Eligibility requirements are contained in the businessowners subdivision of the Insurance Services Office (ISO) Commercial Lines Manual (CLM). Unless otherwise noted, eligible risks cannot exceed 25,000 square feet in total floor area, or exceed $3,000,000 in annual gross sales at each location. Incidental storage buildings not exceeding 25,000 square feet and occupied by the insured may be included. Additional qualifications may be set out in state exception pages.

Apartment buildings of any size, including residential condominium associations are eligible for coverage. Eligible incidental occupancies are (1) offices; (2) eligible wholesaler, mercantile, service or processing occupancies, and contractors which in total do not exceed 25,000 square feet; and (3) contractors which do not occupy more than 7,500 square feet or more than 15 percent of the total area. (Contractors exceeding this limit are classified separately.)

Office buildings, including office condominium associations, occupied principally for office purposes, are eligible. Buildings cannot exceed six stories in height or 100,000 square feet in total floor area. Eligible incidental occupancies are (1) apartments; (2) eligible wholesaler, mercantile, service or processing occupancies and contractors which in total do not exceed 25,000 square feet; and (3) contractors which do not occupy more than 7,500 square feet or more than 15 percent of the total area.

Buildings occupied principally for eligible wholesaler, mercantile, service or processing purposes and contractors which do not exceed 25,000 square feet in total floor area are eligible. Storage buildings occupied by the insured, which are incidental to an eligible wholesaler, mercantile, service or processing risk and do not exceed 25,000 square feet, may be included.

Motels not exceeding three stories may be insured. There is no floor area restriction. Motels with eligible restaurant operations are eligible. Seasonal operations, or motels with bars or cocktail lounges, are not eligible.

Restaurants meeting eligibility requirements may be insured.

Convenience stores, including food/restaurant/gasoline convenience stores are eligible (additional requirements apply; refer to manual).

Self-storage facilities not exceeding two stories in height, except for those permitting cold storage or storage of industrial materials, chemicals, or waste, are eligible.

The following business personal property is eligible for coverage under the BOP property policy:

Building owners' personal property in eligible apartment buildings.

Business personal property in offices which do not occupy more than 25,000 square feet in any one building.

Business personal property of mercantile, wholesaler, service or processing operations which do not exceed 25,000 square feet in total floor area and $3,000,000 in annual gross sales at any insured location.

Condominium owners' business property in units that are used for eligible wholesaler, mercantile, service, processing or office occupancies.

Note that when under one ownership, building and personal property must be included in the same policy.

The following types of business are the only processing and service risks eligible for coverage under the Businessowners Policy. The CLM rules require that no more than 25 percent of gross sales may be derived from off-premises operations. Remember, though, that the BOP may be used to insure a wide variety of organizations from (a) air conditioning equipment sales to (w—there is no z) wood products sales not otherwise classified.

Appliance and Accessories – installation, servicing or repair – commercial or household

Bakeries (with baking on premises)

Barber shops

Beauty Parlors and Hair Styling Salons including Nail Salons

Copying and Duplicating (previously photocopy services)

Dental Laboratories

Engraving

Funeral homes or chapels

Jewelry repair (previously watch, clock, and jewelry repair)

Laundries and dry cleaning or dyeing receiving stations

Laundries and dry cleaning stores – using petroleum solvents and having fewer than three pick-up stations

Laundries and dry cleaning stores – using synthetic solvents and having fewer than three pick-up stations

Lithographing

Mailbox or packaging stores (a new category)

Mailing or addressing companies

Nail Salons (a new category)

Photoengraving

Photographers

Printing

Shoe Repair Shops

Tailoring or Dressmaking Establishments – Custom

Taxidermists

Television or Radio Receiving Set Installation or Repair

There are many classes that are not eligible for the businessowners program. Businesses connected with the auto business, such as repair or service stations, dealerships, or parking lots or garages are not eligible. The exception is if one of these is incidental to an eligible business. Bars and pubs are ineligible for coverage.

Condominium associations other than office or residential condos are not eligible. Places of amusement, banks, savings and loans, credit unions, stockbrokers and similar financial institutions may not be insured. Self storage facilities that provide outdoor storage to motorized vehicles or campers and recreational vehicles may not be insured.

Finally, household personal property or one or two family dwellings, unless of the type where multiple units are grouped together and under one ownership, management, or control, are not eligible.  

As stated earlier, there is no longer a requirement to attach BP 00 09 01 97 to each businessowners policy. The twelve conditions that apply to all the policy's coverages are now section III of the BP 00 03 07 02. Many of these common policy conditions are restatements of conditions found in the commercial property program and are described more fully in that discussion; see Building and Personal Property Coverage Form.

Analysis

The cancellation reasons are the same as in the prior BOP forms. The first named insured may cancel the policy by providing advance written notice of cancellation, by mail or other delivery.

The insuring contract allows the insurer to cancel the policy with varying notice requirements (five, ten, or thirty days) for a variety of reasons. Because vacant or unoccupied buildings are susceptible to vandalism or arson they pose a significant exposure. Therefore, if a building has been vacant or unoccupied for sixty consecutive days the insurer can cancel with five days notice. It is important to note the policy meaning of unoccupied. Buildings with 65 percent of rental units or floor area vacant are unoccupied. Before this clarification, a few articles of furniture could be left in a unit and thus render a basically unused building occupied. This wording allows cancellation in instances when, for example, the bottom floor is in use, but the floors above are unrented or unused. The sixty day requirement does not apply to seasonal unoccupancy or buildings undergoing construction or renovation.

Similarly, buildings where repairs have not commenced or been contracted for within thirty days of initial payment of loss present an unusual exposure and cancellation is permitted. The assumption would be that the money has been pocketed. If a building is under an order to vacate or has been declared unsafe by governmental authorities, cancellation may be issued. This does not mean that if a covered loss results in a premises being declared unsafe or put under order of vacancy the insurer can cancel and thus avoid payment for the loss. The intent here is to preclude continuing on a risk insurers would have no wish to insure.

Other signs of increased exposure and thus uninsurability are when salvageable fixtures have been removed and not replaced—for example, the furnace, or when the insured fails to provide heat or utility service to the building for thirty days (except in a period of seasonal unoccupancy), or fails to pay outstanding property taxes for more than one year (other than where there is a genuine dispute with the authorities over the payment of taxes).