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Businessowners Policy Coverage Guide, 6th Edition
Azioni libro
Inizia a leggereLunghezza: 691 pagine6 ore
- Editore:
- The National Underwriter Company
- Pubblicato:
- Feb 22, 2017
- ISBN:
- 9781945424328
- Formato:
- Libro
Descrizione
The Businessowners Policy Form has changed many times over the years, evolving to meet the expanding insurance needs of small businesses. Some coverage has been expanded and some reduced. Businessowners Policy Coverage Guide, 6th Edition is the authoritative but quick reference for client coverage questions on complex BOP policies. Businessowners Policy Coverage Guide, 6th Edition, is the only coverage guide that enables you to: » Decide when the form may be used—and why it may be the best choice » Follow clear examples to gain direct insight into important topics » Instantly access a full copy of the form for easy reference Enhancements to this edition include: » The 2016 Form endorsements to address the exposures created by emerging technologies, privacy issues and terrorism concerns » New endorsements to cover unmanned aircraft, cyber liability, green upgrades, off-premises business income for business vehicles and revisions brought about by the extension of the Terrorism Risk Insurance Act » New endorsements related to the ISO Businessowners program » A new chapter on the American Association of Insurance Services (AAIS) Businessowners program, summarizing the primary differences between the AAIS and ISO Businessowners programs. Our respected author, Dr. George E. Krauss, CPCU, CLU, is an expert witness in insurance litigation, a business consultant for insurance organizations, and an insurance trainer. In Businessowners Policy Coverage Guide, 6th Edition, he delivers the proven, practical guidance you can apply immediately.
Informazioni sul libro
Businessowners Policy Coverage Guide, 6th Edition
Lunghezza: 691 pagine6 ore
Descrizione
The Businessowners Policy Form has changed many times over the years, evolving to meet the expanding insurance needs of small businesses. Some coverage has been expanded and some reduced. Businessowners Policy Coverage Guide, 6th Edition is the authoritative but quick reference for client coverage questions on complex BOP policies. Businessowners Policy Coverage Guide, 6th Edition, is the only coverage guide that enables you to: » Decide when the form may be used—and why it may be the best choice » Follow clear examples to gain direct insight into important topics » Instantly access a full copy of the form for easy reference Enhancements to this edition include: » The 2016 Form endorsements to address the exposures created by emerging technologies, privacy issues and terrorism concerns » New endorsements to cover unmanned aircraft, cyber liability, green upgrades, off-premises business income for business vehicles and revisions brought about by the extension of the Terrorism Risk Insurance Act » New endorsements related to the ISO Businessowners program » A new chapter on the American Association of Insurance Services (AAIS) Businessowners program, summarizing the primary differences between the AAIS and ISO Businessowners programs. Our respected author, Dr. George E. Krauss, CPCU, CLU, is an expert witness in insurance litigation, a business consultant for insurance organizations, and an insurance trainer. In Businessowners Policy Coverage Guide, 6th Edition, he delivers the proven, practical guidance you can apply immediately.
- Editore:
- The National Underwriter Company
- Pubblicato:
- Feb 22, 2017
- ISBN:
- 9781945424328
- Formato:
- Libro
Informazioni sull'autore
Correlati a Businessowners Policy Coverage Guide, 6th Edition
Anteprima del libro
Businessowners Policy Coverage Guide, 6th Edition - George E. Krauss
Index
Introduction
The Businessowners policy offered by the Insurance Services Office (ISO) brings the package policy concept to the small-to-medium-sized business market. Its origin and initial development were patterned after the Homeowners policy, which combines basic property and liability coverages for family exposures. The Businessowners policy employs that same concept in packaging basic property and liability coverages for main street businesses.
The 2002 edition of the ISO Businessowners policy was expanded substantially from the original 1997 edition from both eligibility and coverage-enhancement viewpoints. The 2006 edition maintained these revisions and included a number of additional changes that had an impact on coverage (either a reduction or broadening of coverage) and numerous editorial changes that had no affect on coverage.
The 2010 edition of the ISO Businessowners policy further expanded eligibility by raising total floor square footage from 25,000 to 35,000 and increasing annual gross sales from $3,000,000 to $6,000,000 per location. Specific new eligible business classes included grocery stores and supermarkets with gasoline sales and casual and fine dining restaurants. Due to the expanded eligibility, substantive revisions were made in the body of the policy form and over thirty new endorsements were introduced.
The 2013 edition of the ISO Businessowners policy maintains the eligibility occupancy groups of the 2010 edition and introduces over thirty major property form changes, four major liability changes, and sixteen new endorsements. Many of the Businessowners policy changes complement ISO revisions made to the commercial package program’s Building and Personal Property 2012 form and Commercial General Liability 2013 form. These revisions and enhancements provide insurance producers and underwriters with the necessary tools to meet the expanding needs of the business owners market.
Eligibility
The following are eligible occupancy groups for the Businessowners program, subject to the criteria that is noted in the following discussion. Unless otherwise noted, eligible risks may not exceed 35,000 square feet in total floor area or exceed $6,000,000 in annual gross sales at each location. Storage buildings (including business personal property) occupied by the insured, incidental to an eligible risk and not exceeding 35,000 square feet, may also be included.
Apartments (Including Residential Condominium Associations)
a. Buildings of any size. The following incidental occupancies are permitted:
(1) Offices
(2) Eligible wholesaler, mercantile, processing and service occupancies, and contractors, which in total do not exceed 35,000 square feet
(3) Contractors that do no occupy more than 7,500 square feet or more than 15 percent of the total area; otherwise, classify as a contractor office
b. Building owners’ business personal property in eligible apartment buildings
Condominium Commercial Unit-owners
Business personal property of owners of condominium units that are used for eligible mercantile, wholesaler, processing, service, office, or contractor occupancies is eligible for coverage under the Businessowners program.
Contractors
a. Contractors listed in the Businessowners Classification Table section of the Commercial Lines Manual (CLM) are the only types eligible for the Businessowners program. Any of the contractors engaged in the trades described in the Businessowners Classification Table Section of the CLM are ineligible if they engage in any combination of activities or types of operations described in Paragraph 22.B.2.
b. Contractors are subject to the following additional eligibility requirements:
(1) No more than $300,000 of annual payroll
(2) No work at a height of over three stories
(3) No more than 10 percent of the contractor’s total annual gross sales from subcontracted work
(4) No renting or leasing equipment to others
(5) No more than 25 percent of annual gross sales unrelated to installation, service, or repair operations
Convenience Food Stores, Grocery Stores, and Supermarkets
a. Definitions
(1) A convenience food store is an establishment where the primary activity is the retail sale in limited amounts of a variety of canned goods, dairy products, prepackaged meats, and other incidental grocery items. Newspapers, magazines, refreshment items, cigarettes, beer, wine, and novelties may also be sold.
(2) A grocery store or supermarket is an establishment where the primary activity is the retail sale of food, such as canned and frozen foods; fresh fruits and vegetables; and fresh and prepared meats, fish, and poultry. Items typically sold in a convenience food store may also be sold.
(3) A convenience food store, grocery store, or supermarket with gasoline sales provides for the sale of gasoline in addition to the applicable description of activities in paragraphs (1) or (2) of the CLM.
(4) A convenience food store/restaurant with gasoline sales is an establishment described in paragraphs (1) and (3) that also contains a limited cooking or fast food restaurant as defined in paragraph 9 of the CLM.
b. Eligibility—Convenience Food Stores
Eligible convenience food store risks, with or without eligible limited cooking or fast food restaurants (refer to paragraph 22.A.9. of the CLM) and gasoline sales are eligible for the Businessowners program subject to the following additional requirements:
(1) A minimum of 3,000 square feet in total floor area when the convenience food store or restaurant provides for the sale of gasoline
(2) No automobile service or repair operations
(3) No car wash operations
(4) No propane or kerosene tank filling operations
c. Eligibility—Grocery Stores/Supermarkets
Eligible grocery store or supermarket risks with gasoline sales are eligible for the Businessowners program subject to the following additional requirements:
(1) A minimum of 3,000 square feet in total floor area when the grocery store or supermarket provides for the sale of gasoline
(2) No automobile service or repair operations
(3) No car wash operations
(4) No propane or kerosene tank filling operations
Mercantile Risks
Building and business personal property for mercantile risks are eligible for coverage under the Businessowners program as listed in the Businessowner Classification Table section of the CLM.
Motels
Building and business personal property for motel risks are eligible for coverage under the Businessowners program. Motels are subject to the following additional eligibility requirements:
a. Motel buildings not to exceed three stories in height; no limitation for floor area
b. Motels with eligible restaurant occupancies permitted
c. No seasonal operations (risks that are closed for more than thirty consecutive days)
d. No bar or cocktail lounge
Offices (Including Office and Commercial Condominium Associations)
a. Buildings occupied principally for office purposes, each of which does not exceed six stories in height or 100,000 square feet in total floor area, are eligible for coverage. The following incidental occupancies are permitted:
(1) Apartments
(2) Eligible wholesaler, mercantile, processing, and service occupancies, and contractors, which in total do not exceed 35,000 square feet
(3) Contractors that do not occupy more than 7,500 square feet or more than 15 percent of the total area; otherwise, classify as a contractor office
b. Business personal property in offices that do not occupy more than 35,000 square feet in one building are eligible for coverage.
Processing and Service Risks
Building and business personal property for processing and service risks listed in the Businessowners Classification Table section of the CLM are the only types of processing and servicing risks eligible under the Businessowners program. No more than 25 percent of annual gross sales may be derived from off-premises operations.
Restaurants
Building and business personal property for the following types of restaurants and those listed in the Businessowners Classification Table section of the CLM are the only restaurants eligible for coverage under the Businessowners program.
a. Limited Cooking Restaurants
(1) Definition
Limited cooking restaurants are those where foods are prepared cold or cooked using appliances that do not emit smoke or grease-laden vapors that require an exhaust system; for example, electric sandwich grills, toasters, warming ovens, roller warmers, infrared snack warmers, microwave ovens, domestic range, domestic ovens, and pizza ovens. Not permitted are grilling, open broiling, deep fat frying, roasting, barbecuing, solid fuel cooking (for example, mesquite, charcoal, or hardwood), or other processes capable of producing grease-laden vapors requiring an exhaust system.
(2) Additional Eligibility Requirements
Limited cooking restaurants are subject to the following additional eligibility requirements:
(a) No more than 7,500 square feet in total floor area
(b) Seating capacity no greater than seventy-five
(c) With or without table service
(d) Sales of beer or wine only; sales of beer and wine no greater than 25 percent of total sales; no other liquor sales
(e) No bar or cocktail lounge
(f) Catering service (that is, service involving serving of food away from the insured’s premises) must not exceed 10 percent of total sales.
(g) No seasonal operations (risks that are closed for more than thirty consecutive days).
b. Fast Food Restaurants
(1) Definition
Fast food restaurants may include limited cooking type appliances and only the following cooking processes capable of producing grease-laden vapors requiring an exhaust system: grilling, enclosed broiling, deep fat frying, roasting, or barbecuing. Open broiling and solid fuel cooking (for example, mesquite, charcoal, or hardwood) are not permitted.
(2) Additional Eligibility Requirements
Fast food restaurants are subject to the following additional eligibility requirements:
(a) No more than 7,500 square feet in total floor area
(b) Seating capacity no greater than 150
(c) No table service
(d) Sales of beer or wine only; sales of beer and wine no greater than 25 percent of total sales; no other liquor sales
(e) No bar or cocktail lounge
(f) Catering (that is, service involving serving of food away from the insured’s premises) not to exceed 10 percent of total sales
(g) No seasonal operations (risks that are closed for more than thirty consecutive days)
(h) Installation and maintenance of an automatic extinguishing system for cooking equipment equivalent to that which is recommended by NFPA Standard #96
(3) National Fire Protection Association Standard for Ventilation Control and Fire Protection of Commercial Cooking Operations (NFPA Standard #96)
NFPA Standard #96 includes the following:
(a) An automatic extinguishing system covering hoods, ducts, and all surfaces of grills, ranges, deep fat fryers, and broilers
(b) A contract for semi-annual inspection and maintenance for the extinguishing system, hood, and ducts
(c) A manual release in the path of exit from the cooking area
(d) Temperature settings of systems with detectors above the filters or temperature settings of systems with detectors below the filters set at specified levels
(e) Portable fire extinguishers of the type described in NFPA Standard #96 that are compatible with the extinguishing agent of the hood and duct fire protection system must be available in the kitchen
(f) All deep fat fryers equipped with separate high limit controls to shut off fuel when the temperature reaches the level described in NFPA Standard #96
(g) A minimum clearance between the hood and duct and combustible construction as described in NFPA Standard #96
c. Casual Dining Restaurants
(1) Definition
Casual dining restaurants serve moderately priced food in a casual atmosphere to patrons who generally order and are served while seated and pay after eating. Take-out service and the use of a buffet may also be available. These restaurants may serve no alcoholic beverages; serve beer and wine only; or serve beer, wine, and liquor.
(2) Additional Eligibility Requirements
Casual dining restaurants are subject to the following additional eligibility requirements:
(a) No more than 7,500 square feet in total floor area
(b) Seating capacity no greater than 150
(c) Sales of beer, wine, or liquor no greater than 50 percent of total sales
(d) Catering (that is, service involving serving of food away from the insured’s premises) not to exceed 10 percent of total sales
(e) No seasonal operations (risks that are closed for more than thirty consecutive days)
(f) Installation and maintenance of an automatic extinguishing system for cooking equipment equivalent to that which is recommended by NFPA Standard #96, as described in paragraph b.(3) of the CLM
(g) No dancing
(h) No live entertainment (including karaoke) other than incidental music, such as piano playing, provided by the establishment
(i) No happy hours
or similar promotions
(j) No bar operations during hours when full table service is not also available; bar operations for the sole purpose of consuming alcoholic beverages are not permitted
d. Fine Dining Restaurants
(1) Definition
Fine dining restaurants provide quality food and alcoholic beverages prepared by highly trained chefs and served with a great deal of attention to customers by wait staff. These restaurants typically have valuable business personal property consisting of furniture, tableware, lighting, art, and other items of décor.
(2) Additional Eligibility Requirements
Fine dining restaurants are subject to the following additional eligibility requirements:
(a) No more than 7,500 square feet in total floor area
(b) Seating capacity no greater than 150
(c) Sales of beer, wine, or liquor no greater than 75 percent of total sales
(d) Catering (that is, service involving serving of food away from the insured’s premises) not to exceed 15 percent of total sales
(e) No seasonal operations (risks that are closed for more than thirty consecutive days)
(f) Installation and maintenance of an automatic extinguishing system for cooking equipment equivalent to that which is recommended by NFPA Standard #96, as described in paragraph b.(3) of the CLM
(g) No dancing
(h) No live entertainment (including karaoke) other than incidental music, such as piano playing, provided by the establishment
(i) No happy hours
or similar promotions
(j) Bar operations for customers who are seated, or waiting to be seated, in the restaurant only
(k) Maître d’ supervision of wait staff and to control customer turnover
(l) Chef supervision of food preparation and other kitchen operations
Self-Storage Facilities
Buildings and business personal property for self-storage facilities are eligible under the Businessowners program. The following additional eligibility requirements apply:
a. Self-storage facilities not to exceed two stories in height; no limitation for floor area
b. Self-storage facilities that permit cold storage or storage of industrial materials, chemicals, pollutants, and waste ineligible
Wholesale Risks
Building and business personal property for wholesale businesses listed in the Businessowner Classification Table section of the CLM are the only types of wholesale risks eligible for the Businessowners program. No more than 25 percent of annual gross sales may be derived from retail operations, and no more than 25 percent of the total floor area may be open to the public. Eligible classifications do not include the operations of manufacturers’ representatives or contractors.
Ineligible Occupancies
1. General
The following classes are not eligible for the Businessowners program:
a. Automobile repair or service stations; automobile, motor home, mobile home and motorcycle dealers; parking lots or garages; unless incidental to another otherwise eligible class
b. Bars or pubs
c. Condominium associations other than office, commercial, or residential condominiums
d. Buildings occupied in whole or in part for manufacturing
e. Insureds whose business operation involves one or more locations that are used for manufacturing
f. Household personal property
g. One or two family dwellings, unless of garden apartment variety where multiple units are grouped within a single area and under common ownership, management, and control
h. Places of amusement
i. Banks, building and loan associations, savings and loan associations, credit unions, stockbrokers, and similar financial institutions
j. Self-storage facilities that provide outdoor storage of any type of motorized vehicles, including campers and recreational vehicles
2. Contractors
The following types of contractors and/or activities are not eligible for the Businessowners program, regardless of whether they engage in eligible activities:
a. General contractor—a contractor who is responsible for managing an entire project on behalf of the client, rather than just a portion of the project; hires and coordinates the efforts of subcontractor
b. Contractors who use cranes in their operations
c. Contractors who repair, install, or service or previously repaired, installed, or serviced boilers, burglar alarm systems, automatic fire extinguishing systems, elevators, escalators, or computers
d. Contractors with products manufactured or sold under the insured’s name
e. Contractors who engage in or previously engaged in the following:
(1) Demolition, blasting, wrecking, high pressure boiler work, or liquid petroleum gas work
(2) Insulation work
(3) Lawn chemical spraying operations, except with respect to the operations of a landscape gardener, provided that such landscape gardener operations meet all standards of any statute, ordinance, regulation, or license requirement of any federal, state, or local government that apply to such operations
(4) Hazardous material or pollution abatement operations, including but not limited to the following:
(a) Asbestos
(b) Lead
(c) Radon mitigation and testing
f. Contractors who engage in the following:
(1) Sales, service, or installation of any kind of automatic opening doors or garage doors (residential or commercial)
(2) Heavy construction, including but not limited to the following:
(a) Bridge, caisson, cofferdam, dam, dike, dry dock, jetty, levee, or pier construction
(b) Cable laying and cable installation
(c) Crane or derrick installation or rigging
(d) Dredging
(e) Drilling
(f) Excavation
(g) Grading of land
(h) Iron or steel erection
(i) Pipeline construction
(j) Sandblasting
(k) Scaffolding, hoists, and tower erection
(l) Tunneling
(3) Installing, repairing, or servicing hot tubs
(4) Ship repair or painting work
(5) Shop-only
carpentry or sheet metal work
(6) Installing and repairing swimming pools
(7) Tree service or removal contracting work
(8) Waterproofing contracting operations
(9) Installing wood and coal stoves
g. Other contractors not specifically provided for in the Businessowners Classification Table section of the CLM
Building and Business Personal Property Ownership
When under one ownership, building and business personal property must be included in the same policy.
Computation of Floor Areas
Do not use basement areas not open to the public in computing floor areas.
These eligibility requirements became effective April 1, 2009. Complete details are available in the ISO Commercial Lines Manual.
Comparison of Businessowners 2010 and 2013 Forms
The following represents a comparison of the changes between the Businessowners 2010 and 2013 forms. Changes that reflect a broadening (B) or reduction (R) of coverage are indicated.
About This Book
This book uses an annotated policy format, in which a portion of the form’s language is followed by a simple interpretation. Pertinent details are included on that portion’s effect on or applicability to coverage that is afforded by the Businessowners program.
Policy language is set off by spacing and by type style. The annotations, or descriptions, are printed in larger type.
In general, the text follows the organization of the 2013 Businessowners Coverage Form. Differences among the 2010, 2006, and previous Businessowners program are explained within the discussions.
Chapter 1
Covered Property
This chapter addresses covered property that may be insured under the Businessowners policy. Property eligible for coverage is grouped into two categories: buildings and business personal property. A separate section specifically addresses the types of property not covered. The Businessowners policy is written on a special form (open peril
) basis, covering direct physical loss to covered property unless the cause of loss is excluded (addressed in Chapter 4) or subject to policy limitations (addressed in Chapter 5).
The 2010 edition was a revision to the 2006 Businessowners policy. The only substantial change to covered property made in this edition was the introduction of 2.j as a category of property not covered. This category expressly states that covered property does not include animals unless owned by others and boarded by the insured, or, if owned by the insured, only as stock while inside a building. This revision represented a reduction of coverage.
The 2013 edition is the successor to the 2010 Businessowners policy. It maintains the revisions that were incorporated into the 2010 edition, including the use of a single special property coverage form. Optional specified peril coverage is still available by adding the Named Perils Endorsement, BP 10 09. Three substantive changes are introduced in the 2013 edition. First, in section A.1.b., the form affirmatively identifies structures in which business personal property may be located as covered property. It extends the distance for which coverage applies to business personal property from 100 feet from the building or structure, or 100 feet from the described premises, whichever is greater. This revision is specifically beneficial to business owners who are tenants in high-rise buildings. Second, in sections A.2.d-e., lawns, trees, shrubs, or plants that are part of vegetated roofs (common in green
building construction) are now part of the building. The third revision in section A.2.i. states that electronic data that is integrated in and operates or controls the building’s elevator, lighting, heating, ventilation, air conditioning, or security system is now part of the building. Both vegetated roofs and electronic data as defined in this section are now considered part of the building and subject to the policy’s applicable perils, limits of insurance, and other applicable policy terms and provisions. These revisions represent a broadening of coverage.
Property eligible for coverage is defined on the form’s first two pages. Covered property is classified and defined as buildings (A.1.a) and business personal property (A.1.b.). Coverage applies to these two categories if a limit of insurance is indicated in the declarations. A separate section specifically addresses the types of property not covered (sections A.2.a-j).
In order for coverage to apply under the policy, a direct physical loss must occur to covered property at the premises described in the declarations. The direct physical loss must be caused by or result from a covered cause of loss. This chapter addresses what property is covered, what property is not covered, and what qualifies as direct physical loss.
Introduction
Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is and is not covered.
This statement advises the insured of his responsibility to read the policy. It specifically states that certain provisions restrict coverage and counsels the insured to be aware of his rights and duties. Moreover, it advises the insured to note what is covered and what is not covered. Its purpose is to motivate the insured to read the policy and to clarify any coverage issues prior to loss.
Throughout this policy the words you
and your
refer to the Named Insured shown in the Declarations. The words we
, us
and our
refer to the Company providing this insurance.
This provision identifies the two parties to the contract—that is, the named insured and the insurance company. The definition of insured for liability coverage purposes differs from the meaning of named insured for property coverage purposes:
In Section II–Liability, the word insured
means any person or organization qualifying as such under Paragraph C. – Who Is An Insured.
The 2013 edition, like the 2002, 2006, and 2010 forms, incorporates the Section II—Liability coverage into a single coverage form. In the 1997 and prior Businessowners policy programs, liability coverage was provided on a form that was separate from the property coverage (BP 00 06). This sentence expands the word insured to mean any person or organization that qualifies as an insured under paragraph II. C. Who Is An Insured. In other words, liability coverage is expanded to include other parties that are performing duties in conjunction with the insured business. These other parties that are provided insured status for liability coverage are addressed in Chapter 11.
Definitions
Other words and phrases that appear in quotation marks have special meaning. Refer to Paragraph H. Property Definitions in Section I – Property and Paragraph F. Liability and Medical Expenses Definitions in Section II – Liability.
Certain words and phrases that appear in quotation marks within the policy are defined terms. This is important because very often whether a property item fits or does not fit a definition may determine if coverage exists for that item. If an item is not defined within the policy, the common dictionary meaning most favorable to the insured is used.
Note that some terms are not defined in these sections but are defined within the body of the coverage form. This often occurs when a term or phrase is specific to a coverage. For example, see the covered property (A.1.) and buildings (A.1.a.) sections explained later in this chapter. Both definitions are contained within the policy body and not in the definitions section. Throughout the form, many such examples exist, all of which are vital to coverage interpretation.
Insuring Agreement
SECTION I – PROPERTY
A. Coverage
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
This part of the policy is the property insuring agreement. It sets forth which types of property are covered and which are not. This insuring agreement requires that four elements be present in order for coverage to be considered.
First, the loss must be a direct physical loss. This means a direct physical consequence of a particular peril. It requires actual physical damage to the property. Examples of direct physical losses include fire, windstorm, or vandalism damage to property. After the loss occurs there must be a reduction in the value of the property. Direct physical losses are separate from indirect or business-type losses. Indirect losses (also known as consequential losses) are not covered under this coverage provision, although they are covered under the additional coverages section of the policy.
Indirect losses result from a direct physical loss. Examples of indirect losses include loss of business income and the incurring of extra expenses as the result of a direct physical loss. For example, a fire destroys a covered office building. The direct physical loss is the destruction of the building. The loss of operational income during the reconstruction period is an indirect or consequential loss that results from the fire. It is a consequence of the fire. Business losses that result from market conditions or obsolescence factors, which are incurred in the normal transaction of business, are not covered. Examples include reductions in the value of real estate caused by market conditions or loss due to the functional obsolescence of a building or a technologically outdated computer. Such operational losses are not covered under any part of the policy.
Second, the loss must be to covered property. This refers to property that is specified or scheduled within the policy. Certain property is specifically listed as not covered. Property not covered is addressed later in this chapter.
Third, the loss must occur at the described premises specified in the declarations. Limited off-premises coverage is provided under the coverage extensions which are discussed in Chapter 3.
Fourth, the loss must result from a covered cause of loss. Since the property coverage is based on special perils coverage, causes of direct physical loss are covered unless specifically excluded or limited. More restrictive property coverage is available by attaching the Named Perils Endorsement (BP 10 09) to the policy. As noted previously in this chapter, the named perils endorsement was introduced in the 2002 program and continues with the 2006, 2010, and 2013 editions. Its purpose is to permit coverage to be written on a named peril basis, under which the cause of loss must be listed on the form in order to trigger coverage. The Named Perils Endorsement parallels the coverage that previously existed under the 1997 Businessowners Standard Property Coverage form.
Covered Property
1. Covered Property
Covered Property includes Buildings as described under Paragraph a. below, Business Personal Property as described under Paragraph b. below, or both, depending on whether a Limit Of Insurance is shown in the Declarations for that type of property. Regardless of whether coverage is shown in the Declarations for Buildings, Business Personal Property, or both, there is no coverage for property described under Paragraph 2. Property Not Covered.
a. Buildings, meaning the buildings and structures at the premises described in the Declarations, including:
(1) Completed additions;
(2) Fixtures, including outdoor fixtures;
(3) Permanently installed:
(a) Machinery; and
(b) Equipment;
(4) Your personal property in apartments or rooms furnished by you as landlord;
(5) Personal property owned by you that is used to maintain or service the buildings or structures or the premises, including;
(a) Fire extinguishing equipment
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;
(6) If not covered by other insurance:
(a) Additions under construction, alterations and repairs to the buildings or structures;
(b) Materials, equipment, supplies and temporary structures, on, or within 100 feet of the described premises, used for making additions, alterations or repairs to the building or structures.
This section describes which types of property are covered. It includes buildings and structures at the premises described in the declarations. Common examples of buildings insured under the Businessowners form include office and apartment buildings. Structures are objects that are attached to the ground at the premises described in the declarations. Common examples of structures insured under the Businessowners form include garages and storage sheds. Both buildings and structures qualify for coverage if they are described in the declarations and a limit of insurance is indicated. It is important to clearly describe the property that is to be insured in the declarations. For example, if a policy is written describing only one building with one limit of insurance, no coverage would apply to additional buildings or structures located on the premises. Therefore, a declarations page might show that insurance applies to an office building, a garage, and a detached storage building—all at 100 Main Street. If a second detached storage building also existed at 100 Main Street, it would not be covered because the Businessowners policy requires that buildings be specifically listed in order for coverage to apply to them.
Completed additions are additions to a building. They are automatically covered by definition. A completed addition may create an immediate underinsurance problem in the event the insured fails to increase coverage equal to the value of the addition once it is completed. Additions under construction are covered if no other insurance applies under A.1.6. However, once the addition is finished, the amount of building coverage should be increased to reflect the added value or a coinsurance problem may arise.
The term fixtures refers to items that are attached to a building that cannot be removed without affecting the value or aesthetics of the structure. Examples of fixtures include intercoms, public address systems, permanently installed blinds, and custom drapes. Also included in this category are outdoor fixtures, which include such items as lights, flag poles, parking stops, mailboxes, and signs.
Examples of machinery and equipment are built-in scales, pulleys, refrigerated lockers, and air-conditioning or heating equipment. Unlike the fixtures category, machinery and equipment must be permanently installed.
It is a distinction without a difference since the items listed as examples of fixtures are commonly installed in permanent positions while heating and air conditioning equipment may be permanently installed portable items.
Personal property owned by the named insured in an apartment, rooms, or common areas furnished by the insured as a landlord is covered. Examples include appliances that are not considered part of the building—such as free-standing stoves and refrigerators—as well as furniture and other personal property normally found in an apartment or in common areas. The inclusion of common areas was introduced in the 2002 program and represented a broadening of coverage from the 1997 program. The 2006, 2010, and 2013 editions maintain this language.
Other types of personal property owned by the named insured and used to maintain or service the buildings, structures, or premises are also covered. This category includes property such as snowplows, lawn tractors, fire extinguishers, outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, or laundering.
If no other insurance applies (such as a builders risk policy or another commercial policy) to additions under construction, alterations, and repairs to buildings and structures, then this Businessowners policy provides coverage. As noted previously, the value of any additions should be added to the building coverage limit upon completion, or an underinsurance problem may develop.
Section 6(b) provides coverage for materials, equipment, supplies, and temporary structures located on or within 100 feet of the described premises. For example, if a building supply truck delivers materials on, or adjacent (within 100 feet) to the business owner’s property, coverage applies to the building materials as long as they are to be used for alterations or repairs to insured buildings or structures. This coverage (for building materials) applies only to materials slated for use with existing buildings and structures. If the insured is constructing a new building or structure, this coverage does not apply. In those cases, the business owner should secure a separate policy to cover the exposure.
Business Personal Property
b. Business Personal Property located in or on the building or structures at the described premises or in the open (or in a vehicle) within 100 feet of the buildings or structures or within 100 feet of the premises described in the Declarations, whichever distance is greater, including:
(1) Property you own that is used in your business;
(2) Property of others that is in your care, custody or control, except as otherwise provided in Loss Payment Property Loss Condition E.5.d.(3)(b);
(3) Tenant’s improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:
(a) Made a part of the building or structure you occupy but do not own; and
(b) You acquired or made at your expense but cannot legally remove;
(4) Leased personal property which you have a contractual responsibility to insure, unless otherwise provided for under Paragraph 1.b. (2); and
(5) Exterior building glass, if you are a tenant and no Limit Of Insurance is shown in the Declarations for Building property. The glass must be owned by you or in your care, custody or control.
This section describes the types of business personal property that are covered. It includes business personal property if located in the building or structure, on the building or structure, outside the building or structure, in the open, or in a vehicle within 100 feet of the building or structure or within 100 feet of the premises described in the declarations, whichever distance is greater. The 2013 form introduces two revisions in A.1.b.. First, the form now affirmatively identifies structures, in addition to buildings,
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