Summary: The commercial package policy program of Insurance Services Office prescribes that the combination of any two or more of the ISO simplified language commercial lines coverage parts constitutes a commercial package policy. Each of these coverage parts is discussed elsewhere in this service. The rules for writing commercial package policies are found in division nine of the revised commercial lines manual. Property eligible for the homeowners program is not eligible for the commercial package policy.
Topics covered: Policy formation Eligibility Package modification assignment and factors
Policy Formation
A commercial package policy is formed by combining two or more of the commercial lines coverage parts for equipment breakdown, commercial automobile, commercial property, crime, commercial general liability, inland marine, farm, liquor liability, pollution liability, products/completed operations liability, professional liability, or employment-related practices liability. (Some states restrict the use of some of these commercial lines coverage parts in the package policy format. Individual state rules should be consulted.)
There is no requirement that the package policy contain both property and liability coverage. However, as is explained later in this discussion, package modification factors do not apply unless both property and liability coverages are included.
Policies may be written on a continuous basis or for up to a three-year-term.
Eligibility
As mentioned previously, only homeowners properties are ineligible for package treatment under the commercial package program. Because of the broad eligibility for the program, almost all other risks are eligible for treatment in a package format. The Commercial Package Policy must include two or more coverage parts.
Package Modification Assignment and Factors
Risks in this program should be assigned to one or more of the following classifications: service, office, mercantile, motel/hotel, apartment house, contractors, industrial and processing, or institutional.
Package modification factors may be used only when both property and liability coverages are provided in the package policy. The property portion of the policy must cover buildings or personal property or both and be written at 80 percent or higher coinsurance (90 percent, if blanket). Any of the simplified language commercial property coverage parts may be used to provide this coverage. In addition, commercial property coverage may be written using the Capital Assets (Output Policy) Coverage Part, the Highly Protected Risks Coverage Part, or the Physicians and Surgeons Equipment Coverage form (coverage must not be limited to only equipment and instruments usually carried by the insured).
Liability coverage in a package policy may be provided through a commercial general liability or garage coverage that covers bodily injury and property damage exposures for the same premises for which property coverage is provided.
Under the rules of the commercial package policy, package modification factors may not be applied to coverage written under the commercial property coverage part for the following types of properties:
1. Highly protected risks;
2. Petroleum properties;
3. Petrochemical plants;
4. Electric generating stations;
5. Natural gas pumping stations.
In addition, no package modification factors apply to the premium developed for coverage under Earthquake and Volcanic Eruption endorsement CP 10 40 08 99, Sprinkler Leakage – Earthquake Extension form CP 10 39 07 88, personal liability exposures, or coverages written on farms eligible for farm combination coverage.
When the package policy includes crime coverage, the package modification factor applies to the premium applicable to the premises covered by the commercial property coverage part. When the package policy includes farm, the factor corresponding to the package modification assignment for the insured's predominant exposures should be applied. For time element and property coverage, the factor applicable only for the exposures that are necessary or incidental to farm operation should be applied, not including owner-occupied dwellings, household personal property, or structures appurtenant to owner-occupied dwellings, should be applied. For liability coverage, the factor applicable only to exposures necessary or incidental to farm operation should be applied.