Summary: Insurance Services Office ISO) has revised its businessowners forms. Where before there were two property coverage forms—one providing standard, or named perils protection (BP 00 01 01 97), and the other providing special perils protection (BP 00 02 12 99), there is now one form (BP 00 03 07 02). This form incorporates special perils coverage, liability, and the policy conditions (previously BP 00 02 12 99, BP 00 06 01 97, and BP 00 09 01 97 respectively). Coverage may be changed to named perils by attaching endorsement BP 10 09 07 02 named perils. This endorsement is discussed elsewhere; see Businessowners Program Endorsements. The businessowners conditions and liability coverages are also discussed elsewhere in this tab. See Businessowners Program for a discussion of eligibility and the general conditions, and see Businessowners Liability Coverage.
The businessowners property form offers replacement cost coverage or an actual cash value option. Beyond this, much of the coverage under the forms is similar to that available through ISO's commercial property program (see Building and Personal Property Coverage Form).
The following discussion focuses on the property coverages of form BP 00 03 07 02, with any differences from the earlier special form BP 00 02 12 99 indicated. For conditions governing loss payment, limits of insurance, and definitions, see Businessowners Property Coverage, Part II. Remember that not all insurers immediately adopt new ISO forms; many use earlier editions. Therefore, check carefully in making any coverage determinations.
Topics covered:
Eligibility
Insuring agreement
Covered property—buildings
Covered property—business personal property
Property not covered
Covered causes of loss
Limitations
Additional coverages
Additional coverages—business income
Coverage extensions
Exclusions—concurrent language precludes coverage
Exclusions—some ensuing losses covered
Optional coverages
Eligibility
The businessowners program may be used for several classes of business, including apartment buildings (including residential condominium associations), office buildings (including office condominium associations), and some selected wholesale, mercantile, processing and service occupancies. The new manual rules allow as well for some restaurants—those having limited cooking facilities, some fast food operations, and motels and some storage facilities. For an in-depth discussion, see Businessowners Program. Print subscribers will find this on page B.1.
Insuring Agreement
A. Coverage
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
Analysis
The property coverage form insuring agreement promises to pay for direct loss or damage to covered property (buildings, business personal property, and personal property of others in the named insured's care, custody, or control, and tenants' improvements and betterments). Covered causes of loss depend on the form used: special perils in the BP 00 03 07 02, or named perils if the BP 10 09 07 02 is attached. The property must be at the premises described in the Declarations.
1. Covered Property
Covered Property includes Buildings as described under Paragraph a. below, Business Personal Property as described under Paragraph b. below, or both, depending on whether a Limit of Insurance is shown in the Declarations for that type of property. Regardless of whether coverage is shown in the Declarations for Buildings, Business Personal Property, or both, there is no coverage for property described under Paragraph 2. Property Not Covered.
a. Buildings, meaning the buildings and structures at the premises described in the Declarations, including:
(1) Completed additions;
(2) Fixtures, including outdoor fixtures;
(3) Permanently installed:
(a) Machinery; and
(b) Equipment;
(4) Your personal property in apartments, rooms or common areas furnished by you as landlord;
(5) Personal property owned by you that is used to maintain or service the buildings or structures or the premises, including:
(a) Fire extinguishing equipment;
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;
(6) If not covered by other insurance:
(a) Additions under construction, alterations and repairs to the buildings or structures;
(b) Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the buildings or structures.
Analysis
The wording of the covered property portion of the businessowners form is similar to that of the covered property portion of the building and personal property coverage form (CP 00 10 04 02). There is a difference, however, in that the BOP covers personal property in apartments, rooms, or common areas furnished by the named insured as a landlord. Coverage for personal property in common areas is a broadening of coverage in the current form. This provision is absent from the CP 00 10 04 02. Remember that the BOP may be used to insure entities such as office buildings with incidental apartment occupancies; the CP 00 10 04 02 is designed for a different class of business.
The building property coverage refers to two types of additions: those that are completed and those under construction. Additions under construction often are covered by the builder's insurance; however, once an addition is completed it is covered as part of the described building. For this reason insurance to value is important. Fixtures refers to items that are attached to the building and that cannot be removed without affecting the structure. Examples are permanently attached blinds or overhead lighting. Outdoor fixtures are items permanently affixed to the realty, such as flag poles. Note, though, that permanently installed equipment or machinery may mean much the same as permanently installed fixtures. Think, for example, of a central vacuum system or telecommunications wiring.
Although not explicitly stated in the coverage for buildings, exterior and interior building glass are now considered covered property. Accordingly, the limitation on glass and optional coverage for interior glass have been deleted from the BP 00 03 07 02.
b. Business Personal Property located in or on the buildings at the described premises or in the open (or in a vehicle) within 100 feet of the described premises, including:
(1) Property you own that is used in your business;
(2) Property of others that is in your care, custody or control, except as otherwise provided in Loss Payment Property Loss Condition E.6.d.(3)(b);
(3) Tenant's improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:
(a) Made a part of the building or structure you occupy but do not own; and
(b) You acquired or made at your expense but cannot legally remove; and
(4) Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Paragraph 1.b.(2).
(5) Exterior building glass, if you are a tenant and no Limit of Insurance is shown in the Declarations for Building property. The glass must be owned by you or in your care, custody or control.
Analysis
As noted earlier, the current BOP includes coverage for exterior building glass within the limit for the building. But if the named insured is a tenant, and therefore no limit is shown for the building, then the glass may be covered as business personal property. As will be discussed later, an additional coverage has been added for certain expenses related to glass.
The BOP form covers property of others in the insured's care (b.(2); this refers to the form's use for such establishments as dry cleaners or jewelry repair. Loss payment for this property is valued at actual cash value unless the item is subject to a written contract governing the insured's liability. (There is an additional limit, discussed below, for theft of property such as jewelry and furs.)
Tenants' improvements and betterments are included as business personal property. Included might be such items as built-in shelving or partitions. There is no requirement that the tenant insured actually install the improvements and betterments. The insured might decide to rent a space because the improvements and betterments that are included save him the expense of installation. Such improvements and betterments have been acquired through the rent being paid and are therefore covered. They must be a part of the building as required by policy language. For example, cabinets or shelving attached to the walls become part of the building while desks and chairs do not.
However, in United Fire Insurance Co. v. Martin, 282 S.E. 2d 2 (Vir. 1981), the court ruled that air conditioning compressors were not “acquired” at the tenant's expense because the tenant had not spent money in the original installation.
Note that in the BP 00 03 if the insured business is a tenant and thus no limit for buildings is indicated on the declarations, exterior building glass will be covered as business personal property. The insured must either own the glass, or it must be in the insured's care, custody, or control.
Personal property the insured has leased and has a contractual responsibility to insure is covered as business personal property. For example, it is common to lease sophisticated copying equipment. If the terms of the lease require the insured to insure the equipment and a covered loss occurs, the insured's businessowners policy will respond.
2. Property Not Covered
Covered Property does not include:
a. Aircraft, automobiles, motortrucks and other vehicles subject to motor vehicle registration;
b. ”Money” or “securities” except as provided in the:
(1) Money and Securities Optional Coverage; or
(2) Employee Dishonesty Optional Coverage;
c. Contraband, or property in the course of illegal transportation or trade;
d. Land (including land on which the property is located), water, growing crops or lawns;
e. Outdoor fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs or plants, all except as provided in the:
(1) Outdoor Property Coverage Extension; or
(2) Outdoor Signs Optional Coverage;
f. Watercraft (including motors, equipment and accessories) while afloat.
g. Accounts, bills, food stamps, other evidences of debt, accounts receivable or “valuable papers and records”; except as otherwise provided in this policy.
h. ”Computer(s)” which are permanently installed or designed to be permanently installed in any aircraft, watercraft, motortruck or other vehicle subject to motor vehicle registration. This paragraph does not apply to “computer(s)” while held as “stock”.
Analysis
Unlike the earlier BP 00 01 01 97, the BP 00 03 07 02 covers bullion but limits coverage. (If named perils endorsement BP 10 09 07 02 is attached then bullion is covered only as provided in the burglary and robbery optional coverage.) Money or securities are covered only when the optional coverage for this type of property or for employee dishonesty are selected (see below).
Outdoor signs (other than those attached to buildings, which are covered as building property) are covered under the outdoor property coverage extension and/or the optional coverage for outdoor signs. Outdoor property such as fences, television antennas, or trees are covered under the outdoor property coverage extension.
Any illegal or prohibited goods are not covered, nor is land, water, growing crops, or lawns. Aircraft and motor vehicles subject to registration are not covered. Watercraft while afloat is not covered, so if the insured was working on a boat in dry-dock or in a building the boat would be covered.
The BP 00 03 07 02 has added two new classes of property not covered: 2.g. and 2.h. Valuable papers and records and accounts receivable are covered in the coverage extensions (discussed later), but certain items such as food stamps are not covered. Computers which are permanently installed, or are designed to be permanently installed, in aircraft, watercraft, motortrucks or other vehicles subject to motor vehicle registration are covered only if they are held as stock (a definition added in the BP 00 03 07 02; see Businessowners Property Coverage, Part II). As discussed later, the BP 00 03 covers computers the insured uses in business, as well as those held as stock.
3. Covered Causes Of Loss
Risks of direct physical loss unless the loss is:
a. Excluded in Paragraph B. Exclusions in Section I; or
b. Limited in Paragraph 4. Limitations in Section I.
Analysis
The BP 00 03 07 02, as noted earlier, provides special perils coverage. If the insured wishes coverage on a named perils basis, endorsement BP 10 09 07 02 named perils may be attached. Coverage for loss in the BP 00 03 07 02 is otherwise restricted through limitations or exclusions.
4. Limitations
a. We will not pay for loss of or damage to:
(1) Steam boilers, steam pipes, steam engines or steam turbines caused by or resulting from any condition or event inside such equipment. But we will pay for loss of or damage to such equipment caused by or resulting from an explosion of gases or fuel within the furnace of any fired vessel or within the flues or passages through which the gases of combustion pass.
(2) Hot water boilers or other water heating equipment caused by or resulting from any condition or event inside such boilers or equipment, other than an explosion.
(3) Property that is missing, where the only evidence of the loss or damage is a shortage disclosed on taking inventory, or other instances where there is no physical evidence to show what happened to the property. This limitation does not apply to the Optional Coverage for Money and Securities.
(4) Property that has been transferred to a person or to a place outside the described premises on the basis of unauthorized instructions.
(5) The interior of any building or structure caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(a) The building or structure first sustains damage by a Covered Cause of Loss to the roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or
(b) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.
b. We will not pay for loss of or damage to fragile articles such as glassware, statuary, marbles, chinaware and porcelains, if broken, unless caused by the “specified causes of loss” or building glass breakage. This restriction does not apply to:
(1) Glass that is part of the exterior or interior of a building or structure;
(2) Containers of property held for sale; or
(3) Photographic or scientific instrument lenses.
c. For loss or damage by theft, the following types of property are covered only up to the limits shown:
(1) $2,500 for furs, fur garments and garments trimmed with fur.
(2) $2,500 for jewelry, watches, watch movements, jewels, pearls, precious and semi-precious stones, bullion, gold, silver, platinum and other precious alloys or metals. This limit does not apply to jewelry and watches work $100 or less per item.
(3) $2,500 for patterns, dies, molds and forms.
Analysis
Excluded is damage to steam boilers and similar objects when the damage is caused by a condition inside the equipment. But damage to such equipment resulting from explosion of gases or fuel within the furnace or flues is covered. (The insured may purchase the optional coverage of mechanical breakdown, which provides coverage for loss caused by an accident to a boiler or machinery. This coverage is discussed below.) Similarly, damage to hot water boilers or heaters is excluded if caused by a condition other than explosion inside the objects.
There is no coverage for missing property when there is no physical evidence to show what happened to it. Physical evidence is open to interpretation. For example, if the insured enters the premises in the morning to find all desks have been stolen, the “physical evidence” is that in the evening they were seen to be there, but not in the morning. An inventory in this case would be unnecessary. However, if the insured, upon taking year-end inventory, found he was missing a case of instruments, then there is no coverage. The wording of this limitation has been changed in the BP 00 03 07 02 to convey that there is no coverage when the only evidence of loss is the discrepancy between inventory and an actual count of items.
An addition to the current form is limitation a.(5), which is similar to that in the CP 10 30 04 02 (C.c.(1) and (2)). There is no coverage for the interior of a building or structure caused by rain, snow, sleet, ice, sand or dust unless the building or structure first sustains damage from a covered cause of loss. The limitation does not apply to damage to the interior of the building or structure caused by thawing snow, sleet, or ice on the building or structure. This change limits coverage, since there was no such requirement in the BP 00 02 12 99.
The limitation (4.b.) of $500 per loss, $100 per pane that applied to interior glass or an outdoor sign in special form BP 00 02 12 99 has been eliminated from the BP 00 03 07 02, since glass is now treated as covered property.
Loss or damage to fragile articles such as glassware is excluded unless covered by a “specified cause of loss,” a term that is defined at the end of the form. For example, cracking is an excluded cause of loss, but fire is not. So if the fragile articles broke as a result of fire there is coverage.
Note also the limits placed on certain types of valuable property such as jewelry and furs. Jewelry or watches worth $100 or less are not limited as to theft coverage.
The following additional coverages are not in the order in which they appear in the form itself. The reason is that many of the additional coverages pertain to business income, and for convenience these are grouped together. Following are the nonbusiness income additional coverages.
5. Additional Coverages
a. Debris Removal
(1) Subject to Paragraphs (3) and (4), we will pay your expense to remove debris of Covered Property caused by or resulting from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date of direct physical loss or damage.
(2) Debris Removal does not apply to costs to:
(a) Extract “pollutants” from land or water; or
(b) Remove, restore or replace polluted land or water.
(3) Subject to the exceptions in Paragraph (4), the following provisions apply:
(a) The most that we will pay for the total of direct physical loss or damage plus debris removal expense is the Limit of Insurance applicable Covered Property that has sustained loss or damage.
(b) Subject to Paragraph (a) above, the amount we will pay for debris removal expense is limited to 25 percent of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage.
(4) We will pay up to an additional $10,000 for debris removal expense, for each location, in any one occurrence of physical loss or damage to covered Property, if one or both of the following circumstances apply:
(a) The total of the actual debris removal expense plus the amount we pay for direct physical loss or damage exceeds the Limit of Insurance on the Covered Property that has sustained loss or damage.
(b) The actual debris removal expense exceeds 25 percent of the sum of the deductible plus the amount that we pay for direct physical loss or damage to the Covered Property that has sustained loss or damage.
Therefore, if Paragraphs (4)(a) and/or (4)(b) apply, our total payment for direct physical loss or damage and debris removal expense may reach but will never exceed the Limit of Insurance on the covered Property that has sustained loss or damage, plus $10,000.
(5) Examples
Example #1
Limit of Insurance $90,000
Amount of Deductible $ 500
Amount of Loss $50,000
Amount of Loss Payable $49,500
($50,000 – $500)
Debris Removal Expense $10,000
Debris Removal Expense Payable $10,000
($10,000 is 20 percent of $50,000)
The debris removal expense is less than 25 percent of the sum of the loss payable plus the deductible. The sum of the loss payable and the debris removal expense ($49,500 + $10,000 = $59,500) is less than the Limit of Insurance. Therefore the full amount of debris removal expense is payable in accordance with the terms of Paragraph (3).
Example #2
Limit of Insurance $90,000
Amount of Deductible $ 500
Amount of Loss $80,000
Amount of Loss Payable $79,500
($80,000 – $500)
Debris Removal Expense $30,000
Debris Removal Expense Payable
Basic Amount $10,500
Additional Amount $10,000
The basic amount payable for debris removal expense under the terms of Paragraph (3) is calculated as follows: $80,000 ($79,500 + $500) x .25 = $20,000; capped at $10,500). The cap applies because the sum of the loss payable $79,500 and the basic amount payable for debris removal expense ($10,500) cannot exceed the Limit of Insurance $90,000).
The additional amount payable for debris removal expense is provided in accordance with the terms of Paragraph (4), because the debris removal expense ($30,000) exceeds 25 percent of the loss payable plus the deductible ($30,000 is 37.5 percent of $80,000), and because the sum of the loss payable and debris removal expense ($79,500 + $30,000 = $109,500) would exceed the Limit of Insurance ($90,000). The additional amount of covered debris removal expense is $10,000, the maximum payable under Paragraph (4). Thus the total payable for debris removal expense in this example is $20,000; $9,500 of the debris removal expense is not covered.
Analysis
ISO has amended the debris removal additional coverage to include examples as to how the percentage and additional $10,000 are to be applied. The expenses must be reported in writing to the insurer within 180 days of the date of loss in order to be paid.
b. Preservation Of Property
If it is necessary to move Covered Property from the described premises to preserve it from loss or damage by a Covered Cause of Loss, we will pay for any direct physical loss of or damage to that property:
(1) While it is being moved or while temporarily stored at another location; and
(2) Only if the loss or damage occurs within thirty days after the property is first moved.
c. Fire Department Service Charge
When the fire department is called to save or protect Covered Property from a Covered Cause of Loss, we will pay up to $1,000 for your liability for fire department service charges:
(1) Assumed by contract or agreement prior to loss; or
(2) Required by local ordinance.
Analysis
If covered property must be moved to protect it from a covered cause of loss—for example, a fire threatens covered stock—the property is covered while being moved or while temporarily at another location. Coverage applies for up to thirty days, and protects from any cause of loss.
d. Collapse
(1) With respect to buildings:
(a) Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose;
(b) A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse;
(c) A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;
(d) A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
(2) We will pay for direct physical loss or damage to Covered Property, caused by collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more of the following:
(a) The “specified causes of loss” or breakage of building glass, all only as insured against in this policy;
(b) Decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;
(c) Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to collapse;;
(d) Weight of people or personal property;
(e) Weight of rain that collects on a roof;
(f) Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. However, if the collapse occurs after construction, remodeling or renovation is complete and is caused in part by a cause of loss listed in Paragraphs (a) through (e), we will pay for the loss or damage even if use of defective material or methods in construction, remodeling or renovation, contributes to the collapse.
The criteria set forth in Paragraphs (1)(a) through (1)(d) do not limit the coverage otherwise provided under this Additional coverage for the causes of loss listed in Paragraphs (2)(a), (2)(d) and (2)(e).
(3) With respect to the following property:
(a) Awnings;
(b) Gutters and downspouts;
(c) Yard fixtures;
(d) Outdoor swimming pools;
(e) Piers, wharves and docks;
(f) Beach or diving platforms or appurtenances;
(g) Retaining walls; and
(h) Walks, roadways and other paved surfaces;
if the collapse is caused by a cause of loss listed in Paragraphs (2)(b) through (2)(f), we will pay for loss or damage to that property only if such loss or damage is a direct result of the collapse of a building insured under this policy and the property is Covered Property under this policy.
(4) If personal property abruptly falls down or carves in and such collapse is not the result of collapse of a building, we will pay for loss or damage to Covered Property caused by such collapse of personal property only if:
(a) The collapse was caused by a cause of loss listed in Paragraphs (2)(a) through (2)(f) of this Additional Coverage;
(b) The personal property which collapses is inside a building; and
(c) The property which collapses is not of a kind listed in Paragraph (3) above, regardless of whether that kind of property is considered to be personal property or real property.
The coverage stated in this Paragraph (4) does not apply to personal property if marring and/or scratching is the only damage to that personal property caused by the collapse.
Collapse of personal property does not mean cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
(5) This Additional coverage, Collapse, will not increase the Limits Of Insurance provided in this policy.
Analysis
Collapse was an additional coverage in the BP 00 02 12 99 (there is no collapse coverage when the named perils endorsement BP 10 09 07 02 is attached), but the wording of the current form has been changed to include a definition of collapse. Heretofore, it was possible to argue that structural impairment could constitute a state of collapse, and to find coverage in jurisdictions applying a liberal interpretation. Now, however, the inclusion of this definition has effectively stopped that argument. Note as well that danger of imminent collapse does not trigger coverage.
There is coverage if collapse of a covered building occurs in the course of remodeling, renovation, or construction because of defective material or methods. There is also coverage if the collapse occurs once the construction, remodeling, or renovation is complete, even if use of defective materials contributes, provided the loss is caused in part by a cause of collapse listed in (2)(a) through (2)(e). Thus, if defective materials—such as defective shingles—contributed to a collapse caused by hidden decay, the direct damage is covered.
The wording of the hidden decay and insect or vermin damage covered causes of collapse has been altered to clarify that once such damage is known to an insured (any insured, not just the named insured), then there is no coverage since presumably the insured knew of the damage but failed to protect the property.
Certain items, such as awnings and gutters, are not covered for damage caused by collapse unless the damage is a result of collapse of an insured building, and the items are themselves covered property.
Personal property—for example, tenant's improvements such as shelving and partitions—is covered for collapse only if: the property is inside a building; the collapse was caused by one of the causes of loss in (2)(a) through (2)(f); and the collapsed property is not one of the items listed as not covered such as awnings or gutters. But if the only damage from collapse to personal property is marring or scratching, then there is no coverage.
e. Water Damage, Other Liquids, Powder or Molten Material Damage
If loss or damage caused by or resulting from covered water or other liquid, powder or molten material damage loss occurs, we will also pay the cost to tear out and replace any part of the building or structure to repair damage to the system or appliance from which the water or other substance escapes.
We will not pay the cost to repair any defect that caused the loss or damage; but we will pay the cost to repair or replace damaged parts of fire extinguishing equipment if the damage:
(1) Results in discharge of any substance from an automatic fire protection system; or
(2) Is directly caused by freezing.
Analysis
Loss covered by this additional coverage includes any cost to tear out and replace any part of a building or structure to repair the system or appliance from which the material escaped. If fire extinguishing equipment is damaged, resulting in the equipment's discharge, or if the damage is directly caused by freezing, the insurer will pay to repair or replace the damaged parts of the fire extinguishing equipment.
This coverage is not included when the named perils form BP 00 09 01 97 is attached.
h. Pollutant Clean Up And Removal
We will pay your expense to extract “pollutants” from land or water at the described premises if the discharge, dispersal, seepage, migration, release or escape of the “pollutants” is caused by or results from a Covered Cause of Loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the earlier of:
(1) The date of direct physical loss or damage; or
(2) The end of the policy period.
The most we will pay for each location under this Additional Coverage is $10,000 for the sum of all such expenses arising out of Covered Causes of Loss occurring during each separate twelve month period of this policy.
Analysis
Coverage for clean-up of pollution is limited to $10,000 for all expenses to extract pollutants (a defined term) from land or water if the release of the pollutants is caused by a covered cause of loss and occurs during the policy period. The expenses must be reported in writing to the insurer within one hundred and eighty days of the earlier of the date of the loss or damage, or the end of the policy period. Note that the $10,000 is an aggregate amount for each separate twelve month period.
j. Money Orders And Counterfeit Paper Currency
We will pay for loss resulting directly from your having accepted in good faith, in exchange for merchandise, “money” or services:
(1) Money orders issued by any post office, express company or bank that are not paid upon presentation; or
(2) ”Counterfeit” paper currency that is acquired during the regular course of business.
The most we will pay for any loss under this Additional Coverage is $1,000.
k. Forgery And Alteration
(1) We will pay for loss resulting directly from forgery or alteration of, any check, draft, promissory note, bill of exchange or similar written promise of payment in “money”, that you or your agent has issued, or that was issued by someone who impersonates you or your agent.
(2) If you are sued for refusing to pay the check, draft, promissory note, bill of exchange or similar written promise of payment in “money”, on the basis that it has been forged or altered, and you have our written consent to defend against the suit, we will pay for any reasonable legal expenses that you incur in that defense.
(3) The most we will pay for any loss, including legal expenses, under this Additional Coverage is $2,500, unless a higher Limit of Insurance is shown in the Declarations.
Analysis
In the earlier forms, coverage j. was limited to United States or Canadian money orders or counterfeit currency. Now, there is no territorial limit so that counterfeit currency or money orders from any country are recognized. The limit for this coverage is $1,000, although a greater amount of coverage may be purchased.
Coverage for payment for loss resulting from a forged or altered check is limited to $2,500, and in the current form this limit may be increased.
l. Increased Cost Of Construction
(1) This Additional Coverage applies only to buildings insured on a replacement cost basis.
(2) In the event of damage by a Covered Cause of Loss to a building that is Covered Property, we will pay the increased costs incurred to comply with enforcement of an ordinance or law in the course of repair, rebuilding or replacement of damaged parts of that property, subject to the limitations stated in Paragraphs (3) through (9) of this Additional Coverage.
(3) The ordinance or law referred to in Paragraph (2) of this Additional Coverage is an ordinance or law that regulates the construction or repair of buildings or establishes zoning or land use requirements at the described premises, and is in force at the time of loss.
(4) Under this Additional Coverage, we will not pay any costs due to an ordinance or law that:
(a) You were required to comply with before the loss, even when the building was undamaged; and
(b) You failed to comply with.
(5) Under this Additional Coverage, we will not pay any costs associated with the enforcement of an ordinance or law which requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”.
(6) The most we will pay under this Additional Coverage, for each described building insured under Section I – Property, is $10,000. If a damaged building(s) is covered under a blanket Limit of Insurance which applies to more than one building or item of property, then the most we will pay under this Additional Coverage, for each damaged building, is $10,000.
The amount payable under this Additional Coverage is additional insurance.
(7) With respect to this Additional Coverage:
(a) We will not pay for the Increased Cost of Construction:
(i) Until the property is actually repaired or replaced, at the same or another premises; and
(ii) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage, not to exceed two years. We may extend this period in writing during the two years.
(b) If the building is repaired or replaced at the same premises, of if you elect to rebuild at another premises, the most we will pay for the Increased Cost of Construction is the increased cost of construction at the same premises.
(c) If the ordinance or law requires relocation to another premises, the most we will pay for the Increased Cost of Construction is the increased cost of construction at the new premises.
(8) This Additional Coverage is not subject to the terms of the Ordinance or Law Exclusion, to the extent that such Exclusion would conflict with the provisions of this Additional Coverage.
(9) The costs addressed in the Loss Payment Property Loss Condition in this Coverage Form do not include the increased cost attributable to enforcement of an ordinance or law. The amount payable under this Additional Coverage, as stated in l.(6) of this Additional Coverage, is not subject to such limitation.
Analysis
There is a limited amount ($10,000, increased from $5,000 in the earlier forms) of ordinance or law coverage—increased cost of construction. However, this coverage only applies to buildings insured on a replacement cost basis. Further, it cannot be used to pay any costs after a loss for an ordinance or law that the insured was required to comply with before the loss, but failed to. It is important to note that the ordinance or law exclusion is still in place, although the provision states that this additional coverage is not subject to the terms of the exclusion to the extent that the exclusion conflicts with the additional coverage.
If the damaged building is covered under a blanket amount of insurance, then the $10,000 applies separately to each damaged building.
This additional coverage applies to damaged property only—hence the reference to “repair, rebuilding, or replacement of damaged parts of that property”—whereas if endorsement BP 04 46 11 02, ordinance or law, is purchased, the increased cost of construction applies to both damaged and undamaged property.
n. Glass Expenses
(1) We will pay for expenses incurred to put up temporary plates or board up openings if repair or replacement of damaged glass is delayed.
(2) We will pay for expenses incurred to remove or replace obstructions when repairing or replacing glass that is part of a building. This does not include removing or replacing window displays.
o. Fire Extinguisher Systems Recharge Expense
(1) We will pay:
(a) The cost of recharging or replacing, whichever is less, your fire extinguishers and fire extinguishing systems (including hydrostatic testing if needed) if they are discharged on or within 100 feet of the described premises; and
(b) For loss or damage to Covered Property if such loss or damage is the result of an accidental discharge of chemicals from a fire extinguisher or a fire extinguishing system.
(2) No coverage will apply if the fire extinguishing system is discharged during installation or testing.
(3) The most we will pay under this Additional coverage is $5,000 in any one occurrence.
Analysis
Coverage for building glass, both interior and exterior, is now treated as covered property (building property for owner-occupants and business personal property for tenants). Therefore, what was in the earlier forms additional coverage k. is now deleted. Coverage n. pays for expenses to put up temporary plates or board up openings if repair or replacement is delayed. Payment is also included to remove or replace obstructions when repairing glass that is part of a building. However, this coverage does not pay for removing or replacing window displays.
A new additional coverage in form BP 00 03 07 02 is o., which responds to the costs to recharge or replace fire extinguishing equipment. The coverage also pays for loss or damage to covered property caused by accidental discharge of the fire extinguishing equipment.
f. Business Income
(1) Business Income
(a) We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises include the area within 100 feet of the site at which the described premises are located.
With respect to the requirements set forth in the preceding paragraph, if you occupy only part of the site at which the described premises are located, your premises means:
(i) The portion of the building which you rent, lease or occupy; and
(ii) Any area within the building or on the site at which the described premises are located, if that area services, or is used to gain access to, the described premises.
(b) We will only pay for loss of Business Income that you sustain during the “period of restoration” and that occurs within twelve consecutive months after the date of direct physical loss or damage. We will only pay for ordinary payroll expenses for sixty days following the date of direct physical loss or damage unless a greater number of days is shown in the Declarations.
(c) Business Income means the:
(i) Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred if no physical loss or damage had occurred, but not including any Net Income that would likely have been earned as a result of an increase in the volume of business due to favorable business conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses; and
(ii) Continuing normal operating expenses incurred, including payroll.
(d) Ordinary payroll expenses:
(i) Mean payroll expenses for all your employees except:
i. Officers;
ii. Executives;
iii. Department Managers;
iv. Employees under contract; and
v. Additional Exemptions shown in the Declarations as:
· Job Classifications; or
· Employees.
(ii) Ordinary payroll expenses include:
i. Payroll;
ii. Employee benefits, if directly related to payroll;
iii. FICA payments you pay;
iv. Union dues you pay; and
v. Workers' compensation premiums.
Analysis
Business income coverage is triggered by physical loss or damage, from a covered cause of loss, to property at the described premises. This loss must result in a suspension (now defined within the coverage; see below) of the business's operations—that is, the business activities—during the period of restoration. The period of restoration begins seventy-two hours after the time of the direct physical loss or damage. Thus, there is a time deductible.
If the insured business is a tenant occupying only a portion of the described premises, then the premises includes the portion of the building the business rents, leases, or occupies, and any area within the building or at the location used to service or gain access to the described premises. For example, if the insured business is located within an enclosed mall, the interior of the mall that is used to gain access to the business is part of the premises.
Business income means net profit or loss (before income taxes) the business would have earned or incurred had there been no direct physical loss or damage. Business income does not include any windfall profits that the business might earn because of the loss. For example, if the insured business is the only relatively undamaged builders supplier in a town hit by a tornado, the businessowner cannot claim the increase in income is normal.
There are changes from the prior forms. In the previous BOP forms ordinary payroll expenses, that is, those for nonmanagerial positions, were only covered for sixty days following the date of loss. Now, however, there is an option to select a longer period of coverage for these expenses. Payroll for key employees, such as officers and executives, is not limited to the sixty day period. Note that employees under contract are included within the nonordinary payroll expenses, presumably because the salary expense will continue. The insured may also decide to include additional employees or job classifications as nonordinary payroll.
(2) Extended Business Income
(a) If the necessary suspension of your “operations” produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that:
(i) Begins on the date property except finished stock is actually repaired, rebuilt or replaced and “operations” are resumed; and
(ii) Ends on the earlier of:
i. The date you could restore your “operations”, with reasonable speed, to the level which would generate the Business Income amount that would have existed if no direct physical loss or damage had occurred; or
ii. Thirty consecutive days after the date determined in Paragraph (a)(i) above, unless a greater number of consecutive days is shown in the Declarations.
However, Extended Business Income does not apply to loss of Business Income incurred as a result of unfavorable business conditions caused by the impact of the Covered Cause of Loss in the area where the described premises are located.
(b) Loss of Business Income must be caused by direct physical loss or damage at the described premises caused by or resulting from any Covered Cause of Loss.
(3) With respect to the coverage provided in this Additional Coverage, suspension means:
(a) The partial slowdown or complete cessation of your business activities; and
(b) That a part or all of the described premises is rendered untenantable, if coverage for Business Income applies.
(4) This Additional Coverage is not subject to the Limits of Insurance of Section I – Property.
Analysis
Extended business income provides an additional amount of coverage, limited by the earlier of thirty days or the date operations are restored to their pre-loss capacity. In the current BP 00 03, this period may be extended and a greater number of days selected. This additional amount is triggered by the business income loss, and provides a stop-gap between when operations begin following the “period of restoration” and when operations reach their pre-loss speed.
The coverage does not apply, however, to a situation where an unfavorable business condition is created by the covered loss. For example, in the tornado situation described above, suppose everyone decided to rebuild using concrete block and the insured builders supply carried only wood products. The extended business income coverage would not apply.
g. Extra Expense
(1) We will pay necessary Extra Expense you incur during the “period of restoration” that you would not have incurred if there had been no direct physical loss or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises include the area within 100 feet of the site at which the described premises are located.
With respect to the requirements set forth in the preceding paragraph, if you occupy only part of the site at which the described premises are located, your premises means:
(a) The portion of the building which you rent, lease or occupy; and
(b) Any area within the building or on the site at which the described premises are located, if that area services, or is used to gain access to, the described premises.
(2) Extra Expense means expense incurred:
(a) To avoid or minimize the suspension of business and to continue “operations”:
(i) At the described premises; or
(ii) At replacement premises or at temporary locations, including relocation expenses, and costs to equip and operate the replacement or temporary locations.
(b) To minimize the suspension of business if you cannot continue “operations”.
(c) To:
(i) Repair or replace any property; or
(ii) Research, replace or restore the lost information on damaged “valuable papers and records”:
to the extent it reduces the amount of loss that otherwise would have been payable under this Additional Coverage or Additional Coverage f. Business Income.
(3) With respect to the coverage provided in this Additional Coverage, suspension means:
(a) The partial slowdown or complete cessation of your business activities; and
(b) That a part or all of the described premises is rendered untenantable, if coverage for Business Income applies.
(4) We will only pay for Extra Expense that occurs within twelve consecutive months after the date of direct physical loss or damage. This Additional Coverage is not subject to the Limits of Insurance of Section I – Property.
Analysis
The extra expense coverage responds to those expenses the insured would not have incurred had there been no covered loss. There are requirements that the expenses: 1) avoid or minimize the suspension of business by continuing either at the described premises or a replacement premises; 2) minimize the suspension if operations cannot be continued; or 3) repair or replace property or restore lost information, but only if these steps reduce the amount of loss payable. So, for example, if the insured's business personal property coverage is insufficient to replace three desks, this coverage may be called upon if replacing the desks minimizes the business income expense.
The wording regarding occupying only a portion of the site at which the insured premises is located is carried through into the extra expense additional coverage. To see the importance of this consider a business located in a mall. If a portion of the mall burns, access to the insured business may be restricted even though there is no damage to the insured business itself.
The coverage for extra expense is limited to twelve consecutive months after the date of direct physical loss or damage.
New to the BP 00 03 07 02 is a definition of suspension. There is now clarification that the insured business need not be shut down completely in order for business income coverage to be triggered. Rather, the business may be either completely stopped or partially slowed. A part or all of the described premises must be rendered untenantable, but remember that in the case of a business occupying only a part of the site the described premises encompasses more than just that occupied part.
i. Civil Authority
We will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.
The coverage for Business Income will begin seventy-two hours after the time of that action and will apply for a period of up to three consecutive weeks after coverage begins.
The coverage for necessary Extra Expense will begin immediately after the time of that action and ends:
(1) Three consecutive weeks after the time of that action; or
(2) When your Business Income coverage ends;
whichever is later.
The definitions of Business Income and Extra Expense contained in the Business Income and Extra Expense Additional Coverages also apply to this Civil Authority Additional Coverage. The Civil Authority Additional Coverage is not subject to the Limits of Insurance of Section I – Property.
Analysis
When a covered cause of loss occurs away from the described premises, but causes the civil authorities to prohibit access to the described premises, then loss of business income is triggered. Business income coverage begins seventy-two hours after the time of the action, and applies for a period of up to three consecutive weeks or when the business income coverage ends, whichever is later. Coverage for extra expense arising out of an act of civil authority—say the insured temporarily relocates to a different office—begins immediately after the time of the action and ends three consecutive weeks after the time of the action or when business income coverage ends, whichever is later.
m. Business Income From Dependent Properties
(1) We will pay for the actual loss of Business Income you sustain due to physical loss or damage at the premises of a dependent property caused by or resulting from any covered Cause of Loss.
The most we will pay under this Additional coverage is $5,000 unless a higher Limit of Insurance is indicated in the Declarations.
(2) We will reduce the amount of your Business Income loss, other than Extra Expense, to the extent you can resume “operations”, in whole or in part, by using any other available:
(a) Source of materials; or
(b) Outlet for your products.
(3) If you do not resume “operations”, or do not resume “operations” as quickly as possible, we will pay based on the length of time it would have taken to resume “operations” as quickly as possible.
(4) Dependent property means property owned by others whom you depend on to:
(a) Deliver materials or services to you, or to others for your account. But services does not mean water, communication or power supply services;
(b) Accept your products or services;
(c) Manufacture your products for delivery to your customers under contract for sale; or
(d) Attract customers to your business.
The dependent property must be located in the coverage territory of this policy.
(5) The coverage period for Business Income under this Additional Coverage:
(a) Begins seventy-two hours after the time of direct physical loss or damage caused by or resulting from any covered Cause of Loss at the premises of the dependent property; and
(b) Ends on the date when the property at the premises of the dependent property should be repaired, rebuilt or replaced with reasonable speed and similar quality.
(6) The Business Income coverage period, as stated in Paragraph (5), does not include any increased period required due to the enforcement of any ordinance or law that:
(a) Regulates the construction, use or repair, or requires the tearing down of any property; or
(b) Requires any insured or others to test for, monitor , clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”.
The expiration date of this policy will not reduce the Business Income coverage period.
(7) The definition of Business Income contained in the Business Income Additional Coverage also applies to this Business Income From Dependent Properties Additional Coverage.
Analysis
This coverage for business income from dependent properties is new in the BP 00 03 07 02. It is limited to $5,000, although a greater amount of coverage may be purchased. The definition of business income (see f.(c) above) is the same for this coverage as in the business income and extended business income additional coverages. The dependent property upon which the insured business relies must be located in the coverage territory, that is, the United States, including its territories and possessions, Puerto Rico, and Canada .
There is a time deductible of seventy-two hours after the time of the direct physical loss or damage resulting in the loss of income. Coverage ends when the property at the premises of the dependent property should be restored, repaired, or replaced “with reasonable speed and similar quality.” The expiration date of the policy does not reduce this coverage. Note that the amount of income may be decreased to the extent that the insured can use—not does use—other available sources for either supplies or as markets. Therefore, the insured is under notice to make other arrangements in a timely manner.
The coverage does not respond to any increased period because of enforcement of any ordinance or law regarding repair or construction or assessment of any pollutants.
Although the current businessowners form contains six coverage extensions, as did the earlier forms, the extensions have been revised considerably. For example, there is now coverage for newly acquired or constructed buildings.
6. Coverage Extensions
In addition to the Limits of Insurance of Section I – Property, you may extend the insurance provided by this policy as provided below.
Except as otherwise provided, the following Extensions apply to property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises, unless a higher Limit of Insurance is shown in the Declarations.
a. Newly Acquired Or Constructed Property
(1) Buildings
If this policy covers Buildings, you may extend that insurance to apply to:
(a) Your new buildings while being built on the described premises; and
(b) Buildings you acquire at premises other than the one described, intended for:
(i) similar use as the building described in the Declarations; or
(ii) Use as a warehouse
The most we will pay for loss or damage under this Extension is $250,000 at each building.
(2) Business Personal Property
(a) If this policy covers Business Personal Property, you may extend that insurance to apply to:
(i) Business Personal Property, including such property that you newly acquire, at any location you acquire.
(ii) Business Personal Property, including such property that you newly acquire, located at your newly constructed or acquired buildings at the location described in the Declarations; or
(iii) Business Personal Property that you newly acquire, located at the described premises.
This Extension does not apply to personal property that you temporarily acquire in the course of installing or performing work on such property or your wholesale activities.
The most we will pay for loss or damage under this Extension is $100,000 at each premises.
(3) Period of Coverage
With respect to insurance on or at each newly acquired or constructed property, coverage will end when any of the following first occurs:
(a) This policy expires;
(b) Thirty days expire after you acquire the property or begin construction of that part of the building that would qualify as covered property; or
(c) You report values to us.
We will charge you additional premium for values reported from the date you acquire the property or begin construction of that part of the building that would qualify as covered property.
Analysis
In the previous forms, the above coverage extension provided $100,000 for personal property at a newly acquired premises. In the BP 00 03 07 02, if the policy covers buildings, the coverage extension applies to buildings being constructed at the described premises and to newly acquired buildings intended for similar use (or for a warehouse) at premises other than the described premises. Coverage under this extension is limited to $250,000 at each building.
If the policy covers business personal property, then the extension applies to: business personal property, including newly acquired property, at any new location; to property at a newly constructed or acquired building at the described premises; or to business property newly acquired located at the described premises. This coverage is limited to $100,000 at each premises. However, the extension does not apply to personal property temporarily acquired in the course of installing or performing work on it or to the insured's wholesale activities. An insured whose policy does not cover buildings should be aware that there is no coverage for a newly-purchased or constructed building; additional coverage must be arranged.
These coverages end when any of these first occurs: the policy's expiration date; thirty days expire after the property has been acquired or construction of what would qualify as covered property begins; or the insured reports the values to the insurer. The insurer will then modify premium accordingly.
b. Personal Property Off Premises
You may extend the insurance that applies to Business Personal Property to apply to covered Business Personal Property, other than “money” and “securities”, “valuable papers and records” or accounts receivable, while it is in the course of transit or at a premises you do not own, lease or operate. The most we will pay for loss or damage under this Extension is $5,000.
c. Outdoor Property
You may extend the insurance provided by this policy to apply to your outdoor fences, radio and television antennas (including satellite dishes), signs (other than signs attached to buildings), trees, shrubs and plants, including debris removal expense, caused by or resulting from any of the following causes of loss:
(1) Fire;
(2) Lightning;
(3) Explosion;
(4) Riot or Civil Commotion; or
(5) Aircraft.
The most we will pay for loss or damage under this Extension is $2,500, but not more than $500 for any one tree, shrub or plant.
d. Personal Effects
You may extend the insurance that applies to Business Personal Property to apply to personal effects owned by you, your officers, your partners or “members”, your “managers” or your employees. This extension does not apply to:
(1) Tools or equipment used in your business; or
(2) Loss or damage by theft.
The most we will pay for loss or damage under this Extension is $2,500 at each described premises.
Analysis
By including coverage under personal effects for members and managers, the BOP provides coverage for those who operate as a limited liability company (LLC). Heretofore, this type of business was not recognized. The coverage does not apply to loss or damage by theft or to loss to tools or equipment used in the insured's business. So, for example, if an employee's handbag is damaged by fire at the premises, there is coverage, but not if the handbag is stolen.
Coverages b. and c. remain unchanged from the earlier BOP forms, although the wording has been altered in coverage b. to include business personal property at another premises. The prior wording stated the coverage applied only to property temporarily at another premises; the current form has eliminated this so that business personal property at another premises is covered no matter how long the duration.
e. Valuable Papers And Records
(1) You may extend the insurance that applies to Business Personal Property to apply to direct physical loss or damage to “valuable papers and records” that you own, or that are in your care, custody or control, caused by or resulting from a Covered Cause of Loss. This Coverage Extension includes the cost to research lost information on “valuable papers and records” for which duplicates do not exist.
(2) This Coverage Extension does not apply to:
(a) Property held as samples or for delivery after sale;
(b) Property in storage away from the premises shown in the Declarations.
(3) The most we will pay under this Coverage Extension for loss or damage to “valuable papers and records” in any one occurrence at the described premises is $10,000, unless a higher Limit of Insurance for “valuable papers and records” is shown in the Declarations.
For “valuable papers and records” not at the described premises, the most we will pay is $5,000.
(4) Paragraph B. Exclusions in Section I – Property does not apply to this Coverage Extension except for:
(a) Paragraph B.1.c., Governmental Action;
(b) Paragraph B.1.d., Nuclear Hazard;
(c) Paragraph B.1.f., War And Military Action; and
(d) Paragraph B.2.f., Dishonesty;
(e) Paragraph B.2.g., False Pretense; and
(f) Paragraph B.3
Analysis
Coverage under this extension has been increased from $5,000 to $10,000 for loss to valuable papers at the described premises, and from $2,500 to $5,000 for loss to valuable papers not at the described premises. Additionally, the coverage now includes the cost to replace or restore as well as research lost information. The definition for “valuable papers and records” has been changed to include those on electronic media; see Businessowners Property Coverage, Part II.
Previously the BP 00 01 01 97 provided limited coverage for loss to valuable papers and records caused by collapse. There is still coverage for loss caused by this peril even if named perils form BP 10 09 07 02 is attached because there is no exclusion of coverage in either the BP 10 09 07 02 or the BP 00 03 07 02. The reference to exclusions applicable both to accounts receivable and valuable papers and records has been deleted and will be discussed later in more detail. (But when the BP 10 09 07 02 is attached the exclusion to both remains. See Businessowners Program Endorsements.) Coverage under this extension is extremely broad; for example, there is coverage for loss arising out of earth movement or volcanic eruption, since of the paragraph B. exclusions only certain of them, such as nuclear hazard, apply.
f. Accounts Receivable
(1) You may extend the insurance that applies to Business Personal Property to apply to accounts receivable. We will pay:
(a) All amounts due from your customers that you are unable to collect;
(b) Interest charges on any loan required to offset amounts you are unable to collect pending our payment of these amounts;
(c) Collection expenses in excess of your normal collection expenses that are made necessary by loss or damage; and
(d) Other reasonable expenses that you incur to re-establish your records of accounts receivable;
that result from direct physical loss or damage by any Covered Cause of Loss to your records of accounts receivable.
(2) The most we will pay under this Coverage Extension for loss or damage in any one occurrence at the described premises is $10,000, unless a higher Limit of Insurance for accounts receivable is shown in the Declarations.
For accounts receivable not at the described premises, the most we will pay is $5,000.
(3) paragraph B. Exclusions in Section I – Property does not apply to this Coverage Extension except for:
(a) Paragraph B.1.c., Governmental Action;
(b) Paragraph B.1.d., Nuclear Hazard;
(c) Paragraph B.1.f., War And Military Action;
(d) Paragraph B.2.f., Dishonesty;
(e) Paragraph B.2.g., False Pretense;
(f) Paragraph 3.; and
(g) Paragraph B.5., Accounts Receivable Exclusion
Analysis
Amounts of coverage in the current form have been increased from those in the prior form. The amount of insurance available has been increased from $5,000 to $10,000 (unless a higher limit is selected); however, $5,000 (increased from $2,500) is the limit for accounts receivable not at the described premises. Direct physical loss or damage by a covered cause of loss is the trigger for this coverage, which encompasses amounts due but uncollectible from customers as well as expenses to re-establish records of accounts receivable. Certain exclusions apply, such as for war. Those applicable solely to this coverage extension are discussed below.
The exclusions now reflect the fact that the BP 00 03 07 02 provides special perils coverage unless the BP 10 09 07 02 is attached. For the additional exclusions that apply in that situation, see Businessowners Program Endorsements.
The lead-in language has also been changed to reflect the fact that an excluded event may occur locally (as when a creek overflows) or over a wide-spread area (as when the Mississippi floods). The event is still excluded.
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
a. Ordinance Or Law
(1) The enforcement of any ordinance or law:
(a) Regulating the construction, use or repair of any property; or
(b) Requiring the tearing down of any property, including the cost of removing its debris.
(2) This exclusion, Ordinance Or Law, applies whether the loss results from:
(a) An ordinance or law that is enforced even if the property has not been damaged; or
(b) The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation, remodeling or demolition of property or removal of its debris, following a physical loss to that property.
Analysis
Remember that the additional coverage for increased cost of construction applies only to buildings insured on a replacement cost basis. Otherwise this exclusion applies. This exclusion reinforces the fact that there is no coverage for loss resulting from any ordinance or law that the insured failed to comply with even if no damage occurs to the property.
b. Earth Movement
(1) Earthquake, including any earth sinking, rising or shifting related to such event;
(2) Landslide, including any earth sinking, rising or shifting related to such event;
(3) Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity has ceased;
(4) Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing erosion, improperly compacted soil and the action of water under the ground surface.
But if Earth Movement, as described in paragraphs (1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.
(5) Volcanic eruption, explosion or effusion. But if volcanic eruption, explosion or effusion results in fire, building glass breakage or volcanic action, we will pay for the loss or damage caused by that fire, building glass breakage or volcanic action.
Volcanic action means direct loss or damage resulting from the eruption of a volcano when the loss or damage is caused by:
(a) Airborne volcanic blast or airborne shock waves;
(b) Ash, dust or particulate matter; or
(c) Lava flow.
All volcanic eruptions that occur within any 168-hour period will constitute a single occurrence.
Volcanic action does not include the cost to remove ash, dust or particulate matter that does not cause direct physical loss or damage to Covered Property.
Analysis
The exclusion for loss or damage resulting from earth movement has been somewhat changed for clarification purposes although there is no change in coverage. Mine subsidence, for example, is excluded whether or not mining is still carried out; the prior exclusion simply referred to mine subsidence.
Note also that earth movement can result from soil conditions such as compaction or improper compaction. This wording is new to the current form.
c. Governmental Action
Seizure or destruction of property by order of governmental authority.
But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread, if the fire would be covered under this policy.
d. Nuclear Hazard
Nuclear reaction or radiation, or radioactive contamination, however caused.
But if nuclear reaction or radiation, or radioactive contamination, results in fire, we will pay for the loss or damage caused by that fire.
e. Power Failure
The failure of power or other utility service supplied to the described premises, however caused, if the failure occurs away from the described premises.
But if the failure of power or other utility service results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
This exclusion does not apply to loss or damage to “computer(s)” and “electronic media and records”.
Analysis
An important coverage grant is apparent in the above statement—that the exclusion for power failure does not apply to computers and electronic data and media. Heretofore, the BOP policyholder had to add coverage through either the standard or the special computer coverage endorsements BP 04 33 01 97 or BP 04 34 01 97. Under this program, those endorsements are being withdrawn and coverage is now included in the coverage form BP 00 03 07 02.
However, endorsement BP 10 04 04 98 exclusion for certain computer-related losses was to be attached to all policies; the provisions of this exclusion now are incorporated into the BP 00 03 07 02 (see following discussion).
f. War And Military Action
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
(2) Mudslide or mudflow;
(3) Water that backs up or overflows from a sewer, drain or sump; or
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows or other openings.
But if Water, as described in Paragraphs (1) through (4), results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage.
Analysis
Although, as is common with other commercial property forms, loss resulting from flood, surface water, water beneath the surface of the ground, or water that backs up through sewers or drains is excluded, under the current program coverage may be added for back-up of sewer or drain or sump pump overflow. This is endorsement BP 04 53 07 02. See Businessowners Program Endorsements for more details.
h. Certain Computer-Related Losses
(1) The failure, malfunction or inadequacy of:
(a) Any of the following, whether belonging to any insured or to others:
(i) ”Computer” hardware, including microprocessors or other electronic data processing equipment as may be described elsewhere in this policy;
(ii) ”Computer” application software or other “electronic media and records” as may be described elsewhere in this policy;
(iii) ”Computer” operating systems and related software.
(iv) ”Computer” networks;
(v) Microprocessors (“computer” chips) not part of any “computer” system; or
(vi) Any other computerized or electronic equipment or components; or
(b) Any other products, and any services, data or functions that directly or indirectly use or rely upon, in any manner, any of the items listed in Paragraph (a) above;
due to the inability to correctly recognize, distinguish, interpret or accept one or more dates or times. An example is the inability of computer software to recognize the year 2000.
(2) Any advice, consultation, design, evaluation, inspection, installation, maintenance, repair, replacement or supervision provided or done by you or for you to determine, rectify or test for, any potential or actual problems described in paragraph (1) above.
However, if excluded loss or damage, as described in paragraph (1) above results in a “Specified Cause of Loss” under Section I – Property, we will pay only for the loss or damage caused by such “Specified Cause of Loss”.
We will not pay for repair, replacement or modification of any items in Paragraphs (1)(a) or (1)(b) to correct any deficiencies or change any features.
Analysis
The above exclusions are, in many cases, similar to those found in the commercial property forms. The concurrent causation language precedes exclusion 1.a. through 1.h so that coverage is excluded even if a covered cause of loss contributes sequentially or concurrently to the loss. See Concurrent Causation”, Fire & Marine, Miscellaneous Property. Note, however, that there are exceptions. Loss or damage resulting from acts of destruction ordered by governmental authority to prevent spread of a fire (if the fire is covered under the policy) is covered. Fire resulting from nuclear reaction is covered, as is fire or explosion resulting from earth movement. Fire and volcanic action—defined as direct loss or damage resulting from the eruption of a volcano that causes shock waves, ash, or lava flow—are covered. If off-premises power failure results in a covered cause of loss, the resulting loss is covered. And, if water as described results in fire, explosion, or sprinkler leakage, that resulting damage is covered.
As noted above, because coverage for some computer-related loss is now included, the exclusion that once was required to be attached excluding coverage for certain time-failure losses is incorporated into the coverage form. However, if excluded loss or damage results in one of the “specified causes of loss,” such as fire, than that resulting fire loss is covered. For example, a computer governs the time a piece of machinery is to turn off. The computer malfunctions; the machinery overheats and a fire ensues. The resulting fire damage is covered.
The following group of exclusions are not prefaced by the concurrent causation language, and so some of the exclusions are followed by exceptions.
2. We will not pay for loss or damage caused by or resulting from any of the following:
a. Electrical Apparatus
Artificially generated electrical current, including electric arcing, that disturbs electrical devices, appliances or wires.
But if artificially generated electrical current results in fire, we will pay for the loss or damage caused by fire.
We will pay for loss or damage to “computer(s)” due to artificially generated electrical current if such loss or damage is caused by or results from:
(1) An occurrence that took place within one-hundred feet of the described premises; or
(2) Interruption of electric power supply, power surge, blackout or brownout if the cause of such occurrence took place within 100 feet of the described premises.
Analysis
The exception to the artificially generated electrical current exclusion—for loss or damage to computers—was previously located in the optional computer endorsements. But now, when coverage for computers is included in this form BP 00 03, the exception for loss resulting from occurrences or interruptions taking place within one-hundred feet of the described premises makes its appearance as an exception to the exclusion.
b. Consequential Losses
Delay, loss of use or loss of market.
c. Smoke, Vapor, Gas
Smoke, vapor or gas from agricultural smudging or industrial operations.
d. Steam Apparatus
Explosion of steam boilers, steam pipes, steam engines or steam turbines owned or leased by you, or operated under your control. But if explosion of steam boilers, steam pipes, steam engines or steam turbines results in fire or combustion explosion, we will pay for the loss or damage caused by that fire or combustion explosion. We will also pay for loss or damage caused by or resulting from the explosion of gases or fuel within the furnace of any fired vessel or within the flues or passages through which the gases of combustion pass.
Analysis
Exclusion 2.d., steam apparatus, excludes explosion of steam boilers, but if the explosion results in fire or combustion explosion the damage is covered. Also, loss or damage caused by or resulting from the explosion of gases or fuel within the furnace of any fired vessel or within the flues is covered. Note that the explosion of such gases is not considered an accident in the mechanical breakdown optional section, since the coverage is provided for in this section. (See optional coverage 4. mechanical breakdown, c.(8).)
e. Frozen Plumbing
Water, other liquids, powder or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment (except fire protective systems) caused by or resulting from freezing, unless:
(1) You do your best to maintain heat in the building or structure; or
(2) You drain the equipment and shut off the supply if the heat is not maintained.
f. Dishonesty
Dishonest or criminal acts by you, anyone else with an interest in the property, or any of your or their partners, “members”, officers, “managers”, employees, directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose:
(1) Acting alone or in collusion with others;
(2) Whether or not occurring during the hours of employment.
This exclusion does not apply to acts of destruction by your employees; but theft by employees is not covered.
With respect to accounts receivable and “valuable papers and records”, this exclusion does not apply to carriers for hire.
This exclusion does not apply to coverage that is provided under the Employee Dishonesty Optional Coverage.
g. False Pretense
Voluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
h. Exposed Property
Rain, snow, ice or sleet to personal property in the open.
i. Collapse
Collapse, except as provided in the Additional Coverage for Collapse. But if collapse results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
j. Pollution
We will not pay for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release or escape of “pollutants” unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the “specified causes of loss”. But if the discharge, dispersal, seepage, migration, release or escape of “pollutants” results in a “specified cause of loss”, we will pay for the loss or damage caused by that “specified cause of loss”.
k. Neglect
Neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.
Analysis
The exclusion for dishonesty has been changed to reflect the possibility that the insured business may be a limited liability company; thus, there is no coverage for members or managers—both defined terms which will be discussed later. If the optional coverage for employee dishonesty is selected, there is coverage for theft of business personal property by employees. But if the coverage is not selected, there is still coverage for acts of damage or destruction committed by employees. The exclusion does not apply with respect to accounts receivable or to valuable papers and records in the care of a carrier for hire.
The exclusion for loss or damage caused by pollutants applies unless the escape of the pollutants is caused by a “specified cause of loss.” This is in contrast to additional coverage h., pollutant clean up and removal, which responds to expense to extract pollutants from land or water if caused by a covered cause of loss.
An exclusion for neglect has been added; this simply reinforces the insured's duty in event of a loss.
l. Other Types Of Loss
(1) Wear and tear;
(2) Rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself;
(3) Smog;
(4) Settling, cracking, shrinking or expansion;
(5) Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents or other animals;
(6) Mechanical breakdown, including rupture or bursting caused by centrifugal force.
This exclusion does not apply with respect to the breakdown of “computer(s)”;
(7) The following causes of loss to personal property:
(a) Dampness or dryness of atmosphere;
(b) Changes in or extremes of temperature; or
(c) Marring or scratching.
But if an excluded cause of loss that is listed in Paragraphs (1) through (7) above results in a “specified cause of loss” or building glass breakage, we will pay for the loss or damage caused by that “specified cause of loss” or building glass breakage.
Analysis
Because the coverage form now provides coverage for computers, exclusion l.(6) mechanical breakdown has been amended so that there is coverage for a computer that breaks down unless another exclusion applies.
m. Errors Or Omissions
Errors or omissions in:
(1) Programming, processing or storing data, as described under “electronic media and records” or in any “computer” operations; or
(2) Processing or copying “valuable papers and records”.
However, we will pay for direct physical loss or damage caused by resulting fire or explosion if these causes of loss would be covered by this coverage form.
n. Installation, Testing, Repair
Errors or deficiency in design, installation, testing, maintenance, modification or repair of your “computer” system including “electronic media and records”.
However, we will pay for direct physical loss or damage caused by resulting fire or explosion if these causes of loss would be covered by this coverage form.
o. Electrical Disturbance
Electrical or magnetic injury, disturbance or erasure of “electronic media and records”, except as provided for under the Coverage Extensions of Section I – Property.
However, we will pay for direct loss or damage caused by lightning.
Analysis
The exclusions for errors and omissions (m.), installation and testing (n.), and electrical disturbance (o.) appeared in the businessowners standard and special computer coverage endorsements. But because the BP 00 03 07 02 provides coverage for computers, many of the exclusions have been incorporated into this form. Note that the exclusion under errors and omissions for copying “valuable papers and records” formerly appeared under the exclusions for both accounts receivable and valuable papers and records.
3. We will not pay for loss or damage caused by or resulting from any of the following Paragraphs a. through c. But if an excluded cause of loss that is listed in paragraphs a. through c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather Conditions
Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in Paragraph B.1. above to produce the loss or damage.
b. Acts or Decisions
Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.
c. Negligent Work
Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or
(4) Maintenance;
of part or all of any property on or off the described premises.
Analysis
These exclusions appear regularly in special perils forms. Loss that is confined to the excluded peril is not covered; however, if the excluded peril results in a covered cause of loss then that resulting cause of loss is covered. The exception to this is 3.a. weather conditions. If weather conditions contribute to, for example, flooding or a mudslide (two of the B.1. excluded perils), the insured cannot argue that weather conditions were the proximate cause and therefore a loss should be covered. But if a severe storm results in lightning damage, the weather conditions brought about a nonexcluded cause of loss.
Similarly, loss resulting from acts or decisions or negligent work is not covered, but a nonexcluded loss arising out of the act or work is covered. For example, a negligent workman may connect the wrong series of wires so that a job must be redone. There is no coverage for re-wiring. But if the faulty wiring job results in a fire, that fire is covered.
4. Business Income And Extra Expense Exclusions
a. We will not pay for:
(1) Any Extra Expense, or increase of Business Income loss, caused by or resulting from:
(a) Delay in rebuilding, repairing or replacing the property or resuming “operations”, due to interference at the location of the rebuilding, repair or replacement by strikers or other persons; or
(b) Suspension, lapse or cancellation of any license, lease or contract. But if the suspension, lapse or cancellation is directly caused by the suspension of “operations”, we will cover such loss that affects your Business Income during the “period of restoration”.
(2) Any other consequential loss.
b. With respect to this exclusion, suspension means:
(1) The partial slowdown or complete cessation of your business activities; and
(2) That a part or all of the described premises is rendered untenantable, if coverage for Business Income applies.
Analysis
Exclusion 4. contains exclusions pertinent to the business income and extra expense additional coverages. Extra expense or increase in business income loss caused by or resulting from delay in rebuilding caused by the actions of strikers or other persons is not covered, nor is any other consequential loss. However, if the suspension of “operations” (a defined term; see Businessowners Property Coverage, Part II) causes a suspension or cancellation of a license, lease, or contract, then such resulting loss is not reached by the exclusion.
Note that a definition of suspension has been added here as under additional coverage g. extra expense. This reinforces the coverage provision—a business need not grind to a halt to trigger coverage; rather, normal business activities may be slowed because of a covered loss.
5. Accounts Receivable Exclusion
The following additional exclusion applies to the Accounts Receivable Coverage Extension:
We will not pay for:
a. Loss or damage caused by or resulting from alteration, falsification, concealment or destruction of records of accounts receivable done to conceal the wrongful giving, taking or withholding of “money”, “securities” or other property.
This exclusion applies only to the extent of the wrongful giving, taking or withholding.
b. Loss or damage caused by or resulting from bookkeeping, accounting or billing errors or omissions.
c. Any loss or damage that requires any audit or records or any inventory computation to prove its factual existence.
Analysis
A group of additional exclusions applies only to accounts receivable. In the earlier forms, these (as well as other) exclusions applied to both accounts receivable and valuable papers and records. But in the BP 00 03 07 02, there is now coverage for computers, and the definition of valuable papers and records has been changed to include electronic media and records. The exclusions that previously applied to valuable papers and records are now incorporated as exclusions B.2.m., B.2.n., and B.2.o., which all apply to computer-related loss.
As noted earlier, we are not following the form exactly. Loss payment and general property conditions are now discussed elsewhere. See Businessowners Property Coverage, Part II.
G. Optional Coverages
If shown as applicable in the Declarations, the following Optional Coverages also apply. These coverages are subject to the terms and conditions applicable to property coverage in this policy, except as provided below.
1. Outdoor Signs
a. We will pay for direct physical loss of or damage to all outdoor signs at the described premises:
(1) Owned by you; or
(2) Owned by others but in your care, custody or control.
b. Paragraph A.3., Covered Causes Of Loss, and Section B., Exclusions in Section I – Property, do not apply to this Optional Coverage, except for:
(1) Paragraph B.1.c., Governmental Action;
(2) Paragraph B.1.d., Nuclear Hazard; and
(3) Paragraph B.1.f., War And Military Action.
c. We will not pay for loss or damage caused by or resulting from:
(1) Wear and tear;
(2) Hidden or latent defect;
(3) Rust;
(4) Corrosion; or
(5) Mechanical breakdown.
d. The most we will pay for loss of or damage in any one occurrence is the Limit of Insurance for Outdoor Signs shown in the Declarations.
e. The provisions of this Optional Coverage supersede all other references to outdoor signs in this policy.
Analysis
Outdoor signs attached to buildings are covered as part of the building. Signs not attached are covered under the extension of coverage for outdoor property up to $2,500. If more coverage for signs is necessary, the optional coverage for outdoor signs provides special perils coverage for the selected limit of insurance. Certain exclusions—war and latent defect, for example—apply.
Coverage for exterior glass was an additional coverage in the prior forms, and coverage for interior glass was an optional coverage. But in the current form both types of glass are covered property (see above), so there is no longer a need to retain either the additional or the optional coverage.
2. Money And Securities
a. We will pay for loss of “money” and “securities” used in your business while at a bank or savings institution, within your living quarters or the living quarters of your partners or any employee having use and custody of the property, at the described premises, or in transit between any of these places, resulting directly from:
(1) Theft, meaning any act of stealing;
(2) Disappearance; or
(3) Destruction.
b. In addition to the Limitations and Exclusions applicable to Section I – Property, we will not pay for loss:
(1) Resulting from accounting or arithmetical errors or omissions;
(2) Due to the giving or surrendering of property in any exchange or purchase; or
(3) Of property contained in any “money”-operated device unless the amount of “money” deposited in it is recorded by a continuous recording instrument in the device.
c. The most we will pay for loss in any one occurrence is:
(1) The limit shown in the Declarations for Inside the Premises for “money” and “securities” while:
(a) In or on the described premises; or
(b) Within a bank or savings institution; and
(2) The limit shown in the Declarations for Outside the Premises for “money” and “securities” while anywhere else.
d. All loss:
(1) Caused by one or more persons; or
(2) Involving a single act or series of related acts;
is considered one occurrence.
e. You must keep records of all “money” and “securities” so we can verify the amount of any loss or damage.
3. Employee Dishonesty
a. We will pay for direct loss of or damage to Business Personal Property and “money” and “securities” resulting from dishonest acts committed by any of your employees acting alone or in collusion with other persons (except you or your partner) with the manifest intent to:
(1) Cause you to sustain loss or damage; and also
(2) Obtain financial benefit (other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other employee benefits earned in the normal course of employment) for:
(a) Any employee; or
(b) Any other person or organization.
b. We will not pay for loss or damage:
(1) Resulting from any dishonest or criminal act that you or any of your partners or “members” commit whether acting alone or in collusion with other persons.
(2) Resulting from any dishonest act committed by any of your employees (except as provided in Paragraph a.), “managers” or directors:
(a) Whether acting alone or in collusion with other persons; or
(b) While performing services for you or otherwise.
(3) The only proof of which as to its existence or amount is:
(a) An inventory computation; or
(b) A profit and loss computation.
c. The most we will pay for loss or damage in any one occurrence is the Limit of Insurance for Employee Dishonesty shown in the Declarations.
d. All loss or damage:
(1) Caused by one or more persons; or
(2) Involving a single act or series of acts;
is considered one occurrence.
e. If any loss is covered:
(1) Partly by this insurance; and
(2) Partly by any prior cancelled or terminated insurance that we or any affiliate had issued to you or any predecessor in interest;
the most we will pay is the larger of the amount recoverable under this insurance or the prior insurance.
We will pay only for loss or damage you sustain through acts committed or events occurring during the Policy Period. Regardless of the number of years this policy remains in force or the number of premiums paid, no Limit of Insurance cumulates from year to year or period to period.
f. This Optional Coverage is cancelled as to any employee immediately upon discovery by:
(1) You; or
(2) Any of your partners, “members”, “managers”, officers or directors not in collusion with the employee;
of any dishonest act committed by that employee before or after being hired by you.
g. We will pay only for covered loss or damage sustained during the policy period and discovered no later than one year from the end of the policy period.
h. If you (or any predecessor in interest) sustained loss or damage during the period of any prior insurance that you could have recovered under that insurance except that the time within which to discover loss or damage had expired, we will pay for it under this Optional Coverage, provided:
(1) This Optional Coverage became effective at the time of cancellation or termination of the prior insurance; and
(2) The loss or damage would have been covered by this Optional Coverage had it been in effect when the acts or events causing the loss or damage were committed or occurred.
i. The insurance under Paragraph h. above is part of, not in addition to, the Limit of Insurance applying to this Optional Coverage and is limited to the lesser of the amount recoverable under:
(1) This Optional Coverage as of its effective date; or
(2) The prior insurance had it remained in effect.
Analysis
The amount of coverage for “money” and “securities” is shown on the declarations as separate limits for inside and outside the premises. Theft, disappearance, or destruction of money or securities are covered. When the BP 10 09 07 02 is attached this is not one of the optional coverages; the available coverage is burglary and robbery, which provides limited coverage for money and securities. See Businessowner Program Endorsements.
Insureds may purchase the employee dishonesty option to cover loss or damage to business personal property, including “money” and “securities,” that results from dishonest acts of employees. Limits of $5,000, $10,000, $25,000, $50,000 or $100,000 per occurrence are available. The wording of this coverage has been revised in the BP 00 03 07 02, although the coverage is substantially the same as in the earlier forms. Before, the trigger for coverage was a single act or series of related acts; the word related has been deleted because many court decisions have construed each act of an employee to be a separate occurrence. Now, the wording “single act or series of acts” should give the coverage intent. Also, the defined words members and managers have been added to reflect that a limited liability company may be insured.
4. Mechanical Breakdown
a. We will pay for direct damage to Covered Property caused by an Accident to an Object. The Object must be:
(1) Owned by you or in your care, custody or control; and
(2) At the described premises.
b. Accident means a sudden and accidental breakdown of the Object or a part of the Object. At the time the breakdown occurs, it must manifest itself by physical damage to the Object that necessitates repair or replacement.
c. None of the following is an Accident:
(1) Depletion, deterioration, corrosion or erosion;
(2) Wear and tear;
(3) Leakage at any valve, fitting, shaft seal, gland packing, joint or connection;
(4) Breakdown of any vacuum tube, gas tube or brush;
(5) Breakdown of any “computer”, including “computer(s)” used to operate production type machinery or equipment.
(6) Breakdown of any structure or foundation supporting the Object or any of its parts;
(7) The functioning of any safety or protective device; or
(8) The explosion of gases or fuel within the furnace of any Object or within the flues or passages through which the gases of combustion pass.
d. Object means any of the following equipment:
(1) Boiler and Pressure Vessels:
(a) Steam heating boilers and condensate return tanks used with them;
(b) Hot water heating boilers and expansion tanks used with them;
(c) Hot water supply boilers;
(d) Other fired or unfired vessels used for maintenance or service of the described premises but not used for processing or manufacturing;
(e) Steam boiler piping, valves, fittings, traps and separators, but only if they:
(i) Are on your premises or between parts of your premises;
(ii) Contain steam or condensate of steam; and
(iii) Are not part of any other vessel or apparatus;
(f) Feed water piping between any steam boiler and a feed pump or injector.
(2) Air Conditioning Units – Any air conditioning unit that has a capacity of 60,000 Btu or more, including:
(a) Inductors, convectors and coils that make use of a refrigerant and form part of a cooling, humidity control or space heating system;
(b) Interconnecting piping, valves and fittings containing only a refrigerant, water, brine or other solution;
(c) Vessels heated directly or indirectly that:
(i) Form part of an absorption type system; and
(ii) Function as a generator, regenerator or concentrator;
(d) Compressors, pumps, fans and blowers used solely with the system together with their driving electric motors; and
(e) Control equipment used solely with the system.
e. Object does not mean:
(1) As Boiler and Pressure Vessels:
(a) Equipment that is not under internal vacuum or internal pressure other than weight of contents;
(b) Boiler settings;
(c) Insulating or refractory material; or
(d) Electrical, reciprocating or rotating apparatus within or forming a part of the boiler or vessel.
(2) As Air Conditioning Units, any:
(a) Vessel, cooling tower, reservoir or other source of cooling water for a condenser or compressor, or any water piping leading to or from that source; or
(b) Wiring or piping leading to or from the unit.
f. We will not pay for an Accident to any Object while being tested.
g. Suspension
Whenever an Object is found to be in, or exposed to, a dangerous condition, any of our representatives may immediately suspend the insurance against loss from an Accident to that Object. This can be done by delivering or mailing a written notice of suspension to:
(1) Your last known address; or
(2) The address where the Object is located.
If we suspend your insurance, you will get a pro rata refund of premium. But the suspension will be effective even if we have not yet made or offered a refund.
Analysis
Coverage for direct damage to covered property by the sudden and accidental breakdown of boiler and pressure vessels and air conditioning units (with 60,000 Btu's or more of capacity) is available under the mechanical breakdown option. Any indirect (time element) losses resulting from a covered mechanical breakdown loss are insured through the business income and extra expense provisions of the policy when the mechanical breakdown optional coverage is purchased.
Note that, if a boiler or air conditioning unit is found to be in dangerous condition, a representative of the company can immediately suspend the insurance provided by this coverage. Note also that breakdown of a computer (now a defined term) does not constitute an accident. The BP 00 03 07 02 covers computers elsewhere in the form.