amounts to
$50,000. Since the total paid for debris removal and direct loss is not more
than the limit of insurance, based on this paragraph, Sara does not receive
the debris removal payment. |
4) This paragraph provides an additional $10,000 for debris removal if one of the limitations in paragraph (3) above is reached. With this provision, the total payment for a direct loss, including debris removal, is the actual physical loss or damage, plus debris removal expense, or the covered property’s limit of insurance plus $10,000 debris removal additional coverage, whichever is less.
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Example: Sara has coverage for $50,000 and up to $10,000 for debris removal. Since the removal expense is only $5,000, the insurance company pays Sara’s entire loss. |
The total paid for debris removal is the amount paid for the physical loss, including deductible, multiplied by 25%, plus an additional $10,000, or the actual debris removal expense, whichever is less.
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Example: Since Sara’s debris removal expense recovery is limited by the actual debris removal expense, she receives only the $5,000 of actual debris removal expense. |
The coverage form includes two examples to explain the coverage in greater detail and to make it clearer, especially the deductible and the occurrence basis.
b.
Preservation Of Property
If covered property is threatened by a covered cause of loss, it may be removed to any other location for up to 30 days. Neither the property moved nor the building where it was originally stored must sustain damage for coverage to apply. Removal is virtually all-risk insurance, because once the property is threatened by a covered cause of loss, virtually anything that happens to it either in transit or in storage is covered.
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Examples:
A hurricane will make landfall at the Ronnie's Retail Outlet. The store's owner loads its trucks with merchandise and removes it to a warehouse outside the storm’s path. The truck is involved in an accident in the fog and rolls over and $100,000 worth of the removed goods is damaged. This loss is covered. A fire damages Ronnie's roof. Desks and other furnishings are removed to a storage warehouse to protect them from damage by rain and other elements. An earthquake ten days later causes the warehouse to collapse and the desks and furnishings sustain $30,000 in damage. This loss is covered. A tornado destroys every commercial building in
town, including those that might be used as storage facilities. Ronnie moves
his salvageable goods to a self-storage building 50 miles away. A fire
occurs there 45 days later. This loss is not covered because the temporary
removal coverage is limited to 30 days after removal. |
c. Fire
Department Service Charge
If assumed by a contract entered into before a loss or if required by a local ordinance, coverage is available for fire department service charges up to $2,500. This limit can be increased.
Note: The fire department must be asked to respond to the threat of or to an actual covered cause of loss.
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Examples:
Based on a written contract between Ronnie and the city, the fire department must respond to any call to his property. The fire department charges $500 for each response. Coverage applies even if the property is not damaged, such as to threats of loss from a neighboring brush fire. In Ronnie's unendorsed BOP, the fire department
is called and responds to damage caused to his building by an earthquake, an
excluded cause of loss. When the building collapses, one of the collapsed walls
cuts the gas main. A spark ignites the leaking gas
and the resulting fire destroys the remaining undamaged property while the
fire department is on its way. Because the fire department was asked to
respond to the earthquake, the fire department service charge does not
apply, even though the property damaged as a result of the ensuing fire was
covered. |
d.
Collapse
The doctrine of concurrent causation holds that an all-risk policy must pay if a loss to property is attributable to two causes, one excluded by the policy and the other covered. By applying this concept, coverage has been found for earth movement, flood and other specifically excluded events. In an effort to avoid the problems of concurrent causation, there are the specified causes of loss that apply to collapse coverage.
This Additional Coverage applies only to
abrupt collapse as described and limited in Paragraphs d. (1) through d. (7)
(01 10 change).
(1) Abrupt collapse is any sudden and unexpected
falling down or caving in of a building or any part of a building. The
collapse must be such that the building cannot be used as intended.
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Example:
Major decides to retire and sell the store he owned for 55 years. He has
a realtor/appraiser come to the store to estimate the price he should charge
for the business. While inspecting the property, the appraiser realizes the
building is in imminent danger of collapse. He informs Major of the
building's condition and that it may soon collapse. Major notifies his
insurance company but it denies coverage because
the building has not actually collapsed. |
(2) The insurance company pays for direct physical
loss or damage to covered property caused by abrupt collapse of a covered
building or any part of it caused by one or more of:
(a) Hidden building decay an insured did not
know about before the collapse
(b) Hidden vermin or insect damage an insured
did know about before the collapse
(c) Use of defective material or methods
during renovation, remodeling or construction activities,
if the abrupt collapse occurs during such activities
(d) Use of defective material or methods
during renovation, remodeling or construction
activities, if the abrupt collapse occurs after such activities are complete
if the collapse is caused only by:
·
One of the causes of loss in (2) (a) or (2)
(b) above
·
One or more specified causes of loss
·
Breakage of building glass
·
Weight of people or personal property
·
Weight of collected rainfall on a roof
(3) This Additional Coverage does not apply:
(a) When a building or any part of it is
considered in danger of caving in or falling down but has not yet done so
(b) To the part of a building that remains
standing, even if it has separated from another part of the building
(c) To a standing building or building part
that can be proved to be leaning, settling, shrinking, expanding, bulging,
cracking, sagging or bending
4) Awnings, gutters, downspouts, yard
fixtures, outdoor swimming pools, piers, wharves, docks, retaining walls,
walks, roadways, paved surfaces and beach or diving platforms or appurtenances
are covered for collapse only if when the abrupt loss is due to a cause in (2)
(b) through (2) (d) above. However, coverage applies only if the damage to the
listed property is a direct result of a covered building collapsing abruptly.
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Example: The weight of rain from the torrential rainstorm caused the awning to collapse. There is no coverage. The weight of rain from the torrential rainstorm caused the roof to collapse and that collapse caused the awning to buckle and collapse. This loss is covered. |
(5) The insurance company pays for loss or
damage to covered property if personal property abruptly caves in or falls
down and that collapse is not the result of an abrupt collapse
of a covered building but only if all of the following apply:
(a) The collapse of personal property was due
to a cause of loss in (2) (a) through (2) (d) above
(b) The personal property that collapsed was
inside a building
(c) The property that collapsed was not one of
those in (4) above, regardless of whether it was treated as real or personal
property
This coverage does not apply to personal
property if the only damage to it caused by the collapse was marring and/or
scratching.
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Example: While Major ponders the denial of coverage in the example above, his cat suddenly jumps off a shelf, the shelf collapses, and both it and all the property on it are destroyed. This claim is covered, after the deductible is applied, because the decay in the wall caused the shelf to separate from the wall. |
(6) This Additional Coverage does not apply to
personal property that has not abruptly caved in or fallen down even if it
appears to be leaning, settling, shrinking, expanding, bulging, cracking, sagging or bending
(7) This Additional Coverage is part of the
limit of insurance, not in addition to it.
(8) Covered Cause Of
Loss includes this Additional Coverage as described and limited in everything
above.
e. Water
Damage, Other Liquids, Powder Or Molten Material
Damage
When a covered water, liquid, powder or molten material damage loss occurs, coverage also applies to undamaged property that must be torn out to stop the flow of the water, liquid, powder or molten material causing the damage. It does not pay costs to repair the defect that caused the loss or damage.
In addition, costs to repair or replace damaged parts of fire extinguishing equipment are covered if such damage is directly caused by freezing or the damage causes any substance in an automatic fire protection system to discharge.
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Example: A water leak occurs on the second floor. It leaks through the ceiling to the first floor and causes extensive damage. The damage is all covered but the undamaged plaster on the second floor must be removed in order to find, stop and repair the leak. Unfortunately, the leak is hard to find and a lot of plaster must be removed to locate and repair the leaky pipe. Coverage applies to the property damage caused by water as well as the destruction and repair of the walls. The part of the loss not covered is the repair of the pipe itself. The insured bears that cost. |
f.
Business Income
(1)
Business Income
(a) If the named insured's operations at a covered premises must be suspended because of direct physical loss or damage to covered property by a covered cause of loss, a business income loss occurs. The insurance company pays for the actual loss of business income sustained while operations are suspended. Payments made are not for longer than the period of restoration. With respect to personal property in the open or in or on a vehicle, premises also includes the area within 100 feet of the site where the described premises are located. If the named insured occupies only part of the site where the described premises are located, premises means:
· The portion of the building the named insured occupies, rents or leases
· Any area inside the building or on the site of the described premises that services or is used to gain access to the named insured's premises
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Examples: Ohio Valley Dental is located on the floor above Van’s Drugstore. A door just inside the drugstore leads up a flight of stairs to Ohio Valley's premises. A fire at Van’s does not damage Ohio Valley Dental but access to its premises is denied because of damage to Van's and the staircase. Ohio Valley is covered because the staircase is considered part of its premises. Grumley’s Restaurant is located on the first floor of a five-story building. A fire starts in the basement and destroys the electrical controls. Grumley’s must suspend operations even though it has not sustained any direct damage. |
(b) The insurance company pays for only the loss of business income sustained during the restoration period that takes place within 12 consecutive months after the date of the covered loss or damage. However, it pays for ordinary payroll expenses for only 60 days after the date of loss unless a higher number of days is on the declarations.
Note: The defined period of restoration does not begin until 72 hours after normal business operations are suspended. This approach establishes a deductible expressed in terms of time without a dollar limitation.
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Example: A fire starts at Jones Hardware at 8:00 a.m., just after the first shift arrives. Work ends at 8:15 a.m. but the fire rages for more than eight hours, finally ending at 4:45 p.m. Under the suspension of operations provision, even though the fire progressively damages the building and extends the necessary period of restoration, the interruption begins at 8:15 a.m., when the fire started, not at 4:45 p.m., when it ended. |
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Example: The same interpretation of when a loss begins can apply to causes of loss that take longer to occur, such as floods, hurricanes and earthquakes. This time BP 10 03–Earthquake is included. There is no loss of income if the first earthquake tremor that occurs on Tuesday does not damage the business. However, a tremor on Thursday at 8:00 a.m., which is within 72 hours of the first movement, causes the named insured's building to collapse. The business income loss begins at 8:00 a.m. on Thursday, the moment that the direct physical damage interrupted operations, not the moment when the earthquake covered cause of loss first occurred. A 72-hour waiting period after operations are interrupted applies before coverage begins. |
Note: The business income deductible under this 72-hour waiting period arrangement may have a greater financial impact on the average business than other property deductibles.
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Example: A business with no seasonal peaks and valleys needs $500,000 of annual business income coverage. This converts to an average of $1,370 per day or a total uninsured 72-hour loss of $4,110. If a hardware store needing the same amount of coverage derives 60% of its annual income in the spring and sustains a loss at that time of the year, its deductible is almost $10,000, based on $500,000 x .60 ÷ 90 days = $3,333 per day. |
A three-day deductible for a business with peak seasons involving short-term events such as spring break, local fairs or events, auto races, or a Triple Crown horse race could lose much of its annual revenue during the 72-hour waiting period. The Businessowners Coverage Form does not have a standard endorsement that reduces the 72-hour waiting period deductible.
(c) Business income is defined as the net income that would have been earned or incurred if a physical loss or damage had not occurred. It excludes net income that could have been earned due to an increase in business volume due to favorable business conditions caused by the impact of the covered cause of loss on its customers or other businesses. It also includes continuing normal operating expenses and payroll incurred.
Note: Net income is the net profit or loss before income taxes.
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Example: Lumberyard A was located directly in the path of an oncoming tornado but Lumberyard B was located far from it. After the tornado, Lumberyard B was able to raise its prices and have an incredibly profitable season. On the other hand, Lumberyard A was closed during the sales season which included the opportunity to supply material for the repairs faced by customers who also suffered tornado damage to their properties. Note: Business income losses are adjusted with an eye to the future. What would Lumberyard A's earnings have been if it was open for business during the period of restoration? Let’s assume there was no tornado and Lumberyard A simply burned down. The adjuster looks at its earnings history, the state of the local and national economy during the period of restoration and the company’s historical peaks and valleys during the same period. This evaluation results in an estimated income loss amount that is paid. When examining the local economy, the adjuster discounts the supply and demand pricing that Lumberyard B charges to generate its huge profits. |
Business income coverage is intended to put a business back into the same condition it was in before the loss. This coverage philosophy means that strange economic twists that occur with disasters are ignored.
(d) Ordinary payroll expense is the payroll for all employees except officers, executives, department managers, contract employees, and any additional exemptions on the declarations, such as job classifications or specific employees. In addition to payroll, it includes employee benefits directly related to payroll, FICA payments and union dues the named insured pays, and workers' compensation premiums.
Note: Company health insurance premiums not directly related to payroll, such as payments covering an employee’s dependents, are not considered ordinary payroll expenses. They would be considered normal expenses not related to ordinary payroll. As a result, the company could continue to pay for the Health Insurance premiums of ordinary payroll employees after the 60-day benefit period for ordinary payroll. This may be important for businesses with a large ordinary payroll staff that, if the ordinary payroll "employees" were to be laid off, could cause cancellation or modification of a favorable Health Insurance plan.
(2) Extended Business Income
(a) This coverage begins when the period of restoration ends. It pays business income loss:
Note: Property does not include finished stock.
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Example: Smith Hardware is located downtown and experiences a devastating fire. It finds a substitute location from which it resumes operations two months later. However, during the period its operations are suspended, regular customers take their business to the big box hardware operation at the edge of town. When Smith Hardware's operations resume, customer traffic is down and sales are lower than before the fire. Because of the extended business income, the insurance company pays the difference between what Smith normally earns in covered business income and what it actually earned. |
Extended Business Income does not apply to loss of business income incurred due to unfavorable business conditions caused by the impact of the covered cause of loss in the area where the covered premises is located.
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Example: Francine's Flowers is the only florist in an Focus again on our florist. However, eliminate the monsoons. Instead, the flower shop burns to the ground, while hundreds of miles away, a hurricane wipes out the season's flower crop. Flower prices skyrocket and people in the florist's community no longer purchase from the shop. |
(b) Direct physical loss or damage at the covered premises by a covered cause of loss must cause the loss of business income.
(3) Under Business Income Additional Coverage, the term suspension is does not require that all operations cease. Suspension can be either a partial slowing down or a complete shutdown. Suspension also occurs when any or all of a described premises is untenable.
(4) This Additional Coverage is not subject to Section I–Property, Limits Of Insurance.
Note: The business income coverage provided is not subject to a dollar amount limitation but is considered actual loss sustained coverage. The concept of actual loss sustained is sometimes referred to as unlimited or no-limit business income. These terms are incorrect. While there is no set dollar limit, there is a limit to the coverage. Coverage is limited to the amount the business would have earned during the "period of restoration" if it was not damaged by a covered cause of loss. Using the term unlimited or no-limit can cause the same problems as using the term all risk. Using these terms may give the insured a false impression that it has a virtually unlimited amount of money at its disposal.
g. Extra Expense
In many
cases, a loss creates only a short suspension of operations. However, even a
brief interruption can result in extraordinary expenses. Necessary extra expenses
are those incurred during the "period of restoration" as a result of
a covered cause of loss directly damaging property at the described premises.
It includes personal property located in the open or in or on a vehicle within
100 feet of the described premises. Extra expense can involve costs incurred
to avoid or minimize the suspension of business at either the described
premises or at a replacement or temporary premises. These extra expenses
include relocation expenses and costs to equip and operate the replacement or
temporary locations. Such costs are covered even if there is no suspension of
operations.
(1) The insurance company pays necessary extra expenses the named insured incurs during the restoration period that would not have been incurred if there had not been a covered loss. The covered loss must be from direct physical loss or damage to covered property at the described premises. Personal property within 100 feet of the described premises while in the open or in or on a vehicle is considered on the described premises. If the named insured occupies only part of the site where the described premises are located, premises means that portion of the building it occupies, rents or leases. It also includes any area either inside the building or on the site of the described premises used to gain access to the named insured's premises or that provides services to the premises.
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Example: B&G Auto Parts burns to the ground on Sunday. By Monday morning at 9:00 a.m., its parts supplier has two semi-trailer loads of stock parked at B&G’s parking lot and B&G doesn't lose even a minute's sales time. However, the extra expense of expediting the delivery of two semi-trailer loads is $10,000 and the cost to rent and power these trailers is $100 per day. |
(2) Extra Expense is defined to be incurred expenses that do any or all of the following:
(a) Allow the business operations to continue at the described premises, at a temporary location, or at a permanent replacement location. If a new or temporary location is secured, the costs to move the business and equip the location are also extra expenses.
(b) Shorten the amount of time the operations are suspended
(c) Repair or replace property. This also includes the cost to research and duplicate damaged valuable papers or records. This item pays only the amount of expense incurred that actually reduces the business income or extra expense loss.
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Examples:
Patterson's Printing burns to the ground. It cannot operate without presses and operations are suspended. Patterson orders new presses but delivery will take six months. Patterson produces extremely high-quality goods and cannot operate with used equipment that has not been overhauled. No supplier has overhauled used equipment available sooner than six months. However, the presses can be delivered in only three months if Patterson pays a $10,000 premium to move up the waiting list and $15,000 in airfreight charges. The insurance company agrees to this because each month of suspension costs them $50,000. By reducing the period of suspension by three months, the company saves $150,000 less the $25,000 in expediting expenses. Patterson is paid for the first three months of suspension and gets back into business three months sooner, helping it retain its customers. Aardvark Abstracting and Title Search loses most of its records in a fire. It finds permanent new office space within two days. Because most of its time is spent in the county office reviewing deed and property records, it can virtually continue operations without interruption. However, the fire destroyed 20 years’ worth of copies of title records made from county records. A computer tape was made of customers' records and kept off site, while back title pages had been copied. Recopying title pages costs $1 per page and many hours of research. There is little or no coverage in this situation because the period of restoration for extra expense begins only at the moment fire first interrupts the business and ends when business resumes at the permanent replacement location. |
(3) Under this coverage, the term suspension does not require that all operations cease. Suspension can be either a partial slowing down or a complete shutdown. Suspension also occurs when any or all of a described premises is untenable.
(4) As with business income coverage, extra expense must occur within the
12 consecutive months immediately following the date of direct physical loss
or damage. There is no set limit of insurance for extra expenses. Any covered
extra expense must be incurred during the period of restoration.
Note:
The Businessowners
Coverage Form's language gives the insurance company some say in how it
interprets the restoration period.
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Example:
W&W Dry Cleaning sustains a lightning loss to its line of dry-cleaning
machines. Business is suspended for a week until alternate facilities can be
rented during the night shift. The loss of income incurred during the period
of suspension is covered. Rent is paid for the alternate facilities and use
of the machines and extra wages are paid for the workers to work the night
shift. Both of these extra expenses are initially covered. W&W can
replace its machines with one of two identical models from two
manufacturers. Model A can be installed in six weeks. Model B requires eight
weeks to install. W&W decides to order Model B. The insurance company
determines the period of restoration to be the six weeks needed to restore
operations with the perfectly functional Model A. As a result, the extra
expenses W&W incurs during the additional two weeks beyond the period of
restoration using Model B are not covered. |
h.
Pollutant Cleanup And Removal
The insurance company pays the named insured's expenses to remove pollutants from land or water at the described premises if the pollutants were caused by or resulted from a covered cause of loss that takes place during the policy period. The company pays only if the named insured reports them to the company within 180 days of the date the covered cause of loss takes place. While coverage does not apply to costs to test for, monitor or assess any aspect of pollutants, the company does pay for testing done in conjunction with extracting pollutants from either land or water.
This coverage is limited to not more than $10,000 for an individual location. It is the most paid for that total of all such losses at the location that occur during each 12-month period, regardless of the number of claims.
Refer to The Insurance Marketplace, a publication of The Rough Notes Company, Inc., for a list of markets that provide pollution coverage. Suggested pollution policies include Environmental Impairment Liability, Pollution Cleanup Indemnity and Underground Fuel Tank Pollution Liability.
i. Civil
Authority (01 10 change)
If a covered cause of loss damages premises
other than the named insured's in such a way that the civil authority
restricts access to the insured premises, coverage applies for up to four consecutive
weeks with business income coverage starting 72 hours after the restriction
begins. Extra expense is not subject to a waiting period and ends after four
weeks or when the civil authority business income coverage ends, whichever is
later.
This is
subject to both of the following:
(1) The
described premises must be not more than one mile from the damaged property.
(2) The
reason for the restriction must be due to either damage resulting from a
covered cause of loss or the civil authorities need
to gain access to damaged property.
Note: The one-mile limitation is a significant reduction of coverage that probably had its birth with the 09/11/01 business income claims. One mile may appear to be a large area in a densely populated urban space but is a very small area in less populated suburban and rural settings. The impact could be significant for businesses located in any disaster area where civil authorities may close an area in order to maintain control even though many properties may be unharmed. Examples to consider are any of the coastline communities following a hurricane or rural communities after a tornado. Some businesses or communities may be relatively unharmed following a storm but the civil authorities prevent entry to it in order to maintain control of the larger area that is severely damaged.
This coverage is subject to the definitions in Business Income and Extra Expense and, similar to those coverages, is not subject to a limit of insurance.
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Example:
A riot two blocks away from the insured begins on Tuesday at 9:00 p.m.
Civil authorities shut down all access to the area the next morning at 8:00
a.m., including the streets that offer access to the insured’s 24-hour
convenience store. The looting continues and the streets remain closed until
Saturday morning at 6:00 a.m. During that time, the insured could not find
suitable inventory or a place to conduct temporary operations outside the
riot zone. The loss amount is calculated at $145.00 per hour. While the riot
began at 9:00 p.m. on Tuesday, the action of civil authority did not begin
until 8:00 a.m. on Wednesday. The 72-hour waiting period begins at that time
and lasts until 8:00 a.m. on Friday. Coverage is available for only the 22
hours of interrupted business between 8:00 a.m. on Friday and 6:00 a.m. on
Saturday. The total paid loss is $3,190 but the total incurred loss is
$13,360. |
This coverage for necessary Extra Expense begins
immediately after the time that the civil authority first acts to prohibit
access to the described premises and ends four consecutive weeks after the
date of the action or when the named insured's coverage for Business Income
ends, whichever is later.
Business Income and Extra Expense, as defined
in Additional Coverages–he Business Income and Extra Expense also apply to
this coverage. This Additional Coverage is not subject to Section I–Property,
Limits Of Insurance.
j. Money
Orders And Counterfeit Money
The
insurance company pays for loss that is a direct result of the named insured
accepting money orders issued by any post office, express company or bank that
are not paid when presented. It also covers such loss due to counterfeit money
being accepted in exchange for merchandise, money or
services. The most paid in any one loss is $1,000.
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Examples:
The insured’s clerk accepts a counterfeit $50 bill that is found and destroyed by the bank. The loss is less than the $500 deductible but otherwise is a covered cause of loss. Able Pharmacy and Check Cashing cashes a
counterfeit United States Postal Service money order for $1,000. $500 is
paid after the $500 deductible is applied. |
There is no provision to increase this limit. Additional coverage is generally not available in other standard ISO commercial property coverage forms because the exposure created by accepting large amounts of counterfeit money generally exist only in situations where large amounts of money are exchanged, such as at banks and casinos. Their employees are usually trained to spot counterfeits or have equipment to help them do so. Check cashing services also have a significant exposure to this kind of loss.
Refer to The Insurance Marketplace, a publication of The Rough Notes Company, Inc., for a list of specialty insurance companies that offer this coverage for these exposures.
k. Forgery
Or Alteration
Coverage applies to loss due to forgery or alteration of any named insured issued check, bill of exchange, draft, bill of exchange, or similar written promises of payment in money. They could be issued by the named insured, its agent, or someone posing as them. In addition, if the named insured is sued for refusing to honor such items because they appear to be forged or altered, the insurance company pays reasonable legal expenses it incurs but only if the company is notified and is given written permission to pursue a defense.
The term check includes substitute checks that meet the definition in the Check Clearing for the 21st Century Act. The most paid for any one loss is $2,500 but higher limits are available.
Note: The legal expenses this coverage provides are not in addition to the limit. Instead, they are included within the limit.
Higher limits on outgoing check forgery can be obtained by writing CR 00 21–Forgery Or Alteration.
l.
Increased Cost Of Construction
This coverage benefits insureds subject to the Americans with Disabilities Acts (ADA) and similar local, state and federal ordinances or laws. Since compliance is often grandfathered until major renovations must be done, these regulations can substantially affect the amount of a loss. They are intended for good, help many people and their costs are relatively easily absorbed when incorporated in new construction. However, updating existing structures after a partial loss can add significant costs to the rebuilding process and is not covered by the unendorsed Businessowners Coverage Form.
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Example: Mainville Church was proud that its building was over 100 years old and still in good condition, thanks to regular maintenance and repair. Unfortunately, a grease fire in the basement kitchen got out of hand and destroyed over a third of the building. Mainville was determined to rebuild but it expected problems due to recent ordinances where compliance was mandatory. |
(1) This Additional Coverage applies only if the building is insured for at least 80% of its replacement cost at the time of loss. Otherwise, the loss is settled based on actual cash value and this coverage does not apply.
(2) This paragraph provides the basic coverage and (3) through (9) below modify it. This additional Coverage applies when covered property is damaged by a covered cause of loss, resulting in increased costs incurred to repair, rebuild or replace damaged parts of the covered property in order to comply with enforcement of an ordinance or law.
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Example: The Mainville loss was due to lightning and windstorm. Since more than a third of the building was damaged, compliance with ordinances required additional construction costs. While the sanctuary was located on the main floor with a handicapped ramp, the major obstacle was that Sunday school classes were held in the basement that did not have handicapped access. Providing such access added $42,000 to the $210,000 direct damage loss. |
(3) The ordinance or law cited in (2) above must regulate the construction or repair of buildings or establish zoning or land use requirements at the described premises and be in force at the time of loss.
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Example:
The village of Mainville had considered an additional ordinance at the
time of the Mainville Church loss and enacted it before it issued the
building permit to the church. The new ordinance changed the grade on the
handicapped ramp to the extent that the current Mainville ramp no longer met
code. The insurance company did not cover this additional cost,
since the ordinance was effective after the loss occurred. |
(4) The insurance company does not pay for costs due to an ordinance or law the insured should have complied with before the loss occurred but did not.
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Example: The village of Mainville and Mainville Church had disagreed about the gutters on the building and the flow of rainwater into the sewer system for many years. The church refused to comply with the rules and the village would not shut down a church over such a minor issue. However, the village now refused to issue a building permit until the gutters were changed. This additional cost is not covered. |
(5) This coverage form does not provide pollution liability coverage and this Additional Coverage does not apply to costs associated with enforcing ordinances or laws that require the insured or others to respond to the effects of pollutants in any way. This additional coverage is not intended to be back door pollution coverage.
(6) This paragraph states that the most the insurance company pays for each damaged building is $10,000. This is an additional amount of insurance and does not affect any other limits.
(7) This paragraph states that the insurance company does not pay the increased cost of construction until the property is repaired or replaced at the same or another premises as soon as possible after the loss but not more than two years later. The insurance company may extend this time period but must do so in writing.
Note: The insurance company does not object to repairs being made at the existing location or being incorporated into construction at a new location. The same limit is available.
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Example: The Mainville Church congregation was outgrowing its existing location and the trustees decided to start a building fund and rebuild at a new location instead of incurring the costs and expenses to meet current codes. The insurance company pays the amount of loss and the increased cost of construction, even at a new location. |
(8) Because of the potential to confuse this coverage and the ordinance or law exclusion, this paragraph states that this Additional Coverage is not subject to the ordinance or law exclusion.
(9) This paragraph states that increased costs of construction due to ordinances or laws are not covered except under this Additional Coverage. As stated in (6), the amount paid under this Additional Coverage is not subject to the limitations in Section I–Loss Payment Property Loss Condition.
Note: This paragraph eliminates any perception that any other coverage applies to losses involving increased costs of construction.
m.
Business Income From Dependent Properties
Businesses do not operate in a vacuum. If a supplier or a customer sustains a loss, the insured may also sustain a loss of income until the supplier or customer either resumes operations or the insured replaces it. This coverage responds to situations like this. The $5,000 limit can be increased. Coverage applies if the following events occur:
(1) The loss sustained by the dependent property must be from a covered cause of loss. This Additional Coverage does not apply if the loss involves only electronic data. If electronic data is damaged in conjunction with other covered damage, this coverage ends when the other damage is restored, even if electronic data is not.
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Example: Myrtle’s fabric shop receives most of its fabric from Berline Textiles. Berline sustains flood damage, ending Myrtle's fabric supply. Myrtle’s policy does not cover flood but she submits a claim because of her loss due to the loss at Berline. The claim is denied because Myrtle's policy does not include flood coverage. |
(2) The named insured must resume some or all operations by using other sources or outlets if it can do so.
(3) If operations are not resumed as quickly as possible, any loss payment is adjusted to the amount that reflects what it would have been if operations had resumed.
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Example: Let's change the example above. Berline’s has a fire instead of a flood. In this case, coverage is available. Since Myrtle anticipates a downtime of three weeks, she plans a vacation. She then learns that Berline’s can resume shipments after just one week but her plans are set. Myrtle is paid for only one week, not three. |
(4) There are four types of dependent properties:
Note: This does not include communication, water or power suppliers.
Note: An example is a just-in-time supplier to an automobile manufacturing plant.
Note: This might be a manufacturing plant that provides a toy brand specifically for Wal-Mart.
Note: This might be a major department store next to the named insured's novelty shop.
(5) The coverage period begins 72 hours after the covered loss occurs and ends when the dependent property is or should be back in operation.
(6) The Business Income coverage period does not apply to any increased time period required due to enforcement of ordinances that regulate construction, use repair or demolition of any property or that requires any insured or others to respond in any way to the effects of pollutants.
Note: The Business Income coverage period is not affected by the policy's expiration date.
(7) Business Income, as defined in Business Income Additional Coverage, also applies to this Additional Coverage.
n. Glass
Expenses
The
insurance company pays expenses incurred to:
o. Fire
Extinguisher Systems Recharge Expense
This coverage provides an additional $5,000 for each occurrence to pay the costs to recharge fire extinguishers and fire-extinguishing systems and for damage that occurs due to accidental discharge of the system. However, coverage does not apply if the discharge occurs during installation or testing.
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Example: The manual discharge for the automatic extinguishing system is located next to the telephone at Angie's snack and grill. Angie is talking to her boyfriend on the telephone when she becomes distracted and inadvertently pulls the system's handle, setting off the automatic extinguishing system over the deep fryers. Coverage applies for the recharge and the cleanup necessary to return the system to normal. |
p.
Electronic Data
(1) The insurance company pays the costs to
restore or replace destroyed or corrupted electronic data due to a covered
cause of loss. Data that is not restored or replaced is valued at the cost to
replace the media the data was stored on with similar blank media.
Note: This Additional Coverage coincides with
deleting coverage for electronic data under valuable papers and records
coverage. As a result, any coverage for electronic data is limited to only
this additional coverage.
(2) Computer virus is added to the other covered
causes of loss. It includes harmful codes or other types of instruction
introduced into the computer or connected network for the purpose of damaging
or destroying information or disrupting normal operations of the computer or
network. There is no coverage if an employee or another individual the named
insured hires to work on the computer or network causes the damage.
(3) The most the insurance company pays in any
policy year is $10,000. This annual aggregate limit can be increased.
Note: The limit is not location specific. It is
the total annual aggregate limit, regardless of the number of locations or
computers.
If a loss
begins in one policy year and continues into another, all loss is treated as
having occurred in the first year.
Note: This is extremely limited coverage. Larger
computer exposures should be insured under electronic data processing coverage
forms or policies.
q.
Interruption Of Computer Operations
(1) This Additional Coverage extends Business
Income and Extra Expense insurance to apply to a suspension of operations
caused by an interruption in computer operations due to destruction or
corruption of electronic data by a covered cause of loss, subject to its
provisions.
(2) The covered causes of loss that apply to
this Additional Coverage are limited to the Specified Causes Of Loss and Collapse. Other covered causes of loss endorsed
to this coverage form do not apply to this Additional Coverage. Computer virus
is added to the other covered causes of loss. It includes harmful codes or
other types of instruction introduced into the computer or connected network
for the purpose of damaging or destroying information or disrupting normal
operations of the computer or network. There is no coverage if an employee or
by other individual the named insured hires to work on the computer or network
causes the damage.
(3) The most the insurance company pays in any
policy year is $10,000. This annual aggregate limit can be increased.
Note: The limit is not location specific. It is
the total annual aggregate limit, regardless of the number of locations or computers.
If a loss
begins in one policy year and continues into another, all loss is treated as
having occurred in the first year.
(4) This Additional Coverage does not apply to
losses sustained or expenses incurred after the period of restoration, even if
part of the limit of insurance is not used up.
(5) Business Income coverage does not apply when
operations are suspended due to destruction or corruption of, or any loss or
damage to, electronic data except as provided for under (1 through 4) above.
(6) Extra Expense coverage does not apply when
specific acts are taken to avoid or minimize operations being suspended due to
destruction or corruption of, or any loss or damage to, electronic data except
as provided for under (1 through 4) above.
Note: This is extremely limited coverage. Actual
electronic data processing exposures should be insured under electronic data
processing coverage forms or policies.
r. Limited
Coverage For Fungi, Wet Rot Or Dry Rot (01 10 change
removed Bacteria)
(1) The coverage described in (2) and (6) below
applies only if the fungi, wet rot or dry rot results
from specified causes of loss, excluding fire or lightning, that takes place
during the policy period. In addition, all reasonable means must be used at
the time of loss to protect the property from further damage.
Note: Fire and lightning are excluded because the
fungi, wet rot or dry rot exclusion does not apply to the fire and lightning
causes of loss.
(2) The insurance company pays for loss or damage
due to fungi, wet rot or dry rot. This means:
(3) The most the insurance company pays in any
policy year for all covered loss or damage is $15,000, regardless of the
number of claims. This is even if a specific loss remains active or present,
or recurs, in a subsequent policy period.
Note: If an occurrence continues into the next
12-month period, there is no additional coverage, because all damage from the
occurrence is restricted to the time period when it was first discovered.
(4) The $15,000 limit is a sub-limit and not an
additional amount of insurance. If a covered loss under this Additional
Coverage and another coverage occurs, the limit is not more than the limit of
insurance for the covered property. If a partial loss involving covered
property occurs to which this Additional Coverage also applies, the amount
paid increases by not more than the $15,000 limit.
(5) This Additional Coverage does not increase
or decrease the Additional Coverages for Water Damage, Other Liquids, Powder Or Molten Material Damage, or Collapse.
(6) If Business Income and/or Extra Expense
coverage applies to the described premises, and if the operations suspended
meet the terms and conditions of the applicable coverage, the following
applies:
Note: The days do not have to be consecutive.
Note: The days do not have to be consecutive.
Special
Note: Pay close attention to and
carefully review Additional Coverages p., q. and r.
They are very limiting and operate in conjunction with certain exclusions
considered to be restrictions of coverage.
6.
Coverage Extensions
These are in addition to the limits of insurance on the declarations. They apply to property in or on the building described on the declarations or within 100 feet of the described premises either in the open or in or on a vehicle.
a. Newly
Acquired Or Constructed Property
(1) Building coverage may be extended to apply to newly constructed buildings on the described premises while they are being built. It may also be extended to newly acquired buildings located off premises as long as they are used for the same or a similar purpose as other buildings on the declarations or as warehouses. The most paid for loss or damage to each such building is $250,000.
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Example: Moe’s Sandwich Shop has the opportunity to purchase the dry-cleaning operation across the street. Although the businesses are quite different, Moe’s son convinces him that he can handle it. The purchase is handled as a contract sale. As Moe and his son visit the dry-cleaning operation a few days later, a fire breaks out and results in a substantial loss. The previous owner no longer has coverage and Moe discovers that he doesn't either, because the businesses are not similar. |
(2) Business Personal Property
Business personal property coverage may be extended to apply to both newly acquired and existing business personal property at a newly acquired location or at a newly constructed or acquired building at a described premises. It may also be extended to newly acquired business personal property at a described premises. The most paid for loss or damage at each such building is $100,000.
Note: This coverage does not apply to personal property the named insured temporarily acquires while performing installation or other work on the property or its wholesale activities.
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Example: Sheila decides to totally renovate the interior of her office building. The cost is $50,000 but it can be amortized. The fixtures are purchased and delivered but, while awaiting installation, a tornado damages the building. Because of this coverage, she can cover both the old furnishings previously installed as well as the new fixtures. |
(3) Period Of Coverage
These coverage extensions apply only until the policy expires, the named insured reports the values, or for 30 days, whichever is less. However, while the coverage may apply for up to 30 days, the named insured pays premium beginning on the date of acquisition or the start of construction.
Note: Even though additional premium must
be paid, this is important "peace of mind" coverage. Businesspeople
occasionally purchase property without immediately consulting their insurance
agent. This 30-days of coverage provides sufficient time to report newly
acquired property.
b.
Business Personal Property Off Premises
The named insured can extend insurance to covered property while in transit or at a location it does not own, operate or lease. However, covered property does not include money, securities, valuable papers and records, or accounts receivable. The most paid for loss or damage to such property is $10,000.
Note:
In transit can be between
any owned, leased, or operated location, or one the named insured does not
have a connection with. Transportation is not limited to only ground
transportation. It can include air and water transportation. However, coverage
is limited to the United States of America, its possessions and territories,
Puerto Rico, and Canada, and while in transit between points in the coverage
territory. Air or sea transit to Hawaii is covered.
For most
small retailers, $10,000 may be an adequate limit of insurance. However, be
aware of the problems posed by Bills of Lading. F.O.B. Point of Origin means
that the shipper is not responsible for damage from the moment the shipment is
loaded on the truck or ship. F.O.B. Destination means that the shipper is
responsible for damage until the shipment is unloaded at the destination.
Federal law also limits ICC regulated carriers and other shipper's liability
from:
Unless a
value or limit is declared for the shipped items, transportation companies may
limit the amount recoverable after a covered loss. Even small retailers may
have extraordinarily large shipments prior to their peak seasons. If a limit
larger than $10,000 coverage is required for goods transported by others,
purchase increased limits from the shipping company or an Inland Marine
transportation policy.
c. Outdoor
Property
The named insured can extend the coverage
provided to its outdoor fences, radio and television antennas, satellite
dishes, and detached signs. Coverage includes debris removal expense. However,
coverage applies only to loss or damage caused by or resulting from fire,
lightning, riot, civil commotion or aircraft. The
most paid for loss or damage is $2,500. Owned trees, shrubs and plants are
limited to not more than $1,000 on any one tree, shrub
or plant (01 10 change). The $2,500 limit may be increased (01 10
addition).
Note: This coverage extension applies only to outdoor trees, shrubs and plants. Trees, shrubs and plants located indoors that are not considered growing crops or lawns are covered for risks of direct physical loss or damage and are included in the business personal property limits. This means that office buildings with large indoor landscaped atriums have full coverage but an office building built around a large garden is subject to the outdoor property exclusion and this limited coverage.
d.
Personal Effects
The named insured may extend Business Personal Property insurance to personal effects it owns or to those owned by its officers, partners, members, managers or employees. This Coverage Extension does not apply to tools or equipment used in the business and excludes loss or damage due to theft. The most paid for loss or damage to such property at each described premises is $2,500.
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Example: Robert’s office was quite a sight to behold. His golf and sports memorabilia seemed to take up the entire space. A fire that seriously damaged the building also destroyed most of his memorabilia. Coverage applied, subject to the other insurance clause, his homeowners' policy, and the valuation clause in this coverage form. However, any payment made was in proportion to the other claims in the office. |
e.
Valuable Papers And Records
(1) Business personal property coverage extends to direct physical loss or damage to valuable papers and records the named insured owns or that are in its care, custody or control caused by or resulting from a covered cause of loss. This coverage includes the cost to research lost information when there are no duplicates.
(2) Coverage does not apply to samples or for property already sold being held for delivery or to property in storage at locations away from the covered premises.
(3) The most paid for loss or damage in any one occurrence at a covered location is $10,000. Higher limits are available. $5,000 is the most paid if a covered loss occurs at a location not covered or described on the declarations.
(4) Loss or damage is based on the cost to
replace the damaged or lost information. However, if the content of the
valuable papers is not restored, loss settlement is based on the replacement
cost of only the blank material.
(5) None of the Section B. Exclusions
apply to this Coverage Extension except for Governmental Action, Nuclear
Hazard, War And Military Action, Dishonesty, False
Pretense, Errors Or Omissions (when
copying or processing valuable papers), Weather Conditions, Acts Or Decisions
and Negligent Work.
f.
Accounts Receivable
(1) Business personal property coverage may be extended to include accounts receivable. Coverage applies to any of the following situations but must involve direct physical loss or damage to the named insured’s records of accounts receivable by a covered cause of loss:
(2) The most paid in any one occurrence at a covered location is $10,000. Higher limits are available. $5,000 is the most paid if a loss occurs at a location not covered or described on the declarations.
(3) None of the Section B. Exclusions apply to this Coverage Extension except for Governmental Action, Nuclear Hazard, War And Military Action, Dishonesty, False Pretense, Weather Conditions, Acts Or Decisions, Negligent Work or the Accounts Receivable exclusion.
B. Exclusions
1. The doctrine of concurrent causation holds that a coverage form or policy must pay if a loss to insured property can be attributed to two causes, one excluded and the other covered. By applying this concept, coverage has been found for earth movement, flood and other specifically excluded events. To eliminate this problem, this paragraph makes three very specific statements:
This language applies to these nine exclusions.
a.
Ordinance Or Law
Enforcement of any ordinance or law regulating construction, use or repair of any property, or that requires tearing down any property, including the cost of removing its debris, whether the property has been damaged or not, is excluded.
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Example: Millie’s Fine Furniture has been in the heart of downtown for as long as anyone can remember. Its frame structure is quite noticeable and distinct from the concrete and brick buildings surrounding it. During a night of looting, a Molotov cocktail thrown into the display window ignites both the building and the upholstered furniture in it. Because the fire department cannot respond quickly, the building is 60% damaged. Millie’s family wants to rebuild so the building appears the same as before but a local ordinance requires all buildings to be of concrete or better construction. Because of this exclusion, the family collects only the amount of money needed to restore the building to the original frame construction. It must pay the additional cost of the construction upgrade from its own funds. |
BP 04 46–Ordinance Or Law Coverage can be written to cover the claim described above.
b. Earth
Movement
Five separate categories of earth movement events are excluded.
(1) Earthquake and any sinking, rising or shifting of the earth that occurs with the earthquake
(2) Landslide and any sinking, rising or shifting of the earth that occurs with the landslide
(3) Mine subsidence of man-made mines, whether the mine is operating or not
Note: This is a common problem in some mid-western states. Separate mine subsidence coverage is available in some states and must be offered in certain counties. Legislation enacted in those states details the coverage that must be offered, the price that may be charged, and the way coverage is written. The state laws concerning mine subsidence coverage on property in Illinois, Indiana, Kentucky, Pennsylvania or West Virginia should be reviewed carefully.
(4) Sinking of the earth and any rising, shifting, erosion, contraction or expansion of the ground as well as water below the surface of the ground and poor soil conditions. Sinkhole collapse is not excluded.
Note: An important exception to these exclusions is that coverage applies if fire or explosion occurs due to any earth movement but only for the loss or damage caused by the fire or explosion.
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Example: Natural gas lines run beneath Prairie Town's main street. A slight earthquake occurs and causes comparatively little damage to the primarily frame structures. Unfortunately, the gas lines are not built to withstand such an incident and they crack, resulting in an explosion followed by a fire. The fire destroys the local drugstore, florist, hardware store and bank. The loss due to the ensuing fire is covered. |
(5) Volcanic eruption, unless it results in fire, breakage of building glass or volcanic action. Volcanic action is defined as airborne blast and shock waves, various types of dust, ash and particulate material emitted, and lava flow. The cost to remove dust, ash and similar material if the volcanic ash did not cause direct physical loss or damage to the described premises and covered property is not covered.
Note: Volcanoes are unpredictable and the damage they cause varies considerably from one to another. Eruptions usually occur over a number of days. All activity within 168 consecutive hours is treated as one occurrence. This is very important to the insured with respect to the deductible. Instead of multiple deductibles due to multiple events, only one deductible applies for any 168-hour period. Volcanic eruption can be covered using BP 10 03–Earthquake.
c.
Governmental Action
Coverage does not apply to property a government authority seizes or destroys. Customs seizures, zero tolerance Drug Enforcement Agency (DEA) drug confiscation, or property seized as evidence in a trial that loses value because of the amount of time it is confiscated are examples of situations that are excluded. However, property lost or damaged by acts of government authority at the time of a hostile fire to prevent its spread is covered.
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Example: The Treetop Resort was nestled in a grove of trees near a national park. A fire that began in the park headed towards town. To create a firebreak, the fire department cleared a path that included the Treetop property. This loss was covered because the fire and its threat were imminent and the action taken was by a civil authority. |
Note: There is no standard BOP endorsement
that covers acts of a government authority. For markets related to customs
confiscation, see The Insurance Marketplace, a publication of The Rough
Notes Company, Inc., and review the section on Customs Bonds or Customs
Brokers and Freight Forwarders.
d. Nuclear
Hazard
Nuclear hazards, including nuclear reaction, radiation, or radioactive contamination, are excluded. When a nuclear hazard causes a fire, the fire damage is covered.
e. Utility
Services (01 10 change)
There is
no coverage for loss or damage caused by or resulting from failure of power, communication,
water or other utility service to the described
premises if the failure has its origin away from such premises.
There is also no coverage if the loss or damage is due to failure of on
premises equipment of the off premises utility
services. Utility service failure includes reduction in supply and
insufficient capacity.
Any loss or damage caused by a power surge
that would not have occurred except for an event causing power failure is
excluded.
Note: There is a very broad exception to this
exclusion. If a covered cause of loss resulting from the power surge or power
failure, or the failure of any of these utility services results in a covered
cause of loss causes loss of damage, coverage applies for only that resulting
loss or damage.
Another
exception states that this exclusion does not apply to loss or damage to
computers or electronic data.
Note: Communication services also include
Internet access service or access to any electronic, cellular or satellite
network but is not limited to just these.
Note: Off-premises power failure coverage can be added using BP 04 56–Utility Services–Direct Damage and BP 04 57–Utility Services–Time Element. Spoilage coverage can be added using BP 04 15–Spoilage Coverage.
f. War And Military Action
Coverage does not apply to war, undeclared war or civil war. This also includes insurrection, rebellion, revolution, usurped power or action taken by government against them as well as warlike action by military forces and actions or attack and defense by any government using military personnel or other agents.
Note: This exclusion does not apply to acts of
terrorism. This policy provision may be superseded by a specific terrorism
endorsement in some states.
g. Water
(01 10 change)
(1)
The first part of this
exclusion has four terms that are unchanged, three terms that are modified and
one new term compared to the exclusion being replaced. The terms unchanged are
"flood," "surface water," "tides" and
"overflow of any body of water." The new term is ‘’tidal
water." The modified terms are:
Note: "Tsunami" and "storm surge" are new terms. Since neither
is defined, judicial interpretation is based on common usage and definitions in
the dictionary.
(2)
The second part of this
exclusion is unchanged. Mudslide or mudflow are not covered and were not
covered previously.
(3)
The third part of the
exclusion is broadened in two ways. The first is the how and the second is the
what. In the prior edition, water had to back up or overflow. In this edition,
water can be discharged in other ways and those other ways are not described.
In the prior edition, water came from a sewer, drain or sump. In this edition,
it can also come from a sump pump or related equipment, and the related equipment
is also not described.
(4)
The fourth section is
unchanged and describes the exclusion of damage from underground water seeping
into doors, windows, floors, surfaces, foundations
and basements.
(5)
The exclusion in the
prior edition did not have section five. This section introduces the term
"waterborne material." Damage caused by this material carried by
waters described in sections (1), (3) and (4) above, or by any material moved
or carried by mudslides or mudflow described in section (2) above, is not
covered.
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Example: The river was moving fast and picked
up trees, docks and more. Mavis was thrilled that the flood did not enter
her warehouse but was upset that a tree had been pushed against and into her
storage building. Because of this exclusion the damage to the storage barn
and also to the items inside the barn are excluded. |
The
last paragraph is similar to the exclusion being replaced by stating that loss
or damage caused by or resulting from fire, explosion or sprinkler leakage is
covered.
Note: There is no standard Businessowners Program endorsement that covers flood and related causes of loss. Some insurance company endorsements cover loss or damage caused by backup of sewers and drains and failure of sump pumps to operate correctly. The federally administered National Flood Insurance Program (NFIP) provides limited coverage for eligible property.
h. Certain
Computer-Related Losses
The Year 2000 computer scare was followed by introduction of exclusions for similar software problems caused by difficulty with handling dates and time. Under this exclusion, there is no coverage for the failure, malfunction or inadequacy of any computer, computer application, computer operation system, computer network, microprocessor or any other computerized part, or any other product that depends on computers due to inability to process dates or time. Coverage also does not apply to anything any insured does to correct any of these problems. If the failure of a computer to accept time or date results in a loss due to a specified cause of loss, coverage is available for the resulting damage from that loss.
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Example: The computer program that controls the sprinkler system at the Food Warehouse does not recognize the date 2/29. The system automatically activates on 2/29/2008 due to the failsafe device inside the program. Since the activation took place at 12:01 a.m., the building’s contents are completely waterlogged when employees arrive for work. This loss is covered because loss or damage caused by or resulting from sprinkler leakage is covered. |
i. Fungi,
Wet Rot Or Dry Rot (the 01 10 edition eliminated bacteria)
The
presence, growth, spread or any other activity of fungi, wet rot or dry rot is
excluded. However, if a specified cause of loss results from any such
activity, the loss or damage caused by the specified cause of loss is covered.
This
exclusion does not apply when such activity results from either fire or
lightning or to the extent that coverage applies under Additional
Coverage–Limited Coverage For Fungi, Wet Rot Or Dry
Rot.
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Example:
A tornado blows the roof off
George’s Hardware Store. The top floor is destroyed but damage to the first
floor initially appears to be minimal. However, mold is discovered in the
interior walls on the first floor two weeks later. The mold damage is not
covered because of this exclusion. Coverage is available under Additional
Coverage–Limited Coverage For Fungi, Wet Rot Or Dry
Rot, but is limited to $15,000 for each 12-month policy period. |
j. Virus
or Bacteria (the 01 10 edition moved bacteria from a previous exclusion and
added virus)
Loss or damage from any type of microorganism
that causes or is capable of causing physical illness, distress, or disease is
excluded. Examples of excluded microorganisms are virus or bacterium
but they are only examples. This means this is a far-reaching exclusion
because microorganisms are everywhere.
This exclusion does not apply to any of the
items described in exclusion i. above which is important because those items
have some limited coverage under Additional Coverage while these
microorganisms do not.
If a microorganism could be excluded under
this exclusion or under the pollution exclusion, this exclusion prevails. This
means that the Additional Coverage for Pollution would not apply to damage
caused by such an organism.
2. The lead in language for this group of exclusions is less restrictive than in paragraph 1. For example, if the proximate cause of loss is a covered cause of loss, the subsequent and companion excluded causes of loss have no bearing on the claim. If fire causes a machine to break down, coverage applies because the proximate cause of loss is fire and the breakdown results from the fire damage. The same approach applies with rust that develops after an accidental sprinkler leakage incident.
The insurance company does not pay for loss or
damage caused by or resulting from the following:
a.
Electrical Apparatus (01 10 change)
Artificially generated energy caused damage, disturbance, disruption or any type of interference with any electrical or electronic wire, device, appliance, system or network or device, appliance, system or network that utilizes cellular or satellite technology is excluded.
The type of artificially generated energy has
a wide range. The exclusion provides examples of the type of excluded energy but they are not the only types excluded. Examples
provided are electrical current, including arcing, magnetic or electromagnetic
field produced or conducted electric charge, electromagnetic energy pulse, or
electromagnetic waves or microwaves.
There is an exception. If fire results, coverage applies to the loss or damage it causes.
Loss or damage to computers due to artificially generated electrical, magnetic or electromagnetic energy is covered but only under limited conditions. It must be caused by either an occurrence that takes place within 100 feet of the described premises or by a blackout or brownout caused by an occurrence that takes place within 100 feet of the described premises.
Note: EB 00 20-Equipment Breakdown Protection Coverage can be used to provide this coverage
b.
Consequential Losses
There is no coverage for loss of use, delay, or loss of market.
Note: These are consequential losses that result from a direct loss. Business income is an example of a covered form of consequential loss.
Note: There is no standard Businessowners Program endorsement that provides this coverage.
c. Smoke,
Vapor, Gas
Loss or damage caused by or resulting from smoke, vapor or gas from agricultural smudging or industrial operations is excluded.
Note: There is no standard BOP endorsement
that provides this coverage. Industrial
firms and incinerators frequently release harsh acids and chemicals into the
air. These can bleach or chip paint or damage plastic and rubber products.
Agricultural smudging operations used to control insects or keep crops from
freezing can release greasy smoke that can discolor paint and cause other
damage to nearby buildings.
d. Steam
Apparatus
Explosions involving steam boilers, steam pipes, steam turbines, or steam engines the named insured owns or leases or has under its control are excluded unless the explosion is caused by the explosion of gas or fuel in a firebox, combustion chamber or flue. If an excluded explosion causes a fire or combustion explosion, the resulting loss or damage is covered.
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Examples:
A boiler explodes because an improper fuel mixture causes gas to accumulate beyond the boiler's ability to contain the combustion. This damage is covered. A boiler cracks, overheats, explodes, and bursts into flames. Damage to the cracked boiler is excluded, but damage caused by the ensuing fire is covered. A steam pipe bursts and ruins a large amount of inventory. This damage is not covered. The boiler runs out of water, cracks, explodes,
and damages the boiler room walls. This damage is excluded. |
Note: Optional mechanical breakdown coverage provided by this coverage form insures most incidents of sudden and accidental breakdown of boilers and similar objects. Equipment breakdown coverage forms also cover boiler explosion.
e. Frozen
Plumbing
Losses from water, liquids, powders and molten materials caused by frozen plumbing, heating, air conditioning and other appliances are excluded. However, this exclusion does not apply if the named insured maintains heat in a building or structure. If heat is not maintained, this exclusion does not apply if the equipment is drained and the supply of water, liquids, powder or molten material is turned off. This exclusion does not apply to fire protective systems that discharge in freezing conditions.
Note: There is no standard Businessowners Program endorsement that provides this coverage. Refer to E. Property Loss Conditions 8. Vacancy for the broadened water damage exclusion that applies to property vacant more than 60 days.
f.
Dishonesty
Criminal or dishonest acts by any of the following persons are excluded:
The acts are excluded whether committed alone or in collusion with others. They are also excluded if they occur when the individual is not considered at work.
If an employee commits an act of destruction other than by theft, it is exempt from this exclusion.
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Examples:
Mike's Machine Shop employs union workers. The machinists go on strike and several disgruntled strikers break windows at Mike's building. This loss is covered. Two employees of Stamps-n-Stuf Collector’s Bin break in and remove money, securities and other property from the safe. This loss is excluded because it is theft, not simply destruction. |
Note: This exclusion does not apply to carriers for hire with respect to accounts receivable and valuable papers and records, or to coverage provided under Employee Dishonesty Optional Coverage.
g. False
Pretense
Coverage does not apply to voluntarily parting with or giving away title to any property because of a fraudulent scheme, trick or device.
Note: There is no standard BOP endorsement that provides this coverage. Only a few insurance companies are willing to insure this exposure for any property line of insurance. One exception is CA 25 03–False Pretense Coverage, available under the ISO garage coverage form used primarily for automobile dealers.
h. Exposed Property
Damage to personal property in the open caused by or resulting from rain, snow, ice or sleet is excluded.
Note: There is no standard BOP endorsement that provides this coverage and few insurance companies write it.
i. Collapse (01 10 change)
(1) Collapse is excluded. The following
property conditions are also excluded:
However, if collapse causes a covered cause of
loss at the described premises, any loss or damage from the covered cause of
loss is covered.
(2) This exclusion does not apply with respect
to the coverage provided under 5. Additional Coverages d. Collapse or to collapse
caused by one or more of:
j. Pollution
Loss caused by or resulting from any release of pollutants is excluded, unless the release is caused by a specified cause of loss. In addition, if pollution results in a specified cause of loss, the damage caused by the specified cause of loss is covered.
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Examples:
A sprinkler opens over an acid tank, causing it to overflow and resulting in damage to floors and equipment. The direct damage caused by the sprinkler leakage is covered as well as the damage caused by the pollutant. An oil spill causes a fire in the building. The damage caused by the oil spill is not covered but the damage caused by the subsequent fire is. |
Note: Additional Coverages Pollutant Clean-Up And Removal provides a $10,000 limit at each location during each separate 12-month policy period. It applies to costs incurred to extract pollutants from land or water only at the described premises and only if the escape is caused by or results from a covered cause of loss that occurs during the policy period. There is no standard BOP endorsement that broadens or improves on this coverage.
ISO Commercial Property Program (CPP) CP 04 07–Pollutant Clean Up And Removal Additional Aggregate Limit Of Insurance increases the $10,000 limit provided under CP 00 10–Building And Personal Property Form but few insurance companies offer this endorsement.
Markets that provide pollution coverage options are listed in The Insurance Marketplace, a publication of The Rough Notes Company, Inc. Suggested sections to review include Environmental Impairment Liability, Pollution Cleanup Indemnity–Marine/Non-Marine Operations and Underground Storage Tank (UST) Pollution Liability.
k. Neglect
There is no coverage if an insured does not use all reasonable means available to it to keep property from further damage at the time of loss and afterwards.
Note: E. Property Loss Conditions 3. Duties In the Event Of Loss Or Damage states that the named insured must protect covered property from further loss. This exclusion reinforces that condition.
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Example: Fred is home watching game seven of the NBA finals. A neighbor calls to tell him that he sees smoke coming from Fred’s furniture store next door to the neighbor's. Fred ignores the situation and continues to watch the game. When the neighbor doesn’t see Fred or hear emergency vehicles, he calls the fire department in order to protect his own property. Fred hears the sirens but the game is going down to the wire and he can’t pull himself away from it. Since Fred doesn’t arrive with the keys, the fire department breaks down the door to fight the fire. After the game ends, Fred goes to the store and notifies his insurance company of the loss. However, based on information the company obtains from the fire marshal, the insurance company denies much of Fred's claim because he did not protect his property. |
l. Other
Types Of Loss
Loss or damage by the following is also excluded. However, if a specified cause of loss or glass breakage occurs, the ensuing loss or damage caused by the specified cause of loss or glass breakage is covered.
(1) Wear and tear. This is a risk of doing business that insurance does not cover.
(2) Rust, corrosion, decay, deterioration, hidden or latent defect or any other quality, fault, or weakness in covered property that causes it to damage or destroy itself
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Example: Paint in cans hardens over time, some goods fade when exposed to sunlight, and iron objects rust when exposed to moisture. |
(3) Smog is fog that has become mixed and polluted with smoke.
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Example:
Smog corrodes the exterior of the building. This is part of routine
maintenance in areas where smog is a problem and is not a covered event. |
(4) Loss or damage caused by or resulting from settling, cracking, shrinking, or expanding is excluded.
(5) Animal, bird, insect or rodent damage caused by or resulting from nesting or infestation, or release or discharge of secretions or waste products
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Example: A deer crashes through a glass window, damaging both the window and property inside. Coverage applies in this case. If the deer decides to reside in the building, the resulting damage from it doing so is excluded. |
6) Mechanical breakdown is excluded. An example is a rupture caused by centrifugal force but it is not the only type of mechanical breakdown excluded. However, this exclusion does not apply to computers that break down.
Note: G. Optional Coverages 4. Equipment
Breakdown Protection Coverage covers mechanical breakdown of boilers, similar objects and production machinery. In addition, more
complete coverage can be obtained with an Equipment Protection Coverage Form
or policy.
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Examples: These losses are excluded: A punch press that requires 440 electrical current loses 25% of its electrical phase and releases the cycle prematurely on a customer’s die, damaging it and also warping the punch press. Lack of lubrication causes an engine to seize up. The governor on a machine malfunctions, the engine over-revs, and the flywheel shatters. This damages both the machine and surrounding walls and windows. |
(7) With respect to personal property:
Note: There is no standard Businessowners Program endorsement that covers these losses. Normal activity that causes scratches to tables is excluded but coverage applies when a light fixture falls on a table and scratches it.
Note: Coverage for certain spoilage losses can be added through BP 04 15–Spoilage Coverage.
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Example: If all the milk and juice spoil after a grocery store employee accidentally shuts off the freezer electrical circuit, the loss is not covered. |
Note: If a loss excluded above is the proximate cause of a specified cause of loss or damage or breakage of building glass, coverage applies only for the loss or damage from the specified cause of loss or glass breakage.
m. Errors Or Omissions
Coverage does not apply to errors or omissions in any computer operations, including storing data, processing or programming as described under Electronic Data, or in processing or copying valuable papers and records. However, coverage does apply to direct physical loss or damage due to any resulting fire or explosion, if the coverage form insures against these causes of loss.
n.
Installation, Testing, Repair
There is no coverage for errors or deficiencies with respect to any aspect of the named insured’s computer system, including its electronic data. However, coverage does apply to any resulting fire or explosion if the coverage form insures against these causes of loss.
o.
Electrical Disturbance
Magnetic injury, electrical injury, disturbance or erasure of electronic data is excluded, except to the extent provided under Section I–Property Additional Coverages. However, coverage does apply for direct loss or damage caused by lightning.
p.
Continuous Or Repeated Seepage Or Leakage Of Water
Repeated
or continual seepage or leakage of water that takes place for 14 or more days
is excluded. In addition, the presence of humidity, moisture or vapor for 14
or more days is also excluded.
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Example:
A crack appears in the shower wall at General Testing and dripping water
accumulates on the floor beneath the shower area. An investigation reveals
that water had been accumulating for many weeks and was finally forced down
through the ceiling. The repairs needed are not covered. |
3. Loss or damage due to any of the following is excluded. However, if the excluded cause of loss triggers a loss involving a covered cause of loss, the ensuing loss or damage is covered.
a. Weather
Conditions
If a weather condition contributes to a cause of loss otherwise excluded in B. Exclusions 1. for Ordinance Or Law, Earth Movement, Governmental Action, Nuclear Hazard, Utility Services, War And Military Action, Water, Certain Computer-Related Losses, Fungi, Wet Rot Or Dry Rot and Virus Or Bacteria, the damage caused by the weather condition is also excluded. Weather is not defined. It commonly includes, but is not limited to, wind, rain, hail, snow and temperatures.
Note: The purpose of this exclusion is to eliminate coverage under concurrent causation. There is no standard BOP endorsement that provides this coverage.
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Example: Heavy late-winter rains start a flood that undermines the building foundation and causes a wall to bulge. The rain turns to ice and the weight of the ice collapses the building. The flood damage is excluded but the damage caused by the weight of ice is covered, provided the insurance company agrees that the roof would have collapsed even if the flood had not weakened the walls. |
b. Acts Or Decisions
Acts or decisions by any person, group or organization or governmental body are excluded. This includes those not acted or decided on.
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Example: The Corps of Engineers urged the city council to designate several sections of the city’s border as “no building” areas. The council ignored the advice and embraced a chance to gain additional tax revenues from new building projects in those areas. A serious flood occurs in those areas a few years later and federal disaster relief is denied because of the decision by the council to ignore the recommendations of the Corps of Engineers. |
c.
Negligent Work
Loss or damage due to faulty, inadequate or defective planning, zoning in development, siting, surveying, design, specifications, workmanship, repair, construction, renovation, remodeling, grading and compaction, or materials used in repair, construction or remodeling, and maintenance to any property on or off premises is excluded.
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Examples: The following are not covered: Property mistakenly built on wetlands that must be torn down Inadequate roof supports that cause the roof to bow A weak weld in the conveyor system that cracks and sends 20 newly manufactured computers crashing to the floor |
Coverage for errors in design of property built for or sold to others is usually provided by professional liability policies.
4. Additional Exclusion–Loss Or Damage To Products (01 10 addition)
There is
no coverage for loss or damage to merchandise, goods or other products caused
by any party's error or omission. These errors or omissions are excluded
beginning with planning or testing through repair and maintenance. This
exclusion also applies to errors or omission made at locations where work is
outsourced. It applies to any compromising of the product in form, substance or quality.
Note: The one exception is if such an
error or omission results in the occurrence of a covered cause of loss. In
that case, coverage applies to only the loss or damage from the covered cause
of loss.
Note: This new exclusion applies only to
merchandise, goods or other products. It is added to
exclude loss or damage to such property because of a production error or
omission.
|
Example: Lindsey designs toys and contracts with a Nigerian
manufacturer to produce toys based on her designs and manufacturing
specifications. The first shipment that arrives is tested and the results
indicate an unacceptable amount of lead. Lindsey cannot sell the product in
the |
5.
Business Income And Extra Expense Exclusions
a. The insurance company does not pay for any increase in business income loss or extra expense caused by or resulting from:
(1) Any delay in resuming operations or repairing, rebuilding or replacing property because of strikers or other persons interfering at the affected location
|
Examples:
Teamsters across the country strike and shut down deliveries of wood construction materials. This causes a three-week increase in the period of restoration. Coverage applies. Construction workers employed by the contractor the named insured hired to rebuild go on strike and picket the premises and delay rebuilding by four weeks. Coverage does not apply. The named insured's second shift employees
working in an undamaged portion of the building being repaired strike and
convert the extra expense claim into a business income claim. Coverage does
not apply. |
(2) Licenses,
leases or contracts that lapse, are suspended or
cancelled. However, if any of these are caused directly by the suspension of
operations due to a covered cause of loss, the resulting loss that affects the
named insured’s business income during the period of restoration is covered, including
any extension of the restoration period according to the terms of Additional
Coverage–Extended Business Income (01 10 addition).
|
Examples:
A supplier penalizes the named insured $300 a
day for each day it goes beyond the contract completion date deadline.
Coverage does not apply. The named insured’s liquor license is suspended until the building is rebuilt. Since the license cannot be used at any substitute location, the named insured has a complete suspension of operations until the period of restoration ends. Coverage applies. The named insured’s favorable lease may be cancelled if it takes more than two months to rebuild the building. It finds a substitute location at $400 per month more than the favorable lease. Both this provision and the extra expense provision cover the additional $400 for the period of restoration. However, the period of restoration ends in six months and the favorable lease would have lasted another two years. The two years of an extra $400 per month lease payments are not covered. CP 00 60–Leasehold Interest Coverage under the ISO Commercial Property Program (CPP) is used to arrange coverage for favorable leases. |
(3) Consequential losses other than those caused by business income or extra expense suspensions of operations
b. As used in this exclusion, suspension is either a partial slowdown or a complete stoppage of the named insured's business operations. If Business Income coverage applies, it also means buildings that are untenable.
|
Example: The Golden Age Apartments building has six units. A fire occurs involving two units and is confined to them because of firewalls. The remaining four units remain occupied. Business income coverage pays for the loss of income for the two damaged units even though the others remain occupied. |
6. Accounts
Receivable Exclusion
This additional exclusion applies only to 6. Coverage Extensions f. Accounts Receivable. The insurance company does not pay for loss or damage:
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Example: Mandy set a fire at her employer’s office to conceal her false entries. The accounts receivables coverage for those wrongful entries is not covered but other legitimate entries are. |
C. Limits Of Insurance
The limits of insurance on the declarations do not stand alone. This section explains exactly how they and any special restrictions and extensions apply. The limits on the declarations may not necessarily be exactly what they seem. This section is intended to resolve any questions.
1. The limits of insurance for Section I–Property on the declarations are the most paid for loss or damage in any one occurrence.
Note: Occurrence is not defined. It generally means an event or a continuous and uninterrupted series of events that causes a loss.
2. The most paid for loss or damage to outdoor signs attached to the building in any one occurrence is $1,000 per sign.
Note: Detached outdoor signs are not covered unless a limit of insurance is added for Optional Coverages–Outdoor Signs. This coverage can also be used to increase the $1,000 limit for outdoor attached signs. Indoor signs attached to the building are subject to the building limit. Indoor signs not attached to the building are subject to the business personal property limit.
3) The insurance amounts in the Coverage Extensions
and the Additional Coverages listed below are in addition to limits of
insurance in Section I–Property Limits Of Insurance.
This means that the limit for any Additional Coverage not listed is not in
addition to those limits. In addition, the terms of the Coverage Extension and
Additional Coverages must be consulted in applying any limit (01 10 change.
Additional Coverages with Limits of insurance
in addition to the Section I-Property Limits of Insurance:
4. Building Limit–Automatic Increase
a. The building limit is automatically increased by an annual increase of 8% unless a different percentage is only the declarations. The application of the increase is subject to item b. below (01 10 additions).
b. The amount of increase is determined by multiplying the most recent building limit by the percentage of annual increase that applies, expressed as a decimal. This is .08 if there is no percentage of annual increase on the declarations (01 10 addition). Multiply this number by the number of days since the most recent date of the most recent building limit change, divided by 365.
Note: This is how the increase is
pro-rated over the course of the policy year.
|
Example: The insurance limit is $300,000; the automatic annual increase percentage is 4% and it is the 100th day of the policy year. The formula is: $300,000 x .04 x 100 divided by 365 = $3,287. The insurance limit is $303,287 on the 100th day of the policy period. |
5. Business Personal Property Limit–Seasonal Increase
a. According to Paragraph 5.b., the
Business Personal Property Limit Of Insurance is
automatically increased by 25%, unless a different percentage is on the
declarations (01 10 addition).
Note: This is used to provide for seasonal variations.
b. The increase described in 5.a. above (01 10 addition) applies only if the Business Personal Property Limit Of Insurance is at least 100% of the named insured's average monthly values during the 12 months immediately before the date of loss or damage, or the length of time the named insured has been in business as of the date of loss or damage, whichever is less.
Note: This benefit encourages insuring the property for its full value. Nearly every business has seasonal variations and the normal inclination may be to insure assuming that the loss will occur when stock values are low. By offering this automatic peak season increase, the named insured is encouraged to insure properly, knowing there is an additional limit for that peak time period. The advantage that this seasonal increase coverage has over the peak season endorsement is that the peak season is not defined. As a result, if sales are higher than expected additional inventory must be ordered after the traditional selling season, the additional inventory is covered. The flexibility of the seasonal increase is also a limitation, because the coverage is triggered by the named insured maintaining an adequate amount of insurance.
|
Example: Perry’s Business Personal Property limit of insurance is $125,000. A fire loss amounting to $130,000 occurs on 05/01/10. A review of the prior 12 months values results in an average monthly value of $110,000. Because the average monthly value is less than the limit, Perry gets the 25% seasonal increase. This means his limit is $125,000 X 1.25 = $156,250. This means his $130,000 is totally covered, after the deductible is applied. |
Note: To be eligible for this additional coverage, the named insured may have to over-insure at the beginning of the year or increase coverage during the year to comply with this condition. Unfortunately, there is no personal property automatic increase endorsement available to eliminate this problem. The automatic increase provision should never be sold as a guarantee or as a way to decrease the amount of insurance simply because an automatic additional 25% amount is available. This coverage cushion is available only to businesses properly insured to value.
D. Deductibles
1. Property insurance deductibles are simple. The named insured first pays a specified amount of the loss and the insurance company pays the rest, up to the limit of insurance. There are three possible scenarios:
|
Example:
The limit is $50,000; the deductible is $1,000 and the loss is $250. The
named insured pays $250. The insurance company pays nothing. |
|
Example: The limit is $50,000; the deductible is $1,000 and the loss is $10,000. The named insured pays $1,000. The insurance company pays $9,000. |
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Example: The limit is $50,000; the deductible is $1,000 and the loss is $55,000. The named insured pays the $1,000 deductible and $4,000, the amount underinsured. The insurance company pays $50,000. |
2. The most deducted for any loss or damage in any one occurrence for each of the following Optional Coverages is the Optional Coverage Deductible on the declarations:
3. These Additional Coverages are not subject to a deductible:
E. Property Loss Conditions
1.
Abandonment
The named insured cannot abandon damaged property to the insurance company.
|
Example:
The building burns down. The Environmental Protection Agency (EPA) investigates and the named insured just wants to get rid
of the problem and headaches. However, it does not have the option of simply
giving the property to the insurance company. |
2. Appraisal
The appraisal process is one of several alternative dispute resolution methods and is fairly simple. If the named insured and the insurance company do not agree on the amount of a covered loss, either can make a written demand for an appraisal. Each hires its own independent and competent appraiser. In turn, the two appraisers hire an umpire. The appraisers then determine the value of the property and the amount of loss. If they cannot agree on the loss amount within a reasonable period of time, they submit their differences to the umpire. A decision that any two parties agrees to is binding. Each party pays its own appraiser. The named insured and insurance company each pay half of the expenses of the umpire.
Note: The insurance company has the right
to deny the claim even after the appraisal.
3. Duties In The Event Of Loss Or Damage
a. The named insured has several important duties to perform and obligations to meet in case of loss or damage:
Note: An insured may not want to involve the police with minor neighborhood vandalism or similar problems but notifying them is required if coverage for the loss or damage is desired. On the other hand, for theft losses, employee dishonesty, arson and other crimes, notifying the police is mandatory. An employer may be reluctant to notify police if its valued employee or employees are involved in minor dishonesty losses. Many dishonesty claims are small at first but grow as they are investigated. Claims can be denied if the employer tries to protect the employee by not notifying the police. Employee dishonesty coverage for an employee is immediately void for that employee's future dishonest acts as soon as the employer is aware that he or she committed a dishonest act.
Note: Prompt notification is not defined but unreasonable delays could be grounds to deny the claim for lack of cooperation.
Note: This information does not have to be in writing but a signed proof of loss including this information will be required at a later date.
|
Examples:
The costs of materials and labor to board up windows in advance of a hurricane are not covered. Repairs to plywood coverings made during the eye of the hurricane to replace pieces blown off during the initial phase of the storm are covered. The cost of sandbags purchased to protect the property from flood damage is not covered if flood is not a covered cause of loss. The cost of plastic sheeting applied to prevent rain from entering the roof after hail damage is covered. Earthquake damage to repairs done because of prior tornado damage is not covered. |
Note: If possible, damaged property must be separated from the undamaged and set aside. It must be kept in good order and be available for the insurance company to examine. Examination is crucial to determine the cause and origin of the loss and missing evidence may cause investigators to consider that arson or some other cause is involved. If an arson investigation suggests that the named insured may be involved, law enforcement is called in and newspapers report the case. The higher costs of counter-investigation and court defense are not covered.
Note: The costs to produce this information can be high, especially if the records needed were destroyed as a result of the loss. These costs are not covered.
Note: Records include, but are not limited to, property inventories, values and loss, including tax records, bank records, computer records and other related documents. Samples are important to determine the extent of loss to certain property where the amount of loss may not be obvious.
Note: A proof of loss is much more detailed than the initial loss notification. The named insured discloses exactly what happened and when, identifies the property damaged, substantiates the reason why the loss is covered, and suggests how much should be paid. All decisions the insurance company makes are based on this very important document.
Note: Failure to do so may constitute lack of cooperation that can be grounds to deny the claim.
Note: Failure to do so could be grounds to deny further consequential loss payments, such as business income and extra expense. If operations will not be resumed, the insurance company must be notified as soon as possible so that loss payments are made according to property loss conditions. Even if operations are not resumed, business income pays for the loss of income resulting from suspension of operations after a covered cause of loss during the period of restoration both parties agreed to. The appraisal process can also be used to resolve and settle business income losses.
b. If the insurance company requests, any insured must agree to be examined under oath as often as reasonably required and to sign for its answers. The company may require that the individuals involved be questioned separately and not in the presence of other employees. This serves to prevent collusion and all parties telling the same story.
4. Legal
Action Against Us
Legal proceedings against the insurance company cannot begin until all terms of the insurance have been complied with. In addition, any legal action must be taken within two years after the date of the direct physical loss or damage.
Note: Both parts of this condition can cause problems. The insured may have a case against the company for unreasonable requests for information or delays. At times, the only way to get action is to ask a judge to determine if the insurer has complied with policy provisions and has made reasonable requests. The courts may impose punitive damage awards against an insurance company for unreasonable delays. In addition, the two-year limitation on filing suits may be overridden by state law. In those cases, individual state endorsements adjust the time limits.
5. Loss
Payment
a. The insurance company has four options for paying a covered loss. It can pay the value of the property lost or damaged, pay the cost to repair or replace it, take all or part of it at an agreed or appraised value, or repair, rebuild or replace it with property of similar kind and quality. When the fourth option is selected, Paragraph d. (1) (e) below that specifically excludes costs to meet ordinances or laws must be followed.
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Example: It will take an additional six months to replace the XYZ printing press with another XYZ printing press but an equivalent FGH press is available immediately. The company may pay for only the FGH press. Further loss or expense due to the named insured insisting on the XYZ printing press may not be covered. |
b. The insurance company must give the insured notice of how it intends to pay within 30 days after it receives a properly prepared and duly executed sworn proof of loss.
c. The insurance company does not pay for more than the named insured's financial interest in the damaged covered property.
|
Examples:
Paul is remodeling his office and agrees to sell his desk to Peter for $5,000. Before Peter gets there to take the desk, a fire destroys Paul’s office and the desk. Since Paul no longer has a financial interest in the desk, he cannot collect proceeds for it. Jay and Maisy are insureds on a policy for a commercial building they own. When they file for divorce, the property settlement stipulates that Jay gets the building and Maisy gets their house. A fire damages the building. Jay collects since he is the only one who has an insurable interest in the building at the time of loss. |
d. The value of covered property is determined as follows in this paragraph. It is important to consider each of these items because not everyone is valued at replacement cost.
(1) At replacement cost without a deduction for depreciation. However, there are several stipulations:
(a) The limit of insurance at the time of loss is 80% or more of the property's full replacement cost. The insurance company pays the cost to repair or replace, without a deduction for depreciation and after applying the deductible. However, this is limited to the least of the following:
Note: If the decision is to build at other than the described premises, the cost is limited to the expense of rebuilding at the described premises.
|
Examples:
The policy for Marv’s Hunting Shop was written ten years ago with a building limit of $150,000. That amount increased a modest 4% at each renewal and the current limit is $222,000. A fire destroys the building and the appraiser determines the replacement cost to be $225,000. The loss is paid at replacement cost because the limit is more than 80% of the property replacement cost valuation. Marv notices that the ZIP codes of most of her customers are about five miles away from her current location. As a result, she decides to rebuild at a location closer to her customer base. This increases the building costs by about $10,000. The insurance company does not cover these additional building costs. Marv rebuilds and the cost is $225,000 along with the $10,000 increase due to the new location. The insurance company pays only the $222,000 limit. |
(b) If the limit of insurance at the time of loss is insufficient for replacement cost coverage, the most paid is the larger of:
Payment is capped at the limit of insurance for the property.
|
Example:
The The depreciation factor is .50 because of the building's age. This means the actual cash value of the loss is $20,000 X .50 = $10,000 The replacement cost proportional factor is $150,000/$200,000 = .75. This means the replacement cost proportional loss value is $20,000 X .75 = $15,000. Since $15,000 is the larger of the two and is less than the $150,000 limit of insurance, Sergio’s loss is valued at $15,000. |
(c) The named insured can decide to delay rebuilding immediately and simply accept an actual cash value settlement. If it decides to rebuild at a later date, it can do so, but only if it notifies the insurance company of its intention within 180 days after the date of loss.
(d) The insurance company does not pay for any loss or damage on a replacement cost basis until the affected property is actually repaired or replaced and unless repair or replacement is done as soon as possible after the loss or damage. However, if the cost to repair or replace is $2,500 or less, the loss is settled according to paragraphs d. (1) (a) and d. (1) (b) above, regardless of whether the repair or replacement is actually done.
(e) Costs to repair, rebuild or replace do not include any increased amounts required by enforcing an ordinance or law that regulates construction, use or repair of the damaged property.
(2) The named insured has the option to insure the building for its actual cash value if the Actual Cash Value–Buildings option applies and appears on the declarations. In that case, the provisions of paragraph (1) above do not apply.
(3) Actual cash value always applies to the following property:
(4) Glass is valued at the cost to replace it with safety glazing material but only when the named insured is required by law to use safety glazing material.
Note: This is the only standard ordinance or law coverage in the Businessowners Coverage Form.
(5) Tenant’s improvements are valued at replacement cost if repaired promptly and at the insured’s expense.
Note: Tenant’s improvements not replaced after a loss are valued as a pro rata portion of the original installation cost as it bears to the named insured’s current lease. The formula involves dividing the number of days between the date of loss and the end of the lease by the number of days from the installation date to the lease expiration date, multiplied by the original cost of the tenant’s improvements. If the lease has a renewal option, the last date in the option is used as the new expiration date. No payment is made if repairs are made at the expense of others.
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Example: A loss occurs on the 200th day of a one-year lease. $5,000 of improvements was installed on the first day of the lease. The lease does not have a renewal option. 365 days minus 200 days equals 165 days remaining in the lease. There are 365 days between the installation date and the end of the lease. 165 days divided by 365 days equals .452 x $5,000 equals $2,260. This is the amount of loss payment before any deductible is applied. |
(6) Optional Coverages are subject to separate specific valuation methods. Money is valued at its face value. Numismatic property, such as old coins or gold coins traded based on gold content instead of face value, is still adjusted based on only the face value. There is no standard BOP endorsement that covers collections or gold coins. Extensive gold holdings require special coverage arrangements on other coverage forms and policies.
Note: If gold or silver coins are in a bank safe deposit box, check with the bank for their coverage and limits. If held by a gold or silver broker, check with the broker on available coverage. Few insurance companies insure gold or silver investment coins.
The value of securities is their closing price at the close of business on the day the loss is discovered.
|
Examples:
The bearer bond is valued at $100 on the date of loss, 01/01/10. When the loss is actually paid, the class of bonds trades at $65 per bond. The loss payment is based on the $100 per bond value on the date of loss. The bearer bond is valued at $100 on the date of loss, 01/01/10. When the loss is actually paid, the class of bonds trades at $125 per bond. The loss payment is based on the $100 per bond value on the date of loss. |
(7) Accounts Receivable only:
e. Payment for loss or damage to personal property of others is only for the account of the property owner. The insurance company adjusts the loss with the owner. If it pays the owner, doing so satisfies the named insured’s claim against the company for property of others.
Note: Payment is not for more than the owner’s financial interest in the property.
f. If the property owner sues the named insured, the insurance company can choose to defend the named insured. In that case, any defense costs are at its expense.
|
Example: The customer’s riding lawn mower is in for repairs when the named insured’s building is destroyed by fire. The insurance company offers and pays $1,000, the actual cash value of the mower, the amount it is required to pay. The customer is unhappy, demands an additional $1,000 and then sues the named insured. The company will probably not pay the additional $1,000 but can defend the insured at its own expense if it chooses to do so. The insured cannot seek more money from the company. The difference must be paid out of the insured's own funds. |
Note: Bailees coverage on property of others is usually broader.
Since there is no standard bailees form, each insurance company has different requirements. For information on various bailee markets, refer to Bailees Customers' Insurance in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
g. The insurance company has 30 days to pay the loss after it receives the named insured's sworn proof of loss. This time period does not begin until all policy terms were complied with, the parties agreed on the payment amount, or an appraisal award was made.
h. Party Walls (01 10 addition)
When
buildings abut one another, they often share a party wall. This wall separates
the two buildings but is also part of each building. If the same insured owns
all buildings, loss settlements are unaffected. However, if different insureds
own the shared party wall, loss settlements may be more difficult. This
edition formally addresses this issue for the first time.
When both
building owners plan to repair and rebuild, the insurance company pays its
insured’s proportional share of the damage to the party wall. However, if the
named insured wants to rebuild but the other building owner does not, the
insurance company pays the full value of the party wall. It then has the right
to subrogate against the adjoining building owner.
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Example: Titanic Tim's Toys and Jungle Jim's Jazzercise occupy adjoining buildings with a common party wall. A fire started by smoldering cleaning rags in an unapproved container on Jim's premises seriously damages both businesses. Tim decides to proceed with the needed repairs but Jim throws in the towel and decides to go out of business. Tim's insurance company pays for the full value of the party wall and then weighs its options as it decides whether or not to pursue its subrogation rights against Jim. |
6.
Recovered Property
Either the named insured or the insurance company may recover property. Whichever one recovers, it must notify the other promptly. Recovered property can be property the police take from burglars or property whose salvage has been paid to either the named insured or the company. If the company pays the claim and the named insured recovers the property, the company is entitled to the salvage or recovered value of what it paid after subtracting its recovery costs.
7.
Resumption Of Operations
If the named insured can resume normal operations using salvaged or damaged property at either its premises or elsewhere, the business income loss is reduced to the extent that operations can be continued. The wording implies that if operations can be resumed using salvaged or damaged goods, the insurance company pays only the business income loss as if operations had been resumed, whether the named insured wants to or not.
Note: Questions periodically arise as to what is considered reasonable for resumption of operations. Asking the named insured to use dented or unsightly back-office machines that are safe to operate and that produce adequate results in a situation where the company may not pay if the named insured refuses to resume operations. On the other hand, if the company believes that the named insured can resume retail operations by holding a fire or salvage sale, but the named insured believes it may affect the integrity of its label and reputation, it may have a case to demand payment of business income.
Extra expense coverage ends when the named insured is able to resume normal operations. There is no reference to how this must be accomplished.
8. Vacancy
a. Terms
(1) With respect to the terms building and
vacant used in this condition:
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Example:
Friendly Deli occupies 25% of the |
Note: The key word is customary. If the lessee, sub-lessee or building owner is a retail business, and that is the customary operation, trying to say the building is being used for storage is not a way to circumvent the definition of vacancy.
(2) Buildings being constructed or renovated are
not treated as vacant.
Note: Buildings
under construction or being renovated are not considered vacant. Just as the
insured might try to stretch the non-vacancy a little to gain coverage, the
insurance company may attempt to treat a building under construction or being
repaired as vacant in order to reduce or deny coverage. If the building is
temporarily vacated for major renovation work, with the tenant intending to
newly occupy or return as soon as the work is completed, the building is not
vacant.
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Example: The Jones Office Complex, consisting of four separate buildings, was having problems retaining its tenants. Building 1 was fully occupied by one tenant. Building 2 was only 20% occupied by a retail shop. The rest of the building had been vacant for more than six months. Building 3 had multiple tenants but was still 15% vacant. Building 4 had just been rented out subject to the completion of major renovation work. A contract had been signed and renovation was under way. A major storm damaged all four buildings. Based
on the definition of vacancy, Buildings 1 and 3 were not vacant and were
fully covered. Building 2 was vacant and subject to a vacancy penalty. Since
Building 4 was being renovated, it was not considered vacant at the time of
loss and was not subject to a vacancy penalty. |
b. Vacancy
Provisions
If the
building that sustains loss or damage was vacant more than 60 consecutive days
before the date of loss:
(1) The insurance company does not pay for loss
or damage from vandalism, sprinkler leakage from a system that was not protected
against freezing, breakage of building glass, water damage, theft, or
attempted theft, even if they are covered causes of loss.
(2) Losses due to covered causes of loss other
than those listed in (1) above are reduced 15%.
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Example:
Continuing the example
above, the loss or damage to building 2 in the |
Note: Insurance companies are interested in insuring only successful, ongoing businesses and their pricing contemplates an active occupancy. For this reason, vacant properties are subject to a significant rating surcharge. Since vacancy is not discovered in many cases until after a loss occurs, the Loss Conditions restrict coverage if the vacancy is not disclosed in advance.
F. Property General Conditions
1. Control
Of Property
Acts or negligence of others who are not the named insured or under its direction or control do not affect the insurance coverage.
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Example: A disgruntled former employee burns down the named insured’s building. Rioters break windows in the building and steal goods that belong to others. These losses are covered. |
In addition, if the named insured breaches one or more policy conditions at one location, coverage at other locations is unaffected if the breach condition does not exist there.
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Example: The named insured's partner burns down the named insured’s headquarters building. Coverage does not apply. In an unrelated incident on the same day, a car skids off the road, slams into the wall of the named insured’s second location and damages it. The damage at the second location is covered. |
2.
Mortgageholders
a. Trustees are included as
mortgageholders.
Note: Mortgageholders and trustees have certain rights. They have the right to be reimbursed for losses the insured voided through misrepresentation, fraud or criminal activity, such as arson.
b. Payments for loss or damage to covered buildings to involved mortgageholders are made in order of precedence, as their interests may appear.
Note: Mortgageholders must be listed on the declarations and loss payments are made in the order listed. Mortgageholder precedence in property law is based on the mortgage filed first as a deed amendment. In order to prevent legal problems, confirming with the named insured the order that mortgageholders are presented in is suggested. The first mortgageholder expects to be paid first and the second and subsequent mortgageholders are paid after the first mortgageholder is indemnified.
c. Mortgageholders have the right to receive loss payments even if they have initiated foreclosure or similar proceedings on the building or structure involved.
d. If the named insured's claim is denied because of its actions or failure to comply with policy terms, the mortgageholder still has the right to receive loss payments. To do so it must:
e. If the insurance company pays a mortgageholder for a loss and does not pay the named insured because of its acts or failure to comply with policy terms, the mortgageholder's rights transfer to the company to the extent of its payment but the mortgageholder's right to recover the full amount of its claim is not affected.
However, the insurance company has the option to pay the mortgageholder its entire principal plus accrued interest in exchange for transferring the mortgage and note to the company and the named insured paying its remaining mortgage debt to the company.
f. The insurance company gives the mortgageholder at least 10 days written notice of the effective date of cancellation if the named insured does not pay the premium and at least 30 days written notice for any other reason.
g. The insurance company gives the mortgageholder at least 10 days written notice before the expiration date of its intent to not renew the policy.
Note: Laws in most states may require longer notification periods than 10 days for non-renewal and 30 days for most other reasons. However, most approve the 10-day notice for non-payment of premium.
3. No Benefit To Bailee
This insurance does not benefit anyone having custody of any covered property other than the named insured.
4. Policy
Period,
Note: Transit can include air, land or
water and includes transit to
G. Optional Coverages
Optional Coverages must have entries on the declarations for coverage to apply. They are subject to the property coverage terms and conditions, except and/or as stated below.
1. Outdoor
Signs
a. The insurance company pays for direct
physical loss or damage to outdoor signs that the named insured owns or that
others own that are in its care, custody or control
at the described premises.
Note: Signs at locations other than the designated premises should be insured under an inland marine sign form.
b. Signs are not subject to A.3. Covered
Causes Of Loss or B. Exclusions. Instead, the covered
causes of loss are stated in item a. above. However, this optional coverage
states that exclusions B.1.c. Governmental Action, B.1.d. Nuclear Hazard and
B.1.f. War And Military Action do apply.
Note: Governmental action is an important exclusion because most municipalities have ordinances regulating the use and placement of signs. Many require sign bonds for signs that overhang public thoroughfares, sidewalks and rights of way or for those that exceed a certain size or height.
c. Coverage also does not apply to loss or damage caused by or resulting from wear and tear, hidden or latent defect, rust, corrosion or mechanical breakdown.
d. The most paid in any one occurrence for loss or damage is the Outdoor Signs Limit Of Insurance on the declarations.
Note: Signs are covered for the limit on the declarations. Outdoor sign coverage otherwise provided by 6. Coverage Extensions Outdoor Property does not apply when this optional coverage is added.
e. These provisions supersede and replace all other references to outdoor signs in the coverage form.
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Example: If the value of a sign is $5,000, do not subtract the $2,500 limit provided in the coverage extension and have the limit on the declarations be $2,500. It should be $5,000. |
Note: There is no limitation with respect
to the sign's construction.
2. Money And Securities
a. Coverage applies to loss of the named insured's money and securities it uses in its business while:
The loss must result directly from theft or any act of stealing, disappearance or destruction.
Note: Since "at banks or savings institutions” is not defined, it is interpreted broadly to mean while in the bank, at the drive-through, at the outside night deposit drop or at the outside Automated Teller Machine (ATM). An ATM at a location away from the actual bank building could be construed as an extension of the bank or savings institution. In other words, ATM's may be considered as branches of the financial institution. Coverage within the living quarters of the insured’s employee can present loss adjustment problems, as can the term “in transit.”
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Example: The employee takes the night deposit to the bank and finds the drop out-of-order. She decides to visit a friend and leaves the money in her car during the visit. The car is broken into and the money is taken. |
Note: Employees who make stops for other than proper delivery of money or securities could open up a question as to whether the money was in transit to the financial institution or was in their living quarters. There is no requirement to take a direct route but a significant deviation could be grounds to deny a claim. A significant deviation could also lead to an investigation into whether the claim was actually an employee dishonesty claim not covered by the money and securities optional coverage.
b. In addition to the Section I–Property Limitations and Exclusions, coverage does not apply to losses caused by or resulting from accounting or arithmetical errors or omissions, giving or surrendering property in any exchange or purchase, or property contained in money operated devices not equipped with continuous recording devices.
Note: There are no standard BOP endorsements to add these coverages.
Note: Property in vending machines, arcade machines, and other money-operated mechanical or electronic devices is excluded unless the device continuously records the transactions and amounts. This limitation is not in the basic coverage form. In addition to excluding money in certain devices, products like drinks or snacks in them are also excluded. However, there is no coverage unless the device is situated on the designated premises, due to other policy limitations. This coverage form is not appropriate for companies that supply arcade machines to others or that have vending machines at scattered locations.
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Examples:
The $600 amount on the cash register tape does not match the $400 in the cash register drawer. In addition, the cash register drawer does not balance with the tape amount and the opening balance. The clerk admits leaving the register briefly while customers were present. There is no actual evidence or proof that a theft occurred but theft is presumed. Coverage applies. The books don’t balance and nobody can figure out why. Coverage does not apply. The named insured sells a large flat screen television for $1,400 and delivers it to the customer. Two days later, the check bounces but the customer is gone and cannot be located. Coverage does not apply. |
c. The most paid for loss in any one occurrence is the limit on the declarations for money and securities inside the premises, including banking premises, and outside the premises while elsewhere.
d. Regardless of the number of people involved in the claim, or whether the act is a single act or a series of acts, all losses are considered one occurrence.
e. The named insured must keep accurate records of all money and securities to verify loss amounts.
Note: This includes cash register tapes,
computer reports, logs and sales slips to verify a
loss. Information that identifies the issuer, serial number, date and complete description of a security should be
maintained at a different location than where it is kept. All securities,
especially negotiable securities, should be stored in a safe deposit box or
other secure place.
3. Employee Dishonesty
a. The insurance company pays for direct loss of business personal property and money and securities due to dishonest acts its employees commit, whether acting alone or in collusion with others. However, it does not include the named insured or a partner if the intent was to cause the named insured to suffer a loss and to benefit the employee, other persons or other organizations.
Note: This section suggests that the intent must be to cause loss to the named insured and to financially benefit either the employee or another party. In addition, the loss can involve money and securities and/or business personal property. The most common loss involves inventory theft but this is frequently the most overlooked coverage feature. The named insured must be aware of its money exposure by utilizing countersignatures, regular audits, and balancing the books by someone other than those who make deposits to the account. It is also important to have arrangements in place to keep track of purchase orders and inventory.
b. There is no coverage for loss or damage due to the named insured's dishonest acts, its partners or members, whether acting alone or in collusion. There is also no coverage for dishonest acts by managers, directors or employees, except as provided for in a. above, while in collusion or acting alone. Finally, there is no coverage if the only proof of a loss is an inventory or a profit and loss calculation.
c. The most paid in any one occurrence is the Employee Dishonesty Limit Of Insurance on the declarations.
d. Loss or damage caused by one or more persons, or those involving a single act or a series of acts, is considered one occurrence.
e. If a loss is covered under the current policy as well as by a previous cancelled or terminated policy issued to the named insured by the same or an affiliated insurance company, the amount paid is limited to the largest amount provided by any policy, regardless of the number of years it was in effect. Limits are not cumulative from year to year.
Note: This provision eliminates stacking of limits from two or more policies due to a series of acts.
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Example: Floyd’s Meat Market has the best steaks in town. Ernie is the head butcher and took steaks home with him at least once a week for over ten years but never told Floyd. Ernie finally recognizes the error of his ways and confesses to Floyd. Floyd suddenly realizes that Ernie has stolen $6,000 worth of steaks in each of the past ten years. His claim is for $60,000 since he has been with the same company the whole time. Since the Employee Dishonesty Limit Of Insurance is $10,000, the loss is capped at $10,000. |
f. This coverage is cancelled with respect to a specific employee as soon as the named insured or one or more of its partners, members, managers, officers or directors not acting in collusion with the employee become aware of dishonest acts the employee committed before or after being hired.
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Example: Floyd at Floyd’s Meat Market really likes Ernie and wants to keep him as an employee. The policy permits this but coverage does not apply to Ernie if he commits any other dishonest acts. Even if Floyd did not report Ernie’s actions, Ernie is not covered in the future because Floyd knew about the situation. |
g. Loss must be sustained during the policy period and discovered not later than one year after the end of the policy period.
h. If the named insured had a covered loss in a previous policy period but did not discover it until after the discovery period expired, the current policy provides coverage if there was no break in coverage from the previous policy and the loss or damage would have been covered under the current policy if it had been in effect at the time of loss.
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Example:
The policy for John’s Pizza and Deli has been in force continuously
since the business started ten years ago. The policy dates are 1/1 to 1/1 of
each year and it has always included employee dishonesty coverage. John
hired Joanne as a cook two years ago. During the time she was employed, from
01/14/2010 to 07/13/2010, John noticed a strange pattern in the inventory.
He couldn’t prove anything but suspected that Joanne was taking inventory.
She ended her employment and was arrested in connection with theft at
another pizza place in June 2011. She was a first-time offender and
confessed to all previous crimes, including her thefts at John’s. John
reported the crime as a claim to the company that provided coverage for the
01/01/2010–01/01/2011 policy period. The company denied the claim. He then
forwarded the claim to the current carrier and its coverage paid the claim
submitted. |
i. The insurance in paragraph h. above is limited to the lesser of the limits on the current policy or the limits on the policy in effect when the loss occurred.
j. This Optional Coverage defines employee.
When used in employee dishonesty, an employee is any natural person:
Independent
contractors are not employees nor are managers, directors
or trustees unless they are carrying out the duties of employees.
Note: ISO uses the term “natural person” in the
definition above. A natural person means a living, breathing individual.
Unnatural persons are entities, such as corporations, that have rights and
obligations as defined by law.
Note: This definition matches the same definition
in the ISO crime coverage forms.
4.
Equipment Breakdown Protection Coverage (01 10 change)
a. The
insurance company pays for loss or damage directly caused by or resulting from
electrical failure or mechanical breakdown to covered property. The covered
property is electrical, mechanical or pressure machinery and equipment. This
coverage does not include:
(1)
Adjustments, alignments, calibration, modifying, cleaning, and other types of
malfunctions
(2) Any
leakage from valves, fittings, shaft seals, gland packing, joints
or connections
(3) Vacuum
or gas tubes or brushes damage
(4)
Protective or safety devices functions
b.
Paragraph A. Coverage 4. Limitations a. (1) and (2) do not apply to this
Optional Coverage because both relate to limitations to boilers and water
heaters that no longer apply because of this optional coverage.
c. Paragraph
B. Exclusions B.2.a. Electrical Apparatus, B.2.d.Steam Apparatus and B.2.l.(6)
Mechanical Breakdown do not apply with respect to this Optional Coverage.
d.
Paragraph G.1.c.(5) that excludes coverage for mechanical breakdown of signs
in the Optional Coverage for Outdoor Signs does not apply with respect to this
Optional Coverage.
e. Any
dollar amount of deductible for this Optional Coverage on the declarations is
subtracted from the amount of loss otherwise payable before the insurance
company pays the remaining amount of loss, up to the limit of insurance. If
there is no separate deductible, the property deductible applies.
f. The
72-hour time deductible in the definition of period of restoration and that
applies to business income can be changed for this coverage by entering a
different time period on the declarations for business income and/or extra expense
mechanical breakdown.
Note: Time
deductibles expressed in a number of days means that a day consists of 24
consecutive hours.
With
respect to this Optional Coverage, any time deductible on the declarations
replaces any other time deductible that otherwise applies to business income
coverage under this coverage form.
g. With
respect to this Optional Coverage, the definition of computer is broadened to
include computers that operate production equipment and machinery.
h. Any
representative of the insurance company may suspend this Optional Coverage as
it applies to any covered property found to be in or exposed to a dangerous
condition. The suspension can be lifted and coverage
reinstated when the reason for the suspension is resolved and no longer exists.
The
insurance company suspends or reinstates this Optional Coverage by mailing or
delivering written notice of the fact to either the named insured's last known
address or the address where the affected equipment is located. The notice
must include the date that coverage is either suspended or reinstated. The
insurance company refunds premium on a pro rata basis if coverage is not
reinstated. However, the suspension is effective even if a refund is delayed
in being offered or made.
H. Property Definitions
1. Computer is any electronic equipment that can be programmed to store, retrieve and process data, including all equipment needed to support the function. It does not include computers used to operate production machinery and equipment.
2. Counterfeit
money is a copy made to imitate
the genuine article with the intent to defraud and to be taken as real money.
3.
Electronic Data is an all-encompassing
term. It means information, facts or programs on
computer software. It also includes media, data, programs
and software wherever and however stored. There is no requirement that the
insured must own it or that it must be on the premises.
4. Fungi are any and every type of fungus, including
any of the by-products produced or released by fungi. This includes, but is
not limited to mold, mildew, spores, scents and
byproducts.
5. Manager is a director of a limited liability company.
6. Member is an owner of a limited liability company. Members may also be managers.
7. Money is currency, coin and bank notes in current use that have a face value. It also includes travelers' checks, register checks, and money orders held for sale to the public.
8. Operations are the named insured’s business activities that take place at the described premises.
9. Period of restoration begins 72 hours after occurrence of direct physical loss or damage for business income coverage but immediately for extra expense coverage. It ends on the date that property should be repaired with reasonable speed and similar quality or the date when business resumes at a new, permanent location. It does not include any increased period due to enforcement of law or pollution assessment, testing, cleanup or removal. It also does not apply to increases due to enforcement of ordinances regulating construction or those requiring monitoring, testing or neutralizing of pollutants, and is not affected by the policy expiration date.
10. Pollutants are any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and wastes. Waste includes products to be recycled, reconditioned or reclaimed.
11.
Securities are negotiable
and non-negotiable instruments or contracts that represent money or other
property. This includes tokens, tickets, revenue and other stamps or unused
postage in a meter, and evidences of debt such as
charge slips used in charge cards the named insured did not issue. It does not
include money itself.
12.
Specified causes of loss are fire, lightning, explosion, windstorm, hail,
smoke, aircraft, vehicles, riot, civil commotion, vandalism, leakage from
fire-extinguishing equipment and sinkhole collapse. It also includes volcanic
action, weight of ice and snow, ice or sleet. Falling
objects are included but not to property in the open or to the interior of or
property inside a building unless the wall or roof is first damaged by a
falling object. Finally, it includes water damage but only as a result of
breaking apart or cracking of any part of a system or appliance containing
water or steam, but not including a sump system.
Sinkhole collapse in this definition is the sudden collapse of earth due to water action creating holes or caverns in limestone or other rock formations. It does not include sinking into man-made underground spaces, such as mines or the costs to fill sinkholes or land that sinks or collapses into man-made underground spaces.
13. Stock is goods held in storage or for sale, raw material, goods-in-process, or finished goods, including their packing and shipping supplies.
14. Valuable papers and records are inscribed, printed or written documents, manuscripts and records. This also includes abstracts, books, deeds, drawings, films, maps or mortgages. It does not include money and securities.
SECTION II–LIABILITY
ISO
Commercial General Liability compared to Businessowners Liability
This section of the ISO Businessowners Coverage Form is similar to the ISO Commercial General Liability Coverage Form but with some important differences.
A. Coverages
1.
Business Liability
a. The insurance company pays damages to third parties related to covered occurrences of bodily injury, property damage and personal and advertising injury, subject to the limits of insurance and the named insured's legal obligation to pay. It must also defend against all suits brought against the named insured covered by the insurance. The insurance company controls all decisions on which occurrence and offenses (01 10 addition) claims or suits are investigated, defended and/or settled. The amount paid for damages is limited as described in Section II–Liability D. Liability and Medical Expenses Limits Of Insurance. All responsibility to defend ends when claims payments or settlements exhaust the limit of insurance that applies to a given loss.
Note: Defense coverage is for the insured's benefit. There is no duty to defend it for any suit seeking damages that the insurance does not cover. This wording clarifies the intent to defend only claims or suits covered by the insurance and should eliminate any confusion or ambiguity concerning when defense is available.
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Example: The Businessowners Coverage Form provides liability coverage on Anton's Army-Navy Store with a $1,000,000 limit of insurance. Anton's negligence causes an explosion that injures a number of people and damages several other premises. Each injured person and property owner files a separate claim for injury or damage. The insurance company settles with the injured persons. Once the $1,000,000 limit is completely exhausted, it is no longer obligated to defend the remaining lawsuits. |
The insurance company is not obligated to provide or perform any other acts or services, or to pay any other expenses or sums except for those under Coverage Extension–Supplementary Payments.
b. Insurance applies:
(1) To bodily injury and property damage only if:
(a) It is caused by an occurrence in the coverage territory.
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Example:
Fred's Finer Foreign Frillery
has an operation in |
(b) Insurance applies only to bodily injury and property damage occurrences that take place during the policy period.
Note: Occurrences before the inception date are not covered under the occurrence coverage, even if the claim is made during the policy period.
(c) If the named insured or anyone who become an insured because of the type of business entity is aware of bodily injury or property damage that occurred in whole or in part before the current policy period, the current coverage does not apply to that event. In addition, any continuation, change or resumption of that prior bodily injury or property damage into the current policy period is considered known prior to the policy period. This paragraph also applies if an employee authorized by the named insured to give notice is aware of the prior policy term bodily injury or property damage.
(2) Insurance applies to personal and advertising injury caused by offenses related to the business committed in the coverage territory during the policy period.
Note: The word committed replaces the words occurred or occurrence. As a result, this coverage is very different from bodily injury and property damage coverage. Occurrence has a long controversial history while committed is much clearer. Rather than defining the term, the Businessowners Coverage Form relies on its plain meaning.
c. Bodily injury and property damage that occurs during the current policy period is covered. In addition, bodily injury and property damage that occurred in prior policy periods but were not known to the named insured, anyone who become an insured because of the type of business entity, or an employee authorized to provide notice is covered. Any continuation change or resumption of the bodily injury or property damage after the end of the policy period is also covered under this policy.
d. The date of knowledge of bodily injury or property damage is the earliest that the named insured, anyone who become an insured because of the type of business entity, or an employee authorized to provide notice reports any part of the occurrence or claim to the insurance company, receives a written or verbal demand or claim for damages, or becomes aware in any other way that bodily injury or property damage has or is beginning to occur.
e. Bodily injury damages include damages claimed for care, loss of services or death. All must result from the bodily injury but they can occur at any time.
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Example: Prather was injured when he fell over a display on a sidewalk in front of Robinson’s Books. He was hospitalized and suffered respiratory failure during surgery. He survived but entered rehabilitation and then a nursing home before dying five years after the initial fall. The care, loss of services and death are all considered bodily injury damages from the fall. |
f. Coverage Extension–Supplementary Payments
(1) These payments apply to any claim or suit the insurance company defends, investigates or settles. They do not reduce the limit of insurance.
(a) All expenses the insurance company incurs
(b) Bail bonds required because of accidents or traffic law violations resulting from use of any vehicle covered by bodily injury liability, but only up to $250
Note: The insurance company does not have to furnish these bonds.
(c) The costs of bonds needed to release attachments but only for amounts within the limit of insurance
Note: The insurance company is not required to furnish these bonds.
(d) Reasonable expenses the insured incurs at the insurance company's request to assist in investigating or defending claims or suits, including actual loss of earnings up to $250 a day for time away from work
(e) All court costs taxed against
the insured in the suit except that these payments do not include attorney
expenses or fees assessed to the insured (01 10 additions).
Note: In cases where costs and expense of the trial are assessed against the negligent party, this supplementary payment provides extensive benefits over and above the policy limits.
(f) Prejudgment interest awarded against the insured for the part of the judgment the insurance company pays. However, if the company offers to pay the limit of insurance, there is no prejudgment interest based on the period of time after the offer is made.
(g) Interest on the full amount of a judgment that accrues after it is entered but before the part within the limit of insurance is paid
None of
the payments described above reduce the limits of insurance.
(2) An insured may agree to reimburse another, called an indemnitee, for damages when both are sued. One example is when the insured asks that an entity be added an additional insured because of a contractual relationship. When a suit is presented and the insurance company defends the insured, it will also defend the indemnitee but only when all of the following apply:
(a) The suit against the indemnitee involves damages for which an insured contract or agreement states that the insured assumes the indemnitee's liability
(b) The coverage provided by this coverage form applies to that assumed liability
(c) The insured is bound in the same contract to assume the defense obligation or cost to defend the indemnitee
(d) Based on the allegations made in the suit and other information the insurance company obtained, there is no apparent conflict of interest between the insured's or the indemnitee's interests
(e) Both parties ask the insurance company
to conduct and control the indemnitee's defense and both agree to the mutual
defense, especially that the same counsel conducts both defenses.
(f) The indemnitee agrees in writing to:
(3) If all of these conditions are met,
the insurance company covers attorneys’ fees, its litigation expenses, and the
indemnitee's litigation expenses incurred at its request. These payments are
not considered awards or payment of damages and do not reduce the limits of
insurance. The company's obligation to defend the indemnitee and to pay for
expenses ends when it has paid the limit of insurance that applies in
judgments or settlements or these conditions are no
longer met.
2. Medical
Expenses
a. The insurance company pays medical expenses related to a covered bodily injury accident that occur on owned or rented premises or on ways adjacent to it. It also pays if the injury results from the named insured’s operations. The accident must occur during the policy period and in the coverage territory. The expenses must be incurred (not just anticipated) and then be reported to the insurance company within one year from the date of loss. The injured party must submit to examinations by physicians the insurance company selects and at its expense as often as reasonably necessary.
b. Payments are made without regard to fault. All expenses must be reasonable. Medical expenses include first aid administered at the time of the accident, necessary medical, surgical, x-ray and dental services, including prosthetic devices and ambulance, hospital and professional nursing services. They even include funeral expenses.
B. Exclusions
1. These
apply to Business Liability Coverage
a. Expected Or Intended Injury
Bodily injury and property damage that the insured expects or intends is excluded. However, coverage applies to bodily injury that results from using reasonable force to protect persons or property.
Note: This exclusion protects insurance companies from paying damages for injury or damage the insured causes deliberately. It is in the public interest and ensures that the insured does not use the coverage for personal gain, such as theft, to injure competitors, for revenge, or for any other intentional harm. However, this wording is constantly challenged and clarified in court cases across the country. The challenges typically seek coverage for intentional acts that result in unintended consequences. In other words, the insured's action causes an unexpected and unintended result.
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Example: Paula’s Pancake Heaven is insured under the Businessowners Coverage Form. Paula has had it with a homeless man who hangs around the front of her store and frightens her customers. Paula asks the man to leave, then shoves him, and is shocked to see him lose his balance, fall, strike his headfirst on a mailbox and then against the concrete curb. The man sustains serious injuries and sues Paula. Paula's insurance company denies coverage. While she never meant to hurt the man, the injuries he sustained were the result of her little, but intentional, shove. |
b.
Contractual Liability
Coverage
does not apply to bodily injury or property damage that the insured is
obligated to pay because of liability it assumed in a contract or agreement.
However, this exclusion does not apply to:
(1) Liability for damages it has even without a
contract or agreement
(2) Liability for damages it assumes in a
contract or agreement that qualifies as an insured contract as long as the
injury or damage occurred after the contract or agreement was executed. With
respect to liability the insured assumes in an insured contract, reasonable
attorney fees and necessary litigation expenses of parties other than an
insured are treated as damages because of bodily injury or property damage as
long as:
(a) The same insured contract also provided
liability to the party for its defense or for the cost of its defense
(b) The attorney fees and litigation expenses
are to defend the involved party against alternative resolution or civil
proceedings for damages allegedly covered by this insurance
Note: This exclusion both provides and excludes coverage and must be reviewed carefully to completely understand. One important point is that all reasonable expenses to defend a suit filed because of this contractual obligation are considered damages. This means that these defense costs are included in the limit of insurance, not outside as provided for in the supplementary payments and every dollar spend on defense reduces the amount available to pay for the actual injuries or damages. The cost to defend can be part of the supplementary payments if the terms of the indemnitee section of Supplementary Payments are met.
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Example:
Mary and Bob entered into a lease agreement. In one part of it, Bob
agreed to assume Mary’s liability but there was no mention of him assuming
defense costs in case of litigation. During the lease period, the furnace
exploded and seriously injured two persons. Mary owned the furnace but,
because of the contract, Bob’s insurance responded up to its limit of
insurance. Once the defense costs and the injury claims exhausted the limit
of insurance, Mary (or her insurance company) became responsible for the
remainder. If the contract was written to include defense costs, they could
have been paid under Coverage Extension–Supplementary Payments. |
c. Liquor
Liability
There is no coverage if an insured engaged in manufacturing, distributing, selling, serving, or furnishing alcoholic beverages is liable for bodily injury or property because of the following:
(1) Causing or contributing to any person's intoxication
(2) Furnishing alcoholic beverages to a person already under the influence or to a person under the legal drinking age
(3) Statutes, laws, ordinances or regulations that address sale, distribution, use or gift of alcoholic beverages
Note: This exclusion does not apply to liquor-related losses for an insured that is not in the liquor business. Events such as business lunches, parties and social functions the insured sponsors are covered for host liquor liability unless existing statutes, laws, ordinances or regulations apply to them.
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Examples:
The insured is a medical supplies distributor. It holds a company-sponsored Christmas party and serves alcoholic beverages at no charge. The owner of a printing business takes a client to lunch that includes a bottle of wine. Coverage applies in both examples if the client or guest is injured as a result of consuming alcohol. |
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Example: The insured sponsored a fund-raiser by holding a Casino Night, including betting and gambling devices. Food and alcoholic beverages were served for a charge. The insured did not obtain the necessary permits and licenses. A patron who was served alcohol was injured on his way home. Coverage applied if the patron sued, as long as the insured was not in the liquor business. |
Note: The Businessowners Coverage Form can use three different endorsements to provide additional liquor liability coverage.
d. Workers
Compensation And Similar Laws
This insurance does not apply to any requirement or obligation the insured must assume due to any workers compensation, disability benefits, unemployment compensation or similar type of law.
Note: This exclusion and the next one are intended to prevent double indemnification for injury that should be covered only under workers compensation and/or employers liability policies.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty workers compensation situations should refer to the workers compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
e. Employers
Liability
Bodily injury an employee of the insured sustains in the course of that employment or performing duties related to the insured's business is excluded. This exclusion applies regardless of the insured’s liability as an employer or any other capacity, or its obligation to repay others who must pay damages because of the injury. This exclusion applies to both the employee’s claims as well as claims from the employee’s spouse, children, parents and siblings as a consequence of the bodily injury.
This exclusion does not apply to liability the insured assumes under an insured contract.
Note: This clarification is particularly important because of the widespread use of outsourcing work to a variety of contractors, subcontractors, independent contractors and leased employees and because it can be difficult to determine who is responsible.
Note: It is important to be aware of monopolistic states where workers compensation coverage is provided or required but coverage for employers' liability is either not required or not available. This can create a significant coverage gap. In the past, many insurance companies in these states developed their own endorsements and programs to add employers' liability coverage to the Businessowners Coverage Form. ISO recently developed endorsements that address this issue.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty employer’s liability situations should refer to the workers compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
f.
Pollution
Note: This is ISO's attempt to make this exclusion as comprehensive as possible by excluding virtually every potential pollution occurrence. There is no reference to pollution being accidental or gradual. Simply stated, all pollution events are excluded, subject to some exceptions.
(1) Coverage does not apply to bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(a) At or from any premises, site or location now or at any time ever owned, occupied, rented or loaned to any insured except:
(b) At or from any premises, site or location now or at any time ever used by or for any insured or others to handle, store, dispose of, process or treat waste
(c) That were transported, handled, stored, treated, disposed of or processed as waste at any time by or for any insured or any other party the insured is or may be legally responsible for
(d) At any place where any insured, or a contractor working on its behalf, performs operations if the pollutants are brought on site in connection with them. However, coverage does apply if:
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Example: A bobcat carrying a barrel of oil flips. Oil from the bobcat leaks out and the barrel of oil also opens. The bodily injury or property damage from oil that was part of the bobcat is covered but any bodily injury or property damage from the barrel of oil is not. |
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Example: ABC Painting is hired to paint a hotel. The paint fumes in a room trigger the smoke alarm. A hotel guest trips going down the fire escape and is injured. She sues the hotel and ABC for her injuries. Coverage applies because of this exception to the exclusion. |
(e) Anywhere the insured, or contractors working on its behalf, are performing operations, if they involve anything to determine or treat the effects of pollutants
(2) Any judgments, suits, awards, fines or penalties resulting from Environmental Protection Act (EPA) enforcement or on behalf of the EPA are also excluded. To clarify this intent, it states that insurance does not apply to any loss, cost or expense resulting from any request, demand or order that requires the insured or any other party to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effects of pollutants. It further states that insurance does not apply to any claim or suit brought by or on behalf of a governmental authority for damages because of any of these circumstances. However, this paragraph does not apply to any property damage liability the insured would have had except for the governmental request.
Five pollution-related endorsements can be used with the Businessowners Coverage Form:
An insured may have a pollution liability exposure due to its owning, operating, using or maintaining underground storage tanks, such as a retail gasoline station. A separate Underground Storage Tank policy may be issued to cover these exposures.
Insurers and brokers that provide coverage to a variety of difficult, unusual or specialty pollution situations should refer to the Environmental Risks section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
g.
Aircraft, Auto Or Watercraft
There is no coverage for bodily injury or property damage that may arise from owning, maintaining, using, or entrusting to others any aircraft, auto or watercraft. This applies to any that an insured owns or operates or that are rented or leased to it, including loading and unloading.
Note: Airplanes, hang gliders, hot air balloons, ultra-lights or helicopters are all types of aircraft that are excluded.
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Example: The owner of Mike’s Marine & Sauna also owned a sailboat he used to promote the store. It had the store’s logo, telephone number and Web site prominently displayed on the main sail. Mike rented it to some of his friends to use but it had not been maintained properly and his friends were injured when it sank. This loss was not covered. |
This exclusion applies even if claims allege negligence or other wrongdoing in supervising, hiring, employing, training or monitoring others if the occurrence involves owning, maintaining, using or entrusting aircraft, auto or watercraft to others.
This exclusion has a number of exceptions and does not apply to:
(1) Watercraft on shore at the named insured's owned or rented premises
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Example: Teenagers use a boat stored behind a warehouse to meet at night. One is injured trying to jump from the boat and the parents sue the warehouse owner for having an attractive nuisance exposure. Coverage applies. |
(2) Non-owned watercraft less than 51 feet long as long as it is not used to carry persons or property for a charge
(3) Any parking of a non-owned auto on or next to premises the named insured owns or rents. The auto must not be owned, rented or loaned by the named insured or the insured.
|
Example: Harriett has five parking spaces next to her dress shop. When she has a fashion show on premises, she has an employee act as a valet and park vehicles in her lot, on the street, and in the school parking lot on the next block. Injuries and damages due to the parking on the street next to her shop and in her parking, lot are covered but those at the school are not. In addition, there is no coverage if the employee parks Harriet’s car and causes injury and damage. |
(4) Liability assumed under an insured contract relating to owning, maintaining or using aircraft or watercraft
|
Example: An employee is injured during a trip out of town. Lionel charters a plane to bring him back to a local hospital. The charter operator requires a hold harmless agreement before he takes off to bring the employee back. Coverage applies if a covered loss occurs. |
(5) Bodily injury or property damage from:
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Example: A pickup truck is modified to carry well-drilling equipment. The equipment accidentally strikes and damages the side of a building while being maneuvered into position over a well. Coverage applies to the damage to the building. |
Numerous different liability policies are available to cover the exposures of insureds that own, rent, lease, charter or operate aircraft, watercraft or autos. One Businessowners Coverage Form endorsement available to modify the auto portion of this exclusion is BP 04 04–Hired Auto And Non-Owned Auto Liability.
CG 24 12–Boats is used with the ISO CGL coverage form to provide coverage for boats. There is no corresponding Businessowners Coverage Form endorsement at this time. Consider writing the exposure under the ISO CGL Coverage Form if liability coverage on boats is desired.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty aviation, auto, truck, boat, or watercraft situations should refer to the Aircraft, Automobiles, Trucks, Recreational Vehicles or Marine Risks sections in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
h. Mobile
Equipment
This insurance does not apply to bodily injury or property damage resulting from transporting mobile equipment by an auto owned or operated by or rented or loaned to any insured. Bodily injury or property damage caused by mobile equipment used in, while practicing for, or being prepared for any pre-arranged racing, speed, demolition or stunt activity is also excluded.
|
Example: The damage caused when a plumbing contractor hauling a backhoe on a trailer behind an owned truck to the jobsite is not covered when the hitch on the trailer snaps, the trailer overturns, and the vehicles following are damaged. Note: The auto liability coverage form or policy that insures the towing vehicle should respond to any liability for a trailer being towed or for mobile equipment being transported by that vehicle. |
i. War
There is
no coverage for bodily injury, property damage or personal or advertising
injury resulting from war, undeclared civil war, or warlike action by a
military force, including any actions by a government or sovereign using
military personnel or other agents. Insurrection, rebellion, revolution,
usurped power or actions a government takes to defend
against or hinder any of these are also not covered.
|
Example: Arnie's Air Works manufactures guided missiles. Country X purchases them and requires a purchase agreement from Arnie that guarantees the missile's accuracy within one meter. When Country X invades Country Y, the missiles completely miss their targets and cause extensive damage to Country Z. This situation is not covered. |
Note: This exclusion is affected by the various terrorism endorsements. Any coverage impact of this provision is substantially affected by either a full or limited exclusion of terrorism losses.
j.
Professional Services
Bodily injury, property damage or personal and advertising injury caused when professional services are provided or when they are intentionally withheld are not covered. Nine specific professional services are listed but the exclusion is not limited to just them.
(1) Any legal, accounting or advertising service
(2) Any preparation or approval, or failure to prepare or approve, maps, drawings, opinions, reports, surveys, change orders, designs or specifications
(3) Any supervisory, inspection or engineering service
(4) Any service, treatment, advice or instruction of a medical, surgical, dental, x-ray or nursing nature
(5) Any health or therapeutic service, treatment, advice or instruction
(6) Any service, advice or instruction to enhance skin appearance, to remove or replace hair, or for personal grooming
(7) Any optometric or optical or hearing-aid service, including related prescribing, preparing, fitting, demonstrating or distributing ophthalmic lenses, similar products or hearing-aid devices
(8) Any body-piercing services
(9) Any pharmacy practice service
If the occurrence that caused the bodily
injury or property damage, or the offense that caused the personal and
advertising injury, involved performing or failing to perform any professional
service, this exclusion applies even if the claim alleged an insured's
negligence or incorrectly supervising, hiring, employing, training
or monitoring others. (01 10 addition)
|
Example: The Bishop family sues The Best Drug Store. They contend that their
father’s death was due to the interaction of two different drugs and, if
Best Drug had used best practices in monitoring its pharmacists, the interaction
would have been discovered and the death prevented. There is no coverage
because of this exclusion. |
Note: Certain insurance companies offer professional liability supplements or coverage endorsements to their separate individual Businessowners Coverage Forms to insure various professional liability exposures. Each should be contacted to determine the coverages provided. This analysis does not cover insurance company-specific endorsements and coverage forms.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty professional situations should refer to the Professional, Errors & Omissions and Malpractice sections in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
k. Damage To Property
Note: This exclusion combines all property damage-specific exclusions into a single exclusion. The goal is to clarify that this coverage is not first-party coverage for the named insured's benefit. In addition, this coverage is not intended to be a substitute for good quality workmanship.
This insurance does not apply to property damage to:
(1) Property the named insured owns, occupies or rents, including costs or expenses incurred by the named insured or others to repair, replace, enhance, restore or maintain such property for any reason. The costs and expenses are not covered even if their goal is to prevent injury and/or damage.
(2) Premises the named insured sells, gives away or abandons but only when the property damage arises out of any part of such premises
(3) Property loaned to the named insured
(4) Personal property in the insured’s care, custody or control
(5) That part of real property where the named insured, or contractors or subcontractors working on its behalf perform operations, but only if the property damage arises out of those operations
(6) That part of any property requiring restoration, repair or replacement because the named insured’s work was done incorrectly
There are four important exceptions to these exclusions:
Note: This is specifically and critically important to homebuilders. Because they build and sell homes, if this exclusion would stand, there would be no property damage coverage once the home was sold. However, this exclusion does apply to any home that the named insured used as a model home or office.
Exclusions (3), (4), (5) and (6) do not apply to sidetrack agreements.
Note: A sidetrack agreement is between a premises or location's owner and a railroad concerning a railroad transfer or access track located on the named insured's premises. The railroad allows the property owner to use the sidetrack as long as the railroad is guaranteed access to the sidetrack and certain conditions of property maintenance are agreed to. It may also contain specific hold-harmless conditions between the railroad and property owner.
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Example: Adolph's Appliances is a large appliance distributor. A railroad track is adjacent to its premises. Adolph believes sales would increase, expenses would drop and overall growth would occur if the railroad constructed a sidetrack into his warehousing area. This would allow him to load and unload directly into rail cars and save shipping costs and truck transportation time. The railroad agrees to the arrangement, subject to it having 24-hour access to the sidetrack and Adolph's guarantee that the track will be protected from vehicle damage, vehicle access will be limited and Adolph will hold the railroad harmless for any collision or injury that occurs during loading and unloading. Note that the Businessowners Coverage Form includes railroad sidetrack agreements as covered contracts. |
l. Damage To Your Product
Coverage does not apply to property damage to the named insured’s product because of damage it or any part of it causes.
|
Example: Frankie manufactures gas furnaces. A furnace malfunctions, catches fire, and is destroyed. The damage to the area around the furnace is covered but damage to the furnace itself is not. |
Insurers and brokers that provide coverage on a
variety of difficult, unusual or specialty product situations should refer to
the Products Liability section in The Insurance Marketplace, a publication
of The Rough Notes Company, Inc.
m. Damage To Your Work
Property damage to the named insured’s work or any part of it covered in the products/completed operations hazard is excluded. An exception applies for work performed by subcontractors on the named insured's behalf.
|
Example: Elvira repairs electrical wiring in a building. The wiring is done incorrectly and there is no coverage. However, coverage applies if Steve's Subcontracting working on Elvira's behalf does the wiring work. Elvira’s insurance pays the loss and then subrogates against Steve’s Subcontracting. |
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty product liability situations should refer to the Products Liability section in The Insurance Marketplace, a publication of the Rough Notes Company, Inc.
n. Damage To Impaired Property Or Property Not Physically Injured
There is no coverage for property damage when property is impaired but not physically damaged because of a defect, inadequacy or dangerous condition in the named insured’s product or work. There is also no coverage if it is caused by a delay or failure by the named insured or its representative to perform the terms of its contract or agreement. This exclusion does not apply when other property cannot be used because a sudden or accidental injury to either the named insured’s product or work occurs after the work or product is put to its intended purpose.
|
Examples:
Eli's Electrical manufactures switches for a variety of products that turn them on and off. Eli sells a batch of defective switches to other manufacturers to incorporate into their products. However, they do not operate correctly after the defective switches are installed in them. As a result, they are impaired because of Eli's defective product, but were otherwise undamaged. This loss is excluded and coverage does not apply. Artie agrees to complete the artwork for Charlie's brochure by a specific date. The date comes and goes and the artwork is not done. There is no physical injury to any property but Charlie loses potential income because the brochure could not be distributed. This loss is also excluded and coverage does not apply. |
Note: There is no standard ISO endorsement currently available to buy back this coverage or delete this exclusion.
Insurers and brokers that provide coverage on a
variety of difficult, unusual or specialty product liability situations should
refer to the Products Liability section in The Insurance Marketplace, a
publication of The Rough Notes Company, Inc.
o. Recall Of Products, Work Or Impaired Property
Damages claimed for loss, cost or expenses the named insured or others incur when its product, work or impaired property is withdrawn or recalled are not covered. This includes loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal. This exclusion applies when the recall is due to a known or suspected dangerous defect, deficiency, inadequacy or condition in the product.
Note: There is no established criteria or protocol that addresses who calls for the recall or withdrawal.
Note: There is no standard ISO endorsement currently available to buy back this coverage or delete this exclusion.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty product liability situations, including recall, should refer to the Products Liability section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
p. Personal
And Advertising Injury
There is no coverage for personal and advertising injury:
(1) Caused or directed by the insured knowing that it would violate the rights of another and inflict personal and advertising injury
(2) Arising from any oral or written publication done by the insured or at its direction knowing it was false
(3) Arising from any oral or written publication first published before the policy period began
|
Example: An incorrect story was first published on December 29. The policy period began on January 1. There is no coverage. |
(4) That the insured assumed in a contract or agreement, unless that liability existed without a contract or agreement
|
Example: A major male sports figure agrees to an interview with Ted's Tabloid that will be published. The sports figure insists on a written agreement where Ted promises not to slander or libel him. This liability exists without a contract or agreement. |
(5) Arising from a breach of contract, other than misappropriating advertising ideas under an implied contract
|
Example: Riley's Camera, Video & One Hour Photo contracts with Retail World Magazine to run an advertisement in its publication the month before Riley's special sale. Riley sues for breach of contract when Retail World runs the advertisement the month after the sale. There is no coverage for this breach of contract. |
(6) Arising from any goods, products or services failing to comply with their advertised quality or performance
|
Example: Big Wally gained even more weight after using a diet supplement that guaranteed a weight loss of at least ten pounds and sued Rapid Weight Loss, the manufacturer of the supplement. There is no coverage in this case. |
(7) Arising from the incorrect description of the price of advertised goods, products or services
|
Example: Morticia's Microwaves sues for lost revenue when Just The Facts Newspapers makes an error in printing the price of a microwave in her advertisement. Coverage does not apply. |
(8) Committed by an insured engaged in the advertising, broadcasting, publishing or telecasting business, designing or assisting with the content of Web sites for others, or providing Internet search, access, service or content. This exclusion does not apply to false arrest, detention or imprisonment, wrongful eviction, entry or invasion by a landlord or malicious prosecution as described in the Definitions Section, 14. Personal and Advertising Injury items a, b and c.
Note: Placement of frames, links or advertising on the Internet is not considered the advertising, broadcasting, publishing or telecasting business.
(9) Arising from the actual or alleged release or escape of pollutants at any time
(10) Concerning loss, expenses or cost arising from requests, demands or orders to clean up, or any claims by a governmental body to clean up, test for or assess pollutants
(11) Due to an offense claimed to be caused by the insured's hosted, owned or controlled electronic bulletin board or chat room
(12) Arising from infringement of copyright, patent, trademark, trade secret or intellectual property rights. However, these other intellectual property rights do not include using advertising ideas of others in the named insured's advertisement (01 10 addition). In addition, this exclusion does not apply to infringing on copyright, trade dress or slogan in the named insured's advertisement.
(13) Arising from unauthorized use of another party's name or product in the named insured's email address, domain name or similar initiatives designed to mislead potential customers of another.
Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty advertising situations should refer to the Professional Liability section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.
q.
Electronic Data
There is
no coverage for any damages due to loss of, loss of use of, damage to,
corruption of and inability to access or manipulate electronic data. This
exclusion defines electronic data. It is similar to the definition in the Property
Definitions section and means most media, data, programs, software
and repositories of computer
software (01 10 addition) wherever
and however stored. Computer
programs is defined as a set of related electronic instructions that direct
operations and functions of the computer or electronic it is connected to that
enable the computer or device to receive, process, store, retrieve or send
data (01 10 addition).
r.
Criminal Acts
Coverage
does not apply to personal and advertising injury arising from a criminal act
the insured commits or directs.
s.
Recording And Distribution Of Material Or Information
In Violation Of Law (01 10 change)
There is no
coverage for bodily injury, property damage or personal and advertising injury
arising from violations or alleged violations of the following:
The exclusions below do not apply to fire damage to premises the named insured rents or temporarily occupies with the owner's permission. Section II–Liability D. Liability And Medical Expenses Limits Of Insurance has a separate Damage To Premises Rented To You Limit Of Insurance that applies to this coverage. This exception involves:
2. These exclusions apply to Medical Expenses Coverage
There is no payment for expenses related to bodily injury:
a. Of any insured. However, volunteer
workers medical expenses are covered.
|
Example:
Patty, one of the Penelope's
Partnership partners, is the first named insured. She slips and falls on ice
on the building's steps and needs x-rays to determine if anything is broken.
This expense is not covered. |
b. Of any person hired to work for or on behalf
of any insured or an insured’s tenant
|
Example:
The insured hires Paul to
paint its building and rental dwelling. Paul falls from a ladder and breaks
his wrist. The medical expenses resulting from the fall are not covered. |
c. Of
any person injured on the part of the named insured's owned or rented
premises normally occupied by that person
|
Example:
Mona Moneybags is a tenant and occupies one of the units in the
apartment building that Leonard landlord owns. Mona falls down the stairs in
her apartment and is injured. This coverage does not apply to Mona's medical
expenses resulting from the fall. |
d. Of any person (employee or non-employee) entitled to benefits for bodily injury under a workers compensation, disability benefits, or similar type law
|
Example: Wilbur sustains burns on his hands as a result of a small fire while he is on the job. This coverage does not apply to this loss. |
e. Of
a person injured while involved a game, sport or athletic content or even just
involved with physical exercise. There is no coverage while that person is
practicing for, instructing, or participating in any of these activities.
|
Example:
Lyle’s Linguini-To-Go sponsors a Little League team. Moses breaks his
leg when sliding into home plate. This coverage does not apply to the expenses
from the injury. |
f. Included in the products-completed operations hazard
|
Example: Micah's Manufacturing produced an appliance that caught fire due to faulty wiring and burned Stacey's fingers. This coverage does not apply to this loss. |
g. That is excluded under the business liability coverage
|
Example:
One of Oscar's employees becomes
angry, strikes a customer, and breaks his nose. This coverage does not apply
to this loss. |
3. These apply to both Business Liability Coverage And Medical Expenses Coverage–Nuclear Energy Liability Exclusion
a. Business Liability Coverage excludes bodily injury or property damage liability:
(1) For losses of an insured who is also an insured under a nuclear energy liability policy issued by the Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters, or Nuclear Association of Canada, including their successors. This exclusion is not affected by the termination or exhaustion of limits of such policies.
(2) Of any loss resulting from the hazardous properties of nuclear material including:
(a) The obligation of any entity to maintain financial protection to comply with the Atomic Energy Act of 1954 and its amendments
(b) The insured is or would be entitled to
indemnification from the
b. Concerning Medical Expenses Coverage, there is no coverage for bodily injury resulting from the hazardous properties of nuclear material and arising from a nuclear facility operated by any person or organization.
c. There is no coverage under Business Liability Coverage for any bodily injury or property damage resulting from the hazardous properties of nuclear material if any of the following applies:
(1) The nuclear material is at a nuclear facility an insured owns or that is operated on an insured's behalf or has been released from such facility
(2) The nuclear material is contained in waste or spent fuel was possessed, handled, used, processed, stored, transported or disposed of at any time by an insured or on its behalf
(3) The bodily injury or property damage
arises from an insured furnishing services, materials, pats
or equipment in conjunction with planning, building, maintaining, using or
operating a nuclear facility. However, this exclusion applies only to property
damage to a nuclear facility and its property situated in the
d. These special terms are defined:
1. By-product material has the meaning given to it in the Atomic Energy Act of 1954 or any related amendatory law.
Note: This exclusion does not provide that meaning. It has multiple meanings in different sections of the act.
2. Hazardous properties include radioactive, toxic or explosive properties.
3. Nuclear
facility is a nuclear
reactor and equipment designed or used to separate uranium or plutonium isotopes,
or for spent fuel processing, utilizing, waste handling, processing
or packaging. It also includes equipment or devices used in special nuclear
material processing, fabricating or alloying, if the
total amount of such material at any time consists of or contains more than 25
grams of plutonium or uranium-233, or any combination thereof, or more than
250 grams of uranium-235. Any structure, basin, excavation, premises
or place prepared or used to store or dispose of waste is also included, along
with the site on which all such operations are conducted and all premises used
for such operations.
4. Nuclear
material is source material, special nuclear material
or by-product material. Each of these properties is defined by the Atomic
Energy Act of 1954 or any amendments to it and is not repeated in this
exclusion.
5. Nuclear
reactor is any device designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material. The size of the reactor and the amount or type of material that must
be present is not defined.
6. Property damage is all forms of radioactive contamination of property.
7. Source material has the meaning given in the Atomic Energy Act of 1954 or as amended.
Note: This exclusion does not provide that meaning. However, it is generally either the element thorium or the element uranium that has not been enriched in the isotope uranium-235. It also includes any combination of thorium and uranium, in any physical or chemical form, or ores that contain by weight one-twentieth of one percent (0.05 percent) or more of uranium, thorium, or any combination of these. Depleted uranium left over from uranium enrichment is considered source material.
8. Special nuclear material has the meaning given in the Atomic Energy Act of 1954 or as amended.
Note: This exclusion does not provide that meaning. However, it is generally plutonium, uranium-233, or uranium enriched in the isotope’s uranium-233 or uranium-235. The definition also includes any other material that the Nuclear Regulatory Commission (NRC) determines to be special nuclear material. It does not include source material.
9. Spent fuel is any solid or liquid fuel element or component that was used or exposed to radiation in a nuclear reactor.
10. Waste is waste material that contains by-product material. By-product material does not include tailings or wastes produced by extracting or concentrating uranium or thorium from any ore processed primarily for its source material content. Waste also includes any waste material that result when any person or organization operates any nuclear facility included under the first two paragraphs of the definition of nuclear facility.
C. Who Is An Insured
1. The declarations has spaces to check and describe
the named insured's type of business. Each type of entity has a different
group of parties that are considered insured and conditions under which they
are insured.
a. If the named insured is an individual, the
individual is an insured as well as the named insured's spouse. However, their
status as insureds is limited to only the named insured’s solely owned
business operations.
|
Example: Mr. John, a sole
proprietor, sells farm produce. Both he and Mrs. John are insureds. In addition,
Mr. John is the sole proprietor in a separate wood kitchen cabinet
manufacturing business. In both cases, he and Mrs. John are insureds.
However, if he and his brother owned the carpentry business as a
partnership, the partnership is not covered. |
b. If the named insured is a partnership or
joint venture, the partnership or joint venture is an insured. In addition,
members and partners of the named insured and their spouses are insureds. The
members, partners and their spouses are only insureds while conducting the named
insured's business.
|
Example: Mr. John and Mr. Joe are partners in a
carpentry business. They and their spouses are insureds with respect to
conduct of the carpentry business. However, none of them are insureds under
this coverage form for their personal exposures or for any other business
activities. |
c. If the named insured is a limited liability
company, the limited liability company is an insured. In addition, members of
the company are insureds but only with respect to conduct of the named insured's
business. The named insured's managers are also insureds but only to the
extent of their specific duties as managers.
Note: A limited liability company is a hybrid form of business somewhere between a partnership and a corporation. Managers operate a limited liability company on behalf of its members. Members have the protection of a corporation, in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit earned by the limited liability company is not taxed against the company but is the obligation of its members as individuals.
d. If the named insured is an organization
other than those listed above, it is an insured. In addition, executive
officers and directors are insureds but only to the extent of their duties as
such. Stockholders are also insureds but their status
is limited to the extent of their liability as stockholders.
e. If
the named insured is a trust, it is an insured. Its trustees are also insureds
but only with respect to their duties as trustees (01 10 addition).
Note:
A trust is an
unincorporated business organized under a legal document and a declaration of
trust. It is used instead of a corporation or partnership to transact business
with limited liability. It is different than a corporation because it does not
receive a charter from the state that gives it legal recognition. It derives
its status from the voluntary actions of the individuals who form it.
2. The following persons or organizations are
also insureds:
a. Volunteer workers, but only when performing
duties related to the named insured's business. Employees, excluding executive
officers and managers of a limited liability company, are insureds within the
narrow range of activities in the scope of their employment or while
conducting the named insured's business.
Volunteers
and employees are not insureds for bodily injury or personal and advertising
injury:
|
Example: Meredith, an employee of Goods and
Plenty, is driving a forklift that suddenly goes out of control and plows
into a group of people before it comes to a stop. Meredith’s supervisor and
two of her co-employees are injured. Meredith is not an insured for their
injuries. John, a co-employee who had just clocked out for the day, is also
injured. Meredith is an insured for his injuries because he was not within
the scope of his employment at the time of the injury. Jason and Wendy,
unpaid interns, were also injured. Because they were volunteers performing
duties on behalf of Good and Plenty at the time of their injuries, Meredith
is not an insured for their injuries. |
Volunteers
and employees are also not insureds for property damage to property:
b. Any party other than an employee or
volunteer acting as the named insured's real estate manager
c. Any party with temporary legal custody of
the property of a deceased named insured. The status applies only to liability
arising out of or caused by maintenance or use of that property and only until
a proper legal representative is appointed.
d. A properly appointed legal representative
for a deceased named insured but only while carrying out its duties as the
legal representative
Note:
The legal representative
assumes all of the deceased named insured's rights and duties. This goes
beyond the standard insured status and extends to rights to cancellation,
conditions and other elements assigned only to named insureds.
Who Is An Insured provides broad coverage to the
named insured for exposures normal to any business operation that can be
expected in a commercial venture. It also clarifies
that any current or past partnerships,
joint ventures or limited liability companies not on
the declaration are not insureds.
A number of endorsements are available to add other interests for liability coverage.
D. Liability And Medical
Expenses Limits Of Insurance
1. The most the insurance company pays are the
limits of insurance on the declarations, regardless of the number of insureds,
claims made, suits brought or number of parties making claims or bringing
suits, subject to the following rules.
|
Example:
Bonnie Brownlocks was a longtime
customer but sued Lara and Prentiss Greatkuple D/B/A Hairy
Essentials. While getting into a chair in their salon, it broke, she fell to
the floor and sustained a concussion, various cuts
and a broken back. She filed two different lawsuits. One named Lara and the
other named Prentiss. The Greatkuples reported the loss and provided all the
relevant paperwork on the two suits to their insurance company. The company
informed them that it would defend the lawsuits but
the $1,000,000 limit was the most it would pay for both suits. |
2. The Liability and Medical Expenses limit on the declarations is the most paid for the total of all damages for bodily injury, property damage and medical expenses arising from any one occurrence. It applies regardless of the number of claims that develop from the occurrence. It is also the most paid for personal and advertising injury that any one organization or person sustains.
|
Example:
Melvin’s Bakery has a liability and medical expenses limit of $1,000,000.
Melvin is leading a group tour of the bakery when an explosion injures a
number of members of the tour group. Twenty-five claims for damages
amounting to $5,000,000 are submitted to the insurance company. The
$1,000,000 limit applies to the occurrence and is subject to the aggregate
limit. Melvin's Bakery is responsible for the remaining $4,000,000 claimed. |
The medical expenses limit on the declarations is a sub-limit and is the most medical expense paid because of bodily injury sustained by any one person. However, it is still subject to the Liability and Medical Expenses limit on the declarations.
|
Example: Melvin’s Bakery's medical expenses limit is $5,000. The claims adjusters settled the cases quickly. One late claim for medical expenses only was filed after the $1,000,000 limit was paid. Even though the amount claimed was less than $5,000, it was denied because the $1,000,000 limit was exhausted. |
3. The Damage To Premises Rented To You Limit on the declarations for the particular location is the most paid under Business Liability coverage for damages to the premises the named insured rents. It is also the most paid in case of fire for premises the named insured rents or temporarily occupies with the owner's permission. The limit for premises the named insured temporarily occupies is the highest Damage To Premises Rented To You limit on the declarations.
|
Example: The Damage To Premises Rented To You limit at each location is $50,000. Melvin's Bakery operations at one such premises cause a fire that completely burns down the building. The total loss is $250,000. The $50,000 Damage To Premises Rented To You limit at that location is all the insurance company pays. |
4. Aggregate Limits
The most paid for:
a. All bodily injury and property damage in the products-completed operations hazard is two times the Liability and Medical Expenses limit.
b. All bodily injury and property damage except those included in the products-completed operations hazard is two times the Liability and Medical Expenses limit.
The Damage To Premises
Rented To You limit is subject to
either the products-completed operations aggregate or the all other aggregate,
whichever applies to the particular loss.
How the limits of insurance are applied is explained. They apply separately to each annual 12-month policy period, beginning with the inception date. If any period of less than 12 months remains, the limits apply separately to that period as well, unless coverage is extended for that period. In that case, the extended period is part of the preceding period for purposes of application of limits.
|
Example: Beulah's Boutique's coverage was originally in force from January 1 to January 1 of each year. In the second year, Beulah requested that the expiration date be extended to July 1 in order to match her accounting year. The limits applied separately to the first annual 12-month January 1 to January 1 period. They also applied separately to the second period now extended to 18 months, from January 1, past the next January 1 to July 1. After that, each annual July 1 to July 1 period has separate limits. |
Note: ISO has not developed any endorsements to amend, modify or delete either the liability limits or the aggregate limit. However, the Commercial General Liability (CGL) Coverage Form has endorsements to do so. The named insured should consider being insured under the CGL Coverage Form if its limits must be modified.
E. Liability And Medical
Expenses General Conditions
1. Bankruptcy
The insurance company is not relieved of its obligations under this coverage form if the insured or the insured's estate becomes bankrupt or insolvent.
2. Duties In The Event Of Occurrence, Offense, Claim Or Suit
The named insured has certain duties it must
perform if a claim or demand for coverage occurs:
a. It must inform the insurance company of any
occurrence or offense that may result in a claim as soon as possible. As a
minimum, the notice should include information concerning how, when and where
the event took place and the names and addresses of all injured parties and
any witnesses. It should also indicate the nature and location of any injury
or damage as a result of the occurrence or offense.
b. Concerning claims made or suits brought, it must
immediately record the details of the claim or suit, the date it was received
and notify the insurance company as soon as possible.
Note: This is in addition to providing the
insurance company with timely written notice of the claim or suit.
c. Every insured involved in or with the claim
must:
d. No insured may voluntarily make any payments,
assume any obligations or incur any expenses, other
than first aid, without the insurance company's consent, unless it does so at
its own cost or expense.
3. Legal
Action Against Us
Nobody has the right:
a. To join the insurance company in any way,
bring it into a suit claiming damages from an insured
b. To sue the insurance company unless all its
terms and conditions have been completely met and complied with
The insurance company can be sued to recover on an
agreed settlement or on a final judgment against an insured. However, it is
not liable for damages not subject to payment under the terms of this coverage
form or that are more than the limit of insurance that applies.
Note: An agreed settlement is a settlement and
release of liability signed by the insured, the insurance company and the
claimant or the claimant's legal representative.
4. Separation of Insureds
Other
than the limits of insurance and any rights and duties that apply specifically
to the first named insured, this insurance applies to each named insured as if
it is the only named insured and separately to each insured a claim is made
against or a suit is brought.
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Examples:
Businessowners Coverage is issued to Zach Taylor, Inez Polk and Leslie Enterprises, Inc. Inez sues Zach for defamation of character. The coverage form responds and defends Zach, even though Inez is another named insured. Daisy Enterprises, Inc. has Businessowners Coverage. A suit is filed against it, the president and Orrin, an employee, for an alleged assault in the parking lot. The insurance company defends all three parties. If Orrin’s actions were found to be intentional, his defense could be denied while the insurance company continues defending Daisy Enterprises and its president. |
F. Liability And Medical
Expenses Definitions
Defined
words are used throughout the coverage form. Restricting their meaning to
their definition provides the means for all parties involved to have a clearer
understanding of the coverage intended.
1. Advertisement is a notice published or broadcast to the general public or specific market segments concerning the named insured's goods, products or services, done with the intent of attracting customers or supporters. Published notices include material placed on the Internet and other electronic forms of communication. Advertising notices on websites include only the information about the named insured's goods, products or services for the purpose of attracting customers or supporters.
2. Auto is a land motor vehicle, trailer or semi-trailer designed for travel on public roads. It includes any attached machinery or equipment. It does not include mobile equipment. It also includes any land vehicle subject to financial responsibility laws or motor vehicle registration rules.
3.
Bodily injury is bodily injury, sickness or disease sustained by a person. This
includes death resulting from bodily injury, sickness
or disease at any time.
4. Coverage territory is the United
States of America, its territories and possessions, Puerto Rico
and Canada. This includes international waters or airspace, subject to the
injury or damage occurring during travel or transportation between any of
these places.
It also includes other parts of the world, subject
to the injury or damage arising out of the following, and subject to the
insured's responsibility to pay damages being determined in a suit based on
the merits in the territory described above or in a settlement the insurance
company agrees to:
5.
Employee includes leased workers but not temporary workers.
6.
Executive officer is a person who occupies any officer position created by the named
insured's charter, constitution, by-laws or similar
governing documents.
7. Hostile
fire is a fire that
becomes uncontrollable or burns outside of its intended receptacle.
8. Impaired
property is tangible property
that cannot be used or is less useful because it includes a portion of the
named insured's product or work known or thought to be dangerous, inadequate, defective or deficient. It also involves situations where
the named insured has not satisfactorily completed the terms of a contract or
agreement. This is subject to the property actually being capable of being
restored to use by repair, replacement, adjustment or removal of the named
insured's product or work, or by the named insured fulfilling the terms of the
contract or agreement.
9. Insured contract means:
a. Leases of premises, except for the
part that agrees to indemnify for fire damage to any premises the named
insured leases, rents or temporarily occupies
b. Sidetrack agreements
Note:
A sidetrack agreement is a
contract between a premises owner and a railroad with respect to a railroad
transfer or access track on the insured property owner's premises. The
railroad agrees to let the insured use the sidetrack as long as it is
guaranteed access to it and the owner agrees to certain conditions concerning
maintenance of the property. They may also contain specific hold harmless
agreements between the property owner and the railroad.
c. Easement or license agreements. It does not
include such agreements connected with construction or demolition operations
on or within 50 feet of a railroad
d. Obligations to indemnify a municipality
required by ordinance. It does not include those connected with work for that
municipality
e. Elevator maintenance contracts
f. An insured contract also includes the part of
any other contract or agreement that applies to the named insured's business
where it assumes the tort liability of another party to pay for bodily injury
or property damage to a third person or organization. This includes contracts
or agreements that indemnify a municipality in conjunction with work done for
the municipality. It does not include any part of a contract or agreement:
Note: Tort liability is liability already imposed
by law when there is no contract or agreement.
10.
Leased worker is a person the named insured leases from a
labor-leasing firm under a written contract or agreement to perform duties
related to conduct of its business. Leased workers are not the same as
temporary workers.
11.
Loading or unloading is handling
property after it is moved from where it is taken for transportation on
aircraft, watercraft or autos, while in or on those
conveyances and while being removed from them at the final delivery location.
It does not include movement of property by mechanical devices if they are not
attached to the aircraft, watercraft or auto unless the device is a hand
truck.
12.
Mobile equipment is the following
land vehicles and machinery or equipment attached to
them:
Mobile equipment does not include land vehicles subject to mandatory or financial responsibility laws or motor vehicle insurance or registration laws in the jurisdiction where they are licensed or principally garaged. Land vehicles subject to mandatory or financial responsibility laws, other motor vehicle insurance law, or motor vehicle registration law (01 10 addition) are considered autos.
Note: This type of mobile equipment is considered auto and coverage is available only under auto coverage forms and policies.
13. Occurrence is an accident. It includes continuous or
repeated exposure to essentially the same harmful conditions.
14. Personal and advertising injury is injury, including consequential bodily injury, arising out of one or more of the following offenses:
15. Pollutants are any
solid, liquid, gaseous or thermal irritant or contaminant. This includes
smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste. Waste includes materials to be recycled, reconditioned
or reclaimed.
16.
Products-completed operations hazard includes all bodily injury and property damage that occurs away from
premises or locations the named insured owns or rents that arises out of its
products or work, except:
Work
that is essentially complete except that it still requires some service,
maintenance, correction, repair or replacement is
treated as complete.
Products-completed
operations hazard does not include bodily injury or property damage arising
out of:
17.
Property damage is:
Electronic
data is not considered tangible property. Under this particular definition,
electronic data is information, facts or programs stored as or on, created or
used on, or transmitted to or from computer software or any other media used
with electronically controlled equipment.
18.
Suit is a civil proceeding
alleging damages for bodily injury, property damage or personal and
advertising injury covered by this insurance. The definition of suit as used in
this coverage form includes arbitration and other alternative dispute
resolution proceedings. The insurance company must consent to the insured submitting
to any arbitration or alternative dispute resolution.
19.
Temporary worker is any person furnished to the named insured as a substitute for a
permanent employee temporarily away from the business or to meet seasonal or
short-term workload conditions.
20. Volunteer worker is a person that the named insured does not employ but who donates his or her work and acts at the named insured's direction and within the scope of duties prescribed. Volunteer workers are not paid a fee, salary or other compensation by the named insured or any other party for the work they perform.
21. Your
product
This is
not real property. Real property is commonly defined as land, buildings and property rights. This means that a home built
by a contractor is not a product.
It is
goods or products the named insured or any party trading under its name
manufactures, sells, handles, distributes or disposes of. This also includes
the goods or products of any party whose business or assets the named insured
acquires. Containers, materials, parts or equipment furnished as part of the
covered goods or products are included within this definition
but containers does not include vehicles.
This
definition also includes warranties or representations made concerning the
fitness, quality, durability, performance or use of the named insured's
product and the warnings and instructions provided with the product. It is
important to note that it includes not only the warnings and instructions that
were included but also the ones that should have been and were not.
This
definition does not include vending machines or other property rented to or
located for use by others but not sold.
22. Your work means work or operations done by the named insured, or by others on its behalf, and materials, parts or equipment furnished in connection with such work or operations.
This definition also includes warranties or representations made concerning the fitness, quality, durability, performance or use of the named insured's work and the warnings and instructions provided with the work. It is important to note that it includes not only the warnings and instructions that were included but also the ones that should have been and were not.
SECTION III COMMON POLICY CONDITIONS (APPLICABLE TO
SECTION I–PROPERTY AND SECTION II–LIABILITY)
The Businessowners Coverage Form combines several different coverages. Most have their own coverage descriptions, definitions, causes of loss and conditions. The two areas all coverages share in common are the declarations and the common policy conditions.
A. Cancellation
1. The first named insured person or organization on the declarations can cancel, as well as make changes, pay premiums, receive cancellation notices and request cancellation.
Note: It is important to select the correct first named insured for communication purposes and to be certain that all rights are properly protected.
2. The insurance company can cancel the policy by mailing or delivering written notice of cancellation to the first named insured at least:
a. Five days’ before cancellation takes effect under the following circumstances:
(1) If the building is vacant 60 or more consecutive days. Buildings that experience normal seasonal unoccupancy or those under construction are not subject to this item. Vacant means 65% or more of rental units or floor area is vacant.
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Example:
Supersnob Department Store
moves out of Magnificent Mall, which is insured by Conservative Mutual.
Supersnob was the mall anchor and occupied 70% of the retail space. As a
result of the move and the resulting vacancy, Conservative Mutual sends
Magnificent Mall five days notice of cancellation. |
(2) If repairs have not begun or been contracted for within 30 days after a covered loss is initially paid.
Note: Initial payment can include a minimum down payment against the total future payment.
(3) If the building has an outstanding order to vacate, an outstanding demolition order, or was declared unsafe by a government authority
(4) If repaired and salvageable items were or are being removed and will not be replaced. This does apply if goods are removed to allow for renovation will eventually be returned.
(5) Necessary heat, water, sewer or electricity has not been provided for 30 days unless due to normal periods of seasonal unoccupancy. Also, if property taxes have not been paid for a year, unless there is a legitimate dispute with the taxing authority over the tax payment
b. Ten days when the reason for cancellation is nonpayment of premium.
c. Cancellation for any reason other than as listed above requires 30 days’ advance written notice.
3. All cancellation notices are sent to the first named insured at the last mailing address known to the insurance company
4. The cancellation notice must state the effective date that the cancellation takes effect. That is the date that the policy period ends.
5. The first named insured receives any premium refunds. Refunds are pro rata if the insurance company cancels. If the named insured cancels, the refund may be less than pro rata. Cancellation is not dependent upon a refund being made or offered.
6. Proof of mailing is sufficient proof of notice, unless this condition is superseded or replaced by a state law requiring certified mail or some other form of postal verification.
Note: The cancellation notice periods indicated above may be different in certain states based on laws that usually require longer notice periods.
B. Changes
This coverage form contains all the agreements and terms between the parties and can be changed or waived only by endorsements the insurance company issues.
C.
Concealment, Misrepresentation Or Fraud
This coverage form is void in case of fraud by the named insured as it relates to the coverage provided. It is also void if the named insured or any other insured at any time intentionally conceals or misrepresents a material fact. However, the material fact must concern the coverage form, covered property, interests of any insured in the covered property, or a claim.
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Example: Mary stated on her application that her dog’s name was Spot but its real name was Rover. This was not a material fact and would not affect her coverage. However, if she stated that Spot/Rover was a Teacup poodle and it was actually a Doberman retriever guard dog, that could be a material fact that could affect coverage and may result in it being voided. |
D.
Examination Of Your Books And Records
The insurance company can examine or audit the
named insured’s books as they relate to the insurance provided at any time
during the policy period and up to three years after.
E.
Inspections And Surveys
1. The company may make surveys and inspections at any time. These reports may be given to the named insured along with recommendations to improve conditions.
2. Inspections are not required. The insurance company uses them only to determine insurability and premiums to be charged. Such inspections do not warrant that a location meets safety or health requirements or that it complies with local, state or federal ordinances or regulations.
3. The provisions in 1. and 2. above also apply to rating, advisory, rate service, and similar organizations that conduct similar inspections and surveys and makes similar reports and recommendations.
4. The provisions in 2. above does not apply to insurance company inspections, surveys, reports or recommendations with respect to certification, ordinances, or regulations of boilers, pressure vessels or elevators under state or municipal statutes.
Note: A number of states noted that insurance companies regularly went into buildings to make inspections. This drew the attention of legislators who attempted to have the industry become the watchdog for various safety and health issues. These paragraphs represent the insurance industry's response.
F.
Insurance Under Two Or More Coverages
Only the actual amount of loss or damage is paid if two or more coverages apply to the same loss or damage.
Note: This eliminates double coverage and duplicate loss payments.
G.
Liberalization
If the insurance company adopts revisions that broaden coverage during the policy period, or within 45 days before it begins that do not require additional premium, the broadened coverage applies immediately.
Note: However, any restrictions similarly adopted at the same time do not apply in the same way.
H. Other
Insurance
1. If other insurance covering the same loss or damage applies, this insurance is excess over the amount due from that other insurance, whether it can be collected or not. However, the insurance company never pays more than the Section I–Property Limit Of Insurance that applies.
2. Business Liability insurance is excess over any other insurance that insures for direct physical loss or damage. This means it is excess over Section I of this coverage form, a commercial property coverage form, auto physical damage coverage, and other first party insurance coverage. It is also excess over any other primary insurance where the named insured has been added as an additional insured.
3. If other insurance is excess, the insurance company does not pay defense costs that the other company should pay. If the other company refuses to defend, the company has the option to do so. If it does, it assumes the rights of the insured under the other policy to proceed against the other insurance company.
I.
Premiums
1. The first named insured pays all premiums due and receives all return premiums.
2. The premiums on the declarations are based on rates in effect at issuance. Renewal premiums are subject to change, based on rules and rates in effect at the time.
3. Insurance coverage can continue in force year after year, subject to insurance company approval, if the named insured pays the premium before the anniversary date. However, any rate changes are reflected in that renewal premium and any forms changes apply. If the renewal premium is not paid, coverage ends on the first anniversary that the insurance company did not receive the premium.
4. Changes in the named insured’s operations or exposures, such as what it does or who it is, during the policy period may require an additional premium charge. Rates and rules for these changes apply as of the effective date of the change and not the rules and rates in effect at inception.
J. Premium
Audit
1. If the policy is written subject to premium audit, the premium on the declarations is an advance premium. The insurance company calculates the final premium after the actual exposures are determined.
2. The advance premium is actually a deposit premium. The actual earned premium is calculated at the end of the audit period. When that is done, the first named insured must pay any additional premium due on the date specified on the billing. If the advance premium exceeds the earned premium, the first named insured receives a premium refund.
3. The first named insured must keep
records of the information the insurance company needs to calculate the actual
earned premium and send that information to the company when requested to do
so.
K.
Transfer Of Rights Of Recovery Against Others To Us
1. With respect to property coverage, the named insured can waive its rights of recovery against other parties in writing prior to a loss. However, it cannot do anything after a loss to impair the company’s rights to recovery. The named insured can waive its rights to recovery after a loss only if it controls or owns the other business, if the business owns or controls the named insured, or if the individual or other business is the named insured's tenant. The named insured can accept normal bills of lading that limit the liability of carriers without restricting its insurance.
2. With respect to liability coverage (but not medical payments), the insured must ensure that the insurance company has the right to recover all payments it made, help it enforce them, and not do anything after a loss to impair them. The insurance company can request that the insured bring suit or transfer such rights to it and require the insured to assist in enforcing them.
L.
Transfer Of Your Rights And Duties Under This Policy
The named insured may not transfer its rights under the policy without the insurance company’s written approval to do so. However, practical considerations apply when an individual named insured dies. When that happens, the named insured's rights and duties transfer to his or her legal representative. The representative has insured status only while acting within the scope of its duties as a legal representative. Anyone having proper temporary custody of the deceased named insured’s property assumes the named insured's rights until a proper legal representative is appointed.
The following listing identifies, by number and title, endorsements available to modify or otherwise attach to ISO's Businessowners Program. A brief explanation of the use of each is also provided. Note, however, that this section does not address state specific endorsements, changes or amendments. Most of the forms are essentially the same under the 07 02 edition of the BOP program. Many forms were revised merely to correct their reference from a separate coverage form to a coverage section.
The numbering of the forms and endorsements offered by ISO have a very specific meaning. 10 digits are used.
· The first two digits are letters which represent the line of insurance, such as BP for Businessowners or IL for interline.
· The next two digits are the category of insurance, further detailed below.
· The next two are the item or form number within the category.
· The next two are the month of that form’s edition date.
· The final two are the year of that form’s edition date.
Endorsements are grouped in categories according to their purpose as follows:
· 00 Coverage Forms
· 01 State Amendatory Endorsements
· 02 State Cancellation and Suspension Endorsements
· 03 Deductible Endorsements
· 04 Additional Coverage Endorsements
· 07 Contractors Endorsements
· 08 Professional Liability Endorsements
· 10 Causes of Loss or Mine Subsidence Endorsements
· 12 General Endorsements
· 17 Condominium Coverage Endorsements
Endorsements are
listed in numerical order.
BP 00 03,
Businessowners Coverage Form
Coverage Form for the BOP Program providing special coverages and protection against causes of loss that result in direct damage. The form also provides comprehensive liability coverages for premises liability and products-completed operations liability.
Note: Coverage forms BP 00 01, BP 00 02, BP 00 06 and BP 00 09 were withdrawn from use under the 07 02 edition of the BOP program. The BP 00 03 form rendered them obsolete as it is a self-contained coverage form.
BP 01 04, Windstorm
or Hail Exclusion
When this endorsement is used, it excludes both windstorm and hail loss or damage.
BP 01 22,
Businessowners Standard Fire Policy Provisions
In those states the required standard fire provisions apply to the property portion of the policy, this endorsement is available to. Another version of the Standard Fire Policy Provisions is found in endorsement BP 01 23.
BP 01 23,
Businessowners Standard Fire Policy Provisions
In those states the required standard fire provisions apply to the property portion of the policy, this endorsement is available too. Another version of the Standard Fire Policy Provisions is found in endorsement BP 01 22.
BP 01 33, Exterior
Paint and Waterproofing Exclusion
When this endorsement is used, if loss or damage to covered property is caused by or results from windstorm, there is no coverage for loss or damage to any paint; or waterproofing material; that has been applied to building exteriors.
BP 03 12, Windstorm
or Hail Percentage Deductibles Endorsement
This endorsement provides a 1%, 2%, or 5% windstorm or hail deductible. For many regions of the country, the peril of wind (hurricane, storms) is difficult to insure. The percentage deductible applies separately for each building. In the case of multiple buildings; the building and personal property in the case of one building; and personal property for each building in the case of multiple locations; and personal property in the open.
BP 04 01,
Comprehensive Business Liability Exclusion
This form permits the elimination of premises and operations, products, and medical payments for a particular designated premises. The affected premises will either be listed on the form or the Businessowners Policy
BP 04 02, Additional
Insured - Managers or Lessors of Premises
Additional Insured—Managers or Lessors of Premises BP 04 02 adds the lessor or property manager to the liability section when an insured leases premises from another. This endorsement excludes an occurrence taking place after the named insured ceases to be a tenant; and structural alterations, new construction or demolition performed by or for the additional insured. This form is used to name an insured’s landlord as an additional insured when this action is contractually required. Coverage ends when the insured is no longer a tenant.
BP 04 03, Accounts Receivable Coverage
This form withdrawn
from use
BP 04 04, Hired Auto
and Non-Owned Auto Liability
This form is available only when the insured does not have any Commercial Auto coverage in force. Virtually identical to monoline General Liability Endorsement CG 04 19, it may be made effective to provide coverage for either hired or non-owned autos, as defined.
"Hired Auto" means an auto (not including mobile equipment) that the insured leases, hires or borrows, except from employees or members of their households or from partners or executive officers.
"Non-Owned Auto" means an auto (not including mobile equipment) used in connection with the insured's business that is leased, hired or borrowed. Non-Owned Auto Liability coverage would apply, for example, to protect the insured if an employee used his or her car in the business, differing from Hired Auto Liability coverage in this respect. However, if the insured is a partnership, "non-owned auto" does not include an auto owned by a partner.
Former BP 04 05,
Valuable Papers and Records Coverage
This form withdrawn
from use - refer to BP 04 33 and BP 04 34 for available endorsements.
BP 04 06, Additional
Insured; Controlling Interest
Additional Insured — Controlling Interest BP 04 06 adds a person or organization on the policy for liability arising out of the additional insured being in financial control of the named insured; or premises that the additional insured owns, maintains or controls while the named insured leases or occupies these premises. Liability on structural alterations, new construction or demolition is excluded.
BP 04 07, Additional
Insured; State or Political Subdivisions—Permits Relating to Premises
Additional Insured - State or Political Subdivisions - Permits Relating to Premises BP 04 07 names a state or political subdivision as an additional insured with respect to certain hazards for which the additional insured has issued a permit in connection with the premises. Such permits might include those issued for advertising signs, awnings, canopies, cellar entrances, coal holes, driveways, manholes, hoist openings, street banners or decorations; or the construction, erection or removal of elevators.
BP 04 08, Additional
Insured—Townhouse Associations
Additional Insured — Townhouse Associations BP 04 08 is added to a townhouse association's policy to provide additional insured status to each individual townhouse owner for their liability as a member of the association. The endorsement does not cover the individual owner's liability arising out of the real property for which the member has title.
BP 04 09, Additional
Insured—Mortgagee, Assignee or Receiver
Additional Insured — Mortgagee, Assignee or Receiver BP 04 09 adds a person or organization with respect to liability as mortgagee, assignee or receiver arising out of the ownership, maintenance or use of the named insured's premises. Does not cover structural alterations, new construction and demolition operations.
BP 04 10, Additional
Insured—Owners or Other Interests From Whom Land Has
Been Leased
Additional Insured — Owners or Other Interests From Whom Land Has Been Leased BP 04 10 adds the owner or other interests from whom the named insured has leased land as additional insureds for liability arising from ownership, maintenance or use of land leased to the insured. No coverage for occurrences taking place after the lease ends or structural alterations, new construction or demolition operations.
BP 04 11, Additional
Insured—Co-Owner of Insured Premises
Additional Insured — Co-owner of Insured Premises BP 04 11 adds the person or organization as an additional insured with respect to liability as a co-owner of the premises.
BP 04 12, Limitation
of Coverage to Designated Premises or Project
This endorsement limits coverage to a particular premises
or project named in the endorsement.
BP 04 13, Additional
Insured—Engineers, Architects, or Surveyors
Additional Insured — Engineers, Architects or Surveyors BP 04 13 adds architects, engineers or surveyors hired by the named insured as additional insureds to the extent liability arises out of the premises or work performed on behalf of the named insured. Coverage is not provided for rendering of or failing to render professional services by or for the named insured.
Note: The coverage extended to these parties applies to ongoing operations but not completed operations.
BP 04 15, Spoilage
Coverage
Spoilage Coverage BP 04 15 may extend insurance to cover spoilage losses to perishable stock of businessowner insureds. The endorsement is similar to endorsement CP 04 40 used with the Commercial Property policy. Exclusions include earth movement, governmental action, nuclear activity, war and war hazards. Other specific exclusions refer to disconnection of refrigeration, cooling or humidifying equipment; deactivation of electric power caused by manipulation of switch or control device; or inability of electrical utility or other power source.
The coverage is subject to the same causes of loss as under the policy and is scheduled on each insured premises and carries a separate limit of liability as shown on the endorsement. A deductible as it appears in the form’s schedule, applies on any one occurrence. It is a condition of the coverage that the insured must maintain a refrigerator maintenance agreement or service or notify the company within 10 days if this condition cannot be met.
BP 04 16, Lessor of
Leased Equipment
Additional Insured—Lessor of Leased Equipment BP 04 16 adds as an additional insured a person or organization leasing equipment to the named insured. Covers liability arising out of the maintenance, operation or use by the insured of the lessor's equipment.
BP 04 17,
Employment-Related Practices Exclusion
Employment-related Practices Exclusion BP 04 17 excludes liability arising out of employment-related practices, such as: refusal to employ; termination of employment; coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or other employment-related practices, policies, acts or omissions; or consequential injuries resulting therefrom. The language of this exclusion focuses upon the person who has been refused employment, terminated, or who has suffered harassment. The exclusion applies also to the spouse, child, parent, brother, or sister of the affected person.
BP 04 18,
Amendment—Liquor Liability Exclusion-Amendment
This form withdrawn with the 07 02 edition of the BOP Program. Refer to BP 04 88 – Liquor Liability.
BP 04 19, Amendment—Liquor
Liability Exclusion—Exception for Scheduled Activities
Except for the activities specifically appearing in the form’s schedule, it excludes coverage if the insured causes or contributes to the intoxication of any person; furnishes liquor to a minor or a person under the influence; or liability assumed under a statute. Exclusion applies in all instances where alcoholic beverages are either served or furnished regardless whether the insured is in the "business of manufacturing, selling or distributing."
BP 04 30, Protective
Safeguard Endorsement
This endorsement enforces the exclusion of coverage when fire or security systems are not maintained.
BP 04 31, Food
Contamination
This is a new optional additional coverage added with the 07 02 edition of the BOP program. Should a governmental authority close a business because it suspects the premises to suffer from food contamination, the form pays its limit to pay for cleaning equipment, replacing ruined food and to pay limited expenses for advertising to restore the business’ reputation. Unless a higher limit is selected, the form pays $10,000 for clean-up and replacement and $3,000 for extra advertising expense.
BP 04 33, Standard
Form Computer Coverage Endorsement
This form,
originally introduced in 1996, was withdrawn with the 07 02 edition of the BOP
program.
BP 04 34, Special
Form Computer Coverage Endorsement
This form,
originally introduced in 1996, was withdrawn with the 07 02 edition of the BOP
program.
BP 04 37,
Exclusion—Personal and Advertising Injury
This endorsement is intended for those businesses with more serious personal and advertising injury exposure such as radio, television, newspapers, publishers. To find coverage when this endorsement is added, go to the specialty markets to find Media Professional Liability Coverage.
BP 04 38, Medical
Expense Exclusion Endorsement
This form serves to exclude all non-suit medical expense coverage except first aid.
BP 04 39, Abuse or
Molestation Exclusion
This exclusion is designed for businesses with above average molestation potential (daycare, private nursery schools, etc.). Abuse and molestation are excluded from coverage as well as the negligent employment, investigation, supervision, report to proper authority, or retention of the individual who caused the act.
BP 04 40, Coverage For Injury To Leased Employees
This endorsement covers both leased employees and temporary employees for employers liability. This endorsement is advised for insureds who employ only leased employees and who have no worker’s compensation policy, and for businesses who have employees who travel. Some states discourage employee leasing with restrictive laws, and coverage may be necessary for these situations.
BP 04 41, Business
Income Changes – Increased Period of Restoration (No Waiting Period)
This is a new optional coverage added with the 07 02 edition of the BOP program. The form modifies the BOP policy by eliminating the delay before a business can be reimbursed for loss of income caused by being closed by order of civil authority or involving loss to a dependent property.
BP 04 46, Ordinance
or Law Coverage Endorsement
Allows the insured to purchase protection to cover loss for the following three items (one or all may be purchased): loss to the undamaged portion of the building; demolition cost; and increased cost of construction. This coverage is for property that has been damaged by a covered cause of loss and for which a current law or ordinance mandates one or more of the above. However, the costs eligible for payment are for the minimal level of compliance. Expenses that exceed this amount are not covered. Further, no coverage applies to costs related to pollutants.
BP 04 47, Additional
Insured – Vendors
This form allows the option to provide coverage for Vendors as additional insureds. It amends the WHO IS AN INSURED provision of the Businessowners Liability section. It protects any entity scheduled on the endorsement for bodily injury or property damage liability that arises out of the insured’s products that are distributed or sold in the vendor’s normal business operations, subject to the exclusions and limitations in the endorsement.
BP 04 48, Additional
Insured – Designated Person or Organization
This option provides coverage for any additional insured of an eligible contractor, in which none of the other additional insured endorsements more specifically applies. Coverage is granted by amending the WHO IS AN INSURED provision of the Businessowners Liability section. It protects the entity scheduled on the endorsement for bodily injury or property damage liability that arises out of insured contractor’s ongoing operations or premises that are owned by or rented to the insured contractor, subject to any exclusions and limitations in the endorsement.
BP 04 49, Additional
Insured – Engineers, Architects or Surveyors Not Engaged By
the Named Insured
This endorsement allows the option to provide coverage for engineers, architects, or surveyors of an insured contractor, hired by common project owners, and for which the contractor is required to add the engineer, architect, or surveyor as an additional insured. It protects the entity scheduled on the endorsement for bodily injury or property damage liability that arises out of insured contractor’s ongoing operations, subject to any exclusions and limitations in the endorsement.
BP 04 50, Additional
Insured – Owners, Lessees or Contractors
This endorsement allows the option to provide coverage for any person or organization for which the insured contractor is performing operations. It protects the entity scheduled on the endorsement for bodily injury or property damage liability that arises out of insured contractor’s ongoing operations, subject to any exclusions and limitations in the BOP.
BP 04 51, Additional
Insured – Owners, Lessees or Contractors – With Additional Insured Requirement
In Construction Contract
This optional form provides coverage for any person or organization for which the insured contractor is performing work. However, granting additional insured status has to result from a written agreement. It protects the entity scheduled on the endorsement for bodily injury or property damage liability that arises out of insured contractor’s operations in the applicable contractor’s agreement, subject to any exclusions and limitations in the endorsement and only until the termination of the agreement.
BP 04 52, Additional
Insured – State or Political Subdivisions — Permits
This endorsement provides coverage for any state or political subdivision that the insured contractor must add as an additional insured in order to obtain a permit to perform work for others.
BP 04 53, Water
Back-Up And Sump Overflow
This is a new optional additional coverage added with the 07 02 edition of the BOP program. The form adds coverage for damage due to water that has backed up and damaged covered property. The water has to have backed-up from sewers or drains or overflowed from a sump pump. Damage from sump overflow is paid even if the overflow is due to a pump that has stopped operating. However, coverage is excluded if the insured was negligent in making sure the sump pump was properly maintained. Another cause for denying coverage is if there’s evidence that an insured failed to clear an obstruction from a drain and that obstruction causes damage.
BP 04 54, Business
Liability Coverage – Newly Acquired Organizations
This endorsement allows the option to provide coverage for any new organization that the insured acquires or forms during the policy period, for up to 90 days or policy expiration, whichever is earliest.
BP 04 55, Business Liability
Coverage – Tenants Liability
This endorsement provides property damage liability coverage for premises rented or temporarily occupied by the insured. Similar to fire legal liability, it provides protection for a broader range of perils. However, maximum coverage is an aggregate limit equal to twice the amount of the BOP’s applicable Liability and Medical Expenses Limit.
BP 04 56, Utility
Services – Direct Damage
Property damage coverage may be extended to protect for loss to covered property as a result of off-premises water, communication, and power supply services and overhead power transmission and communication lines.
BP 04 57, Utility
Services – Time Element
Time element coverage may be extended to protect and insured business from loss of business income or from extra expenses that are the result of off-premises water, communication, and power supply services and overhead power transmission and communication lines.
BP 04 58, Business
Income And Extra Expense Coverage For Year 2000
Computer-Related And Other Electronic Problems
This endorsement provides an insured business with protection from loss of business income or from extra expenses that are the result of computer programming or processing errors related to a system’s or software’s inability to handle calendar dates or times. The coverage only pays for income loss or extra expense that is directly related to the computer processing problem. An aggregate limit of $25,000 applies.
BP 04 64, Year 2000
Computer-Related And Other Electronic Problems –
Limited Coverage Options
This endorsement provides an insured business with limited protection from “bodily injury,” “property damage,” and “personal and advertising injury” liability that is related to computer programming or processing errors related to a system’s or software’s inability to handle calendar dates or times. It extends the policy’s coverage and limits to such losses, but coverage only applies to locations, products or operations that appear in the form’s schedule.
BP 04 71, Exclusion
- Volunteer Workers
This is new exclusion added with the 07 02 edition of the BOP program. The Businessowners Coverage Form extends Medical payments coverage to volunteer workers who suffer bodily injury. This form amends the policy so, like all other insureds, volunteer workers are excluded from Med Pay.
BP 04 83, Removal Of Insurance-To-Value Provision
This is new option added with the 07 02 edition of the BOP program. The Businessowners Coverage Form’s Section I Loss Payment condition is modified by this endorsement. Its attachment eliminates a requirement for the limit of insurance to meet any coinsurance requirement. Therefore, regardless of the property insurance limit’s relationship to the property’s full value, that limit becomes one of the payment options in case of a loss.
BP 04 84, Functional
Building Valuation
This is new option added with the 07 02 edition of the BOP program. Coverage may be added to replace the valuation loss condition of the businessowners coverage form. The new condition pays to replace a damaged building on the same site with a functionally equivalent building. In the event of a partial loss, the damaged portion of the building would be repaired with less costly material. While no premium charge typically applies to this change, an insured that uses this option should carefully evaluate the selected building limits.
BP 04 85, Functional
Business Personal Property Valuation
This is new option added with the 07 02 edition of the BOP program. Coverage may be added to replace the valuation loss condition of the businessowners coverage form. The new condition pays to replace damaged business personal property on the same site with functionally equivalent property. While no premium charge typically applies to this change, an insured that uses this option should carefully evaluate the selected business personal property limits.
BP 04 86, Vacancy
Changes
This is new option added with the 07 02 edition of the BOP program. This form may be added to alter the percentage of building occupancy that is used to determine whether a covered location is considered vacant. The change applies only to the building and location that is specifically described in the form’s schedule. No premium charge typically applies.
BP 04 87, Vacancy
Permit
This is new option added with the 07 02 edition of the BOP program. This form may be added to alter the BOP’s vacancy provision. It may be used to temporarily suspend the provision’s application. The suspension only applies to the premises and buildings described in the form’s schedule. Further, coverage applies to loss from vandalism or sprinkler leakage (if both causes of loss are selected in the schedule) that occurs during the time period listed in the schedule. No premium charge typically applies.
BP 04 88, Liquor
Liability
This is new option added with the 07 02 edition of the BOP program. This form may be used to add BOP coverage for liquor liability. The form merely eliminates the policy’s liquor liability exclusion and is appropriate for use with insureds who have minimal exposure to such losses.
BP 04 89, Liquor
Liability Coverage
This is new option added with the 07 02 edition of the BOP program. This form may be used to add BOP coverage for liquor liability. It should be used for risks that have a significant liquor liability exposure. The form provides coverage for bodily injury and property damage liability related to the insured’s furnishing alcohol. However, a number of exclusions still apply to alcohol-related losses, such as any loss that also involves:
· an insured’s deliberately causing a loss,
· employer liability
· Workers’ Compensation (or similar laws)
· Circumstances indicating that the insured acted irresponsibly or illegally
The coverage is constrained by the aggregate and per cause limits appearing in the form’s schedule.
BP 04 90, Pollution
Exclusion – Limited Exception For a Short-Term Pollution
Event
This is new option added with the 07 02 edition of the BOP program. This form may be used to add some liability coverage for bodily injury or property damage related to damage caused by pollution. An exception is made to the BOP policy’s pollution exclusion. The result is that, under certain circumstances, a pollution event qualifies for coverage. The form includes a definition of “short term pollution event.” The definition and other provisions result in limited coverage for accidental, non-recurring pollution losses. However, losses involving underground storage tanks or hostile fires. The form also includes a number of other excluded circumstances.
BP 04 91, Pollution
Exclusion – Limited Exception For Designated
Pollutants
This is new option added with the 07 02 edition of the BOP program. This form may be used to add some liability coverage for bodily injury or property damage related to damage caused by a type of pollutant designated in the form’s schedule. However, coverage does not extend to a loss involving the designated pollutant’s handling, transportation, storage, disposal, treatment or processing.
BP 04 92, Total
Pollution Exclusion
This is a new exclusion added with the 07 02 edition of the BOP program. This form may be used to completely eliminate coverage for any loss involving loss caused by pollution.
BP 04 93, Total
Pollution Exclusion With A Building Heating Equipment
Exception And A Hostile Fire Exception
This is a new exclusion added with the 07 02 edition of the BOP program. This form may be used to completely eliminate coverage for any loss involving loss caused by pollution and then make a couple of exceptions. Attaching the form to the BOP allows coverage for pollution losses involving heat, smoke and fumes generated by a hostile fire as well as heating equipment.
BP 04 94, Limited
Pollution Liability Extension
This is a new exclusion added with the 07 02 edition of the BOP program. This form may be used to add limited liability coverage for pollution losses. Coverage exists for some circumstances, such as certain pollution losses due to a hostile fire, or from pollution events that don’t involve treatment, handling or transportation of pollutants. Also excluded are events caused by contractors or related to monitoring, testing, remediating and similar costs.
BP 04 96, Premium
Audit Endorsement
This endorsement was
withdrawn with the introduction of the 07 02 edition of the BOP program.
BP 04 97, Waiver Of Transfer Of Rights Of Recovery Against Others To Us
This is a new form added with the 07 02 edition of the BOP program. This form may be used to eliminate the insurer’s ability to secure subrogation rights. In other words, this form prevents an insurer to pursue another party which may be responsible for damages paid by the insurer. However, rather than completely giving up this right, the insurer only waives exercising the right against the entity shown in the schedule.
BP 04 98, Employee
Benefits Liability Coverage
This is a new form added with the 07 02 edition of the BOP program. This form may be used to add coverage for damages the insured causes by negligent acts, errors or omission that are related to the administration of their employee benefits program. Coverage is subject to a Retroactive Date and it applies on a claims-made basis. A number of circumstances are excluded such as (but not limited to), criminal acts, BI, PD and PI losses, loss related to performance of a contract, involving Workers’ Compensation or ERISA, Employer-Related Acts and taxes, fines and penalties. A limit of insurance, an aggregate limit and a deductible must be selected for this coverage.
BP 04 99, Extended
Reporting Period For Employee Benefits Liability
Coverage
This is a new form added with the 07 02 edition of the BOP program. This form may be used in conjunction with claims-made form BP 04 98, Employee Benefits Liability Coverage. Since this coverage applies on a claims made basis, this form gives an insured the option to extend the loss reporting period. This would be critical if coverage were switched from a claims-made to an occurrence policy.
BP 05 01,
Calculation Of Premium
This is a new form added with the 07 02 edition of the BOP program. This form advised the insured that subsequent policy periods will have their premiums calculated according to rates that are in effect at the time of policy renewal or anniversary date.
BP 07 01,
Contractors’ Installation, Tools And Equipment
Coverage
Whenever a contractor is covered under the Businessowners Program, this endorsement should be attached. It provides protection for property sold under an installation agreement when the contractor’s interest continues until the purchaser accepts the property. The provision for Personal Property Off-Premises does not apply to contractors because of their exposure; however, a selected amount of protection is given for installation coverage. Another insurance limit for contractor's tools and equipment coverage is provided subject to a limit of $2,000 for any one tool or piece of equipment. The perils of earthquake and flood are given for installation and contractor’s tools and equipment coverage. Besides the selected insurance limit for coverage per job site, $5,000 coverage applies separately to property in transit and to property temporarily stored at another location. When there’s more than one job site, a maximum of three times the per site limit applies (though this may create unintended additional coverage if there are only two job sites).
BP 07 02, Amendment
- Aggregate Limits of Insurance (Per Project)
This endorsement changes the aggregate limit of insurance under the liability coverage for products-completed operations hazard so that it will apply per project.
BP 07 03, Business
Liability Coverage – Property Damage Liability Deductible (Per Claim Basis)
This endorsement makes provision for a property damage deductible that will apply to each claim.
BP 07 04, Business
Liability Coverage – Property Damage Liability Deductible (Per Occurrence
Basis)
This endorsement makes provision for a property damage deductible that will apply on a per occurrence basis.
BP 07 05,
Contractors' Installation Coverage
This endorsement was
withdrawn with the introduction of the 07 02 edition of the BOP program.
BP 07 06,
Contractors' Tools and Equipment Coverage
This endorsement was
withdrawn with the introduction of the 07 02 edition of the BOP program.
BP 07 07, Businessowners
Liability Coverage, Amendment of Liability and Medical Expenses Limits of
Insurance
Allows the insured to purchase increased liability limits. Use of this endorsement increases the products-completed operations hazard limit to three (3) times the Liability and Medical Expenses Limit. All other occurrences will be twice (2 times) the Liability and Medical Expenses Limit.
BP 07 08, Pesticide
or Herbicide Applicator Coverage
Using this endorsement amends the pollution exclusion so that there will be some pollution coverage for the operations that are designated in the Schedule of the endorsement, as long as all federal, state, or local governmental statutes, ordinances, regulations or license requirements are met or complied with.
BP 07 10, Motels
This is a new form added with the 07 02 edition of the BOP program. This form expands coverage of the BOP to cover exposures faced by Motels. Coverage is modified to handle property that belongs to guests, including liability and lock replacement coverage.
BP 07 11, Motels –
Liability For Guests’ Property In Safe Deposit Boxes
This is a new form added with the 07 02 edition of the BOP program. This form expands coverage of the BOP to handle the titled exposure faced by Motels. However, coverage is still excluded for a variety of causes of loss, including fire, dishonest acts of any insured, acts committed by parties held harmless by an insured, as well as property that is lost, damaged or seized related to government acts.
BP 07 12, Self-Storage
Facilities
This is a new form added with the 07 02 edition of the BOP program. This form expands coverage of the BOP to handle liability arising from damage or loss of customer property that an insured has placed in a self-storage facility. However, the property is protected only if it is at the facility due to a covered loss occurring at the insured’s premises. In other words, damage to customer property at a self-storage site because the insured runs out of storage space at his premises is not covered.
BP 08 01, Barbers and Beauticians Professional Liability
Provides coverage for the rendering or failing to render of professional barber and beautician services, including treatment, advice, instruction for appearance, skin enhancement, personal grooming or therapy.
BP 08 02, Funeral
Directors Professional Liability
Provides coverage for the rendering or failing to render of funeral director’s professional services. Additional exclusions apply relating to property damage for property consisting of dead bodies, caskets, and urns in the insured’s care, custody, or control. These are excluded unless a theft or hostile fire occurs.
BP 08 03, Optical
and Hearing Aid Establishments
Provides coverage for the rendering or failing to render of services regarding the dispensing of optical or hearing aid products such as the preparation, fitting, demonstration, or distribution of lenses and similar products or hearing aid devices.
BP 08 04, Printers Errors and Omissions Liability
Provides coverage for damage resulting from the insured’s negligence, act, error, or omission in providing printing services. Excluded are criminal acts, infringement of copyright, writing of materials for customers or publishing activities.
BP 08 05,
Veterinarians Professional Liability
Provides coverage for the rendering or failing to render of professional veterinarian services.
BP 08 06, Limited
Pharmacists Liability Coverage
Provides coverage for the rendering or failing to render of professional services related to pharmaceutical operations.
BP 10 03, Earthquake
Earthquake Form BP 10 03 provides coverage for damage or loss created by earthquake (including volcanic eruption.)
Landslide, mudslide and mudflow are added to excluded causes of loss, paralleling the language of the simplified Commercial Property Earthquake Form, CP 10 40.
Earthquake or volcanic eruption that begins prior to the inception of coverage is excluded. Accordingly, there is no coverage for damage that occurs during the policy period if the earthquake (all shocks within a 168-hour period) begins before the policy period. The intent is to make certain that two policies do not respond to loss by the same earthquake simply because the earthquake straddles the policy periods of both. In order to avoid a gap in coverage when the simplified policy replaces a non-simplified policy, there is an exception to the exclusion that restores the period of coverage in such circumstances.
BP 10 04, Exclusion Of Certain Computer- Related Losses
This endorsement was
withdrawn with the introduction of the 07 02 edition of the BOP program.
BP 10 05, Exclusion
- Year 2000 Computer-Related And Other Electronic
Problems
This endorsement excludes any liability for “bodily injury,” “property damage,” and “personal and advertising injury” liability involving computer programming or processing errors related to a system’s or software’s inability to handle calendar dates or times.
BP 10 06, Exclusion
- Year 2000 Computer-Related And Other Electronic
Problems (Products-Completed Operations Hazard)
This endorsement excludes any liability for “bodily injury,” “property damage,” and “personal and advertising injury” liability that is related to computer programming or processing errors involving a system’s or software’s inability to handle calendar dates or times. Coverage is barred for losses that are related to an insured’s finished work or products.
BP 10 07, Exclusion
- Year 2000 Computer-Related And Other Electronic
Problems – With Exception For Bodily Injury On Your Premises
This endorsement excludes any liability for “bodily injury,” “property damage,” and “personal and advertising injury” liability involving computer programming or processing errors related to a system’s or software’s inability to handle calendar dates or times. However, an exception is made when the loss is restricted to bodily injury IF it occurs on the insured’s described premises.
BP 10 08, Exclusion
- Year 2000 Computer-Related And Other Electronic
Problems – Exclusion of Specified Coverages For Designated Locations,
Operations Products-Or Services
This endorsement excludes any liability for, depending on what is selected on the schedule, either “bodily injury,” “property damage,” and/or “personal and advertising injury” liability involving computer programming or processing errors related to a system’s or software’s inability to handle calendar dates or times. Coverage, as selected, applies to the location, products, services or operations that are indicated in the form’s schedule.
BP 10 09, Named
Perils
This is a new form added with the 07 02 edition of the BOP program.
This form modifies coverage of the BOP to handle property losses on a named peril basis.
BP 10 10, Sprinkler
Leakage – Earthquake Extension
This is a new form added with the 07 02 edition of the BOP program. This form expands coverage when Earthquake Form BP 10 03 is attached to the BOP Coverage Form. The endorsement broadens the earthquake and volcanic eruption protection to include damage caused a water escaping from a sprinkler system.
BP 12 01,
Businessowners Policy Changes
This endorsement is added to the policy when any changes
are made in coverage. It lists an effective date, a coverage description, the
new limit of insurance, and the previous and new premium. Optional coverages
are listed for when an insured opts for an optional coverage after the
original policy has been issued. Optional coverages found on the form are: outdoor signs, glass, burglary and robbery, money and
securities, employee dishonesty, and mechanical breakdown.
BP 12 02, Fire
Department Service Contract
This endorsement is used when maintenance of a service
contract with a privately-owned fire department is required to apply a Public
Protection Classification.
BP 12 03, Loss
Payable Provisions
This endorsement is attached to reflect either a loss payee, a lender’s loss payee, or a loss payee under a contract-of-sale.
BP 12 05,
Businessowners Supplemental Declarations
This endorsement was
withdrawn with the introduction of the 07 02 edition of the BOP program.
BP 17 01,
Condominium Association Coverage
This coverage amends the Businessowners policy to provide coverage for condominium associations. It is notable that, if a unit-owner has other insurance covering the same property as this insurance, this endorsement is intended to be primary and does not contribute with the unit-owner's insurance. Coverage includes temporary structures, building additions and specific types of building maintenance equipment.
BP 17 02,
Condominium Commercial Unit-Owners Coverage
Condominium Commercial Unit-Owners Coverage BP 17 02 amends the Businessowners coverage for personal property to provide coverage modified for the special needs of condominium commercial unit-owners.
BP 17 03,
Condominium Commercial Unit-Owners Optional Coverages
Provides the following coverages for condominium commercial unit-owners: Loss Assessment Coverage, applicable to assessments charged to the unit-owners by the Condominium Association as a result of direct physical loss of or damage to property in which each unit-owner has an undivided interest. The company will not pay more than $1,000, regardless of the limit of insurance, if the assessment results from a deductible in the Association's insurance. A $500 deductible applies to each unit under this coverage.
Miscellaneous Real Property Coverage, applying to condominium property that pertains only to the unit-owner's unit or that the unit-owner must insure by virtue of the Condominium Association Agreement. It excludes property that may be insured under "Business Personal Property." If the Condominium Association has other insurance covering the same property, this coverage will pay only for the excess that should have been received from the other insurance, whether or not the other insurance is collectible.
BP DS 01, Businessowners
Policy Declarations
This is a new form added with the 07 02 edition of the BOP program. This form is a new Declarations that accommodates use of the new, self-contained Businessowners Coverage Form.
BP IN 01,
Businessowners Coverage Form Index
This is a new form added with the 07 02 edition of the BOP program. This form is provided as a service to insureds. It is a convenient reference for finding various parts of the BP 00 03, Businessowners Coverage Form. Because of the switch to a single, package coverage, the form has more than 40 pages.
This list identifies endorsements available to modify the Insurance
Services Office (ISO) Businessowners Program (BOP) Coverage Form. It is
arranged by form number and title and includes a brief description and explanation
of the use of the latest edition of each form. It does not include any
terrorism forms or endorsements or state specific endorsements, changes or amendments.
Note: New endorsements since the previous analysis appear in bold type.
The ten-digit numbering sequence of ISO forms and endorsements has a
very specific meaning.
Endorsements are grouped in categories according to their purpose as
follows:
|
Section |
Description |
|
BP DS |
Declarations and Schedules |
|
BP IN |
Index |
|
BP 00 |
Coverage Form |
|
BP 01 |
Amendments |
|
BP 02 |
State Cancellation And
Suspension Endorsements |
|
BP 03 |
Deductible Endorsements |
|
BP 04 |
Additional Coverage Endorsements |
|
BP 05, BP 06 |
Miscellaneous Endorsements, Exclusions And Schedules |
|
BP 07 |
Contractors Endorsements |
|
BP 08 |
Professional Liability Endorsements |
|
BP 10 |
Causes Of Loss Endorsements |
|
BP 12 |
General Endorsements |
|
BP 17 |
Condominium Coverage Endorsements |
BP DS 01–Businessowners Policy Declarations
This is the declarations for the 01 06 edition of the ISO Businessowners Policy.
BP DS 02–Apartment
Buildings Supplemental Schedule
This schedule
supplements the Businessowners Policy Declarations when insuring
apartment buildings and when including BP 07 75–Apartment Buildings
endorsement.
BP DS 03–Restaurants
Supplemental Schedule
This schedule
supplements the Businessowners Policy Declarations when insuring
restaurants and when including BP 07 78–Restaurants endorsement.
BP IN 01–Businessowners Coverage Form Index
This index is a
convenient reference used to locate the various parts of BP 00 03–Businessowners
Coverage Form.
BP 00 03–Businessowners Coverage Form
This is the Businessowners Program (BOP) Coverage Form.
BP 01 59–Water
Exclusion Endorsement
This endorsement is
an absolute exclusion of loss or damage caused by or resulting from water in
any form, including mudslide and waterborne material.
BP 03 12–Windstorm Or Hail Percentage
Deductibles
This endorsement makes windstorm or hail deductibles of 1%, 2% or 5% available. The deductible selected applies separately to each building if more than one building is involved, to the building and business personal property in anyone building, to business personal property in each building if more than one building is involved, and to personal property in the open.
BP 04 01–Comprehensive Business Liability Exclusion (All Hazards In Connection With Designated Premises Or Operations)
This endorsement excludes premises and operations, products/completed operations and medical payments coverages at specific designated premises indicated on the endorsement schedule or on the declarations.
BP 04 02–Additional Insured–Managers Or
Lessors Of Premises
This endorsement adds the owner, lessor or property manager for liability coverage at locations the named insured leases and occupies that are owned by that party. It excludes events that occur after the insured vacates and no longer occupies the premises. It also excludes structural alterations, new construction or demolition performed by or for the additional insured. It can include the named insured’s landlord as an additional insured when required by contract. The party's additional insured status ends when the insured no longer occupies the premises.
BP 04 03–Accounts Receivable Coverage
This endorsement was used with previous editions. It is withdrawn from use and no longer applies.
BP 04 04–Hired And Non-Owned Auto Liability
This endorsement is used only when the named insured does not own vehicles and does not have commercial automobile coverage. Hired autos are those leased, hired or borrowed, except from employees or members of their households, or from partners or executive officers. It does not include mobile equipment. Non-owned autos used in connection with the insured’s business do not include mobile equipment. This endorsement protects the insured if an employee uses his or her car in the business and is different than hired auto liability coverage. If the insured form of business is a partnership, non-owned auto liability coverage does not apply to autos a partner owns.
BP 04 05–Valuable
Papers And Records–Electronic Media And Records
This endorsement was
used with previous editions. It is withdrawn from use and no longer applies.
BP 04 06–Additional Insured–Controlling Interest
This endorsement includes the party that financially controls the named insured or for the premises it owns, maintains or controls for the period that it occupies those premises as an additional insured but not for structural alterations, new construction or demolition they might perform.
BP 04 07–Additional Insured–State Or
Political Subdivisions–Permits Relating To Premises
This endorsement includes a state or political subdivision as an additional insured for certain hazards for which it issued a permit to the named insured in connection with the premises. Examples include permits issued for advertising signs, awnings, canopies, driveways, manholes, street banners or decorations, or for the construction, erection or removal of elevators.
BP 04 08–Additional Insured–Townhouse Associations
This endorsement grants additional insured status to individual townhouse owners for their liability as members of the association on policies issued to townhouse associations. Coverage does not apply to liability of individual unit owners arising out of real property titled to the member.
BP 04 09–Additional Insured–Mortgagee, Assignee Or
Receiver
This endorsement includes a person or organization with respect to its liability as a mortgagee, assignee or receiver arising out of the ownership, maintenance or use of the named insured’s premises. It does not apply to structural alterations, new construction or demolition operations.
BP 04 10–Additional Insured–Owners Or Other
Interests From Whom Land Has Been Leased
This endorsement adds the owner or another interest that the named insured has leased land from as an additional insured for liability arising out of the ownership, maintenance or use of the land. Coverage does not apply to events that occur after the lease ends or to any structural alterations, new construction or demolition operations.
BP 04 11–Additional Insured–Co-Owner Of
Insured Premises
This endorsement adds the
person or organization indicated on the endorsement schedule that owns the
scheduled premises in common with the insured as an additional insured with respect
to liability coverage.
BP 04 12–Limitation Of Coverage To Designated
Premises Or Project
This endorsement limits coverage to only the premises or project indicated on the endorsement schedule.
BP 04 13–Additional Insured–Engineers, Architects Or
Surveyors
This endorsement includes an architect, engineer or surveyor the named insured hires as an additional insured but only with respect to liability arising out of the named insured's actions or omissions, or those acting on its behalf, concerning the named insured’s premises or work performed on its behalf. Coverage does not apply to rendering or failing to render any professional services by or for the named insured. Coverage applies to ongoing operations but not to completed operations.
BP 04 15–Spoilage Coverage
This endorsement covers spoilage losses to perishable stock the insured owns.
BP 04 16–Additional Insured–Lessor Of Leased
Equipment
This endorsement extends liability coverage to the person or organization that leases equipment to the named insured indicated on the endorsement schedule. Coverage applies to only liability arising out of the named insured's maintenance, operation or use of the lessor’s equipment.
BP 04 17–Employment-Related Practices Exclusion
This endorsement excludes liability arising out of employment-related practices, such as refusal to employ, termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or other employment-related practices, policies, acts or omissions. It also excludes consequential injuries resulting from these practices. It applies to the person as well as to certain relatives.
BP 04 18–Amendment–Liquor Liability Exclusion
This endorsement was
used with previous editions. It is withdrawn from use and no longer applies.
Refer to
BP 04 88–Liquor Liability.
BP 04 19–Amendment–Liquor Liability Exclusion–Exception For Scheduled Activities
This endorsement excludes losses caused or contributed to by any insured involving intoxication of any person, furnishing liquor to minors or persons already under the influence, or for liability assumed under a statute, except for activities listed and described on the endorsement schedule. It applies to all cases involving alcoholic beverages, regardless of whether or not the insured is in the liquor business.
BP 04 30–Protective Safeguards
This endorsement is used when a rate or premium credit applies to reflect the specific protective safeguards installed at the location indicated on the endorsement schedule. The named insured agrees to maintain these safeguards in proper working order at all times. If this is not done, the otherwise covered loss is not covered. The warranty nature of this exclusion means that a loss can be excluded even if there is no relationship between the lack of a working protective safeguard and the loss that occurred.
BP 04 31–Food Contamination
This endorsement pays the costs of cleaning equipment, replacing ruined food and limited expenses for advertising to restore the named insured's business reputation if a governmental entity closes the business because of suspected food contamination. The limits are $10,000 for cleanup and replacement and $3,000 for extra advertising expense unless other limits are selected.
BP 04 37–Exclusion–Personal And Advertising
Injury
This endorsement completely deletes personal and advertising injury coverage.
BP 04 38–Medical Expenses–Exclusion
This endorsement excludes medical expense coverage at the locations or for the classifications indicated on the endorsement schedule, except for first aid administered to others at the time of an accident involving bodily injury.
BP 04 39–Abuse Or Molestation Exclusion
This endorsement excludes abuse and molestation, as well as the negligent employment, investigation, supervision, failure to report to proper authority or retention of individuals committing or involved with such acts.
BP 04 40–Coverage For Injury To Leased
Workers
This endorsement provides employers liability coverage for both leased and temporary employees. It is recommended for businesses that use only leased employees having no workers compensation coverage or that have employees who travel. Some state laws discourage employee leasing and this coverage may be necessary.
BP 04 41–Business Income Changes–Time Period
The endorsement eliminates the waiting period before a business is reimbursed for loss of income resulting from an order to close by a civil authority or a loss at a dependent property.
BP 04 46–Ordinance Or Law Coverage
BP 04 47–Additional Insured–Vendors
This endorsement adds
product liability coverage for vendors indicated on the endorsement schedule
for the products listed as additional insureds by amending the "Who Is An Insured" provision in the liability section. It
covers bodily injury or property damage liability arising out of the named
insured’s products the vendor sells or distributes in the course of its normal
business operations, subject to the endorsement's exclusions and limitations.
BP 04 48–Additional Insured–Designated Person Or
Organization
This endorsement allows the insured contractor to cover any additional insured in cases where no other specific additional insured endorsement applies by amending the "Who Is An Insured" provision of the liability section. It covers the party indicated on the endorsement schedule for bodily injury or property damage liability caused by the named insured’s, or others acting on its behalf, acts or omissions. Loss or damage must occur in the course of the insured's ongoing operations or at premises it owns or rents, subject to the endorsement's exclusions and limitations.
BP 04 49–Additional Insured–Engineers, Architects Or
Surveyors Not Engaged By The Named Insured
This endorsement allows
the named insured contractor to cover as additional insureds engineers,
architects or surveyors hired by common project owners or required to be added
due to a written contract or agreement. It protects the party indicated on the
endorsement schedule for bodily injury or property damage liability arising
out of the named insured's ongoing operations, subject to the endorsement's exclusions and limitations. Covered losses
must be caused by the named insured’s error or omission or by errors or
omissions by others acting on its behalf. This means that a loss caused solely
by the designated additional insured is not covered.
BP 04 50–Additional Insured–Owners, Lessees Or
Contractors–Scheduled Person Or Organization
This endorsement covers
any person or organization for which the named insured contractor performs
operations when that party is indicated on the endorsement schedule for bodily
injury or property damage liability arising out of the named insured's ongoing
operations but excludes completed operations and is subject to certain
exclusions and limitations. Covered
losses must be caused by the named insured’s errors or omission or by error or
omissions by others acting on its behalf. This means that a loss caused solely
by the designated additional insured is not covered.
BP 04 51–Additional Insured–Owners, Lessees Or
Contractors–With Additional Insured Requirement In Construction Contract
This endorsement covers
any party for which the named insured contractor performs work, subject to it
being required by a written contract or agreement. It protects the party for
bodily injury or property damage liability arising out of the named insured’s
operations specified in the contract or agreement and applies only until the
contract or agreement ends. Covered
losses must be caused by the named insured’s error or omission or by errors or
omissions by others acting on its behalf. This means that a loss caused solely
by the designated additional insured is not covered.
BP 04 52–Additional Insured–State Or
Political Subdivisions–Permits
This endorsement covers any state or political subdivision indicated on the endorsement schedule that the named insured contractor must include as an additional insured in order to obtain needed work permits.
BP 04 53–Water Back-Up And Sump Overflow
This endorsement covers loss or damage caused by or resulting from water that backs up from a sewer or drain or from overflow of a sump pump that damages covered property at the location indicated on the endorsement schedule. Coverage does not apply if the loss was due to negligent maintenance of the pump or if an insured failed to clear an obstruction from a drain and the damage was due to that obstruction. The $5,000 limit of insurance can be increased to a different limit entered in the space on the endorsement schedule.
BP 04 54–Newly Acquired Organizations
This endorsement covers newly acquired organizations or organizations the named insured forms during the policy period, for up to 90 days or until policy expiration, whichever occurs first.
BP 04 55–Broadened Coverage For Damage To
Premises Rented To You
This endorsement was renamed to more accurately reflect the coverage
provided.
BP 04 56–Utility Services–Direct Damage
This endorsement extends
property damage coverage to loss or damage to covered property as a result of
an interruption of service from off-premises water, communication, power
supply services and overhead power transmission and communication lines but
excluding loss or damage to electronic
data.
BP 04 57–Utility Services–Time Element
This endorsement extends time element or loss of income coverage to apply to loss of business income or extra expense resulting from interruption of off-premises water, communication, power supply services and overhead power transmission and communication lines but excluding loss or damage to electronic data.
BP 04 58–Business Income And Extra Expense
Coverage for Year 2000 Computer-Related And Other Electronic Problems
This endorsement protects an insured business against loss of business income or extra expenses incurred due to computer programming or processing errors related to a system's or software's inability to address, handle and resolve calendar dates or times. It pays only for loss of income or extra expenses directly related to computer processing problems. The annual aggregate policy limit is $25,000.
BP 04 59–Equipment Breakdown Protection Coverage
This endorsement broadens the mechanical breakdown coverage in BP 00 03.
It covers damage to pressure, mechanical or electrical machinery and equipment
caused by mechanical breakdown or electrical failure similar to the coverage
provided by the Equipment Breakdown Protection Coverage Form. The two
coverages should be compared before recommending one instead of the other.
BP 04 64–Year 2000 Computer-Related And Other
Electronic Problems–Limited Coverage Options
This endorsement provides limited protection for bodily injury, property damage and personal and advertising injury liability because of computer programming or processing errors that a system or software could not address, handle or resolve involving calendar dates or times. It extends the coverage and limits to apply to such losses but only to locations, products or operations listed on the endorsement schedule.
BP 04 71–Exclusion–Volunteer Workers
This endorsement is used to exclude volunteer workers from medical payments coverage.
BP 04 83–Removal Of Insurance-To-Value
Provision
This endorsement modifies the loss payment condition by eliminating the provision for the limit of insurance to meet insurance to value requirements. As a result, the coverage limit becomes one of the payment options in the event of a loss, regardless of the relationship of the property insurance limit to the full value of the property.
BP 04 84–Functional Building Valuation
This condition replaces the valuation loss condition by agreeing to pay to replace a damaged building on the same site with a functionally equivalent building. In case of a partial loss, the damaged portion of the building is repaired with less costly material. The insured using this option should carefully evaluate and consider the building limit selected. This endorsement includes ordinance or law provisions for direct damage loss. It also has an option to include business income and extra expense coverage for the additional time needed to comply with ordinance or law changes.
BP 04 85–Functional Business Personal Property Valuation
This condition replaces the valuation loss condition by agreeing to pay to replace damaged business personal property with functionally equivalent or market value property. The insured should carefully evaluate and consider the business personal property limit chosen when selecting this option.
BP 04 86–Vacancy Changes
This endorsement amends the
percentage of building occupancy used to determine if a covered location is
considered vacant. It applies only to the building and location listed and
described on the endorsement schedule.
BP 04 87–Vacancy Permit
This endorsement amends
the vacancy provision to temporarily suspend application of the vacancy
provision at only the premises and buildings indicated on the endorsement
schedule for the selected time period. It has some flexibility in that loss or
damage due to vandalism or sprinkler leakage cannot be covered during the
period of suspension by so indicating it on the endorsement schedule.
BP 04 88–Liquor Liability
This endorsement adds liquor liability coverage by deleting the liquor liability exclusion. It is used in cases where an insured has minimal exposure to such losses. It should not be used when BP 04 89–Liquor Liability Coverage is part of the policy.
BP 04 89–Liquor Liability Coverage
This endorsement adds liquor liability coverage. It applies to businesses that have significant liquor liability exposures and covers bodily injury and property damage liability related to its furnishing of liquor. Coverage does not apply if the insured operates without a license when legally required to have one and is limited to the aggregate and per-cause limits indicated on the endorsement schedule.
BP 04 90–Pollution Exclusion–Limited Exception For
A Short-Term Pollution Event
This endorsement adds some liability coverage for bodily injury or property damage related to certain pollution events under certain circumstances. It defines a short-term pollution event and this definition and other policy provisions provide limited coverage for accidental, non-recurring pollution losses. Since a number of other pollution exclusions and exceptions still apply, this endorsement should be reviewed carefully before recommending it as a possible coverage solution for an insured’s pollution-related exposures.
BP 04 91–Pollution Exclusion–Limited Exception For
Designated Pollutant(s)
This endorsement adds some liability coverage for bodily injury or property damage related to damage caused by the types of pollutants indicated on the endorsement schedule. However, coverage does not extend to losses involving handling, transporting, storing, disposing, treating or processing of the designated pollutants.
BP 04 92–Total Pollution Exclusion
This endorsement completely excludes any loss or damage caused by or resulting from pollution.
BP 04 93–Total Pollution Exclusion With A
Building Heating Equipment Exception And A Hostile Fire Exception
This endorsement
completely excludes any loss or damage caused by pollution
but exceptions provide coverage for loss or damage involving heat, smoke and
fumes generated by a hostile fire and by heating, cooling, dehumidifying and water heating equipment.
BP 04 94–Limited Pollution Liability Extension
This endorsement adds
limited pollution liability coverage and must be reviewed carefully to
determine if the broadened coverage is appropriate for a particular insured.
It has its own aggregate limit.
BP 04 97–Waiver Of Transfer Of Rights Of
Recovery Against Others To Us
This endorsement eliminates the insurance company's ability to secure subrogation rights by preventing it from proceeding against another party that may be responsible for damages it paid. The company only waives exercising the right against the entity indicated on the endorsement schedule and retains the right to subrogate against others.
BP 04 98–Employee Benefits Liability Coverage
This endorsement covers damages caused by the insured because of its negligent acts, errors or omissions relating to administration of its employee benefits program.
BP 04 99–Extended Reporting Period For
Employee Benefits Liability Coverage
This endorsement is used with BP 04 98–Employee Benefits Liability Coverage. Coverage applies on a claims-made basis and this endorsement gives the insured the option to extend the time period to report losses. This is very important if coverage changes from a claims-made to an occurrence basis.
BP 05 01–Calculation Of Premium
This endorsement informs the insured that premiums for subsequent policy periods are calculated according to rates in effect at the policy renewal or anniversary date.
BP 05 15–Disclosure Pursuant To Terrorism
Risk Insurance Act Of 2002
BP 05 17–Exclusion–Silica Or Silica-Related
Dust
This endorsement excludes bodily injury, property damage and personal
and advertising injury losses associated with exposure to silica or
silica-related dust. It includes definitions for silica and silica-related
dust.
BP 05 21 through BP 05 42–Various Terrorism Related Endorsements
BP 05 47–Computer Fraud And Funds Transfer
Fraud
This endorsement adds computer fraud and funds transfer crime coverage.
If a computer is used to transfer money, securities
or other property from inside the insured’s premises or banking institution,
coverage applies up to the limit indicated on the endorsement schedule. In
addition, if fraudulent instructions given to a financial institution result
in the unauthorized transfer of the insured's funds, coverage applies up to
the limit indicated on the endorsement schedule.
BP 05 64 through BP 05 71–Various Terrorism Related Endorsements
BP 05 76–Changes–Limited Fungi Or Bacteria
Coverage
This endorsement was originally introduced with the 11 02 edition and
was revised because the 01 06 edition included limited fungi coverage.
BP 05 77–Fungi Or Bacteria Exclusion
(Liability)
This endorsement excludes bodily injury, property damage or personal and
advertising injury losses due to exposure to fungi or bacteria as defined,
except for certain edible fungi, such as mushrooms.
BP 05 78–Limited Fungi Or Bacteria Coverage
(Liability)
This endorsement
provides limited coverage for the fungi and bacteria excluded in BP 05 77.
BP 05 89–Employment-Related Practices Liability Endorsement
This endorsement provides claims-made liability coverage with defense
included within the limits indicated on the endorsement schedule. It has a
retroactive date and an extended reporting period. Coverage applies for
injuries to employees due to demotion, wrongful termination, wrongful denial
of opportunities, including wrongful hiring and supervision, retaliatory actions,
coercion, harassment and other types of work-related discrimination, libel, humiliation and similar acts.
BP 05 93–Loss Of Rental Value–Landlord As
Designated Payee
This endorsement broadens the definition of rental value to include all
charges the tenant is contractually obligated to pay on behalf of the property
owner.
BP 05 94–Electronic Commerce (E-Commerce)
This endorsement is similar to CP 04 30–Commercial Commerce (E-Commerce)
used with the ISO Commercial Property Program.
BP 05 95–Electronic Data Liability–Limited Coverage
This endorsement covers loss of electronic data only if physical damage
to tangible property occurs first. Electronic data is not considered tangible
property. This coverage is subject to the separate occurrence limit indicated
on the endorsement schedule. BP 05 96–Electronic Data Liability–Broad Coverage
provides broader and more comprehensive coverage.
BP 05 96–Electronic Data Liability–Broad Coverage
This endorsement covers on a claims-made basis with a retroactive date
and an extended reporting period and has its own insuring agreement, exclusions and limits. It also amends various conditions, amends and adds definitions and changes the definition of
who is an insured. It is similar to CG 00 65–Electronic Data Liability
Coverage Form.
BP 05 97–Extended Reporting Period For
Electronic Data Liability–Broad Coverage
This endorsement initiates the extended reporting condition time period
as required in BP 05 96–Electronic Data Liability–Broad Coverage. It applies
and is effective only after the full premium is paid.
BP 05 98–Amendment Of Insured Contract Definition
This endorsement restricts coverage. The additional insured endorsements
have been revised to clarify that the named insured or a party acting on its
behalf must be at least partially responsible for a loss in order for coverage
to apply. Since this change in the definition of insured contract does the
same thing under item f., the definition of insured contract cannot be used to
override the new additional insured endorsements.
BP 06 01–Exclusion Of Loss Due To Virus Or Bacteria
This endorsement excludes
loss or damage due to viruses, bacteria or other microorganisms that cause or
may cause physical disease, illness or distress. It
does not apply to loss or damage due to fungi, wet rot
or dry rot, for which a separate exclusion applies.
BP 07 01–Contractors’ Installation, Tools And
Equipment Coverage
BP 07 02–Amendment–Aggregate Limits Of
Insurance (Per Project)
This endorsement changes the aggregate limit of insurance under the liability coverage for the products/completed operations hazard to apply per project.
BP 07 03–Business Liability Coverage–Property Damage Liability Deductible
(Per-Claim Basis)
This endorsement is used to apply a property damage liability deductible for each claim.
BP 07 04–Business Liability Coverage–Property Damage Liability
Deductible (Per-Occurrence Basis)
This endorsement is used to apply a property damage liability deductible for each occurrence.
BP 07 07–Business Liability Coverage–Amendment Of
Liability And Medical Expenses Limits Of Insurance
This endorsement is used to purchase higher liability limits. It increases the limit for the products/completed operations hazard to three times the liability and medical expenses limit. It also increases the limit for all other occurrences to two times the liability and medical expenses limit.
BP 07 08–Pesticide Or Herbicide Applicator Coverage
This endorsement amends the pollution exclusion so limited pollution coverage applies for the operations indicated on the endorsement schedule. This is subject to the insured meeting or complying with all federal, state or local governmental statutes, ordinances, regulations or license requirements.
BP 07 10–Motels
This endorsement broadens the coverage provided to include exposures common to motels. It modifies the coverage to include property of others, personal property in rooms, lock replacement and liability for guests' property.
BP 07 11–Motels–Liability For Guests’
Property In Safe Deposit Boxes
This endorsement broadens the coverage provided to include liability for guest property stored in safety deposit boxes. However, coverage does not apply to liability excluded under business liability coverage or to loss or damage caused by or resulting from fire, dishonest acts of any insured, acts committed by parties held harmless by an insured and property lost, damaged or seized related to governmental acts.
BP 07 12–Self-Storage Facilities
This endorsement broadens the coverage provided to include liability arising from damage to or loss of customer property the named insured places in a self-storage facility caused by or resulting from a covered cause of loss that applies at the named insured's location. For example, coverage does not apply to damage to customer property at a self-storage facility because the insured was out of storage space at its premises.
BP 07 75–Apartment
Buildings
BP 07 76–Apartment
Buildings–Liability For Loss Or Damage To Tenants'
Auto (Legal Liability Coverage)
This endorsement
covers the named insured's legal liability for damages for direct physical
loss or damage and resulting loss of use to tenants' autos at premises
indicated on the declarations caused by or resulting from a covered cause of
loss.
BP
07 77–Fine Arts Coverage
This endorsement is
an additional coverage under Section I–Property. It covers loss or damage
caused by or resulting from a covered cause of loss to the named insured's
fine arts, or to fine arts of others in its care, custody
or control, up to $25,000 in any one occurrence.
BP 07 78–Restaurants
BP 07
79–Restaurants–Loss Or Damage To Customers' Autos
(Legal Liability Coverage)
This endorsement
covers the named insured's legal liability for damages for direct physical
loss or damage and resulting loss of use to customers' autos left in its care,
custody or control at or temporarily away from
premises indicated on the declarations caused by or resulting from a covered
cause of loss.
BP 08 01–Barbers And Beauticians Professional
Liability
This endorsement covers loss or damage due to rendering or failing to render professional barber and beautician services, including treatment, advice and instruction for appearance, skin enhancement, personal grooming or therapy.
BP 08 02–Funeral Directors Professional Liability
This endorsement covers loss or damage due to rendering or failing to render funeral directors professional services. It excludes property damage to dead bodies, caskets and urns in the insured's care, custody or control unless caused by or resulting from theft or a hostile fire.
BP 08 03–Optical And Hearing Aid
Establishments
This endorsement covers loss or damage due to rendering or failing to render services involving dispensing of optical or hearing aid products, including preparation, fitting, demonstration or distribution of lenses and similar products or hearing aid devices.
BP 08 04–Printers Errors And Omissions Liability
This endorsement covers loss or damage resulting from the insured’s negligence, act, error or omission in providing printing services.
BP 08 05–Veterinarians Professional Liability
This endorsement covers loss or damage due to rendering or failing to render professional veterinarian services.
BP 08 06–Pharmacists–Broad Coverage
This endorsement covers loss or damage due to rendering or failing to render professional pharmaceutical services. It is similar to CG 22 97–Druggists–Broadened Coverage.
BP 08 07–Pharmacists
This endorsement covers loss or damage due to rendering or failing to
render professional pharmaceutical services. It does not provide coverage for
the broadened roles of druggists enacted by legislation in many states,
including prescribing, consulting or diagnosing. It
is similar to CG 22 69–Druggists.
BP 10 03–Earthquake
This endorsement covers loss or damage caused by earthquake, including volcanic eruption, but excludes loss or damage due to an earthquake or volcanic eruption that begins prior to the coverage inception date. This ensures that two policies do not respond to loss by the same earthquake simply because the earthquake event straddles their respective policy periods.
BP 10 04–Exclusion Of Certain
Computer-Related Losses
This endorsement was withdrawn from use with the 07 02 edition and no longer applies.
BP 10 05–Exclusion–Year 2000 Computer-Related And
Other Electronic Problems
This endorsement excludes all liability for bodily injury, property damage and personal and advertising injury liability involving computer programming or processing errors related to the inability of a system or software to handle calendar dates or times.
BP 10 06–Exclusion–Year 2000 Computer-Related And
Other Electronic Problems (Products-Completed Operations Hazard)
This endorsement excludes all liability for bodily injury, property damage and personal and advertising injury liability related to computer programming or processing errors involving the inability of a system or software to handle calendar dates or times. Coverage does not apply to loss or damage related to the insured’s finished work or products.
BP 10 07–Exclusion–Year 2000 Computer-Related And
Other Electronic Problems–With Exception For Bodily Injury On Your Premises
This endorsement excludes all liability for bodily injury, property damage and personal and advertising injury liability involving computer programming or processing errors related to the inability of a system or software to handle calendar dates or times. It does not apply to bodily injury that occurs on any premises the named insured owns or rents.
BP 10 08–Year 2000 Computer-Related And Other
Electronic Problems–Exclusion Of Specified Coverages For Designated Locations,
Operations, Products Or Services
This endorsement excludes all liability for bodily injury, property damage and/or personal and advertising injury liability involving computer programming or processing errors related to the inability of a system or software to handle calendar dates or times, based on the coverages selected and indicated on the endorsement schedule. The selected coverages apply to the location, products, services or operations also indicated on the endorsement schedule.
BP 10 09–Named Perils
This endorsement changes the property causes of loss insured to those designated or named.
BP 10 10–Sprinkler Leakage–Earthquake Extension
This endorsement
broadens coverage when BP 10 03–Earthquake is attached. It broadens the
earthquake and volcanic eruption protection to include loss or damage caused
by or resulting from water escaping from a sprinkler system.
BP 12 01–Businessowners Policy Changes
This endorsement is used to make coverage changes. It indicates the effective date, a description of the coverage change, the new limit of insurance, the previous premium and the new premium. Optional coverages are listed when additional or optional coverages are purchased after initial policy issuance. Optional coverages indicated on the form include outdoor signs, burglary and robbery, money and securities, employee dishonesty and mechanical breakdown.
BP 12 02–Fire Department Service Contract
This endorsement is used when the named insured must maintain a service contract with a private fire department to provide fire protection service to its premises.
BP 12 03–Loss Payable Provisions
This endorsement is used to indicate the interests of loss payees, lender’s loss payees or loss payees under contracts of sale.
BP 12 05–Businessowners Supplemental Declarations
This endorsement was withdrawn from use with the 07 02 edition and no longer applies.
BP 17 01–Condominium Association Coverage
This endorsement amends coverage to apply to condominium associations. If a unit owner has other insurance covering the same property as this insurance, it makes this insurance primary and it does not contribute with the unit owner’s insurance. Coverage applies to temporary structures, building additions and specific types of building maintenance equipment.
BP 17 02–Condominium Commercial Unit-Owners Coverage
This endorsement amends personal property coverage to apply to the special needs of condominium commercial unit owners.
BP 17 03–Condominium Commercial Unit-Owners Optional Coverages
This endorsement provides two coverages for condominium commercial unit owners:
INTRODUCTION
This
list identifies endorsements available to modify the Insurance Services Office
(ISO) Businessowners Coverage Form. It is arranged by form number and title
and briefly describes and explains how each endorsement is used. It does not
include any terrorism forms or endorsements or state specific endorsements, changes or amendments. New endorsements introduced or
changed in the 01 10 edition are in bold print.
FORM NUMBERING
The
ten-digit numbering sequence of ISO forms and endorsements has a very specific
meaning.
CATEGORIES
Endorsements
are grouped in categories according to their purpose as follows:
|
Section
|
Description
|
|
BP DS |
Declarations
And Schedules |
|
BP IN |
Index |
|
BP 00 |
Coverage
Form |
|
BP 01 |
Amendments
|
|
BP 02 |
State
Cancellation And Suspension Endorsements |
|
BP 03 |
Deductible
Endorsements |
|
BP 04 |
Additional
Coverage Endorsements |
|
BP 05,
BP 06 |
Miscellaneous
Endorsements, Exclusions And Schedules |
|
BP 07 |
Contractors
Endorsements |
|
BP 08 |
Professional
Liability Endorsements |
|
BP 10 |
Causes
Of Loss Endorsements |
|
BP 12 |
General
Endorsements |
|
BP 14 |
Coverage
Endorsements And Exclusions |
|
BP 12 |
General
Endorsements |
|
BP 17 |
Condominium
Coverage Endorsements |
DECLARATIONS AND SCHEDULES (BP DS)
BP DS
01–Businessowners Policy Declarations (01 10 changes)
This is the declarations for the 01 10 edition of
the ISO Businessowners Policy. The 01 10 changes reflect and match the
changes in BP 00 03–Businessowners Coverage Form.
BP DS 02–Apartment Buildings Supplemental
Schedule
This schedule supplements BP DS 01–Businessowners Policy Declarations when insuring apartment buildings and when BP 07 75–Apartment Buildings is included.
BP DS 03–Restaurants Supplemental Schedule
This schedule supplements BP DS 01–Businessowners
Policy Declarations when insuring restaurants and
when
BP 07 78–Restaurants is included.
BP DS 06–Flood Coverage Schedule (01 10
addition)
This schedule supplements BP DS 01–Businessowners
Policy Declarations and is used when BP 10 79–Flood Coverage is provided. It
has spaces to list and describe the locations covered, for deductibles that
apply, and for limits on either a blanket basis for all coverages at all
locations or for scheduled limits for specific coverages at each location.
INDEX (BP IN)
BP IN
01–Businessowners Coverage Form Index (01 10 changes)
This index is useful in locating the various
parts of BP 00 03–Businessowners Coverage Form. The 01 10 changes reflect
and match the changes in BP 00 03–Businessowners Coverage Form.
COVERAGE FORM (BP 00)
BP 00 03–Businessowners Coverage Form
AMENDMENTS (BP 01)
BP 01 59–Water Exclusion Endorsement
This endorsement was used with previous editions.
It is withdrawn from use and no longer applies.
DEDUCTIBLE ENDORSEMENTS (BP 03)
BP 03
12–Windstorm Or Hail Percentage Deductibles (01 10
change)
This endorsement makes windstorm or hail
deductibles of 1%, 2% or 5% available. The deductible selected applies
separately to each building if more than one building is involved, to the
building and business personal property in anyone building, to business
personal property in each building if more than one building is involved, and to
personal property in the open. The 01 10 change clarifies how this deductible
works with the water exclusion.
ADDITIONAL COVERAGE ENDORSEMENTS (BP 04)
BP 04
01–Comprehensive Business Liability Exclusion (All Hazards In
Connection With Designated Premises Or Operations)
This endorsement excludes premises and operations, products/completed operations and medical payments coverages at specific designated premises on the endorsement schedule or the declarations.
BP 04
02–Additional Insured–Managers Or Lessors Of Premises
This endorsement adds the owner, lessor or property manager for liability coverage at locations the named insured leases and occupies that are owned by that party. It excludes events that occur after the named insured vacates and no longer occupies the premises. It also excludes structural alterations, new construction or demolition performed by or for the additional insured. It can include the named insured’s landlord as an additional insured when required by contract. The party's additional insured status ends when the named insured no longer occupies the premises.
BP 04
04–Hired And Non-Owned Auto Liability (01 10 change)
This endorsement is used only when the named
insured does not own vehicles and does not have commercial automobile
coverage. Hired autos are leased, hired or borrowed,
except from employees or members of their households, or from partners or
executive officers. It does not include mobile equipment. Non-owned autos used
in connection with the insured’s business do not include mobile equipment.
This endorsement protects the named insured if an employee uses his or her car
in the business and is different than hired auto liability coverage. If the
named insured form of business is a partnership, non-owned auto liability coverage
does not apply to autos a partner owns. This coverage is excess over any
primary insurance that applies to any hired or non-owned autos.
BP 04
06–Additional Insured–Controlling Interest
This endorsement includes the party that financially controls the named insured or for the premises it owns, maintains or controls for the period that it occupies those premises as an additional insured. However, there is no coverage for structural alterations, new construction or demolition the party might perform.
BP 04
07–Additional Insured–State Or Political
Subdivisions–Permits Relating To Premises
This endorsement includes a state or political subdivision as an additional insured for certain hazards for which it issued a permit to the named insured in connection with the premises. Examples include permits issued for advertising signs, awnings, canopies, driveways, manholes, street banners or decorations, or for the construction, erection or removal of elevators.
BP 04
08–Additional Insured–Townhouse Associations
This endorsement gives additional insured status to individual townhouse owners for their liability as members of the townhouse association. Coverage does not apply to liability of individual unit owners arising out of real property titled to them.
BP 04
09–Additional Insured–Mortgagee, Assignee Or Receiver
This endorsement includes a person or organization as an additional insured with respect to its liability as a mortgagee, assignee or receiver arising out of ownership, maintenance or use of the named insured’s premises. However, there is no coverage for structural alterations, new construction or demolition operations.
BP 04
10–Additional Insured–Owners Or Other Interests From
Whom Land Has Been Leased
This endorsement adds the owner or another interest that the named insured has leased land from as an additional insured for liability arising out of ownership, maintenance or use of the land. Coverage does not apply to events that occur after the lease ends or to any structural alterations, new construction or demolition operations.
BP 04 11–Additional
Insured–Co-Owner Of Insured Premises
This endorsement adds the person or organization on
the endorsement schedule that owns the scheduled premises in common with the
named insured as an additional insured with respect to liability coverage as
co-owner of the premises.
BP 04
12–Limitation Of Coverage To Designated Premises Or
Project
This endorsement limits coverage to only the premises or project(s) on the endorsement schedule.
BP 04
13–Additional Insured–Engineers, Architects Or
Surveyors
This endorsement includes an architect, engineer or surveyor the named insured hires as an additional insured but only with respect to liability arising from the named insured's actions or omissions, or those acting on its behalf, concerning the named insured’s premises or work performed on its behalf. Coverage does not apply to providing or failing to provide any professional services by or for the named insured. Coverage applies to ongoing operations but not to completed operations.
BP 04
15–Spoilage Coverage (01 10 change)
This endorsement covers spoilage losses to
perishable stock the insured owns. The changes in this edition are
editorial in nature to match similar editorial changes in BP 00 03–Businessowners
Coverage Form and do not affect coverage.
BP 04
16–Additional Insured–Lessor Of Leased Equipment (01
10 change)
This endorsement extends liability coverage to
the person or organization on the endorsement schedule that leases equipment
to the named insured. Coverage applies to only liability arising out of the
named insured's maintenance, operation or use of the
lessor’s equipment. The 01 10 edition adds spaces to describe the leased
equipment and the location(s) where it is kept.
BP 04
17–Employment-Related Practices Exclusion (01 10 changes)
This endorsement excludes liability arising out of employment-related practices, such as refusal to employ, termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination, malicious prosecution, or other employment-related practices, policies, acts or omissions. It also excludes consequential injuries resulting from these practices, whether the event that caused the injury occurs before, during, or after employment of the person. It applies to the person as well as to certain relatives.
BP 04
18–Amendment–Liquor Liability Exclusion
This endorsement was used withdrawn from use with the 07 02 edition and no longer applies. Refer to BP 04 88–Liquor Liability.
BP 04
19–Amendment–Liquor Liability Exclusion–Exception For
Scheduled Activities
This endorsement excludes losses caused or contributed to by any insured involving intoxication of any person, furnishing liquor to minors or persons already under the influence, or for liability assumed under a statute concerning distribution of liquor, except for activities described on the endorsement schedule. It applies to all cases involving alcoholic beverages, regardless of whether or not the insured is in the liquor business.
BP 04
30–Protective Safeguards
This endorsement is used when a rate or premium credit applies to reflect the specific protective safeguards installed at the location on the endorsement schedule. The named insured agrees to maintain them in proper working order at all times or a normally covered loss is not covered. The warranty nature of this endorsement means that a loss can be excluded even if there is no relationship between the lack of a working protective safeguard and the loss that occurred.
BP 04
31–Food Contamination (01 10 change)
This endorsement pays the costs of cleaning equipment, replacing ruined food, and limited expenses for advertising to restore the named insured's business reputation if a governmental entity closes the business because of suspected food contamination. The limits are $10,000 for cleanup and replacement and $3,000 for additional advertising expense unless other limits are selected. Section I–Property Exclusion B.1.j. Virus Or Bacteria does not apply with respect to the coverage this endorsement provides (01 10 addition).
BP 04
37–Exclusion–Personal And Advertising Injury
This endorsement completely deletes personal and advertising injury liability coverage.
BP 04
38–Medical Expenses–Exclusion
This endorsement excludes medical expenses at the locations or for the classifications on the endorsement schedule. Coverage is added to the Liability Supplementary Payments for first aid administered to others at the time of an accident.
BP 04
39–Abuse Or Molestation Exclusion
This endorsement excludes abuse and molestation, as well as the negligent employment, investigation, supervision, failure to report to proper authorities, or retention of individuals who committed or were involved in such acts.
BP 04
40–Coverage For Injury To Leased Workers
This endorsement provides employers liability coverage for both leased and temporary employees. It is recommended for businesses that do not carry workers compensation insurance that use only leased employees, or that have employees who travel.
Note: Some state laws discourage employee leasing and this coverage may be necessary.
BP 04
41–Business Income Changes–Time Period (01 10 change)
The endorsement eliminates the waiting period
before a business is reimbursed for loss of income resulting from an order to
close by a civil authority or a loss at a dependent property. The coverage
period is increased from three weeks to four weeks.
BP 04
46–Ordinance Or Law Coverage
BP 04
47–Additional Insured–Vendors
This endorsement adds products liability coverage
for vendors named on the endorsement schedule as additional insureds for the
products listed by amending the "Who Is An
Insured" provision in Section II–Liability. It covers bodily injury or
property damage liability that arises from the named insured’s products the
vendor sells or distributes in the course of its normal business operations,
subject to the endorsement's exclusions and limitations.
BP 04
48–Additional Insured–Designated Person Or
Organization
This endorsement allows the named insured contractor to cover any additional insured, in cases where no other specific additional insured endorsement applies, by amending the "Who Is An Insured" provision in Section II–Liability. It covers the party named on the endorsement schedule for bodily injury or property damage liability caused by the named insured’s acts or omissions, or by the acts or omissions of others acting on its behalf. Loss or damage must occur in the course of the insured's ongoing operations or at premises it owns or rents, subject to the endorsement's exclusions and limitations.
BP 04
49–Additional Insured–Engineers, Architects Or
Surveyors Not Engaged By The Named Insured
This endorsement allows the named insured
contractor to include engineers, architects or surveyors hired by common
project owners, or required to be added due to a written contract or
agreement, as additional insureds. It protects the party named on the
endorsement schedule for bodily injury or property damage liability that
arises from the named insured's ongoing operations, subject to the endorsement's exclusions and limitations. Covered losses
must be caused by the named insured’s act or omission or by acts or omissions
of others acting on its behalf. Losses caused solely by the designated
additional insured are not covered.
BP 04
50–Additional Insured–Owners, Lessees Or
Contractors–Scheduled Person Or Organization
This endorsement covers any person or
organization the named insured contractor performs operations for on the
endorsement schedule. Coverage applies to bodily injury or property damage
liability arising out of the named insured's ongoing operations but excludes
completed operations and is subject to certain exclusions and limitations. Covered losses must be caused by the named
insured’s act or omission or by acts or omissions of others acting on its
behalf. Losses caused solely by the designated additional insured are not
covered.
BP 04
51–Additional Insured–Owners, Lessees Or
Contractors–With Additional Insured Requirement In Construction Contract
This endorsement covers any party the named
insured contractor performs work for as required by a written contract or
agreement. It protects the party for bodily injury or property damage
liability that arises from the named insured’s operations specified in the
contract or agreement and applies only until the contract or agreement ends. Covered losses must be caused by the named
insured’s act or omission or by acts or omissions of others acting on its
behalf. Losses caused solely by the designated additional insured are not
covered.
BP 04
52–Additional Insured–State Or Political
Subdivisions–Permits
This endorsement covers any state or political subdivision on the endorsement schedule that the named insured contractor must include as an additional insured in order to obtain needed work permits.
BP 04
53–Water Back-Up And Sump Overflow (01 10 changes)
This endorsement covers loss or damage caused by
or resulting from water that backs up from a sewer or drain or from overflow of
a sump or sump pump that damages covered property at each location on the
endorsement schedule. This is essentially an additional specific covered cause
of loss. Coverage does not apply if the loss was due to negligent maintenance
of the pump or if an insured failed to clear an obstruction from a drain and
the damage was due to that obstruction. The $5,000 annual aggregate limit
of insurance per location can be increased or decreased.
This endorsement also covers loss of Business
Income or Extra Expense incurred as a result of these losses at each location
on the endorsement schedule. The $5,000 annual aggregate limit of insurance
per location can be increased or decreased. There was no business income or
extra expense limit in the past. As a result, this is a reduction of coverage.
BP 04
54–Newly Acquired Organizations
This endorsement covers newly acquired organizations or organizations the named insured forms during the policy period, for up to 90 days or until expiration, whichever occurs first.
BP 04
55–Broadened Coverage For Damage To Premises Rented
To You
BP 04
56–Utility Services–Direct Damage (01 10 change)
This endorsement extends property damage coverage
to loss or damage to covered property as a result of an interruption of
service from off-premises water, communication, power supply services and
overhead power transmission and communication lines but excludes loss or damage to electronic data. The
limitation that the utility service property had to be located outside a covered
building is eliminated.
BP 04
57–Utility Services–Time Element (01 10 change)
This endorsement extends time element or loss of
income coverage to apply to loss of business income or extra expense resulting
from interruption of off-premises water, communication, power supply services
and overhead power transmission and communication lines but excludes loss or
damage to electronic data. The
limitation that the utility service property had to be located outside a
covered building is eliminated.
BP 04
58–Business Income And Extra Expense Coverage For
Year 2000 Computer-Related And Other Electronic Problems
This endorsement insures the named insured's business against loss of business income or extra expenses incurred due to computer programming or processing errors related to a system's or software's inability to address, handle and resolve calendar dates or times. It pays only for loss of business income or extra expenses directly related to computer processing problems. The annual aggregate limit for all losses and/or expenses is $25,000.
BP 04 59–Equipment
Breakdown Protection Coverage
This endorsement was used with previous editions.
It is withdrawn with the 01 10 edition and no longer applies. The coverage it
provided was incorporated into the 01 10 edition of BP 00 03–Businessowners
Coverage Form.
BP 04
64–Year 2000 Computer-Related And Other Electronic
Problems–Limited Coverage Options
This endorsement provides limited protection for bodily injury, property damage and personal and advertising injury liability because of computer programming or processing errors that a system or software could not address, handle or resolve that involved calendar dates or times. It extends the coverage and limits to apply to such losses but only to locations, products or operations on the endorsement schedule.
BP 04
71–Exclusion–Volunteer Workers
This endorsement removes the term volunteer
workers from the coverage form and eliminates volunteer workers as insureds.
BP 04
83–Removal Of Insurance-To-Value Provision (01 10
changes)
This endorsement eliminates the requirement that
property must be insured to 80% of replacement value at the time of loss in
order for the loss to be adjusted on a replacement cost basis. The 01 10
changes involve only paragraph references to track with corresponding changes
in BP 00 03–Businessowners Coverage Form.
BP 04
84–Functional Building Valuation (01 10 changes)
This condition replaces the valuation loss
condition by agreeing to pay to replace a damaged building on the same site
with a functionally equivalent building. In case of a partial loss, the
damaged portion of the building is repaired with less costly material. The
named insured using this option should carefully evaluate and consider the
building limit selected. This endorsement includes ordinance or law provisions
for direct damage loss. It also has an
option to include business income and extra expense coverage for the
additional time needed to comply with ordinance or law changes. The 01 10
changes involve only paragraph references to track with corresponding changes
in
BP 00 03–Businessowners Coverage Form and minor editorial changes that do not
affect coverage.
BP 04
85–Functional Business Personal Property Valuation (01 10 change)
This condition replaces the valuation loss condition by agreeing to pay to replace damaged business personal property with functionally equivalent or market value property. The named insured should carefully evaluate and consider the business personal property limit chosen when selecting this option. The 01 10 change involves only adding one word inadvertently omitted in the previous edition.
BP 04
86–Vacancy Changes
This endorsement allows the minimum percentage of building occupancy used to determine if a covered location is treated as vacant to be increased or decreased from 31%. It applies only to the premises and building(s) on the endorsement schedule.
BP 04
87–Vacancy Permit
This endorsement amends the vacancy provision to
temporarily suspend applying the vacancy provision at only the premises and
buildings on the endorsement schedule for the time period selected. It has
some flexibility in that loss or damage due to vandalism or sprinkler leakage
can be excluded during the period of suspension by making appropriate entries
on the endorsement schedule.
BP 04
88–Liquor Liability
This endorsement adds liquor liability coverage by deleting the liquor liability exclusion. It is used in cases where an insured has limited exposure to such losses. It should not be used when BP 04 89–Liquor Liability Coverage is used.
BP 04
89–Liquor Liability Coverage (01 10 change)
This endorsement adds liquor liability coverage. It applies to businesses that have significant liquor liability exposures and covers bodily injury and property damage liability related to its furnishing of liquor. Coverage does not apply if the named insured operates without a license when legally required to have one and is limited to the aggregate and per-cause limits on the endorsement schedule. The 01 10 change involves only changing one word used in the previous edition.
BP 04
90–Pollution Exclusion–Limited Exception For A
Short-Term Pollution Event
This endorsement adds some liability coverage for bodily injury or property damage related to specific short-term pollution events under certain circumstances. It defines a short-term pollution event and this definition and other provisions provide limited coverage for accidental, non-recurring pollution losses. However, a number of other pollution exclusions and exceptions still apply. As a result, this endorsement should be reviewed carefully before it is recommended as a possible coverage solution for the named insured’s pollution-related exposures.
BP 04
91–Pollution Exclusion–Limited Exception For
Designated Pollutant(s)
This endorsement adds both on-site and off-site liability coverage for bodily injury or property damage related to damage caused by the types of pollutants described on the endorsement schedule. However, coverage does not extend to losses involving handling, transporting, storing, disposing of, treating, or processing the described pollutants.
BP 04
92–Total Pollution Exclusion
This endorsement completely excludes bodily injury or property damage loss or damage caused by or resulting from pollution.
BP 04
93–Total Pollution Exclusion With A Building Heating
Equipment Exception And A Hostile Fire Exception
This endorsement completely excludes bodily
injury or property damage loss or damage caused by pollution. However, it has
exceptions that cover loss or damage involving heat, smoke and fumes generated
by a hostile fire and/or by heating, cooling,
dehumidifying, and water heating equipment.
BP 04
94–Limited Pollution Liability Extension
This endorsement adds limited pollution liability
coverage. It eliminates the part of the exclusion that applies at or from any
owned, rented, occupied or loaned premises. It should
be reviewed carefully to determine if the broadened coverage is appropriate
for the named insured. It has its own aggregate limit.
BP 04
97–Waiver Of Transfer Of Rights Of Recovery Against
Others To Us
This endorsement eliminates the insurance company's ability to secure subrogation rights by preventing it from proceeding against another party that may be responsible for damages it paid. The company only waives exercising its rights against the party(ies) on the endorsement schedule.
BP 04
98–Employee Benefits Liability Coverage (01 10 changes)
BP 04
99–Extended Reporting Period For Employee Benefits
Liability Coverage (01 10 changes)
This endorsement is used with BP 04 98–Employee
Benefits Liability Coverage. Coverage applies on a claims-made basis and this
endorsement gives the named insured the option to extend the time period to
report losses. This is very important if coverage changes from a claims-made
to an occurrence basis. The 01 10 changes involve only changes in paragraph
references to track with corresponding changes in BP 00 03–Businessowners
Coverage Form and removing the policy period section from the endorsement
schedule.
MISCELLANEOUS ENDORSEMENTS, EXCLUSIONS AND SCHEDULES (BP 05, BP 06)
BP 05
01–Calculation Of Premium
This endorsement states that premiums for subsequent policy periods are calculated according to rates in effect on the renewal or anniversary date.
BP 05 15
Disclosure Pursuant To Terrorism Risk Insurance Act
BP 05
17–Exclusion–Silica Or Silica-Related Dust
This
endorsement excludes bodily injury, property damage and personal and
advertising injury liability losses associated with exposure to silica or
silica-related dust. It includes definitions for silica and silica-related
dust.
BP 05 21
11 02–Coverage For Certified Acts Of Terrorism: Cap
On Losses
BP 05 22 11 02–Removal Of
Exclusion Of Acts Of Terrorism: Cap On Certain Losses
BP 05 23–Cap On Losses
From Certified Acts Of Terrorism
BP 05 24 01 88–Exclusion Of
Certified Acts Of Terrorism
BP 095 26 01 88–Exclusion Of
Certified Acts Of Terrorism Involving Nuclear, Biological Or Chemical
Terrorism: Cap On Covered Certified Acts Losses
BP 05 27 01 88–Limitations Of
Coverage For Certified Acts Of Terrorism
BP 05 38 06 08–Exclusion Of
Other Acts Of Terrorism Committed Outside The United States: Cap On Losses
From Certified Acts Of Terrorism
BP 05 41 06 08–Exclusion Of
Certified Acts Of Terrorism & Exclusion Of Other Acts Of Terrorism
Committed Outside The United States
BP 05 42 01 88–Exclusion Of
Punitive Damages Related To A Certified Act Of Terrorism
BP 05
47–Computer Fraud And Funds Transfer Fraud (01 10 changes)
This
endorsement adds computer fraud and funds transfer fraud crime coverage. If a
computer is used to transfer money, securities or
other property from inside the insured’s premises or banking institution,
coverage applies up to the limit on the endorsement schedule. In addition, if
fraudulent instructions given to a financial institution result in
unauthorized transfer of the named insured's funds, coverage applies up to the
limit on the endorsement schedule. The
01 10 change clarifies the intent of the endorsement by deleting the limitation
involving property transferred based on unauthorized instructions and
eliminating the false pretense exclusion. It adds an exclusion involving use
of credit and other cards and the information they contain.
BP 05
64–Conditional Exclusion Of Terrorism
BP 05
65–Conditional Exclusion Of Terrorism Involving
Nuclear, Biological Or Chemical Terrorism
BP 05 66– Conditional Limitation Of Coverage For
Terrorism–Sub-Limit On Annual Aggregate Basis
BP 05
67–Exclusion Of Terrorism
BP 05
68–Exclusion Of Terrorism Involving Nuclear,
Biological Or Chemical Terrorism
BP 05
69–Limitation Of Coverage For Terrorism–Sub-Limit On
Annual Aggregate Basis
BP 05
70–Disclosure Of Premium Through End Of Year For
Certified Acts Of Terrorism Coverage (Pursuant To Terrorism Risk Insurance
Act)
BP 05
71–Disclosure Of Premium & Estimated Premium For
Certified Acts Of Terrorism Coverage (Pursuant To Terrorism Risk Insurance
Act)
BP 05
76–Changes–Limited Fungi Coverage (01 10 change)
This
endorsement's schedule is used to increase the sub-limit of insurance for
fungi, wet rot and dry rot coverage, to designate the
location(s) covered, and to permit different limits at different locations.
The number of days for Business Income and/or Extra Expense coverages can be
changed from 30 days. The 01 10 change
removed Bacteria included in the previous edition.
BP 05
77–Fungi Or Bacteria Exclusion (Liability)
This
endorsement excludes bodily injury, property damage or personal and
advertising injury liability losses due to exposure to bacteria or fungi as
defined, except for certain edible bacteria or fungi, such as mushrooms.
BP 05
78–Limited Fungi Or Bacteria Coverage (Liability) (01
10 changes)
This endorsement provides limited coverage for
the fungi and bacteria excluded in BP 05 77–Fungi Or
Bacteria Exclusion (Liability). The 01 10 changes involve only paragraph
references to track with corresponding changes in BP 00 03–Businessowners
Coverage Form.
BP 05
89–Employment-Related Practices Liability Endorsement (01 10 changes)
This
endorsement provides claims-made liability coverage with defense included
within the limits on the endorsement schedule. It has a retroactive date and
an extended reporting period. Coverage applies for injuries to employees due
to demotion, wrongful termination, wrongful denial of opportunities, including
wrongful hiring and supervision, retaliatory actions, coercion, harassment and
other types of work-related discrimination, libel, humiliation
and similar acts. The 01 10
changes include exclusions added for Prior And
Pending Litigation and Prior Notice, adds coverage for Employment-Related
Malicious Prosecution, and adds a definition for Wrongful Act. Other minor and
editorial changes and paragraph reference changes are also included. The
changes make this endorsement more consistent with EP 00 01–Employment-Related
Practices Coverage Form.
BP 05
93–Loss Of Rental Value–Landlord As Designated Payee
This
endorsement broadens the definition of rental value to include all charges the
tenant is contractually obligated to pay on behalf of the property owner.
BP 05
94–Electronic Commerce (E-Commerce)
This
endorsement is similar to CP 04 30–Commercial Electronic (E-Commerce) used
with the ISO Commercial Property Program.
BP 05
95–Electronic Data Liability–Limited Coverage
This endorsement
covers liability for damages due to loss of electronic data only if physical
damage to tangible property occurs first. Electronic data is not considered
tangible property. This coverage has a separate occurrence limit on the endorsement
schedule.
Note: BP 05 96–Electronic Data Liability–Broad
Coverage provides broader and more comprehensive coverage.
BP 05
96–Electronic Data Liability–Broad Coverage (01 10 changes)
This
endorsement covers on a claims-made basis with a retroactive date and an extended
reporting period and has its own insuring agreement, exclusions
and limits. It also amends various conditions, amends
and adds definitions, and changes the definition of who is an insured. It is
similar to CG 00 65–Electronic Data Liability Coverage Form. The primary 01 10 changes involve adding
trusts to entities that can be an insured and an Extended Reporting Period
Aggregate Limit Of Insurance. Other changes are
editorial in nature and do not affect coverage.
BP 05
97–Extended Reporting Period For Electronic Data
Liability–Broad Coverage (01 10 changes)
This
endorsement initiates the extended reporting condition time period as required
in BP 05 96–Electronic Data Liability–Broad Coverage. It applies and is
effective only after the full premium is paid. The 01 10 changes are editorial in nature and do not affect coverage.
BP 05
98–Amendment Of Insured Contract Definition
This
endorsement restricts coverage. The additional insured endorsements clarify
that the named insured or a party acting on its behalf must be at least partially
responsible for a loss for coverage to apply. Since this definition of insured
contract does the same thing under item f., the definition of insured contract
cannot be used to override the additional insured endorsements.
BP 06 01–Exclusion Of
Loss Due To Virus Or Bacteria
This endorsement was used with previous editions.
It is withdrawn from use with the 01 10 edition and no longer applies. It was
incorporated into the 01 10 edition of BP 00 03–Businessowners Coverage Form.
CONTRACTORS ENDORSEMENTS (BP 07)
BP 07
01–Contractors’ Installation, Tools And Equipment
Coverage (01 10 changes)
BP 07
02–Amendment–Aggregate Limits Of Insurance (Per
Project)
This endorsement changes the aggregate limit of insurance under liability coverage for the products-completed operations hazard to apply per project.
BP 07
03–Business Liability Coverage–Property Damage Liability Deductible (Per-Claim
Basis)
This endorsement is used to apply a property damage liability deductible per claim.
BP 07
04–Business Liability Coverage–Property Damage Liability Deductible
(Per-Occurrence Basis)
This endorsement is used to apply a property damage liability deductible per occurrence.
BP 07
07–Business Liability Coverage–Amendment Of Liability
And Medical Expenses Limits Of Insurance
This endorsement is used to purchase higher aggregate liability limits. It increases the aggregate limit for the products-completed operations hazard to three times the liability and medical expenses limit. It also increases the aggregate limit for all other occurrences to two times the liability and medical expenses limit.
BP 07
08–Pesticide Or Herbicide Applicator Coverage (01 10
change)
This endorsement amends the pollution exclusion
so limited pollution coverage applies for the operations described on the
endorsement schedule. This is subject to the named insured meeting or complying
with all federal, state or local governmental
statutes, ordinances, regulations or license requirements. The one 01 10
change is editorial in nature and does not affect coverage.
BP 07
10–Motels
This endorsement broadens the coverage provided to include exposures common to motels, such as property of others, personal property in rooms, lock replacement, and liability for guests' property.
BP 07
11–Motels–Liability For Guests’ Property In Safe
Deposit Boxes
This endorsement broadens the coverage provided to include liability for guest property stored in safety deposit boxes. However, coverage does not apply to liability that business liability coverage excludes or to loss or damage caused by or resulting from fire, dishonest acts of any insured, acts committed by parties an insured held harmless, and property lost, damaged or seized related to governmental acts.
BP 07
12–Self-Storage Facilities (01 10 changes)
This endorsement broadens the coverage provided
to include liability arising from damage to or loss of customer property the
named insured places in a self-storage facility caused by or resulting from a
covered cause of loss that applies at the named insured's location. For
example, coverage does not apply to damage to customer property at a self-storage
facility because the named insured was out of storage space at its premises. There
are numerous
01 10 changes. The current Paragraph A that excluded customer's property was
deleted and Customers' Goods Legal Liability Coverage revised to exclude any
loss covered under Section I–Property. It clarified that Employee Dishonesty
Optional Coverage is in addition to the Employee Dishonesty Optional Coverage
in
BP 00 03–Businessowners Coverage Form and does not replace it. It added
provisions that provide for a $250 deductible per occurrence for this coverage
It also added provisions to clarify that
Supplementary Payments that apply to Bodily injury, Property Damage, and
Personal Injury Liability coverages also apply to Customers Goods Legal
Liability Coverage. It added a provision that states that Section II–Liability
E. Liability And Medical Expenses General Conditions,
Duties In The Event Of Occurrence, Offense, Claim, Or Suit applies To
Customers Goods Legal Liability Coverage. It increased the base limit of
insurance for Customers' Goods Legal Liability from $25,000 to $50,000 and
revised the provisions that relate to higher limits.
In addition, it increased the aggregate limit
of insurance under D. for Lock-Out Or Sale, Removal
And Disposal Liability Coverage from $5,000 to $25,000 and revised related
provisions and added a definition of Other Property.
It also included numerous other changes of an
editorial nature or involved moving or relocating language from one section to
another and did not affect coverage.
BP 07 75–Apartment Buildings (01 10 changes)
BP 07 76–Apartment Buildings–Liability For Loss Or Damage To Tenants' Auto (Legal Liability
Coverage)
(01 10 changes)
This endorsement covers the named insured's legal
liability for damages for direct physical loss or damage and resulting loss of
use to tenants' autos at premises on the declarations caused by or resulting
from a covered cause of loss. The 01 10 changes are editorial in nature and
do not affect coverage.
BP 07 77–Fine Arts Coverage
This endorsement is an additional coverage under Section I–Property. It covers loss or damage caused by or resulting from a covered cause of loss to the named insured's fine arts, or to fine arts of others in its care, custody or control, up to $25,000 in any one occurrence.
BP 07 78–Restaurants (01 10 changes)
BP 07 79–Restaurants–Loss Or
Damage To Customers' Autos (Legal Liability Coverage) (01 10 changes)
This endorsement covers the named insured's legal
liability for damages for direct physical loss or damage to and resulting loss
of use of customers' autos left in its care, custody
or control at or temporarily away from premises on the declarations caused by
or resulting from a covered cause of loss. The 01 10 changes are editorial
in nature and do not affect coverage.
BP 07 81–Residential Cleaning Services (01 10
addition)
This endorsement adds certain coverage needs
common to residential cleaning services. It modifies coverage under Section
I–Property and provides Reward Payment coverage for up to $5,000 and a $1,000
limit for the cost to replace keys and locks at a client's residence. It also
extends employee dishonesty coverage to theft of specific client property by
the named insured's employees. It also includes property damage to customers’
property resulting from its work for up to $5,000.
PROFESSIONAL LIABILITY ENDORSEMENTS (BP 08)
BP 08
01–Barber Shops And Hair Salons Professional
Liability (01 10 changes)
This endorsement covers loss or damage due to
providing or failing to provide professional barber and hair salon services. Prior to 01 10 this endorsement was called
Barber Shops and Beauticians Professional and provided many more beautician
professional services. Consider using BP 08 09–Beauty Salons Professional Liability if this coverage is too
limiting.
BP 08
02–Funeral Directors Professional Liability (01 10 changes)
This endorsement covers loss or damage due to
providing or failing to provide funeral directors professional services. It
excludes property damage to dead bodies, caskets and urns in the named
insured's care, custody or control unless caused by or resulting from theft or
a hostile fire. The 01 10 changes are primarily editorial in nature and do
not affect coverage except the words "or other injury" are added
after "personal and advertising injury" in Paragraph B.
BP 08
03–Optical And Hearing Aid Establishments (01 10
changes)
This endorsement covers loss or damage due to providing or failing to provide services involving dispensing of optical or hearing aid products. The services include preparing, fitting, demonstrating or distributing lenses and similar products or hearing aid devices. The 01 10 changes are editorial in nature and do not affect coverage.
BP 08
04–Printers Errors And Omissions Liability
This endorsement covers loss or damage resulting from the named insured’s negligence, act, error or omission in providing printing services.
BP 08
05–Veterinarians Professional Liability (01 10 changes)
This endorsement covers loss or damage due to providing or failing to provide professional veterinarian services.
BP 08 06–Pharmacists–Broad Coverage (01 10 changes)
This endorsement covers loss or damage due to providing or failing to provide professional pharmaceutical services. It is similar to CG 22 97–Druggists–Broadened Coverage and includes the broadened roles of druggists enacted by state legislatures. The 01 10 changes are editorial in nature and do not affect coverage.
BP 08 07–Pharmacists (01 10 changes)
This
endorsement covers loss or damage due to providing or failing to provide
professional pharmaceutical services. It does not cover the broadened roles of
druggists enacted by legislation in many states, including prescribing, consulting or diagnosing. It is similar to CG 22
69–Druggists. The 01 10 changes are editorial in nature and do not affect
coverage.
BP 08 09 Beauty Salons Professional Liability
(01 10 addition)
This endorsement
is designed for beauty salons and is used to cover salon services beyond those
that most barber shops or hair salons offer. It defines salon services to
include a listing of standard services but then includes additional services
described on the endorsement schedule.
CAUSES OF LOSS ENDORSEMENTS (BP 10)
BP 10
03–Earthquake
This endorsement covers loss or damage caused by
earthquake, including volcanic eruption. It excludes loss or damage due to an
earthquake or volcanic eruption that begins before the inception date and continues
coverage beyond the expiration date if the earthquake or volcanic eruption
started prior to the expiration date. This ensures that two coverage forms or
policies do not respond to loss by the same earthquake simply because the
earthquake event straddles their respective policy periods and that an insured
is not penalized by an expiration date.
BP 10
04–Exclusion Of Certain Computer-Related Losses
This endorsement was used with previous editions. It was withdrawn from use with the 07 02 edition and no longer applies.
BP 10
05–Exclusion–Year 2000 Computer-Related And Other
Electronic Problems
This endorsement excludes all bodily injury, property damage and personal and advertising injury liability involving computer programming or processing errors related to a system or software being unable to handle calendar dates or times.
BP 10
06–Exclusion–Year 2000 Computer-Related And Other
Electronic Problems (Products-Completed Operations Hazard)
This endorsement excludes all bodily injury, property damage and personal and advertising injury liability related to computer programming or processing errors involving a system or software being unable to handle calendar dates or times. Coverage does not apply to loss or damage related to the named insured’s finished work or products.
BP 10
07–Exclusion–Year 2000 Computer-Related And Other
Electronic Problems–With Exception For Bodily Injury On Your Premises
This endorsement excludes all bodily injury, property damage and personal and advertising injury liability involving computer programming or processing errors related to a system or software being unable to handle calendar dates or times. It does not apply to bodily injury that occurs on any premises the named insured owns or rents.
BP 10
08–Year 2000 Computer-Related And Other Electronic
Problems–Exclusion Of Specified Coverages For Designated Locations,
Operations, Products Or Services
This endorsement excludes all bodily injury, property damage and/or personal and advertising injury liability involving computer programming or processing errors related to a system or software being unable to handle calendar dates or times, based on the coverages selected on the endorsement schedule. The selected coverages apply to the location, products, services or operations described on the endorsement schedule.
BP 10
09–Named Perils (01 10 changes)
BP 10
10–Sprinkler Leakage–Earthquake Extension
This endorsement cannot be attached when BP 10
03–Earthquake is attached. It covers sprinkler leakage damage caused when earthquake
and volcanic eruption coverage causes the sprinkler system to discharge.
BP 10
11–Earthquake And Volcanic Action (Sub-Limit) (01 10
addition)
This
endorsement provides earthquake and volcanic eruption coverage for a sub-limit.
It is similar to ISO's CP 10 45–Earthquake And
Volcanic Eruption Endorsement (Sub-Limit Form).
This
endorsement provides earthquake and volcanic eruption coverage for a sub-limit
and compares to ISO's CP 10 45–Earthquake And Volcanic
Eruption Endorsement (Sub-Limit Form). It has several features:
Note: This endorsement broadens the unendorsed
Businessowners Coverage Form but is not as broad as the coverage provided under
BP 10 03–Earthquake.
BP 10
79–Flood Coverage (01 10 addition)
The ISO
Businessowners Program has not provided flood insurance in the past. This
optional coverage can be used to write coverage on a first-dollar basis or
above the federally insured limits under the National Flood Insurance Program
(NFIP).
GENERAL ENDORSEMENTS (BP 12)
BP 12
01–Businessowners Policy Changes
This endorsement is used to make changes in coverage. It indicates the effective date, a description of the coverage change, the new limit of insurance, the previous premium, and the new premium. Optional coverages are listed when additional or optional coverages are purchased after policy issuance. Optional coverages available are Outdoor Signs, Burglary And Robbery, Money And Securities, Employee Dishonesty, and Mechanical Breakdown.
BP 12
02–Fire Department Service Contract
This endorsement is used to require a named insured
to maintain a service contract with a private fire department.
BP 12
03–Loss Payable Provisions (01 10 changes)
This endorsement is used to list loss payees,
lender’s loss payees, or loss payees under contracts of sale and the property
their interests apply to. Its title changed, Building Owner Loss Payable Clause is added, and Lender's Loss Payable
Clause is revised.
BP 12 05–Businessowners
Supplemental Declarations
This endorsement was withdrawn from use with the 07 02 edition and no longer applies.
BP 12 31–Additional Insured–Building Owner (01
10 addition)
This endorsement is used to add the owner of a
building as an additional insured under Section I–Property. It is used when
the insured is a tenant of the building.
COVERAGE ENDORSEMENTS (BP 14)
BP 14 01–Identity Fraud Expense Coverage (01
10 addition)
This endorsement adds identity fraud expense coverage
with a $25,000 aggregate limit. It also provides a separate aggregate limit of
$5,000 for advertising expenses incurred by the named insured to restore its
reputation following an identity fraud.
BP 14 02–Additional Insured–Owners, Lessors Or Contractors–Completed Operations (01 10 addition)
Most additional insured endorsements apply to
only ongoing operations. This endorsement adds the scheduled person or
organization as an insured for the product-completed operations hazard.
BP 14 03–Theft Of Clients'
Property Coverage
This endorsement extends Employee Dishonesty
Optional Coverage to include theft of a client’s property while it is at the
client’s location. The $5,000 limit can be increased to limits of $10,000,
$15,000, or $25,000. The $250 deductible in this endorsement is the only
deductible that applies.
BP 14 04–Windstorm Or
Hail Losses To Roof Surfacing–Actual Cash Value Loss Settlement (01 10
addition)
This restrictive endorsement changes the loss
payment condition. For only the buildings and premises on the endorsement
schedule, if a wind or hail loss damages the subsurface, any loss settlement
is based on actual cash value instead of replacement cost.
BP 14 05–Additional Insured–Grantor Of Franchise (01 10 addition)
This endorsement adds the party on the
endorsement schedule who granted the franchise to the named insured as an
additional insured.
BP 14 06–Business Income, Extra Expense And Related Coverages Limit Of Insurance (01 10 addition)
This endorsement restricts coverage because
the named insured must select a limit instead of having unlimited 12-month
business income and extra expense coverage.
BP 14 07–Business Income And
Extra Expense–Revised Period Of Indemnity (01 10 addition)
This endorsement provides a way to increase or
decrease the 12-month consecutive time period of coverage for business income
and extra expense. It gives a named insured with unique exposures the
flexibility to tailor the period of time that coverage applies to match its
individual circumstances. Reducing the time period should be done very cautiously
because a slight amount of premium savings could result in a significant
reduction in coverage.
BP 14 08–Exclusion–Exterior Insulation And Finish Systems (01 10 addition)
This
endorsement excludes coverage for losses arising out of, caused by, or attributable
to any exterior insulating and finish system. It includes a definition of
Exterior Insulation and Finish System.
BP 14 09–Debris Removal Additional Insurance
(01 10 addition)
This endorsement is used to increase the
Additional debris removal coverage from the $10,000 amount in the coverage
form to the amount on the endorsement schedule.
BP 14 10–Brands And
Labels (01 10 addition)
This optional coverage endorsement allows the
insured to control its labeling. If a loss occurs, the insurance company
agrees to settle the claim in the usual way. The difference lies with what
happens with any salvage the insurance company plans to distribute. The
insured can stamp “salvage” on such property as long as doing so does not further
damage it. The insured can even remove all labels as long as doing so does not
damage the property or violate any laws. The insured is reimbursed for its
expenses in stamping or removing labels. However, the expense of doing so added
to the value of the property cannot exceed the limit of insurance that
applies. This endorsement does not usually involve a premium charge but a higher limit of insurance is usually needed
because of the potential expenses that might be involved.
BP 14 11–Abuse Or
Molestation Exclusion–Specified Services (01 10 addition)
This endorsement excludes coverage for injury
or damage that arises from abuse or molestation of persons in any insured's
care, custody or control while the services
specified on the endorsement schedule are being provided. This exclusion
is less restrictive than BP 04 39–Abuse Or
Molestation Exclusion.
BP 14 12–Exclusion–Erroneous Delivery Or Mixture And Resulting Failure Of Seed To Germinate–Seed
Merchants (01 10 addition)
This endorsement excludes property damage
liability due to errors in delivering seed or in mechanical mixture of seed,
or due to seed that fails to germinate.
BP 14 13–Seed Merchants–Coverage For Erroneous Delivery Or Mixture (Resulting Failure Of
Seed To Germinate Not Included) (01 10 addition)
This endorsement excludes property damage
liability due to seed failing to germinate. It also deletes Exclusion n.
Damage To Impaired Property Or Property Not
Physically Injured under Paragraph A.1. Business Liability Coverage with
respect to property damage liability resulting from errors in delivering seed
or in mechanically mixing seed.
BP 14 14–Seed Merchants–Coverage For Erroneous Delivery Or Mixture And Resulting Failure Of
Seed To Germinate (01 10 addition)
This endorsement
adds property damage coverage for loss resulting from erroneous delivery of
seed. This includes failing to deliver seed at all, delivering the wrong seed
or delivering seed at the wrong time of the year or season. It also includes
errors in the mechanical mixture of seed or the failure of seed to germinate
if the failure is caused by the delivery of the wrong seed, delivery of seed at
the wrong time of the year or season, or errors in the mechanical mixture of
seed.
BP 14 15–Limited Exclusion–Personal And Advertising Injury–Lawyers (01 10 addition)
This endorsement excludes personal and
advertising injury that arises from providing or failing to provide
professional services as a lawyer but continues to provide
personal and advertising injury coverage for other activities lawyers perform
that fall outside professional services.
BP 14 16–Snowplow Products–Completed
Operations Hazard Coverage (01 10 addition)
This endorsement adds products-completed
operations coverage for loss or damage caused when an auto is used to remove
snow or ice.
BP 14 17–Designated Location(s) General
Aggregate Limit (01 10 addition)
This endorsement broadens coverage by
replacing the general aggregate with an aggregate per location.
BP 14 18–Designated Construction Project(s)
General Aggregate Limit (01 10 addition)
This endorsement broadens coverage by
replacing the general aggregate with an aggregate per project.
BP 14 19–Exclusion–Damage To
Work Performed By Subcontractors On Your Behalf (01 10 addition)
This exclusion replaces the
Damage To Your Work exclusion. It excludes property
damage to the named insured's work arising out of it or any part of it and
included in the products/completed operations hazard.
Note: This endorsement excludes damage to the work by
subcontractors performing work on behalf of the named insured and is a
reaction to construction defects lawsuits. The CGL coverage form does not
cover damage an insured does to its own work but does cover damage to that
work done by a subcontractor. Since this limited exception is becoming
increasingly important, the loss of the exception is a significant reduction
of coverage. This exclusion applies on a blanket basis and excludes damage to
work performed by subcontractors on behalf of the named insured.
BP 14 20–Exclusion–Damage To
Work Performed By Subcontractors On Your Behalf–Designated Sites Or Operations
(01 10 addition)
This exclusion replaces the
Damage To Your Work exclusion. It excludes property
damage to the named insured's work arising out of it or any part of it and
included in the products/completed operations hazard but only applies with
respect to the sites or operations listed on the endorsement schedule. Similar
to
BP 14 19, the exception for subcontractors working on the named insured’s
behalf is removed.
Note: This endorsement is less
restrictive than BP 14 19–Exclusion–Damage To Work
Performed By Subcontractors On Your Behalf because it applies only to the
sites or operations listed.
BP 14 21–Exclusion–Designated Work (01 10
addition)
This
endorsement excludes coverage for bodily injury or property damage included in
the products/completed operations hazard arising out of the named insured's
work listed on the endorsement schedule.
BP 14 22–Exclusion–Products-Completed
Operations Hazard (01 10 addition)
This endorsement excludes bodily injury and
property damage included in the products-completed operations hazard.
BP 14 23–Exclusion–Designated Products (01 10
addition)
This
endorsement excludes coverage for bodily injury or property damage included in
the products/completed operations hazard arising out of any of the named
insured's products listed on the endorsement schedule.
BP 14 30–Discretionary Payroll Expense (01 10
addition)
This endorsement gives the named insured the option
to change the maximum number of days of payroll expense covered during the
period of restoration from 60 days to the number on the endorsement schedule.
It applies only for the specific employees or job description indicated. It
does not affect any other employees or job descriptions. The payroll expense
is not required to be necessary for the named insured to resume operations.
CONDOMINIUM ENDORSEMENTS (BP 17)
BP 17
01–Condominium Association Coverage
This endorsement amends coverage to apply to condominium associations. If a unit owner has other insurance that covers the same property that this insurance covers, it makes this insurance primary and non-contributory with the unit owner’s insurance. Coverage applies to temporary structures, building additions and specific types of building maintenance equipment.
BP 17
02–Condominium Commercial Unit-Owners Coverage (01 10 change)
This endorsement amends personal property
coverage to apply to the special needs of condominium commercial unit owners. The
01 10 change amends the paragraph for Property Not Covered to match the
corresponding change in BP 00 03–Businessowners Coverage Form.
BP 17
03–Condominium Commercial Unit-Owners Optional Coverages (01 10 changes)
This endorsement provides loss assessment and
miscellaneous real property overages for condominium commercial unit owners as
scheduled in the endorsement. The 01 10 changes involve minor revisions but
do not affect coverage.
BP 17 24–Condominiums, Co-Ops,
Associations–Directors And Officers Liability
Endorsement (01 10 addition)
This endorsement adds Directors And Officers (D & O) Liability Coverage for
condominiums, co-ops and community associations eligible for coverage under
the ISO Businessowners Program. The coverages provided are Management
Liability, Association Reimbursement and Association Liability.
BP 07 01–CONTRACTORS’ INSTALLATION, TOOLS, AND
EQUIPMENT COVERAGE - 07 13 edition
INTRODUCTION
This endorsement must be attached to any
Insurance Services Office (ISO) Businessowners Coverage Form issued to a
contractor. Its primary intent is to eliminate all off
premises coverage and then add the coverage back in a more controlled
way. This is understandable because the Businessowners Coverage Form was not
originally designed for insureds that have extensive off premises exposures. Many
contractors have off premises exposures with little or no on premises
exposure. This endorsement attempts to match the exposure with the premium
charged.
Important Note: This is intended for insureds with comparatively small exposures. Inland marine coverage forms or policies should be used if the insured has more significant exposures because they provide broader coverage. However, even with the separate inland marine coverage, this endorsement continues to be a mandatory endorsement because BP 00 03–Businessowners Coverage Form does not cover off premises exposures.
ENDORSEMENT SCHEDULE
Coverage 1–Contractors' Installation Coverage
This
coverage is mandatory. Entries are required.
1. A limit is required for Property at Each Covered Job Site.
2. The Property at All Covered Job Sites Combined Limit of Insurance is three times the Property at Each Covered Job Site Limit of Insurance.
3. The Property in Transit Limit of Insurance is $5,000. This limit cannot be increased.
Note: The $10,000 Off Premises Limit that BP 00 03 provides is not available to contractors because of this endorsement. This $5,000 limit replaces it.
4. The Property at a Temporary Storage Location Limit of Insurance is $5,000. This limit cannot be increased.
Note: The $10 000 Off Premises limit that BP 00 03 provides is not available to contractors because of this endorsement. This $5,000 replaces it.
Coverage 2–Contractors' Tools and Equipment Coverage
This coverage is mandatory. Entries are required.
1. Blanket Limit
Spaces are provided for the blanket limit of insurance. Each covered item the blanket limit includes is subject to either a $500 or $2,000 per item limit, depending on the option selected.
Note: The
minimum limit is $3,000 based on the rules but higher limits can be entered.
These items would have been covered without any sub-limit up to the $10,000 Off
Premises limitation if not for this endorsement.
2. Scheduled Limit (and description of
property)
Spaces are provided for each scheduled and described tool or item of equipment, its limit of insurance, and for the total scheduled property limit of insurance.
Coverage 3–Non-Owned Tools and Equipment Coverage
This is an optional coverage. Spaces are provided for a limit of insurance on Non-Owned Tools and Equipment. Coverage applies only if a limit is entered.
Coverage 4–Employees’ Tools Coverage
This is an optional coverage. Spaces are provided for a limit of insurance on Employee Tools, not to exceed $100 per tool and $500 for all tools of any one employee, and for the additional premium charge.
COVERAGE ANALYSIS
Note: This
analysis is of the 07 13 edition of this endorsement. Changes from the 01 10
edition are in bold print.
A. PROPERTY NOT COVERED
The following is added to the list of Property Not Covered in BP 00 03–Businessowners Coverage Form.
1. Tools and equipment the named insured owns or has in its care, custody, or control. All accessories of the tools and equipment are also excluded whether or not they are attached to the tools or equipment. Spare parts designed and intended to maintain and operate the tools and equipment are also excluded.
2. Item 1. above does not apply when the cause of the loss or damage to tools and/or equipment is a specified cause of loss, theft, or building glass breakage. It also does not apply to tools and/or equipment when this endorsement covers that property under:
a. Coverage 1–Contractors' Installation Coverage for property to be installed by the named insured or at its direction
b. Coverage 2–Contractors' Tools and Equipment Coverage
c. Coverage 3–Non-Owned Tools and Equipment Coverage
d. Coverage 4–Employees' Tools Coverage
B. COVERAGE EXTENSIONS
BP 00 03–Businessowners Coverage Form, A. 6. Coverage Extensions b. Personal Property off Premises is amended to exclude loss of or damage to items covered under:
(1) Coverage 1–Contractors' Installation Coverage
(2) Coverage 2–Contractors' Tools and Equipment Coverage
(3) Coverage 3–Non-Owned Tools and Equipment Coverage
(4) Coverage 4–Employees' Tools Coverage
Note: This could be the most important part of this coverage form because it removes any and all off premises coverage. Contractors’ personal property is mostly off premises. This is where coverage is removed and the coverage that follows replaces it.
C. COVERAGE
1. Coverage 1–Contractors' Installation Coverage
This
coverage is mandatory
a. Property the named insured sells under an installation agreement is added to A. 1. b. (2) Business Personal Property. In order for coverage to apply, the named insured’s interest in the property must continue until the project purchaser accepts the project.
Note: This is added to the property of others business personal property item. Because of where it is added, it is important to note that the property is valued at actual cash value and is subject to values established in contracts between the contractor and the customer. The endorsement’s wording suggests that this additional business personal property applies only within this endorsement's coverage. None of this is a change from prior forms.
b. Business Personal Coverage can be extended to the following but only when the named insured requests:
Note: The named insured decides when to extend coverage.
(1) Materials, supplies, equipment, machinery, and fixtures the named insured owns or has in its care, custody, or control that it will either install itself or direct others to install
(2) Temporary structures built or assembled on site, such as cribbing, scaffolding, and construction forms.
Note: The Businessowners Coverage Form already covers this property. The only difference is where it is covered. The coverage must be added back in because this endorsement removed Off Premises coverage earlier.
The property described above is covered:
(1) At job sites but only if the named insured does not own, lease, or operate the site
(2) While waiting to be installed, during installation, and while waiting for the purchaser to accept the project
(3) When in transit
(4) While at temporary storage locations
c. Coverage ends at the earliest of:
(1) The expiration or cancellation date of this coverage
(2) When the purchaser accepts the property, this endorsement covers
(3) When the named insured's interest in the property this endorsement covers ends
(4) When the named insured abandons the project without intending to complete it
(5) Ninety days after the project is complete, unless the insurance company amends the number of days in writing
|
Example: Commercial Builders, Inc. is building an office under an installation agreement for Insurance Agency, LLC. Commercial orders custom cabinets that are delivered before they are ready to be installed. Until it’s time for installation, Commercial stores the cabinets at Material Holders, Inc., a local builders’ supplier. Lightning strikes Material's building, a fire ensues, and the cabinets are destroyed. Commercial has a $25,000 limit for contractors’ installation coverage and the cabinets are valued at $17,750. This loss is covered because the loss occurred at a temporary storage location and involved materials awaiting installation at a job already in progress. Continuing this example, imagine that Commercial and Insurance Agency disagree over the quality of the work. After the cabinets are delivered, Commercial walks off the job and refuses to return. Once again, fire from a lightning strike destroys the cabinets. In this case, the contractors’ installation coverage does not insure this loss because Commercial abandoned the work with no intent of completion. |
d. Property Not Covered
In addition to items listed and described in Property Not Covered in the Businessowners Coverage Form, coverage does not apply to:
(1) Existing structures or buildings where additions, alterations, remodeling, restoration, repairs, or improvements are being made
(2) Property at the named insured's owned storage yards or warehouses
(3) Designs, blueprints, plans, specifications, or other documents that form the basis for the work
(4) Landscape property that consists of plants, shrubs, grass, trees, and sod
(5) Tools, equipment, machinery, and supplies not intended to become permanent parts of the building or structure
Note: The Contractors' Tools and Equipment section of this endorsement should cover the tools and equipment.
e. This coverage endorsement introduces five exclusions that apply in addition to the exclusions in the Businessowners Coverage Form. There is no coverage for loss or damage due to the following:
(1) Costs to repair, replace, or make good on faulty workmanship or defective materials
Note: There is no coverage if the contractor does a poor job or uses inferior materials.
(2) Testing, unless it results in fire or explosion, and then only for the loss or damage the fire or explosion causes
Note: Most machinery or processing equipment must be tested after it is installed to ensure that it operates properly. Since testing usually involves pushing the system beyond its recommended limits, losses that result from testing are excluded.
(3) Faulty or defective designs or blueprints or other professional errors or omissions
|
Example:
Construction of the building is
complete but it develops mold almost immediately
because the exterior brick was applied directly over the exterior plywood
without installing a vapor barrier. Since the contractor did exactly what
the plans called for, this loss is due to faulty design and professional
errors and is excluded. |
(4) Weight of loads that exceed the design capacity of the property that lifts, moves, or supports the load. This property must be covered property under this coverage endorsement in order for this exclusion to apply.
Note: This exclusion is poorly worded and difficult to follow. Does the exclusion apply to the damage to the property that does the lifting/supporting/moving or does it apply to the property subsequently damaged by being lifted/supported/moved?
(5) Damage to tires or inner tubes or property that this coverage item insured that results from collision, upset, or overturn. However, damage to inner tubes or tires is covered if the same accident causes damage to other parts of the item.
f. Coverage 1–Contractors' Installation
Coverage Limits of Insurance
(1) Property at Covered Job Sites
(a) The Property at Each Covered Job Site Limit of Insurance on the endorsement schedule is the most paid at any covered job site.
|
Example: Ronnie’s Specialty Kitchens has contractors' installation coverage with a $60,000 limit at each job site. A tornado damages $65,000 of material and supplies at a covered job site. $60,000 is the most paid for this loss. |
(b) The most paid for loss or damage to Covered Property at All Covered Job Sites Combined in any one occurrence is three times the Property at Each Covered Job Site Limit of Insurance on the endorsement schedule.
|
Example: Continuing the example above, Ronnie has four jobs going at the same time and in the same housing subdivision. A tornado strikes and each site sustains some damage, as follows: Site 1–$55,000 Site 2–$65,000 Site 3–$75,000 Site 4–$45,000 Payment for damages at sites 2 and 3 is limited to $60,000 each. Coverage applies for the amount of damage at sites 1 and 4. However, since the tornado was one occurrence
and loss is limited to three times the job site
limit, $180,000 is the most paid for the tornado damage. This means that
after paying $60,000 each at sites 2 and 3, only $60,000 is left to pay for
the damage at sites 1 and 4. To summarize, even though sites 1 and 4 are
within the $60,000 per job site limit, since the limit for all job sites is
limited to $180,000, only part of that limit is available. This means Ronnie
receives only $180,000 and is responsible for the remaining $60,000 of the
loss. |
(2) Property in Transit
The $5,000 Property in Transit Limit of Insurance on the endorsement schedule is the most paid for direct physical loss or damage to covered property in transit.
Note: This limit cannot be increased. An inland marine transportation coverage form should be used if higher limits are needed.
(3) Property at a Temporary Storage Location
The $5,000 Property at a Temporary Storage Location Limit of Insurance on the endorsement schedule is the most paid for direct physical loss or damage to covered property at a temporary storage location.
Note: This limit cannot be increased. An inland marine installation floater coverage form should be used if higher limits are needed.
2. Coverage 2–Contractors’ Tools and Equipment Coverage (07 13 change)
Note: This coverage is mandatory.
a. This section adds coverage for the tools and equipment that were made Property Not Covered in item A of this endorsement. Tools and equipment the named insured owns or has in its care, custody, or control are covered business personal property. All accessories of the tools and equipment are also covered whether or not they are attached to the tools or equipment. Spare parts designed and intended to be used to maintain and operate the tools and equipment are also covered.
b. Property Not Covered, Paragraph A.2.a. in the Businessowners Coverage Form is replaced with respect to this coverage. The replaced item excludes aircraft, automobiles, motor trucks, and any other vehicles that are subject to motor vehicle registration. This item excludes all of those as well as:
c. This exclusion does not relate to the actual property but how it is used. Even though the coverage outlined above may apply to the item, coverage does not apply when it is used under any of the following circumstances:
(1) Property used in underground mining, tunneling, or similar operations and underwater construction. This includes property in caissons.
Note: Caissons are watertight containers used in underwater construction. This and similar property is unique and is usually insured under specialty coverage forms.
(2) Property leased, loaned, or rented to others
Note: Coverage does not apply while tools or equipment are in the care, custody, or control of others, regardless of whether or not monetary fees are involved.
(3) Property that is or is intended to be a permanent part of the building or structure
Note: This wording differentiates installation coverage from tools and equipment coverage so that the coverage parts are mutually exclusive and there is no duplication of coverage.
(4) Property held for sale
Note: As with other property, other coverage forms should be used to insure this exposure.
(5) Non-owned tools and equipment the named insured leases or rents from others while in its care, custody, or control, except such property leased for six months or more
Note: This coverage can be purchased as Coverage 3.
(6) Tools the named insured's employees, temporary employees, and leased employees own
Note: This coverage can be purchased as Coverage 4.
The next item is either a major concern or an error.
(7) There is no coverage if the cause of loss or damage to tools and/or equipment is a specified cause of loss, theft, or breakage of building glass.
Note: This seems to work with Item A. in this endorsement where coverage for tools and equipment is eliminated for only causes of loss other than specified causes of loss, theft, and glass breakage. However, this does not consider the removal of off premises coverage in item B. of this endorsement. This means that any off premises coverage this endorsement provides excludes loss or damage due to specified causes of loss, theft, or glass breakage.
Editor's note: We believe that this must be an error in the endorsement. This is because ISO’s explanation of coverage in the 01 10 edition when this change was added did not mention any such reduction in coverage. However, there was no correction made in the 07 13 edition.
d. Earthquake coverage is provided by changing
Exclusion B. 1. b. Earth Movement by removing only the first paragraph. All
other paragraphs in that exclusion continue to apply.
Note: This item does not have the 168-hour occurrence wording. As a result,
multiple earthquake events would be subject to multiple deductibles but would
also have multiple occurrence limits available.
e. Flood coverage is provided by changing Exclusion B. 1. g. Water by removing only the first paragraph. As a result, coverage applies to loss or damage by flood, surface water, waves, tidal waves, tsunamis, tides, tidal water, overflow of bodies of water, spray (whether wind-driven or not), and storm surge. All other paragraphs in that exclusion continue to apply.
Note: This item does not have the 168-hour occurrence wording. As a result,
multiple water damage events would be subject to multiple deductibles but would
also have multiple occurrence limits available.
f. Additional exclusions that apply to Coverage 2:
Loss or damage caused by or that results from the following is excluded:
(1) Theft from unattended vehicles unless they are completely closed, all doors, windows, and other compartments are locked, and there are visible signs of forced entry. This exclusion does not apply if the property is in the custody of a carrier for hire.
Note: Refer to the last item in paragraph c. above. According to that item, there is no coverage for theft. If that is the intent, why is this exclusion added?
(2) Weight of a load that exceeds the designed capacity of any insured equipment to lift, move, or support it
Note: This exclusion is poorly worded and difficult to follow. Does the exclusion apply to the damage to the property that does the lifting/supporting/moving or does it apply to the property being lifted/supported/moved that is subsequently damaged?
(3) Damage to tires or inner tubes or property that this coverage item insures that results from collision, upset, or overturn. However, damage to inner tubes or tires is covered if the same accident damages other parts of the item.
|
Example: A forklift overturns on the jobsite because the operator misjudges the ground conditions and the tires are damaged. Coverage does not apply to the tire damage unless other parts of the forklift are also damaged. |
g. Coverage 2–Limits of Insurance
(1) The blanket limit of insurance on the endorsement schedule is the most
paid in any one occurrence for the total of all covered losses for direct
physical loss or damage to covered property. There is a per item sub-limit
that applies to each covered item within the blanket. That sub-limit can be
either $500 or $2,000 based on the entry on the declarations. This provision
does not apply to scheduled tools or equipment that has its own limits of
insurance.
(2) Under scheduled limits, the most paid in any one occurrence for direct
physical loss or damage to each item scheduled is its limit of insurance.
3. Coverage 3–Non-Owned Tools and Equipment Coverage (07 13 change)
This is an optional coverage. Coverage applies only when there is a limit of insurance for this coverage on the endorsement schedule. It is the most paid for direct physical loss or damage to covered property in any one occurrence. Coverage applies to tools and equipment leased or rented from others but only while they are in the named insured's care, custody, and control. However, coverage does not apply to cribbing, construction forms, or temporary structures built or assembled on the job site because Coverage 1 provides this coverage.
There is no coverage for any of the following:
a. Non-owned tools and equipment the named insured leases or rents from any of its employees, temporary employees, or leased employees.
Note: This coverage can be purchased as Coverage 4.
b. Other non-owned tools the named insured leases for six months or more
This final item is either a major concern or an error.
c. There is no coverage if the cause of loss or damage to tools and/or equipment a specified cause of loss is, theft, or building glass breakage.
Note: This seems to work with Item A. in this endorsement where coverage for tools and equipment is eliminated for only causes of loss other than specified causes of loss, theft, and glass breakage. However, this does not consider the removal of off premises coverage in item B. of this endorsement. This means that any off premises coverage this endorsement provides excludes loss or damage due to specified causes of loss, theft, or glass breakage.
Editor's note: We believe that this must be an error. When this change was added with the 01 10 form edition, ISO’s explanation did not mention a coverage reduction. Further, no correction appeared in the 07 13 edition.
4. Coverage 4–Employees’ Tools Coverage (07 13 change)
This is an optional coverage which applies only when there is a limit of insurance for this coverage on the endorsement schedule. Tools and equipment the named insured's employees, temporary employees, or leased employees own and use in the business are covered up the limit on the endorsement schedule. That limit is maximum amount available for direct physical loss or damage to such property in any one occurrence. However, it is subject to sub-limits of not more than $100 per tool and $500 for all tools that belong to a single employee.
The following item is either a major concern or an error.
There is no coverage if the cause of loss or damage to tools and/or equipment is a specified cause of loss, theft, or breakage of building glass.
Note: This seems to work with Item A. in this endorsement where coverage for tools and equipment is eliminated for only causes of loss other than specified causes of loss, theft, and glass breakage. However, this does not consider the removal of off premises coverage in item B. of this endorsement. This means that any off premises coverage this endorsement provides excludes loss or damage due to specified causes of loss, theft, or glass breakage.
Editor's note: We believe that this must be an error. When this change was added with the 01 10 form edition, ISO’s explanation did not mention a coverage reduction. Further, no correction appeared in the 07 13 edition.
D. Definitions
The
definition for Temporary Storage Location is added to the Definitions
section of the Businessowners Coverage Form but only for this endorsement's
coverage. It means any location where property intended to become a permanent
part of a completed project is stored, pending delivery to a job site. The
named insured must not own, lease, or operate the job site and work must be in
progress or be scheduled to begin in 30 days.