Chapter 11: Businessowners Policy

Question 1

Purpose of Businessowners Policy (BOP)

Answer 1

provides property & labiality coverage for small/medium sized businesses

Question 2

Coverages automatically included in BOP

Answer 2

-Business Income & Extra Expense Coverage, up to 12 months; income from dependent properties
-Inflation guard
-Peak season coverage (up to 25% of business personal property)
-Glass expense and fire extinguisher system recharge expense

Question 3

BOP- other information
*loss replacement basis
*coinsurance?

Answer 3

• Special Form
• Insurance to value requirement; requires limit of insurance equal to 80% or more of the full RC of the property immediately before the loss

Question 4

BOP- Optional coverages

Answer 4

outdoor signs, money/securities, employee dishonesty, equipment breakdown

Question 5

9 Risks eligible for coverage

Answer 5

*meant for low risk businesses
-apartment building
- office buildings
- Mercantile, processing, service risks (bakeries, barber shops)
- Contractors; annual payroll doesn’t exceed $300,000 and no work done over 3 stories
- Convenience stores; w/ minimum of 3,000 sq. ft
- Motels; under 3 stories, no bar/lounge/seasonal
- Restaurants; limited to 7,500 sq. ft, max seating 150, limited cooking 75, beer/wine 25% of sales, casual/fine dining alcohol sales 50%
- Storage; no more than 2 stories, no chemicals, industrial material, cold storage
-Wholesale Risks; no more than 25% retail sales and 25% are open to public

Question 6

10 ineligible risks

Answer 6

*takes it out of low risk
- Manufacturers
- Banks
- Wholesalers not specified
- Amusement parks
- Processing and servicing
- Auto dealers, repair/service stations, parking lots/garages
- Household personal property
- Restaurants/bars/pubs (too much alcohol)
- Businesses located in building w/ ineligible processing or manufacturing operations
- Contractors (heavy construction, demolition, larger general contractors)

Question 7

6 property included under the building

Answer 7

• Completed additions
• Fixtures
• Permanently installed machinery/equipment
• Personal property in apartments
• Personal property used to service/maintain the building
• additions in progress, w/n 100 ft of premise

Question 8

BPP covered

Answer 8

insured’s personal property located in/on the building described on the dec pages or in the open (vehicle) w/n 100 ft. of the described premises

Question 9

10 property not covered

Answer 9

• aircraft/auto
• money or securities
• contraband
• land, water, growing crops/lawns
• outdoor fences, radios, antennas, signs, trees/shrubs
• watercraft while afloat
• accounts, bills, food stamps, other evidences of debt
• computers permanently installed or designed in aircraft, watercraft, truck or vehicle
• electronic data
• animals

Question 10

Causes of Loss

Answer 10

*similar to CP Causes of Loss- special form
insured for risks of direct physical damage unless otherwise excluded/limited

Question 11

Concurrent Causation exclusions

Answer 11

• weather conditions; excluded events
• acts or decisions
• negligent work

Question 12

limit of insurance for outdoor signs attached to buildings

Answer 12

$1,000

Question 13

How much coverage is provided under BPP limit- seasonal increase

Answer 13

25%; only applies if the limit of insurance is 100% of the average monthly values during the 12 months prior to the loss

Question 14

How does vacancy affect the property coverage

Answer 14

if the property is vacant for more that 60 consecutive days, policy will pay nothing for losses arising from vandalism, sprinkler leakage (unless protected from freezing), building glass breakage, water damage, theft/attempted

Question 15

Loss Valuation Clause under Section 1

Answer 15

will pay a specified amount for losses

Question 16

Optional Coverage: Outdoor Signs

Answer 16

coverage to all outdoor signs at insured premises; limit of liability on dec pages, open perils basis with few exclusions (wear/tear), subject to the deductible

Question 17

Optional Coverage: Money and securities

Answer 17

theft, disappearance or destruction of the insured’s money/securities while on premise, transit, bank, or living quarters of insured/employee; limit is purchased separately for inside/outside premises

Question 18

Optional Coverage: employee dishonesty

Answer 18

loss of business, personal property, money/securities caused by a dishonest employee and discovered w/n 1 year from policy expiration
*limits $10,00 on premises and $5,000 off premises

Question 19

Optional Coverage: equipment breakdown

Answer 19

sudden breakdown of pressure, mechanical, or electrical machinery/equipment that necessitates repair/replacement; must be owned or in the care of the insured at the described location

Question 20

Period of Restoration

Answer 20

begins 72hrs after time of direct physical loss/damage for business income loss OR immediately after loss/damage for extra expense coverage; caused by covered loss on premises; ends on the earlier of the date when the property should be repaired, replaced, rebuilt with reasonable speed/quality OR date when business is resumed at new location

Question 21

Coverages under Section 2- Liability

Answer 21

COV A&B are combined under Business Liability
COV C is called Medical Expenses

Question 22

How does the BOP liability coverage format differ from CGL

Answer 22

BOP is only written on an occurrence basis

Question 23

Supplementary Payments

Answer 23

same as CGL

Question 24

two differences in exclusions under the BOP compared to CGL

Answer 24

The Aircraft, Auto or Watercraft- nonowned less than 51ft in length
Professional Services Exclusion- bodily injury, property damage, personal injury, advertising injury, due to rendering/failing to any professional service

Question 25

Who is an insured

Answer 25

chart pg. 18

Question 26

Included in the policy premium are basic limits: what are they
*liability, medical payments, damage to premises rented

Answer 26

Liability $300,000 per occ. and $600,000 aggregate
Medical Payments $5,000
Damage to Premises Rented to you of $50,000

Question 27

5 limits within Businessowners Liability

Answer 27

1. Liability & Medical Expense Limit- any one occurrence
2. Medical Expenses Limit- per person limit, reduces General Aggregate limit
3. Damage to Premises Rented to You
4. Products/Completed Operations- during policy period, no matter how many claims
5. General Aggregate- injury/damage/medical occurrences; twice the liability/medical limit

Question 28

Products and Completed Operations hazard

Answer 28

bodily injury/property damage occurring away from premises & arising out of your product. Liability coverage for consumption of insured’s product on insured’s premises (fast food)

Question 29

Product and Completed Operations vs. CGL
*what makes it different

Answer 29

Includes liability coverage for consumption of insured’s product on insured’s premises (fast food)

Question 30

Common Policy Conditions: Changes and who can make them

Answer 30

same as CPP; only first named insured to request changes to policy with insurance company’s consent

Question 31

Common Policy Conditions: How does Other Insurance differ from the CGL

Answer 31

BOP is excess over any other insurnace

Question 32

Common Policy Conditions: Recovery Against Others to Us (Subrogation)
*property vs. liability loss

Answer 32

Property- insured may waive right of recovery prior/after loss
Liability- insured may waive rights prior, not after loss

Question 33

Common Policy Conditions: Rights and Duties Under this Policy (Assignment)

Answer 33

insured’s rights/duties may not be transferred w/o insurer’s written consent; except in case of death of named insured. If insured dies, company will insure the legal representative of the insured for 180 days or until end of policy, whichever is longer (unless property is sold)

Question 34

Examination of Books: Common Policy Condition

Answer 34

permits insurance company to examine the insured’s record/books up to 3 years from the policy expiration date

Question 35

Endorsement: Hired and Non-Owned Auto Liability

Answer 35

provides liability insurance for Business Auto exposures; entity that does not own any auto and does not have a Commercial Auto Policy

Question 36

Hired Auto

Answer 36

any auto hired, rented, leased, or borrowed by the business

Question 37

Non-Owned Auto

Answer 37

auto not owned, leased, borrowed by insured that is used in connection with the insured’s business

Question 38

Endorsement: Protective Safeguards

Answer 38

*open applies to peril of fire
identify protective safeguards for premium discount; subject to suspension for not working/shut off during claim

Question 39

Endorsement: Utility Services- Direct Damage

Answer 39

pays for loss to the insured’s property resulting from an interruption of utility services (water, communication, power)
*must arise from direct damage to utility company from a covered cause of loss

Question 40

Endorsement: Utility Services- Time Element

Answer 40

provides coverage for a loss of income or extra expenses arising from a loss of the utility service
*must arise from a covered cause of loss