(July 2026)
The Insurance Services Office (ISO)
Businessowners Program includes a variety of restaurants as eligible classes of
business. Restaurants present unique exposures and require coverages
not included in the unendorsed Businessowners Coverage Form. This endorsement
adds coverages, considerations, and definitions that
address those needs. This analysis examines them relative to BP 00
03–Businessowners Coverage Form.
NOTE: This analysis is of the
07 13 edition of this endorsement. Changes from the 01
10 edition are in
bold print.
This section adds six
new coverages under Section I–Property A. 5. Additional Coverages.
a. Reward Payment (07
13 change)
(1) Reimbursement
(a) The insurance company
reimburses the named insured up to $5,000 for rewards it 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 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 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 person to voluntarily provide information that leads to the arrest
and conviction in a case of stolen property being returned. However, the
following are not considered eligible persons, even if
they are the first ones 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.
b. Brands and Labels
(1) A
covered cause of loss may damage covered property that consists of branded or
labeled merchandise. In that case, the insurance company may take all or part
of it at an appraised or agreed value. If it does, the named insured has two
options:
(a) It
can stamp the word salvage on the merchandise or its containers if doing so
does not physically damage the product.
(b) It
can remove the labels or brands if doing so does not physically damage the
merchandise and then re-label it or its containers to comply with laws that
apply to such activities.
(2) The
insurance company pays reasonable costs the named insured incurs to perform any
of these activities. The most paid in a claim is the value of the damaged
property plus the cost of branding and labeling, or the business personal
property limit of insurance, whichever is less.
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Example: Riley developed a salad dressing that was so popular his
customers asked to take it home. He arranged to have it manufactured and sold
but only at his restaurant. Three cartons of the dressing were stolen along
with other property. Everything was recovered, but it was all damaged. The
insurance company paid the value and took the salvage. Riley arranged for the
word “salvage” to be stamped on every bottle of dressing. This coverage paid
the expenses to do the stamping, but more importantly, Riley ensured that
none of his unmarked proprietary salad dressing could be sold except at his
restaurant, and he still received a full settlement from the insurance
company. |
c. Ordinance or
Law–Equipment Coverage
The insurance company
pays more than the cost to repair or replace equipment that qualifies as
covered property damaged by a covered cause of loss.
(1) It pays to repair or
replace the qualifying equipment as the law requires.
(2) If a loss involves
refrigeration equipment, it pays the additional costs to satisfy 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, or dry rot.
(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: L & L Restaurant has
a walk-in refrigerated unit over 50 years old that was never replaced because
it still worked. A local ordinance requires refrigerated units to use “green”
technology, but existing units are grandfathered until and unless they must
be replaced. When a fire occurs, L & L must replace the unit, and this
coverage pays for the green upgrade required when the unit is replaced. |
d. Lock Replacement
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: Adam, Rusty Nail’s bartender, closed the restaurant one
evening and never returned. Keith, the owner, is concerned because Adam took
the keys and might use them to enter and steal items after hours. Keith
decides to replace all the locks in the restaurant. This coverage responds up
to the $5,000 limit and is subject to the deductible. |
e. Spoilage Coverage
(1) This coverage pays for
loss of perishable stock caused by:
(a) Changes in temperature
or humidity but only if the change is due to mechanical breakdown or failure of
refrigeration, cooling, or humidity control equipment at an insured location.
(b) Contamination by
refrigerants.
(c) Complete or partial
power outage either on or off the premises. However, this is only when
conditions beyond the named insured's control cause an outage that causes the
change in temperature or humidity.
(2) The most
the insurance company pays for loss or damage in any one occurrence is
$10,000. Higher limits are available and must be entered on the declarations.
The loss must exceed the coverage deductible before any payments are made.
(3) Perishable stock is
valued at the price it would have sold for if there were no loss. This value is
then reduced by any discounts or expenses the named insured would have incurred
if the items had actually been sold.
(4) The exclusions in the
coverage form do not apply. Instead, coverage does not apply if the spoilage is
due to any of the following:
(a) Earth movement.
(b) Governmental action.
(c) Nuclear hazard.
(d) War and military action.
(e) Water.
(f) Disconnecting any
described system from its power source, such as pulling the plug out of the
wall outlet.
(g) Deactivating electrical
power by manipulating switches or devices that control electrical power or
current, such as flipping the "on" switch to "off."
(h) The electrical utility
or other power source's inability to provide sufficient power because of lack
of fuel or due to a government order.
(i) The power source at the
covered premises not being able to provide the needed
power level because of insufficient generating capacity.
(j) Any glass breaking that forms a permanent part of any refrigeration, cooling,
or humidity control unit.
(5) The insurance company
does not pay for loss or damage until the amount of loss exceeds the deductible
on the declarations for this coverage. It then pays up to the applicable limit
of insurance. This is the only deductible that applies to this Additional
Coverage.
(6) The named insured must
have a refrigeration maintenance or service agreement and keep it in force. If
it does not, and if it does not inform the insurance company within 10 days of
its termination, this coverage is suspended at the location involved. Coverage
is reinstated only if the agreement is reinstated, or another equivalent
agreement replaces it.
NOTE: A refrigeration
maintenance agreement is a written service contract between the named insured
and the organization that provides the service. It requires that the
refrigeration equipment at the involved location be inspected at regular
periods and be serviced or repaired as needed. It also includes any required
emergency service.
f. Food Contamination (07
13 changes)
(1) The Board of Health or
another governmental regulatory authority may close the named insured's
business because it either finds or suspects food contamination. In that case,
this coverage pays the named insured's:
(a) Expenses to clean its
equipment as the governmental authority or Board of Health directs.
(b) Expenses incurred to
replace food that is contaminated or is suspected to be contaminated.
(c) Medical expenses to
test or vaccinate employees, temporary
employees, and leased employees potentially infected by the food contamination.
This applies only to expenses that workers compensation insurance does not
cover.
(d) Loss of business income
sustained while operations are suspended. The period of restoration does not
begin until 24 hours after the named insured receives the governmental
authority's order to close.
(e) Additional advertising
expenses incurred to restore its reputation.
(2) The definition for business income used in this coverage is the same as
the definition in Section
I–Property 5. Additional Coverages f. Business Income.
(3) The most the insurance
company pays for additional advertising expenses to restore the named insured's
reputation is $3,000 unless there is a higher limit entered on the
declarations. The most paid for the other expenses indicated above is $10,000,
including business income. Higher limits are available.
(4) Coverage does not apply
to any fines or penalties any governmental authority imposes because it
discovers or suspects food contamination at the involved location.
(5) Section I–Property,
Exclusions B. 1. j. Virus or Bacteria does not apply to this coverage.
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Example: Maple Valley’s new health inspector is determined
to clean up the town's restaurants. She orders Lilliput’s Tea Room to close
when she discovers the temperature in the refrigerator is higher than
allowed. She also orders that all refrigerated items be destroyed and any
equipment that came into contact with the possibly
contaminated food to be thoroughly cleaned. She notifies the newspapers, and
they make the story front-page news. Lilliput’s owners try to explain the
situation by taking out ads, distributing pamphlets, and offering specials.
All costs associated with replacing stock and cleaning equipment are covered,
up to the $10,000 limit. If Lilliput’s had to shut down for more than 24
hours, the business income for that time period is
also covered within the $10,000 limit. The advertising costs are covered up
to $3,000. However, there is no coverage for any fines the health inspector
imposed. |
The following is added
to Section I–Property g. Optional Coverages 3. Employee Dishonesty but only if
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 customer's money, securities, and other property
due to theft by an identified employee, whether acting alone or with others.
The property must have been in an insured building at the premises on the
declarations and have been property the customer owned, leased, or held for
others.
This coverage is for the named insured's
benefit and does not benefit any other party, even the customer. As a result,
the named insured must submit all such claims for covered losses.
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Example: Frederick, the maître d’ at Rouchell’s,
always took customer coats and checked them in the coatroom. On one occasion,
he found a wallet with over $15,000 in cash in a coat. He decided it was a
good day to retire, took the money, and left. When the customer discovered
his loss, he notified Rouchell’s owner, who submitted it as a claim on the
customer’s behalf. |
Three definitions that
apply to the coverage this endorsement provides are added to BP 00
03–Businessowners Coverage Form Section i–Property H. Property Definitions.
1. Food contamination (07 13 changes)
This is an outbreak (the 01 10 edition used the words
“incidence of”) that involves food poisoning to at least one customer due
to any of the following:
a. Food the named insured purchased or distributed that was
tainted.
b. Food that was stored, handled, or prepared incorrectly in the course of the named insured’s
business operations.
c. Food that bacteria or virus has contaminated. An
employee, temporary employee, or leased employee must have transmitted the
bacteria or virus. (The 01 10 edition used the term “communicable disease.”)
2. Other property means
property other than money and securities that is tangible and has intrinsic
value. It does not include any property that the coverage form excludes.
3. Perishable stock is
property that is susceptible to loss or damage unless it is maintained and
preserved under certain controlled temperature or humidity conditions.
This section adds two
new coverages to Section II–Liability A. Coverages.
1. Delivery Errors and
Omissions Coverage
a. The insurance company
pays amounts the insured is legally obligated to pay as damages because items
were not delivered or were delivered incorrectly. The items to be delivered
must have been held for sale by the named insured, its employees, or
concessionaires that trade under its name. The insurance company has both the
right and the duty to defend the insured against suits that seek such damages
that coverage applies to. That right includes the right to investigate and
settle any claim or suit.
A $250 per occurrence
deductible applies. The company's duty to defend ends when it has exhausted
this limit by paying judgments or settlements.
b. Coverage applies only
if delivery fails entirely or an error in delivery occurs in the coverage
territory during the policy period.
c. Coverage does not
apply:
(1) When the nondelivery or misdelivery is intentional.
(2) To bodily
injury, property damage, or personal and advertising injury.
(3) To customer
discrimination of any kind. This includes race, color, national origin,
religion, gender, marital status, age, sexual orientation or preference,
physical or mental condition, or location of the customer’s residence.
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 most this coverage
pays per premises is $10,000 in any one policy period. This is subject to a $250
deductible per occurrence.
f. Duties in the Event of a Delivery
Error or Omission
This condition replaces
Section II–Liability E. Liability and Medical Expenses General Conditions 2. Duties
in the Event of Occurrence, Offense, Claim, or Suit but only with respect to
this Additional Coverage.
(1) The named insured must
notify the insurance company as soon as possible of any error or omission that
may result in a claim. This includes details on how, when, and where it
occurred, and the names and addresses of any affected customers.
(2) The named insured must
immediately record the details of the claim or suit and the date it was
received, notify the company, and ensure that the company receives notice of
the claim or suit as soon as practicable.
(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 error or omission that this insurance may cover.
(4) Coverage does not apply
to any voluntary payments made, obligations assumed, or expenses that any
insured incurs without the insurance company's consent.
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Example: Middleheart Office Park
hosts a celebration luncheon that runs from noon to 1:00 p.m. Michel’s Fine
Food was scheduled to deliver the food at 11:45 a.m., but the driver misread
the address and headed east instead of west. When he finally arrived at the luncheon
site at 2:00 p.m., the guests had already left. Middleheart Office Park must
redo the luncheon and demands that Michel's reimburse it for those expenses.
Coverage applies to this loss up to $10,000, but only after the $250
deductible is paid. |
2. Merchandise
Withdrawal Expenses Coverage
a. This coverage
reimburses the named insured for expenses it incurs when it must withdraw
merchandise for reasons that this insurance covers.
b. Coverage applies only
if the withdrawal takes place during the policy period and in the coverage
territory. The decision to withdraw the items may be voluntary or required by a
governmental authority.
c. A merchandise
withdrawal begins at the earliest of the following times:
(1) When the named insured
first informs the public, its vendors, and employees of the decision to make or
participate in a merchandise withdrawal. Discussions with employees to make the
withdrawal decision are not considered employee notification.
(2) When the named insured
receives a written or verbal government order to withdraw merchandise.
d. All expenses the named
insured incurs to withdraw products that have the same or similar defects are
treated as having resulted from the same merchandise withdrawal.
e. A $250 deductible
applies. Loss or damage above that amount is paid up to this coverage's limit
of insurance.
f. This coverage does not
apply to any merchandise withdrawal expense that arises from:
(1) Any merchandise
withdrawal that began because of any of the following:
·
The named insured's product failed to achieve its intended
purpose. This includes breach of any written or implied warranty but does not
apply if the failure caused or is expected to cause bodily injury.
·
Infringing
on copyright, patent, trademark, trade secret, or trade dress.
·
The
named insured's products that deteriorate, decompose, or chemically transform.
This exclusion does not apply if design, processing, or manufacturing errors,
transportation, or tampering with merchandise caused the deterioration,
decomposition, or chemical transformation.
·
The
named insured's product's shelf life expires.
(2) Defects the named
insured or its executive officers knew of in one of its products before this
endorsement was issued or before the product left the named insured's control
or possession.
(3) Recall of any products that are excluded from bodily injury or property
damage coverage because of an endorsement added to the coverage form.
(4) Recall where an
authorized governmental unit had banned the named insured's product or one of
its components from the market before the policy period begins. This exclusion also
applies to products or components the named insured sold or distributed after such
bans were implemented.
(5) Defending claims or
suits against the named insured for liability that arises out of withdrawing merchandise.
(6) Costs incurred to
redesign the named insured's product or to regain goodwill, market share,
revenue, or profit.
g. The most the insurance
company reimburses the named insured during the policy period for the total of
all merchandise withdrawal expenses it incurs is $25,000.
h. Duties in the Event of
a Defect or a Merchandise Withdrawal
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 actual, suspected, or
threatened defect in its product, or of any governmental investigation that
could lead to a merchandise withdrawal. The notice should explain the type of
product defect and how, when, and where that defect was discovered. The names
and addresses of persons who were injured and of witnesses to the injury should
be included, along with the nature, location, and circumstances of injury or
damage resulting from the use or consumption of the named insured's product.
(2) The named insured must
immediately record the details of a merchandise withdrawal and the date on
which it was initiated. At that point, the insurance company must be given
written notice of the withdrawals as soon as practicable.
(3) The named insured must
do everything it can to minimize expenses associated with a merchandise
withdrawal. Any profits it receives to do so are deducted from the amount it is
reimbursed for merchandise withdrawal expenses.
(4) The named insured and
any other involved insured must immediately send the insurance company copies
of all pertinent correspondence it has received that relates to the merchandise
withdrawal. The named insured must authorize the insurance company to obtain
relevant records or other information and cooperate with the insurance company
as it investigates the merchandise withdrawal.
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Example: A Riley’s Restaurant customer was taken to the
hospital after eating a salad dressed in Riley’s Salad Dressing. Riley’s
owner checks a bottle in storage and discovers a terrible mistake in the
recipe. He recalls all bottles. His expenses to do so, up to $25,000, are
paid after the $250 deductible is applied. |
Five definitions that
apply to this endorsement's coverage are added to Section II–Liability F.
Liability and Medical Expenses Definitions.
1. Defect
This is not just a
defect. It is also a deficiency or inadequacy. However, the term goes beyond
just these attributes because it must create a dangerous condition.
2. Merchandise
tampering
This is
an intentional act of altering the named insured's product to cause bodily
injury. In cases of known, suspected, or threatened merchandise tampering,
merchandise withdrawal is limited to the batches of product known or suspected
to be involved.
3. Merchandise
withdrawal
This is
any recall or withdrawal of the named insured's products with the following
features:
4. Merchandise
withdrawal expenses
These are
the reasonable and necessary additional expenses paid that relate directly to a
merchandise withdrawal. They include costs of:
5. Profit
This is
the increase in revenue from business operations after deducting operating
expenses.
This term in Section
II–Liability F. Liability and Medical Expenses Definitions is clarified. It now
states that bodily injury or property damage resulting from the named insured's
products, in connection with restaurant operations they perform or that others
do on their behalf, includes any bodily injury or property damage caused by the
products even after the insured no longer has possession of them.
NOTE: This is the same wording used in CG 24
07–Products/Completed Operations Hazard Redefined.