Topics covered:

Introduction

Overview—property

Overview—liability

Eligibility

Introduction

 AAIS updated its businessowners coverage forms with 2012 editions: BP 0100 06 12 and BP 0200 06 12. Both forms include liability coverages. AAIS offers a variety of endorsements to tailor the businessowners form to meet specific needs.

 Overview—Property

 Two AAIS businessowners forms are available: BP 0100, Businessowners Standard Policy, and BP 0200, Businessowners Special policy.

 The Businessowners Standard Policy provides named perils coverage for property and business income losses. The following are the named perils covered by the form: explosion, fire or lightening, riot or civil commotion, sinkhole collapse, smoke, sonic boom, sprinkler leakage, transportation, vandalism, vehicles and aircraft, volcanic action, and windstorm or hail.

 The Businessowners Special Policy provides coverage against risks of direct loss for property and covers loss of income. Certain exceptions apply.

 Building coverage includes buildings and structures described in the declarations; completed additions, indoor and outdoor fixtures; machinery and equipment that are a permanent part of the building; a landlord’s personal property used to maintain or service the premises; personal property used to maintain or furnish the premises; building glass; and additions, alterations, or repairs being made to the building, and materials, equipment, supplies, and temporary structures used in making additions, repairs, or alterations—if not covered elsewhere.

 Business personal property is also covered in the described building, in the open, or if vehicles—if within 100 feet of the described premises. Personal property includes the insured’s interest in business personal property of others in its care, custody, or control; business personal property the insured owns; business personal property leased to the insured for which it has a contractual obligation to provide coverage; exterior building glass owned by the insured or in the insured’s care, custody, or control (if no limit is shown on the declarations for building coverage); and the insured’s use interest in tenant’s improvements.

 Up to one year of earnings and extra expense coverage is provided when business income is lost due to a covered cause of loss.

 Overview—Liability

 The liability section of the businessowners forms includes coverage for bodily injury and property damage liability, medical payments, fire legal liability, and personal and advertising injury.

 Eligibility

 The businessowners program provides property, loss of income, and liability coverages for seven categories of eligible risks.

 1. Habitational. Building coverage is available for apartment buildings, residential condominium buildings, and one-to four-family rental dwellings are eligible. No building may exceed six stories or sixty units. Incidental occupancies can include offices, eligible retail, wholesale, service, or processing occupancies that do not occupy more than 25,000 square feet in total. Floor areas do not include basement areas that are not open to the public. Building owners’ business personal property contained in eligible buildings is also eligible.

 2. Office. Office buildings and office condominium buildings are eligible. Buildings cannot exceed six stories and must have a total floor area under 100,000 square feet. These buildings may also contain the incidental occupancies of apartments and eligible retail, wholesale, service, or processing occupancies occupying less than 25,000 square feet. Again, floor areas do not include basement areas not open to the public.

 Business personal property belonging to either the office occupants or the building owners is eligible. The total square footage for an eligible office occupant cannot exceed 25,000 ( square feet in a single building.

 3. Restaurants. Restaurants or properties with commercial cooking facilities on the premises that are open to the general public are eligible (such as a condominium building that also houses a small restaurant), but these restrictions apply: the total restaurant area cannot exceed 7,500 square feet; sales of alcohol cannot exceed 25 percent of total sales; seasonal operations closed for more than thirty consecutive days are not eligible; annual gross sales cannot exceed $3,000,000 at any insured location. One caveat: liquor liability coverage is not available under the AAIS program. Floor areas do not include basements not open to the public.

 4. Retail, service, or processing. Buildings occupied principally by eligible retail, service, and processing operations are eligible. If the insured’s business is a service or processing operation, at least 75 percent of the annual gross sales must be derived from on-premises operations. Eligible classifications are shown in the manual. The total area of the building must not exceed 25,000 square feet. Storage buildings occupied by the insured are also eligible as long as they are incidental to the eligible retail, service, or processing operation and not over 25,000 square feet. Basement areas not open to the public should not be counted within the square footage.

 The business personal property of eligible retail, service, or processing operations is also eligible. Annual gross sales must not exceed $3,000,000 at any insured location.

 5. Warehouses. Warehouses used solely for private storage of the insured’s goods are eligible, as are the contents. Self-storage warehouses used to store the property of others are also eligible, and no square footage restrictions apply.

 When self-storage warehouses are written, coverage C – loss of income is extended to include loss of rental income resulting when a space cannot be rented because of covered loss. Legal liability for customer’s goods ($25,000 each occurrence; this limit may be increased) is included, as well as liability due to lockout sale, removal, or disposal of property. This coverage is subject to a $5,000 annual aggregate. Endorsement B 0735 is used for this coverage.

 Business personal property of customers who rent storage space in the warehouse is not eligible.

 6. Wholesale. The manual lists eligible wholesale operations classifications. Wholesale risks cannot have more than 25 percent of annual gross sales from retail operations and no more than 25 percent of the total open floor area open to the public. The total area of the building cannot exceed 25,000 square feet (not counting a basement area not open to the public

 Storage buildings and the business personal property in insured-occupied storage buildings is also eligible. The storage buildings may not exceed 25,000 square feet in total floor area and must be incidental to the eligible wholesale operation.

 7.Miscellaneous. Some eligible classifications do not fit in the other categories. The business personal property of an otherwise eligible tenant is eligible if a multiple occupancy building includes both eligible and ineligible operations. Convenience stores with food sales and with or without gasoline sales are eligible with some exceptions—stores with auto repair or service, car washes, gasoline sales of 75 percent or more of total gross sales, and propane or kerosene tank filling are not eligible.

 Buildings leased to others for use as bank, credit union, or other financial institutions offices are eligible. Pet stores that own or keep animals are eligible, but coverage for animals is limited to boarded animals and not those owned by the named insured, except the name insured’s stock that is kept inside buildings.

 The following classifications are not eligible for the businessowners program: automobile business, including dealers, repair, service, or salvage; bars; churches; condominium buildings (except for office or residential); contractors (unless off-premises operations are loss than 25 percent of annual gross sales); farms; financial institutions (except for buildings leased to others as bank, credit union, or other financial institutions offices); household personal property; manufacturing (except for eligible classifications); parking lots or garages (unless incidental to an otherwise eligible classification); and places of amusement.