Analysis

The inspections clause simply gives the insurer a contractual right, but not an obligation, to make inspections, surveys and recommendations regarding the insured premises; however, such inspections and reports are for insurability and premium determination only. By undertaking such inspections, the insurer takes on no liability nor warrants that the premises are safe, up to code, or healthful.

Because the BOP provides coverage for property damage because of the breakdown of boilers and machinery, an addition to the conditions is the paragraph stating that paragraph 2. does not apply when the insurer makes an inspection because of state or municipal statutes or ordinances relating to these devices.

Analysis

Where insured property might be covered under two of the policy's coverage parts—for example, a walk-in freezer which might be covered as building or business personal property—this provision eliminates any possible excess recovery beyond the actual loss. Note that this provision supports the notion that partial recovery can be had from both sources, if necessary.

Analysis

If other insurance exists, the policy responds as excess insurance, even if the insured is unable to collect under the other policy. There is no provision for pro rata sharing of losses.

Note that there is now a provision specifically addressing situations in which the named insured has been added as an additional insured on another policy. In these situations it is common for the additional insured to look to the other policy for primary coverage. The liability coverage of this policy, therefore, will be excess in such circumstances. 

Analysis

The premium audit condition has been revised to clarify that the due date for the audit premiums is the date shown as the due date on the bill. Heretofore, the form stated that the premium was “due and payable on notice to the first Named Insured.” The first Named Insured has the responsibility of keeping records for the insurer's use in computing the premium.

Analysis

The final conditions give subrogation details. The insurer has the right of recovery unless the named insured has waived his rights prior to a loss to covered property; or, if following a loss, the person whom the insurer would subrogate against is someone insured by this policy, or is a firm either owed or controlled by, or that owns or controls, the named insured, or is the named insured's tenant. As respects liability coverage—but not medical expenses—if the insured has rights to recover all or any part of a payment the insurer has made under the policy, those rights are transferred to the insurer. Moreover, the insured must do nothing to impair those rights, and, at the insurer's request, must bring suit or transfer the rights of recovery to the insurer and help the insurer enforce them.

Like other ISO insurance programs, the businessowners program may be modified through use of endorsements. Some of the endorsements previously in use have been withdrawn because the coverage they provided is now included in the BP 00 03 07 02. However, because they may still be used by insurers using the earlier forms, they are included. Below is a brief description of many of the more common endorsements.

Windstorm or Hail Percentage Deductible (BP 03 12 07 02). Percentage deductibles are offered on an optional basis. The deductible amount can be 1, 2, or 5 percent of the limit(s) of insurance applicable to the covered property that has sustained loss or damage caused directly or indirectly by windstorm or hail, regardless of any other cause contributing to the loss. The deductible applies separately to each building, if two or more buildings sustain damage; to building and personal property in that building, if both sustain damage; to personal property in each building, and to personal property in the open.

Business Liability Coverage—Property Damage Liability Deductible (BP 07 03 07 02, BP 07 04 07 02). The insured may select optional property damage liability deductibles of $250, $500, $1,000, or $2,500. The first endorsement is per claim made; the second is per occurrence.

Additional Insured—Managers or Lessors of Premises (BP 04 02 07 02). Amends the definition of “who is an insured” in section II liability to include designated persons or organizations arising out of their liability because of ownership, maintenance, or use of the premises leased to the named insured.

Additional Insured—Controlling Interest (BP 04 06 07 02). Provides coverage for additional insureds who financially control the insured or own, maintain, or control the insured's premises.

Additional Insured—State or Political Subdivision—Permits Relating to Premises (BP 04 07 07 02). Provides coverage for governmental entities issuing permits to the named insured for such activities as erecting a sign or canopy, constructing a driveway or cellar entrance, removing or installing an elevator, or the ownership, maintenance, or use of an elevator. These are activities which may expose the governmental entity to liability because often the issuance of a permit may be perceived by the public as an assurance the project poses no risk to safety. Additional Insured—Townhouse Associations (BP 04 08 07 02.pdf). Covers individual townhouse owners for liability arising from membership in townhouse associations. 

Additional Insured—Owner or Other Interests from whom Land Has Been Leased (BP 04 10 07 02). Covers owners or lessors of land leased to the insured. However, liability arising out of construction, alterations, and post-lease occurrences is excluded.

Additional Insured—Co-owner of Insured Premises (BP 04 11 07 02). Covers co-owners of the insured premises, but only for liability arising out of such ownership.

Additional Insured—Engineers, Architects, or Surveyors (BP 04 13 07 02). Covers engineers, architects or surveyors engaged by the insured for premises and operations liability. Professional liability is excluded. See, as well, endorsement BP 04 49 07 02, below.

Additional Insured—Lessor of Leased Equipment (BP 04 16 07 02). Includes as additional insured a designated person or organization leasing equipment to the insured. Covered is liability involving contributory negligence and arising out of the maintenance, operation, or use of the leased equipment. But if an occurrence arises out of the sole negligence of the leasing organization, there is no coverage.

Additional Insured—Vendors (BP 04 47 07 02). Adds coverage for a vendor with respect to liability arising out of distribution or sales of the insured's products.

Additional Insured—Designated Person or Organization (BP 04 48 07 02). Covers the person or organization shown in the schedule, but only with respect to liability arising out of the ongoing operations of the insured contractor or liability arising out of premises owned by or rented to the insured contractor.

Additional Insured—Engineers, Architects, or Surveyors Not Engaged by the Named Insured (BP 04 49 07 02). Covers engineers, architects or surveyors not engaged by the insured contractor, but who are contractually required to be added as additional insureds. The endorsement does not provide professional liability coverage.

Additional Insured—Owners, Lessees or Contractors; Owners, Lessees or Contractors; Additional Insured—Owners, Lessees or Contractors—With Additional Insured Requirement in Construction Contract (BP 04 50 07 02; BP 04 51 07 02). The first of these endorsements provides liability arising out of the named insured's ongoing operations for the person or organization named in the schedule. The second gives additional insured status to a person or organization for whom the named insured is performing operations, if both parties have agreed in writing or a contract that such person or organization be given this status. When the project or operations end, so does the additional insured status.

Additional Insured—State or Political Subdivisions—Permits (BP 04 52 07 02). Provides coverage for governmental entities issuing permits to contractors. Whereas endorsement BP 04 07 07 02 covers liability arising out of operations on the insured premises, this endorsement covers liability away from the insured premises. Not included is coverage for bodily injury, property damage, or personal and advertising injury for work performed for the governmental organization, or for bodily injury or property damage included within the products-completed operations hazard.

Spoilage Coverage(BP 04 15 07 02). Direct damage coverage may be extended for spoilage of perishable stock caused by breakdown or contamination and/or power outage. A mandatory deductible of $500 applies; the maximum limit available per location is $50,000.

Ordinance or Law Coverage (BP 04 46 07 02). The current edition (11 02) of this endorsement has been revised. As with the earlier endorsement, the insured may elect coverage 1, 2, 3, or coverages 2 and 3 combined limits; 1 being coverage for loss to the undamaged portion of the building; 2 being demolition cost coverage; and 3 being increased cost of construction. However, unlike the earlier endorsement, there is a proportionate loss payment provision to provide coverage in situations where the underlying physical damage that triggers coverage is caused both by a covered and by an excluded peril. The insurance pays the proportion the covered physical loss bears to the total direct physical loss. For example, if a building is damaged by both wind and flood, and the damage in its entirety results in enforcement of an ordinance or law, there is proportionate coverage for the ordinance or law repairs arising from the wind damage. But, there is no coverage if only an excluded cause of loss results in enforcement of any ordinance or law.  So, if a building is damaged by both wind and flood and the only ordinance that would be enforced is elevation of the premises, there is no coverage.

Optional coverage for business income and extra expense, and an option to reduce the seventy-two hour waiting period, are included. 

Food Contamination (BP 04 31 07 02). New with the current edition of the BOP, this endorsement may be attached to risks such as restaurants and grocery or convenience stores. The endorsement covers expenses ($10,000, which may be increased) to clean equipment, provide necessary tests or vaccines for infected employees, and additional advertising expense ($3,000, which may be increased) to restore the insured's reputation. Included also is the cost to replace the contaminated food and the loss of actual business income (a twenty-four hour time deductible applies.) 

Computer Coverage (BP 04 33 01 97 and BP 04 34 01 97). Because coverage is now included in the BP 00 03 07 02, these endorsements have been withdrawn. Since they may still be in use with insurers using older forms, they are included here. Optional coverage for risks of direct physical loss or damage is available for: a. electronic data processing equipment (this coverage includes mechanical breakdown coverage); and b. electronic data processing media And records.

An automatic limit of 25 percent of the electronic data processing equipment limit applies unless a higher limit is selected. Coverage must be provided for electronic data processing equipment and media when the computer coverage endorsement is written.

Separate endorsements apply to the standard businessowners property coverage form and special businessowners property coverage form, although both endorsements afford equivalent coverage.

Water Back-up and Sump Overflow (BP 04 53 07 02). This endorsement is new. An annual aggregate amount of $5,000 (which may be increased) applies to loss resulting from water which backs up through sewers or drains or which overflows from a sump.

Utility Services—Direct Damage Endorsement(BP 04 56 07 02). Property damage coverage may be extended to cover loss of or damage to covered property described in the Schedule caused by direct physical loss or damage to off-premises: a. properties providing water, communication and power supply services; and b. overhead transmission and overhead communication lines. See, as well, the description of utility services—time element (BP 04 57 07 02) under Business Income Endorsements.

Removal of Insurance-to-Value Provision (BP 04 83 07 02). This endorsement, new with the current program, removes the 80 percent insurance to value provision from the loss settlement provisions, so that in event of a covered loss there is no penalty if the insured does not carry the required amount. Obviously, this is an endorsement to be used with great discretion.

Functional Valuation (for building, use BP 04 84 07 02; for personal property, use BP 04 85 07 02). These endorsements are new with the current program. The functional valuation of the building is agreed upon and scheduled; in event of a covered loss that limit is the only applicable limit that applies. The endorsement includes coverage for ordinance or law on the same basis as endorsement BP 04 46 11 02 above. Endorsement BP 04 85 07 02 allows functional replacement value for business personal property to be agreed upon and scheduled. In event of a covered loss, property is replaced with less costly property that can perform the same function as the damaged or destroyed property.

Terrorism Endorsements BP 05 21 11 02 through BP 05 42 11 02 refer to coverage for or the exclusion of coverage for acts of terrorism. Please consult the forms for more details.

Contractors' Installation, Tools and Equipment Coverage (BP 07 01 07 02). Previously, this endorsement was mandatory and amended coverage for contractors. It was frequently used with endorsements BP 07 05 07 02 and BP 07 06 01 97. Now, those two endorsements have been withdrawn and their provisions incorporated into BP 07 01 07 02, which is no longer mandatory. The insured may select any or all of four coverage extensions, for contractors' installation coverage, contractors' tools and equipment, nonowned tools and equipment, and employees' tools.

Motels (BP 07 10 07 02). This endorsement is new with the current program and is mandatory whenever the BOP is used to insure an eligible motel. It provides an additional coverage of $2,500 for lock replacement. There is coverage for property damage the insured is legally obligated to pay of $25,000 per occurrence limit for guests' property, with a maximum of $1,000 per guest. These limits may be increased. Property contained in a safe deposit box is excluded, but coverage may be added for this property by attaching endorsement BP 07 11 07 02 motels—liability for guests property in safe deposit boxes.

Self-Storage Facilities (BP 07 12 07 02). This endorsement is new and is mandatory whenever the BOP is written to insure a self-storage facility. It provides coverage for accrued rental charges as a part of business income in event of a covered loss, customers' goods legal liability ($25,000 per occurrence), and a $5,000 aggregate limit for sale and disposal liability. Earthquake (BP 10 03 07 02.pdf). Provides coverage for loss by earthquake. A percentage deductible applies.

Sprinkler Leakage—Earthquake Extension (BP 10 10 07 02). New in the current program, this endorsement provides coverage for leakage from a sprinkler system resulting from an earthquake.

In addition to the various endorsements noted above (such as for food contamination) which include coverage for a business income loss, there are other endorsements applicable to business income.

Business Income Changes—Increased Period of Restoration (No Waiting Period) (BP 04 41 07 02). This endorsement is new in the current edition. It eliminates the seventy-two hour waiting period time deductible.

Utility Services—Time Element (BP 04 57 07 02). By attaching this endorsement, a business income and extra expense loss resulting from interruption of power (with or without overhead transmission lines), water, or communication (with or without overhead transmission lines) is covered.

Hired Auto and Nonowned Auto Liability (BP 04 04 07 02). Provides liability coverage for the use of a hired auto, by the named insured or an employee, or the use of a nonowned auto, by anyone other than the named insured, to carry out the named insured's business.

Coverage for Injury to Leased Workers (BP 04 40 07 02). Amends the definition with respect to the exclusion for employers' liability so that “employee” does not include a leased worker.

Newly Acquired Organizations (BP 04 54 07 02). Liability coverage is extended for up to ninety days for an organization newly acquired or formed by the named insured.

Business Liability Coverage—Tenants Liability (BP 04 55 07 02). Provides broadened tenants legal liability for property damage to property rented to or occupied by the named insured with the permission of the owner. Limits of from $50,000 to $1,000,000 are available.

Liquor Liability Coverage (BP 04 19 07 02, BP 04 88 07 02, BP 04 89 07 02). The first of these endorsements amends the liquor liability exclusion by exempting functions scheduled in the endorsement. The second deletes the liquor liability exclusion in the BP 00 03 07 02 altogether. (Consequently, endorsement BP 04 18 06 89 has been withdrawn under the current program.) BP 04 89 07 02 provides an aggregate limit and a common cause limit (the most that will be paid for all bodily injury or property damage sustained by one or more persons as the result of serving alcoholic beverages to any one person). These limits are separate from the liability and medical expenses limits already provided under the policy.

Pollution Liability (BP 04 90 07 02, BP 04 91 07 02). The first of these endorsements provides limited coverage for bodily injury and property damage arising out of the release of pollutants from an insured's premises or a contractor's job site. The release must begin and end within forty-eight hours. The second endorsement provides limited bodily injury and property damage coverage arising out of release of a specific pollutant scheduled on the endorsement. The pollutant must be used as part of the insured's operations at his premises or at a contractor's job site. 

Employee Benefits Liability Coverage (BP 04 98 07 02). This endorsement is new in the current program. Coverage is provided on a claims made basis for damages or a suit as the result of an act, error, or omission negligently committed in the administration of the insured's employee benefit program. The benefit program may include group life, accident, or health insurance, flexible spending accounts, employee profit sharing, savings, or stock ownership plans, unemployment insurance, workers' compensation, and social security benefits, and vacation plans. There is an each employee limit, subject to the aggregate limit. The insured may purchase a five year extended reporting period (BP 04 99 07 02) so long as the insurer is notified within sixty days after the end of the policy period or date of termination of the intent to purchase the coverage.

Limited Fungi or Bacteria Coverage (Liability) (BP 05 78 07 02). Coverage for bodily injury or property damage is provided on an aggregate basis. This amount is not in addition to the limit of liability shown on the declarations.

Pesticide or Herbicide Applicator Coverage (BP 07 08 07 02). Amends liability exclusion 1.f.(d)(i) so that there is coverage for the intentional discharge of pollutants so long as the operation meets all applicable federal, state, or local statutes and ordinances governing such operations.

Barbers and Beauticians Professional Liability (BP 08 01 07 02). Provides professional liability coverage for bodily injury, property damage, or personal and advertising injury arising out of rendering or failing to render professional services. Activities such as electrolysis, hair implanting, or body piercing are not covered.

Funeral Directors Professional Liability (BP 08 02 07 02). Liability exclusion B.1.k.(4) care custody or control is amended to cover property such as caskets or urns in the care of the insured. Bodily injury, property damage, or personal and advertising injury arising out of rendering or failing to render professional services are covered.

Optical and Hearing Aid Establishments (BP 08 03 07 02). This endorsement provides liability coverage for opticians or hearing aid specialists. It is not intended to cover liability for optometry.

Printers Errors and Omissions Liability (BP 08 04 07 02). Provides liability coverage for negligent acts, errors or omissions in providing printing services. The endorsement does not apply to claims arising out of a publishing function or to the writing of materials for customers.

Veterinarians Professional Liability (BP 08 05 07 02). Provides professional liability for bodily injury, property damage or personal and advertising injury, including serving on an accreditation or standards board. The endorsement is not intended for veterinarians serving zoos, circuses, carnivals, training or obedience schools, or animals intended for professional racing or show.

Limited Pharmacists Liability Coverage (BP 08 06 07 02). New in the current program, this endorsement provides professional liability coverage for services in connection with the practice of pharmacy, for operations of a retail druggist or drugstore, including administering or prescribing any drug, consulting, diagnostic, referral or similar service. Excluded is any willful violation of any applicable state statute.

Though many of these endorsements are intended to be attached to a policy by an underwriter not desirous of writing a particular exposure, some may be used by the insured to eliminate unwanted coverage.

Named Perils (BP 10 09 07 02). When attached to the BP 00 03 07 02, this endorsement provides coverage similar to the businessowners standard property coverage form (BP 00 01 01 97). It deletes the limitations paragraph and the collapse and water damage, other liquids, powder or molten material damage additional coverages of the BP 00 03 07 02. Money and securities optional coverage is replaced with optional burglary and robbery. The specified causes of loss definition is deleted, since coverage is on a named perils basis.

Exclusion—Volunteers as Insureds (BP 04 71 07 02). Excludes volunteer workers as insureds.

Limitation of Coverage to Designated Premises or Project (BP 04 12 07 02). As the name suggests, limits liability coverage to those premises, operations or projects specifically designated in the schedule.

Exclusion—Personal and Advertising Injury (BP 04 37 07 02). This endorsement is mandatory when the BOP is written to insure detective or investigative agencies, employment agencies, labor union offices, lawyers' offices, political campaign headquarters or offices, and security and patrol agencies.

Medical Expenses—Exclusion (BP 04 38 07 02). Eliminates medical expenses coverage. Adds cost of first aid administered by the insured to supplementary payments.

Abuse or Molestation Exclusion (BP 04 39 07 02). Excludes coverage for any incident arising out of anyone's abuse or molestation of anyone in the care of any insured. Excluded as well is coverage for the negligent hiring or supervision of a person whose conduct would be excluded under the first sentence.

Vacancy Changes and Vacancy Permit (BP 04 86 07 02, BP 04 87 07 02). The vacancy provisions of the businessowners form state a building is considered vacant unless at least 31 percent of the total square footage is rented to a lessee, or used by the business owner to conduct normal operations. New endorsement BP 04 86 07 02 allows the insured to select a reduced percentage to a minimum of 10 percent. New endorsement BP 04 87 07 02 suspends the vacancy condition for the time scheduled in the endorsement.

Fire Department Service Contract (BP 12 02 07 02). For use when maintenance of a service contract with a privately owned fire department is required to apply a public protection classification.

Condominium Associations (BP 17 01 07 02, BP 17 02 07 02, BP 17 03 07 02). Endorsement BP 17 01 07 02 amends the coverage to reflect the condominium form of ownership. Endorsement BP 17 02 07 02 is similar, but is used for the commercial unit owner. Endorsement BP 17 03 07 02 provides the optional coverages of loss assessment and miscellaneous real property coverage.