Unit 19: Businessowners Policy (BOP)

other additional coverages

*money order counterfeit money -$1,000 *pollutant cleanup -$10,000 per policy period *preservation of property -30 days *fire department service charge -$2,5000 *water or other liquid material damage -not flood *glass *fire extinguisher recharge -$5,000 per occurrence

who is an insured? designation: corporation

*named insured *executive officers and directors

business income from dependent properties

*this additional coverage covers loss of business income the insured sustains due to physical loss of damage at a dependent property from a covered cause of loss. a dependent property is a business that delivers materials or services to the insured, accepts the insured's products or services, manufactures products for delivery to the insured's customers, or attracts customers to the insured's business *coverage is limited to $5,000 unless a higher limit is shown in the declarations. coverage begins 72 hours after the loss at the dependent property and continues until the date the damage should be repaired, rebuilt, or replaced with reasonable speed and similar quality

endorsements 1

*utility services-direct damage coverage endorsement *utility services-time element coverage endorsement *protective safeguards endorsement *employee-owned

debris removal example

*a building is insured for $500,000. a fire causes $200,000 damage to the building. in addition to the cost of repair ($200,000), the cost of debris removal would be covered up to $50,000. $200,000*25%=$50,000. if the building had been totally destroyed by the fire, the policy limit of $500,000 would be paid plus an additional $25,000 for debris removal since the policy limit has been paid because of the total loss. the total payment would then be $525,000

fire department service charges

*additional coverage applies when a fire department is called to save or protect covered property from a covered cause of loss *the standard limit for this coverage is $2,5000, unless a different limit is shown in the declarations

water or other liquid materials

*additional coverage covers damage to a building that indirectly results from the escape of these items (not flood) *if the damage is otherwise covered, this additional coverage pays for necessary costs to tear out and replace any part of the building to repair damage to the system from which the material escaped

preservation of property

*additional coverage covers direct physical loss or damage from any cause of loss if the property has been removed to another location to preserve it from damage by a covered peril *coverage applies while the property is being moved or while it is temporarily stored at another location, but only for 30 days after the property is first moved

glass expenses

*additional coverage covers expenses incurred to put up temporary plates or board up openings if repair or replacement of damaged glass is delayed

pollutant clean up and removal

*additional coverage does what the debris removal additional coverage does not do: it provides limited coverage for costs to remove pollutants from land or water at the insured's premises as a result of a covered cause of loss *there is a $10,000 limit for each separate 12-month policy period

fire extinguisher systems recharge expense

*additional coverage pays to recharge or replace the insured's fire extinguishers and fire extinguishing systems if they are discharged on or within 100 ft of the premises *it also covers loss or damage to covered property caused by the accidental discharge of chemicals from and fire extinguisher or fire extinguishing system *this coverage has a per occurrence limit of $5,000

electronic data

*additional coverage pays to replace or restore electronic data that have been destroyed or corrupted by a covered cause of loss. electronic data means info, facts, or computer programs stored, created, used on, or transmitted to or from computer software or hardware *the most that will be paid under this additional coverage is $10,000 for all loss or damage sustained in any one policy year

Money Orders and Counterfeit Money

*additional coverage provides coverage for loss that results when an insured accepts these items in good faith and in exchange for merchandise, money, or services as part of normal business transactions. *a $1,000 limit applies to this additional coverage

businessowners policy

*almost any business can buy a commercial package policy (CPP) which includes a long menu of property and liability coverages from which the named insured can choose. however, for certain small businesses, there is an alternative to the complex CPP. this small business policy is similar to the homeowners (HO) policy for individuals in the property, liability, and other coverages are automatically included. in addition, there are some optional coverages a small business may need that can be added for a relatively small premium. the policy is called the businessowners policy (BOP)

forgery and alteration

*applies to an insured's loss that results directly from someone forging or altering checks, drafts, and similar items made or drawn by or on the insured or the insured's agent *if the insured is sued for refusing to pay any part of these items because it has been forged or altered, and if the insured has the insurance company's written promise to defend the insured, the company will pay for any reasonable legal expenses the insured incurs in that defense. however, the most that will be paid for a loss, including legal expenses, is $2,500

for BI and PD liability losses, the BOP excludes liability:

*arising out of expected or intended injury *assumed under contracts or agreements *related to liquor, but only for insureds whose business is manufacturing, distributing, selling, serving, or furnishing alcoholic beverages *for obligations under workers comp, disability benefits, unemployment comp, or similar laws *for BI to employees that arises out of and in the course of their employment with the insured *arising out of pollutants, including associated cleanup costs *arising out of the ownership, maintenance, and use of aircraft, autos, and watercraft *arising out of the use of mobile equipment in, or while practicing or preparing for, any prearranged race, speed or demolition contest, or any stunting activity *arising from rendering or failing to render professional services for damage to property the insured owns, rents, or occupies, or property in the insured's care, custody, or control *for business liability or medical expenses resulting from the hazardous properties of nuclear materials

liability coverage 3

*bodily injury *property damage *personal injury *advertising injury *must occur during the policy period and territory *US, possessions and canada *duty to defend ends when policy limits have been paid

limits of insurance 2

*bodily injury and property damage limit per occurrence *personal injury and advertising-limit per person or organization *no fault medical payments-limit per person *fire legal-limit per fire *aggregate limits per policy period -products and completed operations aggregate -general aggregate for all other claims

liability coverage 1

*business liability coverage covers the insured's legal liability that arises from bodily injury, property damage, and personal and advertising injury. personal and advertising injury (hurt feelings but not bodily injury) is injury that arises out of any of the following offenses: -false arrest, detention, or imprisonment -malicious prosecution -wrongful eviction from a place a person occupies, by or on behalf of its owner, landlord, or lessor -wrongful entry into a place a person occupies, by or on behalf of its owner, landlord, or lessor -invasion of the right of private occupancy of a place a person occupies, by or on behalf of its owner, landlord, or lessor -oral or written publication of material that slanders or libels a person or organization; disparages a person's or organization's goods, products, or services; or violates a person's right of privacy -use of another's advertising idea in the insured's advertisement -infringement of copyright, trade dress, or slogan *for a policy to cover any of the injuries or offenses we have described, the loss must take place in the coverage territory and occur during the policy period.

conditions

*conditions that apply to the entire policy are called the common policy conditions *there are 2 sets of conditions for the property coverage: -the property general conditions and; -the property loss conditions *the liability conditions are called the liability and medical expenses general conditions *most of these are standard conditions that appear in other commercial property and liability policies

building coverage (coverage A)

*coverage applies to more than just the buildings and structures at the premises itself *other items covered under the building coverage include: -completed additions -permanently installed machinery and equipment -fixtures -personal property used to maintain or service buildings, including portable fire extinguishing equipment -additions under construction -alterations and repairs to the buildings or structures -materials, equipment, supplies, and temporary structures that are on or within 100 ft of the premises and being used for additions, alterations or repairs

coverage extensions 1

*coverage extensions permit an insured to extend the insurance for other specified purposes. unless otherwise provided, coverage extensions apply to property located in or on the building covered under the policy or to property located in the open or in a vehicle within 100 ft of the premises *under the newly acquired or constructed property coverage extension, if the insured acquires a building at another location or builds a new building on the described premises, the newly acquired or constructed buildings are covered under the policy's building coverage for up to $250,000 at each location. business personal property coverage can be extended to property, including newly acquired property, at newly acquired or constructed buildings, or to newly acquired property at the described premises. coverage for newly acquired business personal property is $100,000 at each location. coverage applies for 30 days after the new premises or property is acquired or construction has begun on the new premises, until the policy expires or until the insured reports values to the insurance company, whichever occurs first

coverage extensions 2

*coverage may be extended to apply to the insured's covered property, other than money and securities, valuable papers and records, or accounts receivable, while it is in the course of transit or at a premises the insured does not own, lease, or operate. the most the policy will pay for loss or damage under this extension is $10,000 *coverage may be extended to apply to outdoor property, including outdoor fences, signs not attached to buildings, trees, shrubs, and plants, and radio and television antennas, including satellite dishes. coverage is limited to $2,500 and not more than $1,000 for any one tree, shrub, or plant *business personal property coverage may be extended to include personal effects owned by the insured's officers, partners, or employees. the most the company will pay under this extension is $2,500 at each insured premises *if the insured has business personal property coverage, the valuable papers and records coverage extension can be used to cover the costs to research, replace, or restore info on lost or damaged valuable papers and electronic or magnetic records for which duplicates do not exist. there is a max limit of $10,000 at each described premise

utility services- direct damage coverage endorsement

*covers loss or damage to property caused by an interruption in water, communication, or power supply service. for coverage to apply, the property must be scheduled for coverage on the endorsement and the service interruption must be caused by a covered cause of loss *example: the insured, a web site developer, has computer equipment insured under a BOP with the utility services-direct damage endorsement. when an electrical transformer is struck by lightning, a power surge results that damages the equipment. the BOP would cover this loss

hired auto and nonowned auto liability endorsement

*covers the insured's liability for one or both of the following: -bodily injury or property damage that arises out of the maintenance or use of a hired auto (lease, rented, or borrowed) by the insured or the insured's employees in the course of the insured's business -bodily injury or property damage that arises out of the use of any nonowned auto in the insured's business by any person (an employee using their own vehicle while performing work for their employer). this endorsement covers the business, not the employee. a pizza business owner would need this endorsement in case an employee is in an accident while delivering pizza. the owner of the pizza business could get sued even though the employee owned the car *this endorsement is available only when the insured's business doesnt have commercial auto insurance

increased cost of construction

*due to covered peril *if replacement cost coverage *applies only to buildings insured on a replacement cost basis *if a covered cause of loss damages a covered building, the company will pay the additional costs required to comply with an ordinance or law in repairing the damage or replacing damaged parts *this additional coverage has a limit of $10,000

optional coverages-additional premium

*employee dishonesty -must be discovered while policy in force -or within 1 year after expiration *equipment breakdown *outdoor signs *money and securities

business personal property coverage 2

*examples of leased personal property the insured has a contractual responsibility to insure include copy machines and computer equipment leased under contracts that require the lessees to insure the leased property *exterior building glass is covered as business personal property for insureds who are tenants and do not have building coverage. the glass must be owned by the insured or in the insured's care, custody, or control

civil authority

*is available for losses that result from actions of civil authorities *covered is business income an insured loses when a civil authority denies the insured access to the described premises because property not at the described premises was damaged by a covered cause of loss *coverage applies for a specified period *coverage for business income begins 72 hours after the action by the civil authority and is effective for up to 4 consecutive weeks *action of civil authority -for business loss when insured cannot access premise -beginning 72 hours after the action

limits of insurance

*limits are show in the declarations and are the most that will be paid under the circumstances described in the policy. these limits are the limits, no matter how many insureds, claims, suits, people, or organizations involved *policy also includes 2 separate aggregate limits: -one for injury or damage under the products completed operations hazard -for all other injury, damage, or medical expenses except fire legal liability loss *both of the aggregates are 2 times the limit shown in the declarations for liability and medical expenses coverage

employee dishonesty

*loss to business personal property and money and securities that results from dishonest acts of employees is covered by the employee dishonesty optional coverage *coverage for an employee is canceled immediately upon discovery by the insured or any partners, members, managers, officers, or directors of any dishonest act committed by that employee before or after he was hired by the insured *the amount shown in the declarations is the most that will be paid for all loss or damage in one occurrence, whether one or more people or acts are involved *only loss that occurs during the policy period is covered *the insurance company will not pay for a covered loss that is discovered after one year from the end of the policy period *this is known as the discovery period

who is an insured? designation: limited liability company

*named insured *members *managers

who is an insured? designation: parntership

*named insured *named insured's partners and their spouses

who is an insured? designation: individual

*named insured *named insured's spouse

who is an insured 2

*named insured is an individual -includes spouse *named insured is a partnership of individuals -includes spouses *limited liability company -includes members and managers *corporation -includes officers and directors *named insured's employees *named insured's representative, if deceased

coverage extensions 3

*newly acquired -buildings-30 days. $250,000 -personal property-30 days, $100,000 *trees and detached signs -max total of $2,500 -max per tree-$1,000 *personal property of others (not customers) such as employee property on the premises *$2,500 *valuable papers and records -$10,000

medical expenses coverage

*not employees or insureds *1 yr from the date of accident *the BOP also covers specified medical expenses without regard to who is at fault *the policy will pay reasonable expenses for the following within 1 yr of the date of accident: -first aid when an accident occurs -medical services -funeral services *medical expenses will generally not be paid for the following: -any insured (does not include the insured's volunteer workers) -anyone hired to work for or on behalf of any insured or any insured's tenant -a person who is injured on a part of the premises the insured owns or rents and that the injured person normally occupies -a person (whether or not an employee of the insured) who injury calls for benefits payable under a workers' comp, disability, or similar law

optional coverages

*number of optional coverages are included in the BOP, but they apply only if so designated in the declarations *optional coverages usually require an additional premium

debris removal

*pays for expenses to remove debris of covered property caused by a covered cause of loss during the policy period. the most the insurer will pay for the total of the direct physical loss or damage and the debris removal expense is the limit of insurance applicable to the property that was damaged. subject to this limit, the amount reimbursed for debris removal expenses is 25% of the amount paid for the direct physical loss plus the deductible applicable to that loss *an additional $25,000 of insurance for each location in any one occurrence is available for debris removal under the following circumstances: -the direct physical loss and the debris removal expense together exhaust the limit of insurance -the maximum amount collectible for debris removal (25% of the loss plus the deductible) is not enough to cover the debris removal expense *if either of these conditions applies, the total payment for the direct physical loss and the debris removal expense may be up to-but cannot exceed-the policy limit plus $25,000

utility services-time element coverage endorsement

*pays for loss of business income or extra expense if damage to certain utility services property located outside the covered building by a covered cause of loss results in an interruption of utility service to the described premises

covered causes of loss

*provided on an open peril basis *this means that the policy covers any causes of loss that are not specifically excluded or limited. an endorsement can be added to the policy so that coverage is provided on a named peril basis, meaning that the policy covers only the causes of loss specifically named in the endorsement *all open peril *EXCEPT

protective safe guard endorsement

*requires the insured to maintain the protective devices or services listed on the endorsement on specified property as a condition of the policy *examples would be a sprinkler system or burglar alarm *the insurer will not pay for fire damage or burglary losses if the insured failed to keep the protective safeguard in working order or did not notify the insurer within 48 hours that the device was not working properly

eligible risks

*some common requirements -less than 100 employees -revenues of $3 million or less -businesses occupying up to 25,000 square ft -owned buildings up to 100,000 square ft and less than 6 stories -a majority of the operation is located on-premises *the list of businesses that are eligible is extensive, so it is simpler to take a look at the classes of risks that may be underwritten *they include retail, office, and service businesses, apartments, wholesale distributors, contractors, and small restaurants *BOP underwriting-small businesses

deductible

*standard deductible for property losses is $500 *a base deductible applies to all buildings and business personal property coverages, including both mandatory and optional coverages *no deductible applies to the fire department service charge, extra expense, business income, civil authority, and fire extinguisher systems recharge expense additional coverages *standard deductible for the BOP is $500

the following exclusions apply specifically to personal and advertising injury losses. not covered are personal and advertising innjury:

*that is intentional *that arises out of oral or written publication or material that was first published before the beginning of the policy period *that arises out of a criminal act committed by or at the direction of any insured *arising out of the failure of goods, products, or services to conform with advertised quality or performance *arising out of a wrong description of the price of goods, products, or services *committed by insureds in the business of advertising, broadcasting, publishing, telecasting, designing websites, or providing internet search, access, content, or service *arising out of infringement of copyright, trademark, patent, trade secret, or other intellectual property rights *arising out of a criminal act committed by or at the direction of the insured

supplementary payments

*the BOP includes the following supplementary payments. these payments do not reduce the policy limit -expenses the insurance company incurs -up to $250 for the cost of bail bonds -reasonable expenses the insured incurs at the insurance company's request to assist in investigating or defending a claim or suit, including $250 per day for lost earnings because of time off from work -costs the insured is required to pay because of a lawsuit -prejudgment interest the insured is required to pay -interest that accrues after a judgment and before it is paid

collapse

*the collapse additional coverage applies only when specific conditions are met *collapse of a building, or part of a building, is covered only when it is caused by: -building glass breakage -hidden decay -hidden insect or vermin damage -weight of people or personal property -weight of rain or snow *the collapse additional coverage is subject to the limits of insurance. it does not provide an additional amount of insurance

liability coverage 2

*the coverage territory is the following: -the US,, its territories and possessions (e.g. puerto rico), and canada -international waters or airspace between the US, its territories or possessions (e.g. puerto rico), and canada -all parts of the world if the injury or damage arises out of: -goods or services normally made or sold by the insured in the US, its territories or possessions (e.g. puerto rico), and canada -the activities of a person who is away from home on business in any of these places -personal and advertising injury offenses that take place through the internet or similar electronic means of communication *coverage also typically applies in al parts of the world if the insured's responsibility to pay damages is determined in a suit filed in the US, its territories or possessions (e.g. puerto rico), and canada *as part of the liability coverage, the insurance company agrees to defend suits that seek damages under the policy. the insurance company has the sole right to investigate and settle claims and resulting suits. however, when the limits of insurance are used up in paying judgments, settlements, or medical expenses, the company's duty to defend ends. for example, under the BOP, defense costs do not reduce the liability limit of insurance

extra expense

*the extra expense additional coverage allows reimbursement for additional costs an insured incurs to avoid or minimize suspending business operations after a covered loss *insurance company will pay for extra expenses that occur within 12 consecutive months after the date of the direct physical loss or damage. this coverage is in addition to the insured's limits of insurance. *example: an insurance agency that has to relocate temporarily until damage to the agency building has been restored. extra expense would cover the relocation costs including rental of the temporary location *caused by covered peril

BOP property coverage exclusions

*the following are excluded in the BOP: -losses resulting from the enforcement of a building ordinance or law -earth movement (does not include a fire or explosion resulting from earth movement) -government action (government ordering demolition of a building) -nuclear hazard -damage caused by failure of power or other utility services occurring away from the insured's premises (does not apply to loss or damage to computers and electronic media and records) -war and military action -water, including flood, sewer backup, mudslides, or seepage of ground water -mold, wet rot, dry rot, and bacteria, except as provided as an additional coverage -explosion of any steam boilers, pipes, engines, or turbines -dishonest or criminal acts of the insured or employees -voluntarily parting with property if induced to do so by fraud or a trick -pollution (unless the release, discharge, or dispersal is caused by a specified cause of loss) -damage caused by insects, birds, rodents, or other animals

property not covered

*the following property is not covered under the BOP: -aircraft -motor vehicles and other vehicles subject to motor vehicle registration -land -contraband being illegally traded or transported -outdoor fences, signs ($1,000 if attached to the building), trees, shrubs, and plants (except as covered under an optional coverage or coverage extension) -outdoor radio or television antennas, including satellite dishes (except as covered under an optional coverage or coverage extension) -money and securities (except as covered under an optional coverage or coverage extension) -watercraft while afloat, including motors, equipment, and accessories -outdoor signs not attached to buildings (except as covered under an optional coverage or coverage extension) -accounts, bills, food stamps, other evidences of debt, accounts receivable, and valuable papers and records -electronic data -animals (unless owned by others and being boarded)

other optional coverages

*the outdoor signs optional coverage provides coverage for direct physical loss or damage to all outdoor signs on the premises that are owned by or in the care, custody, or control of the insured. the limit of insurance for this optional coverage is specified in the declarations *the money and securities optional coverage applies to loss of money and securities used in the insured's business as a result of theft, disappearance, or destruction. coverage applies while the money and securities are: -at a bank or savings institution -at the described premises -in transit between any of these places

business personal property coverage 1

*there are 5 different classes of business personal property covered: -property owned and used by the insured in the business -property of others in the insured's care, custody, and control (not customer's property) -tenants' improvements and betterments -leased personal property that the insured has a contractual responsibility to insure -exterior building glass *personal property is covered when it is located at the described premises and in or on a building, in a vehicle, or in the open within 100 ft of the premises *tenants' improvements and betterments are fixtures, alterations, installations, or additions that tenants make to rented buildings in which they operate their businesses. for coverage to apply, these items must be permanently attached to the building, acquired or made at the insured's expense, and unable to be legally removed. examples are when tenants have new carpeting or light fixtures installed

limited coverage for fungi, wet rot, dry rot, and bacteria

*this additional coverage for said perils that results from a specified cause of loss. the loss must occur during the policy period, and all reasonable means must have been used to save and preserve the property from further damage at the time of and after that occurrence *the insurer will pay for: -direct physical loss or damage to covered property caused by mold, including the cost to remove it -costs to tear out and replace any part of the building or other property if needed to gain access to the mold -cost of testing performed after removal, repair, replacement, or restoration of the damaged property is completed, provided there is a reason to believe that mold is present *coverage is limited to $15,000 for all loss or damage arising out of all occurrences that take place in a 12-month period, regardless of the number of claims *must occur during the period

business income

*under this condition, the insurance company will pay for loss of business income that occurs when the insured's business operations have to be suspended after a covered loss and income cannot be generated *for coverage to apply, there must be direct physical loss or damage to property at the described premises. this includes personal property in a vehicle or in the open within 100 ft of the premises *the loss must be caused by or result from a covered cause of loss. payment is for loss during the period the property is being restored that occurs within 12 consecutive months after the date of the direct physical damage *this additional coverage is not subject to the limits of insurance

equipment breakdown

*under this optional coverage, the insurance company will pay for direct damage to covered property (such as air conditioning and heating system) caused by a sudden and accidental breakdown, as defined by the policy, that damages the object so it needs to be repaired or replaced. it must be at the described premises *the policy definition of object lists equipment in 2 main categories: -certain boiler and pressure vessels -certain types of ac units *the policy also defines exactly what is not considered an accident

endorsements 2

*utility services-direct damage -damage to property caused by interruption of utility services *utility services-time element -loss of income or extra expense caused by interruption of utility services *protective safe guards -requires sprinklers, burglar alarm, etc -no coverage if not working and no prior notice given to the insurer *employee-owned -liability for rented, leased, or borrow autos -liability for employee-owned vehicles -applies only if the business has no commercial auto insurance

limit shown in the declarations: liability and medical expenses

maximum amount payable for *total of all damages that arise our of: -bodily injury, property damage, and medical expenses in one occurrence -personal injury and advertising injury to one person or organization

limit shown in the declarations: medical expenses

maximum amount payable for: *medical expenses for bodily injury to one person

limit shown in the declarations: under business liability coverage, damage to premises rented to you

maximum amount payable for: *property damage to premises the insured rents or occupies temporarily with the owner's permission that arises out of one fire or explosion

property coverage

the property coverage of the BOP includes 2 major coverages: -coverage A-buildings -coverage B-business personal property *a limit of insurance must be shown in the declarations for each type of property covered *example: an insured who is a tenant (renter) would not require the building coverage

who is an insured

who is considered an insured under the BOP depends on how the named insured is designed in the policy declarations: -as an individual, partnership, joint venture -limited liability company -organization other than a partnership, joint venture, or limited liability company *others that are considered insured's under the BOP include: -named insured's employees (other than executive officers and managers) when acting within the scope of their employment -if the named insured dies, insured's legal representative while acting within the scope of those duties