In the midnight, moonlight hour
He's walking that lonely lonely mile
And every time I do
I keep seeing this picture of you

Not exactly the way Cat Stevens wrote it, but you get the idea.

Add in the fact that I'm finally getting around to reading the investment book, “A Random Walk Down Wall Street.” Seems walking, whether through the evening, a song or a good book, is a great way to rediscover forgotten gems or learn something new.

Which, of course, brings us to ­insurance.

When was the last time you enjoyed the simple pleasure of “walking” through a favorite insurance form, just to revisit and confirm old perceptions, or perhaps to uncover new potential gems useful to prospects and insureds?

Related: Read “No Reruns“

For example, consider the supposedly simple, “commoditized” businessowners' policy, fondly known as the BOP (it even sounds musical). Thanks to a recent email query from alert reader Alex, I was inspired to revisit ISO's latest edition of the BOP (BP 00 03 07 13) and lo, the many ­memories revived and new possibilities overlooked did I find.

Keeping in mind you can take this same stroll and analysis with any form or endorsement, let us note just a few of my journey's highlights.

• 53 pages. This isn't a form, it's a book! Which means there are no doubt many interesting wording connections, limitations and provisions just lurking within the weeds, waiting to trip up the unwary agent or, worse, insured. “Commodity”? I think not.
• Exterior building glass. The good news? It's automatically considered part of business personal property (BPP) for tenants who have no building coverage and yet own or are responsible for the glass. The possible bad news? How many agents actually calculate the value of such glass and make sure the amount for BPP is adequate? Leaving out that valuation—which could be a significant amount—may wreak some havoc on the following two provisions.
• Coinsurance. When the BOP was first released, much was made of the fact there was no coinsurance clause in the form. You received full replacement cost on all property not specifically ­subject to actual cash value loss settlement. Underwriting was meant to ­control any attempt at gross underinsurance.

All that fell by the wayside when ISO inserted the following clause into the property loss payment condition: “(1) At replacement cost without ­deduction for depreciation, subject to the following:..” And guess what follows? Surprise! “(a) if, at the time of loss the Limit of Insurance on the lost or damaged property is 80% or more of the full replacement cost of the property immediately before the loss…”

Sure sounds like coinsurance to me. Yet that word, so prominently labeled as a specific additional condition in the regular commercial property forms, appears nowhere in the BOP. Nor is it prominently displayed on the declarations page (BP DS 01 07). Even the endorsement to remove this requirement and replace it with the previous full replacement cost coverage is called “Removal of Insurance-To-Value Provision” (BP 04 83). Now leave out the value of exterior glass (or the oft-overlooked tenant's improvements and betterments—TIB) and you could definitely find yourself “walking that lonely, lonely mile” come claim time.

• Seasonal personal ­property limit—seasonal increase. I've written on this “trap within a trap” before. Although the provision begins by promising an automatic built-in “peak season ­endorsement” of 25 percent (or other different percentage if shown in the declarations), the form adds: “The increase described in Paragraph 5.a. will apply only if the Limit Of Insurance shown for Business Personal Property in the Declarations is at least 100% of your average monthly values during the lesser of: (1) The 12 months immediately preceding the date the loss or damage occurs; or (2) The period of time you have been in business as of the date the loss or damage occurs.”

Okay, let's do the math. Last year your insured averaged $100,000 BPP per month except for his peak season when he needed $125,000. He wants the same coverage this year. Easy, right? Write the BPP limit for $100,000 and voila! Seasonal increase to the rescue. Except it's not. Using the preceding numbers: 9 months at $100,000 plus three months at $125,000 equals an annual total of $1,295,000. Divide that by 12 and you get an average monthly value required for the seasonal increase to apply of $107,916.67. Any BPP limit of less than that amount and how much seasonal increase does our happy insured get? Nada. Zip. Nothing. Now consider the possibility even those original values overlooked that exterior glass and/or tenants; improvements and betterments.

• Business income: length of ­coverage limitation. One of the truly great inclusions introduced by the original BOP is the “actual loss of business income” coverage. Outstanding and without limit—in amount. There is, however, the possibly painful limit of the “period of restoration” to a maximum of “12 consecutive months after the date of direct physical loss or damage.”

Might be fine for your everyday minor damage, but when catastrophic losses an an annual occurrence, that generous 12 months may suddenly seem to go by in a flash, with months and perhaps years of restoration yet to be done before the business can reopen or fully restore its income. Can you say “Katrina” or “Sandy”?

• Business income: Ordinary payroll limitation. Depending upon the business, how the BOP defines “ordinary payroll” may differ widely from what the insured thinks. Best to get that one nailed down in advance, because coverage for whatever payroll the term ultimately includes comes to a screeching halt 60 days following the date of direct physical loss or damage.
• Other property “bonuses.” One of the nice features of the BOP package is the litany of included additional coverages normally requiring separate endorsements or coverage forms. The issue you want to uncover with your “walk” through these provisions is the contrast between the generosity of the coverage description and the meagerness of the internal coverage limit.

For example, “business income from dependent properties” is a dynamite inclusion, until you read a little further and find the most that will be paid is a not-so-generous $5,000. Likewise, “interruption of computer operations” is a nice touch, but the limit of $10,000? Not so great. Moral? Be certain to review all coverage extensions and additions to be sure the limitations, definitions, restrictions and coverage amounts don't render an otherwise nice feature essentially moot for a given insured's needs. Then find out how to fix the problem, whether that be a mere entry in the declarations, adding an endorsement or possibly the need for an entirely separate coverage form in addition to the BOP.

• Business liability limits. Who decided that for every business insured under a BOP (and in truly soft markets that could be almost your entire book) needs aggregate limits (one for products/completed operations and one for all other claims) precisely twice the liability and medical expenses limit? And that “2X” is hard-wired into the form wording. What if the insured may find a $1 million liability and medical expenses limit just fine, but has potential exposure requiring a much higher aggregate?

Unlike a CGL where you can simply declare higher limits on the ­declarations page, a BOP needs an endorsement or a separate liability policy. And while looking at business liability, did you notice that, unlike the CGL, personal and advertising injury is included within the “per occurrence” BOP limit rather than having a separate limit subject to the general aggregate? Better think long and hard with your insured who has a high need for PI/AI coverage when setting that liability and medical expenses limit.

Related: Read “Choose Wisely“

Given the BOP's 53 pages, there are many more potentially interesting coverage twists and turns along the path as you walk through the form. And many a carrier has its own version of the BOP that may provide endless trails into potential claim-time swamps and hollows.

And that is just the BOP. Think of the myriad journeys possible when you consider all of the other key forms and endorsements you use regularly. And the pitfalls you may uncover. Consider the added value of knowing how to truly provide advice and counsel to your clients on avoiding, moderating or maximizing their impact.

Don't ignore the dangers or fail to truly understand what coverage you are providing. To reference another great song by the Tremeloes, “Silence is Golden” is not a great tactic when E&O looms in the forest.

Rather, heed the advice of “Here Comes My Baby.” To put that great lyric into insurance terms:

In the midnight, moonlight hour Keep walking that lonely formly mile Cause everytime you do You'll keep seeing the opportunity for you.