Summary: Insurance Services Office (ISO) has revised the businessowners program. Under the new program, the property and liability coverages and the general conditions have been incorporated into the current form BP 00 03 07 02. Therefore, the BP 00 01 01 97 (standard form), BP 00 02 01 97 (special form), BP 00 09 01 97 (conditions), and BP 00 06 01 97 (liability) forms have been withdrawn.
In many respects, the liability coverages on the BP 00 03 07 02 are comparable to the occurrence version of ISO's commercial general liability (CGL) coverage form. Consequently, the businessowners insured has essentially the same scope of coverage for premises and operations, products and completed operations, advertising and personal injury, and medical payments as an insured with the CGL form. However, there are some differences between the two forms, as described subsequently in this discussion. For a further discussion of the CGL provisions, see [IDL:CGL Definitions.xml^"Commercial General Liability Definitions"],[IDL:CGL Cvg Fm - Cvg A .xml^"CGL Coverage Form—Coverage A"], [IDL:CGL Cvg Fm - Cvg B.xml^"CGL Coverage Form—Coverage B"], [IDL:CGL Med Pyaments.xml^"Medical Payments"], and [IDL:General Provisions of CGL.xml^"General Provisions of the CGL"]. Print subscribers can find this information in the Public Liability section of the Casualty and Surety volume.
Following is a discussion of the liability coverages in the BP 00 03 07 02. Many insurers may not have adopted the current form, so take this into account when making coverage determinations.
Topics covered:
Business liability coverage
Supplementary payments
Medical expenses
Business liability exclusions
Exclusions applicable to medical expenses
Nuclear energy exclusion
Who is an insured
Limits of insurance
Liability and medical expenses conditions
Liability definitions
Business Liability Coverage
1. Business Liability
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury”, “property damage”, or “personal injury and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury”, “property damage”, or “personal injury and advertising injury” to which this insurance does not apply. We may at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result. But:
(1) The amount we will pay for damages is limited as described in Paragraph D – Liability And Medical Expenses Limits Of Insurance in Section II – Liability; and
(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements or medical expenses.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Paragraph f. Coverage Extension – Supplementary Payments.
Analysis
The most noticeable difference between the businessowners liability form and the CGL is format. In the businessowners liability form, bodily injury and property damage liability as well as advertising and personal injury liability are all insured under one coverage called “business liability.” In contrast, the CGL insures bodily injury and property damage liability under coverage A, and advertising and personal injury through coverage B. The businessowners liability form also provides medical expenses coverage which is equivalent to medical payments coverage (coverage C) of the CGL.
b. This insurance applies:
(1) To “bodily injury” or “property damage” only if:
(a) the “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;
(b) The “bodily injury” or “property damage” occurs during the policy period; and
(c) Prior to the policy period, no insured listed under Paragraph C.1. Who Is An Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known before the policy period.
(2) To “personal and advertising injury” caused by an offense arising out of your business, but only if the offense was committed in the “coverage territory” during the policy period.
c. ”Bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph C.1. Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim, includes any continuation, change or resumption of “bodily injury” or “property damage” after the end of the policy period.
d. ”Bodily injury” or “property damage” will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph C.1. Who Is An Insured or any “employee” authorized by you to give or receive notice of an “occurrence” or claim:
(1) Reports all, or any part, of the “bodily injury” or “property damage” to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the “bodily injury” or “property damage”; or
(3) Becomes aware by any other means that “bodily injury” or “property damage” has occurred or has begun to occur.
e. Damages because of “bodily injury” include damages claimed by any person or organization for care, loss of services or death resulting at any time from the “bodily injury”.
Analysis
The only difference in 1.a. through 1.e. between the current CGL form and the businessowners liability coverages is that the CGL form places item 1.b.(2) in coverage section B – personal and advertising liability.
The current businessowners form, like the CGL form, has been revised to state that the insurance applies only if no insured or employee authorized to receive notice of an occurrence or claim knew prior to the policy period that bodily injury or property damage had occurred. If any of these listed insureds or employees had such knowledge, any continuation of the bodily injury or property damage will be considered to have been known before the policy period and therefore will not be covered.
This language has arisen from the case of Montrose Chemical Corporation v. Admiral Insurance Company, 913 P.2d 878 ( Cal. 1995); for more information on this language and the CGL form, see [IDL:CGL Cvg Fm - Cvg A.xml^"CGL Coverage Form—Coverage A", Casualty & Surety, Public Liability section^CGL Coverage Form—Coverage A]. However, bodily injury or property damage which occurs during the policy period, and was not known to have occurred prior to the policy period, will include any continuation of the injury or damage occurring after the end of the policy period.
There are three ways injury or damage may be deemed to have been known to occur. First, the injury or damage is reported to the insurer. Second, an insured or another authorized person receives written or verbal claim for damages because of the injury or property damage. Third, an insured or other authorized person becomes aware by any other means—a TV story, perhaps—that injury or damage has occurred.
Damages claimed because of bodily injury include damages claimed by any other person for care, loss of services, or death resulting from the bodily injury.
f. Coverage Extension – Supplementary Payments
(1) In addition to the Limit of Insurance of Section II – Liability we will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
(a) All expenses we incur.
(b) Up to $250 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which Business Liability coverage for “bodily injury” applies. We do not have to furnish these bonds.
(c) The cost of bonds to release attachments, but only for bond amounts within our Limit of Insurance. We do not have to furnish these bonds.
(d) All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim of “suit”, including actual loss of earnings up to $250 a day because of time off from work.
(e) All costs taxed against the insured in the “suit”.
(f) Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the Limit of Insurance, we will not pay any prejudgment interest based on that period of time after the offer.
(g) All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within our Limit of Insurance.
(2) If we defend an insured against a “suit” and an indemnitee of the insured is also named as a party to the “suit”, we will defend that indemnitee if all of the following conditions are met:
(a) The “suit” against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an “insured contract”;
(b) This insurance applies to such liability assumed by the insured;
(c) The obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same “insured contract”;
(d) The allegations in the “suit” and the information we know about the “occurrence” are such that no conflict appears to exist between the interests of the insured and the interests of the indemnitee;
(e) The indemnitee and the insured ask us to conduct and control the defense of that indemnitee against such “suit” and agree that we can assign the same counsel to defend the insured and the indemnitee; and
(f) The indemnitee:
(i) Agrees in writing to:
i. Cooperate with us in the investigation, settlement or defense of the “suit”;
ii. Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the “suit”;
iii. Notify any other insurer whose coverage is available to the indemnitee; and
iv. Cooperate with use with respect to coordinating other applicable insurance available to the indemnitee; and
(ii) Provides us with written authorization to:
i. Obtain records and other information related to the “suit”; and
ii. Conduct and control the defense of the indemnitee in such “suit”.
(3) So long as the conditions in Paragraph 2. are met, attorneys' fees incurred by us in the defense of that indemnitee, necessary litigation expenses incurred by us and necessary litigation expenses incurred by the indemnitee at our request will be paid as Supplementary Payments. Notwithstanding the provisions of Paragraph B.1.b.(2) Exclusions in Section II – Liability, such payments will not be deemed to be damages for “bodily injury” and “property damage” and will not reduce the limits of insurance.
Our obligation to defend an insured's indemnitee and to pay for attorneys' fees and necessary litigation expenses as Supplementary Payments ends when:
(a) We have used up the applicable limit of insurance in the payment of judgments or settlements; or
(b) The conditions set forth above, or the terms of the agreement described in Paragraph 2.f. above are no longer met.
Analysis
The insurer promises to pay the cost of investigation and defense of a claim or suit. Additional payments under this coverage extension include up to $250 for the cost of bail bonds required because of accidents or violations involving a vehicle to which businessowners liability coverage applies. Loss of earnings incurred by an insured to assist in investigation or defense at the insurer's request are paid up to $250 per day. Costs taxed against the insured, prejudgment interest awarded against the insured, and interest accrued after entry of a judgment and before the insurer has paid are included.
Contractual liability—that is, where the insured has assumed the liability of another—is the subject of many of the supplementary payments provisions. The suit must name both the insured and the insured's indemnitee, and must seek damages for which the insured has assumed liability under an insured contract as defined. (See Liability Definitions below.) Then, if certain other conditions are met, the insurer agrees to defend the indemnitee.
Those conditions include: the insurance must apply to such liability; the insured must have assumed the obligation to defend; there is no conflict of interest between the insured and the indemnitee; the insured and indemnitee must allow the insurer to direct the defense of the suit and to provide the same counsel for both; and the indemnitee must agree in writing to cooperate with the insurer.
The insurer's obligation to the indemnitee ends when the applicable limit of insurance has been used up in the payment of a judgment or settlement, or when the conditions outlined are no longer being met.
2. Medical Expenses
a. We will pay medical expenses as described below for “bodily injury” caused by an accident:
(1) On premises you own or rent;
(2) On ways next to premises you own or rent; or
(3) Because of your operations; provided that:
(a) The accident takes place in the “coverage territory” and during the policy period;
(b) The expenses are incurred and reported to us within one year of the date of the accident; and
(3) The injured person submits to examination, at our expense, by physicians of our choice as often as we reasonable require.
b. We will make these payments regardless of fault. These payments will not exceed the Limits of Insurance of Section II – Liability. We will pay reasonable expenses for:
(1) First aid administered at the time of an accident;
(2) Necessary medical, surgical, x-ray and dental services, including prosthetic devices; and
(3) Necessary ambulance, hospital, professional nursing and funeral services.
Analysis
Although the insuring agreement for medical expenses is identical to that in the CGL form, the applicable exclusions are located later in the policy. In order to be covered, an accident must take place within the coverage territory as defined, and during the policy period. The accident must occur on premises owned by or rented to the insured business, on ways next to the owned or rented premises, or occur because of the insured's operations. For example, the insured's business might be an appliance dealership. While installing a dishwasher, the insured employee accidentally drops it on the customer's foot. The medical expenses arising out of this accident will be covered.
The payments are available regardless of negligence or fault on anyone's part. If the customer in the example above was asked to move out of the way, and failed to do so, the payments are still available up to the section II limit of liability ($5,000 on a per-person basis) for medical expenses.
1. Applicable To Business Liability Coverage
This insurance does not apply to:
a. Expected Or Intended Injury
”Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.
b. Contractual Liability
”Bodily injury” or “property damage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) That the insured would have in the absence of the contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured contract”, provided the “bodily injury” or “property damage” occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an “insured contract”, reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of “bodily injury” or “property damage”, provided:
(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same “insured contract”; and
(b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.
c. Liquor Liability
”Bodily injury” or “property damage” for which any insured may be held liable by reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.
Analysis
Similarly to the CGL form, the businessowners liability encompasses certain contractual liability exposures, as well as liability the insured would have had if no contract existed. This is exception (1) to exclusion b. Exception (2) states that if the insured has assumed the liability of another, but would be liable for bodily injury or property damage even if no such contract existed, the contractual liability exclusion does not apply. To see how this works, the insured may have signed a lease agreement in which he agrees to hold the owner of the building which houses the business harmless in event of bodily injury occurring on the premises. This lease is thus an “insured contract,” the meaning of which will be discussed later. (See Liability Definitions below.) The insured negligently fails to clean up water on the floor inside his business, and a customer slips and falls and is injured and sues both the building owner and the business. The insured would be liable for the injury even without the contract. But because of the insured contract, the insured has agreed to assume the building owner's liability as well as his own.
Exclusion c. liquor liability applies only if the insured business has to do with alcoholic beverages—distributing, selling, manufacturing, serving, or furnishing. Therefore, liability arising out of an incident in which alcohol played a part, such as an office party, would be covered so long as alcoholic beverages were not in some manner the insured business. Coverage may be purchased for some activities. See [IDL:BOP Endts - GP Vol.xml^"Businessowners Program Endorsements", Fire & Marine, Commercial Property section^Businessowners Program Endorsements].
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