(July 2026)
The Insurance Services Office (ISO) Businessowners Program includes apartment buildings as an eligible class of business. ISO recognized that this class faces exposures requiring coverages that are not in the unendorsed Businessowners Coverage Form. This endorsement adds a number of coverages, considerations, and definitions that respond to those exposures. This analysis examines them relative to BP 00 03–Businessowners Coverage Form.
NOTE: This
analysis is of the 07 13 edition of this endorsement. The
single change from the 01 10 edition is in
bold print.
This section increases the limit of insurance for Pollutant Cleanup and Removal from $10,000 to $25,000 under the Businessowners Coverage Form Section I–Property A. 5. Additional Coverages h. Pollutant Cleanup and Removal.
This section adds four new coverages under the Businessowners Coverage Form Section I–Property A. 5. Additional Coverages.
(1) Reimbursement
(a) The insurance company reimburses the named insured up to $5,000 for rewards paid to eligible persons for information that results in the arrest and conviction of anyone who committed a crime that caused loss or damage to the covered property from an eligible source of loss. It does not pay more than the lesser of the following:
· The covered property’s actual cash value at the time of loss up to (but not to exceed) amounts needed to repair or replace it.
· The amount determined by applying the loss settlement procedure in the Loss Payment Condition.
(b) The insurance company pays up to $5,000 to eligible persons for the return of stolen covered property. It does not pay more than the property's actual cash value, based on its condition when returned, up to (but not to exceed) the lesser of the following:
· The amount needed to repair or replace it.
· The amount determined by applying the loss settlement procedure in the Loss Payment Condition.
(2) This additional coverage is subject to three specific conditions:
(a) An eligible person is the party that law enforcement authorities consider to be the first to voluntarily provide information that leads to the arrest and conviction in a case or to the return of stolen property. However, the following are not considered eligible persons, even if they are the first to supply such information.
· The named insured, its family members, employees, temporary employees, leased employees, or their family members
· Employees of a law enforcement agency or a property protection business
· Anyone with custody of the property when it was stolen
· Any person involved with the crime
(b) Rewards are not paid until the parties that committed the crime are convicted or the property is returned.
(c) The amount of reimbursement in any one occurrence is the lesser of the reward amount or $5,000.
The insurance company pays more than the cost to simply repair or replace equipment that qualifies as covered property damaged by a covered cause of loss.
(1) It pays to repair or replace qualifying equipment as the law requires. This is subject to item (2) below.
(2) If a loss involves refrigeration equipment, it pays the additional costs to comply with the various laws that require reclaiming refrigerant, retrofitting the equipment to use non-CFC refrigerants, and the higher costs to recharge the system with such non-CFC refrigerants.
(3) This coverage applies separately to each item of covered equipment.
(4) Coverage does not apply to any costs that relate to enforcing laws or ordinances that require any response to pollutants, fungi, wet rot, dry rot, or bacteria.
(5) Loss to equipment is determined as follows:
(a) If damaged equipment at any location is repaired or replaced, the company pays the lesser of the amount actually spent to repair it or the cost to replace it with like kind and quality, up to the limit of insurance.
(b) If damaged equipment is not repaired or replaced, the company pays the lesser of the equipment's actual cash value on the date of loss or the limit on the declarations that applies to Building or Business Personal Property.
(c) The insurance company does not pay the increased costs to comply with any ordinance or law that the named insured should have complied with prior to the loss but did not.
|
Example:
Meadowview Apartments has operated for many years.
A recently introduced town ordinance requires all refrigerators to use only
“green” refrigerants. Existing owners are given five years to comply with the
ordinance. Scenario 1: A fire occurs at Meadowview
one year after the ordinance is enacted. Because the ordinance was in effect
and Meadowview was not yet required to comply, this coverage pays for the
upgrade costs. Scenario 2: A fire occurs at Meadowview
six years after the ordinance is enacted. Meadowview had not yet replaced the
refrigerated units the fire damaged. Because Meadowview did not comply with a required ordinance, this coverage does not pay for the
upgrade. |
This coverage pays the costs incurred to repair or replace locks at the described premises when keys are lost or stolen. The limit of insurance is $5,000 in any one occurrence and is subject to a $100 deductible.
|
Example:
Harry is the
Belafont Apartments manager. He hangs his coat at church on a Sunday morning
but finds the keys that were in one of its pockets missing when he returns.
One was the master key to all of the apartments.
Since he is concerned for the safety of his tenants,
he has all the locks re-keyed. This coverage responds, up to the $5,000
limit, and is subject to the deductible. |
This coverage pays up to $15,000 in expenses the named insured incurs to move its tenants from a temporary premises back to their homes. The tenant's removal must have been due to direct physical loss or damage to covered property from a covered cause of loss that rendered the property uninhabitable.
Coverage applies to packing, transporting, and unpacking tenants' property. It also applies to the net costs after refunds to re-establish utility and telephone service. Only expenses incurred within 60 days after the damaged building is repaired and habitable again are covered.
|
Example:
Unit A in a six-unit apartment building experiences
a small fire that sends smoke throughout Unit A and the other units. All
tenants must move out until the smoke damage is repaired. This coverage pays
the expenses the named insured incurs to return displaced tenants to their
respective units. |
The following is added to Section I–Property, g. Optional Coverages, 3. Employee Dishonesty, but only if the Employee Dishonesty Optional Coverage is provided. It is subject to that paragraph's provisions.
3. Employee Dishonesty
The insurance company pays for loss or damage to a tenant's money, securities, and other property due to theft by an identified employee who either acted alone or with others. The property must have been in an insured building at the premises listed on the declarations. It must have been property the tenant owned or leased, was legally liable for, or held for others.
This coverage is for the named insured's benefit and does not extend to other parties, including tenants. As a result, the named insured must submit all claims for covered losses.
As used in this section, other property means property other than money and securities that is tangible and that has intrinsic value. It does not include any property the coverage form excludes.
This section adds three new coverages to Section II–Liability A. Coverages.
1. Tenants' Property Legal Liability Coverage
a. The insurance company pays the amounts the insured is legally obligated to pay as damages for covered property damage to tenants' property or the property of others for which the insured is legally liable. However, this applies only when the property is in the named insured's care, custody, or control outside a leased unit, apartment, or storage area at the premises listed in the declarations. The insurer has the right and duty to defend the insured against suits seeking such damages to which coverage applies, including the right to investigate and settle any claim or suit.
The most this coverage pays is $10,000. This is subject to a $250 deductible. The company's right and duty to defend end when it exhausts this limit by paying judgments or settlements. It has no other obligations to pay, act, or provide services beyond those specifically provided as Supplementary Payments.
b. Coverage applies only if the property damage occurs in the coverage territory during the policy period.
c. Coverage does not apply to:
(1) Property damage to land motor vehicles, trailers, or semi-trailers the tenant stores at the described location
(2) Property damage for liability the insured assumed in a contract or agreement
This exclusion does not apply to liability the insured has without a contract or agreement.
(3) Liability caused by or that results from intentional acts of property damage, dishonest acts, or criminal acts committed by the named insured, its employees, or others entrusted with such property.
(4) Liability that arises from the named insured's sale and disposal operations
(5) Losses that the Businessowners Coverage Form Section I–Property covers
d. This coverage is subject to the Supplementary Payments provision that applies to Bodily Injury, Property Damage, and Personal and Advertising Injury Liability coverages.
e. The $10,000 limit applies per premises per
occurrence.
f. Section II–Liability E. Liability and Medical Expenses Conditions 2. Duties in the Event of Occurrence, Offense, Claim, or Suit applies to this coverage.
|
Example:
Fairfax Apartments receives all parcel deliveries for its tenants so that
they are not left outside their apartment units during the day. While the
apartment manager is at lunch one day, the parcels received that day are
stolen. This coverage insures the tenants' losses,
provided an employee did not take the parcels. |
2. Lock-Out or Sale, Removal, and Disposal Liability
Coverage
a. The insurance company pays amounts the insured is legally obligated to pay as damages because of acts or omissions that arise out of lockout, sale, removal, or disposal of tenants' property. The act or omission must occur during sale and disposal operations. The insurance company has the right and duty to defend the insured against suits seeking such damages covered by this insurance, and this right includes the right to investigate and settle any claim or suit.
The most this coverage pays is $5,000. The company's duty to defend ends when it exhausts this limit by paying judgments or settlements. It has no other obligations to pay, act, or provide services beyond those specifically provided as Supplementary Payments.
b. Coverage applies to only acts or omissions that take place in the coverage territory during the policy period.
c. Coverage does not apply to:
(1) Liability for damages the insured assumed in a contract or agreement
NOTE: This exclusion does not apply to liability
the insured has without a contract or agreement.
(2) Liability caused by or resulting from dishonest or criminal acts committed by the named insured, its employees, or others entrusted with such property
d. This coverage is subject to the Businessowners Coverage Form Section II–Liability A. Coverages 1. Business Liability f. Coverage Extension–Supplementary Payments provision that applies to Bodily Injury, Property Damage, and Personal and Advertising Injury Liability coverages.
e. The $5,000
limit is a policy year aggregate. It applies per premises.
f. Duties in the Event of Claim or Suit as a Result of a Lock-Out or Sale, Removal, or Disposal of Tenants' Property
This condition replaces Section II–Liability E. Liability and Medical Expenses General Conditions 2. Duties in the Event of Occurrence, Offense, Claim, or Suit.
(1) The named insured must notify the insurance company as soon as possible of any lock-out, sale, removal, or disposal of tenants' property that may result in a claim, including how, when, and where it took place.
(2) The named insured must immediately record the details of the claim or suit, the date it was received, and notify the company as soon as practicable if any of these activities result in a claim being made or a suit being brought against any insured.
(3) The named insured and any other insured involved in a claim or suit must immediately send copies of all related legal papers and documents received to the company and authorize the company to obtain any relevant records or other information. They must cooperate with the company as it investigates, settles, or defends the claim or suit and help the company enforce its rights against any party that may be liable to the insured for an action that this insurance may cover.
(4) Coverage does not apply to any voluntary payments made, obligations assumed, or expenses incurred without the insurance company's consent.
|
Example:
Corvair Management contracted with JH-L to remove
property from apartments after tenants were evicted. Following Corvair’s
instructions, JH-L removed everything from Apartment 2D. Upon returning home,
2D's tenant found the apartment empty and asked Corvair to explain. Because
of a clerical error, JH-L was misinformed and should have cleared Apartment
2E instead of Apartment 2D. Corvair has up to $5,000 to compensate the
occupant of 2D. |
3. Heating or Air Conditioning Loss Reimbursement
Coverage
a. The insurance company reimburses the named insured for payments it made voluntarily or because of demands for per-diem rental returns. The return must be demanded because of a complete loss of heating or air conditioning in a tenant's rental unit. The loss of heat or air conditioning must be caused by a mechanical breakdown or an electrical failure. The amount of reimbursement is limited to $5,000 for any one breakdown or failure and $10,000 in any annual policy period. The company has no other obligation or liability to pay sums, perform acts, or provide services.
b. The coverage provided is subject to three requirements:
(1) The breakdown or failure must occur at a premises listed in the declarations during the policy period.
(2) The named insured must receive a notarized written demand for the return of per-diem rental from a tenant within 90 days of the breakdown or failure.
(3) The named insured determines that such voluntary payment may prevent bodily injury or property damage.
NOTE: This is a very open-ended statement
because it does not specify whose bodily injury or property damage is being
prevented. This could be a way to prevent more significant claims, just as
medical payments expense is often used to prevent bodily injury claims. Quick
action a landlord takes can prevent a lawsuit.
c. The insurance company is not obligated or required to defend the insured, perform acts, or provide services.
d. The coverage provided does not apply to expenses the named insured incurs to repair or replace the malfunctioning system or to bodily injury, property damage, personal injury, or advertising injury.
e. The
$5,000 per occurrence and $10,000 policy year aggregate limits apply per
premises.
f. Duties in the Event of a Heating or Air
Conditioning System Failure
This condition replaces Section II–Liability E. Liability and Medical Expenses General Conditions 2. Duties in the Event of Occurrence, Offense, Claim, or Suit.
(a) The named insured must notify the insurance company as soon as possible of any voluntary payments made or of a demand for rental return. The notice should include the tenant's notarized demand letter for a rental return and a written description of how, when, and where the breakdown or failure occurred. It should also include the tenant's name and address and the cancelled check or money order written to the tenant.
(b) The named insured must also explain the cause of the breakdown or failure and describe the actions it took to repair or replace the system. This must be done as soon as possible after the company requests this information.
(c) The named insured must cooperate with the company in its review of the reimbursement.
|
Example:
The boiler at the Edgewood Apartments malfunctions.
Tenants continue to live there but are forced to use alternate heating
sources. They are upset, and the manager hears rumors of retribution in the
form of planned property damage. He tells the tenants that he will return
their daily rent for each day the heat remains off. This is covered for up to
$5,000. |
Three definitions that apply to this endorsement's coverage are added to Section II–Liability F. Liability and Medical Expenses Definitions.
1. Lock-out
This denies a tenant access to their property or occupancy of an apartment they rent, lease, or otherwise occupy.
|
Example:
Peter is three months past due paying his rent.
Marlbory Apartments issues Peter an eviction notice and changes the locks on
his apartment. |
2. Sale and disposal operations
These are activities the named insured conducts to reclaim an apartment or storage space when the tenant pays their rent late or does not pay at all.
|
Example:
Paula executes an eviction notice against Maggie.
Maggie vacates the property but leaves most of her possessions behind. Paula
removes and sells items she believes have value, distributes others to
charity, and sends the rest to the landfill. |
3. Tenants' property
This is property that belongs to the named insured's tenants. It consists of money, securities, and other tangible property with intrinsic value.