(July 2026)
The Water exclusion in
the Insurance Services Office (ISO) BP 00 03–Businessowners Coverage Form bars
flood damage. This endorsement modifies that exclusion and provides coverage in
specifically described circumstances.
NOTE: This analysis covers the 07 13 edition
of this endorsement and schedule. Changes from the 01 10 edition are shown in
bold.
Coverage does not apply
to a flood that begins before or within 72 hours after the date entered in the
space provided.
NOTE: The flood coverage
endorsement explains this limitation.
The location(s) covered
is/are entered in the space provided.
Property in the open
subject to flood coverage is described in the space provided because otherwise
damage to all property in the open is not covered.
The deductible amount
that applies to loss or damage caused by or that results from flood is entered
in the space provided.
If any underlying
insurance is written that applies to the risk, the insurance company name and
the policy number must be listed.
NOTE: The
National Flood Insurance Plan (NFIP) coverage is primary.
Related Article:
National Flood Insurance Program General Property Policy Coverage
Analysis
The Underlying
Insurance Waiver box must be checked if there is no underlying flood coverage. The 07 13 edition allows the waiver to
apply per location.
NOTE: This verifies that the
insurance company has waived the requirement that NFIP be primary.
The Flood Coverage
Limits of Insurance also apply to Additional Coverages–Business Income and
Extra Expense. Paragraph E. in the endorsement provides additional information.
The annual aggregate
limit for flood coverage is entered in the space provided.
This is the limit that
applies in any one occurrence.
The coverage(s) the
flood blanket limit applies to must be selected. The options available are
Building and Business Personal Property
NOTE: This limit is the total
paid for all loss or damage to covered property/coverage at the scheduled
locations, subject to the provisions that apply to Limits in BP 10 79–Flood
Coverage.
If a separate limit of
insurance for a specific covered property/coverage is entered in this section, the
blanket limit does not include that covered property/coverage.
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Example: Manley's has four locations. Two are included in
the flood blanket limit of $1,500,000 and two are covered on a scheduled
basis. A flood occurs, Manley discovers that the limit at one of the
scheduled locations is inadequate to cover the amount of loss, and he decides
to claim the blanket coverage limit. His request is denied because a
specified location with its own limit cannot collect under the blanket limit.
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This endorsement applies only to Section I–Property covered property and coverages that have a limit for Flood Coverage entered on either BP DS 06–Flood Coverage Schedule or on the declarations.
Flood is added as a
covered cause of loss. This endorsement defines it as a general and temporary
condition where areas that are usually dry are partially or totally submerged.
This condition can be caused in one of three ways:
1. Overflow of inland or tidal waters
2. Rapid or unusual build-up of surface waters. The source of
the water is irrelevant.
3. Mudslide or mudflow but only if the rapid or unusual build-up
of surface water causes it. Mudslide or mudflow in this endorsement is a river
of liquid flowing mud that covers land that is usually dry. An example is when such
a flow carries earth and subsequently deposits it along its path.
All flooding in a
continuous or extended event is considered a single flood.
1. Except as stated in 2
and 3 below, the exclusions and limitations sections in the Businessowners
Coverage Form apply to this endorsement's coverage.
2. Any part of the Water
exclusion that conflicts with the coverage this endorsement provides does not
apply.
NOTE: It is important to review the water
exclusion in the Businessowners Coverage Form.
3. The earth movement exclusion does not exclude coverage if it was the
proximate cause of loss that triggered a tsunami that resulted in an overflow of tidal
waters.
4. BP 00 03–Businessowners
Coverage Form Section I–Property B. Exclusions 1. a. Ordinance or Law applies
with respect to any loss (including losses this endorsement covers) unless BP
04 46–Ordinance or Law Coverage is attached and applies to the specific loss.
5. This endorsement has
six additional exclusions and limitations: (07
13 change)
a. Coverage does not apply
if a flood begins within 72 hours after the inception date on the endorsement
schedule. In addition, any increase in limits during the policy term does not
apply to any flood loss or damage that occurs within 72 hours after the named
insured requests the increase. The
72-hour waiting period does not apply when the previous policy included flood
coverage, the policy periods were consecutive, and there was no break in
coverage. In addition, the 72-hour waiting period to increase the limit of
insurance does not apply to increases made as part of the renewal process.
The start of a flood
event caused by an overflow of inland waters begins when the water first breaks
out of its banks.
NOTE: This exclusion prevents
individuals who anticipate a flood event from purchasing flood coverage and
then cancelling it when the threat passes.
b. Coverage does not apply
to loss or damage caused when water beneath the surface destabilizes the earth
above it.
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Example: The land beneath the area consists of three yards
of soil on top of a rock formation. An inundation of rain causes a river to
form under the soil, separates it from the rock formation, and causes the
buildings above to move. This endorsement does not cover this loss. |
c. Land is excluded. As a
result, this endorsement's coverage does not include costs to restore or
remediate land that collapses or sinks due to flood. It also does not cover the
costs to grade, excavate, fill, or backfill land. On the other hand, coverage
applies to damage to covered portions of buildings and business personal
property caused by land along the shore of a body of water that collapses or
sinks due to erosion or undermining. Such loss or damage to the building or
business personal property is covered only if erosion or undermining occurred
because currents or waves of water were higher than their cyclical levels and
caused a flood.
d. Loss or damage to
business personal property in the open that flood causes is excluded. However,
there is coverage for property in the open that is specifically described and scheduled
on either the flood schedule or the declarations and for for which a premium is
paid.
e. Property Not Covered
with respect to Flood Coverage:
(1) Buildings or other property not eligible for flood
insurance based on the Coastal Barrier Resources Act and the Coastal Barrier
Improvements Act of 1990.
(2) Boathouses, open structures, and property contained within
them. They are excluded only if situated on or above a body of water.
(3) Bulkheads, pilings, piers, wharves, docks, and retaining
walls are covered only if they are part of a covered building.
f. There is no coverage for loss or damage caused by or that results from water or waterborne material discharging from a sewer, drain, or sump unless
the discharge results from flood and takes place within 72 hours after the
flood recedes. (07 13 change)
1. Section I–Property A. 5.
a. Debris Removal Additional Coverage does not apply. The following replaces it
but only with respect to this endorsement.
Debris Removal
a. Coverage applies to
expenses to remove debris from covered property and other debris deposited at
covered premises due to flooding. Expenses to remove mud from the premises'
grounds are not covered.
NOTE: Using the word grounds
suggests that expenses to remove mud from inside buildings may be covered.
b. Expenses to remove
debris of covered property that floated or was swept away from the covered
premises are covered.
c. This Additional
Coverage does not increase the Flood Limit of Insurance. If a building is
destroyed and floats downstream, the most paid is its limit of insurance. No
additional limit is available to cover the costs of debris removal.
NOTE: This coverage is especially important because cleanup is a major part
of most flood losses. Debris removal covers the costs to remove covered
property that floated away or that the flood removed from the location. It does
not include costs to remove mud from the premises' grounds. This does not mean
that loss or damage caused by or that results from mud is excluded. It means
that such loss or damage on the premises' grounds to covered property that is
not in a building is excluded.
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Example: Paul's Promotional Gadgets has a $3,000,000 blanket
flood limit on its building and business personal property. During heavy
spring rains, the river overflows its banks. A storage shed from a property
upstream winds up on Paul's property at the same time that one of Paul's
sheds and some outdoor equipment lands on somebody else's property further
downstream. The main building is not damaged structurally but is filled with
mud and leftover debris. All business personal property is damaged, but most
can be cleaned and reused. The claim handling is as follows:
Coverage applies as indicated above, but payments
end when the $3,000,000 blanket limit is exhausted. |
2. Section I–Property 6.
Coverage Extensions a. Newly Constructed or Acquired Property is amended and
the following added with respect to Flood Coverage:
a. This Coverage Extension
does not apply to buildings or structures that are not fully enclosed by walls
and a roof.
b. The amounts of coverage
for buildings or structures that this Coverage Extension insures do not apply
to Flood Coverage. The most the insurance company pays for loss or damage to
such property is 10% of the total Flood Limits of Insurance this endorsement
provides. This extension does not increase the Flood Limit of Insurance.
3. The Flood Limit of
Insurance is not increased by any additional coverage or extension in the
Businessowners Coverage Form. The only exceptions are those described in D.1
and D.2 in this endorsement.
1. General Information
The Flood Limit of
Insurance can be equal to or less than the limit of insurance that applies to
other covered causes of loss. If there is no Flood Limit of Insurance on the
Flood Coverage Schedule or the declarations, the limit is the same as the Fire
limit of insurance.
2. Application of Limit
and Aggregate
The Flood Limit of
Insurance is the most paid for loss or damage in a single flood. The Flood
Annual Aggregate Limit is the most paid for all loss or damage that flood
causes in any policy period.
The Flood Limit of
Insurance and the Flood Annual Aggregate Limit may be the same or there may not
be a Flood Annual Aggregate Limit. When the declarations does not display an
aggregate limit, the Flood Limit of Insurance is the most paid for all loss or
damage due to flood that takes place in a 12-month policy period, regardless of
the number of flood events that occur during the period.
If a flood event begins
in one policy period and continues into a second, only the aggregate from the
first policy period applies.
The Flood Limit of
Insurance also applies to Additional Coverages–Business Income and Extra
Expense.
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Example:
Wild Willie's
Wicker Rockers purchases the Flood Coverage
endorsement with a $2,000,000 blanket limit, but the declaration does not contain
an annual aggregate limit. Coverage runs from October 1 to October 1. During
the winter season, an ice jam at a nearby dam causes severe flooding in the
area, resulting in $600,000 in direct damage and $700,000 in business
income/extra expense. The good news is that Wild Willie's resumes operations
in April, just in time for the spring buying season. Unfortunately, the
spring rains begin, the earthen dam that the winter ice jam weakened gives
way, totally floods the area, and submerges Willie's facility. The bad news
is that there is only $700,000 left of the annual policy limit to respond to
this loss because the insured did not request an aggregate limit which
results in the Flood Limit of Insurance being the annual aggregate. |
3. Ensuing Loss
A covered ensuing loss
caused by or that results from a covered flood event may occur. In that case,
the most the insurance company pays is the limit of insurance that applies to
fire, not the total of the fire and flood limits.
NOTE: This section concludes
with two examples of ensuing losses.
1. The deductible on the
Flood Coverage Schedule or the declarations is the one that applies to the
coverage this endorsement provides.
2. This endorsement is not
used to pay any part of a loss that consists of any deductibles in the National
Flood Insurance Program (NFIP) policy.
3. If flood results in
another covered cause of loss to the extent that damage by both ensues, only
the highest deductible applies.
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Example: The flood at Chester's Conserved Classics causes a
stove's pilot light to go out. The gas flow continues, a spark ignites the
gas, and causes a fire. Chester has both flood insurance and fire insurance.
Flood coverage has a $10,000 deductible and fire coverage has a $5,000
deductible. The $10,000 Flood deductible applies to this loss because it is
the higher of the two. |
This condition replaces
the Other Insurance Condition in BP 00 03–Businessowners Coverage Form.
1. If the NFIP provides
flood coverage, or if the property is eligible for flood coverage under NFIP,
this coverage is excess over the maximum limit available from NFIP. This is
regardless of the limits purchased, whether or not they were kept in force, or if
the limits can be collected at all. The insurance company never pays more than
the Flood Limit of Insurance that applies.
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Example: Alexander discovers that he can obtain flood coverage through NFIP with a $500,000
limit of insurance. However, his agent gives him a flood quote for the same
limit that looks much better. He purchases a NFIP policy with a $200,000
limit and places the rest on his Businessowners Coverage Form. After a flood
loss occurs and during his review, the claims adjuster discovers the NFIP
limit that was offered. Instead of paying the entire amount for the flood
loss, he reduces the payment by $300,000. This is the difference between the
amount Alexander could have purchased from the NFIP and the amount he
actually did purchase. |
Some risks are at
locations that would qualify for NFIP treatment but that are not currently
available for various reasons. The NFIP requirement is waived in those cases.
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Example: The town of Winchester has 90 days to resolve all
flood-related issues the Army Corps of Engineers brought to its attention.
When it fails to do so, NFIP begins to cancel every flood policy that covers the
affected area. In addition, the Federal Emergency Management Agency (FEMA)
informs Winchester that it is not eligible for disaster relief the next time
flooding occurs. Winchester suddenly gets the message, understands what needs
to be done, and starts doing it. About this time, flooding occurs at
Springfield Commons, a southern suburb of Winchester. Because Winchester is
not eligible for the NFIP when flooding occurs at Springfield Commons, this
insurance covers the flood losses for several businesses located there up to
the flood limit of insurance. |
An insurance company
may agree to write the entire flood amount without requiring NFIP underlying
coverage. If it does, the box next to the Underlying Insurance Waiver statement
on the Flood Coverage Schedule must be checked. Checking the box is critical if
the insurance company agrees to waive NFIP. If it is not checked, the insurance
agent should contact the company immediately, have the policy endorsed, and
receive written confirmation of the waiver.
2. If any flood coverage
other than NFIP is available, this insurance pays only its proportional share
but not more than the flood limit of insurance.