PF&M AT A GLANCE

ISO BOP PROGRAM

The purpose of the ISO Businessowners Program (BOP) is to provide smaller businesses a package of insurance similar to the Commercial Package Policy (CPP). Certain endorsements and additional coverages are available to customize the coverage. In July 1, 2002, ISO announced significant enhancements and other form and coverage changes to both the property and liability sections of the BOP, including adding property coverage that is essentially an expansion of what was found in the Special Property Policy (SPP). These changes are consistent with the latest round of revisions to the Commercial General Liability (CGL) Policy and the Commercial Property Policy.

Background

The ISO Businessowners Program brings the “homeowners’’ approach to packaging insurance for businesses, whereby the selection of an amount of insurance on a building and/or contents automatically includes a broad range of additional coverages for an indivisible package premium. The latest edition of the BOP, like its predecessors, is designed for small and medium-sized apartment and residential condominium associations, office and office condominium associations, mercantile risks, wholesale operations, small or artisan contractors, small fast-food or limited-cooking restaurants, convenience stores with gas pumps, and laundry and dry cleaning operations. The BOP continues to be available to a substantial number of service or processing operations.

Companies not affiliated with ISO offer similar coverage for smaller businesses. Also, individual companies have long offered their own forms, similar to the ISO BOP. Typically, carriers that have developed their own forms have targeted a particular niche market.

For smaller operations, a BOP is generally preferable to a CPP. Built-in coverages include (but are not limited to) debris removal, automatic increase in building insurance, automatic seasonal increase, personal property off premises, business income and extra expense. Additionally, the BOP is not subject to coinsurance provisions and provides replacement cost coverage.

Almost all retailers, wholesalers, small contractors, artisan contractors and convenience stores (including those with gas pumps) are eligible for BOP coverage. Note that such operations do not qualify for BOP coverage if their premises exceed 25,000 square feet in total floor area or they have gross annual sales greater than $3 million per location. Small to medium apartment and condominium properties, small to medium offices, non-manufacturers and some limited service/processing risks are eligible under standard ISO guidelines. Limited-cooking and fast-food restaurants with up to 7,500 square feet and under $1 million in gross sales are also eligible. Most companies have filed deviations in eligibility and now offer the agent a variety of options. It is not uncommon to see some manufacturing and larger retailers covered under the BOP form or an enhanced version of the form.

What is covered

Buildings coverage in the BOP applies to buildings and structures at the premises described in the declarations, including: completed additions; permanently installed fixtures; machinery and equipment; personal property owned by the landlord in apartments or rooms furnished by the landlord; outdoor fixtures (Note: outdoor fixtures need not be permanently installed to be covered); and personal property owned by the insured that is used to maintain or service the buildings and structures on the premises, including fire extinguishing equipment, outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing and laundering.

Also covered as part of the building if not separately covered by other insurance are: additions under construction; alterations and repairs; and materials, equipment, supplies and temporary structures on or within 100 feet of the described premises that are used for making alterations or repairs.

Business personal property coverage applies to business personal property in or on the buildings at the described premises, in the open or in a vehicle within 100 feet of the described premises. Business personal property is defined as: property owned by the insured and used in the business; property leased by the insured for which the insured has a contractual responsibility to provide insurance; property of others in the insured’s care, custody and control to the extent of the insured’s liability plus the insured’s cost of labor, materials or services on the property; and tenant’s improvements and betterments.

Businessowners liability coverage provides comprehensive protection for third-party claims, conforming to the simplified monoline liability per-occurrence form to the maximum extent possible. There is no claims-made form. Specifically, the BOP liability section provides liability and medical expense coverage where the limit applies on a per-occurrence basis to bodily injury, property damage and medical expenses; personal injury and advertising injury on a per-person or per-organization basis; and products-completed operations coverage as an annual aggregate. A medical expense limit of $5,000 per person applies. A general aggregate limit that is two times the liability and medical expense per-occurrence limit applies, except to the products-completed operations hazard. A fire legal liability limit, independent of the general aggregate, applies to each fire or explosion. A minimum of $50,000 is noted, but higher amounts may be selected. The limit will appear on the declarations page. Fire damage legal liability also applies to a building temporarily occupied by the insured with the permission of the owner. Mobile equipment is covered while indirectly involved in the preparation of a prearranged racing, speed or demolition event.

The business liability exclusions parallel the simplified monoline Commercial General Liability form. Most companies make use of the pollution exclusion endorsement. There is no professional liability coverage.
The Businessowners Property coverage form covers risks of direct physical loss, except as limited under “Limitations” or specifically excluded under “Exclusions.”

The following property is not covered except as noted: aircraft, autos, motor trucks and other vehicles subject to motor vehicle registration; bullion (protection is available only through the optional burglary and robbery coverage); money and securities; contraband; land, water, growing crops or lawns; outdoor fences; radio or television antennas, including satellite dishes; detached signs (except as provided for under Coverage Extensions); trees, shrubs and plants (except as provided for under Coverage Extensions); and watercraft (including motors and accessories) while afloat.

ISO publishes established rate tables in the Commercial Lines Manual (CLM). Provisions for credits, increased limits, etc., are made. Individual companies may employ variations by filing.

Please note that this is only an overview of this coverage. A thorough discussion of this coverage form may be found in the PF&M Analysis from Rough Notes.

Agency OnLine subscribers, please refer to PF&M Section 192.4-2A, 192.4-2B and 192.4-2C ISO Businessowners Coverage Form Analysis for a more in-depth discussion of this coverage part. *