Summary: Insurance Services Office (ISO) has revised the businessowners program. Under the new program, the property and liability coverages and the general conditions have been incorporated into the current form BP 00 03 07 02. Therefore, the BP 00 01 01 97 (standard form), BP 00 02 01 97 (special form), BP 00 09 01 97 (conditions), and BP 00 06 01 97 (liability) forms have been withdrawn.
In many respects, the liability coverages on the BP 00 03 07 02 are comparable to the occurrence version of ISO's commercial general liability (CGL) coverage form. Consequently, the businessowners insured has essentially the same scope of coverage for premises and operations, products and completed operations, advertising and personal injury, and medical payments as an insured with the CGL form. However, there are some differences between the two forms, as described subsequently in this discussion. For a further discussion of the CGL provisions, see [IDL:CGL Definitions.xml^"Commercial General Liability Definitions"],[IDL:CGL Cvg Fm - Cvg A .xml^"CGL Coverage Form—Coverage A"], [IDL:CGL Cvg Fm - Cvg B.xml^"CGL Coverage Form—Coverage B"], [IDL:CGL Med Pyaments.xml^"Medical Payments"], and [IDL:General Provisions of CGL.xml^"General Provisions of the CGL"]. Print subscribers can find this information in the Public Liability section of the Casualty and Surety volume.
Following is a discussion of the liability coverages in the BP 00 03 07 02. Many insurers may not have adopted the current form, so take this into account when making coverage determinations.
Topics covered:
Business liability coverage
Supplementary payments
Medical expenses
Business liability exclusions
Exclusions applicable to medical expenses
Nuclear energy exclusion
Who is an insured
Limits of insurance
Liability and medical expenses conditions
Liability definitions
Business Liability Coverage
1. Business Liability
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury”, “property damage”, or “personal injury and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury”, “property damage”, or “personal injury and advertising injury” to which this insurance does not apply. We may at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result. But:
(1) The amount we will pay for damages is limited as described in Paragraph D – Liability And Medical Expenses Limits Of Insurance in Section II – Liability; and
(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements or medical expenses.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Paragraph f. Coverage Extension – Supplementary Payments.
Analysis
The most noticeable difference between the businessowners liability form and the CGL is format. In the businessowners liability form, bodily injury and property damage liability as well as advertising and personal injury liability are all insured under one coverage called “business liability.” In contrast, the CGL insures bodily injury and property damage liability under coverage A, and advertising and personal injury through coverage B. The businessowners liability form also provides medical expenses coverage which is equivalent to medical payments coverage (coverage C) of the CGL.
b. This insurance applies:
(1) To “bodily injury” or “property damage” only if:
(a) the “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;
(b) The “bodily injury” or “property damage” occurs during the policy period; and
(c) Prior to the policy period, no insured listed under Paragraph C.1. Who Is An Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known before the policy period.
(2) To “personal and advertising injury” caused by an offense arising out of your business, but only if the offense was committed in the “coverage territory” during the policy period.
c. ”Bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph C.1. Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim, includes any continuation, change or resumption of “bodily injury” or “property damage” after the end of the policy period.
d. ”Bodily injury” or “property damage” will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph C.1. Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim:
(1) Reports all, or any part, of the “bodily injury” or “property damage” to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the “bodily injury” or “property damage”; or
(3) Becomes aware by any other means that “bodily injury” or “property damage” has occurred or has begun to occur.
e. Damages because of “bodily injury” include damages claimed by any person or organization for care, loss of services or death resulting at any time from the “bodily injury”.
Analysis
The only difference in 1.a. through 1.e. between the current CGL form and the businessowners liability coverages is that the CGL form places item 1.b.(2) in coverage section B – personal and advertising liability.
The current businessowners form, like the CGL form, has been revised to state that the insurance applies only if no insured or employee authorized to receive notice of an occurrence or claim knew prior to the policy period that bodily injury or property damage had occurred. If any of these listed insureds or employees had such knowledge, any continuation of the bodily injury or property damage will be considered to have been known before the policy period and therefore will not be covered.
This language has arisen from the case of Montrose Chemical Corporation v. Admiral Insurance Company, 913 P.2d 878 ( Cal. 1995); for more information on this language and the CGL form, see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A", Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]. However, bodily injury or property damage which occurs during the policy period, and was not known to have occurred prior to the policy period, will include any continuation of the injury or damage occurring after the end of the policy period.
There are three ways injury or damage may be deemed to have been known to occur. First, the injury or damage is reported to the insurer. Second, an insured or another authorized person receives written or verbal claim for damages because of the injury or property damage. Third, an insured or other authorized person becomes aware by any other means—a TV story, perhaps—that injury or damage has occurred.
Damages claimed because of bodily injury include damages claimed by any other person for care, loss of services, or death resulting from the bodily injury.
f. Coverage Extension – Supplementary Payments
(1) In addition to the Limit of Insurance of Section II – Liability we will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
(a) All expenses we incur.
(b) Up to $250 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which Business Liability coverage for “bodily injury” applies. We do not have to furnish these bonds.
(c) The cost of bonds to release attachments, but only for bond amounts within our Limit of Insurance. We do not have to furnish these bonds.
(d) All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim of “suit”, including actual loss of earnings up to $250 a day because of time off from work.
(e) All costs taxed against the insured in the “suit”.
(f) Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the Limit of Insurance, we will not pay any prejudgment interest based on that period of time after the offer.
(g) All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within our Limit of Insurance.
(2) If we defend an insured against a “suit” and an indemnitee of the insured is also named as a party to the “suit”, we will defend that indemnitee if all of the following conditions are met:
(a) The “suit” against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an “insured contract”;
(b) This insurance applies to such liability assumed by the insured;
(c) The obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same “insured contract”;
(d) The allegations in the “suit” and the information we know about the “occurrence” are such that no conflict appears to exist between the interests of the insured and the interests of the indemnitee;
(e) The indemnitee and the insured ask us to conduct and control the defense of that indemnitee against such “suit” and agree that we can assign the same counsel to defend the insured and the indemnitee; and
(f) The indemnitee:
(i) Agrees in writing to:
i. Cooperate with us in the investigation, settlement or defense of the “suit”;
ii. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the “suit”;
iii. Notify any other insurer whose coverage is available to the indemnitee; and
iv. Cooperate with use with respect to coordinating other applicable insurance available to the indemnitee; and
(ii) Provides us with written authorization to:
i. Obtain records and other information related to the “suit”; and
ii. Conduct and control the defense of the indemnitee in such “suit”.
(3) So long as the conditions in Paragraph 2. are met, attorneys' fees incurred by us in the defense of that indemnitee, necessary litigation expenses incurred by us and necessary litigation expenses incurred by the indemnitee at our request will be paid as Supplementary Payments. Notwithstanding the provisions of Paragraph B.1.b.(2) Exclusions in Section II – Liability, such payments will not be deemed to be damages for “bodily injury” and “property damage” and will not reduce the limits of insurance.
Our obligation to defend an insured's indemnitee and to pay for attorneys' fees and necessary litigation expenses as Supplementary Payments ends when:
(a) We have used up the applicable limit of insurance in the payment of judgments or settlements; or
(b) The conditions set forth above, or the terms of the agreement described in Paragraph 2.f. above are no longer met.
Analysis
The insurer promises to pay the cost of investigation and defense of a claim or suit. Additional payments under this coverage extension include up to $250 for the cost of bail bonds required because of accidents or violations involving a vehicle to which businessowners liability coverage applies. Loss of earnings incurred by an insured to assist in investigation or defense at the insurer's request are paid up to $250 per day. Costs taxed against the insured, prejudgment interest awarded against the insured, and interest accrued after entry of a judgment and before the insurer has paid are included.
Contractual liability—that is, where the insured has assumed the liability of another—is the subject of many of the supplementary payments provisions. The suit must name both the insured and the insured's indemnitee, and must seek damages for which the insured has assumed liability under an insured contract as defined. (See Liability Definitions below.) Then, if certain other conditions are met, the insurer agrees to defend the indemnitee.
Those conditions include: the insurance must apply to such liability; the insured must have assumed the obligation to defend; there is no conflict of interest between the insured and the indemnitee; the insured and indemnitee must allow the insurer to direct the defense of the suit and to provide the same counsel for both; and the indemnitee must agree in writing to cooperate with the insurer.
The insurer's obligation to the indemnitee ends when the applicable limit of insurance has been used up in the payment of a judgment or settlement, or when the conditions outlined are no longer being met.
2. Medical Expenses
a. We will pay medical expenses as described below for “bodily injury” caused by an accident:
(1) On premises you own or rent;
(2) On ways next to premises you own or rent; or
(3) Because of your operations; provided that:
(a) The accident takes place in the “coverage territory” and during the policy period;
(b) The expenses are incurred and reported to us within one year of the date of the accident; and
(3) The injured person submits to examination, at our expense, by physicians of our choice as often as we reasonable require.
b. We will make these payments regardless of fault. These payments will not exceed the Limits of Insurance of Section II – Liability. We will pay reasonable expenses for:
(1) First aid administered at the time of an accident;
(2) Necessary medical, surgical, x-ray and dental services, including prosthetic devices; and
(3) Necessary ambulance, hospital, professional nursing and funeral services.
Analysis
Although the insuring agreement for medical expenses is identical to that in the CGL form, the applicable exclusions are located later in the policy. In order to be covered, an accident must take place within the coverage territory as defined, and during the policy period. The accident must occur on premises owned by or rented to the insured business, on ways next to the owned or rented premises, or occur because of the insured's operations. For example, the insured's business might be an appliance dealership. While installing a dishwasher, the insured employee accidentally drops it on the customer's foot. The medical expenses arising out of this accident will be covered.
The payments are available regardless of negligence or fault on anyone's part. If the customer in the example above was asked to move out of the way, and failed to do so, the payments are still available up to the section II limit of liability ($5,000 on a per-person basis) for medical expenses.
1. Applicable To Business Liability Coverage
This insurance does not apply to:
a. Expected Or Intended Injury
”Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.
b. Contractual Liability
”Bodily injury” or “property damage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) That the insured would have in the absence of the contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured contract”, provided the “bodily injury” or “property damage” occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an “insured contract”, reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of “bodily injury” or “property damage”, provided:
(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same “insured contract”; and
(b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.
c. Liquor Liability
”Bodily injury” or “property damage” for which any insured may be held liable by reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.
Analysis
Similarly to the CGL form, the businessowners liability encompasses certain contractual liability exposures, as well as liability the insured would have had if no contract existed. This is exception (1) to exclusion b. Exception (2) states that if the insured has assumed the liability of another, but would be liable for bodily injury or property damage even if no such contract existed, the contractual liability exclusion does not apply. To see how this works, the insured may have signed a lease agreement in which he agrees to hold the owner of the building which houses the business harmless in event of bodily injury occurring on the premises. This lease is thus an “insured contract,” the meaning of which will be discussed later. (See Liability Definitions below.) The insured negligently fails to clean up water on the floor inside his business, and a customer slips and falls and is injured and sues both the building owner and the business. The insured would be liable for the injury even without the contract. But because of the insured contract, the insured has agreed to assume the building owner's liability as well as his own.
Exclusion c. liquor liability applies only if the insured business has to do with alcoholic beverages—distributing, selling, manufacturing, serving, or furnishing. Therefore, liability arising out of an incident in which alcohol played a part, such as an office party, would be covered so long as alcoholic beverages were not in some manner the insured business. Coverage may be purchased for some activities. See [IDL:BOP Endts - GP Vol.xml^"Businessowners Program Endorsements", Fire & Marine, Commercial Property section^Businessowners Program Endorsements].
d. Workers' Compensation And Similar Laws
Any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law.
e. Employer's Liability
”Bodily Injury” to:
(1) An “employee” of the insured arising out of and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured's business; or
(2) The spouse, child, parent, brother or sister of that “employee” as a consequence of paragraph (1) above.
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.
This exclusion does not apply to liability assumed by the insured under an “insured contract”.
Analysis
These exposures are intended to be covered under workers compensation and employers liability policies, and so are excluded here. Exclusion e. also eliminates coverage for any third party over suits; that is, where an employee is injured, sues someone other than his employer for the injury, and the other party in turn sues the employer. For example, say an employee, while running an errand for the insured business, slips and falls in another business. He sues that businessowner for negligent maintenance of the premises. That businessowner in turn sues the insured for negligent hiring—sending such an accident-prone employee to run the errand. The BP 00 03 will not respond. The exception to exclusion e. is that any liability assumed by the insured under an insured contract as defined is covered.
f. Pollution
(1) ”Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”:
(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. However, this subparagraph does not apply to:
(i) ”Bodily injury” if sustained within a building and caused by smoke, fumes, vapor or soot from equipment used to heat that building;
(ii) ”Bodily injury” or “property damage” for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured; or
(iii) ”Bodily injury” or “property damage” arising out of heat, smoke or fumes from a “hostile fire”;
(b) At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;
(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:
(i) Any insured; or
(ii) Any person or organization for whom you may be legally responsible; or
(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the “pollutants” are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor. However, this subparagraph does not apply to:
(i) ”Bodily injury” or “property damage” arising out of the escape of fuels, lubricants or other operating fluids which are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of “mobile equipment” or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold, store or receive them. This exception does not apply if the “bodily injury” or “property damage” arises out of the intentional discharge, dispersal ore release of the fuels, lubricants or other operating fluids, or if such fuels, lubricants or other operating fluids are brought on or to the premises, site or location with the intent that they be discharged, dispersed or released as part of the operations being performed by such insured, contractor or subcontractor;
(ii) ”Bodily injury” or “property damage” sustained within a building and caused by the release of gases, fumes or vapors from materials brought into that building in connection with operations being performed by you or on your behalf by a contractor or subcontractor; or
(iii) ”Bodily injury” or “property damage” arising out of heat, smoke or fumes from a “hostile fire”.
(e) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, “pollutants”.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, “pollutants”; or
(b) Claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, “pollutants”.
However, this paragraph does not apply to liability for damages because of “property damage” that the insured would have in the absence of such request, demand, order or statutory or regulatory requirement or such claim or “suit” by or on behalf of a governmental authority.
Analysis
The pollution exclusion has undergone extensive revision since the earlier businessowners liability form. The definitions of “pollutants” and “hostile fire” now appear in the definitions section, discussed later. Exceptions to certain of the exclusions are now placed within the exclusion to which they refer, rather than appearing at the end of the paragraph. For example, the “hostile fire” exception has been moved from a subparagraph following f.(1)(d)(ii) and given its own number f.(1)(a)(iii).
New coverage has been added. There is coverage for bodily injury caused by smoke, fumes, or vapor released by equipment used to heat the building. There is coverage for bodily injury or property damage arising out of pollutants if an insured contractor is performing operations on a site or location owned by another, and that party has been added to the insured's policy as an additional insured. Thus, there is coverage that could have been denied because the site is “occupied by” the insured while performing operations.
Another new exception for bodily injury or property damage caused by pollutants is located in f.(1)(d)(ii), which provides that there is coverage for injury arising out of the release of gases or vapors from materials brought into a building in connection with operations being performed by the insured or a subcontractor. So, for example, if the insured is using glue to install carpeting and the fumes sicken some workers inside the building, the BP 00 03 07 02 will provide coverage.
Finally, the subparagraph following f.(2)(b) has been added. The intent of paragraph f.(2) is to preclude coverage for any pollutant cleanup or testing the insured may undertake without any coverage trigger. For example, the insured may decide to clean up an oil spill that has soaked into the ground at the insured premises because of a local ordinance. There is no coverage. But if a hostile fire on the premises causes smoke damage to adjacent property, that is a covered loss and this paragraph should not serve to bar coverage.
Endorsements relating to pollution are discussed elsewhere; see [IDL:BOP Endts - GP Vol.xml^"Businessowners Program Endorsements", Fire & Marine, Commercial Property section^Businessowners Program Endorsements].
g. Aircraft, Auto Or Watercraft
”Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and “loading or unloading”.
This exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by an insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft that is owned or operated by or rented or loaned to any insured.
This exclusion does not apply to:
(1) A watercraft while ashore on premises you own or rent;
(2) A watercraft you do not own that is:
(a) Less than fifty-one feet long; and
(b) Not being used to carry persons or property for a charge;
(3) Parking an “auto” on, or on the ways next to, premises you own or rent, provided the “auto” is not owned by or rented or loaned to you or the insured;
(4) Liability assumed under any “insured contract” for the ownership, maintenance or use of aircraft or watercraft; or
(5) ”Bodily injury” or “property damage” arising out of the operation of any of the following equipment:
(a) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and
(b) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.
h. Mobile Equipment
”Bodily injury” or “property damage” arising out of:
(1) The transportation of “mobile equipment” by an “auto” owned or operated by or rented or loaned to any insured; or
(2) The use of “mobile equipment” in, or while in practice for, or while being prepared for, any prearranged racing, speed, demolition or stunting activity.
Analysis
Exclusion g. has been revised since the last businessowners form. The second paragraph—referring to negligent supervision—has been added to clarify that the exclusion applies even if there is an attempt to find coverage for an auto accident based on the insured's negligent hiring or training of the person causing the injury. In the past, some courts have found coverage because of the allegations of general negligence and so the CGL form responded to a claim involving autos, when such claims should have been within the purview of the auto form. For more information, see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage Form A", Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage Form A].
There are exceptions to the exclusion. There is coverage for the operation of certain types of equipment, such as cherry pickers or air compressors, even though they are mounted on otherwise excluded vehicles, such as trucks. The parking of an auto on or next to premises owned or rented by the insured business is covered (although there is no coverage for damage to the vehicle itself; the “care, custody or control” exclusion applies).
A revision to exclusion g.(2) increases the foot limitation for a nonowned watercraft from twenty-six feet to fifty-one feet. And, the exclusion does not apply to any watercraft while ashore on premises owned or rented by the insured business.
Liability assumed under an insured contract for the ownership, maintenance or use of aircraft or watercraft is excepted from the exclusion.
Finally, exclusion h. precludes coverage for bodily injury or property damage arising out of the transportation of mobile equipment as defined; again, any claims resulting from this activity should fall under an auto policy. Use of any mobile equipment in prearranged racing or stunting is excluded, although if the equipment were used to, say, prepare a track for a race there would be coverage. So, if a tractor (farm machinery; “mobile equipment” unless licensed for road use) was used to prepare a track for a race and someone was injured because of this activity there would be coverage, but if the tractor was actually racing the exclusion would apply.
i. War
”Bodily injury” or “property damage” due to war, whether or not declared, or any or condition incident to war. War includes civil war, insurrection, rebellion or revolution. This exclusion applies only to liability assumed under a contract or agreement.
Analysis
For more information, see [IDL:War Exclusion Clause.xml^"War Exclusion Clause", Fire & Marine, Misc. Property section^War Exclusion Clause]. Also, see [IDL:BOP Endts - GP Vol.xml^"Businessowners Program Endorsements"^Businessowners Program Endorsements], for information on the terrorism exclusionary endorsement, to which the war exclusion is closely allied.
j. Professional Services
”Bodily injury”, “property damage”, “personal and advertising injury” caused by the rendering or failure to render any professional service. This includes but is not limited to:
(1) Legal, accounting or advertising services;
(2) Preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications;
(3) Supervisory, inspection or engineering services;
(4) Medical, surgical, dental, x-ray or nursing services treatment, advice or instruction;
(5) Any health or therapeutic service treatment, advice or instruction;
(6) Any service, treatment, advice or instruction for the purpose of appearance or skin enhancement, hair removal or replacement or personal grooming;
(7) Optometry or optical or hearing aid services including the prescribing, preparation, fitting, demonstration or distribution of ophthalmic lenses and similar products or hearing aid devices;
(8) Body piercing services; and
(9) Services in the practice of pharmacy.
Analysis
Even though the CGL form no longer excludes liability arising out of professional services, in practice, most insurers still exclude professional services from the CGL by adding endorsement [IDL:CG 21 16 07 98.pdf^CG 21 16 07 98^CG 21 16 07 98]. This endorsement is not a blanket exclusion of all professional services, but only of “designated professional services.” As a result, a CGL insurer must specify all professional services it wants to exclude from any policy. For a further discussion, see [IDL:CGL Endorsements.xml^"CGL Endorsements", Casualty & Surety, Public Liability section^CGL Endorsements].
The BOP liability form, on the other hand, gives the above extensive list of excluded professional services. But in a change from the earlier forms, there is no longer an exception made for professional liability of druggists. See, as well, Who is an Insured, below. The exception granting coverage for pharmacists providing health care services in the insured business's retail drugstore operation has been deleted. Coverage is now provided through endorsement; see [IDL:BOP Endts - GP Vol.xml^"Businessowners Program Endorsements", Fire & Marine, Commercial Property section^Businessowners Program Endorsements].
k. Damage to Property
”Property damage” to:
(1) Property you own, rent or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;
(2) Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;
(3) Property loaned to you;
(4) Personal property in the care, custody or control of the insured;
(5) That particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
Paragraphs (1), (3), and (4) of this exclusion do not apply to “property damage” (other than damage by fire or explosion) to premises, including the contents of such premises, rented to you for a period of seven or fewer consecutive days. A separate limit of insurance applies to Damage To Premises Rented To You as described in Paragraph D. Liability and Medical Expenses Limit Of Insurance in Section II – Liability.
Paragraph (2) of this exclusion does not apply if the premises are “your work” and were never occupied, rented or held for rental by you.
Paragraphs (3), (4), (5) and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.
Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations hazard”.
Analysis
The wording of k.(1) has been amended. Previous wording simply stated that there was no coverage for any property damage to property owned, rented, or occupied by the named insured. This wording left open the possibility that damage to another's property that might arise out of a condition of the insured property could be viewed as a liability claim, and thus provide coverage for repair or restoration of the insured property to prevent damage. Because it was never the intent of the coverage to serve as a maintenance policy for the insured's premises, the wording has been amended to its present form.
The second exclusion eliminates coverage for premises sold, given away, or abandoned by the named insured, although the exception in the subparagraph gives back coverage if the premises were the named insured's work and never occupied, rented, or held for rental by the named insured.
There is no coverage for property loaned to the named insured, or for personal property in the care, custody or control of the insured. The exception gives coverage for property damage not caused by fire or explosion to premises (including contents) that the named insured has rented for a period of seven or fewer consecutive days. (There is coverage for damage caused by fire or explosion to premises rented to the named insured; as we will discuss later many of the exclusions do not apply in this situation.)
Likewise, the liability coverage of the policy was never intended to serve as a warranty for the insured's faulty work. However, exclusion k.(5) applies only to the particular part of real property upon which the named insured or any contractor is performing operations. Therefore, if damage to the remainder of the property occurs there is coverage.
Exclusion k.(6) does not apply to property damage falling within the products-completed operations hazard—in other words, this exclusion applies to on-going operations.
l. Damage To Your Product
”Property damage” to “your product” arising out of it or any part of it.
Analysis
Exclusion l. states that if the named insured's own product sustains damage because of a condition within the product itself, there is no liability coverage. In other words, the insured cannot rely on the liability coverage to restore his damaged product.
m. Damage To Your Work
”Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”.
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
Analysis
For a discussion of the definitions of property damage, your work, and products-completed operations hazard, see Liability Definitions later. The exclusion applies to work that has been completed, not work that is in progress (other exclusions may apply to work in progress). The exclusion does not apply to work that has been performed on the insured's behalf by a subcontractor. So, for example, the insured business may be carpet sales and installation. The installation is contracted out. If the subcontractor mistakenly uses a highly flammable liquid instead of glue and the residence in which the carpeting is being installed catches fire, the exclusion does not apply to the fire damage to the residence.
n. Damage To Impaired Property Or Property Not Physically Injured
”Property damage” to “impaired property” or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to “your product” or “your work” after it has been put to its intended use.
Analysis
Impaired property is tangible property other than the insured's own work or product that can no longer be used, or is less useful, because it incorporates the insured's work or product. However, the property could be restored to usefulness if the insured's work or product were removed or replaced. Or, perhaps, the tangible property is less useful or unable to be used because of a delay or a failure in carrying out a contract on the part of the insured or by someone acting for the insured. This exclusion precludes coverage. Using the carpet installation example, say the insured installs bright orange carpeting in a living room when the specs call for beige. The tangible property—in this case, the room—can be restored if the carpeting is replaced. But if the insured's own work or property suddenly and accidentally sustains physical injury which results in the other property's loss of use after that property has been put to its intended use, the liability coverage will respond.
o. Recall Of Products, Work, Or Impaired Property
Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:
(1) ”Your product”;
(2) ”Your work”; or
(3) ”Impaired property”;
if such product, work or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.
Analysis
This type of loss is part of the cost of doing business. In essence, the insured is presumed to be in the business of selling products fit for their intended purpose. The exclusion precludes coverage not only for expenses the insured may incur, but for those incurred by others as well.
p. Personal And Advertising Injury
”Personal and advertising injury”:
(1) Caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict “personal and advertising injury”;
(2) Arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity;
(3) Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;
(4) Arising out of a criminal act committed by or at the direction of any insured;
(5) For which the insured has assumed liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.
(6) Arising out of a breach of contract, except an implied contract to use another's advertising ideas in your “advertisement”;
(7) Arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your “advertisement”;
(8) Arising out of the wrong description of the price of goods, products or services stated in your “advertisement”;
(9) Committed by an insured whose business is:
(a) Advertising, broadcasting, publishing or telecasting;
(b) Designing or determining content of web-sites for others; or
(c) An Internet search, access, content or service provider.
However, this exclusion does not apply to Paragraphs 14.a., b. and c. of “personal and advertising injury” under Paragraph F. Liability And Medical Expenses Definitions.
For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, by itself, is not considered the business of advertising, broadcasting, publishing or telecasting.
(10) Arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants” at any time.
(11) With respect to any loss, cost or expense arising out of any:
(a) Request, demand or order that any insured or others test for, monitor, clean-up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of, “pollutants”; or
(b) Claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing or in any way responding to, or assessing the effects of, “pollutants”.
(12) Arising out of an electronic chat room or bulletin board the insured hosts, owns or over which the insured exercises control.
(13) Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.
However, this exclusion does not apply to infringement, in your “advertisement”, of copyright, trade dress or slogan.
(14) Arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatags, or any other similar tactics to mislead another's potential customers.
Analysis
The definition of personal and advertising injury is discussed later. In the earlier forms, there were separate terms: personal injury and advertising injury. Now they are combined, and the exclusions that were heretofore exclusions p. and q. are combined into exclusion p. Some of the previous language has been simplified. There are changes in the current form that reflect the exposures of the Internet age.
If the insured knows beforehand that an act will violate the rights of another and result in injury there is no coverage. (Compare this with the exclusion for expected or intended bodily injury or property damage.) If the insured knows something is false, but publishes it anyway, there is no coverage. There is no coverage for publication of material prior to the beginning of the policy. Exclusion p.(4) has been clarified: criminal act replaces “willful violation of a penal statute or ordinance,” which states that the insurance will not respond to acts the insured commits knowing they are illegal.
Exclusions p.(5) and (6) apply to contractual liability. Liability the insured would have had in absence of a contract is covered. And, if the insured has an implied contract to use another's advertising idea—perhaps a friend tells the insured to feel free to use a slogan the friend has created—and the implied contract is breached, there is coverage.
Exclusions p.(7) and (8) apply to the risks and costs of doing business, which are uninsurable.
Exclusion p.(9) is new in the current BP 00 03 07 02. Insureds whose business is advertising, publishing, telecasting, broadcasting, or Web designer or Internet provider are covered only for false arrest, malicious prosecution, and invasion of the right of privacy. Specialty coverage must be arranged for the other exposures.
Exclusion p.(10) and (11) are in place because some courts have held that the CGL form (and thus the BOP) provides coverage for pollution under “wrongful entry or eviction or other invasion of the right of private occupancy.” In order to clarify that damages resulting from pollution are not covered as “personal and advertising injury,” ISO has added wording to the pollution exclusion specifying that it also applies to these coverages. See [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A", Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A], for a discussion of the CGL form's pollution exclusion.
Exclusions p.(12) and (14) preclude coverage for liability arising out of Internet activities, such as chat rooms or unauthorized use of another's name in the insured's own Web address.
Exclusion p.(13) applies to infringement of intellectual property rights. There is an exception to this, and that is infringement in the insured's advertisement, now a defined word. So, for example, the insured business may refer to its products as outperforming those of Company X in an advertisement, and even go so far as to mimic Company X, but cannot actually appropriate Company X's ideas or method of doing business.
Exclusions c., d., e., f., g., h., i., k., l., m., n., and o. in Section II – Liability do not apply to damage by fire or explosion to premises while rented to you, or temporarily occupied by you with permission of the owner. A separate Damage To Premises Rented To You Limit of Insurance applies to this coverage as described in Paragraph D. Liability And Medical Expenses Limits of Insurance in Section II – Liability.
Analysis
The purpose of this exception is to provide fire legal liability coverage. There is a separate amount of insurance available for this coverage; see below under Limits of Insurance.
Exclusions Applicable to Medical Expenses
2. Applicable To Medical Expenses Coverage
We will not pay expenses for “bodily injury”:
a. To any insured, except “volunteer workers”.
b. To a person hired to do work for or on behalf of any insured or a tenant of any insured.
c. To a person injured on that part of premises you own or rent that the person normally occupies.
d. To a person, whether or not an “employee” of any insured, if benefits for the “bodily injury” are payable or must be provided under a workers' compensation or disability benefits law or similar law.
e. To a person injured while taking part in athletics.
f. Included within the “products-completed operations hazard”.
g. Excluded under Business Liability Coverage.
h. Due to war, whether or not declared, or any act or condition incident to war. War includes civil war, insurrection, rebellion or revolution.
Analysis
There is no coverage for anyone qualifying as an insured, with the newly-added exception for volunteer workers. Coverage for other than volunteer workers is properly the province of workers compensation. Thus, a person who volunteers, receiving no financial compensation, will not have to rely on his or her own medical insurance (or, in worse-case scenario, his or her own pocketbook) in event of an injury.
There is no coverage for a person who is injured while on the part of the insured's owned or rented premises normally occupied by that person. It is up to that person to provide his or her own medical insurance. And, there is no coverage for any person if benefits are payable or must be provided under workers compensation. For example, if an employee of another company is delivering something to the insured business and is injured, the other employer's workers compensation should respond so long as the benefits are payable or must be provided.
There is no coverage for any bodily injury that would otherwise be excluded under the business liability coverage, or while “taking part in athletics.” In other words, there is no coverage for trained athletes taking part in organized sporting events, but there is coverage for those participating in the business's picnic softball game.
Finally, there is no coverage for injury resulting from war.
3. Applicable To Both Business Liability Coverage And Medical Expenses Coverage – Nuclear Energy Liability Exclusion
This insurance does not apply:
a. Under Business Liability Coverage, to “bodily injury” or “property damage”:
(1) With respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by the Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or
(2) Resulting from the “hazardous properties” of “nuclear material” and with respect to which:
(a) Any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof; or
(b) The insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization.
b. Under Medical Expenses Coverage, to expenses incurred with respect to “bodily injury” resulting from the “hazardous properties” of “nuclear material” and arising out of the operation of a “nuclear facility” by any person or organization.
c. Under Business Liability Coverage, to “bodily injury” or “property damage” resulting from the “hazardous properties” of the “nuclear material”; if:
(1) The “nuclear material”:
(a) Is at any “nuclear facility” owned by, or operated by or on behalf of, an insured; or
(b) Has been discharged or dispersed therefrom;
(2) The “nuclear material” is contained in “spent fuel” or “waste” at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or
(3) The “bodily injury” or “property damage” arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any “nuclear facility”; but if such facility is located within the United States of America, its territories or possessions or Canada, this Exclusion (3) applies only to “property damage” to such “nuclear facility” and any property thereat.
d. As used in this exclusion:
(1) ”By-product material” has the meaning given it in the Atomic Energy Act of 1954 or in any law amendatory thereof;
(2) ”Hazardous properties” include radioactive, toxic or explosive properties;
(3) ”Nuclear facility” means:
(a) Any “nuclear reactor”;
(b) Any equipment or device designed or used for:
(i) Separating the isotopes of uranium or plutonium;
(ii) Processing or utilizing “spent fuel”; or
(iii) Handling, processing or packaging “waste”;
(c) Any equipment or device used for the processing, fabricating or alloying of “special nuclear material” if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235;
(d) Any structure, basin, excavation, premises or place prepared or used for the storage or disposal of “waste”;
and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations;
(4) ”Nuclear material” means “source material”, “special nuclear material” or “by-product material”;
(5) ”Nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material;
(6) ”Property damage” includes all forms of radioactive contamination of property.
(7) ”Source material” has the meaning given it in the Atomic Energy Act of 1954 or in any law amendatory thereof;
(8) ”Special nuclear material” has the meaning given it in the Atomic Energy Act of 1954 or in any law amendatory thereof;
(9) ”Spent fuel” means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a “nuclear reactor”;
(10) ”Waste” means any waste material:
(a) Containing “by-product material” other than the tailings or wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its “source material” content; and
(b) Resulting from the operation by any person or organization of any “nuclear facility” included under Paragraphs (a) and (b) of the definition of “nuclear facility”.
Analysis
The BOP has the nuclear exclusion within it, while it must be added via endorsement [IDL:IL 00 21 05 04.pdf^IL 00 21 05 04^IL 00 21 05 04] to the CGL form. For a discussion of endorsement IL 00 21 05 04 see [IDL:Nuclear Energy Liab Excls.xml^"Nuclear Energy Liability Exclusion", Casualty & Surety, Public Liability section^Nuclear Energy Liability Exclusion].
The hazards presented by nuclear processing or material are not contemplated within the businessowners program rate structure, and therefore are excluded.
1. If you are designated in the Declarations as:
a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner
b. A partnership or joint venture, you are an insured. Your members, your partners and their spouses are also insureds, but only with respect to the conduct of your business.
c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.
d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your “executive officers” and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
Analysis
Several types of business organization are included, with a description as to who within that organization is an insured. Note that in each of these organizations, insured status is enjoyed only so long as the person is performing duties with respect to the conduct of the insured business.
A limited liability company is operated by members and managers who are immune from any debt or liability attached to the company. As with a partnership, the earnings are passed through the company to the members and taxed at their own personal rate. As with a corporation, only the company's assets are at risk, and not the personal assets of the owners. In order to accommodate this newer form of business organization, the definition of “who is an insured” was changed to include limited liability companies, their members, and their managers.
2. Each of the following is also an insured:
a. Your “volunteer workers” only while performing duties related to the conduct of your business, or your “employees”, other than either your “executive officers” (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these “employees” or “volunteer workers” are insureds for:
(1) ”Bodily injury” or “personal and advertising injury”:
(a) To you, to your partners or member (if you are a partnership or joint venture), to your members (if you are a limited liability company), or to a co-”employee” while in the course of his or her employment or performing duties related to the conduct of your business, or to your other “volunteer workers” while performing duties related to the conduct of your business;
(b) To the spouse, child, parent, brother or sister of that co-”employee” as a consequence of Paragraph (a) above;
(c) For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in Paragraphs (a) or (b); or
(d) Arising out of his or her providing or failing to provide professional health care services.
(2) ”Property damage” to property:
(a) Owned, occupied or used by,
(b) Rented to, in the care, custody or control of,; or over which physical control is being exercised for any purpose by
you, any of your “employees”, “volunteer workers”, any partner or member (if you are a partnership or joint venture), or any member (if you are a limited liability company).
Analysis
A new category of insured has been added to the businessowners form, volunteer workers. These entities are insureds while performing duties related to the conduct of the insured business. Note that while the same preclusions of coverage apply in regards to other insureds, such as for bodily injury to the named insured, they enjoy payments for medical expenses not available to other insureds.
The definition of employee encompasses leased employees, but not temporary employees. Therefore, if an employee negligently injured a temporary worker, presumably the employee would be considered an insured for any resulting claim or suit, since the exclusion applies to a co “employee” as defined.
Any claim made by a relative of an employee injured by a fellow employee is not covered. Likewise, any claim to share damages because of any injury as described is not covered. These exclusions are in keeping with the workers compensation and employers liability exclusions, since those claims properly fall to that coverage, not the businessowners liability coverage.
It should be noted that exclusion (1)(d) refers solely to the employee providing the professional health care services (“professional health care” means that provided by, say, a nurse or doctor, not a fellow worker applying a band-aid). Therefore, the named insured would be protected for any liability arising from such an act.
For further discussion of employees as insureds, see [IDL:General Provisions of CGL.xml^"General Provisions of the CGL", Casualty & Surety, Public Liability section^General Provisions of the CGL].
b. Any person (other than your “employee” or “volunteer worker”), or any organization while acting as your real estate manager.
c. Any person or organization having proper temporary custody of your property if you die, but only:
(1) With respect to liability arising out of the maintenance or use of that property; and
(2) Until your legal representative has been appointed.
d. Your legal representative if you die, but only with respect to duties as such. That representative will have all your rights and duties under this policy.
Analysis
Persons or organizations acting as the named insured's real estate manager are insureds while acting in that capacity. Provisions c. and d. detail who is an insured upon the death of the named insured.
3. With respect to “mobile equipment” registered in your name under any motor vehicle registration law, any person is an insured while driving such equipment along a public highway with your permission. Any other person or organization responsible for the conduct of such person is also an insured, but only with respect to liability arising out of the operation of the equipment, and only if no other insurance or any kind is available to that person or organization for this liability. However, no person or organization is an insured with respect to:
a. ”Bodily injury” to a co-”employee” of the person driving the equipment; or
b. ”Property damage” to property owned by, rented to, in the charge of or occupied by you or the employer of any person who is an insured under this provision.
Analysis
Certain persons have insured status although they may not be employees of the insured business. Any person is an insured while driving mobile equipment registered to the business along a public highway with the named insured's permission. Persons or organizations responsible for the conduct of such a person are also insureds, but only for liability arising out of the operation of such equipment. For example, an employee of another business may drive a forklift from the insured business to the other business. This employee is an insured under the insured business's policy only for the operation of the forklift, and not for any injury to the operator's co-employee or to property either owned by the insured business or by the other business. The insured business liability applies only if no other insurance of any kind is available.
No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations.
Analysis
The current CGL form provides limited coverage for newly acquired organizations, but the businessowners form does not. However, the preclusion of coverage for any past exposures is identical to that in the CGL form. There is no coverage for the conduct of any current or past partnership, joint venture or limited liability company not shown as a named insured in the declarations.
D. Liability And Medical Expenses Limits Of Insurance
1. The Limits of Insurance of Section II – Liability shown in the Declarations and the rules below fix the most we will pay regardless of the number of:
a. Insureds;
b. Claims made or “suits” brought; or
c. Persons or organizations making claims or bringing “suits”.
2. The most we will pay for the sum of all damages because of all:
a. ”Bodily injury”, “property damage” and medical expenses arising out of any one “occurrence”; and
b. ”Personal and advertising injury” sustained by any one person or organization;
is the Liability and Medical Expenses limit shown in the Declarations. But the most we will pay for all medical expenses because of “bodily injury” sustained by any one person is the Medical Expenses limit shown in the Declarations.
3. The most we will pay under Business Liability Coverage for damages because of “property damage” to premises while rented to you or temporarily occupied by you with permission of the owner, arising out of any one fire or explosion is the Damage To Premises Rented To You limit shown in the Declarations.
Analysis
The first statement advises that the limit of liability insurance as indicated in the declarations is the most that will be paid regardless of the number of insureds, claims made, or persons making the claims or bringing suits. For example, if the insured business carries $500,000 liability and two persons, each claiming damages of $500,000, bring a suit for the same incident the limits remain at $500,000. (The basic limit for businessowners liability and medical expenses is $300,000, which may be increased to either $500,000, $1 million, or $2 million. Medical expenses coverage is limited to $5,000 per person.)
The next statement advises that the sum of all damages arising out of any one occurrence—including bodily injury, property damage, and medical expenses—will be the liability and medical expenses limit shown in the declarations. However, medical expense coverage is on a per person basis even though it is included within the overall liability limit. For example, say the insured business carries a $500,000 limit of liability and $5,000 medical expenses. The business is responsible for negligently injuring five persons. Each person could incur up to $5,000 in medical expenses, but if all file suit asking $500,000 in damages, the maximum that will be paid for this occurrence is $500,000 total.
The sum of all damages arising out of any one personal and advertising injury is likewise limited to the limit of liability indicated in the declarations.
This limit is separate, however, from the limit shown in the declarations for damage caused by fire or explosion to premises rented to the insured, or fire legal liability. If this were not the case, and the insured was responsible for a fire resulting in property damage and bodily injury, the limit would quickly be eaten up. The basic limit for this coverage is $50,000, which may be increased by endorsement.
4. Aggregate Limits
The most we will pay for:
a. All “bodily injury” or “property damage” that is included in the “products-completed operations hazard” is twice the Liability and Medical Expenses limit; and
b. All:
(1) ”Bodily injury” or “property damage” except damages because of “bodily injury” and “property damage” included in the “products-completed operations hazard”;
(2) Plus medical expenses;
(3) Plus all “personal and advertising injury” caused by offenses committed;
is twice the Liability and Medical Expenses limit.
This Aggregate Limit does not apply to “property damage” to premises while rented to you or temporarily occupied by you with permission of the owner, arising out of fire or explosion.
The Limits of Insurance of Section II – Liability apply separately to each consecutive annual period and to any remaining period of less than twelve months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than twelve months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.
Analysis
The businessowners liability coverage contains two aggregate limits. One, as in the CGL form, applies to all injury or damage during the policy period that falls within the products-completed operations hazard. The other businessowners aggregate limit applies to all other injury or damage during the policy period, other than fire legal liability losses. In the CGL form, the general aggregate limit applies to, and is reduced by, fire legal liability losses.
The businessowners aggregate limit that applies to products-completed operations losses is equal to twice the “liability and medical expenses limit” discussed above. This marks a broadening of coverage from the previous form, where the amount available for products-completed operations losses was limited to the liability and medical expenses limit. The aggregate limit that applies to all other losses, including medical expenses, is also equal to twice the liability and medical expense limit. Note that it does not matter whether separate claims are made for personal and advertising injury, for bodily injury, and for property damage. Once the aggregate limit is exhausted, no more claims will be paid during the policy period.
However, the form states that the aggregate limit does not apply to property damage to premises rented to or temporarily occupied by the insured with the owner's permission, if the damage arises out of fire or explosion.
Finally, the limits of insurance apply separately to each annual term, but if policy is extended for a period of less than twelve months that period is considered to be part of the previous term. For example, an insured business carries liability limit of $500,000 and the policy term is one year. But the businessowner asks for the policy to be extended two months because he is closing the business at that time. The liability limit of $500,000 will apply during the entire fourteen months.
Liability and Medical Expenses Conditions
E. Liability And Medical Expenses General conditions
1. Bankruptcy
Bankruptcy or insolvency of the insured or of the insured's estate will not relieve us of our obligations under this policy.
2. Duties In The Event Of Occurrence, Offense, Claim Or Suit
a. You must see to it that we are notified as soon as practicable of an “occurrence” or an offense which may result in a claim. To the extent possible, notice should include:
(1) How, when and where the “occurrence” or offense took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the “occurrence” or offense.
b. If a claim is made or “suit” is brought against any insured, you must:
(1) Immediately record the specifics of the claim or “suit” and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or “suit” as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation, or settlement of the claim or defense against the “suit”; and
(4) Assist us, upon our request, in the enforcement of any right against any person or organization that may be liable to the insured because of injury or damage to which this insurance may also apply.
d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.
Analysis
These conditions are similar to those found in other liability forms such as the CGL. The insured is reminded that information must be obtained and forwarded to the insurer “as soon as practicable” so that the insurer can investigate and mount a defense. Delay can result in insufficient or loss of information—a key witness moves, for example, and leaves no forwarding address. The insured can give an oral notice to the insurer of an occurrence or offense that might result in a claim, but must give a written notice in event a suit or claim actually occurs.
Insureds volunteering any payments other than for first aid do so at their own expense.
3. Financial Responsibility Laws
a. When this policy is certified as proof of financial responsibility for the future under the provisions of any motor vehicle financial responsibility law, the insurance provided by the policy for “bodily injury” liability and “property damage” liability will comply with the provisions of the law to the extent of the coverage and limits of insurance required by that law.
b. With respect to “mobile equipment” to which this insurance applies, we will provide any liability, uninsured motorists, underinsured motorists, no-fault or other coverage required by any motor vehicle law. We will provide the required limits for those coverages.
Analysis
The BOP acts as an auto policy when, for example, an insured is parking an auto (not one owned by, rented to, or loaned to an insured) on the insured premises or ways next to it. Therefore, condition 3.a. states the BOP will comply with any state financial responsibility requirements.
In the event an accident involves mobile equipment as defined, the policy will respond with all applicable coverages in accordance with state law.
4. Legal Action Against Us
No person or organization has a right under this policy:
a. To join us as a party or otherwise bring us into a “suit” asking for damages from an insured; or
b. To sue us on this policy unless all of its terms have been fully complied with.
A person or organization may sue us to recover on an agreed settlement or on a final judgment against an insured; but we will not be liable for damages that are not payable under the terms of this policy or that are in excess of the applicable limit of insurance. An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative.
5. Separation Of Insureds
Except with respect to the Limits of Insurance of Section II – Liability, and any rights or duties specifically assigned in this policy to the first Named Insured, this insurance applies:
a. As if each Named Insured were the only Named Insured; and
b. Separately to each insured against whom claim is made or “suit” is brought.
Analysis
Condition 4. states that the insurer cannot be drawn into a suit against its own insured, and adds that no legal action against the insurer can be taken unless all policy terms have been complied with.
Condition 5. states that the insurance applies separately to each named insured and to each insured against whom suit is brought, except with regard to the limits of insurance and the duties specifically assigned to the first named insured.
1. ”Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products, or services for the purpose of attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.
Analysis
This definition is new in the BP 00 03 07 02. Because of the coverage in the BOP for personal and advertising injury, and because of the use of the Internet for advertising, the definition has been added to clarify coverage intent. For example, many Web sites carry several advertisements for site sponsors. The only advertisement to be considered, though, so far as the policy goes is the one referencing the insured business.
2. ”Auto” means a land motor vehicle, trailer, or semitrailer designed for travel on public roads, including any attached machinery or equipment. But “auto” does not include “mobile equipment”.
3. ”Bodily injury” means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.
Analysis
These definitions remain identical to those in the earlier BOP forms. The definition of an auto includes trailers or semitrailers, so long as these vehicles are designed for travel on public roads.
4. ”Coverage territory” means:
a. The United States of America (including its territories and possessions), Puerto Rico, and Canada ;
b. International waters or airspace, but only if the injury or damage occurs in the course of travel or transportation between any places included in Paragraph a. above; or
c. All other parts of the world if the injury or damage arises out of:
(1) Goods or products made or sold by you in the territory described in Paragraph a. above;
(2) The activities of a person whose home is in the territory described in Paragraph a. above, but is away for a short time on your business; or
(3) ”Personal and advertising injury” offenses that take place through the Internet or similar electronic means of communication
provided the insured's responsibility to pay damages is determined in a “suit” on the merits in the territory described in Paragraph a. above or in a settlement we agreed to.
Analysis
There have been some editorial changes to the definition of coverage territory—for example, 4.b. read “International waters or airspace, provided …” but now reads “International waters or airspace, but only if…” The most significant change is the addition of 4.c.(3), which recognizes that the use of the Internet to conduct business is a major factor in modern business.
5. ”Employee” includes a “leased worker”. “Employee” does not include a “temporary worker”.
Analysis
Employee includes a leased worker to show that leased employees are to be considered the same as regular employees when it comes to the BOP form. Due to the increased use of leased workers by many employers throughout the country, the point of just who is to be considered an employee under the terms of the coverage is important. This definition, as well as the definitions of leased worker and temporary worker that are found below, clarifies the issue: leased workers are employees of the named insured when it comes to the coverages, exclusions, and conditions of the form.
6. ”Executive officer” means a person holding any of the officer positions created by your charter, constitution, by-laws, or any other similar governing document.
Analysis
This definition clarifies the distinction between an executive officer and an employee.
7. ”Hostile fire” means one which becomes uncontrollable or breaks out from where it was intended to be.
Analysis
This definition formerly appeared within the pollution exclusion (f.); now, it has been moved to the definitions section.
8. ”Impaired property” means tangible property, other than “your product” or “your work”, that cannot be used or is less useful because:
a. It incorporates “your product” or “your work” that is known or thought to be defective, deficient, inadequate, or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement;
if such property can be restored to use by:
(1) The repair, replacement, adjustment or removal of “your product” or “your work”; or
(2) Your fulfilling the terms of the contract or agreement.
Analysis
This definition is necessary to understand the exclusion for impaired property, exclusion n. See Business Liability Exclusions, above, for a discussion.
9. ”Insured contract” means:
a. A contract for a lease of premises. However, that portion of the contract for a lease of premises that indemnifies any person or organization for damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner is not an “insured contract”;
b. A sidetrack agreement;
c. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;
d. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;
e. An elevator maintenance agreement;
f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.
Paragraph f. does not include that part of any contract or agreement:
(1) That indemnifies a railroad for “bodily injury” or “property damage” arising out of construction or demolition operations, within fifty feet of any railroad property and affecting any railroad bridge or trestle, tracks, road beds, tunnel, underpass or crossing
(2) That indemnifies an architect, engineer, or surveyor for injury or damage arising out of:
(a) Preparing, approving or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; or
(b) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage; or
(3) Under which the insured, if an architect, engineer, or surveyor, assumes liability for an injury or damage arising out of the insured's rendering or failure to render professional services, including those listed in Paragraph (2) above and supervisory or engineering activities.
Analysis
Policy intent was clarified by adding a new paragraph stating that an insured contract does not include a contract or agreement for indemnification for damage by fire to premises the insured rents or temporarily occupies with permission of the owner. Fire legal liability is not included within the definition because there is a separate limit applicable to that coverage. Because work near a railroad involves considerable risk, an insured contract does not encompass any construction or demolition within fifty feet of a railroad.
If an ordinance requires a business to indemnify the municipality in connection with some condition of the business, that is considered an insured contract. For example, a hardware store may place a signboard on the sidewalk. If someone trips and sues the municipality for allowing this, the business assumes the municipality's liability.
Similarly, if the insured business assumes the tort liability of another (including assumption of a municipality's liability in connection with work performed for the municipality), that is an insured contract. For example, the carpet sales and installation business negligently leaves a rolled up carpet intended for installation in the mayor's office where a passer-by trips and falls over it. A claim against the municipality arising from this will be covered by the insured businessowners policy (provided limits are adequate and no other exclusion applies).
Finally, the exceptions to paragraph f. are those that should be covered through professional errors and omissions coverage forms.
10. ”Leased worker” means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. “Leased worker” does not include a “temporary worker”.
Analysis
Because of the common practice of leasing workers for long-term projects, and because the employer rather than the leasing company controls” the work, leased workers are considered employees.
11. ”Loading or unloading” means the handling of property;
a. After it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft, or “auto”;
b. While it is in or on an aircraft, watercraft, or “auto”; or
c. While it is being moved from an aircraft, watercraft, or “auto” to the place where it is finally delivered;
but “loading or unloading” does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft, or “auto”.
Analysis
Similarly to the CGL form, the businessowners liability does not apply to loading or unloading property; this is properly covered under a business auto property. However, if an insured is loading property onto a truck by means of a forklift, and the property falls off and injures someone, the exception provides coverage.
12. ”Mobile equipment” means any of the following types of land vehicles, including any attached machinery or equipment;
a. Bulldozers, farm machinery, forklifts, and other vehicles designed for use principally off public roads;
b. Vehicles maintained for use solely on or next to premises you own or rent;
c. Vehicles that travel on crawler treads;
d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted:
(1) Power cranes, shovels, loaders, diggers, or drills; or
(2) Road construction or resurfacing equipment such as graders, scrapers, or rollers;
e. Vehicles not described in a., b., c., or d. above that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:
(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or
(2) Cherry pickers and similar devices used to raise or lower workers;
f. Vehicles not described in Paragraphs a., b., c., or d. above maintained primarily for purposes other than the transportation of persons or cargo.
However, self-propelled vehicles with the following types of permanently attached equipment are not “mobile equipment” but will be considered “autos”:
(1) Equipment designed primarily for:
(a) Snow removal;
(b) Road maintenance, but not construction or resurfacing; or
(c) Street cleaning;
(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and
(3) Air compressors, pumps, and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.
Analysis
This definition details what will be and what will not be considered mobile equipment for coverage purposes. Note that some items may fall into either being covered or not, e.g., cherry pickers. A cherry picker that is not self-propelled—mounted on a trailer, perhaps—is mobile equipment and thus covered, but if the cherry picker is permanently mounted on a truck then that properly falls under a business auto policy.
13. ”Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Analysis
Even though the phrase is not mentioned here, this definition makes the point that coverage is meant for bodily injury or property damage that is neither expected nor intended by the insured; accidental (that is, unforeseen and unplanned) events or circumstances are the key to coverage for bodily injury or property damage for which the insured is legally liable.
Although bodily injury and property damage usually results immediately upon contact with someone or something, the phrase “continuous or repeated exposure” eliminates the necessity of proving the exact moment at which the damage is sustained (although the prior knowledge provisions do seek to limit the occurrence to events happening during the policy period).
The definition of occurrence cannot be interpreted as limiting coverage to a single event. For example, a forklift hitting an adjoining building's wall once might not do much damages, but if the forklift repeatedly hits the wall in the same spot for a period of time considerable damage might result. Such damage is included within the scope of the “continuous or repeated exposure” wording.
14. ”Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses:
a. False arrest, detention, or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord, or lessor;
d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services;
e. Oral or written publication, in any manner, of material that violates a person's right of privacy;
f. The use of another's advertising idea in your “advertisement”; or
g. Infringing upon another's copyright, trade dress or slogan in your “advertisement”.
Analysis
This definition has been changed from the earlier BOP form. The previous definitions distinguished personal injury and advertising injury; in the current form the two are combined. In the current edition, consequential bodily injury arising from personal and advertising injury is encompassed in the definition. For example, an insured businessowner may forcibly grab the arm of someone he believes is shoplifting. If a suit results alleging bodily injury, this is where coverage is found.
15. ”Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Analysis
This definition has been moved from its previous location within the pollution exclusion, but remains unchanged from previous editions.
16. ”Products-completed operations hazard”:
a. Includes all “bodily injury” and “property damage” occurring away from premises you own or rent and arising out of “your product” or “your work” except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned. However, “your work” will be deemed completed at the earliest of the following times:
(a) When all of the work called for in your contract has been completed.
(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
Work that may need service, maintenance, correction, repair, or replacement, but which is otherwise complete, will be treated as completed.
The “bodily injury” or “property damage” must occur away from premises you own or rent, unless your business includes the selling, handling or distribution of “your product” for consumption on premises you own or rent.
b. Does not include “bodily injury” or “property damage” arising out of:
(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the “loading or unloading” of that vehicle by any insured; or
(2) The existence of tools, uninstalled equipment or abandoned or unused materials.
Analysis
The definition describes the conditions under which there is coverage for bodily injury or property damage occurring away from the premises and arising out of the insured's product or work.
Unlike the CGL form, the BOP excepts injury or property damage occurring on the premises of the insured business if the business includes selling, handling or distribution of the insured's product for consumption. The BOP, remember, may be used for convenience stores and other eating establishments; this exception allows coverage without the necessity of adding coverage by endorsement.
17. ”Property damage” means:
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.
For the purposes of this insurance, electronic data is not tangible property.
As used in this definition, electronic data means information, facts or programs stored as, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
Analysis
The current BP 00 03 has added a definition of electronic data to the definition of property damage. This is in keeping with the personal and advertising injury exclusions and is a means to eliminate coverage for damage to this type of property.
18. ”Suit” means a civil proceeding in which damages because of “bodily injury”, “property damage”, “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.
Analysis
The definition makes it clear that alternative dispute resolution proceedings or arbitrations will be treated the same as a lawsuit.
19. ”Temporary worker” means a person who is furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions.
20. ”Volunteer worker” means a person who is not your “employee”, and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary or other compensation by you or anyone else for their work performed for you.
Analysis
Temporary workers do not have insured status as do employees and leased workers; therefore, if a temporary worker is injured due to the named insured's negligence and brings suit, the BOP will provide coverage for the named insured.
A new definition is that for a volunteer worker. Volunteers are now insureds while carrying out the insured's business. Volunteer workers are distinct from employees, however, in that they may receive medical expenses coverage.
21. ”Your product”:
a. Means:
(1) Any goods or products, other than real property, manufactured, sold, handled, distributed, or disposed of by:
(a) You;
(b) Others trading under your name; or
(c) A person or organization whose business or assets you have acquired; and
(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.
b. Includes:
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product”; and
(2) The providing of or failure to provide warnings or instructions.
c. Does not include vending machines or other property rented to or located for the use of others but not sold.
Analysis
The definition does not apply to real property. The definition under the 1973 comprehensive general liability policy did not address this point and as a result, some insurers used the injury-to-products exclusion to deny coverage for losses to real property that would have otherwise been covered by the broad form property damage endorsement for completed operations. The current definition should avoid that problem. Because of the similarity between the CGL form and the businessowners liability coverage, the definition has made its way into the BOP.
Note that “your product” is stated to include goods or products manufactured, sold, handled, distributed, or disposed of by a “person or organization whose business or assets you have acquired.” It should also be noted that the definition of “your product” includes the providing of or failure to provide warnings or instructions. This is to make clear the point that coverage for claims arising out of the failure to provide adequate warnings or instructions concerning a product should be handled under the products-completed operations hazard.
22. ”Your work”:
a. Means:
(1) Work or operations performed by you or on your behalf; and
(2) Materials, parts or equipment furnished in connection with such work or operations.
b. Includes:
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your work”; and
(2) The providing of or failure to provide warnings or instructions.
Analysis
Note that this definition includes the phrase about “the providing of or the failure to provide warnings or instructions”, just like the “your products” definition. Also, the phrase “work or operations performed … on your behalf” complements the wording in exclusion m. concerning the fact that the exclusion does not apply to work performed on behalf of the named insured by a subcontractor; thus, the named insured does have coverage for property damage to work performed on his or her behalf by a subcontractor even though such work is considered as the work of the named insured.