With an effective date of 4/1/2020, ISO has implemented a new Micro-Businessowners Program. While the filing was introduced as a multistate filing, it has not at this time been filed in California, Florida, Georgia or Hawaii. This new program was added as a new section within Division Ten of the ISO Commercial Lines Manual, which contains the rules, loss costs and forms to be used with this new program.
The new Micro-Businessowners Program (hereinafter referred to as Micro-BOP) is designed for micro-businesses, so named based on the size eligibility of zero to four employees, including the owner. The program resides within ISO's existing Businessowners program, but has its own policy Declarations, coverage form, and endorsements. The program in essence provides named perils property coverage for the personal items used in an insured's business; and liability coverage for damage to property of others or injury to others for which the insured is legally responsible to pay, as well as medical expense coverage. The main coverage form is BP 00 04, Micro-Businessowners Coverage Form. The Micro-Businessowners Policy Declarations is form BP DS 20.
Topics Covered:
Eligibility
The eligibility rules for the Micro-BOP includes small operations of no more than four employees (including the owner), with gross annual sales of $500,000 or less, that are involved in Artisan Manufacturing Retail Sales, Direct Retail Sales, Online Retail Sales and Service. Risks that operate out of a commercial space that is either owned or leased by the insured for a period of over ninety consecutive days are not eligible for the program. This is important to make note of; any permanent location in a commercial space is not eligible; this is for a temporary location for a limited period of time, less than ninety days. Someone setting up at the fairgrounds during the fair, for example. However, this does not apply to a shared space in a single location occupied by two or more businesses with no permanent walls to separate the businesses. Many artisans will work together and share a space; you may have a vendor or specialty items sharing space with someone selling hand-knit items. Also ineligible are operations that rent or lease equipment to others, sell alcohol, or any other operation not specifically listed as eligible.
Artisan Manufacturing Retail Sales include businesses that sell eligible craft or food products. The food products must be prepared or manufactured in either a commercially certified kitchen, cottage food kitchen, or equivalent in-home kitchen in compliance with state and local regulations. A cottage food kitchen is one where the cook produces food products in his home kitchen and sells them directly to consumers. It cannot operate as a retail food store, food service establishment or wholesale food manufacturer. Someone baking cookies at home and selling them through online sites or word of mouth, for example, is a cottage food kitchen. A commercially certified kitchen must be inspected and licensed based on local health department regulations. The products must be sold by direct retail sales and/or online retail sales, with no more than 10 percent of gross sales derived from other Micro-BOP eligible operations. Artisan Manufacturing Retail Sales are those that fall within the following description and classification codes:
Baking – Class code 78407
Clothing and Accessories – Class code 78411
Gifts and Home Décor – Class code 78433
Jewelry – Class code 78446
Pet Supplies – Class code 78463
Specifically listed as ineligible operations for artisan manufacturing are manufacturing of personal care products such as shampoo, hair color, soap, perfume or other like items that are consumed or applied to the body.
Direct Retail Sales includes businesses selling products directly to customers that fall within the following descriptions and classification codes, and have no more than 10 percent of annual gross sales from other Micro-BOP eligible operations.
Art Dealers – Class code 78404
Clothing and Accessories – Class code 78412
Consignment Shops – Class code 78417
Cosmetics – Class code 78419
Gifts and Home Décor – Class code 78434
Grocery Specialties – Class code 78438
Jewelry – Class code 78444
Pet Supplies – Class code 78464
Snacks/Non-Alcoholic Drinks – Class code 78472
Online Retail Sales (not wholesale distribution) includes businesses selling products through online transactions that fall within the following descriptions and classification codes, and have no more than 10 percent of annual gross sales from other Micro-BOP eligible operations.
Clothing and Accessories – Class code 78413
Consignment Shops – Class code 78418
Cosmetics – Class code 78420
Gifts and Home Décor – Class code 78435
Grocery Specialties – Class code 78439
Jewelry – Class code 78445
Pet Supplies – Class code 78465
Service businesses eligible for the program are those that are listed as eligible service classifications such as artists, computer or data services, house sitting/cleaning, inspection services, auctioneers, to name a few. Refer to Micro-Businessowners Service Classifications. In addition to the class code eligibility, the service business must meet the same 10 percent threshold for annual gross sales from other eligible Micro-BOP operations; and also any food products must be prepared or manufactured in either a commercially certified kitchen, cottage food kitchen or equivalent in-home kitchen in accordance with state and local regulations.
Limits and Deductibles
The ISO Micro-BOP program contemplates a standard property deductible of $250 per occurrence, with an optional $500 deductible available. The property limit is $2,500 per occurrence unless a different limit is shown in the Declarations. An additional limit of insurance of $1,000 applies to Electronic Data Additional Coverage, unless a higher limit is shown in the Declarations for such coverage. The deductible will also apply to this coverage.
The liability coverages contemplate a basic limit of $300,000 per occurrence/$600,000 aggregate, with optional limits available up to $2,000,000/$4,000,000. The same aggregate limit options are available for the products/completed operations hazard. A per person medical expense limit of $5,000 applies, which may be increased to $10,000. The Damage to Premises Rented To You coverage (a/k/a tenant's fire liability coverage) contemplates a basic limit of $50,000, with options available up to $1,000,000.
Micro-Businessowners Coverage Form
The Micro-BOP coverage form BP 00 04 is largely based on the current ISO BOP form BP 00 03. Therefore, this analysis will address only those features of BP 00 04 that pertain specifically to the Micro-BOP form.
Section 1 — Property
Since the Micro-BOP coverage is specifically designed to cover only the insured's business personal property, there is no building or structure coverage and this is so stated under Property Not Covered. Stock, while listed as property not covered, can be covered under a separate ISO Micro-Businessowners Retail endorsement which will be discussed later. Stock is defined as merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping. The business personal property limits available under the program are from $2,500 up to and including $25,000.
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Covered Property
Business Personal Property including:
a. Property you own that is used in your business;
b. Property of others that is in your care, custody or control, except as otherwise provided in Loss Payment Property Loss Condition Paragraph E.5.d.(2)(b); and
c. Leased personal property which you have a contractual responsibility to insure, unless otherwise provided for under Paragraph 1.b.
2. Property Not Covered
Covered Property does not include:
a. Buildings and structures, including:
(1) Completed additions;
(2) Fixtures, including outdoor fixtures;
(3) Permanently installed:
(a) Machinery; and
(b) Equipment;
(4) Personal property owned by you that is used to maintain or service buildings or structures, including:
(a) Fire extinguishing equipment;
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;
(5) Additions under construction, alterations and repairs to buildings or structures; and
(6) Materials, equipment, supplies and temporary structures used for making additions, alterations or repairs to buildings or structures;
b. "Stock";
c. Aircraft, automobiles, motortrucks and other vehicles subject to motor vehicle registration;
d. "Money" or "securities";
e. Contraband, or property in the course of illegal transportation or trade;
f. Watercraft (including motors, equipment and accessories);
g. Accounts, bills, food stamps, other evidences of debt, accounts receivable or "valuable papers and records";
h. "Computer(s)" which are permanently installed or designed to be permanently installed in any aircraft, watercraft, motortruck or other vehicle subject to motor vehicle registration;
i. "Electronic data", except as provided under Additional Coverages – Electronic Data; or
j, Animals.
Named Perils
Keep in mind that the coverage being provided is only for direct physical loss or damage to insured business personal property, and the coverage is specifically tailored to micro-business exposures. As such, the coverage is not restricted to a specific premises, and off-premises coverage is available at full limits.
3. Covered Causes Of Loss
a. Fire.
b. Lightning.
c. Explosion.
d. Windstorm or Hail, but not including:
(1) Frost or cold weather; or
(2) Ice (other than hail), snow or sleet, whether driven by wind or not.
e. Smoke, causing sudden and accidental loss or damage.
Analysis:
The above named perils are self-explanatory, however note that the windstorm or hail physical damage cannot be due to the elements associated with cold weather conditions. For example, an artisanal craftsman is selling jams at a winter festival. The temperature drops to an unusual low freezing point, ruining the jams. There is no coverage for this loss. Also, while smoke is covered if it causes sudden and accidental loss or damage, the term sudden and accidental is not a defined term under the policy. As such, these words will be determined based on their common meaning, as defined in a standard dictionary. Merriam-Webster defines them in part as such:
Sudden – happening or coming unexpectedly;
Accidental – occurring unexpectedly or by chance; happening without intent or through carelessness and often with unfortunate results.
For example, smoke from a fire that damages clothing by leaving an odor that cannot be removed.
f. Aircraft or vehicles, meaning only physical contact of an aircraft, a spacecraft, a selfpropelled missile, a vehicle or an object thrown up by a vehicle with the Covered Property.
This cause of loss includes loss or damage by objects falling from aircraft. We will not pay for loss or damage caused by or resulting from vehicles you own or which are operated in the course of your business.
Analysis:
ISO has described the type of loss or damage related to aircraft or vehicles in a specific manner. There must be physical contact to Covered Property by any of the specifically named items, including damage by falling objects from an aircraft. However, the coverage does not include any loss or damage from vehicles owned or operated in the course of the insured's business. For example, the insured is setting up to sell his products at a renaissance festival. If the sword swallower backs his vehicle into the insured's shelving holding his handmade wooden trinkets damaging the shelving and the trinkets, the damage to the shelving would be covered but because "stock" is not covered, there would be no coverage for the damaged trinkets. Also, if the insured backs into his own shelving that is not covered since it is his own vehicle that he used to transport the trinkets to the festival.
g. Riot or Civil Commotion, including:
(1) Acts of striking employees (including temporary or leased employees); and
(2) Looting occurring at the time and place of a riot or civil commotion.
h. Vandalism, meaning willful and malicious damage to, or destruction of, Covered Property.
We will not pay for loss or damage caused by or resulting from theft.
Analysis:
The coverage for riots or civil commotion is broad in that it covers acts of striking employees and looting. Therefore, if employees while on strike damage covered personal property, or if covered personal property is stolen during a civil commotion, these losses would be covered. A vandalism loss would also be covered except if it were caused by or a result of theft.
i. Sprinkler leakage, meaning leakage or discharge of any substance from an Automatic Sprinkler System, including collapse of a tank that is part of the system.
j. Sinkhole collapse, meaning loss or damage caused by the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite. This cause of loss does not include:
(1) The cost of filling sinkholes; or
(2) Sinking or collapse of land into manmade underground cavities.
k. Volcanic action, meaning direct loss or damage resulting from the eruption of a volcano when the loss or damage is caused by:
(1) Airborne volcanic blast or airborne shock waves;
(2) Ash, dust or particulate matter; or
(3) Lava flow.
All volcanic eruptions that occur within any 168-hour period will constitute a single occurrence. This cause of loss does not include the cost to remove ash, dust or particulate matter that does not cause direct physical loss of or damage to Covered Property.
l. Transportation, meaning loss or damage caused by:
(1) Collision, derailment or overturn of a vehicle;
(2) Stranding or sinking of vessels; and
(3) Collapse of bridges, culverts, piers, wharves or docks. This cause of loss applies only to Covered Property in the course of transit.
Analysis:
Items i. through k. are self-explanatory, but note that in the case of removal costs of ash, dust or particulate matter there must first be physical loss or damage to covered property from the ash, dust or particulate matter. The ash, dust or particulate matter must cause damage, and not just need to be removed from the site. Unlike most property coverages, the covered property is protected from almost any type of transportation damage, but in the case of bridge, culvert, pier, wharf or dock collapse the covered property must have been in the course of transit at time of loss.
Electronic Data Additional Coverage
There is only one additional coverage in the Micro-BOP that being an additional $1,000 limit of insurance, unless a higher limit is shown in the Declarations. The aggregate limit is the maximum payable in any one policy year, regardless of the number of occurrences of loss or damage or the number of computer systems involved. The maximum limit available is the same as the Micro-BOP business personal property limit, a maximum of $25,000, and the property deductible also applies to this coverage.
Analysis:
The coverage provides for the cost to replace or restore "electronic data" that has been destroyed or corrupted by a covered cause of loss. To the extent the data is not restored or replaced, the loss will be valued at the cost of replacement of the media on which the data was stored, with blank media of substantially identical type.
In addition, the covered causes of loss for business personal property includes a computer virus, as follows:
The Covered Causes of Loss applicable to Business Personal Property include a computer virus, harmful code or similar instruction introduced into or enacted on a computer system (including "electronic data") or a network to which it is connected, designed to damage or destroy any part of the system or disrupt its normal operation. But there is no coverage for loss or damage caused by or resulting from manipulation of a computer system (including "electronic data") by any employee, including a temporary or leased employee, or by an entity retained by you, or for you, to inspect, design, install, modify, maintain, repair or replace that system.
Property Exclusions
There are three separate categories of property exclusions — those that are broadly excluded on a direct or indirect basis and regardless of contributing factors; those types of exposures that may or may not be covered by another policy, such as an equipment breakdown policy; and miscellaneous exclusions that apply unless the excluded loss results in a covered cause of loss.
Analysis:
The broad exclusions are as follows, and unless otherwise stated the exclusions read the same as in the Businessowners Coverage Form, BP 00 03. If an exclusion that is on the current BOP form is not listed here, then that exclusion does not apply to the Micro-BOP form.
Earth Movement Governmental Action Nuclear Hazard Utility Services
- Utility services excludes the failure of power, communication, water or other utility service from any cause. Failure includes lack of capacity and reduction in supply. Loss or damage caused by power surge is also excluded if the surge would not have occurred but for an event causing power failure. For example, the insured has portable equipment used for glass blowing at various festivals. While at the fairgrounds, lightning struck the building he was in causing a power surge that damaged his equipment. That damage is excluded.
The exclusion contains an exception for loss or damage caused by a resulting covered cause of loss. If the power surge causes a fire to covered property, that loss is covered.
- Communication services include but are not limited to service relating to Internet access or access to any electronic, cellular or satellite network.
This exclusion does not apply to loss or damage to "computer(s)" and "electronic data".
War and Military Action Water Certain Computer-related Losses Fungi, Wet Rot or Dry Rot Virus or Bacteria
- The Fungi, Wet Rot or Dry Rot exclusion is the same as in BP 00 03 except that there is no Limited Coverage provision, as the Micro-BOP does not provide any additional coverage for fungi, wet rot or dry rot.
The next set of exclusions is listed below. Unless otherwise stated, the exclusions read the same as in the Businessowners Coverage Form, BP 00 03. If an exclusion that is on the current BOP form is not listed here, then that exclusion does not apply to the Micro-BOP form.
Electrical Apparatus Burst Pipes Water Discharge Steam Apparatus Mechanical Breakdown Errors or Omissions Installation, Testing, Repair Electrical Disturbance Continuous Or Repeated Seepage Or Leakage Of Water
A few of these exclusions need clarification:
- Burst Piping excludes the rupture or bursting of water pipes (other than Automatic Sprinkler Systems) unless caused by a Covered Cause of Loss.
- Water Discharge excludes leakage or discharge of water or steam from any part of a system or appliance containing such (other than an Automatic Sprinkler System). The exclusion does not apply if the leakage or discharge is due to damage from a covered cause of loss.
- Steam Apparatus excludes explosion of steam boilers-pipes-engines-turbines that are owned, leased or operated by the insured or under the insured's control. An exception exists if the explosion results in fire or combustion explosion, in which case the damage by the fire or combustion explosion will be covered. Unlike the BOP form, there is no exception for explosion of gases or fuel within the furnace of any fired vessel or within the flues or passages.
- Mechanical Breakdown reads the same as the exclusion in the BOP form, with an exception for loss or damage caused by a covered cause of loss that results from mechanical breakdown.
The third set of exclusions in the Micro-BOP form are identical to the same exclusions in the BOP form. If any of the excluded losses result in a covered cause of loss, that loss or damage caused by the covered cause of loss will be covered. These exclusions are:
Weather Conditions Acts Or Decisions Negligent Work
Property and General Conditions
The property conditions are all identical to those contained in the BOP Coverage Form, with the following exceptions:
- Resumption of Operations – Since the policy does not cover business income exposures there is no need to include conditions related to that coverage.
- Vacancy and Vacancy Provisions – Since the policy does not cover buildings, there is no need to include conditions related to that coverage.
- Loss Payment – This condition applies to business personal property; therefore to this respect it differs from the same condition in the BOP form. The condition provides for an option for claim payment on an actual cash value basis instead of replacement cost without the requirement that the limit of insurance be at 80 percent or greater, as there is no building coverage. Valuations for coverages not provided for in the Micro-BOP form are understandably not included in the loss condition. Certain property will only be valued at actual cash value: used or secondhand merchandise held in storage, property of others (except if amount required by contract differs; in which case the item will be valued based on the contract amount, but not to exceed the lesser of the property's replacement cost or the applicable limit of insurance); and works of art, antiques, or rare articles, including etchings, pictures, statuary, marble, bronzes, porcelain and bric-a-brac. Otherwise, the loss payment condition is the same as that in the BOP Coverage Form.
The same General Conditions apply to the Micro-BOP as the BOP form, except that there is no need for the Mortgageholders condition so it does not exist in the Micro-BOP form.
Property Definitions
The Micro-BOP form contains only eight property definitions, all of which are defined the same as they are in the BOP form:
Exclusions:
- The professional services exclusion is not included in the form. An optional professional exclusion endorsement is available and discussed under the Endorsement section of this analysis.
- The electronic data exclusion incorporates the exclusion for access to or disclosure of confidential or personal information, consistent with the conditionally mandatory endorsement for the Businessowners Program, BP 15 04 – Exclusion – Access Or Disclosure Of Confidential Or Personal Information And Data-Related Liability – With Limited Bodily Injury Exception. The exclusion contained in BP 15 04 is added as an additional exclusion within the Micro-BOP liability exclusions, and the following is also added to the Electronic Data Exclusion:
(14) Arising out of any access to or disclosure of any person's or organization's confidential or personal information, including patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information.
This exclusion applies even if damages are claimed for notification costs, credit monitoring expenses, forensic expenses, public relations expenses or any other loss, cost or expense incurred by you or others arising out of any access to or disclosure of any person's or organization's confidential or personal information.
Section III — Common Policy Conditions
Because there is no building coverage, the Cancellation provision of the Micro-BOP form does not contain any references to building occupancy, vacancy, items removed from a building, requirements to furnish utility services, or property taxes. Otherwise, the Cancellation provision is consistent with the BOP Coverage Form.
The Other Insurance condition of the Micro-BOP provides as follows with respect to the Business Liability Coverage; otherwise it is consistent with the BOP form.
If there is other valid and collectible insurance to cover a loss, the coverage will be primary except as follows:
Excess Insurance — This insurance is excess over:
(a) Any of the other insurance, whether primary, excess, contingent or on any other basis:
(i) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for "your work";
(ii) That is Fire insurance for premises rented to you or temporarily occupied by you with permission of the owner;
(iii) That is insurance purchased by you to cover your liability as a tenant for "property damage" to premises rented to you or temporarily occupied by you with permission of the owner; or
(iv) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion B.1.g. Of Section II – Liability.
(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.
(2) 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.
(3) When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:
(a) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and
(b) The total of all deductible and self insured amounts under all that other insurance.
(4) We will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not brought specifically to apply in excess of the Business Liability Coverage Limits of Insurance shown in the Declarations.
In addition, the method of sharing provision is added consistent with how it reads in the CGL Coverage form, as follows:
c. Method Of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.
If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.
Available Endorsements
The following endorsements are available under the program:
BP 20 01 – Micro-Businessowners Retail
BP 20 02 – Micro-Businessowners Service
BP 21 01 – Micro-Businessowners Abuse or Molestation Exclusion
BP 21 02 – Micro-Businessowners Employment Related Practices Exclusion
BP 21 03 – Micro-Businessowners Professional Services Exclusion
BP 22 01 – Micro-Businessowners Policy Changes
Analysis:
The endorsement amends the coverages provided under Micro-Businessowners coverage Form BP as follows:
The endorsement provides coverage for stock at a specific limit as shown in the endorsement Schedule. Theft of stock is added as a covered cause of loss, subject to a separate $500 theft deductible. The deductible may be increased and shown in the Schedule. Several additional exclusions applying specifically to theft are included in this endorsement:
- dishonesty, including dishonest or criminal acts, including theft by anyone entrusted with the property (except acts of destruction by employees or authorized representatives);
- false pretense, when property is voluntarily entrusted to others by fraudulent scheme, trick, device or other false pretense; and
- inventory shortages where property is missing and the only evidence of the loss or damage is inventory shortage, or any other instances where there is no physical evidence to show what happened to the property.
In addition to the above, an exclusion is also added for loss or damage to products that excludes any loss or damage based on errors or omissions as follows:
Any merchandise, goods or other product caused by or resulting from error or omission by any person or entity (including those having possession under an arrangement where work or a portion of the work is outsourced) in any stage of the development, production or use of the product, including planning, testing, processing, packaging, installation, maintenance or repair. This exclusion applies to any effect that compromises the form, substance or quality of the product. But if such error or omission results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
Under the Liability section of the endorsement, an additional insured provision is added that includes as additional insured any person or organization that is required by written agreement to be added as additional insured with respect to liability under a signed contract or agreement.
The additional insured coverage applies with respect to liability:
(1) in connection with the insured's ongoing operations performed for that additional insured; or
(2) arising out of the ownership, maintenance or use of that part of the premises leased to the insured which is used in connection with the insured's operations.
BP 20 02 Micro-Businessowners Service
This endorsement amends the Micro-Businessowners Policy to provide coverage for insureds involved in the service industry.
Analysis:
The endorsement may be added to those entities meeting the eligibility requirements under the Service classifications described above.
This endorsement adds theft as a covered cause of loss with respect to property of others in the insured's care, custody or control. The endorsement adds in theft-related exclusions for dishonesty and false pretenses as described in BP 20 01 above.
The endorsement includes Additional Coverages of Reward Payment and Key And Lock Replacement:
Additional Coverages:
Reward Payment provides for reimbursement of up to $500 for information that leads to the arrest and conviction of anyone committing a crime as reported by an eligible person. The crime must result in loss to covered property from a covered cause of loss. An additional amount of up to $500 is included for the return of stolen property. The payment amounts will be determined by either the actual cash value of the covered property at time of loss, subject to the amount required to repair or replace it; or the amount determined by the Property loss settlement provision. Payment will not be made until the conviction is made, or the covered property is returned.
An eligible person for reporting purposes means the first person designated by a law enforcement agency to voluntarily provide the information, but cannot be any of the following:
- insured, or any family member;
- employee (including leased or temporary employee) or any of their family members;
- a law enforcement agency employee;
- an employee of a property protection business;
- anyone having custody of the covered property at the time of theft; or
- anyone involved in the crime.
Key And Lock Replacement coverage provides up to $1,000 per occurrence for replacement of keys and locks at a client's premises if such replacement is due to theft or other loss to keys that were entrusted to an insured by a client. A separate $100 per occurrence deductible applies to this coverage.
Under the Liability section, an exception to the Damage to Property exclusion states that coverage does not apply to animals in the care, custody or control of the insured in the insured's rendering of service to such animals.
This endorsement provides the same additional insured provision as described in the above Micro-Businessowners Retail endorsement.
BP 21 01 Micro-Businessowners Abuse or Molestation Exclusion
This endorsement is used to exclude any liability for abuse or molestation of any person while in the care, custody or control of an insured. The exclusion reads as follows:
This insurance does not apply to "bodily injury", "property damage" or "personal and advertising injury" arising out of:
(a) The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured; or
(b) The negligent:
(i) Employment;
(ii) Investigation;
(iii) Supervision;
(iv) Reporting to the proper authorities, or failure to so report; or
(v) Retention; of a person for whom any insured is, or ever was, legally responsible, and whose conduct would be excluded by (a) above.
BP 21 02 Micro-Businessowners Employment-related Practices Exclusion
This endorsement is used to exclude bodily injury and personal and advertising injury arising out of described employment-related practices. The exclusion applies:
- whether the injury causing the event took place before, during, or after the employment;
- whether the insured may be liable as an employer or in any other capacity; or
- to any obligation to share damages with or repay someone else who must pay damages because of the injury.
BP 21 03 Micro-Businessowners Professional Services Exclusion
This endorsement is used to exclude liability arising out of the rendering, or failure to render, professional services. Since professional services is not a defined term in this endorsement, the endorsement effectively excludes all professional services. The exclusion also applies in the case of negligence or other wrongdoing by the insured in the supervision, hiring, employment, training or monitoring of others, if the occurrence or offense which caused the personal and advertising injury involved the rendering of or failure to render any professional service.
BP 22 01 Micro-Businessowners Policy Changes
This endorsement is used for changes to the Micro-BOP policy, with entry fields for effective date, coverage change description, previous and new limits of insurance, and previous and new premiums.
BP 22 02 Micro-Businessowners Professional Liability
This endorsement amends the Micro-Businessowners Policy to provide Professional Liability coverage for insureds involved in the service industry. The endorsement may be added for any of those entities meeting the eligibility requirements and listed under the Service classifications described above. Coverage is limited to only the "professional services" listed in the Schedule of the endorsement.
Analysis:
Endorsement BP 22 02 provides liability coverage for claims made as a result of wrongful acts occurring in the rendering of or failure to render professional services as described in the endorsement Schedule. Coverage is provided on a claims-made and reported basis. A separate Professional Liability Aggregate Limit of Insurance applies to this coverage, and defense is included within the limit. A separate deductible applies to each claim.
The endorsement provides for scheduling a prior or pending litigation date that serves to exclude any claims that were pending on, or existed prior to, the date shown in the Schedule as applicable to Prior or Pending Litigation. The exclusion also applies to any claims arising out of the same or substantially the same facts, circumstances or allegations which are the subject of, or the basis for such prior or pending claims. "Claim" is a defined term in the endorsement.
"Claim" means any of the following received by an insured:
a. A written demand for monetary or nonmonetary relief, including injunctive relief;
b. A civil proceeding commenced by the receipt of a complaint or similar pleading;
c. A written request for mediation or demand for arbitration; or
d. A written request to toll or waive a statute of limitations related to a potential "claim" in the preceding Paragraphs a. – c.
Defense expenses are also a defined term:
"Defense expenses" means the reasonable and necessary fees (attorneys' and experts' fees) and expenses incurred in the defense or appeal of a "claim", including the cost of appeal, attachment or similar bonds (without any obligation on our part to obtain such bonds) but excluding wages, salaries, benefits or expenses of your employees.
If no Retroactive Date is shown in the endorsement Schedule, coverage may be afforded for wrongful acts occurring prior to the inception date of the policy.
If a Retroactive Date is shown in the endorsement Schedule, any wrongful act prior to the Retroactive Date is not covered, even if the claim is first made during the policy period, the Basic Extended Reporting Period or the Supplemental Extended Reporting Period (if purchased).
A Basic Extended Reporting Period is automatically provided at no charge, starting with the end of the policy period and lasting for thirty days. This extended reporting period does not apply to claims that would be covered under subsequent insurance, or to claims after the aggregate limit of insurance is exhausted.
If the circumstances related to cancellation or nonrenewal of coverage specified in the Extended Reporting Periods Condition of the endorsement are met, an optional Supplemental Extended Reporting Period is available for an additional charge, to be determined by the carrier. The Named Insured must request the Supplemental Extended Reporting Period in writing within thirty days after the end of the policy period or the effective date of cancellation, whichever comes first. The Supplemental Extended Reporting Period will begin after the thirty-day Basic Extended Reporting Period expires and will last for one year. The aggregate limit is not reinstated for the Supplemental Extended Reporting Period, so only what is left of the aggregate limit at the end of the Basic Extended Reporting Period is available.
Exclusions:
The coverage is subject to a number of exclusions that exclude both liability and defense expenses.
Abuse and molestation (excludes any liability for abuse or molestation of any person while in the care, custody or control of an insured, similar to the same exclusion in endorsement BP 21 01 described above, except that this exclusion also excludes any defense expenses);
Access or disclosure of confidential or personal information and data-related liability (the standard exclusion);
Antitrust (any violation of antitrust laws);
Bodily injury or property damage (to prevent overlapping of coverages);
Breach of contract and assumed liability (actual or alleged breach of contract or any liability of others assumed by any insured in a contract or agreement; except for liability an insured would have had in absence of the contract or agreement);
Breach of warranty, guarantee or promise (actual or alleged breach of warranty, guarantee or promises; except for liability the insured would have had in absence of the contract or agreement);
Business enterprise (excludes professional services that otherwise would be covered by the endorsement, if such services were rendered to or by any business owned, controlled, operated or managed by any insured or their spouse; or if the cumulative ownership control by insureds exceeds 10 percent);
Employment practices violations and discrimination (actual or alleged wrongful employment-related practices, policies, acts, errors or omissions; or discrimination by an insured against anyone as described);
Fees, costs, charges or estimates (actual or alleged fees, costs or charges of any estimates made by the insured that are exceeded);
Fungi or bacteria (follows the CGL exclusion, with no limited coverage provided);
Fraudulent, criminal, malicious, dishonest or intentional acts (by an insured; but this exclusion does not affect the endorsement's duty to defend an insured prior to determining, through legal processes, that the insured is responsible for such criminal, fraudulent or malicious act or omission);
Governmental and regulatory entity (actions or proceedings brought by or on behalf of a governmental authority or regulatory agency, including but not limited to property seizures, actions by or for the FTC, FCC or other; but the exclusion does not apply if the authority or agency brings the claim solely in its capacity as the client or customer of any insured for professional services as covered by the endorsement);
Improper use of funds (excludes any type of illegal or inappropriate fund activity, monetary advantage, or the inability or failure to pay, collect, safeguard or return any funds);
Intellectual property (copyright infringement or violations of patent, trademark, trade secrets or other intellectual property rights);
Mental or emotional distress (any claim for mental or emotional distress);
Personal injury (excludes offenses including false arrest, detention, imprisonment; malicious prosecution; wrongful eviction/entry or property invasion; publications of slander, libel or disparagement; or any publication that violates a person's right of privacy);
Pollution (the standard CGL pollution exclusion);
Prior or pending litigation (excludes pending claims or claims that existed prior to the Prior or Pending Litigation Date shown in the Schedule; or to any claims arising out of the same or substantially the same facts, circumstances or allegations which are the subject of, or the basis for such prior or pending claims);
Prior Notice (excludes any claim or "wrongful act" which has been reported or notice has been given under any other prior insurance providing essentially the same type of coverage);
Recording and distribution of material in violation of law (the standard CGL exclusion);
Statutory violations (actual or alleged violations of any of the listed Acts or their amendments; or any similar federal, state or local statutes, rules or regulations or similar laws under any other jurisdiction anywhere in the world);
Workers' compensation (the standard CGL exclusion).
Conditions:
In addition to the conditions relating to the Basic and Supplemental Extended Reporting Periods and Limits, several additional conditions are added to this endorsement, as follows:
Assignment
There can be no assignment of interest without the insurer's written consent.
Consent to Settle
The insurer may, with insured's consent, make settlement of a claim deemed reasonable by the insurer. If the insured does not consent to the settlement, the insurer's liability will not exceed the amount for which the claim could have been settled, including defense expenses incurred as of the date the settlement was proposed to the insured in writing.
Merger or Acquisition of Named Insured
If, during the policy period, there is a merger or consolidation such that the named insured is not surviving; or if the insured's securities or voting rights result in ownership or voting control by other entities or persons of more than 50 percent of the outstanding securities representing the right to vote for the named insured's election of directors; then the policy will continue to the end of the policy period but only with respect to claims which occurred on or after the Retroactive Date and prior to such merger, consolidation, or acquisition; and the full annual premium will be fully earned at the time of the merger, consolidation or acquisition. The named insured must give the insurer thirty day's written notice of the merger, consolidation or acquisition.
An additional General Condition is added:
Duties In The Event Of A Claim Or Wrongful Act that May Result In A Claim
This condition outlines the insured's notice requirements (as soon as practicable) and detailed reporting instructions in event of a claim or a potential wrongful act that could reasonably be expected to give rise to a claim. In essence, the insured has no more than thirty days after the end of the policy period to give written notice of a claim during the policy period; and no longer than the end of the policy period to give written notice of any circumstances the insured is aware of that could potentially involve a wrongful act that could reasonably be expected to give rise to a claim. As with other policies, the insured may not, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense without the insured's written consent.
Definitions:
A number of definitions are added to the endorsement. The definitions for "claim" and "defense expenses" have been described above. The remaining definitions are as follows:
"Fungi" means any type or form of fungus, including mold or mildew and any mycotoxins, spores, scents or by-products produced or released by fungi.
"Interrelated wrongful acts" means all "wrongful acts" that have as a common nexus any:
a. Fact, circumstance, situation, event, transaction or cause; or
b. Series of causally connected facts, circumstances, situations, events, transactions or causes.
"Loss" means the following that you are legally obligated to pay:
a. Compensatory awards or judgments, including prejudgment and post-judgment interest;
b. Monetary settlements; or
c. Punitive, exemplary and multiple damages where insurable by the applicable law which most favors coverage for such damages.
"Loss" does not include:
a. Taxes, fines or penalties imposed by law, other than punitive, exemplary or multiple damages that are considered insurable by the applicable law which most favors coverage for such damages;
b. Liquidated damages;
c. Any amounts that are uninsurable under the law pursuant to which this Policy shall be construed;
d. Restitution, disgorgement, unjust enrichment or any profits or advantage you were not legally entitled to;
e. The cost to comply with any order or agreement to provide any equitable relief including injunctive relief; or
f. Your cost to provide, correct, re-perform or complete any "professional services".
"Professional services" means only those services specified in the Schedule that are performed by you or on your behalf for others.
"Wrongful act" means any actual or alleged act, error, misstatement, misleading statement, omission, neglect, breach of duty committed, attempted, or allegedly committed or attempted solely in the performance of or the failure to perform "professional services".
Terrorism Endorsements
Although TRIA was scheduled to terminate on December 31, 2005, Congress has acted to extend the provisions of the Act three times, and it is currently set to expire on December 31, 2020.
The specific TRIA related endorsements available for use with the Micro-Businessowners Program are as follows:
BP 23 02 Micro-Businessowners Cap On Losses From Certified Acts Of Terrorism
This endorsement is attached when an insured accepts certified acts of terrorism coverage for a new or renewal policy.
BP 23 03 Micro-Businessowners Exclusion Of Certified Acts Of Terrorism
This endorsement should be attached when an insured rejects the offer of certified acts of terrorism coverage, on new or renewal policies at the time of policy inception.
BP 23 04 Micro-Businessowners Exclusion Of Certified Acts Of Terrorism Involving Nucler, Biological Chemical Or Radiological Terrorism, Cap On Covered Certified Acts Losses
In Standard Fire Policy (SFP) states coverage is provided for fire following an excluded act of terrorism. This coverage is stated in Paragraph B.2. of the endorsement and is made applicable by entry of state information in the Schedule of the endorsement, enabling the same endorsement to be used in SFP and non-SFP states. The endorsement excludes coverage for:
- a certified act of terrorism that is carried out using radioactive material or a nuclear device;
- a certified act of terrorism in which radioactive material is released, and it appears that one purpose of the terrorism was to release such material;
- a certified act of terrorism that is carried out by means of the dispersal or application of pathogenic or poisonous biological or chemical materials;
- a certified act of terrorism in which pathogenic or poisonous biological or chemical materials are released, and it appears that one purpose of the terrorism was to release such materials.
BP 23 05 Micro-Businessowners Limitations Of Coverage For Certified Acts Of Terrorism
This is a property endorsement. Under this endorsement, the Limit of Insurance for certified acts of terrorism is less than the Limit of Insurance applicable to other perils. As such, the policy's insurance-to-value requirements do not apply to this sub-limited coverage. The sublimit applies on an annual aggregate basis, and coverage will cease once the stated sublimit has been exhausted by incurred losses.
The sublimit will not apply in SFP (standard fire policy) states. In these states if the fire loss exceeds the amount of the sublimit, the otherwise applicable limit will apply to direct damage caused by fire following a certified act of terrorism. This provision is stated in the endorsement and is made applicable by entering the state information in the endorsement Schedule.
BP 23 06 Micro-Businessowners Exclusion Of Other Acts Of Terrorism Committed Outside The United States; Cap On Losses From Certified Acts Of Terrorism
This is a liability endorsement, applying to both Sections I and II. This endorsement is available for use on new and renewal policies where the insured accepts coverage for certified acts of terrorism. This gives the insurer an option to then exclude "other acts of terrorism" committed outside the United States.
The Federal Terrorism Risk Insurance Act caps an insurer's liability payments for terrorism losses. To satisfy this, the form does not exclude acts that would satisfy the first part of the definition of certified acts but which are not certified because the related losses do not exceed five million dollars.
This endorsement, in part, excludes any injury or damage arising out of an "other act of terrorism" that is committed outside the United States. The exclusion is limited to acts where:
- The total of all damage to all types of property (including business interruption losses) from a terrorism incident exceeds $25 million; or
- Fifty or more persons sustain death or serious physical injury; or
- The terrorism incident involves the use, release or escape of nuclear materials, or directly or indirectly results in nuclear reaction or radiation or radioactive contamination; or
- The terrorism incident is carried out by means of dispersal or application of pathogenic or poisonous biological or chemical materials; or
- Pathogenic or poisonous biological or chemical materials are released, and it appears that one purpose of the terrorism incident was to release such materials.
Includes copyrighted material of Insurance Services Office, Inc., with its permission.