Insurance Exam ch. 15

Controlled Property

Acts or neglect by any person other than the insured that happen beyond the insured's direction or control will not affect insurance coverage. A breach of any policy condition at one location will not affect coverage at any other location where the breach does not exist. No Benefit to Bailee Other than the insured, no other person or organization with custody of covered property will benefit from the policy. For example, a company with custody of the insured's property for repair would not be covered by the policy; however, if the insured has business personal property coverage for the personal property of others in the insured's care, then the insured will have coverage for damage to that property.

Section I Additional Coverages

Additional Coverages Section I of the Businessowners policy contains a number of Additional Coverages. These are what make the BOP so valuable to a businessowner: if property coverage was obtained through a different commercial property policy, many of these coverages would not be provided unless the insured purchased them separately for an additional premium. Debris Removal The policy covers debris removal expenses after a covered loss. The insurer will pay up to 25% of the amount of loss, included in the applicable limit of insurance. If debris removal expenses exceed this 25% limit, or cause the limit of insurance to be exhausted, an additional $25,000 is provided. Expenses are paid if they are reported within 180 days of the direct physical loss. This coverage does not apply to the cost to remove property that is not covered by the policy or to the cost to remove pollutants.

Exclusions Applicable to Business Liability Coverage

Almost all of the exclusions applying to business liability coverage are common exclusions for commercial liability policies. These exclusions include the following: Expected or intended injury Contractual liability Liquor liability Workers' Compensation Employers Liability Pollution Criminal acts Transportation of mobile equipment Professional services Damage to the insured's property Damage to Your Product Damage to Your Work Damage to impaired property or property not physically injured Recall of products, work, or impaired property Damages arising out of the loss of electronic data Use of an aircraft, auto, or watercraft, including damages during loading or unloading Recording and distribution of material or information in violation of the law The exclusion for expected or intended injury does not apply to bodily injury resulting from the use of reasonable force to protect persons or property. The exclusion for contractual liability does not include liability arising out of an insured contract.

Business Liability

Business liability coverage is provided for the sums for which the insured becomes legally liable to pay as damages for all of the following: Bodily injury or property damage caused by an occurrence that takes place in the coverage territory and during the policy period Personal and advertising injury caused by an offense, arising out of the insured's business, that takes place in the coverage territory and during the policy period Covered damages for bodily injury include claims for care, loss of services, or death resulting from the bodily injury. Liability assumed under an insured contract is also covered. The insurer has a duty to defend the insured against any suit seeking these damages from occurrences to which the policy applies, and those costs are paid in addition to the limit of liability. The insured may investigate any occurrence or offense and settle any claim or suit that may result. The duty to defend ends when the insurer pays the relevant limit of insurance.

Valuable Papers and Records

Business personal property coverage may be extended to apply to direct physical loss to valuable papers and records, as well as costs to research, replace, or restore lost information. Losses are valued at the restoration or replacement cost of the damaged information. This extension excludes coverage for samples, property held for delivery after sale, and property in storage off the premises. Processing or copying errors are not covered. The most the insurer will pay for loss to valuable papers and records located on the described premises is $10,000 per occurrence. If the papers and records are located off-premises, the limit is $5,000 per occurrence. Accounts Receivable Business personal property coverage may be extended to apply to direct physical loss to accounts receivable. The insurer will pay the amounts due from customers that the insured cannot collect, related interest charges, excess collection expenses, and reasonable expenses to re-establish the accounts receivable. On-premises losses are covered up to $10,000 per occurrence, and off-premises losses are covered up to $5,000 per occurrence. Business Personal Property Temporarily in Portable Storage Units Business personal property coverage may be extended to apply to business personal property temporarily stored in a portable storage unit located within 100 feet of the covered building or within 100 feet of the premises, whichever is greater. Coverage will end after 90 days. The coverage limit is $10,000.

Ineligible Risks

Certain risks are always ineligible for coverage under a Businessowners policy, including: Automobile operations, such as:Automobile repair and service stationsAutomobile, mobile home, and motorcycle dealersParking lots and garages, unless incidental to an otherwise eligible risk Restaurants, bars, and grills, unless in compliance with restaurant eligibility Places of amusement, such as theme parks Financial institutions, such as banks Manufacturers If an otherwise-eligible building includes a manufacturing risk or if an otherwise-eligible restaurant is located at an amusement park, they are no longer eligible.

Collapse

Collapse is defined as an abrupt falling down or caving in of all or part of a building, such that it cannot be occupied for its intended use. Without increasing the applicable limit of insurance, coverage is provided for direct physical damage resulting from collapse that was caused by: Hidden building decay, or hidden insect or vermin damage Defective materials or methods in construction or renovation, if collapse occurs during the course of construction or renovation A specified cause of loss Weight of rain collected on a roof, or the weight of people or personal property Water Damage and Other Liquids, Powder, or Molten Material Damage The policy will pay for 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 cost to repair the defect that caused the escape of water or other substance is not covered by this Additional Coverage.

Property Not Covered

Compared to the Business Personal Property Coverage Form, the BOP does not require as many Property Not Covered exclusions because they apply to types of businesses that are already ineligible for BOP coverage. Covered property does not include the following: Money or securities, except as provided by Optional Coverages Accounts, bills, food stamps, other evidence of debt, accounts receivable, or valuable papers and records, except as otherwise provided in the policy Aircraft, automobiles, motor trucks, and other vehicles subject to motor vehicle registration Watercraft and associated equipment, while afloat Computers that are permanently installed or designed to be permanently installed in any aircraft, watercraft, motor truck, or other vehicle subject to motor vehicle registrationHowever, these computers that are held as stock are covered Electronic data, except as provided by Additional CoveragesHowever, prepackaged software held as stock and data integrated into the building's elevator, lighting, heating, ventilation, air conditioning, or security system are covered Land, water, growing crops, lawns, outdoor fences, trees, shrubs, and plants Outdoor fences; outdoor radio or television antennas, including satellite dishes, and their lead-in wiring, masts, or towers; and trees, shrubs, and plants, except as provided by Coverage Extensions Outdoor signs that are not attached to buildings, except as provided by Coverage Extensions or Optional CoveragesHowever, signs attached to the building are covered, with an applicable limit AnimalsHowever, coverage is provided for animals that are owned by others and boarded by the insured, and animals that are held as stock inside of buildings Contraband, or property in the course of illegal transportation or trade

Virus or Bacteria

Coverage is not provided for a virus, bacterium, or microorganism that induces physical distress, illness, or disease. Dishonesty Dishonest or criminal acts, including theft, are excluded if they are done by the insured, anyone with interest in the property, partners, members, officers, managers, employees, directors, trustees, or authorized representatives. Coverage may be given back through the Employee Dishonest Optional Coverage, or through separate Crime insurance. False Pretense Losses resulting from voluntarily parting with property when induced to do so by a fraudulent scheme, trick, or false pretense are not covered by the BOP. Exposed Property Rain, snow, ice, or sleet damage to personal property in the open is excluded from coverage.

Personal Property Off-Premises

Coverage is provided for property in transit off the described premises or at a premises the insured does not own, lease, or operate is insured for up to $10,000. This extension does not cover money, securities, valuable papers and records, or accounts receivable. Outdoor Property Coverage may be extended to outdoor fences, radio and television antennas, satellite dishes, outdoor signs that are not attached to the building, trees, shrubs, and plants. Loss must result from fire, lightning, explosion, riot or civil commotion, or aircraft. A $2,500 limit applies, which includes debris removal expenses, with up to $1,000 provided for any one tree, shrub, or plant. Personal Effects Business personal property coverage may be extended to apply to personal effects owned by the named insured and their officers, partners, managers, and employees. Theft losses and all losses to business tools or equipment are not covered. The limit of this extension is $2,500.

Business Income

Coverage is provided for the actual loss of business income that is sustained during the period of restoration and within 12 consecutive months after the date of direct physical loss or damage. The period of restoration begins 72 hours after the direct loss and ends on either the date when the property should be repaired or the date when business is resumed at a new permanent location, whichever occurs first. 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. This Additional Coverage is not subject to the Section I limits of insurance. Business Income from Dependent Properties Coverage is provided for the actual loss of business income sustained by the insured due to physical loss or damage at the premises of a dependent property caused by or resulting from a covered loss. A dependent property is property owned by others that the insured depends on to deliver materials or services to the insured, accept the insured's products or services, manufacture products, or attract customers. Losses only to the dependent property's electronic data do not trigger coverage. This Additional Coverage has a $5,000 limit that is additional to the Section I limits of insurance.

Increased Cost of Construction

Coverage is provided for the increased costs incurred to comply with the enforcement of an ordinance or law in the course of repair, rebuilding, or replacement of damaged parts of a covered building following a covered loss. The ordinance or law must relate to the construction or repair of buildings, or to zoning or land use requirements. This Additional Coverage has a $10,000 per-building limit that is additional to the Section I limits of insurance. The building must be insured on a replacement cost basis for this Additional Coverage to apply. Glass Expenses The policy will pay for the expenses incurred to install temporary plates or board up openings if replacement of building glass is delayed. Covered expenses also include those incurred to remove or replace obstructions when replacing building glass.

Nuclear Energy Liability Exclusion

Coverage provided by Section II in its entirety does not apply to: Bodily injury or property damage covered by the insured's Nuclear Energy Liability policy Bodily injury or property damage resulting from nuclear material and for which the insured would be indemnified by the United States government Bodily injury, resulting medical expenses, or property damage resulting from nuclear material and arising out of the operation of a nuclear facility by an insured

Coverage Extensions

Coverage provided by the policy may be extended to certain kinds of property, as provided by Coverage Extensions. These extensions are provided automatically, without an additional premium, and their limits are provided in addition to other Section I limits. Newly Acquired or Constructed Property Newly acquired or constructed buildings are insured for up to $250,000, and newly acquired business personal property in those buildings is insured for up to $100,000 per building. Coverage applies for up to 30 days after acquiring the property or beginning construction.

Electrical Disturbance

Except as provided by Additional Coverages, electrical or magnetic injury, disturbance, or erasure of electronic data is excluded. However, these losses resulting from lightning are covered. Certain Computer-Related Losses The failure or malfunction of any computer hardware, software, operating system, network, or microprocessor due to the inability to correctly recognize a date or time is not covered by the policy. Errors or Omissions Losses resulting from errors or omissions in programming or storing data, or in processing or copying valuable papers and records, are excluded. Installation, Testing, Repair Losses resulting from errors or deficiency in design, installation, testing, maintenance, or repair of the insured's computer system or electronic data are excluded.

Transfer of Rights of Recovery Against Others to Us

If any person or organization has received payment by the insurer but has rights to recover damages from another, those rights are transferred to the insurer to the extent of the insurer's claim payment. This is the Subrogation condition. Transfer of Your Rights and Duties Under This Policy The insured's rights and duties under the policy may not be transferred, or assigned, to someone else without the insurer's written consent. This does not apply in the case of the named insured's death, in which case their rights and duties are transferred to their legal representative.

Electronic Data

If electronic data is destroyed or corrupted due to a covered cause of loss, the insurer will provide up to $10,000 of coverage per policy year. Covered causes of loss include Section I's covered perils as well as computer viruses and harmful code. Interruption of Computer Operations If the destruction or corruption of electronic data by a covered cause of loss leads to an interruption in computer operations, this Additional Coverage extends business income and extra expense coverage to apply to that suspension of operations. Covered causes of loss include the specified causes of loss, as well as computer viruses and harmful code. The insurer will pay up to $10,000 per policy year for these amounts. Limited Coverage for Fungi, Wet Rot, and Dry Rot The policy will pay for direct physical loss resulting from fungi, wet rot, or dry rot, including removal costs, the cost to tear out and replace parts of the building damaged to gain access to the fungi or rot, and necessary testing costs after removal and repair. The fungi, wet rot, or dry rot must result from a specified cause of loss, other than fire or lightning. Up to $15,000 is provided for each 12-month policy year.

Coverage Extension - Supplementary Payments

In addition to the limit of insurance for Section II - Liability Coverages, the insurer will pay: All investigation, settlement, or defense expenses incurred by the insurer 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 The cost of bonds to release attachments, but only for bond amounts within the limit of insurance 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 All costs taxed against the insured in a suit Prejudgment interest awarded against the insured on the part of any judgment All interest on the full amount of any judgment that accrues before the judgment is paid

Legal Action Against Us

Legal action against the insurer must be brought within 2 years after the date of direct physical loss.

Section II Limits

Liability and Medical Expenses Limits of Insurance The limits shown in the Declarations are the most the insurer will pay, regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits. The limits apply separately to each consecutive 12-month policy period. The Liability and Medical Expenses limit is the most the insurer will pay for the sum of all damages resulting from: All bodily injury, medical expenses, and property damage arising out of any one occurrence All personal and advertising injury sustained by any one person or organization The Medical Expenses limit is the most the insurer will pay for medical expenses incurred by any one person. The Damage to Premises Rented to You limit is the most the insurer will pay for property damage to a premises rented to the insured. For example, this limit would apply when coverage is provided for the insured's fire legal liability. In the case of fire losses, this limit also applies to a premises temporarily occupied by the insured with permission from the owner of the premises. For some insurers, this limit will apply to any one fire or explosion, and for others, this limit will apply per premises.

Covered Property

Like other commercial property forms, the BOP provides coverage for the building and for business personal property. Building coverage applies to the building and structures at the premises described in the Declarations, including: Completed additions Fixtures, including outdoor fixtures Permanently installed machinery and equipment Personal property owned by the insured that is used to maintain or service the buildings or structures or the premises, including:Firefighting equipmentOutdoor furnitureFloor coveringsAppliances used for refrigerating, ventilating, cooking, dish washing, or laundering If the insured is a landlord: the insured's personal property that is located in apartments, rooms, or common areas If not covered by other insurance: additions under construction, alterations, and repairs to the buildings or structures, as well as related materials, equipment, supplies, and temporary structures on or within 100 feet of the described premises Business personal property coverage applies to business personal property located in or on the buildings at the described premises, or located in the open or in a vehicle within 100 feet of the premises, including: Property the insured owns that is used in the insured's business Property of others that is in the insured's care, custody, or control Leased personal property the insured has a legal responsibility to insure Tenant's improvements and betterments, which are fixtures, alterations, installations, or additions the insured acquired or made to a part of a building or structure that the insured occupies but does not own If the insured is a tenant and a limit of insurance is not shown for building coverage: exterior building glass owned by the insured or in the insured's care, custody, or control

Insured Contracts

Like the CGL's definition, insured contracts refer to a lease of premises, easement agreement, agreement to indemnify the municipality, sidetrack agreement, and elevator maintenance agreement. The Insured's Product and Work When used by the policy, Your Product refers to any goods or products manufactured, sold, handled, distributed, or disposed by the insured or others trading under the insured's name. Containers that are not vehicles, materials, parts, and equipment connected to these goods and products are included in this definition, as are warranties made about the quality of the product and any instructions. Vending machines are not included in this definition. Your Work refers to work or operations performed by the insured, including materials, parts, and equipment furnished in connection with that work. The products-completed operations hazard includes all bodily injury and property damage occurring away from the insured's premises that arises out of the insured's product or work.

Section II - Who Is An Insured

Like the CGL, the designation of the named insured in the Declarations determines who is considered an insured: If an individual or sole proprietorship is designated, the named insured and their spouse are insureds If a partnership or joint venture is designated, the named insured and their spouse are insureds, as are the named insured's partners, members, and their spouses If a limited liability company is designated, the named insured and their members and managers are insureds If any other organization (like a corporation) is designated, the named insured and their executive officers, directors, and stockholders are insureds If a trust is designated, the named insured and their trustees are insured Additionally, each of the following are also considered insureds: Volunteer workers, while performing duties for the insured's business, and employees Any person or organization acting as the named insured's real estate manager Any person or organization with temporary custody of the named insured's property after the insured's death, until a legal representative has been appointed The named insured's legal representative if the named insured dies

Off-Premises Utility Services

Losses resulting from an off-premises failure of power, communication, water, or other utility service are excluded from coverage, including losses caused by a power surge that occurs because of the failure. Communication services include any service related to internet access or access to a cellular network. This exclusion does not apply to computers and electronic data. If the failure or power surge results in a covered cause of loss, the damages resulting from the covered peril will be covered.

Electrical Apparatus

Losses resulting from artificially generated electrical, magnetic, or electromagnetic energy that damages or interferes with any electrical device, appliance, system, or network are excluded. However, if fire results, the fire damage is covered. Also, damage to computers due to artificially generated energy is covered if it results from an occurrence that took place within 100 feet of the described premises, including an interruption of the power supply or a power surge.

Continuous or Repeated Seepage or Leakage of Water

Losses resulting from the continuous or repeated seepage or leakage of water that occurs over a period of 14 days is excluded. This also applies to the presence or condensation of humidity, moisture, or vapor that occurs over the same time period.

Steam Apparatus

Losses resulting from the explosion of steam boilers, steam pipes, steam engines, or similar equipment are excluded. This is related to one of the policy's limitations, which removes coverage for damage directly to steam equipment itself, while this exclusion excludes losses to other property resulting from a steam boiler explosion. This coverage is provided by the Equipment Breakdown Protection Optional Coverage or other Equipment Breakdown insurance.

Definitions

Many of the definitions included for Section II are the same as those included in the CGL. Coverages Bodily injury means bodily injury, sickness, or disease sustained by a person, including any resulting death. Property damage is any physical injury to tangible property, including loss of use of that property, or any loss of use of property that is not physically injured. Electronic data is not considered tangible property. Personal and advertising injury means injury resulting from: False arrest, detention, or imprisonment Malicious prosecution Wrongful eviction, wrongful entry, or invasion of privacy committed by a landlord Oral or written invasion of privacy Slander or libel of a person's or organization's goods, products, or services Using another person's or organization's advertising ideas in the insured's advertisement Copyright infringement in an advertisement

Covered and Excluded Property

Many of the definitions provided by Section I define property referenced throughout the policy. Money refers to currency, coins, bank notes, traveler's checks, register checks, and money orders. Securities are negotiable or non-negotiable instruments or contracts representing money or other property, such as tokens, tickets, stamps, and evidences of debt. Valuable papers and records include documents, manuscripts, records, abstracts, books, deeds, drawings, films, maps, and mortgages. Money and securities are not included in this definition. Computers are programmable electronic equipment used to store, retrieve, and process data. Coverage for computers includes associated peripheral equipment, such as printers. Computers used to operate production-type machinery or equipment are not covered. Electronic data means information, facts, or computer programs that are stored as, stored on, created on, used on, transmitted to, or transmitted from computer software, tapes, drives, cells, and other repositories. Stock refers to merchandise held in storage or for sale, raw materials and in-process or finished goods. The policy's definition of stock includes supplies used for packing and shipping.

Medical Expenses

Medical expense coverage covers reasonable medical expenses for bodily injury to others resulting from an accident 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. Expenses must be incurred and reported to the insurer within 1 year of the accident. Reasonable expenses include: First aid administered at the time of the accident Necessary medical, surgical, X-ray, and dental services, including prosthetic devices Necessary ambulance, hospital, professional nursing, and funeral services Payments are made regardless of fault.

Optional Coverages

More coverage options are available to the insured, primarily to add coverages that are normally excluded or limited. These must be selected by the insured and a limit of insurance will be indicated on the Declarations page if the insured applies any of these Optional Coverages to their policy. Outdoor Signs This coverage provides insurance for direct physical loss, on an open perils basis, to all outdoor signs at the described premises, up to the specified limit. This allows the insured to have higher limits of insurance for outdoor signs, without being limited to the policy's sublimit for attached signs or the limit provided by the Outdoor Property Coverage Extension. Money and Securities This coverage protects money and securities used in the insured's business while at a bank or savings institution; within the living quarters of the insured, or the living quarters of the insured's partners, managers, or employees; at the described premises; or in transit between any of these places. Covered perils are theft, disappearance, and destruction, but accounting errors are not covered. Losses caused by employee theft are also not covered, as a separate Optional Coverage would be required. An Inside the Premises limit is provided for losses in a financial institution or on the described premises, and an Outside the Premises limit is provided for losses occurring elsewhere. Records of all money and securities must be kept. Employee Dishonesty This coverage provides insurance for losses to business personal property, including money and securities, resulting from dishonest acts (such as theft) committed by any of the insured's employees acting alone or in collusion with others. Equipment Breakdown Protection This coverage provides insurance for covered property damaged by the breakdown of pressure, mechanical, or electrical machinery and equipment owned by the insured or in the insured's care, custody, or control, and located at the described premises.

Types of Eligible Businesses

Restaurants Limited-line cooking and fast food restaurants occupying up to 7,500 square feet of space are eligible. Max capacity requirements may also apply, and only sales of beer and wine are allowed. Eligible restaurants include bakeries and pizza shops. Office Buildings Office buildings must be occupied primarily for office purposes, with a height of up to 6 stories and total area of up to 100,000 square feet. Contractors 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. Work may not be done at heights over 3 stories. Apartment Buildings Apartment buildings of any size are eligible, including residential condominium associations. Incidental occupancies, such as an office or retail space, are allowed if their total area does not exceed 35,000 square feet. Condominium Commercial Unit-Owners Eligible units include those used for mercantile, wholesale, service or processing, and contracting occupancies. This could include units used for bookstores, toy stores, furniture stores, and other retail stores. Motels Eligible motels may be any size, but they are limited to a height of 3 stories and may not be seasonal in their operation. Eligible restaurant occupancies are also allowed, but the motel may not contain a bar or cocktail lounge. Processing and Service Risks Processing and service businesses include dry cleaners, laundromats, barber and beauty shops, dental labs, funeral homes, appliance repair services, and print shops. Convenience Food Stores, Grocery Stores, and Supermarkets If a convenience food store also sells gasoline, the food store must be at least 3,000 square feet in total area. There may be eligibility limitations regarding the amount of gas sales, such as gas sales not exceeding 75% of total annual gross receipts. Auto repair services, car washes, and propane tank filling stations are typically not allowed. Grocery stores and supermarkets must meet the standard eligibility requirements. Self-Storage Facilities These facilities may be any size, but they are limited to a height of 2 stories. Cold storage or storage of industrial materials, chemicals, pollutants, or waste do not

Section I - Property Coverages

Section I of the Businessowners policy addresses the property coverages afforded by the policy. The standard BOP is written on an open perils basis to cover all direct physical losses to covered property, unless otherwise excluded or limited. A named perils option is available by endorsement.

Hired Auto and Non-owned Auto Liability Endorsement

Some businesses may not own autos, meaning a Commercial Auto policy is unnecessary, but it may still have auto liability exposures from hired and non-owned autos. This exposure is excluded on the unendorsed Businessowners policy, but the Hired Auto and Non-owned Auto Liability Endorsement may be added to include this protection. The endorsement extends the policy's business liability coverage to apply to bodily injury or property damage arising out of: The maintenance or use of a hired auto by the named insured or their employees in the course of the insured's business The use of a non-owned auto by any person in the course of the insured's business A hired auto includes any auto that the insured leases, hires, rents, or borrows, not including autos owned by the insured's employees, partners, executive officers, or members of their household. A non-owned auto means any auto the insured does not own, lease, hire, rent, or borrow, including autos owned by the insured's employees, partners, executive officers, or members of their household.

Personal and Advertising Injury

Some personal and advertising injuries are excluded from coverage, including those injuries that: Are caused by an insured with knowledge that the act would violate another person's rights Arise out of oral or written material published at the direction of an insured with knowledge of its falsity Arise out of liability assumed in a contract or agreement, unless the liability would have existed in absence of the contract or agreement Arise out of a breach of contract Arise out of the failure of goods, products, or services to conform to a statement of quality or performance made in an advertisement Arise out of the wrong description of the price of goods, products, or services made in an advertisement Arise out of an electronic chatroom or bulletin board the insured hosts, owns, or controls Are committed by an insured whose business is advertising, broadcasting, publishing, or web design Exception Like the CGL, the BOP's exclusions have an exception that provides coverage for the insured's fire damage legal liability, subject to its own limit of insurance. This exception allows coverage for damage to property the insured rents that is caused by fire or explosion.

Section I Exclusions

The BOP contains a number of exclusions, many of which are common to property policies. Except as provided by the policy's coverages, losses resulting from the following are excluded: Ordinance or law Earth movement, including earthquake and landslide Governmental action Nuclear hazard War and military action Fungi, wet rot, or dry rot Collapse Pollution Neglect Water, such as flood, mudslide, and sump pump backup Consequential losses, such as delay, loss of use, or loss of market Smoke, vapor, or gas from agricultural smudging or industrial operations A number of other exclusions also apply.

Pollutants

The BOP defines pollutants to include any solid, liquid, gaseous, or thermal irritant or contaminant. This includes smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes material to be recycled, reconditioned, or reclaimed. Operations When used by the policy, operations refers to the insured's business activities occurring at the described premises.

Vacancy

The BOP's Vacancy condition is the same as the one found in the Building and Personal Property Coverage Form of a commercial package policy. If the insured is a tenant, the rented unit is considered vacant if it does not contain enough personal property for the insured to conduct customary operations. If the insured is a building owner or the general lessee of an entire building, the building is considered vacant if less than 31% of the building's total square footage is rented to a lessee or sublessee or used by the building owner to conduct customary operations. Buildings under construction or renovation are not considered vacant.If the building where loss or damage occurs is vacant for more than 60 consecutive days immediately before the occurrence, the insurer will reduce loss payments by 15%. However, losses resulting from the following perils are excluded completely: Vandalism Sprinkler leakage, unless it is protected against freezing Building glass breakage Water damage Theft or attempted theft

Businessowners Policy

The Businessowners policy (BOP) is essentially the commercial lines equivalent of the Homeowners policy, offering property and liability coverages in a package policy. For eligible businesses, the cost of a BOP is more competitive than if the insured business purchased property and liability policies on separate monoline policies or together on a Commercial Package policy. This is partially because the BOP automatically offers property coverages that could only be provided by endorsement on other monoline or package policies. The liability coverages are the same as those provided by a Commercial General Liability policy, including premises and operations exposure coverage, products and completed operations exposure coverage, coverage for personal and advertising injury liability, and medical payments to others. Additionally, the Businessowners policy does not use causes of loss forms for its property coverages, and the BOP's liability coverages do not use the coverage forms necessary for a CGL policy. Instead, the BOP provides broad coverages in its property and liability sections. This chapter discusses the coverages, exclusions, and conditions provided by the Businessowners Coverage Form.

Protective Safeguards Endorsement

The Protective Safeguards Endorsement adds an additional condition to Section I that requires the insured to maintain protective safeguards listed in the endorsement. Possible safeguards include: Automatic sprinkler system Automatic fire alarm Security service, with a recording system or watch clock and making hourly rounds through the building when the premises are not in operation Service contract with a privately owned fire department Automatic commercial cooking exhaust and extinguishing system Any other protective system described on the endorsement If an automatic sprinkler system or commercial cooking exhaust and extinguishing system is damaged and shut off for 48 hours or longer, the insurer must be notified. If the required systems are not maintained, or if the insured knew of any suspension or impairment of the required systems and failed to notify the insurer before a fire loss, that loss is not covered.

Utility Services - Direct Damage Endorsement

The Utility Services - Direct Damage Endorsement pays for loss to covered property caused by the interruption of water, communication, or power supply services to the described premises. The interruption must result from direct physical damage to utility services property, caused by a covered peril. Some insurers may require the utility services property to be located outside of a covered building. Losses to electronic data are not covered. A limit of insurance for utility services is shown on the endorsement, subject to the limit of insurance applicable to covered property. Utility Services - Time Element Endorsement The Utility Services - Time Element Endorsement pays for business income losses and extra expenses that result from an interruption of water, wastewater removal, communication, and power supply services to the described premises. The interruption must result from direct physical damage to utility services property, caused by a covered peril. Some insurers may require the utility services property to be located outside of a covered building. Time element losses resulting from a service interruption that causes a loss of or damage to electronic data is not covered. A limit of insurance for these losses is shown on the endorsement, which will apply per occurrence. This limit is subject to the limit of insurance applicable to covered property.

Civil Authority

The coverage applies when civil authorities prohibit access to the described premises due to a covered loss that occurs within 1 mile of the insured's property. This Additional Coverage pays for losses to business income and any extra expenses incurred as a result of the prohibited access. The coverage begins 72 hours after the action occurs and ends 4 consecutive weeks after the coverage begins. Money Orders and Counterfeit Paper Currency The insurer will pay up to $1,000 for loss resulting from the insured's good-faith acceptance of money orders that are not payable upon presentation or counterfeit money during the regular course of business in exchange for merchandise, money, or services. Forgery or Alteration The insurer will pay up to $2,500 per loss resulting from forgery or alteration of a check, draft, or similar promise of payment that the insured, or someone impersonating the insured, has issued.

Changes

The first named insured is authorized to make policy changes with the insurer's consent and only by written endorsement issued by the insurer. Concealment, Misrepresentation, and Fraud The policy is void in any case of fraud committed by the insured, as it relates to the policy. It is also void if any insured intentionally conceals or misrepresents a material fact concerning the policy, their insurable interest in the property, or a claim. Examination of Your Books and Records The insurer may examine and audit the insured's books and records, as they relate to the policy, any time during the policy and for up to 3 years afterward.

Premiums

The first named insured is responsible for premium payments and will receive any return premiums paid by the insurer. The premium will be recalculated at each policy renewal, in accordance with the insurer's current rates and rules. However, the insured may pay a continuation premium prior to the policy's anniversary date to avoid this recalculation. Premium Audit If the designated premium is an advance premium, the policy is subject to a premium audit.

Cancellation

The first named insured may cancel the policy at any time by mailing or delivering advance written notice to the insurer. The insurer may cancel the policy by mailing or delivering advance written notice to the first named insured, subject to certain notice requirements. Reasons for cancellation include, but are not limited to, the following: Nonpayment of premium The building has been unoccupied or vacant for 60 or more consecutive days. This does not apply to seasonal unoccupancy or to buildings being constructed or renovated. Buildings are considered unoccupied when at least 65% of the rental units or floor area is vacant or unoccupied Permanent repairs to the building have not started and have not been contracted for within 30 days of the initial loss payment The building has an outstanding order to vacate or demolition order, or is otherwise declared unsafe by a governmental authority Fixed and salvageable items have been or are being removed from the building and are not being replaced The insured failed to furnish necessary heat, water, sewage, or electricity services for 30 or more consecutive days The insured failed to pay property taxes that have been outstanding for more than 1 year Notice is sent to the first named insured's last known mailing address, and the cancellation date will be the end of the policy period. If the insurer cancels, it will refund the unearned premium on a pro rata basis. If the insured cancels, a short-rate refund of unearned premium will be delivered.

Duties in the Event of Occurrence, Offense, Claim, or Suit

The insured must notify the insurer as soon as practicable of an occurrence or offense that may result in a claim. This notice should include: How, when, and where the occurrence or offense took place The names and addresses of any injured persons and witnesses The nature and location of any injury If a claim is made or suit brought, the insured must immediately record the specifics of the claim or suit, including the date, and notify the insurer as soon as practicable. The involved insureds must: Immediately send copies of demands, notices, summonses, and legal papers Authorize the insurer to obtain records and other information Cooperate with the insurer's investigation, settlement, or defense Insureds may not voluntarily make a payment or incur an expense, except for first aid, without the insurer's consent. Otherwise, that payment or expense is paid at the insured's own cost.

Inspections and Surveys

The insurer has the right, but is not obligated, to make inspections and surveys at any time, give reports on the conditions, and recommend changes. These inspections and surveys relate to insurability and premiums, and they are not health or safety inspections, meaning the insurer does not warrant that conditions are safe, healthful, or in compliance with the law. Insurance Under Two or More Coverages If two or more of the policy's coverages apply to the same loss, the insurer is only liable for the actual amount of loss or damage. Liberalization If any revisions are made to the policy form that would broaden coverage without an additional premium and that were adopted within 45 days prior to or during the insured's policy period, the broadened coverage is automatically applied to the insured's policy.

Loss Payment

The insurer may, at their option, do any of the following: Pay the value of lost property Pay the cost to repair or replace the lost property Take all or part of the property at an agreed or appraised value Repair, rebuild, or replace the damaged property with property of like kind and quality Losses are typically settled on a replacement cost basis. Although a true coinsurance provision is not included in the BOP, an Insurance to Value provision is included. This means that in the event of a partial loss, if property is insured for less than 80% of its replacement value, a penalty will be applied to the loss payment. Some insurers may agree to waive this provision by endorsement. If insurance is maintained to value, the insurer will not pay the replacement cost until the damaged property is actually repaired or replaced, which should be done as soon as reasonably possible after a loss. The insured may choose to apply an actual cash value loss settlement option to losses to the buildings. However, regardless of which basis applies to the buildings, certain property will be valued on an ACV basis automatically, including: Used property or secondhand merchandise held in storage for sale Property of others Household contents, except personal property in apartments or rooms furnished by the insured in their capacity as a landlord Works of art, antiques, manuscripts, and rare articles like etchings, pictures, statuary, etc. Coverage is provided for a party wall, which is a wall that separates adjoining units or buildings owned by different parties. The insured is paid a proportion of the loss based on the insured's proportion of the wall to the adjoining owner's proportion of the wall. If the other owner does not repair their proportion of the wall, the insurance will pay for the entire wall and subrogate against the adjoining owner.

Exclusions Applicable to Medical Expenses Coverage

The insurer will not pay expenses for bodily injury: To any insured, except for volunteer workers To any tenant injured on the part of the premises the tenant rents To a person hired to do work for any insured or insured's tenant, such as an independent contractor To any person if benefits are payable under a Workers' Compensation or similar law To a person injured while participating in any physical exercises or athletic contests Included within the products-completed operations hazard Excluded under business liability coverage

Limitations

The insurer will not pay for losses to steam boilers, steam pipes, steam engines, steam turbines, or water heating equipment like hot water boilers when the loss or damage is caused by any internal condition or event. However, losses to this kind of equipment that result from an internal explosion, such as damage caused by a gas explosion inside the furnace, are covered. The insurer will not pay for losses to missing property if the only evidence is an inventory shortage and there is no physical evidence. This limitation does not apply to the Money and Securities Optional Coverage. Property that has been transferred based on unauthorized instructions is also not covered. Loss to the interior of a building or structure, such as rain damage to floors, is covered only if either the exterior is damaged first or the loss results from the thawing of snow, sleet, or ice on the building. The following types of property are covered for theft losses up to certain limits: $2,500 for furs, fur garments, and garments trimmed with fur $2,500 for jewelry, watches, pearls, precious and semiprecious stones, bullion, gold, silver, platinum, and other precious alloys or metals $2,500 for patterns, dies, molds, and forms Animals and fragile articles (such as glassware, statuary, and marble) are protected against the specified causes of loss and building glass breakage.

Seasonal Increase in Business Personal Property Limit

The limit of insurance for business personal property will automatically increase by 25% to account for fluctuations in the value of business personal property, such as stock, held at the premises during a peak season. A different percentage may be indicated in the Declarations. In order for this seasonal increase to apply, the business personal property limit shown in the Declarations must be at least 100% of the insured's average monthly values during the 12 months immediately preceding the loss.

Limits of Insurance

The most the policy will pay for loss or damage in any one occurrence is the applicable limits of insurance shown in the Declarations. The limits may be individually applied to property, such as scheduled limits for each building, or the policy may indicate a blanket limit for a type of property (building or business personal property). The most the policy will pay for loss or damage to outdoor signs that are attached to the building is $1,000 per sign, per occurrence.

Loss or Damage to Products

The policy will not cover any loss or damage to merchandise, goods, or other product caused by an error or omission in any stage of development, production, or use of the product. This includes planning, testing, processing, packaging, installation, maintenance, or repair. Business Income and Extra Expense Exclusions The insurer will not pay for any extra expense or increased business income loss resulting from a delay in rebuilding or repairing property or resulting from an interference at the location by striking workers. Coverage is also not provided for increased expenses resulting from suspension, lapse, or cancellation of a license, lease, or contract. Exclusion to the Accounts Receivable Coverage Extension The insurer will not pay for loss or damage to accounts receivable caused by alteration, falsification, concealment, or destruction to conceal wrongful acts. Errors or omissions in bookkeeping, accounting, or billing are also excluded.

Pollution Clean-Up and Removal

The policy will pay up to $10,000 per location for the extraction of pollutants from land or water if the pollution resulted from a covered loss. The limit applies during each separate 12-month policy period and includes the cost of testing during extraction. Preservation of Property The policy will cover property being moved or temporarily stored at another location to save and protect it from a covered peril. Coverage is provided on an open perils basis for up to 30 days. Fire Department Service Charge The policy will pay up to $2,500 per location for the insured's liability for fire department service charges assumed by contract or agreement prior to the loss, or required by local ordinance. Fire Extinguisher Systems Recharge Expense The insurer will pay up to $5,000 per occurrence for the cost of recharging or replacing fire extinguishers and fire extinguishing systems if they are discharged, as well as loss to covered property resulting from accidentally discharged chemicals.

Resumption of Operations

The policy will reduce the amount of business income loss to the extent that the insured is able to use damaged or undamaged property to resume operations at the described premises or elsewhere, even if the insured does not resume operations.

Section I Loss and General Conditions

The policy's property and liability coverage sections each have their own conditions, and more conditions applicable to both sections are included in Section III. If the insured violates a condition, the insurer may refuse to cover losses at any location where that violation exists. Section I of a Businessowners policy contains a number of common property conditions, including: Abandonment Appraisal Recovered Property Mortgage holders Policy Period, Coverage Territory

Deductibles

The standard deductible is $500, though the insured may choose a higher or lower deductible. The deductible applies per location, per occurrence. The insurer will pay the amount of loss that exceeds the applicable deductible, up to the applicable limit of insurance. The Optional Coverages, if chosen, will have their own deductible. The deductible does not apply to the following Additional Coverages: Fire Department Service Charge Fire Extinguisher Systems Recharge Expense Business Income Extra Expense Civil Authority

Exclusions

This coverage does not apply to bodily injury sustained by employees. It also does not apply to property damage to property owned by, transported by, rented to, or loaned to the insured, or property that is otherwise in the insured's care, custody, or control. Insureds Under the endorsement, the named insured is considered an insured, as is: Any person using a hired auto with the named insured's permission Any partner, executive officer, or employee using a non-owned auto in the course of business However, if a partner, executive officer, or employee is using an auto that they own or their family member owns, they are not considered an insured. Essentially, this provision clarifies that the endorsement covers the liability of the business for damages resulting from the partner's or executive officer's use of their own auto for business purposes. The partner or executive officer may still be personally liable for damages, which would be covered by their own insurance policy.

Extra Expense

This coverage pays for the necessary expenses the insured incurs to minimize the suspension of business during the period of restoration and within 12 consecutive months after the date of direct physical loss or damage. The period of restoration applicable to this coverage begins immediately after a loss. This Additional Coverage is not subject to the Section I limits of insurance.

Other Types of Loss

This exclusion contains a number of commonly excluded perils, including: Wear and tear or latent defect Rust, corrosion, decay, or deterioration Smog Settling, cracking, shrinking, or expansion Nesting or infestation of insects, birds, rodents, or animals Mechanical breakdown, except for breakdown of computers Humidity damage to personal property Extreme temperatures that damage personal property Marring or scratching of personal property Further, the following perils are excluded unless they cause a covered cause of loss: Weather conditions Acts or decisions of any person, group, organization, or governmental body Negligent work, such as faulty zoning, design, construction, materials, or maintenance

Specified Causes of Loss

Though the BOP provides open perils coverage for most losses, certain coverages on the policy are provided only if the loss results from specified causes of loss. These specified perils are: Fire or lightning Windstorm or hail Explosion Riot or civil commotion Aircrafts Vehicles Smoke Vandalism Sinkhole collapse Volcanic action Falling objects Weight of snow, ice, or sleet Leakage from fire extinguishing equipment Water damage (accidental discharge of water or steam from a system or appliance)

Automatic Increase in Building Limit

To help account for inflation, the limit of insurance for buildings will automatically increase by 8% annually. A different percentage may be indicated in the Declarations. The increase is applied per day in the policy period. To calculate the daily amount of increase, multiply the percentage of increase by the building's limit of insurance, then divide by 365.

Aggregate Limits

Two aggregate limits also apply. The Products-Completed Operations Aggregate limit applies to all bodily injury and property damage included in the products-completed operations hazard. This aggregate is twice the Liability and Medical Expenses limit. The General Aggregate limit applies to all damages relating to bodily injury or property damage (except those included in the products-completed operations hazard), all medical expenses, and all damages for personal and advertising injury. This aggregate is twice the Liability and Medical Expenses limit. For some insurers, payments for the insured's fire legal liability will not reduce the aggregate limit.

Eligible Risks

Unlike a Commercial Package policy, which is designed to accommodate the needs and exposures of larger businesses, the Businessowners policy (BOP) is designed to better serve the needs of small- to medium-sized businesses that do not engage in high-risk or highly specialized operations. Generally, businesses that generate over $6 million in annual gross sales or that occupy more than 35,000 square feet of space are ineligible, unless otherwise noted. Other requirements also apply to eligibility, taking into account the number of stories, business type, and characteristics of business operations. Each insurer will have specific eligibility requirements, but most conform to certain standardized requirements.

Frozen Plumbing

Water or other materials leaking from plumbing, heating, or air conditioning equipment because of frozen plumbing is not covered. However, coverage may be given back if the insured did their best to maintain heat in the building.

Duties in the Event of Loss or Damage

he insured must: Notify the police if any laws are broken Give prompt notice of the loss, including a description of the involved property Give a description of how, when, and where loss occurred as soon as possible Take all reasonable steps to protect covered property from further damage and keep a record of expenses incurred to do so Provide complete inventories of damaged and undamaged property at the insurer's request, including quantities, costs, values, and amount of loss claimed Allow the insurer to inspect the property proving loss and to examine the insured's books and records as often as reasonably required, including allowing the insurer to take samples or make copies Send a signed, sworn proof of loss to the insurer within 60 days of the insurer's request Cooperate with the insurer in the investigation or settlement of the claim Resume all or part of business operations as quickly as possible Any insured my be examined independently and under oath about any matter related to the policy, the claim, or the insured's books and records. The insured's answers must be signed.