Part 2 - Section I Property Coverages & Additional Coverages

Part 3 - Section I Exclusions & Conditions

Part 4 - Section II Liability Coverages & Exclusions

Part 5 - Section II Additional Coverages, Conditions & Endorsements

Topics covered:

Section II - Additional Coverages

Section II - Conditions

Endorsements

Section II - Additional Coverages

With respect to the coverage provided by this endorsement:

1. Under Paragraph 1. in the Homeowners Form, the limit of liability is revised to $2,500 per "occurrence" but is subject to the aggregate Limit Of Liability shown in A.2. in the Schedule above under Section II – Liability; and

2. Paragraph 2.e.(1) in the Homeowners Form does not apply to your "business".

3. The following paragraph is added:

3. This coverage is subject to all the Coverage E exclusions in this endorsement that apply to "property damage".

Analysis

The homeowners policy provides $5,000 at replacement cost per occurrence for property damage caused by an insured to property of others. Endorsement HO 07 01 lowers that amount to $2,500 with respect to coverage provided by the endorsement.

This coverage is separate from the property coverage that applies to property of others in the insured’s care; the damage to property of others additional coverage does not respond in cases where damages can be recovered under Section I property coverage.

The endorsement deletes the business exclusion of this coverage found in the homeowners form. The $2,500 limit is per occurrence but subject to the aggregate limit A.2. found in the schedule of the HO 07 01 form for All Other Business Liability.

Section II - Conditions

A. Limit Of Liability

1. Aggregate Limits

a. Products-completed Operations Hazards Liability

Our total limit of liability in an annual policy period for the sum of damages because of "bodily injury" and "property damage" included in the "products-completed operations hazard" under Coverage E will not be more than the Annual Aggregate Limit Of Liability for the "products-completed operations hazard" shown in A.1. in the Schedule above under Section II – Liability. This is the most we will pay regardless of the number of "occurrences", "insureds", claims made, "suits" brought, or persons injured.

b. All Other Business Liability

Our total limit of liability in an annual policy period for the sum of:

(1) Damages under Coverage E, not including "bodily injury" and "property damage" included in the "products-completed operations hazard"; and

(2) Medical expense payable under Coverage F;

will not be more than the Annual Aggregate Limit Of Liability for all other "business" liability shown in A.2. in the Schedule of this endorsement under Section II – Liability. This is the most we will pay regardless of the number of "occurrences", accidents, offenses, "insureds", claims made, "suits" brought, or persons injured.

2. Sublimit Of Liability

Subject to the Annual Aggregate Limit Of Liability described in A.1.b. above, our total limit of liability under Coverage F for all medical expense payable for "bodily injury" to one person as the result of one accident will not be more than the Sublimit Of Liability for Coverage F shown in B. of the Schedule above under Section II – Liability. This Sublimit Of Liability does not increase the Annual Aggregate Limit of Liability.

The limits described in A.1. and 2. above apply regardless of any provision to the contrary contained in this endorsement, including the policy Declarations.

Analysis

Endorsement HO 07 01 replaces Conditions A, B, and I of the homeowners policy. Condition A is amended to include aggregate limits for (a) products-completed operations hazards liability and (b) all other business liability.

The products-completed operations hazards liability limit is shown on the schedule and is equal to the Coverage E limit of the underlying homeowners policy. The All Other Business limit is also on the schedule and is equal to twice the combined limits of Coverages E and F. There is a sublimit within this limit, also shown on the schedule, for Coverage F on a per person or per accident basis.

It is important to note these limits are separate from the homeowners limits and do not replace them. These limits apply for the purposes of the insured’s business, so the personal liability coverage found on the homeowners form is still intact.

A major difference is that the HO 07 01 limits are on an annual aggregate limit basis. The homeowners form limits are per occurrence, so after a covered loss the homeowner would still have the entire limit available for another occurrence. In contrast, a loss under this endorsement would reduce the aggregate limit available for the rest of the year or policy period.

B. Severability Of Insurance

The coverage provided by this endorsement applies separately to each "insured" except with respect to the limit of liability. Therefore, this condition will not increase the Annual Aggregate Limits of Liability regardless of the number of "insureds".

Analysis

As with the homeowners form, the coverage provided by endorsement HO 07 01 applies separately to each insured, but does not increase the aggregate limit available. If there are three insureds and a products-completed operations hazard liability limit of $100,000, it does not mean there is a total of $300,000 available coverage.

I. Policy Period And Coverage Territory

This endorsement applies only to "bodily injury", "personal and advertising injury", and "property damage" which occur during the policy period within the applicable "coverage territory".

Analysis

In the homeowners policy, there is worldwide coverage for claims arising out of bodily injury or property damage, unless otherwise excluded. In the HO 07 01, coverage is limited to loss occurring within the “coverage territory”

Sections I and II Conditions 

The following condition is added:

H. Examination Of Your Books And Records

We may examine and audit your books and records as they relate to this coverage at any time during the policy period and up to three years afterward.

Analysis

As is common with commercial property exposures, the insurer has the right to audit the insured's books and records relating to the home business. The insurer may examine and audit the books up to three years after the termination of a policy period. There is no requirement for the insurer to perform an audit, but they have the ability to do so if deemed necessary.

Endorsements

The following endorsements can only be used when HO 07 01 Home Business Insurance Coverage endorsement is attached to an underlying homeowner policy.

HO 07 50 03 22, Additional Insured – Managers or Lessors of Premises Leased to an Insured, amends the definition of insured to include a person or organization named in the schedule, but only with respect to their liability arising out of the ownership, maintenance, or use of the part of the premises leased to the named insured. The person or organization and the leased premises must be designated in the schedule.

An exclusion is added stating that coverage does not apply to any occurrence that takes place before or after an insured occupies the designated premises, or when the insured’s business property is no longer at the scheduled premises. Also excluded are any structural alterations, new construction, or demolition operations performed by or for the designated person or organization named in the schedule. A final exclusion is added for any act or omission, or failure to act by additional insured, even if that act or failure to act is directly related to the ownership, maintenance, or use of the designated premises.

HO 07 51 03 22, Additional Insured – Vendors, includes as an insured a vendor who distributes or sells the insured products named in the schedule. Coverage applies only to bodily injury or property damage arising out of the insured’s products. The insured’s products that are being sold or distributed must also be scheduled.

There is an exclusion for the vendor’s assumption of liability in a contract or agreement. However, this exclusion would not apply to liability for damages that the vendor would have had in the absence of a contract or agreement.

Other exclusions include the vendor providing a warranty unauthorized by the named insured, physical or chemical change in the product made intentionally by the vendor, unauthorized repackaging by the vendor, and failure to make inspections, adjustments, or tests that the vendor has agreed to.

HO 07 52 03 22 Loss Payable Provisions, addresses how payment following a covered loss will be made when there are loss payees other than the insured in three circumstances. The schedule provides for the name and address of the loss payee, description of the property, and whether condition A, B, or C apply.

When condition A Loss Payable applies for covered business property where the insured and a loss payee both have an insurable interest, the insurer will adjust all losses with the insured and pay the claim jointly to the insured and the loss payee, as interests appear. This provision might apply when the insured finances some business equipment, such as a copier.

When condition B Lender’s Loss Payable applies, losses are settled in order of precedence, as interests appear. The loss payee’s interest must be established by a written contract, such as a warehouse receipt or bill of lading. This loss provision is applicable when the insured has entered into a contract for the sale of covered property.

The loss payee may still receive payment even if the insured's claim is denied because of failure to comply with the terms of the policy or endorsement. In this way, the conditions are similar to those governing a mortgagee's ability to receive payment under the homeowners policy. The loss payee also receives notice of cancellation or nonrenewal of the policy.

When condition C Contract of Sale is designated, losses are adjusted with the insured, and payment is made jointly to the insured and loss payee, as interests appear. The difference between conditions B and C is that for condition B to apply, the contract for the sale of covered business property must be written and documented by warehouse receipts, bills of lading, financing statements, or a contract or deed. Condition C has no such requirement.

There is no additional premium charge for this endorsement.

HO 07 53 03 22, Exclusion – Personal and Advertising Injury, excludes all personal and advertising injury coverage that is available from the HO 07 01 form. It may be used when, for example, the underwriter perceives an unacceptable exposure for personal and advertising injury due to the nature of the business.

HO 07 54 03 22, Liquor Liability Exclusion and Exception for Scheduled Activities, excludes coverage for bodily injury or property damage arising out of the selling, serving, or furnishing of alcoholic beverages. There is an exception for activities or functions that are described in the schedule. The exception applies at any time during the policy period unless otherwise specified in the schedule.

HO 07 55 03 22 Special Coverage – Spoilage of Perishable Stock, provides coverage for perishable stock that is named in the schedule, along with a limit of liability. Perishable stock is defined as property on the business location that is kept under controlled temperature or humidity conditions for preservation and is susceptible to loss if these conditions change.

Perishable stock is covered for direct physical loss caused by the perils of breakdown, contamination, or power outage. Breakdown or contamination is defined as contamination by a refrigerant and a change in temperature or humidity that results from mechanical breakdown at the business location. Power outage means a change in temperature or humidity that results from loss of power, due to conditions beyond an insured’s control, on or off the business location.

The exclusions found in the homeowners form do not apply to spoilage of perishable stock except for earth movement, war, nuclear hazard, governmental action, and water.

These exclusions are added and apply only to perishable stock: disconnection from refrigerating, cooling, or humidity control system; deactivation of electrical power caused by manipulation of any switch or other power control device; inability of electrical utility company or other power source to provide power due to lack of fuel or governmental order; inability of power source at described premises to provide sufficient power due to lack of generating capacity to meet demand; and breaking of any glass that is a permanent part of any refrigerating, cooling, or humidity control unit.

The loss payment for covered losses of perishable stock that has been sold but not delivered is based on the selling price less discounts and expenses, or the actual cash value.

HO 07 56 03 22 Valuable Papers and Records Coverage Increased Limits, allows the insured to increase the limit of liability for valuable papers and records, and endorsement HO 07 57 03 22 Special Coverage for Valuable Papers and Records, provides open perils coverage for these items.

HO 07 01 Home Business Insurance Coverage endorsement provides a limit of $2,500 for valuable papers and records. Endorsement HO 07 56 can be used to increase that limit. The schedule provides for an increase in the limit and shows the total limit.

HO 07 57 provides special coverage for valuable papers and records, though still only up to the basic limit of $2,500 found in HO 07 01. The items are insured against direct physical loss caused by any peril unless specifically excluded. Coverage does not apply to property held as samples or for delivery after sale, or property in storage away from the residence premises.

The homeowners Section I exclusions do not apply except for war, nuclear hazard, and governmental action. The home business insurance form exclusion for accounts receivable and valuable papers and records is amended, and an exclusion for unauthorized instructions to transfer property to any person or any place is added.

HO 07 58 03 22 Computer-Related Damage Or Injury Exclusion, precludes coverage for any direct or indirect loss arising out of computer failure to process, recognize, or accept one or more dates or times. This includes software that cannot accept the year 2000 and beyond.

Also excluded is loss caused by the act or omission of anyone who consults, designs, repairs, restores, inspects, maintains, or oversees others to determine, rectify, or test, potential or actual computer failure or deficiency. If such a loss results in a peril insured against, then only the loss caused by such peril is covered.

The insurer will not pay to repair or restore any product or correct any services due to a failure of computer software from processing one or more dates or times.

HO 07 59 03 22 Limited Computer-Related Damage or Injury Liability Coverage, gives back some of the coverage excluded by HO 07 58. Coverage is provided for loss of income the business sustains and necessary extra expenses due to computer failure. It is important to note for the purposes of this endorsement, computer failure is defined to mean the failure of a computer to recognize or process one or more dates or times. It does not include any type of computer failure. Coverage is limited to $25,000 in any one policy year.

Liability coverage is provided for bodily injury, property damage, and personal and advertising injury due to computer failure. That coverage is subject to the applicable limit shown in the schedule of the Home Business Insurance Coverage endorsement.

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