Summary: The Insurance Services Office (ISO) businessowners program is a package policy offering property and liability coverage for certain groups of commercial insureds. The program may be used to insure a variety of business enterprises. It is directed towards "main street" commercial insureds who otherwise would find an insurance package comprised of the Building and Personal Property Coverage form, (CP 00 10 10 12); Commercial General Liability form, CG 00 01 04 13; Equipment Breakdown Protection Coverage Form, (EB 00 20 01 13); and Business Income (and Extra Expense) Coverage Form, (CP 00 30 10 12), which would provide unnecessary coverage at an unaffordable price for the size and complexity of their business operations.
The forms have undergone many revisions since they were first introduced. BOP coverage was made up of a general conditions form (BP 00 09 01 97), a standard or special property part (BP 00 01 01 97 or BP 00 02 01 97), and a businessowners liability part (BP 00 06 01 97). The standard property coverage form (BP 00 01 97) provided named perils coverage; the special property coverage form (BP 00 02 01 97) provided special perils coverage. Each form provided both mandatory and optional coverages. Liability coverage was mandatory and was provided by the liability coverage form (BP 00 06 01 97). Mandatory form BP 00 09 01 97 contained the conditions.
Now, however, ISO has revised the businessowners program. Forms BP 00 09 01 97, BP 00 01 01 97, BP 00 02 01 97, and BP 00 06 01 97 were withdrawn in 2002. The contents of these forms are incorporated into forms BP 00 03 01 06 and BP 00 03 01 10, as well as the latest revision, BP 00 03 07 13. Form BP 00 03 is written on a special causes of loss basis; the form can be converted to named perils coverage by endorsement.
Topics covered:
Eligibility—Occupancies
Eligibility requirements are contained in the businessowners subdivision of the Insurance Services Office (ISO) Commercial Lines Manual (CLM). Unless otherwise noted, eligible risks cannot exceed 35,000 square feet in total floor area or exceed $6,000,000 in annual gross sales at each location. Incidental storage buildings not exceeding 35,000 square feet and occupied by the insured may be included. Additional qualifications may be set out in state exception pages.
Apartment buildings of any size, including residential condominium associations, are eligible for coverage as well as building owners' business personal property in eligible apartment buildings. Eligible incidental occupancies are (1) offices; (2) eligible wholesaler, mercantile, service or processing occupancies, and contractors, which in total do not exceed 35,000 square feet; and (3) contractors that do not occupy more than 7,500 square feet or more than 15 percent of the total area. (Contractors exceeding this limit are classified separately.)
Commercial Unit-owners Condominiums used for eligible wholesaler, mercantile, service, processing, contractor, or office occupancies are eligible.
Contractors are subject to the following eligibility requirements: annual payroll may not exceed $300,000; may not work at a height over three stories; total cost of subcontracted work may not exceed 10 percent of total annual gross sales; equipment may not be leased or rented to others; and sales not related to installation, repair, or service cannot exceed 25 percent of annual gross sales. The only eligible types of contractors are listed in the Businessowners Classification Table found in the Commercial Lines Manual.
Mercantile risks listed in the Businessowners Classification Table section of the Commercial Lines Manual are eligible.
Processing and service risks listed in the Businessowners Classification Table section of the Commercial Lines Manual are eligible. Businesses with more than 25 percent of sales from off-premises operations are not eligible.
Wholesale risks listed in the Businessowners Classification Table section of the Commercial Lines Manual are eligible. Businesses with more than 25 percent of annual gross sales from retail operations or more than 25 percent of total floor area open to the public are not eligible. Operations of manufacturers' representatives or contractors are also not eligible.
Office buildings, including office condominium associations occupied principally for office purposes, are eligible. Buildings cannot exceed six stories in height or 100,000 square feet in total floor area. Eligible incidental occupancies are (1) apartments; (2) eligible wholesaler, mercantile, service, or processing occupancies and contractors that in total do not exceed 35,000 square feet; and (3) contractors that do not occupy more than 7,500 square feet or more than 15 percent of the total area.
Buildings occupied principally for eligible wholesaler, mercantile, service, or processing purposes and contractors that do not exceed 25,000 square feet in total floor area are eligible. Storage buildings occupied by the insured, which are incidental to an eligible wholesaler, mercantile, service, or processing risk and do not exceed 25,000 square feet, may be included.
Motels not exceeding three stories may be insured. There is no floor area restriction. Motels with eligible restaurant operations are eligible. Seasonal operations—those that are closed more than thirty consecutive days—or motels with bars or cocktail lounges are not eligible.
Restaurants listed in the Businessowners Classification Table section of the Commercial Lines Manual are eligible. If the restaurants are limited cooking—food is prepared cold or cooked with appliances that do not emit smoke or grease-laden vapors requiring an exhaust system—casual dining, fast food, or fine dining restaurants, they may be eligible. All must have no more than 7,500 square feet in total floor area. Limited cooking restaurants can have only the maximum of seventy-five seats, while fast food, casual dining, and fine dining restaurants can have seating capacity of no more than 150.
Convenience food stores/gasoline stores/grocery stores/supermarkets are eligible if the store has no auto service or repair operations, no car wash operations, or no propane or kerosene tank filling operations. The store must have a minimum of 3,000 square feet in total floor area if the store or restaurant sells gasoline.
Restaurants—limited cooking , fast food, casual dining, and fine dining only—are eligible if they are less than 7,500 square feet with a seating capacity no greater than 150 (75 for limited cooking). Other restrictions are outlined in the ISO Commercial Lines Manual.
Self-storage facilities not exceeding two stories in height are eligible except for those permitting cold storage or storage of industrial materials, pollutants, chemicals, or waste.
Ineligible Classes of Business
There are many classes that are not eligible for the businessowners program. Businesses connected with the auto business, such as repair or service stations, dealerships, or parking lots or garages are not eligible unless one of these is incidental to an eligible business. Bars and pubs are ineligible for coverage as well.
Condominium associations other than office, commercial, or residential condos are not eligible. Places of amusement, banks, building and savings and loans, credit unions, stockbrokers, and similar financial institutions may not be insured. Self storage facilities that provide outdoor storage to motorized vehicles or campers and recreational vehicles may not be insured.
Buildings used for manufacturing or insureds whose business operations involve one or more locations for manufacturing are ineligible.
Household personal property or one or two family dwellings, unless of the type where multiple units are grouped together and under one ownership, management, or control, are also not eligible. Many types of contractors, listed in the Commercial Lines Manual, are not eligible.
Businessowners Section III Policy Conditions
As stated earlier, there is no longer a requirement to attach BP 00 09 01 97 to each businessowners policy. The twelve conditions that apply to all the policy's coverages are now section III of the BP 00 03. Many of these common policy conditions are restatements of conditions found in the commercial property program and are described more fully in that discussion; see Building and Personal Property Coverage Form.
A. Cancellation
1.The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.
2. We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:
a.Five days before the effective date of cancellation if any one of the following conditions exists at any building that is Covered Property in this policy:
(1)The building has been vacant or unoccupied sixty or more consecutive days. This does not apply to:
(a)Seasonal unoccupancy; or
(b)Buildings in the course of construction, renovation or addition.
Buildings with 65 percent or more of the rental units or floor area vacant or unoccupied are considered unoccupied under this provision.
(2)After damage by a Covered Cause of Loss, permanent repairs to the building:
(a)Have not started, and
(b)Have not been contracted for,
within thirty days of initial payment of loss.
(3)The building has:
(a)An outstanding order to vacate;
(b)An outstanding demolition order; or
(c)Been declared unsafe by governmental authority.
(4)Fixed and salvageable items have been or are being removed from the building and are not being replaced. This does not apply to such removal that is necessary or incidental to any renovation or remodeling.
(5)Failure to:
(a)Furnish necessary heat, water, sewer service or electricity for thirty consecutive days or more, except during a period of seasonal unoccupancy; or
(b)Pay property taxes that are owing and have been outstanding for more than one year following the date due, except that this provision will not apply where you are in a bona fide dispute with the taxing authority regarding payment of such taxes.
b.ten days before the effective date of cancellation if we cancel for nonpayment of premium.
c.thirty days before the effective date of cancellation if we cancel for any other reason.
3.We will mail or deliver our notice to the first Named Insured's last mailing address known to us.
4.Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.
5.If this policy is cancelled, we will send the first Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.
6.If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis:
The first named insured may cancel the policy by providing advance written notice of cancellation, by mail, or by other delivery.
The insuring contract allows the insurer to cancel the policy with varying notice requirements (five, ten, or thirty days) for a variety of reasons. Because vacant or unoccupied buildings are susceptible to vandalism or arson, they pose a significant exposure. So, if a building has been vacant or unoccupied for sixty consecutive days, the insurer can cancel with five days notice. The policy meaning of unoccupied includes buildings with 65 percent of rental units or floor area vacant. Before this clarification, a few articles of furniture could be left in a unit and render a basically unused building occupied. This wording allows cancellation in instances when, for example, the bottom floor is in use, but the floors above are unrented or unused. The sixty-day requirement does not apply to seasonal unoccupancy or buildings undergoing construction or renovation.
Similarly, buildings where repairs have not commenced or been contracted for within thirty days of initial payment of loss present an unusual exposure and cancellation is permitted. The assumption would be that the money has been pocketed. If a building is under an order to vacate or has been declared unsafe by governmental authorities, cancellation may be issued. This does not mean that if a covered loss results in a premises being declared unsafe or put under order of vacancy the insurer can cancel and avoid payment for the loss. The intent here is to preclude continuing on a risk insurers would have no wish to insure.
Other signs of increased exposure and thus uninsurability are when salvageable fixtures have been removed and not replaced—for example, the furnace—or when the insured fails to provide heat or utility service to the building for thirty days (except in a period of seasonal unoccupancy) or fails to pay outstanding property taxes for more than one year (other than where there is a genuine dispute with the authorities over the payment of taxes).
B. Changes
This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy.
C. Concealment, Misrepresentation Or Fraud
This policy is void in any case of fraud by you as it relates to this policy at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:
1.This policy;
2.The Covered Property;
3.Your interest in the Covered Property; or
4.A claim under this policy.
Analysis:
Only the first named insured may make changes to the policy.
Fraud committed by the named insured or any other insured voids the policy. Intentional concealment or misrepresentations concerning the policy, the covered property, the insured's interest in the covered property, or claims made under the policy also void the policy.
For more information on concealment, misrepresentation, or fraud, see Effect of Insureds' Declarations or Statements.
D.Examination Of Your Books And Records
We may examine and audit your books and records as they relate to this policy at any time during the policy period and up to three years afterward.
E.Inspections And Surveys
1.We have the right to:
a.Make inspections and surveys at any time;
b.Give you reports on the conditions we find; and
c.Recommend changes.
2.We are not obligated to make any inspections, surveys, reports or recommendations and any such actions we do undertake relate only to insurability and the premiums to be charged. We do not make safety inspections. We do not undertake to perform the duty of any person or organization to provide for the health or safety of workers or the public. And we do not warrant that conditions:
a.Are safe or healthful; or
b.Comply with laws, regulations, codes or standards.
3.Paragraphs 1. and 2. of this condition apply not only to us, but also to any rating, advisory, rate service or similar organization which makes insurance inspections, surveys, reports or recommendations.
4.Paragraph 2. of this condition does not apply to any inspections, surveys, reports or recommendations we may make relative to certification, under state or municipal statutes, ordinances or regulations, or boilers, pressure vessels or elevators.
Analysis:
The inspections clause simply gives the insurer a contractual right, but not an obligation, to make inspections, surveys, and recommendations regarding the insured premises; however, such inspections and reports are for insurability and premium determination only. By undertaking such inspections, the insurer takes on no liability nor warrants that the premises are safe, up to code, or healthful.
Because the BOP provides coverage for property damage due to the breakdown of boilers and machinery, paragraph 2. does not apply when the insurer makes an inspection because of state or municipal statutes or ordinances relating to these devices.
F. Insurance Under Two Or More Coverages
If two or more of this policy's coverages apply to the same loss or damage, we will not pay more than the actual amount of the loss or damage.
Analysis:
Where insured property might be covered under two of the policy's coverage parts—for example, a walk-in freezer that might be covered as building or business personal property—this provision eliminates any possible excess recovery beyond the actual loss. This provision supports the notion that partial recovery can be had from both sources, if necessary.
G. Liberalization
If we adopt any revision that would broaden the coverage under this policy without additional premium within forty-five days prior to or during the policy period, the broadened coverage will immediately apply to this policy.
H. Other Insurance
1.If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance of Section I – Property.
2.Business Liability Coverage is excess over:
a.Any other insurance that insures for direct physical loss or damage; or
b.Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured.
3.When this insurance is excess, we will have no duty under Business Liability Coverage to defend any claim or "suit" that any other insurer has a duty to defend. If no other insurer defends, we will undertake to do so; but we will be entitled to the insured's rights against all those other insurers.
Analysis:
If other insurance exists, the policy responds as excess insurance, even if the insured is unable to collect under the other policy. There is no provision for pro rata sharing of losses.
The other insurance provision specifically addresses situations in which the named insured has been added as an additional insured on another policy. In these situations it is common for the additional insured to look to the other policy for primary coverage. The liability coverage of this policy, therefore, will be excess in such circumstances.
In the 2013 revision, the phrase "by attachment of an endorsement" was removed from the end of H.2.b. ISO was asked to revise the provision because some insurers may provide various parties additional insured status directly in the coverage form and not by endorsement. Thus, insurance provided to a named insured will be excess over any other insurance that the named insurance has been added to as an additional insured, no matter how the named insured has been added.
I. Premiums
1.The first Named Insured shown in the Declarations:
a.Is responsible for the payment of all premiums; and
b.Will be the payee for any return premiums we pay.
2.The premium shown in the Declarations was computed based on rates in effect at the time the policy was issued. On each renewal, continuation or anniversary of the effective date of this policy, we will compute the premium in accordance with our rates and rules then in effect.
3.With our consent, you may continue this policy in force by paying a continuation premium for each successive one-year period. The premium must be:
a.Paid to us prior to the anniversary date; and
b.Determined in accordance with Paragraph 2. above.
Our forms then in effect will apply. If you do not pay the continuation premium, this policy will expire on the first anniversary date that we have not received the premium.
4.Undeclared exposures or change in your business operation, acquisition or use of locations may occur during the policy period that are not shown in the Declarations. If so, we may require an additional premium. That premium will be determined in accordance with our rates and rules then in effect.
J. Premium Audit
1.This policy is subject to audit if a premium designated as an advance premium is shown in the Declarations. We will compute the final premium due when we determine your actual exposures.
2.Premium shown in this policy as advance premium is a deposit premium only. At the close of each audit period we will compute the earned premium for that period and send notice to the first Named Insured. The due date for audit premiums is the date shown as the due date on the bill. If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium, we will return the excess to the first Named Insured.
3.The first Named Insured must keep records of the information we need for premium computation, and send us copies at such times as we may request.
Analysis:
The premiums provision outlines who is responsible for paying the premium and who will receive returned premiums (the named insured), how the premium was calculated, and how to keep the policy in force. The provision also describes when additional premium may be charged.
The premium audit condition states that the due date for the audit premiums is the date shown as the due date on the bill. Previous editions of the form stated that the premium was "due and payable on notice to the first Named Insured." The first named insured has the responsibility of keeping records for the insurer's use in computing the premium.
K. Transfer Of Rights Of Recovery Against Others To Us
1.Applicable to Businessowners Property Coverage:
If any person or organization to or for whom we make payment under this policy has rights to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them. But you may waive your rights against another party in writing:
a.Prior to a loss to your Covered Property.
b.After a loss to your Covered Property only if, at time of loss, that party is one of the following:
(1)Someone insured by this insurance;
(2)A business firm:
(a)Owned or controlled by you; or
(b)That owns or controls you; or
(3)Your tenant.
You may also accept the usual bills of lading or shipping receipts limiting the liability of carriers.
This will not restrict your insurance.
2.Applicable to Businessowners Liability Coverage:
If the insured has rights to recover all or part of any payment we have made under this policy, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring "suit" or transfer those rights to us and help us enforce them. This condition does not apply to Medical Expenses Coverage.
L. Transfer Of Your Rights And Duties Under This Policy
Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual Named Insured.
If you die, your rights and duties will be transferred to your legal representative but only while acting within the scope of duties as your legal representative. Until your legal representative is appointed, anyone having proper temporary custody of your property will have your rights and duties but only with respect to that property.
Analysis:
The final conditions give subrogation details. The insurer has the right of recovery unless the named insured has waived his rights prior to a loss to covered property; or, if following a loss, the person against whom the insurer would subrogate is someone insured by this policy or is a firm either owned or controlled by, or that owns or controls, the named insured, or is the named insured's tenant. As respects liability coverage—but not medical expenses—if the insured has rights to recover all or any part of a payment the insurer has made under the policy, those rights are transferred to the insurer. The insured must do nothing to impair those rights, and, at the insurer's request, must bring suit or transfer the rights of recovery to the insurer and help the insurer enforce them.