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Businessowners Coverage (Chapter 13)
Terms in this set (64)
The Businessowners Policy is a package policy designed for small to medium-sized business firms. The Businessowners Form provides to an eligible business what a Homeowners Policy provides to private residential insureds. The policy is multiline, combining property and liability coverages under one form.
The Businessowners policy was designed for small to medium-sized businesses that don't engage in high-risk or highly specialized operations. Businesses that generate sales over $6 million or that occupy more than 35,000 square feet of space are ineligible, unless otherwise noted. Other requirements also apply. Each insurer will have specific eligibility requirements, but most conform to certain standards. The types of businesses eligible for a BOP include:
Apartment buildings of any size, including residential condominium associations.
Office buildings that are occupied primarily for office purposes that do not exceed 6 stories in height or contain more than 100,000 square feet in total area.
Service or Processing
Service and processing businesses such as bakeries, laundromats, dry cleaners, funeral homes, and print shops.
Buildings and business personal property for businesses operating as wholesalers, provided that no more than 25% of annual gross sales are derived from retail operations, and no more than 25% of the total floor area is open to the public.
Eligible contractors include those whose total annual payroll does not exceed $300,000, and no more than 10% of total annual gross sales comes from subcontracted work.
Fast-food restaurants and others with limited cooking.
Buildings are limited to 3 stories in height; the motel may not be seasonal in its operation, and may not contain a bar or cocktail lounge.
Convenience Food/Gasoline Stores
The total annual gross receipts from the sale of gasoline must not exceed 75% of the total annual gross receipts. Auto service repair, car wash operations, and propane or kerosene tank filling operations are not allowed.
Buildings are limited to 2 stories in height. Cold storage or storage of industrial materials, chemicals, pollutants, and waste do not qualify.
Condominium Commercial Unit-Owners
Mercantile, wholesale, service or processing, and contracting occupancies.
1. Automobile repair or service stations; automobile, mobile home, motorcycle dealers; and parking lots or garages, unless incidental to an otherwise eligible risk
2. Restaurants, bars, and grills, unless in compliance with restaurant eligibility
3. Places of amusement
Businessowners Coverage Forms
Causes of Loss
The Businessowners policy is written on an open-perils basis.
Section I Property
1. Buildings, meaning buildings and structures at the premises described in the Declarations, including:
1. Completed additions
2. Fixtures, including outdoor fixtures
3. Permanently installed machinery and equipment
4. The insured's personal property in apartments, rooms,
or common areas furnished by the insured as landlord
5. Personal property owned by the insured that is used to
maintain or service the buildings or structures or the
premises (including: fire fighting equipment; outdoor
furniture; floor coverings; and appliances used for
refrigerating, ventilating, cooking, dishwashing, or
6. If not covered by other insurance: additions under
construction, alterations and repairs to the buildings or
structures; materials, equipment, supplies, and
temporary structures, on or within 100 feet of the
2. Business Personal Property located in or on the buildings at the described premises or in the open (or in a vehicle) within 100 feet of the premises, including:
1. Property the insured owns that is used in the insured's
2. Property of others that is in the insured's care, custody,
3. Tenant's improvements and betterments (improvements
and betterments are fixtures, alterations, installations, or
additions made a part of the building or structure that
the tenant occupies but does not own; includes
structures the tenant acquired or made at their
expense, but cannot legally remove)
4. Leased personal property the insured has a legal
responsibility to insure
Property Not Covered
1. Aircraft, automobiles, motor trucks, and other vehicles subject to motor vehicle registration
2. Money or securities, except as provided in the Money and Securities Optional Coverage or Employee Dishonesty Optional Coverage
3. Contraband, or property in the course of illegal transportation or trade
4. Land, including land on which the property is located, water, growing crops, or lawns
5. Outdoor fences, radio or television antennas, satellite dishes, and their lead-in wiring, masts or towers, signs (other than signs attached to the building), trees, shrubs, or plants
6. Watercraft and associated equipment, while afloat
7. Accounts, bills, food stamps, other evidence of debt, accounts receivable or valuable papers and records, except as otherwise provided in the policy
8. Computers that are permanently installed or designed to be permanently installed in any aircraft, watercraft, motor truck, or other vehicle subject to motor vehicle registration, except while held as stock
The method of valuation on building and business personal property is replacement cost, presuming that at the time of the loss, the limit of insurance on the lost or damaged property is 80% or more of the full replacement cost of the property.
Some business personal property, such as household contents and property of others is valued on an ACV basis.
The insurer will not pay for loss or damage to property that is missing, where the only evidence of loss or damage is a shortage disclosed on taking inventory, or other instances where there is no physical evidence to show what happened to the property.
For loss or damage by theft, the following types of property are covered only up to the limits shown:
1. $2,500 for furs, fur garments, and garments trimmed with fur
2. $2,500 for jewelry, watches, pearls, precious and semi-precious stones, bullion, gold, silver, platinum, and other precious alloys or metals
3. $2,500 for patterns, dies, molds, and forms
Additional Coverages Automatically Included by the Policy
Policy will pay/cover:
Up to an additional $10,000 for debris removal expense, for each location, for any one occurrence of physical loss or damage to covered property.
Preservation of Property
On an open-perils basis, for up to 30 days, property while being moved or temporarily stored at another location.
Fire Department Service Charge
Up to $1,000 for fire department service charges assumed by contract or agreement prior to loss, or required by local ordinance.
Abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.
Water Damage, Other Liquids, Powder, or Molten Material Damage
The cost to tear out and replace any part of the building or structure to repair damage to the system or appliance from which the water or other substance escaped.
The actual loss of business income that is sustained within 12 consecutive months after the date of direct physical loss or damage. However, ordinary payroll expenses are paid only for 60 days following the direct physical loss or damage, unless a greater number of days is shown in the Declarations.
The necessary extra expenses the insured incurs within 12 consecutive months after the date of direct physical loss or damage.
Pollution Clean Up and Removal
Up to $10,000 per location for pollution clean up and removal due to a covered loss occurring during a 12-month period.
Money Orders and Counterfeit Paper Currency
Up to $1,000 for any one loss resulting from the insured having accepted, in good faith, such items during the regular course of business.
Forgery or Alteration
Up to $2,500 for any one loss resulting directly from forgery or alteration of any check or similar instrument that the insured, or someone impersonating the insured, has issued.
Increased Cost of Construction
Up to $10,000, for each building, for the increased costs incurred to comply with enforcement of an ordinance or law in the course of repair, rebuilding, or replacement of damaged parts of the covered building following a covered loss.
Business Income from Dependent Properties
The actual loss of business income (up to $5,000) sustained by the insured due to physical loss or damage at the premises of a dependent property caused by or resulting from a loss.
The expenses incurred to put up temporary plates, board up openings, and to remove or replace obstructions when repairing or replacing glass that is part of a building.
Newly Acquired or Constructed Property
Buildings, up to $250,000 at each building for up to 30 days. Business Personal Property up to $100,000 at each premise for up to 30 days.
Personal Property Off Premises
The insured may extend up to $10,000 of the insurance that applies to Business Personal Property to property while it is in the course of transit or at premises that the insured does not own, lease, or operate.
The insured may extend the insurance provided by the policy to apply to their outdoor fences, radio and television antennas, signs (other than signs attached to buildings), trees, shrubs, and plants. The most the policy will pay is $2,500, but not more than $500 for any one tree, shrub, or plant.
The insured may extend the insurance that applies to Business Personal Property to apply to personal effects owned by the insured, the insured's officers, partners, managers, or employees up to $2,500 at each described premises.
Valuable Papers and Records
The insured may extend the insurance that applies to Business Personal Property to direct physical loss of valuable papers and records that they own or that are in their care, custody, or control up to $10,000 at the described premises, and up to $5,000 away from the described premises.
The insured may extend the insurance that applies to Business Personal Property to apply to the direct physical loss of records of accounts receivable up to $10,000 at the described premises, and up to $5,000 away from the described premises.
The policy does not cover loss or damage caused directly or indirectly by any of the following:
1. Ordinance or law
2. Earth movement
3. Governmental action
4. Nuclear hazard
5. Power failure that occurs away from premises
6. War and military action
8. Certain computer-related losses relating to failure, malfunction, or inadequacy of computer hardware, software, operating systems, and networks
Limits of Insurance
The most the policy will pay for damage to outdoor signs attached to the building is $1,000 per sign in any one occurrence. The limit of insurance for Buildings will automatically increase by the annual percentage shown in the Declarations.
The limit of insurance for Business Personal Property will automatically increase by 25%, providing for seasonal variations, if the limit shown for Business Personal Property in the Declarations is at least 100% of the insured's average monthly values during the 12 preceding months.
A Businessowners Policy generally has a base deductible, which may range from $250-$2,500, applicable to property losses, and may have a second deductible that applies in place of the base deductible to Optional Coverages, if any are chosen.
No deductible applies to the following Additional Coverages: Fire Department Service Charge, Business Income, Extra Expense, and Fire Extinguisher Recharge Systems.
These coverages may be added by the insured for an extra premium.
Coverage for direct physical loss (open peril) of, or damage to, all outdoor signs at the described premises. The additional premium will be based on the replacement cost of the insured signs.
Money and Securities
Coverage for money and securities used in the insured's business against theft, disappearance, or destruction while at a bank or savings institution; within the living quarters of the insured, or the living quarters of partners, managers, or employees of the insured; at the described premises; or in transit between any of these places.
Coverage for Business Personal Property, including money and securities, resulting from dishonest acts committed by any of the insured's employees acting alone or in collusion with other persons.
Equipment Breakdown Protection Coverage for boiler and pressure vessels, and air conditioning units owned by the insured or in the insured's care, custody, or control, and at the described premises.
Section II - Liability Coverages
Liability coverage in the BOP is similar to what is offered by Coverages A, B, and C of the CGL policy.
Business Liability covers sums for which the insured becomes legally liable to pay as damages for bodily injury, property damage, or personal injury and advertising injury, including liability assumed under an insured contract.
Coverage applies to:
1. Bodily injury or property damage caused by an occurrence that takes place in the coverage territory during the policy period
2. Personal injury and advertising injury caused by an offense arising out of the insured's business, but only if the offense takes place in the coverage territory during the policy period
This section covers medical expenses for bodily injury, caused by an accident, occurring on the premises the insured owns or rents, or due to the insured's operations. The accident must take place in the coverage territory and during the policy period. The expenses must be incurred within 1 year of the date of the accident. Payments are made regardless of fault.
The insurer will pay reasonable expenses for:
1. First aid administered at the time of an accident
2. Necessary medical, surgical, x-ray, and dental services, including prosthetic devices
3. Necessary ambulance, hospital, professional nursing, and funeral services
In addition to the limit of insurance for Section II - Liability, the insurer will pay:
1. All expenses incurred by the insurer
2. Up to $250 for the cost of bail bonds, required because of accidents or traffic violations arising out of the use of any vehicle to which coverage for bodily injury applies
3. The cost of bonds to release attachments, but only for bond amounts within the limit of insurance
4. All reasonable expenses incurred by the insured, at the request of the insurer, including actual loss of earnings for up to $250 per day for time off work
5. All costs taxed against the insured in a suit
6. Prejudgment interest awarded against the insured on the part of any judgment
7. All interest on the full amount of any judgment that accrues before the judgment is paid
Applicable to Business Liability Coverage
1. Expected or Intentional Injury
2. Contractual Liability
3. Liquor Liability
4. Workers' Compensation and Similar Laws
5. Employer's Liability
7. Aircraft, Auto, or Watercraft
8. Mobile Equipment - Transportation of mobile equipment
10. Professional Services
11. Damage to Insured's Property
12. Damage to Insured's Product
13. Damage to Insured's Work
14. Damage to Impaired Property or Property Not Physically Injured
15. Recall of Products, Work, or Impaired Property
16. Personal and Advertising Injury arising out of material known to be false, or that took place before the beginning of the policy period, as well as losses arising out of breach of contract, failure to conform to advertised quality, or the wrong price
17. Injuries committed by an insured whose business is advertising, broadcasting, publishing, or telecasting
18. Electronic Data
19. Criminal Acts
20. Illegal Recording or Distribution
Applicable to Medical Expense Coverage
1. BI to any insured, except volunteer workers
2. BI to a person hired to do work for, or on behalf of, any insured or tenant of any insured
3. BI to any person, if benefits for the bodily injury are payable under Workers' Compensation
4. BI to a person injured on that part of the premises that the insured owns or rents and that the person normally occupies
5. BI to a person injured while taking part in athletics
6. BI incurred within the products/completed operations hazard
7. BI excluded under Business Liability Coverage
Nuclear Energy Liability Exclusion (Applicable to Both Business Liability Coverage and Medical Expense Coverage)
1. Bodily injury or property damage when an insured is also an insured under a Nuclear Energy Liability Policy issued by the Nuclear Energy Liability Insurance Association
2. Medical expenses for incurred bodily injury resulting from the hazardous properties of nuclear material, and arising out of the operation of a nuclear facility by any person
Who Is An Insured?
An insured must be designated in the Declarations as one of the following:
A sole proprietorship
Named insured and his/her spouse
A partnership or joint venture
The named insured, members, partners, and their spouses
A limited liability company
The named insured, members, and managers
An organization other than a partnership, joint venture, or limited liability company
The named insured, executive officers and directors, and stockholders
Each of the following is also an insured:
1. Volunteer workers, while performing duties related to the conduct of the insured's business, and employees of the named insured
2. Any person or organization, while acting as the named insured's real estate manager
3. Any person or organization having temporary custody of the named insured's property, until a legal representative is appointed if the named insured dies
4. The insured's legal representative if the named insured dies
5. Anyone driving the named insured's mobile equipment along a public highway with the named insured's permission
Limits of Insurance
The Limits of Insurance shown in the Declarations is the most the insurer will pay regardless of the number of insureds, claims made, or suits brought.
The Liability and Medical Expenses limit shown in the Declarations applies per occurrence for bodily injury, property damage, and medical expenses, and per person or organization for personal injury and advertising injury. The per person or per occurrence limits are subject to limitation according to the policy's aggregate limits, which is the most the insurer will pay for all losses in a single year.
Two aggregate limits apply:
For bodily injury or property damage that falls within the product/completed operations hazard, the limit is twice the Liability and Medical Expenses limit shown in the Declarations.
For all losses, except those which fall within the product/completed operations hazard, plus medical expenses, plus all personal injury and advertising injury caused by offenses committed, the limit is likewise equal to twice the Liability and Medical Expenses limit shown in the Declarations.
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