Analysis

 Medical payments to others (med pay) is the BOP's other main liability coverage. Coverage F differs from Coverage E in that it provides nominal dollar limits of coverage for another party's medical expenses whether an insured is legally liable or at fault in causing the injury. Unlike the med pay insuring agreement in ISO's commercial general liability forms, which agrees to pay medical expenses for bodily injury, the MSO BOP avoids the phrase "bodily injury," further emphasizing the differences between Coverage E and Coverage F.

 The medical payments insuring agreement contains the insurer's promise to pay medical expenses caused by an accident. The types of medical expenses that the insurer will pay are listed in the policy: ambulance, dental, funeral, hospital, medical, professional nursing, surgical or x- ray services; prosthetic devices; drugs and surgical supplies.

 The requirement that the injury be caused by an accident is not elaborated on in the policy provisions but is generally understood to mean that the event causing injury can be traced to a definite time and place and that the injury was not expected or intended from the insured's or the injured person's point of view.

 To illustrate the latter point, say that the named insured is a merchant at whose going-out-of-business sale two customers disagree over who can buy the last pair of designer jeans in their mutual size. If one of the customers settles the argument by suddenly and without warning striking the other customer, the resulting injury will have been no accident from the viewpoint of the customer doing the striking. From the viewpoint of the injured customer, however, the injury will have been quite unexpected and unintended and therefore accidental. The fact that the customer was injured by an intentional act of another person should not stand in the way of medical payments coverage.

 The insuring agreement goes on to say that the accident must take place in the coverage territory and during the policy term, and it must be reported within three years. The requirement that the accident must take place during the policy period in order for coverage to be triggered under that policy is essentially the same as the occurrence trigger that applies to coverage E which requires that the bodily injury or property damage must occur during the policy period. Although the accident must take place during the policy period, medical expenses are covered if they are incurred and reported to the insurer within three years of the date of the accident. (ISO's CGL has only a one-year window.)

 The insuring agreement also states that medical payments coverage applies to injuries from accidents that take place on premises that the named insured owns or rents, as well as accidents occurring elsewhere but arising out of a condition on those premises, or because of the named insured's business/operations. Coverage clearly applies to accidents that occur away from the named insured's premises, as long as the injuries result from the named insured's operations. However, the coverage for accidents taking place on the insured's premises is broader than that which applies elsewhere, since there is no requirement, with respect to such premises, that the injury must result from the named insured's operations. If, for example, a child is injured while trespassing on the insured's grounds after the insured's regular business hours, and even if the injury results from something other than the insured's operations, such as the child tripping over his own toy, medical payments coverage can still apply to the child's injuries.

 One of the BOP's special liability conditions, which applies specifically to this coverage, obligates coverage beneficiaries to provide written proof of a claim; to submit to physical examinations if required, at the insurer's expense; and to authorize the insurer to obtain medical records.

 The opening phrase of this insuring agreement includes a statement that medical payments shall not exceed the applicable limit of insurance shown in the Declarations. The indicated dollar limit applies to any one person in any one accident.

 Part II B – Supplemental Coverages

 The following coverages do not extend or modify any provisions in this policy, including our Limits of Liability or any applicable Exclusions, except to the extent specifically described.

 Analysis

 Most of the BOP's liability supplemental coverages begin with the words, "Coverage E is extended to include…." In other words, they expand coverage E. The exceptions are defense coverage, first aid expense coverage, and personal injury/advertising injury coverage.

 Positioning defense coverage as a supplemental coverage makes it clear that the insurer's duty to defend the insured is separate from the duty to pay damages. This duty applies to defending the insured against suits (civil proceedings) and adds a comment that "suit" includes alternative dispute resolution proceedings submitted to with the insurer's consent.

 The insurer is obligated only to defend suits (civil proceedings) against insureds if they seek damages for bodily injury, property damage, and personal/advertising injury that this policy covers. Personal injury/advertising injury coverage is not provided in Coverage E but rather in a supplemental coverage discussed later in this analysis. To trigger the insurer's duty to defend, an insured needs only to establish that coverage potentially applies. The insurer may have a duty to defend even when coverage is in doubt and ultimately is found not to apply.

 The insurer can deny the duty to defend if the BOP does not apply to the claimed bodily injury or property damage. For example, if the injured party claims the insured caused the damage by hitting him intentionally, the BOP insurer could reasonably and legitimately deny coverage and deny any duty to defend. But, courts look very closely at a situation such as this, and insurers would do well to be absolutely certain of no coverage before categorically denying coverage or the duty to defend.

 The MSO BOP goes on to say that the insurer has no duty to investigate or defend suits not seeking damages that the policy does not cover or allegations within a suit that the policy does not cover. If the insurer is to provide any defense, the complaint must contain at least some allegations that are potentially within coverage. However, under the terms of this form, the insurer has no obligation to defend the insured against allegations outside the scope of coverage.

 Policies typically state that the insurer's duty to defend applies even if any of the allegations of the suit are groundless, false, or fraudulent. There is no such explicit statement in the MSO BOP. Rather, the insurer agrees that it may investigate and settle claims or suits that the insurer deems to be reasonable. It is the insurer's decision—not the insured's—as to which claims or suits are reasonable.

 The insurer's duty to defend ends when it has used up the applicable limit of insurance in the payment of judgments or settlements. As previously noted, the applicable limit of liability applies only to damages; all other costs, including defense, are payable in addition. But, once the applicable limit has been paid, the duty to defend ceases. It is important to note that the limits have to be used up in the payment of judgments or settlements; the insurer's simply tendering the policy limits and walking away from the defense of the insured is not an acceptable way to complete the duty to defend.

 The insurer reserves to itself the right to investigate and settle any claim or lawsuit. The insured does not have the right to prevent a settlement even if he does not like the terms.

 The insurer agrees to pay all costs it incurs in investigating and settling a claim, as well as prejudgment interest and/or postjudgment interest accrued up to the point when the insurer offers to pay the policy limits. The insurer also agrees to pay costs taxed against the insured, the costs of bonds, and to reimburse the insured's expenses and pay lost wages, up to $250 per day, elevator maintenance agreement.

 Analysis

 Contractual coverage applies to liability assumed under certain types of contracts defined in the policy (ISO forms refer to these as insured contracts). This contractual liability coverage is concerned with another party's (the indemnitee's) liability that is assumed; it has no applicability to the liability that results from a breach of contract. In other words, the coverage under contractual liability is for those specific obligations of the insured wherein the insured has contracted to be responsible for the legal liability of another entity.

 Although lease of premises agreements qualify as insured contracts, contractually assumed liability for fire or explosion damage is not covered here. The Incidental Fire and Explosion Legal Liability supplemental coverage is designed to addresses the fire and explosion liability exposure, whether the insured has contractually assumed liability for the fire or explosion damage to nonowned premises.

 The MSO BOP's contractual liability coverage is limited to injury or damage that is caused in whole or in part by the named insured or those acting on behalf of the named insured. This wording serves to exclude coverage for tort liability assumed under a contract when the indemnitor or anyone acting on his behalf does not cause the injury or damage at issue.

 Coverage for contracts that deal with the maintenance, ownership, or use of aircraft or watercraft is not negated by the automobiles/aircraft/watercraft exclusion, but that exclusion still applies to automobiles.

 A portion of the contractual liability exclusion, which appears later in the policy, applies specifically to the contractual coverage supplemental coverage. The exclusion again precludes contractual liability coverage for fire- or explosion-damage legal liability to rented premises; coverage for that exposure is relegated to the Incidental Fire and Explosion Legal Liability supplemental coverage. Contractual liability coverage is also excluded for postloss agreements to indemnify another party for bodily injury or property damage. Insuring such postloss agreements would be comparable to providing property insurance on a burning building.

 3.Employer's Liability for Nonowned Automobile Coverage

 Analysis

 Many small businesses do not own any autos, believe they have no auto liability exposures, and carry no business auto insurance. However, virtually every business has incidental auto liability exposures arising from employees' use of personal autos to run business errands, borrowed autos, or autos rented to meet a temporary need or while on a business trip. BOPs sometimes include nonowned and hired car coverage, or offer it as an option, to meet these important but unrecognized exposures. The MSO BOP includes nonowned auto coverage, but it does not include coverage for borrowed or hired autos. Liability coverage, but not medical payments, coverage applies on an excess basis, and only when another policy provides primary coverage. This supplemental coverage can be deleted by entering "BU 50 04″ in the Declarations.

 4.First Aid Expense Coverage

 Analysis

 When first aid is needed by others at the scene of the accident, it is not the time to debate who should pay for it. The insured may call for an ambulance or incur other reasonable medical expenses without admitting or implying any responsibility for the person's injuries. The insurer will cover those expenses unless they involve bodily injury that the policy excludes. For example, this policy would not cover first aid for injuries sustained in a typical auto accident.

 Analysis

 Liquor liability concerns involve situations in which somebody overimbibes and is subsequently involved in an auto accident (or other incident), and the party that served the alcohol is held responsible for the resulting injuries or damage. The BOP's alcoholic beverage exclusion (discussed later) precludes coverage for this exposure.

 A business that does not generally sell or serve alcohol may still have incidental liquor liability exposures. Other general liability forms provide coverage for this incidental exposure, commonly referred to as host liquor liability coverage, as an exception to the liquor liability exclusion. MSO's BOP treats it as a supplemental coverage. Liability coverage applies to an insured that serves alcoholic beverages without charge, as is often done at a business meeting or an office party. Adding "BU 50 05″ to the Declarations also provides coverage in situations where a charge is made but serving alcoholic beverages is incidental to other activities. For example, a charge might be made to attend a fundraising dinner that includes wine.

 6.Incidental Automobile Coverage

 Analysis

 A Part II exclusion in the BOP eliminates auto liability coverage. However, this supplemental coverage serves as an exception to the exclusion by affirmatively providing coverage for the insured's parking lot or parking operations. Together with the incidental mobile equipment supplemental coverage, it also provides liability coverage for vehicles not subject to coverage under a business auto policy.

 Subject to the fire and explosion legal liability coverage limit, the incidental fire and explosion legal liability coverage protects the named insured who, as a tenant, is held liable for property damage to premises the named insured occupies. This coverage would also apply to a named insured who is temporarily occupying a hotel room or renting a hospitality suite or a temporary office space. Note that this coverage applies only to premises rented to or occupied by the named insured. It does not extend to provide coverage for damage to premises occupied by an employee, which is also specifically excluded by Part D of the premises/other property additional exclusions. It seems questions could arise as to whether the policy would cover damage to a hotel room occupied by an employee who is on a business trip for his or her employer.

 This is a legal liability coverage; it is not first-party property coverage, and it applies only if the insured is legally liable for the damage. Coverage against additional perils can be obtained by listing "BU 50 08″ in the Declarations. This coverage might apply, for example, if an insured inadvertently leaves the water running resulting in water damage to a rented hotel suite.

 Supplemental Coverage 8 provides incidental medical/professional liability coverage that applies to medical services, nursing services, drugs, or related supplies provided at no charge by an insured who is not in the business of providing medical services.

 10.Incidental Watercraft Coverage

 Analysis

 As with other supplemental coverages, the incidental title implies that this coverage is designed to address occasional exposures that are not part of a typical insured's main activities. The incidental watercraft exposure applies to bodily injury and property damage liability arising out of watercraft ashore at the named insured's premises, or to nonowned watercraft less than twenty-six feet long that do charge for carrying passengers or cargo. Also covered is bodily injury or property damage arising out of the insured's direct act and involving watercraft of any size that are not owned by or rented or loaned to an insured. This would apply, for example, to a guest who is injured while attending a seminar that the named insured is presenting aboard a cruise ship.

 11. PERSONAL INJURY/ADVERTISING INJURY COVERAGES

 The insuring agreement for this supplemental coverage expresses the insurer's promise to pay for the benefit of insureds those sums that the insured becomes legally obligated to pay as damages because of personal injury and advertising injury arising out of a covered offense. A glossary within this supplemental coverage defines "personal and advertising injury" by listing the offenses that are covered. In brief, the terms include a wide range of offenses that often result in neither bodily injury nor damage to tangible property and consequently are not insured under coverage E of the BOP.

 Personal injury offenses are covered if they arise out of the conduct of the named insured's business/operations other than advertising, publishing, broadcasting, or telecasting done by or for the named insured. So, if the named insured is itself in the business of advertising, it will need to have a more specialized form of coverage designed for firms in that business.

 Advertising injury offenses are covered if they arise in the course of advertising the named insured's goods, products, or services. When the named insured (who is not in the advertising, publishing, broadcasting, or telecasting business) is merely advertising its own business, however, it will be protected by this supplemental coverage against the advertising injury offenses as defined. A grocery store that distributes flyers in its neighborhood is an example of this point.

 Insurance applies only if the offense is committed in the coverage territory. Close examination of the coverage territory condition, one of the form's common conditions, makes it clear that the coverage territory applicable to personal injury/advertising injury offenses is not as broad as the coverage territory applicable to bodily injury and property damage liability claims which can, in some cases, apply worldwide.

 "Offense," rather than "occurrence," is used in the advertising injury/personal injury insuring agreement because this insuring agreement is meant to apply to intended actions of the insured. Occurrence, of course, means an accident, but if the insured commits an act for which advertising injury or personal injury coverage is applicable, the act itself is not an accident. For example, if the insured detains someone or writes an article that libels a person, those acts of detention and writing are intentional (not accidental), and the insured needs protection for such intentional acts. Occurrence as an accident coverage would not do the job.

 Personal or advertising injury from publications that took place before the policy went into effect are not covered. Apart from that provision, it is interesting that the Montrose provisions that are in the coverage E insuring agreement are not part of this supplemental coverage's insuring agreement. It could be that the particular nature of advertising injury and personal injury caused by an offense (intended actions as opposed to accident) does not warrant Montrose provisions. Or, perhaps since the Montrose case itself dealt with property damage and with an occurrence, there was no perceived threat to personal and advertising injury coverage. For whatever reason, this supplemental coverage does not have the Montrose clauses.

 The advertising injury/personal injury coverage has its own set of exclusions, and most of the BOP's liability exclusions do not apply. However, the workers compensation/employers liability, fungi/mold, pollution/environmental damage, and silica exclusions do apply.

 Part II C – Liability Not Insured

 Analysis

 Like the preamble to Section I's property exclusions, the preamble to the liability exclusions includes concurrent causation language designed to make it clear that the exclusions in this section of the policy apply even if some nonexcluded occurrence contributes in some manner to the loss.

 The alcoholic beverage exclusion excludes what is commonly referred to as dram shop liability, as well as virtually any other liability claim that results from furnishing alcoholic beverages. However, the incidental alcoholic beverage supplemental coverage, discussed earlier in this analysis, limits the effect of this exclusion by providing host liquor liability for incidental exposures.

 2.Automobiles/Aircraft/Watercraft Exclusions

 Analysis

 This exclusion precludes coverage for most bodily injury or property damage claims involving automobiles, aircraft, or watercraft. However, limited coverage for these exposures is provided by the following supplemental coverages: employers liability for nonowned automobile coverage, incidental automobile coverage, and incidental watercraft coverage.

 A key word in this exclusion is "automobiles." The exclusion does not apply to mobile equipment. "Automobile" is defined in the Part II glossary, where the definition clearly states that mobile equipment is not an automobile. Mobile equipment is defined at length—not in the Part II glossary, but in the incidental mobile equipment supplemental coverage. The complex definition, which occupies half a page of text, concludes by noting that land vehicles that are subject to motor vehicle insurance laws are considered automobiles; they are not mobile equipment.

 3.Business Activities/Business Risk Exclusions

 Analysis

 Part A of this exclusion focuses on and has meaning through the definition of "your products" and "your work," both of which are defined in detail in the policy's glossary. Basically, the products category includes goods or products, other than real property, that the named insured manufactures, sells, distributes, handles, or discards. It also includes warranties, as well as missing instructions or warnings. "Your products" include goods or products manufactured, sold, distributed, handled, or disposed of by others trading under the named insured's name or by "persons or organizations whose business or assets you have acquired." Vending machines or other property that is rented to others or placed for others' use are not considered products. "Your work" includes completed operations performed by or for the insured; related equipment, materials, or parts; and warranties as well as missing instructions or warnings.

 If the named insured's product or work sustains property damage, the named insured must look to sources of recovery other than the insured's BOP's liability coverage. This exclusion does not apply to work that is still in progress at the time of the damage or if a subcontractor performed the damaged work or the work out of which the damage arises.

 Part B of this exclusion deals with impaired property. Before the exclusion can be discussed, the term "impaired property" must be understood. This somewhat elusive term is defined in a glossary that is included within this exclusion. "Impaired property," by definition, is restricted to tangible property that, on the one hand, cannot be used or is less useful, but, on the other hand, can be restored to use. For example, assume that a product made by the named insured is incorporated into another product made by another manufacturer. If the named insured's product is defective or deficient and this results in the other product's being made less useful or totally unusable, the first part of the definition is met. Then, if that other product can be restored to use by repairing or replacing the named insured's product, the definition is satisfied and exclusion 3B applies. Both parts of the definition have to be present. If the property has been damaged to the extent that it is not only unusable but also cannot be restored to use, the impaired property exclusion does not apply. Because "your products" and "your work" include instructions or warnings, this exclusion would apply to property that cannot be used or is less useful because instructions or warnings were incomplete, inaccurate, or absent.

 Part 2 of the impaired property exclusion speaks of a delay or failure by the named insured (or others acting on the named insured's behalf) to perform a contract in accordance with its terms. For example, if the insured contracted with a party to deliver oil for engines and then fails to deliver so that that party cannot use the engines, the policy provides no coverage.

 The exception to the damaged to impaired property exclusion states that the exclusion does not apply to loss of use of other property arising out of abrupt and accidental physical damage to the named insured's product or work after it has been put to its intended use. For example, if an apartment building became untenantable after being occupied due to an explosion of a gas clothes driver that had been sold by the named insured, the exclusion would not apply and the owner's property damage liability claim against the insured for resulting loss of use of the building would therefore be covered.

 Part C of the exclusion precludes coverage for products recall expenses, as well as the costs of fixing defective products, work, or impaired property. These expenses are generally regarded as business risks, part of the cost of doing business. However, products recall insurance is available in the specialty market.

 Part D deals with the elusive issue, sometimes referred to as "broad form property damage coverage," that CGL policies traditionally provide as an exception to an exclusion. Conceptually, the objective is to provide coverage for damage a contractor or repairman does to someone else's property other than the specific stuff that is being or has been worked on. The coverage is hard to understand because the devil is in the details. Because MSO's BOP avoids granting coverage via exceptions to exclusions, the provision here addresses only the issue of what property is not covered. Not covered is property damage to the part of real property that the named insured or a subcontractor is working on or the part of any real or personal property that has to be fixed because of the insured's faulty work.

 To illustrate the effect of this exclusion, say that an installer working for an appliance store accidentally sets a customer's house on fire while soldering copper pipes, and the entire structure is burned down. If the owner of the house sues the appliance store for the loss, the exclusion in question will apply only to "that particular part" of the structure on which the installer was working. Thus, the named insured would be covered for damage to all parts of the building other than the particular part being worked on at the time of the loss.

 Parts E and F of the business activities/business risk exclusions specifically exclude bodily injury liability coverage for specifically described treatment therapies that are in the nature of professional liability exposures but might not be reached by the professional activities exclusion, discussed later.

 4.Contractual Liability Exclusion

 Analysis

 The contractual liability exclusion precludes coverage for virtually all contractually assumed liability except for liability that would exist even in the absence of a contract. Supplemental Coverage 2 restores much of the contractual liability coverage that this contractual liability exclusion eliminates.

 It is interesting that an exclusion to the supplemental coverage is placed here rather than in the contractual coverage supplement. The exclusion specifically precludes coverage for fire or explosion damage legal liability to rented premises; coverage for that exposure is relegated to the incidental fire and explosion legal liability supplemental coverage. Contractual liability coverage is also excluded for postloss agreements to indemnify another party for bodily injury or property damage. Insuring contractual liability coverage for such postloss agreements would be comparable to providing property insurance on a burning building.

 5.Employee, Employment, and Related Injury Exclusions

 Analysis

 Parts A, B, and C of this exclusion preclude BOP coverage for losses that can or should be covered under workers compensation, employers liability, and employment practices liability insurance. Also excluded are disability benefits or unemployment compensation benefits that an employer might be required by law to provide.

 There are more points to make about the employer's liability exclusion. First, the exclusion applies to any obligation on the part of the insured to share damages with or repay someone else who must pay damages because of the injury. Second, the employer's liability exclusion applies whether the insured may be liable as an employer or in any other capacity, Third, it does not apply to liability assumed under insured contract covered under the supplemental contractual coverage. These items are part of the exclusive remedy concept that is meant to draw a definite line between workers compensation coverage and general liability coverage.

 6.Endangerment or Harm Exclusion

 Analysis

 This exclusion is comparable to the intentional loss exclusion in Part I of the BOP. It is meant to complement the requirement that bodily injury and property damage be caused by an occurrence as defined (that is, it must be accidental) in order to be covered by this liability insurance. The important point here is that the expected or intended part of the exclusion has to be seen from the standpoint of the insured; he is the entity being protected under part II of the BOP, and so, his or her intention is the key.

 With respect to the wording in other policies, some courts have made a distinction between an intentional act and an intentional or expected result, holding that an intentional act does not necessarily preclude coverage. The second phrase of the MSO BOP exclusion attempts to address this issue by specifically denying coverage for the consequence of an intentionally harmful act or knowing endangerment. However, this comes close to being a negligence or stupidity exclusion. According to Merriam-Webster's Collegiate Dictionary, "endangerment" is creating a dangerous situation. Although it would not be consistent with most insureds' reasonable expectations, an insurer could conceivably argue that merely introducing or increasing some hazard was enough to preclude coverage, even if the resulting bodily injury or property damage was neither expected, intended, or likely.

 7.Fungi/Mold Exclusion

 Analysis

 "Fungi" includes but is not limited to mold. However, the primary concern here is mold. Mold is found everywhere, and complete elimination is impossible. Suits by inhabitants of so-called "sick buildings" are not uncommon. Suits may allege bodily injury, property damage, or both.

 The fungi/mold exclusion precludes coverage for bodily injury and property damage related in virtually any manner to mold or other fungi. It further excludes any cost or expense arising out of abating, remediating, or even testing for the effects of fungi. The exclusion also applies to advertising injury and personal injury. Remember that one of the components of personal and advertising injury is wrongful eviction; thus, a claim cannot allege the presence of mold forced a wrongful eviction in hopes of triggering coverage.

 This exclusion does not apply to eating edible mushrooms, cream of mushroom soup, or other food products.

 8.Mobile Equipment Exclusion

 Analysis

 Policies that provide general liability coverage exclude automobile liability but cover liability arising out of mobile equipment. The challenge policy drafters face is to draw a clear distinction between these two sets of exposures.

 The MSO BOP's automobiles/aircraft/watercraft exclusion eliminates coverage for automobiles, and the incidental mobile equipment supplemental coverage provides coverage for mobile equipment. The exclusion here clarifies a few additional details. First, although liability arising out of the use of mobile equipment is covered, liability arising out of the transportation of mobile equipment is not. This exclusion eliminates the possibility that the BOP might be found to provide coverage for an auto accident involving a truck that is carrying, say, a lawn mower, a fork lift, or a backhoe. The second part of this exclusion is essentially a racing exclusion.

 9.Pollution/EnvironmentalDamage Exclusion

 Analysis

 Although this is almost an absolute pollution exclusion, limited coverage remains for bodily injury, property damage, advertising injury, or personal injury arising out of a hostile fire at the named insured's premises. Pollution cleanup costs and similar expenses are also not covered under Part II of the BOP. Note, however, that Part I of the policy includes a supplemental pollution cleanup cost coverage that applies to cleanup expenses at the described premises.

 10. Premises/Other Property Additional Exclusions

 Analysis

 Part A of this exclusion is a care, custody, or control exclusion that applies only to personal property. (Real property is subject to other, less strict exclusions.) It applies to personal property in the care, custody, or control of any insured, not just the named insured. This wording can be seen as an omnibus term, denying coverage to any and all insureds regardless of which insured or how many insureds have custody or control of the property in question at the time of loss. The care, custody, or control exclusion does not eliminate the supplemental contractual coverage for contractual liability assumed under a sidetrack agreement.

 Part B, traditionally referred to as an alienated premises exclusion, excludes coverage for property damage to premises the named insured no longer uses. The exclusion does not apply if the premises were built by or on behalf of the named insured and were never occupied, rented, or held for rental by the named insured.

 Part C makes it clear that the named insured cannot rely upon its liability insurance to cover damage to its own or rented property, whether real property or personal property. Remember, however, that there is a supplemental incidental fire and explosion legal liability coverage and that this supplemental coverage can be modified to include other perils.

 Part D of this exclusion precludes property damage liability coverage for real or personal property that employees own, occupy, borrow, or rent. An employer's BOP cannot be expected to cover damage to an employee's rented residence. A Part II supplemental coverage provides incidental fire and explosion legal liability for premises rented to the named insured, but this protection does not extend to premises rented to or occupied by an employee. One of the business property supplemental coverages in Part I of the BOP covers employees' personal effects, but only when they are at the described premises.

 11. Professional Activities exclusion

 Analysis

 Although this professional liability exclusion is not specific as to what professions it has in mind, there are other factors that limit coverage. First, some of the business activities/business risk exclusions specifically exclude coverage for a list of specific treatment therapies such as massage parlors, tanning salons, and tattoo shops. Second, the BOP's liability coverage applies only to bodily injury, property damage, advertising injury, and personal injury. Giving professional advice or service—as an accountant, a lawyer, or an insurance agent might do—does not generally give rise to claims within the scope of these insuring agreements.

 Medical activities can lead to bodily injury claims, and Supplemental Coverage 8 provides incidental medical/professional liability coverage that applies to medical services, nursing services, drugs, or related supplies provided by no charge by an insured who is not in the business of providing medical services.

 12. Silica Exclusion

 Analysis

 The two final exclusions that relate to all of Part II both deal with health risks in somewhat comparable ways.

 Although stated broadly enough to encompass property damage, advertising injury, and personal injury claims, the silica exclusion is directed at bodily injury claims for silicosis, a respiratory disease caused by inhaling silica dust. People who work in jobs where they are exposed to silica dust, such as mining, glass manufacturing, or stone cutting, are at risk.

 The virus contamination exclusion deals with pathological agents, not infected computers. The exclusion does not mention advertising injury or personal injury—there probably is little if any exposure there—but does specifically exclude medical payments coverage related to the actual, alleged, or threatened exposure at your premises to any virus or other pathological agent that is known to cause illness or disease in humans, animals, birds, or other creatures.

 One notable example of such an exposure involved Philadelphia's Bellevue-Stratford Hotel that gained worldwide notoriety in July 1976, when it hosted a statewide convention of the American Legion. Soon after, a pneumonia-like disease, which became known as Legionnaires Disease, killed thirty-four people and sickened 221 more who had been in the hotel. Not until 1977 did doctors discover the causative organism—a bacterium that had been spread throughout the hotel by the hotel's air conditioning systems.

 Both the silica exclusion and the virus contamination exclusion exclude cleanup and testing costs and similar expenses. An exception to the virus contamination exclusion preserves coverage for bodily injury arising out of contaminated food or other products intended for human (not animal) consumption.

 The Following Additional Exclusions Apply Only to Coverage F

 Analysis

 These exclusions apply only to the medical payments to others coverage. First, med pay coverage does not apply to products or completed operations claims.

 Second, med pay to others coverage does not apply to any person qualifying as an insured. This does not preclude coverage for volunteers, who do not qualify as insureds. However, the exclusion applies with respect to persons hired to work for the insured or a tenant of the insured.

 There is no coverage for any person if benefits are payable or must be provided under workers compensation or some other law. For example, if an employee of another company is delivering something to the insured business and is injured, the other employer's workers compensation should respond as long as the benefits are payable or must be provided.

 There is no coverage for any person injured while taking part in an athletic activity. Passive spectators injured, for example, by a foul baseball or an errant golf ball would presumably still be eligible for med pay benefits.

 The insurer will not pay for medical services that the named insured or its employees provide. This does not preclude coverage for ambulance services or other first aid services provided by another party.

 The final exclusion reiterates a provision in the insuring agreement which says, in effect, that the BOP's med pay coverage is not broader than its bodily injury liability coverage. If a liability claim for some injury would not be covered, medical expenses involving that injury are not covered either. This reinforces the fact that a primary purpose of med pay is to keep small claims from turning into large liability claims by providing a mechanism to pay for the small claims without arguing over liability or fault.

 Part II D – Special Liability Conditions

 1.Duties of Insureds – What to Do in Case of Claim, Injury, Occurrence, or Suit

 Analysis

 A series of conditions apply to only the BOP's liability coverages. Although many conditions deal with routine matters, they should not be overlooked, because failure to comply with them may relieve the insurer of its obligations under the policy.

 The first set of conditions lists the usual duties that must be fulfilled in the event a claim, injury, occurrence, or suit takes place. These are duties of not only the named insured but also other insureds and other coverage beneficiaries. The first five duties apply to all coverages; the final item applies only to med pay coverage beneficiaries who must, if the insurer so requires, provide written proof of a claim, submit to physical examinations at the insurer's expense, and authorize the insurer to obtain medical records.

 The first condition in this set requires the named insured, other insureds, and other coverage beneficiaries to "immediately" notify the insurer of a claim or an incident that might result in a claim. The condition also states that the notice should include "all necessary information" such as, but not limited to, the time, place, and circumstances of the incident and the names and addresses of injured persons and witnesses. There might be a conflict between the demand for immediate notice and the requirement that the notice include all necessary information such as the names and addresses of witnesses. "Immediately" is meant to convey upon the insured the importance of involving the insurer quickly in the event of a claim, a lawsuit, or even of an occurrence (such as a slip and fall) that could lead to a claim or lawsuit. In determining whether this condition has been met, most courts will use common sense. Has the insurer received information about a claim or lawsuit early enough to adequately investigate the claim, to see if the coverage form applies, to set up a proper reserve, and, if necessary, to mount a proper defense against the claim or lawsuit? Alternatively, has the insurer's position been prejudiced or damaged by any delay to the degree that it cannot even investigate the claim or present a proper defense to a lawsuit in court?

 If an actual claim or suit is brought against any insured, all relevant documents should immediately be sent to the insurer. Once again, the intent is to convey a sense of urgency. The insurer cannot respond to any claims-related documents it does not know about.

 Another important part of this condition states that no insureds or coverage beneficiaries will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expenses, other than for first aid, without the consent of the insurer. Insureds should be made aware of this condition since a violation of the provisions could prejudice the ability of the insurer to investigate the claim and mount a proper defense; this prejudice could lead the insurer to claim a breach of contract and then, try to make the insurance contract voidable. It makes sense for the insured to not voluntarily make any payments or assume any obligations in the event of an occurrence. After all, the insurer has agreed with the insured to "pay for the insured's benefit…those sums that the insured becomes legally liable to pay as damages" and to "defend suits against insureds seeking damages." The insured has paid a premium for these contractual agreements and to ignore them is simply not good risk management.

 2.Limits of Liability

 Analysis

 The limits of liability provision begins by stating that the insurer's maximum total liability applies regardless of the number of insureds, claims, suits, or claimants involved. It then reinforces prior provisions in the insuring agreement and the defense supplemental coverage by stating that the insurer is not obligated to "make payments" when the applicable limit has been used up in payment of a judgment or settlements. Payments, in this context, include both damages (which are capped by policy limits) and defense costs, which need no longer be made when policy limits have been paid (not just offered, but paid).

 The limits of liability condition next describes two types of limits: general and aggregate. The three general liability limits shown in the declarations or the declarations supplement apply to (1) each occurrence (liability or med pay coverage), (2) each person in an accident (med pay coverage), and each claimant (advertising injury/personal injury).

 The aggregate limits in the Declarations cap the insurer's liability for all damages or medical expenses occurring during a certain time period—normally twelve months. If an aggregate/total limit for general coverages" is listed in the Declarations, it caps the insurer's maximum obligation for liability, med pay, and personal injury/advertising injury claims that do not fall within the products/completed operations hazard, as defined. A separate aggregate/total limit caps the insurer's liability for products/completed operations claims. Although it is a separate limit, the dollar amount is the same as the amount of coverage under the each occurrence limit."

 Like most other policies providing general liability coverage, the BOP contains no distinct products and completed operations insuring agreement. The liability coverage, Coverage E, applies to claims based on the named insured's premises, products, operations in progress, and completed operations. The main effect of the distinction between products/completed operations claims and other claims lies in the application of aggregate limits. The products/completed operations hazard's definition will be examined more closely later in this analysis.

 As stated above, the aggregate limits apply to all claims within a specific time period. Most policies are one-year policies, and the relevant time period is normally twelve months. The "application of limits" provision explains what happens with policies that do not have a twelve-month policy term.

 3.Other Conditions

 Analysis

 Apart from the limits of insurance and any rights and duties specifically assigned to the policy's first named insured, the insurance is to apply as if each named insured (if there are more than one) were the only named insured, and separately to each insured against whom claim is made or suit is brought. This condition should be read with an eye toward the Part II Glossary's definition of "insured" which defines just who is the insured to whom the insurance separately applies. In Part I of the BOP, "insured" means the named insured, but in Part II spouses, partners, directors and officers, stockholders, employees, real estate managers, and newly acquired entities, may also be insureds, depending on the nature of the organization and other factors.

 The bankruptcy condition states that bankruptcy of the insured will not relieve the insurance company of its obligations under the policy. Bankruptcy or insolvency of the insurer is a different issue not addressed in the policy.

 An antistacking provision applies if the insurer that issued the BOP also has another policy issued to the named insured that provides primary insurance on the same event. It limits the insurer's liability to the highest limit of any applicable primary policy. If another insurer's policy also provides primary insurance applicable to the loss, the "other insurance" provision in the policy's common conditions section will provide for contribution by equal shares or proration based on limits.

 Common Exclusions – Parts I and II

 The following includes similar type Exclusions applicable to Parts I and II. These Common Exclusions apply in addition to those shown under the separate Coverage Parts. We provide no insurance for any damages, expenses, liability, or loss directly or indirectly, wholly or partially, aggravated by, consisting of, or resulting from the following – even if loss otherwise covered contributes to such concurrently or in any sequence.

 Analysis

 The common exclusions in this section of the form apply to both Parts I and II of the BOP. The Part I and Part II exclusions are listed separately, but both sets deal with similar matters.

 The preamble to this set of exclusions is extremely broad: "We provide no insurance for any damages, expenses, liability, or loss directly or indirectly, wholly or partially, aggravated by, consisting of, or resulting from the following – even if loss otherwise covered contributes to such concurrently or in any sequence." (Emphasis added.) Taken literally, the sweeping nature of this absolute exclusion could preclude coverage for events that are even remotely related to earth movement, war, governmental action, or nuclear events. For example, a slip-and-fall incident in the parking lot of a factory built to manufacture military uniforms might be said to indirectly result from war.

 Property coverage against earth movement, including earthquakes and volcanic activity, is broadly excluded. With respect to this peril, ensuing fire, explosion, or theft (if theft is a covered peril) is, however, covered. Volcanic eruption (including damage by shock waves, ash, or lava flow) is not excluded; it is a covered peril in all BOPs, as discussed earlier. The parallel liability exclusion, in a word, simply excludes "earthquake."

 Like virtually all insurance policies, this one broadly excludes all property and liability coverage for war. Terrorism is not specifically addressed. However, the "war exclusion" goes on to exclude coverage for actual or expected "invasion, insurrection, rebellion, revolution, or seizure of power" and defenses against same. Disputes could arise, especially in light of the broad preamble to these exclusions, as to whether this exclusion negates or limits any of the property coverage that might otherwise be provided under the riot or civil commotion peril that "includes, but is not limited to" striking employees' acts and looting during a riot or civil commotion.

 Whether or not it is war-related, damage or destruction of property that is ordered by civil authorities is also excluded; however, damage intentionally ordered to prevent the spread of fire (such as setting a backfire or clearing an open area) will be covered.

 Both the property and liability exclusions preclude coverage for a loss resulting from any insured's knowing violation of a penal law or ordinance. A penal law involves punishment, penalties, or imprisonment. Statutory fines are specifically excluded and, of course, the insurance company will not go to prison.

 Subtle but significant provisions in this set of exclusions preclude both property and liability coverage for exemplary or punitive damages. Punitive damages are those awards rendered by courts that are over and above the amount required by the injured person as compensation. These damages are imposed when the defendant's conduct is intentional, malicious, or consists of action or inaction that is so grossly willful, or which indicates such a conscious disregard of others, that a jury could conclude that the conduct takes on a criminal character, although it may not be punishable as an offense against the state. Jurisdictions have adopted opposing opinions regarding the insurability of punitive damages. Some states deem it against public policy to allow the insuring of punitive damages. The reasoning is that the purpose of punitive damages awards is punishment and deterrence. Allowing a wrongdoer to avoid personal payment is not in the interest of the community as a whole. Other states have taken a contractual approach to the problem. In these states, courts have held that the state's public policy is not offended by allowing payment of punitive damages under a liability policy. Some liability policies cover punitive damages awards where permitted by law; the MSO BOP, however, does not.

 Like virtually all insurance policies, this one broadly excludes property and liability coverage for nuclear incidents, but it preserves property coverage for direct fire damage that ensues from a nuclear incident.

 Common Glossary – Parts I and II

 Certain words and phrases used in this policy are defined for the purposes of this insurance contract. These are described as follows.

 Analysis

 Throughout the MSO BOP, words and phrases that the policy defines appear in italics. However, the definitions are not all found in the same place. Some words and phrases are defined in a small but captioned glossary within the provision where they are used. The BOP's common glossary defines certain words and phrases used throughout the policy.

 A first set of definitions applies to both Part I and Part II. This set is followed by a set of definitions used in Part I and another set of definitions used in Part II. When reading any definition, it is important to look at the right set of definitions (Part I or Part II). As mentioned in the following analysis, some important words, such as "insured," are defined differently in Part I and Part II.

 Parts I and II

 Analysis

 There is a loose relationship among the first three defined terms in that they all deal with harmful substances or organisms. The fungi definition is most relevant with respect to property or liability insurance claims involving mold. In the context of this definition, "rust" refers to a fungus that injures plants, not to the oxidation of iron. The fungi definition includes rot and decay organisms, a term elaborated upon in a separate definition. Mushrooms are also fungi, but they are not encompassed within this definition that specifically excludes edible fungi.

 The definition of "pollutants" is very broad in its scope, allowing an insurer to include just about anything under the terms of the definition.

 We/Us/Our

 Analysis

 The words "we," "us," and "our" refer to the company providing this insurance.

 The definition of you/your/yourself seems simple enough. The term obviously includes parties named in the declarations. However, it also includes unnamed newly acquired business organizations that are covered subject to the policy's terms.

 The first named insured (a phrase specifically defined within the you/your/yourself definition) is the one whose name appears first in the declarations. Because the first named insured has some duties and rights that other insureds do not have, it is important to name the correct person or entity first when preparing the declarations.

 In Part I of the BOP, "insured" and "you" both mean the named insured. With respect to Part II, it is important to remember the distinction between "you" (the named insured) and phrases such as "the insured" or "any insured." For example, when a policy provision applies to "you," that means that only the named insured; it does not apply to every person or organization that fits within Part II's "insured" definition.

 Part I

 Analysis

 Italicized words and phrases used in Part I and not defined elsewhere in the BOP have the meanings defined in this glossary.

 Notice that "insured" is defined here as the person or entity named in the declarations. This definition is actually narrower than the definition of "you," which can include newly acquired entities. In Part II of the BOP, "insured" has a much broader meaning.

 Many of the defined terms are discussed elsewhere in this analysis. Others, though they are important, contain no surprises and require no elaboration.

 PART II

 Analysis

 The definition of automobile is quite broad, relating to any land motor vehicle, trailer, or semitrailer designed for (but not necessarily being used) on public roads. Mopeds and motorcycles, three-wheelers, motor homes, cars, trucks, and tractor-trailer combinations—and their equipment—can all come under the term "automobile." As if that definition were not broad enough, the policy adds that any other land vehicle subject to a motor vehicle insurance law in its home state is also an automobile. The purpose of these provisions is to distinguish between automobiles and mobile equipment. Mobile equipment is defined in a glossary within the incidental mobile equipment supplemental liability coverage.

 Bodily Injury

 Analysis

 Bodily injury, for purposes of this policy, does not exist unless it has been caused by a covered occurrence. Although occurrence includes repeated exposure to harmful conditions, it does not include self-inflicted injuries or any other injury that is not of an accidental nature.

 Employee

 Analysis

 A "temporary worker" is not an "employee," but a "leased worker" is. These terms are all separately defined.

 Part II of this policy defines "insured" differently than Part I. In Part I, "insured" means only the named insured. In Part II, parties other than the named insured may also be insureds, depending on whether the named insured is an individual; a partnership, joint venture, or limited liability company; or an "other organization."

 If the named insured is an individual operating as a sole proprietor, the named insured's spouse is also an "insured" with respect to the business.

 If the named insured is a partnership, joint venture, or limited liability company, then that entity, its partners or members, and their spouses are all "insureds" with respect to the entity's conduct. Even if newly acquired or formed, a partnership, joint venture, or limited liability policy is not an insured unless it is named in the policy.

 If the named insured is a corporation or some other organization, "insureds" include executive officers (as defined in the organization's governing documents) or directors performing their duties as such; stockholders (but only with respect to their liability as such); employees—including leased workers, as defined, but not temporary workers; real estate managers; and—for the first 120 days—a newly acquired or formed business entity that is not otherwise insured in which the named insured has a majority interest.

 Questions sometimes arise as to whether an executive officer should be considered an employee of the named insured company. Although employee and executive officer are separately defined terms, the "employees (other than executive officers)" phrasing makes it clear that executive officers are considered employees. At least one phrase elsewhere in the policy refers to "employee (including any executive officer)." In short, unless otherwise indicated, any Part II reference to employees also applies to executive officers.

 A temporary worker is not an employee, but a leased worker is. Both terms are defined in the glossary.

 Loading/Unloading

 Analysis

 The main point of the definition of "loading or unloading" in its use with the automobiles/aircraft/watercraft exclusion is that there is no coverage under the BOP for injury or damage arising out of the transporting of property. Complementary wording in a business auto policy makes it relatively clear, with respect to loading and unloading, that business auto coverage picks up where general liability coverage leaves off, and vice versa.

 Occurrence

 Analysis

 Even though the phrase is not mentioned here, this definition makes the point that liability coverage under a BOP is meant for bodily injury or property damage that is not expected nor intended by the insured; accidental (that is, unforeseen and unplanned) events or circumstances are the key to coverage for bodily injury or property damage for which the insured is legally liable.

 Although bodily injury and property damage usually results immediately upon contact with someone or something, the phrase "continuous or repeated exposure" eliminates the necessity of proving the exact moment at which the damage is sustained (although the prior knowledge provisions in Coverage E do seek to limit the occurrence to events happening during the policy period).

 The definition of occurrence cannot be interpreted as limiting coverage to a single event. For example, a single accident where a few drops of paint might splatter on an unintended object could result in barely perceptible damage, but repetition of the same accident on the same object could result in considerable damage over time. Another example is where an insured repeatedly (but unintentionally) strikes a neighbor's fence abutting the driveway with a lawnmower. Each time the fence is lightly hit, it weakens until finally it falls without an apparent single occurrence. Such damage is included within the scope of the "continuous or repeated exposure" wording.

 Products/Completed Operations Hazard

 Analysis

 This definition hinges in part on the definitions of "your product" and "your work," which are analyzed later. The products-completions operation hazard makes a distinction that is used primarily to clarify the extent of two exclusions and an aggregate limit.

 Exclusion 3.D.2., which relates to property damage to any part of property that must be fixed due to the named insured's faulty workmanship, states that the exclusion does not apply to property damage included in the products-completed operations hazard. On the other hand, a medical payments exclusion makes it clear that med pay coverage does not apply to bodily injury or property damage included within the products/completed operations hazard. The effect, in both cases, is that these may qualify as liability claims to which products/completed operations coverage applies. However, the definition of products-completed operations hazard must be checked to see if the exclusions are relevant.

 Products-completed operations has its own aggregate limit under the BOP form that is separate from the general aggregate limit. The aggregate limit is the most that the insurer will pay for damages because of injury or damage included in the products-completed operations hazard; again, the definition has to be consulted to see if the amount to be paid goes toward the products-completed operations aggregate or the general aggregate limit. This may appear to be a rather mundane subject, and it is largely irrelevant to small claims. However, the matter becomes very important when an insured's losses are coming close to maxing out a particular aggregate.

 The definition of products-completed operations hazard does not include injury or damage arising out of the transportation of property since that is the domain of an auto policy. There is an exception, however, for conditions resulting from the loading or unloading of a vehicle. As an example, suppose the insured negligently loads a pile of steel on a nonowned truck and the load then falls off during the transportation of the steel, causing injury or damage. The definition makes it clear that this is a products-completed operations hazard. Any claim against the insured would be handled under the insured's BOP, not the insured's auto form. This definition, in effect, gives the insured something akin to nonowned auto liability coverage, under certain conditions.

 If "BU 50 06″ is shown in the Declarations, the products/completed operations hazard applies only to injury or damage occurring away from the named insured's premises. This "endorsement" might be triggered for an ice cream parlor or other business where the insured's product is normally consumed or used on the premises.

 Property Damage

 Analysis

 This definition makes it clear that property damage includes loss of use, even in cases where tangible property has not been injured. It also clarifies when loss of use occurs (whether the property is physically injured or not) so as to clear up any questions pertaining to the liability coverage requirement that the damage must occur during the policy period.

 Temporary Worker

 Analysis

 A temporary worker is neither an employee nor a leased worker. The "temporary worker" phrase is used only within the glossary, but it is important when answering questions such as, "does employee dishonesty coverage apply to a temporary worker"?

 Your Premises

 Analysis

 Part II of the BOP begins by stating that "This insurance applies to liability arising out of your premises," and that phrase is also used throughout Part II. One might expect that the term applies to a location listed in the Declarations and, in fact, it does. More subtle is the fact that "your premises" also include unlisted premises that the named insured owns, rents, or occupies, including premises that the named insured has abandoned, sold, or transferred.

 Your Products

 Analysis

 Although there is a distinction between products and completed operations, the two exposures generally go hand-in-hand.

 The first point to make is that "your products" does not apply to real property. The second point is that "your product" is stated to include goods or products manufactured, sold, handled, distributed, or disposed of by "persons or organizations whose business or assets you have acquired." While such coverage might have been inferred from the BOP's automatic coverage for newly acquired organizations, it is perfectly clear under this definition.

 It should also be noted that the definition of "your product" includes warranties, warnings, and instructions, including failure to provide warnings or instructions. The "your work" definition contains a similar statement. This makes it clear that claims arising out of the failure to provide adequate warnings or instructions concerning a product or service should be handled under the products-completed operations hazard.

 Vending machines at other property are not the named insured's products. This does not mean that vending machine-related losses are not covered. It simply means that any liability coverage that does apply falls under the general aggregate limit, not the products/completed operations aggregate.

 Common Conditions – Parts I and II

 The following are Conditions that apply to both Parts I and II. These Common Conditions apply in addition to those shown under the separate Coverage Parts.

 Analysis

 If the insured wishes to sue the insurer with respect to its property coverages, the insured must comply with conditions expressed elsewhere in the policy or in a state-specific endorsement. Typically, the insured must first be in full compliance with the terms of the policy, and the action must be brought within a specified time period, such as one or two years, following the loss or damage.

 With respect to the liability coverages, no person or organization has a right to bring an action against the insurer unless or until all policy conditions have been fully complied with. The insured, for example, cannot sue the insurer for coverage under the policy unless it has duly notified the insurer of the occurrence, forwarded suit papers, authorized the insurer to obtain records, and performed any other duties required of the insured. The condition further states that action may not be brought against the insurer "until the amount of the insured's obligation (payable under this policy) has been determined…." This might look like a typographical error; after all, it is generally the insurer's obligation that is at stake. The point here is that the insurer's obligation is to pay damages for the benefit of the insured. Once the amount of a judgment or settlement against the insured has been established, the amount of the insurer's obligation is determined.

 2.Assignment of Your Interest

 Analysis

 The insurer's written consent is required for any transfer to another person of the insured's rights and duties under the policy. The single exception to this requirement of written consent is transfer to a legal representative upon the death of an individual named insured. In such cases, the legal representative exercises the deceased insured's rights and duties while acting as legal representative. Until a legal representative is appointed, rights and duties of the deceased insured with respect to the deceased insured's property pass to anyone having "proper temporary custody" of that property.

 3.Cancellation/Termination

 Analysis

 Either the insurer or the insured may cancel the policy. Dealings between insurer and insured with respect to cancellation are to be carried out by "the first named insured shown in the Declarations" when more than one insured is named in the policy. It is the first named insured—not any insured—who must mail or deliver notice of cancellation to the insurer. Premium refund is also made to the first named insured.

 The policy automatically terminates if the named insured purchases a replacement policy from another insurer and does not pay the premium on this policy when it becomes due. If the business or premises are sold, coverage automatically terminates at the time title is transferred, unless the named insured retains an insurable interest in the property.

 Whether the insured or the insurer cancels the policy, return premium is calculated on a pro rata basis, but the insurer may retain a minimum earned premium.

 Insurers' cancellation, termination, and nonrenewal rights vary by state. Unless otherwise described in this policy, the insurer's rights are described in a state-specific endorsement.

 4.Concealment/Misrepresentation/Fraud This policy is void if, either before or after a loss or occurrence or claim, any insured misrepresents or knowingly conceals any material fact or circumstance, commits fraud, or swears falsely relating to any aspect of this insurance (including the information we relied upon in issuing this contract). However, if we specifically choose not to declare this policy void, we do not provide insurance under this policy to, or for the benefit of, any such insureds.

 Analysis

 This provision voids coverage should the named insured commit a fraudulent act or if the named insured or any other insured commits fraud or intentionally conceals or misrepresents a material fact about the coverage, the covered property, a claim, the named insured's interest in the property, or any other aspect of this insurance. Note that the concealment, misrepresentation, or fraud condition works to void coverage whether the fraud, concealment, or misrepresentation occurs before or after a loss.

 The language does not state that the act of any insured voids the policy only as to that individual. Conceivably, therefore, the act of any insured could void the policy as to all other insureds, including the named insured. However, the insurer may choose to honor the contract with respect to insureds other than the one who was personally guilty of concealment, misrepresentation, or fraud. In some jurisdictions or situations, the insurer may be required to provide coverage for a battered spouse or other "innocent coinsured."

 5.Conformity with Statute

 Analysis

 Relevant statutes supersede policy provisions if there is any conflict.

 6.Coverage Territory

 Analysis

 For property to be covered under the BOP, loss or damage must occur within the coverage territory: the fifty United States (including its territories and possessions), Washington D. C., Canada, and Puerto Rico. The U.S. territories and possessions include the Northern Mariana Islands, Guam, American Samoa, Wake Island, Baker Island, Johnson Atoll, Navassa Island, U.S. Virgin Islands, Midway Island, Howland Island, Jarvis Island, Kingman Reef, and Palmyra Island.

 The territory where liability coverage applies is somewhat broader. It includes bodily injury or property damage while in transit to or from the described territory. If an insured accidentally injures a fellow passenger on a commercial airplane traveling from the U.S. to London, coverage would apply regardless of the plane's location.

 An important point here is that the covered territory includes all parts of the world for bodily injury or property damage arising out of products made or sold by the named insured in the territory described in paragraph A. of the definition (basically, the United States and Canada). For example, a product made by the named insured in the United States but sold abroad would be covered for liability purposes, as long as the insured's liability was determined in a suit or agreement in the territory described in paragraph A. If an insured did not make the product, but sold it in the United States and later it was taken abroad and caused injury, the resulting liability would likewise be covered. There would not be coverage if the named insured neither made nor sold the product in (essentially) the United States or Canada.

 The worldwide products coverage extension does not apply as well to completed operations. Say, for example, that the insured's business is aircraft instrument repair. If faulty repair of an aircraft results in injury or damage to others while the aircraft is outside the coverage territory, coverage is likely to be denied.

 Note also that the international or worldwide coverages apply only to bodily injury and property damage; this implicitly excludes advertising injury and personal injury offenses that might occur through the Internet or other electronic communication media.

 7.Examination/Changes

 Analysis

 This provision underscores the point that one should not assume an insurance provision's contents based on its title. Based on experience with other insurance policies' "changes" provisions, one might expect from the title of this provision that it explains that policy changes may be made only by the insurer and then only in writing. Not so; that issue is addressed in Condition 14. Condition 7 deals with the insurer's right to conduct inspections and to examine the insured's books and records.

 This condition gives the insurer the right (but does not impose any obligation) to conduct inspections, to make surveys, and to make recommendations. The nature of these recommendations is not specified, but recommendations made to the insured typically deal with safety or compliance issues. This condition does not place the insurer (or any rating, advisory, or similar organization making inspections under the policy) in the position of warranting that conditions connected with the insured's operations are safe or healthful or that the insured is in compliance with legal requirements that may pertain to those operations.

 This condition also gives the insurer the right to audit books and records of the insured relating to the policy. The examination or audit may be made during the policy period or any time within three years after the policy period ends. The insurer may make premium adjustments based on the inspection and audit.

 This condition is linked to the Premiums condition that appears later in the form's alphabetical sequence. The Premiums condition allows the insurer to charge a provisional initial premium with a final premium, retroactive to policy inception, based on a rating inspection or investigation of the insured premises. MSO conducts detailed property inspections on every nonresidential risk to develop specific rates for the building and its contents. The specific fire rate reflects the unique circumstances surrounding the individual risk, including building construction, operational hazards and distance to the fire department and hydrants. In addition to the schedule rate, MSO develops an "idealized" rate that would apply if all correctable hazards were eliminated. For insureds that may not want or are not able to address all recommendations, MSO will develop tentative rates that show what the rate will be if some of the recommendations are complied with.

 8.Insurance under More Than One Coverage In the event that more than one coverage under this policy covers the same loss we are liable only for the amount of our obligation, up to our limit of liability, not exceeding the amount of loss.

 Analysis

 This anti-stacking provision prevents the insured from collecting more than once for the same loss.

 9.Liberalization

 Analysis

 Insurers periodically introduce new policy editions that contain some changes. Any broadening of coverage produced by a revision of the coverage form that is introduced during the policy period or in the forty-five days preceding its inception will immediately apply to the insured's unrevised policy. However, the liberalization clause does not apply if the revision that broadens coverage also includes coverage restrictions or requires any extra premium. This provision is standard in many insurance forms.

 10.Other Insurance Part I

 Analysis

 The condition does not state that the insured cannot have other property insurance. Indeed, many insureds with commercial property to insure will carry more than one policy, or more than one insurance company will insure a specific risk. The other insurance condition recognizes this but reduces all situations in which other insurance might apply to two: (1) the existence of other insurance written on any other basis than this policy, in which case the policy responds as excess insurance; and (2) the existence of other insurance written with the same provisions as this policy, in which case the policy and others are primary insurers. When two or more other primary insurers provide for contributions by equal shares, then this policy contributes on that basis. Otherwise, this policy responds pro rata by limits or responds pro rata by limits.

 If this policy covers a property loss that another policy would also cover except that the other policy does not cover that peril, then the loss will be apportioned the same as though the other policy did cover that cause of loss.

 As regards the liability coverage under Part II of the BOP, the condition also defines two broad situations: excess, and primary. When the BOP is excess over another policy, the insurer has a right, but not an obligation to become involved in the defense. If other insurance is also primary, the BOP's insurer will pay on either a contribution-by-equal-shares basis or a pro rata-by-limits basis.

 11.Premiums

 Analysis

 The first named insured (the party whose name appears first in the Declarations) is responsible for making all premium payments when due and receiving any return premiums.

 12.Recovery from Others

 Analysis

 This is a subrogation provision. The most important point here is that, if the insured waives it rights of recovery against a third party after a loss has occurred, the insurer may not be obligated to pay a claim that might otherwise be covered.

 This condition defines the insurer's subrogation rights under the policy, which arise when the insurer makes a payment to or for "any insured (or others)." The reference to others preserves the insurer's subrogation rights with respect to third parties who might recover for a loss under the policy—a mortgagee or bailor, for instance. It clarifies that the insurer takes over the subrogation rights of not only the named insured, but also of any third-party claimant, but only to the extent of any payment the insurer has made to that third party.

 The insured's right to waive possible recovery against third parties is retained if the waiver is made before a loss. The insured is also permitted to waive its rights of recovery after a loss when the waiver is given to another insured or to a business owned or controlled by the insured or one owning or controlling the insured.

 13. Time of Inception Part I

 Analysis

 Coverage basically begins at midnight, but insurers refer instead to 12:01 A.M. This might seem like an unusual time for a policy period to begin, but it avoids ambiguity. "12:00 A.M." might arguably be interpreted to mean either noon or midnight, and "midnight" is ambiguous as to whether it is the moment in time that begins or ends a particular calendar date.

 Unless otherwise stated, a covered property loss must take place during the policy period. This is substantially different from the wording in ISO's commercial property conditions which covers loss or damage commencing during the policy period. Suppose a fire starts burning at 11:00 p.m. and the policy period ends at 12:01 a.m., before the fire is extinguished. ISO's "commencing" language makes it clear that fire damage taking place after 12:01 a.m. is still covered by the expiring policy. A literal interpretation of the MSO language holds that the policy in force when the fire started covers only the direct damage that takes place up until the moment when the policy expires. As regards Coverage C (loss of income), a provision states that the period of indemnity is not limited by expiration of the policy.

 As regards Part II, this condition simply clarifies the BOP's inception and expiration dates. What must happen when in order to trigger coverage is dealt with in the relevant insuring agreements.

 14.Waiver or Change of Provisions

 Analysis

 This condition stipulates that any changes in the terms of the policy can be made only by an endorsement signed by the insurer's agent. Requests for changes on the insured's part must be made by the first named insured.

 Endorsements Preprinted in the MSO Businessowners Policy (BU 04 01)

 Several commonly used endorsements are preprinted in the body of the policy, thereby eliminating the need for separate attachments; each of these endorsements can be triggered simply by listing the endorsement number in the Declarations. MSO refers to these options as "trigger endorsements," but the form itself does not refer to these options as "endorsements." A list of the form's trigger endorsements follows

 Number Description

BU 50 01Permits Coverage D when Expanded Coverage not provided

BU 50 02Deletes Water Sewer Backup Exclusion

BU 50 03 Limits Water Sewer Backup

BU 50 04Deletes Employer's Nonowned Auto Supplemental Coverage

BU 50 05Extends Incidental Alcoholic Beverage Coverage

BU 50 06Limits Products Coverage to off-premises

BU 50 08Extends Fire Legal to "all causes of loss"

BU 50 10Deletes Business Income from Coverage C

BU 50 12 Deletes Consequent Loss Coverage