Summary: Insurance Services Office (ISO) has revised its businessowners program. Where before there were two property coverage forms—one providing special perils (BP 00 02 12 99) and the other named perils protection (BP 00 01 01 97), there is now one form BP 00 03 07 02. This form incorporates special perils coverage for property, liability coverage, and the policy conditions (previously BP 00 02 12 99, BP 00 06 01 97, and BP 00 09 01 97 respectively). Coverage may be changed to named perils by attaching endorsement BP 10 09 07 02 named perils. This endorsement is discussed elsewhere; see Businessowners Program Endorsements. The businessowners conditions and liability coverage are discussed elsewhere in this tab. See Businessowners Program for a discussion of eligibility and the general conditions, and see Businessowners Liability Coverage.
The following discussion focuses on the conditions and definitions applicable to the property coverages. Remember that not all insurers immediately adopt new ISO forms; many use earlier editions. Therefore, check carefully in making any coverage determinations.
Limits of insurance
Deductibles
Property loss conditions
Loss payment conditions
Additional loss conditions
Property general conditions
Property definitions
Limits of Insurance
C. Limits Of Insurance
1. The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance of Section I – Property shown in the Declarations.
2. The most we will pay for loss of or damage to outdoor signs attached to buildings is $1,000 per sign in any one occurrence.
3. The limits applicable to the Coverage Extensions and the Fire Department Service Charge and Pollutant Clean Up and Removal Additional Coverages are in addition to the Limits of Insurance of Section I – Property.
4. Building Limit – Automatic Increase
a. The Limit of Insurance for Buildings will automatically increase by the annual percentage shown in the Declarations.
b. The amount of increase will be:
(1) The Building limit that applied on the most recent of the policy inception date, the policy anniversary date, or any other policy change amending the Building limit, times
(2) The percentage of annual increase shown in the Declarations, expressed as a decimal (example: 8 percent is .08), times
(3) The number of days since the beginning of the current policy year of the effective date of the most recent policy change amending the Building limit, divided by 365.
Example:
If: The applicable Building limit is $100,000. The annual percentage increase is 8 percent. The number of days since the beginning of the policy year (or last policy change) is 146.
The amount of increase is
$100,000 x .08 x 146 divided by 365 = $3,200.
5. Business Personal Property Limit – Seasonal Increase
a. The Limit of Insurance for Business Personal Property will automatically increase by 25 percent to provide for seasonal variations.
b. This increase will apply only if the Limit of Insurance shown for Business Personal Property in the Declarations is at least 100 percent of your average monthly values during the lesser of:
(1) The twelve 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.
Analysis
This portion of the policy makes it clear that the limits of coverage applicable to the coverage extensions are additional amounts of insurance. The fire department service charge and pollutant clean up and removal additional coverages also are in addition to, and not included in, the limits of insurance. However, the additional coverage for debris removal is capped by the limit of insurance, except for an additional $10,000 per location that may be paid if the total of direct property loss and debris removal costs exceed the limit of insurance or if the debris removal expense is more than 25 percent of the sum of the deductible plus the amount paid for the direct physical loss.
Note that the businessowners form contains provisions for an automatic inflation increase, and for a seasonal business personal property increase in event of a covered loss at that time. The insured must maintain a business personal property limit of at least 100 percent of the average monthly values during the lesser of the twelve months immediately preceding the loss or the period of time the insured has been in business as of the date of loss.
Note also the limited coverage for outdoor signs. This coverage may be increased by purchasing the optional outdoor sign coverage.
Deductibles
D. Deductibles
1. We will not pay for loss or damage in any one occurrence until the amount of loss or damage exceeds the Deductible shown in the Declarations. We will then pay the amount of loss or damage in excess of the Deductible up to the applicable Limit of Insurance of Section I – Property.
2. Regardless of the amount of the Deductible, the most we will deduct from any loss or damage for Glass and under all of the following Optional Coverages in any one occurrence is the Optional Coverage/Glass Deductible shown in the Declarations:
a. Money and Securities;
b. Employee Dishonesty; and
c. Outdoor Signs.
But this Optional Coverage/Glass Deductible will not increase the Deductible shown in the Declarations. This Deductible will be used to satisfy the requirements of the Deductible in the Declarations.
3. No deductible applies to the following Additional Coverages:
a. Fire Department Service Charge;
b. Business Income;
c. Extra Expense;
d. Civil Authority; and
e. Fire Extinguisher Systems Recharge Expense.
Analysis
The standard deductible for the BP 00 03 is $500, unchanged from the previous forms. It applies to all property coverages, including optional coverages, except for business income, extra expense, civil authority and the fire department service charge. Optional deductibles of $250, $1,000, and $2,500 are available. The insured may select a separate deductible applicable to the optional coverages. In event of a loss occurring to, say, money and securities, then that deductible applies. But if there is a loss to other covered property as well as the money and securities, the deductible applying to the money and securities will be included within the property deductible, so that only one deductible applies.
There is no deductible applicable to the additional coverages of business income, extra expense, civil authority, fire department service charge, and the fire extinguisher systems recharge expense. (Business income is subject to a time deductible; see Property Definitions later in this discussion.)
Property Loss Conditions
E. Property Loss Conditions
1. Abandonment
There can be no abandonment of any property to us.
2. Appraisal
If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.
3. Duties In The Event Of Loss Or Damage
a. You must see that the following are done in the event of loss or damage to Covered Property:
(1) Notify the police if a law may have been broken.
(2) Give us prompt notice of the loss or damage. Include a description of the property involved.
(3) As soon as possible, give us a description of how, when and where the loss or damage occurred.
(4) Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance of Section I – Property. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.
(5) At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed.
(6) As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records.
Also permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records.
(7) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within sixty days after our request. We will supply you with the necessary forms.
(8) Cooperate with us in the investigation or settlement of the claim.
(9) Resume all or part of your “operations” as quickly as possible.
b. We may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed.
Analysis
These property conditions are found in the commercial property forms as well as the businessowners forms. For a discussion, see Building and Personal Property Coverage Form. Note that the form requires the insured take “all reasonable steps to protect the Covered Property from further damage,” even though the steps taken may not be reimbursable. For example, the insured cannot move covered property from his burning building into the path of a flood, and expect the reasonable expenses for doing so to be covered. The use of the word consideration has led to some confusion, in that some believe it means the insurer will consider whether or not to reimburse the expenses. Rather, in this instance, it means “recompense; payment” (Webster's Collegiate Dictionary, Tenth Edition). Indeed, many early insurance contracts began “For consideration received, we promise to…” Thus, although the expenses will not increase the limit of insurance applying to the covered loss, they may be included in the payment of the loss.
4. Legal Action Against Us
No one may bring a legal action against us under this insurance unless:
a. There has been full compliance with all of the terms of this insurance; and
b. The action is brought within two years after the date on which the direct physical loss or damage occurred.
Analysis
This clause is commonly found in property and liability coverage forms, and, simply stated, means no legal action against the company may be taken unless the terms of the policy have been complied with. The time limit for such action is within two years from the date on which the direct physical loss or damage occurred.
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