Business Owners Policy

Question 1

The Businessowners Policy - Learning Objectives
12.1 Learning Objectives
After completing The Businessowners Policy, you will be able to do the following:

Explain why an insured might choose a businessowners policy (BOP) instead of a commercial package policy

Identify buildings and businesses that are eligible for a BOP

Describe property covered under the businessowners property section’s building and business personal property coverages

Identify property that cannot be covered under the businessowners property section

Describe the covered perils, additional coverages, coverage extensions, optional coverages, and exclusions in the BOP property section

Describe the types of losses covered under the businessowners liability section

Identify the supplementary payments included in the businessowners liability section

Explain how the limits of insurance apply in the businessowners liability section

Identify situations and perils that are excluded under the businessowners liability coverage

Explain the purpose of the following endorsements: utility services—direct damage coverage, utility services—time element coverage, protective safeguards, and hired and nonowned auto liability

Compare and contrast key features of the BOP and the CPP

Answer 1

Describe the covered perils, additional coverages, coverage extensions, optional coverages, and exclusions in the BOP property section

Describe the types of losses covered under the businessowners liability section

Identify the supplementary payments included in the businessowners liability section

Explain how the limits of insurance apply in the businessowners liability section

Identify situations and perils that are excluded under the businessowners liability coverage

Explain the purpose of the following endorsements: utility services—direct damage coverage, utility services—time element coverage, protective safeguards, and hired and nonowned auto liability

Compare and contrast key features of the BOP and the CPP

Question 2

The Businessowners Policy - Introduction
12.2 Introduction
The businessowners policy (BOP) is a commercial package policy that provides property and liability insurance to certain types of small businesses. While the CPP allows the insured to choose the coverages to be included in the CPP, the businessowners policy prepackages a group of coverages desirable to small businesses.

Many companies have developed their own small businessowners-type package policy, but in this unit we’ll focus on ISO’s businessowners policy.

Answer 2

The Businessowners Policy - Eligibility and Policy Organization
12.3.1 Eligible Occupancies
The eligibility rules for the BOP are more stringent than those for the CPP, which can be used to cover almost any commercial risk.

Specific rules of eligibility that deal with the size of buildings and the specific type of business involved determine what risks are eligible to be covered under a businessowners policy.

The ideal BOP prospect is the small, well managed, one-location business with easily predicted coverage needs.

Only certain types of businesses are eligible under current ISO rules. They include certain wholesale, processing and service, restaurant, convenience store, and contracting risks. Eligible businesses are listed in the classification table of ISO’s businessowners policy rules.

Unless otherwise noted, eligible risks may not exceed 25,000 square feet in total floor area or $3 million in annual gross sales at each location.

Question 3

end of section The Businessowners Policy - Eligibility and Policy Organization
12.3.3 Organization
The businessowners policy includes the required property and liability coverages and policy conditions in one form, with certain required information about the insured in a separate declarations.

Answer 3

The policy declarations will show

• the policy number,
• name of insurer,
• name of producer,
• name and address of the named insured, and
• the policy period.

Spaces are provided for a

• description of the business, the
• form of business,
• locations of described premises, and
• name and address of any mortgageholder.
• Limits of insurance will be shown for buildings and for business personal property.

Any optional coverages the insured has selected will be indicated on the declarations, along with the limit of insurance for those coverages.

Question 4

The Businessowners Policy BOP - Property Coverage
12.4 Building Coverage
The property coverage of the BOP includes two major coverages:

Coverage A—buildings
Coverage B—business personal property

A limit of insurance must be shown in the declarations for each type of property covered. For example, an insured who is a tenant would not require the building coverage.

Answer 4

12.4.1. Building Coverage

Building coverage applies to more than just the buildings and structures at the premises structure itself. Other items covered under the building coverage include:

1: completed additions;
2: permanently installed machinery and equipment;
3: fixtures, including outdoor fixtures, such as lawnmowers, garden hoses, and snow removal equipment;
4: personal property used to maintain or service buildings, structures, or the premises,
5: including portable fire extinguishing equipment, outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering; and
6: personal property furnished by the insured in apartments, rooms, or common areas that are rented to others.

Question 5

The Businessowners Policy - Property Coverage
12.4 Building Coverage (cont.)
The following items are also covered under the building coverage if no other insurance applies:

Answer 5

1: Additions under construction
2: Alterations and repairs to the buildings or structures
3: Materials, equipment, supplies, and temporary structures that are on or within 100 feet of the premises and being used for additions, alterations, or repairs

Question 6

The Businessowners Policy BOP - Property Coverage
12.4.2 Business Personal Property Coverage
There are five different classes of business personal property covered:

1: Property owned and used by the insured in the business
2: Property of others in the insured’s care, custody, or control
3: Tenants’ improvements and betterments
4: Leased personal property that the insured has a contractual responsibility to insure
5: Exterior building glass

Property is covered when it is located at the described premises and in or on a building, in a vehicle, or in the open within 100 feet of the premises.

Answer 6

Tenants’ improvements and betterments are fixtures, alterations, installations, or additions that tenants make to rented buildings in which they operate their businesses.

For coverage to apply, these items must be permanently attached to the building, acquired or made at the insured’s expense,– and unable to be legally removed. Examples are when tenants have new carpeting or light fixtures installed.

Examples of leased personal property the insured has a contractual responsibility to insure include photocopiers and computer equipment leased under contracts that require the lessees to insure the leased property.

Exterior building glass is covered as business personal property for insureds who are tenants and do not have building coverage. The glass must be owned by the insured or in the insured’s care, custody, or control.

Question 7

The Businessowners Policy - Property Coverage
12.4.3 Property Not Covered
The following property is not covered under the BOP:

• Aircraft
• Motor vehicles and other vehicles subject to motor vehicle registration
• Land (including land on which the property is located), water, growing crops, and lawns
• Contraband and property being illegally traded or transported
• Outdoor fences, trees, shrubs, and plants*
• -Outdoor radio or television antennas, including satellite dishes, and their lead-in wiring, masts, or towers*

Answer 7

• Money and securities*
• Watercraft while afloat, including motors, equipment, and accessories
• Outdoor signs not attached to buildings*
• Accounts, bills, food stamps, other evidences of debt, accounts receivable, and valuable papers and records
• Computers that are permanently installed or designed to be permanently installed in an aircraft, watercraft, motor truck, or other vehicle subject to motor vehicle registration
• Electronic data*
• Except as covered under an optional coverage or coverage extension

Question 8

The Businessowners Policy - Property Coverage
12.4.4 Covered Causes of Loss and Limitations

Property coverage in the BOP is provided on an open peril basis. This means that

–the policy covers any causes of loss that are not specifically excluded or limited.

An endorsement can be added to the policy so that coverage is provided on a

–named peril basis, meaning that the policy covers only the causes of loss specifically named in the endorsement.

12.4.4.1. Limitations

The following limitations in the BOP exclude certain types of losses or cap the amount of particular coverages.

Damage to steam equipment such as boilers, pipes, engines, or turbines is not covered if the damage results from a condition that originates inside the equipment. There is coverage, however, for damage that results from explosions of gases or fuel inside the furnace of a fired vessel or within the flues or passages through which gases pass.

Damage to hot water boilers or other water heating equipment is not covered if the damage results from a condition that originates inside the equipment. There is coverage, however, for explosions.

Answer 8

There is no coverage for property that is missing for which no physical evidence exists to show what happened to it, such as shortage disclosed from an inventory.

This limitation does not apply to money and securities when the money and securities optional coverage is added to the policy.

There is no coverage for property that has been transferred to someone or someplace outside the described premises and under unauthorized instructions.

The interior of a building is covered against damage from rain, snow, sand, sleet, ice, or dust only if the roof or walls are first damaged by a covered cause of loss that allows these elements to enter, or if the loss or damage is caused by or results from thawing of snow, sleet, or ice on the building.

Question 9

The Businessowners PolicyBOP - Property Coverage
12.4.4 Covered Causes of Loss and Limitations (cont.)

Loss or damage to fragile articles that are broken is not covered unless the damage is caused by building glass breakage or the specified causes of loss named in the policy.

Fragile articles include glassware, marbles, porcelains, statuary, and chinaware. The specified causes of loss are:

fire;
lightning;
explosion;
windstorm or hail;
smoke;
aircraft or vehicles;
riot or civil commotion;
vandalism;
leakage from fire extinguishing equipment;
sinkhole collapse;
volcanic action;
falling objects;
weight of snow, ice, or sleet; and
water damage.
This restriction does not apply to glass that is part of a building, containers of property held for sale, or photographic or scientific instrument lenses.

Answer 9

leakage from fire extinguishing equipment;
sinkhole collapse;
volcanic action;
falling objects;
weight of snow, ice, or sleet; and
water damage.

This restriction does not apply to glass that is part of a building, containers of property held for sale, or photographic or scientific instrument lenses.

Question 10

The Businessowners Policy - Property Coverage
12.4.4 Covered Causes of Loss and Limitations (cont.)

For the following types of property, the amount paid for theft losses is limited to $2,500:

Answer 10

1; Furs, fur garments, and garments trimmed with fur

2: Jewelry, watches, watch movements, jewels, pearls, precious and semiprecious stones, bullion, gold, silver, platinum, and other precious alloys or metals; does not apply to jewelry and watches worth $100 or less per item
3: Patterns, dies, molds, and forms

Question 11

The Businessowners Policy - Property Coverage
12.4.4.2 Exclusions
The following are excluded in the BOP:

• Ordinance or law
• Earth movement (does not include a fire or explosion resulting from earth movement)
• Government action
• Nuclear hazard
• Failure of power or other utility services occurring away from the insured’s premises (does not apply to loss or damage to computers and electronic media and records)
• War and military action
• Water, including flood, sewer backup, mudslides, or seepage of ground water (does not include fire, explosion, or sprinkler leakage resulting from water)
• Failure of computers to recognize a particular date or time, such as the year 2000
• Mold, wet rot, dry rot, and bacteria, except as provided as an additional coverage (does not apply when caused by fire or lightning)

Answer 11

-Artificially generated electrical current (loss or damage to computers from artificially generated electrical current is covered if the loss results from an occurrence that took place within 100 feet of the described premises, such as an interruption of electric power supply, power surge, blackout, or brownout)

• Delay, loss of use, or loss of market
• Smoke, vapor, or gas from agricultural smudging or industrial operations
• Explosion of any steam boilers, pipes, engines, or turbines

-Water, liquids, powder, or molten material that leaks or flows from any equipment other than fire protective systems as the result of freezing unless the insured has done his best to maintain heat in the building or has drained the equipment and shut off the supply

• Dishonest or criminal acts of the insured or the insured’s employees
• Voluntarily parting with property if induced to do so by fraud or a trick
• Rain, snow, ice, or sleet damage to personal property left in the open

Question 12

The Businessowners Policy - Property Coverage
12.4.4.2 Exclusions (cont.)
The BOP also excludes:

• Any type of collapse other than as provided as an additional coverage under the policy
• Pollution (unless the release, discharge, or dispersal is caused by a specified cause of loss)
• Failure of an insured to use all reasonable means to save and preserve property from further damage at and after the loss
• Errors or omissions in programming, processing, or storing data or in any computer operations, or in processing or copying valuable papers and records
• Errors or deficiency in design, installation, testing, maintenance, modification, or repair of the insured’s computer system, including electronic media and records
• Electrical or magnetic injury, disturbance, or erasure of electronic media and records, except as provided as a coverage extension under the policy

Answer 12

• Weather conditions that contribute to causing a loss
• Loss resulting from acts or decisions, or the failure to act or decide
• Faulty planning, development, design, specifications, workmanship, or repair
• Rust, corrosion, decay, deterioration, and hidden or latent defects
• Smog
• Settling, cracking, shrinking, or expansion
• Damage caused by insects, birds, rodents, or other animals
• Wear and tear
• Continuous or repeated seepage or leakage of water that occurs over 14 or more days

Question 13

The Businessowners Policy - Property Coverage
12.4.5 Additional Coverages
Additional coverages provide coverage in specific situations. These coverages may have a separate limit of insurance or require that certain conditions be met for coverage to apply.

12.4.5.1. Debris Removal

The debris removal –additional coverage– pays for expenses to remove debris of covered property caused by a covered cause of loss during the policy period.

Expenses will be paid only if the insured reports them to the insurance company in writing within 180 days of the date of loss.

Costs to extract pollutants or remedy polluted land or water are not covered.

The most the insurer will pay for the total of the direct physical loss or damage and the debris removal expense is the limit of insurance applicable to the property that was damaged.

Subject to this limit, the amount reimbursed for debris removal expenses is 25% of the amount paid for the direct physical loss plus the deductible applicable to that loss.

Answer 13

An additional $10,000 of insurance for each location in any one occurrence is available for debris removal under the following circumstances:

The direct physical loss and the debris removal expense together exhaust the limit of insurance

The maximum amount collectible for debris removal (25% of the loss plus the deductible) is not enough to cover the debris removal expense

If either of these conditions applies, the total payment for the direct physical loss and the debris removal expense may be up to, but cannot exceed, the policy limit plus $10,000.

Question 14

The Businessowners Policy - Property Coverage
12.4.5.2 Collapse

The collapse additional coverage applies only when very specific conditions are met.

The form defines collapse as an abrupt falling down or caving in of the building or part of the building that results in the building being unusable.

This definition does not include a building that is in danger of collapsing or a building or part of a building that is still standing but has separated from another part of the structure or shows signs of instability such as bulging, cracking, leaning, or settling.

Answer 14

Collapse of a building or part of a building is covered –only when it is caused by one of the specified causes of loss,

• building glass breakage,
• hidden decay, hidden insect or vermin damage,
• weight of people or personal property,
• weight of rain that collects on a roof, or
• use of defective materials or methods in construction, remodeling, or renovation
• if the collapse occurs during the course of the construction, remodeling, or renovation.

Collapse that results from hidden decay or hidden insect or vermin damage is not covered if the insured knew about the damage before the collapse occurred.

If collapse occurs after construction, remodeling, or renovation is completed and is caused by a peril listed above, the loss or damage is covered even if the use of defective materials or methods contributed to the collapse.

Question 15

The Businessowners Policy - Property Coverage
12.4.5.2 Collapse (cont.)

Certain types of outdoor properties, even if they are otherwise covered under the policy, are covered for collapse only when they are damaged directly by a collapsed building.

This includes awnings, gutters and downspouts, yard fixtures, outdoor swimming pools, piers, wharves and docks, beach or diving platforms or appurtenances, retaining walls, and walks, roadways, and other paved surfaces

Answer 15

Under certain conditions, loss or damage that occurs when personal property falls down or caves in is covered even when there is no building collapse.

The property must be inside a building.

The collapse must result from one of the causes of loss listed above.

The property that collapses must not be one of the items of outdoor property listed above.

The collapse additional coverage is subject to the limits of insurance. It does not provide an additional amount of insurance.

Question 16

The Businessowners Policy - Property Coverage
12.4.5.3 Business Income

Under the business income additional coverage, the insurance company will pay for loss of business income that occurs when the insured’s business operations have to be suspended after a loss and income cannot be generated.

For coverage to apply, there must be direct physical loss or damage to property at the described premises. This includes personal property in a vehicle or in the open within 100 feet of the premises.

Answer 16

The loss must be caused by or result from a covered cause of loss. Payment is for loss during the period the property is being restored that occurs within 12 consecutive months after the date of the direct physical damage.

Also included in this additional coverage is extended business income coverage. This coverage extends the period for which business income loss will be paid under certain circumstances.

The extended business income coverage begins after the insured’s operations are resumed and continues until the insured is restored to the previous earning condition or for 30 consecutive days (or the number of days listed in the declarations) after operations could have been resumed.

This additional coverage is not subject to the limits of insurance.

Question 17

The Businessowners Policy - Property Coverage
12.4.5.4 Extra Expense

The extra expense additional coverage allows reimbursement for additional costs an insured incurs to avoid or minimize suspending business operations after a covered loss

Answer 17

If an insured spends more money than would otherwise be required in order to reduce a loss, the insurance company will reimburse specified expenses during the period of restoration.

The insurance company will pay for extra expense that occurs within 12 consecutive months after the date of the direct physical loss or damage. This coverage is in addition to the insured’s limits of insurance.

Question 18

The Businessowners Policy BOP- Property Coverage
12.4.5.5 Increased Cost of Construction

The increased cost of construction – additional coverage– applies only to buildings insured on a replacement cost basis. If a covered cause of loss damages a covered building, the company will pay the additional costs required to comply with an ordinance or law in repairing the damage or replacing damaged parts.

This additional coverage has a limit of $10,000.

Answer 18

If the building is repaired or replaced at the same premises or rebuilt at the insured’s option at another premises, the most the company will pay is the increased cost of construction at the same premises.

If the ordinance or law requires relocation, the most the company will pay is the increased cost of construction at the new premises.

The provisions of the ordinance or law exclusion do not apply to this additional coverage –to the extent– they conflict with this coverage.

Question 19

The Businessowners Policy - Property Coverage

12.4.5.6 Civil Authority

The civil authority – additional coverage – is available for losses that result from actions of civil authorities. Covered is business income an insured loses when a civil authority denies the insured access to the described premises because property not at the described premises was damaged by a covered cause of loss.

Answer 19

Coverage applies for a specified period. Coverage for business income == begins 72 hours after the action by the civil authorit y– and is effective for up to three consecutive weeks.

Coverage for extra expenses begins immediately after the action by the civil authority and ends either three consecutive weeks after that action or when the business income coverage ends, whichever is later.

Question 20

The Businessowners Policy - Property Coverage

12.4.5.7 Forgery and Alteration

The forgery and alteration additional coverage applies to an insured’s loss that results directly from someone forging or altering checks, drafts, and similar items made or drawn by or on the insured or the insured’s agent.

Answer 20

If the insured is sued for refusing to pay any of these items because it has been forged or altered, and if the insured has the insurance company’s written promise to defend the insured, the company will pay for any reasonable legal expenses the insured incurs in that defense.

However, the most that will be paid for a loss, including legal expenses, is $2,500, UNLESS a higher limit is shown in the DECLARATIONS.

Question 21

The Businessowners Policy - Property Coverage

12.4.5.8 Business Income from Dependent Properties

This additional coverage covers loss of business income the insured sustains due to physical loss or damage at a dependent property from a covered cause of loss.

A dependent property is a business that delivers materials or services to the insured, accepts the insured’s products or services, manufactures products for delivery to the insured’s customers, – or attracts customers to the insured’s business.

Answer 21

Coverage is limited to $5,000 UNLESS a higher limit is shown in the declarations.

Coverage begins 72 hours after the loss at the dependent property and continues until the date the damage should be repaired, rebuilt, or replaced with reasonable speed and similar quality.

Coverage does not apply if the only property damaged at the dependent property is electronic data. The amount paid will be reduced to the extent the insured can resume operations, in whole or in part, by using another source of materials or outlet for its products.

Question 22

The Businessowners Policy - Property Coverage

12.4.5.9 Electronic Data

The electronic data additional coverage pays to replace or restore electronic data that have been destroyed or corrupted by a covered cause of loss.

Electronic data means information, facts, or computer programs stored, created, used on, or transmitted to or from computer software, CD-ROMs, hard or floppy disks, or any other repositories of computer software used with electronically controlled equipment. It does not include the insured’s stock of prepackaged software.

Also covered are viruses or other instructions introduced to a computer system or network designed to damage or destroy any part of its system or disrupt its normal operation.

There is no coverage for loss or damage caused by or resulting from manipulation of a computer system by an employee or an entity retained by the insured to inspect, design, install, maintain, repair, or replace the system.

Answer 22

To the extent – that electronic data are not replaced or restored, the loss will be valued at the cost of replacement of the media on which the data were stored with blank media that is substantially identical.

The most that will be paid under this additional coverage is $10,000 for all loss or damage sustained in any one policy year, regardless of the number of losses or the number of premises, locations, or computer systems involved.

If payment for one loss does not exhaust this limit, the balance is available for subsequent loss or damage sustained in, but not after, that policy year. An occurrence that begins in one policy year and continues or results in additional loss in a subsequent policy year will be treated as if all loss occurred in the year in which the occurrence began.

Question 23

The Businessowners Policy BOP - Property Coverage

12.4.5.10 Limited Coverage for Fungi, Wet Rot, Dry Rot, and Bacteria

This additional coverage provides limited coverage for fungus (i.e., mold), wet rot, dry rot, or bacteria that result from a specified cause of loss other than fire or lightning. (Coverage for mold-related losses arising out of fire or lightning is provided elsewhere in the form.)

The loss must occur during the policy period, and all reasonable means must have been used to save and preserve the property from further damage at the time of and after that occurrence. The insurer will pay for:

Answer 23

1: direct physical loss or damage to covered property caused by mold, including the cost to remove it;
2: costs to tear out and replace any part of the building or other property if needed to gain access to the mold; and
3: cost of testing performed after removal, repair, replacement, or restoration of the damaged property is completed, provided there is a reason to believe that mold is present.

Coverage is limited to $15,000 for all loss or damage arising out of all occurrences that take place in a 12-month period, regardless of the number of claims.

The 12-month period starts with the beginning of the present annual policy period. If a particular loss results in mold, the insurer will not pay more than a total of $15,000 even if it continues to be present or active or recurs in a later policy period. This additional coverage does not increase the applicable limit of insurance on covered property.

Question 24

The Businessowners Policy - Property Coverage

12.4.5.11 Other Additional Coverages

The money orders and counterfeit money additional coverage provides coverage for loss that results when an insured accepts these items– in good faith and in exchange for merchandise, money, or services – as part of normal business transactions.

A $1,000 limit applies to this additional coverage.

The pollutant clean up and removal additional coverage does what the debris removal additional coverage does not do:

it provides limited coverage for costs to extract pollutants from land or water at the insured’s premises as a result of a covered cause of loss. Coverage applies only under specified circumstances; there is a $10,000 limit for each separate 12-month policy period. The insured must report expenses within 180 days after the date of loss.

Answer 24

The preservation of property additional coverage covers direct physical loss or damage from any cause of loss if the property has been removed to another location to preserve it from damage by a covered peril. Coverage applies while the property is being moved or while it is temporarily stored at another location, but only for 30 days after the property is first moved.

The fire department service charge additional coverage covers charges that might be levied because such liability was assumed by the insured under a contract or agreement before the loss or because these charges are required by local ordinance. Coverage applies when a fire department is called to save or protect covered property from a covered cause of loss. The standard limit for this coverage is $2,500, unless a different limit is shown in the declarations.

Question 25

The Businessowners Policy - Property Coverage

12.4.5.11 Other Additional Coverages (cont.)

The water or other liquid, powder, or molten material s– additional coverage covers damage to a building that indirectly results from the escape of these items.

If the damage is otherwise covered, this additional coverage pays for necessary costs to tear out and replace any part of the building to repair damage to the system from which the material escaped.

The policy will also cover repair or replacement of damaged parts of fire extinguishing equipment if the damage results in discharge of any substance from an automatic fire protection system or is directly caused by freezing. The cost to repair the defect that caused the loss or damage is not covered.

The glass expenses additional coverage covers expenses incurred to put up temporary plates or board up openings if repair or replacement of damaged glass is delayed. It also covers expenses required to remove or replace obstructions (other than window displays) when repairing or replacing glass that is part of a building.

Answer 25

The interruption of computer operations additional coverage extends the business income and extra expense coverages to include a suspension of operations caused by an interruption in computer operations caused by destruction or corruption of electronic data.

The most that will be paid under this additional coverage is $10,000 for all loss or damage sustained in any one policy year, regardless of the number of losses or the number of premises, locations, or computer systems involved. If payment for one loss does not exhaust this limit, the balance is available for subsequent loss or damage sustained in, but not after, that policy year.

Finally, the fire extinguisher systems recharge expense additional coverage pays to recharge or replace the insured’s fire extinguishers and fire extinguishing systems if they are discharged on or within 100 feet of the premises. It also covers loss or damage to covered property caused by the accidental discharge of chemicals from a fire extinguisher or fire extinguishing system. This coverage has a per occurrence limit of $5,000.

Question 26

The Businessowners Policy BOP- Property Coverage

12.4.6 Coverage Extensions

Coverage extensions permit an insured to extend the insurance for other specified purposes. Unless otherwise provided, coverage extensions apply to property located in or on the building covered under the policy or to property located in the open or in a vehicle within 100 feet of the premises

Answer 26

Under the newly acquired or constructed property coverage extension, if the insured acquires a building at another location or builds a new building on the described premises, the newly acquired or constructed buildings are covered under the policy’s building coverage for up to $250,000 at each location.

Business personal property coverage can be extended to property, including newly acquired property, at newly acquired or constructed buildings, or to newly acquired property at the described premises.

Coverage for newly acquired business personal property is $100,000 at each location. Coverage applies for 30 days after the new premises or property is acquired or construction has begun on the new premises, until the policy expires or until the insured reports values to the insurance company, whichever occurs first.

The coverage extension for personal property off-premises extends the insurance provided by the policy to apply to the insured’s covered property while it is in the course of transit or at a premises the insured does not own, lease, or operate.

Coverage under this extension does not apply to money, securities, valuable papers and records, or accounts receivable. The most that will be paid for loss or damage under this extension is $10,000.

Question 27

The Businessowners Policy - Property Coverage
12.4.6 Coverage Extensions (cont.)

Coverage may be extended to apply to outdoor property, including outdoor fences, signs not attached to buildings, trees, shrubs and plants, and radio and television antennas, including satellite dishes.

Debris removal expense is also covered. Coverage applies only for loss by fire, explosion, aircraft, lightning, and riot or civil commotion. Coverage is limited to $2,500 and not more than $500 for any one tree, shrub, or plant.

Business personal property coverage may be extended to include personal effects owned by the insured and the insured’s officers, partners, or employees. The most the company will pay under this extension is $2,500 at each insured premises.

Answer 27

If the insured has business personal property coverage, the – valuable papers and records coverage== extension can be used to cover the costs to research, replace, or restore information on lost or damaged valuable papers and electronic or magnetic records for which duplicates do not exist. It does not apply to property held as samples or for delivery after sale or to property in storage away from the premises shown in the declarations. T

here is a maximum limit of $10,000 at each described premises, unless a higher limit is shown in the declarations. For valuable papers and records not at the described premises, the limit is $5,000.

If the insured has business personal property coverage, the– accounts receivable coverage extension– may be used to cover amounts due from customers that the insured is unable to collect because of damage from a covered loss, interest charges on loans required to offset those amounts, excess collection expenses incurred because of the loss, and other reasonable expenses required to reestablish accounts receivable records.

Limits are the same as those for the valuable papers and records coverage extension: $10,000 at the described premises and $5,000 for accounts receivable not at the described premises.

Question 28

The Businessowners Policy - Property Coverage

12.4.7 Optional Coverages

A number of optional coverages are included in the businessowners policy, but they apply only if so designated in the declarations. Optional coverages usually require an additional premium.

Answer 28

The Businessowners Policy - Property Coverage
12.4.7.1 Employee Dishonesty

Loss to business personal property and money and securities that results from dishonest acts of employees is covered by the employee dishonesty optional coverage.

Coverage applies whether the employees act alone or in collusion with others, except the insured and partners of the insured. There is no coverage for loss where the only proof is an inventory or profit and loss computation.

Coverage for an employee is canceled immediately upon discovery by the insured or any partners, members, managers, officers, or directors not in collusion with the employee of any dishonest act committed by that employee before or after he was hired by the insured.

The amount shown in the declarations is the most that will be paid for all loss or damage in one occurrence, whether one or more people or acts are involved. Only loss that occurs during the policy period is covered. The insurance company will not pay for a covered loss that is discovered after one year from the end of the policy period. This is known as – the discovery period.

Under certain circumstances, the insured has coverage under the employee dishonesty optional coverage of the current policy for losses that occurred during the previous policy period that would have been covered by that policy except that the discovery period expired. The following conditions must be met for the current policy to apply.

1: The current policy must have become effective at the time the previous policy terminated.
2; The current policy would have covered the loss had it been in effect when the loss occurred.

Question 29

The Businessowners Policy - Property Coverage

12.4.7.2. Mechanical Breakdown

Under this optional coverage, the insurance company will pay for direct damage to covered property caused by a sudden and accidental breakdown of an object, as defined by the policy, that damages the object so it needs to be repaired or replaced.

The object may be one that is owned by the insured or is in the insured’s care, custody, or control. It must be at the described premises.

Answer 29

The policy definition of object lists equipment in two main categories: certain boiler and pressure vessels and certain types of air conditioning units. The policy also defines exactly what is not considered an accident.

There is no coverage for accidents that occur while an object is being tested.

The insurance company may suspend this coverage by immediately mailing written notice to the insured if it is discovered that the object is in or is exposed to a dangerous condition. The insured will receive a pro rata refund of the premium.

Question 30

The Businessowners Policy - Property Coverage
12.4.7.3 Other Optional Coverages

The outdoor signs optional coverage provides coverage for direct physical loss or damage to all outdoor signs on the premises that are owned by or in the care, custody, or control of the insured.

The limit of insurance for this optional coverage is specified in the declarations. When this optional coverage applies, all other references to outdoor signs in the policy no longer apply.

Answer 30

The money and securities optional coverage applies to loss of money and securities used in the insured’s business as a result of theft, disappearance, or destruction.

Coverage applies while the money and securities are:

• at a bank or savings institution;
• within the living quarters of the insured, a partner, or an —employee who has custody of the property;
• at the described premises; or
• in transit between any of these places.

Question 31

The Businessowners Policy - Property Coverage
12.4.8 Limits of Insurance

The most the insurer will pay for loss or damage in any one occurrence is the applicable limit of insurance in the declarations.

Each coverage shown in the declarations has its own limits, and the per occurrence rule applies separately to each.

Some coverages have internal or inside limits. These limits are stipulated in the limits of insurance provision and in various other sections of the policy, such as the covered property, additional coverages, and coverage extensions sections.

An example is the $2,500 limit for the fire department service charge additional coverage.

Answer 31

A $1,000 per occurrence limit applies to outdoor signs attached to buildings. This provision also specifies that the limits applicable to the coverage extensions, the fire department service charge additional coverage, and the pollutant clean up and removal additional coverage are – in addition to the policy’s limits of insurance.

The businessowners policy also includes a provision that addresses inflation.

A percentage – selected by the insured from a number of options – the insurance company offers is indicated in the declarations for the building coverage. Over the policy period, the limit of insurance gradually increases until it reaches the full amount by the end of the period.

The limit for business personal property will automatically increase by 25% to provide for seasonal variations, but only if the limit of insurance for business personal property coverage in the declarations is at least 100% of the insured’s average monthly values during either the 12 months or the period the insured was in business before the loss, whichever is less.

Question 32

The Businessowners Policy - Property Coverage
12.4.9 Deductible

The standard deductible for property losses is $500.

A base deductible applies to all building and business personal property coverages, including both mandatory and optional coverages.

No deductible applies to the fire department service charge, extra expense, business income, civil authority, and fire extinguisher systems recharge expense additional coverages.

Answer 32

A separate $500 deductible applies to the money and securities, employee dishonesty, and outdoor signs optional coverages.

There is also a separate $500 deductible for the glass expenses additional coverage. These deductibles are not in addition to the base deductible.

Question 33

The Businessowners Policy - Liability and Medical Expenses Coverage

12.5.1 Liability Coverage

Business liability coverage covers the insured’s legal liability that arises from bodily injury, property damage, and personal and advertising injury.

Personal and advertising injury is injury, including consequential bodily injury, that arises out of any of the following offenses:

1: False arrest, detention, or imprisonment
2: Malicious prosecution
3: Wrongful eviction from a place a person occupies, by or on behalf of its owner, landlord, or lessor
4: Wrongful entry into a place a person occupies, by or on behalf of its owner, landlord, or lessor

Answer 33

5: Invasion of the right of private occupancy of a place a person occupies, by or on behalf of its owner, landlord, or lessor
6: Oral or written publication of material that slanders or libels a person or organization; disparages a person’s or organization’s goods, products, or services; or violates a person’s right of privacy
7: Use of another’s advertising idea in the insured’s advertisement
8: Infringement of copyright, trade dress, or slogan

Question 34

The Businessowners Policy - Liability and Medical
Expenses Coverage

12.5.1 Liability Coverage (cont.)
For a policy to cover any of the injuries or offenses we have described, the loss must take place in the coverage territory and occur during the policy period. The coverage territory for liability coverage is the following:

Answer 34

1: The United States, its territories and possessions (e.g., Puerto Rico), and Canada
2: International waters or airspace between the United States, its territories or possessions (e.g., Puerto Rico), and Canada
3: All parts of the world if the injury or damage arises out of:
a) goods or services normally made or sold by the insured in the United States, its territories and possessions (e.g., Puerto Rico), or Canada;
b) the activities of a person who is away from home on business in any of these places; or
c) personal and advertising injury offenses that take place through the Internet or similar electronic means of communication

Question 35

The Businessowners Policy - Liability and Medical Expenses Coverage
12.5.1 Liability Coverage (cont.)
Coverage also typically applies in all parts of the world if the insured’s responsibility to pay damages is determined in a suit on the merits in the United States, its territories and possessions (e.g., Puerto Rico), or Canada or in a settlement to which the insurance company has agreed.

The insuring agreement also stipulates that losses of a continuing or ongoing nature that were—prior to the policy period—known to the insured or employees authorized to report losses are not covered.

Answer 35

Under liability coverage, the insurance company accepts the right and duty to defend suits that seek damages under the policy. The insurance company has the sole right to investigate and settle claims and resulting suits. However, when the limits of insurance are used up in paying judgments, settlements, or medical expenses, the insurance company’s duty to defend ends.

Question 36

12.5.2 Supplementary Payments
The businessowners policy includes the following supplementary payments. These payments do not reduce the policy limit:

1: Expenses the Insurance Co incures
2: Up to $250 for the cost of bail bonds related to violation that arise from vehicles to which bodily injury liability applies
3: Cost of bonds to release attachments; up to the limits of insurance
4: Reasonable expenses…incurred at the Insurance Co’s request to assist in investigating or defending a claim or suit, including $250 per day for lost earnings for time off work

5: Costs the insured is required to pay because of a suit
6: Prejudgement interest the insured is required to pay, unless th insurance company makes an offer to pay the limit of insurance, and then it will not pay prejudgement interest based on the period after that offer
7: Interest that accrues after a judgement and before it is paid, offered, or deposited in court

Answer 36

If certain conditions are met, the insurer will pay the defense costs for an indemnitee—a party who is not an insured who is under contract to provide goods or services to an insured—in addition to the policy’s limit of liability and provide a defense for the indemnitee. Among the conditions that must be met for this coverage to apply are that the insured and the indemnitee must be named in the same lawsuit and the liability assumed by the insured must be covered by the policy.

Question 37

The Businessowners Policy - Liability and Medical Expenses Coverage
12.5.3 Medical Expenses Coverage

The businessowners policy also covers specified medical expenses without regard to who is at fault.

If other requirements are met, the policy will pay for medical expenses even if the insured would not have been legally liable for them or for the events that precipitated them.

The policy will pay reasonable expenses for the following:

Answer 37

First aid when an accident occurs
Medical and surgical services
Hospital services
X-ray services
Ambulance services
Professional nursing services
Dental services
Funeral services

Question 38

The Businessowners Policy - Liability and Medical Expenses Coverage

12.5.3 Medical Expenses Coverage (cont.)

To be covered, the medical expenses must be necessary expenses that result from bodily injury that occurs on or next to premises the insured owns or rents, or injury that occurs because of the insured’s business operations. The accident that causes the injury must occur in the coverage territory and during the policy period, and the medical expenses must be incurred and reported to the insurance company within one year after the accident.

Medical expenses coverage is intended to pay for such expenses incurred by the general public. Therefore, medical expenses will generally not be paid for the following:

Answer 38

Any insured (does not include the insured’s volunteer workers)

Anyone hired to work for or on behalf of any insured or any insured’s tenant

A person who is injured on a part of the premises the insured owns or rents and that the injured person normally occupies

A person (whether or not an employee of the insured) whose injury calls for benefits payable under a workers’ compensation, disability, or similar law

A person who is injured while taking part in athletics

Question 39

The Businessowners Policy - Liability and Medical Expenses Coverage
12.5.4 Exclusions

For BI and PD liability losses, the businessowners policy excludes liability:

arising out of expected or intended injury (does not apply to bodily injury that occurs when the insured uses reasonable force to protect persons or property);

assumed under contracts or agreements (does not apply to contracts that meet the policy’s definition of an insured contract or to liability the insured would have whether or not a contract or agreement existed);

Answer 39

related to liquor, but only for insureds whose business is manufacturing, distributing, selling, serving, or furnishing alcoholic beverages;

obligations under workers’ compensation, disability benefits, unemployment compensation, or similar laws;

for BI to employees that arises out of and in the course of their employment with the insured;

arising out of pollutants, including associated cleanup costs;

arising out of the ownership, maintenance, and use of aircraft, autos, and watercraft and;

arising out of the use of mobile equipment in, or while practicing or preparing for, any prearranged race, speed or demolition contest, or any stunting activity.

Question 40

The Businessowners Policy - Liability and Medical Expenses Coverage

12.5.4 Exclusions (cont.)
Also excluded is liability:

arising out of war or war-like acts;

arising from rendering or failing to render professional services;

for damage to property the insured owns, rents, or occupies, or property in the insured’s care, custody, or control;

for damage to the insured’s product or the insured’s own work;

for damage to impaired property or to property that has not been physically injured arising out of a defect or deficiency in the insured’s product or work, or a delay or failure to perform a contract or agreement;

Answer 40

for losses, costs, or expenses incurred for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the insured’s product, work, or impaired property;

for business liability or medical expenses resulting from the hazardous properties of nuclear materials;

for medical expenses that are included within the products-completed operations hazard, excluded under liability coverage or due to war and acts of war;

arising out of loss or damage to electronic data; or
arising out of violations of any law that prohibits or limits the distribution of material or information, including the federal Telephone Consumer Protection Act and CAN-SPAM Act.

Question 41

The Businessowners Policy - Liability and Medical Expenses Coverage
12.5.4 Exclusions (cont.)

The following exclusions apply specifically to personal and advertising injury losses. Not covered are personal and advertising injury:

1: caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and inflict personal and advertising injury;
2: that arises out of oral or written publication of material that occurs by or at the insured’s direction with the insured’s knowledge that it is false;
3: that arises out of oral or written publication of material that was first published before the beginning of the policy period;
4: that arises out of a criminal act committed by or at the direction of any insured;
5: for which an insured has assumed liability in a contract or agreement (does not apply to liability for damages the insured would have even if there were no contract or agreement);

Answer 41

6: arising out of breach of contract (other than an implied contract to use another’s advertising idea in the insured’s advertisement, which is covered);
7: arising out of the failure of goods, products, or services to conform with advertised quality or performance;
8: arising out of a wrong description of the price of goods, products, or services;
9: arising in connection with any actual, alleged, or threatened discharge, dispersal, seepage, or escape of pollutants as well as any requests to test for, clean up, contain, or otherwise respond to pollutants;
10: committed by insureds in the business of advertising, broadcasting, publishing, telecasting, designing Websites, or providing Internet search, access, content, or service;
11: arising out of an electronic chat room or bulletin board the insured hosts, owns, or controls;
12: arising out of infringement of copyright, trademark, patent, trade secret, or other intellectual property rights;
13: arising out of the unauthorized use of another’s name or product in the insured’s email address, domain name, or metatags; or
14: arising out of a criminal act committed by or at the direction of the insured.

Question 42

The Businessowners Policy - Liability and Medical Expenses Coverage

12.5.5 Who Is an Insured

Who is considered an insured under the businessowners policy depends on how the named insured is designated in the policy declarations: as an individual, partnership, or joint venture, limited liability company, or organization other than a partnership, joint venture, or limited liability company.

Answer 42

The Businessowners Policy - Liability and Medical Expenses Coverage

12.5.5 Who Is an Insured (cont.)

Others that are considered insureds under the businessowners policy include:

1: named insured’s employees (other than executive officers and managers) when acting within the scope of their employment;
2: organization or person (other than employees) while acting as insured’s real estate manager; and
if the named insured dies
3; any person or organization that has temporary custody of the deceased’s property, but only with regard to liability that arises out of maintenance or use of the property and only until a legal representative has been appointed, or
4: insured’s legal representative while acting within the scope of those duties.

Question 43

The Businessowners Policy - Liability and Medical Expenses Coverage
12.5.6 Limits of Insurance

The limits shown in the policy’s declarations are the most that will be paid under the circumstances described in the policy. These limits are the limits, no matter how many insureds, claims, suits, people, or organizations are involved.

The following chart illustrates the most the insurance company will pay under the businessowners policy in various circumstances:

Answer 43

The policy also includes two separate aggregate limits: one for injury or damage under the products-completed operations hazard and another for all other injury, damage, or medical expenses except fire legal liability losses. Both of the aggregates are two times the limit shown in the declarations for liability and medical expenses coverage.

(see separate foto for

Question 44

The Businessowners Policy - Conditions

12.6 Conditions

There are several sets of conditions in the businessowners policy.

The conditions that apply to the Entire POLICY are called the Common Policy Conditions. There are two sets of conditions for the property coverage:

`1: the property general conditions and
2: the property loss conditions.

The liability conditions are called the liability and medical expenses general conditions.

Most of these are standard conditions that appear in other commercial property and liability policies

Answer 44

The Businessowners Policy - Endorsements

12.7.1 Utility Services Endorsements: Direct Damage and Time Element

Endorsements for both the property and liability sections of the policy may be used to alter the coverage or to provide additional coverages.

The utility services—direct damage coverage endorsement …covers loss or damage to property caused by an interruption in water, communication, or power supply service. For coverage to apply, the property must be scheduled for coverage on the endorsement AND the service interruption must be caused by a covered cause of loss.

Here’s an example of a loss that would be covered under this endorsement. The insured, a photographer, has her developing equipment insured under a businessowners policy with the utility services—direct damage endorsement. When an electrical transformer is struck by lightning, a power surge results that damages the equipment. The businessowners policy would cover this loss.

The utility services—time element coverage endorsement …pays for loss of business income or extra expense if damage to certain utility services property located outside the covered building by a covered cause of loss results in an interruption of service to the described premises.

Question 45

The Businessowners Policy - Endorsements

12.7.2 Protective Safeguards Endorsement

The protective safeguards endorsement requires the insured to MAINTAIN the protective devices or services listed on the endorsement on specified property as a condition of the policy. The protective safeguards are identified by the following symbols:

P-1—automatic sprinkler system: any automatic fire protective system, including related supervisory services and connected sprinklers, pipes, pumps, and similar devices

P-2—automatic fire alarm system: an automatic fire alarm system that protects the entire building and is connected to a central station or reports to a public or private fire alarm station

Answer 45

P-3—security service: a security service with a guard that makes hourly rounds of the premises while the business is closed

P-4—service contract: a privately owned fire department that provides fire protection service to the premises.

P-9—any other protective system described in the endorsement.

The insurer will not pay for fire damage losses if the insured failed to keep the protective safeguard – in working order – or did not notify the insurer that the device was not working properly.

When an automatic sprinkler system is shut off due to breakage, leakage, freezing, or opening of sprinkler heads, the insurer does not have to be notified if the system can be restored within 48 hours.

Question 46

The Businessowners Policy - Endorsements

12.7.3 Hired Auto and Nonowned Auto Liability

The hired auto and nonowned auto liability endorsement covers the insured’s liability for one or both of the following:

1: Bodily injury or property damage that arises out of the maintenance or use of a hired auto by the insured or the insured’s employees in the course of the insured’s business
2: Bodily injury or property damage that arises out of the use of any nonowned auto in the insured’s business by any person

Answer 46

Hired autos are autos the insured leases, hires, or borrows, – but not from employees or members of their households or any partners or executive officers of the insured.

Nonowned autos are autos not owned, leased, or borrowed by the insured but used in the business.

These coverages are purchased separately and scheduled on the endorsement. The endorsement is available only when the insured has no other commercial auto insurance.