The Businessowners Policy (BOP) Liability Provisions

Fair Credit Reporting Act of 1970 (FCRA)

A federal act aiming to promote the fairness and accuracy of information contained in consumer reports, such as a credit report. It creates legal standards for the collection, use, and dissemination of consumer credit information. It also contains notice and opt-out provisions for the sharing of credit-related information between affiliates and for prescreened solicitation of consumers.

Telephone Consumer Protection Act of 1991 (TCPA)

A federal law prohibiting the sending of unsolicited advertisements to a fax machine. Claims arising out of the violation of TCPA are excluded under standard general liability insurance policies.

Electronic Data

The BOP does not cover damages resulting from the loss of electronic data or the inability to use this data.

Distribution of Material in Violation of Statutes

The BOP does not cover injury or damage arising from the violation or alleged violation of laws that prohibit or limit the distribution of material.

Liquor Liability

The BOP does not cover the liability of insureds who are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. It provides host liquor liability coverage for insureds who host events at which they provide liquor.

Defense Cost Coverage

The most important supplementary payment. The insurer pays for the cost of legal representation to defend or settle a lawsuit against the insured. It pays these costs until the case is decided or settled or the insurer has paid the policy limit to satisfy a judgment or settlement

Expected or Intended Injury

The policy does not cover bodily injury or property damage that the insured expects or intends other than that resulting from the reasonable use of force to protect people or property.

Contractual Liability

The policy offers no coverage for liability that the insured assumes through a contract, unless the insured would have been liable even without the contract, or unless the contract is an insured contract.

Nigel and Collette form N&C Company, a partnership that is the named insured in a businessowners policy. For purposes of liability coverage, who is NOT an insured?

a customer who sues N&C (If the named insured is a partnership, the partners and their spouses and employees are the insureds with respect to the business.)

Supplementary Payments

are made in addition to the policy limit and are not subject to it.

Business Liability Coverage pays for three types of injury or damage that the insured is required to pay for:

bodily injury property damage (including fire or explosion damage to rented premises) personal and advertising injury

Lessor

the person granting the lease, the landlord

Workers Compensation and Employers Liability

the policy will not cover its liability for bodily injury to its employees, for a resulting injury (such as an ulcer, heart attack, or mental anguish) to an employee's family member, or for an obligation to indemnify another party because of injury to an employee. Instead, this coverage is provided by a workers compensation policy.

Business Liability Coverage

to pay damages for which the insured is legally liable, subject to the applicable limit of insurance

Earl's businessowners policy has a liability and medical expenses limit of $300,000. Five customers are injured in an explosion. Each is awarded $150,000 in damages. How much will Earl's insurer pay in response to this claim?

$300,000 (The liability and medical expenses limit applies per occurrence, so the insurer's maximum obligation for injuries arising from this explosion is $300,000.)

An insured contract includes:

*A premises lease *An elevator maintenance agreement *A railroad sidetrack agreement *An easement or license agreement (except in connection with construction or demolition operations within 50 feet of a railroad) *An agreement to indemnify a municipality that is required by ordinance *Any other contract pertaining to the business with respect to the insured's assumption of another party's tort liability to third persons Nevertheless, the BOP does not cover an insured who assumes the professional liability of architects or engineers, indemnification for construction or demolition operations within 50 feet of a railroad, or liability for damage from fire to premises rented or loaned to the insured.

The BOP covers only bodily injury or property damage liability (but not cleanup costs) arising from:

*Most types of products or completed operations *Some types of off-premises pollution releases, when the insured did not bring the pollutants to the site *Smoke, heat, and fumes from a hostile fire *The escape of fuels, lubricants, or other operating fluids from mobile equipment *Fumes from building heating, cooling, and dehumidifying equipment or equipment used to heat water for personal use by occupants and guests *Fumes from materials used by the insured in off-site work

The BOP does not cover the insured's liability for damage to:

*Premises that the insured sells, gives away, or abandons if the damage arises from the premises *Property that the insured owns, rents, or occupies (unless fire damages premises that the insured leases or temporarily occupies with the owner's permission) *Property loaned to the insured *Personal property in the insured's care, custody, or control *A part of real property on which the insured or its subcontractors are working *A part of real property that must be restored, repaired, or replaced because the insured's work was not performed properly ***the policy covers the insured's liability for damage to property that the insured rents for seven or fewer consecutive days (such as a conference room or hotel room). In this case, liability for fire damage is not covered.

Personal and advertising injury consists of:

*Slander or libel *Violation of privacy rights *Invasion of right of private occupancy *False arrest, detention, or imprisonment *Malicious prosecution *Copyright infringement *Trade dress or slogan infringement in the insured's advertising *Use of another's advertising idea in the insured's advertising

The BOP also does not cover personal and advertising injury committed by insureds:

*Who are in the business of advertising, publishing, and broadcasting *Who design or determine the content of websites for others *Who are Internet search, access, content, or service providers *Engaged in or directing a criminal act *The BOP covers false arrest, detention, or imprisonment; malicious prosecution; or wrongful eviction from, entry into, or invasion of the right of private occupancy committed by or on behalf of its owner, landlord, or lessor.

These supplementary payments cover the cost of:

*investigation and defense (private investigator's fees, attorneys' fees, court *prejudgment interest on the amount the insured is ordered to pay *post-judgment interest on the amount the insured is ordered to pay

partnership or joint venture

1) its members and partners and their spouses are covered, but only with respect to the conduct of the business

War

A broad exclusion eliminates all liability coverage for bodily injury and property damage caused by war.

If the insured is an organization other than a partnership, joint venture, or limited liability company

1) the executive officers and directors of the organization are covered with respect to their duties. Stockholders are covered with respect to their liability as stockholders. No one is an insured with respect to any partnership, joint venture, or limited liability company that is not a named insured in the declarations. If the insured is a trust, both the trust and its trustees are covered, but trustees are insureds only with respect to their trust-related duties. 2) Employees and volunteer workers of the insured are covered with respect to acts within the scope of their employment. However, employees are not covered for injuries to themselves or to other employees (or for indirect injury to family members of an injured worker) in the course of employment. Workers compensation is the sole remedy for such injuries. 3) Employees are also not covered with respect to property damage to their own property or to that of another employee. Medical professionals employed by the insured are not covered for providing or failing to provide medical care. 4) An insured may be the insured's real estate manager or the insured's executor, trustee, or legal representative.

The businessowners policy provides three categories of liability coverage:

1. Business Liability 2. Supplementary Payments 3. Medical Expenses

The BOP has five limits of insurance:

1.) Liability expenses limit, 2.) Medical expenses limit, 3.) Fire legal liability limit, 4.)Products-completed operations aggregate limit, 5.)General aggregate limit.

Five limits of coverage appear in the businessowners liability coverage form:

1.) The liability and medical expenses limit applies per occurrence to bodily injury, property damage, and medical expenses ($300,000, $500,000, $1 million, or $2 million). 2.)The medical expenses limit applies per person to medical expenses ($5,000). 3.)The fire legal liability limit applies per occurrence to property damage by fire to premises rented to the insured ($50,000 to $1 million). The limit for temporary locations is the highest limit shown in the declarations when the declarations list more than one fire liability limit. 4.)The products-completed operations aggregate limit is two times the liability and medical expenses limit. It applies per policy period to all injury or damage from the products-completed operations hazard. 5.)The general aggregate limit is two times the liability and medical expenses limit. It applies per policy period to all other injury, damage, or medical expenses.

The ISO businessowners liability coverage form provides three categories of coverage:

1.)Business liability coverage for covered damages for which the insured is legally liable; 2.)Supplementary payments for expenses associated with claims and suits defended by the insurer; 3.)Medical expenses in connection with an accident on the insured's premises or involving the insured's operations, regardless of fault.

Controlling The Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM)

A federal law regulating the use of unsolicited e-mails for marketing purposes and providing causes of action against violators. Such e-mails are generally prohibited by the Act unless they contain correct header information, a physical address for the mailer, and an opt-out mechanism for recipients. Legal liability in connection with CAN-SPAM violations is ordinarily excluded under standard general liability policies.

Transportation of Mobile Equipment

Bodily injury or property damage arising from the transportation of mobile equipment by an auto owned or operated by the insured is not covered. The policy also excludes liability arising from the use of mobile equipment in a race, demolition contest, or stunting activity.

Who Is an Insured?

If the named insured is designated an individual, the named insured and the insured's spouse are covered, but only with respect to the conduct of the business.

Product Recall

There is no coverage for expenses associated with the recall, repair, replacement, or loss of use of the insured's product because of a known or suspected defect in the product. This exclusion also applies to impaired property in which the insured's product is part of the recalled product.

Professional Liability

There is no coverage for liability due to the insured's providing or failing to provide professional services.

The BOP does not cover personal and advertising injury from:

criminal acts that the insured commits or directs personal and advertising injury that the insured commits or directs knowing that the act will violate the rights of another and inflict injury publication of material known to be false material that was published before the policy took effect a contractual assumption of liability (unless the insured would have been liable even without the contract) breach of contract (except an implied contract to use another's advertising idea) failure of goods or services to meet the insured's claims of performance or quality in its advertising an advertisement that incorrectly describes the price of goods or services infringement of copyright, patent, trademark, trade secret, or other intellectual property rights (except infringement of copyright, trade dress, or slogan in the insured's advertising) electronic chat rooms or bulletin boards that the insured controls unauthorized use of another's name or product in an e-mail address or domain name, and similar tactics to mislead another's potential customers pollutants

Pollution Exclusion

eliminates almost all coverage for claims arising from the release of pollutants.

Nuclear Energy Liability Exclusion

in the BOP precludes coverage when an insured has a nuclear energy liability policy, is an insured under such a policy, or is entitled to indemnification from the U.S. government. The exclusion applies when bodily injury or property damage results from the hazards of nuclear material. The exclusion does not affect coverage for businesses that use radioactive isotopes, the most common nuclear materials in commercial use.

Bodily Injury

includes injury, sickness, disease, and death.

Auto, Watercraft, and Aircraft

it does cover liability arising from the insured's use of nonowned watercraft under 51 feet long, watercraft onshore on the insured's premises, and autos parked on or next to the insured's premises. Coverage also applies to the operation of cherry pickers and similar equipment mounted on an automobile chassis, and to the operation of air compressors, pumps, and generators. The policy covers equipment attached to or part of a land vehicle that would qualify as mobile equipment unless it is subject to a motor vehicle financial responsibility, insurance, or registration law

Mobile Equipment

it refers to equipment such as earthmovers, tractors, diggers, farm machinery, forklifts, etc., that, even when self-propelled, are not considered automobiles for insurance purposes

limited liability company

its members are covered, but only with respect to the conduct of the business. Its managers are covered, but only with respect to their duties as managers.

Arnulfo takes his computer to Patti's shop for repairs. Patti accidentally erases the hard drive, so Amulfo sues her for the loss of the data. Patti's ISO businessowners policy will:

not cover the loss of the electronic data (The BOP does not cover damages arising out of the loss of electronic data.)

For BOP business liability coverage to apply to a loss, the loss need NOT

occur within a single policy period. (Business liability coverage covers sums the insured is legally obligated to pay for bodily injury, property damage, and personal and advertising injury. It covers losses arising within the policy period and within the coverage territory. It also covers continuous injury that occurs during more than one policy period.)