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BUSINESS OWNER’S POLICY
CHARACTERICTICS AND PURPOSE
Many organizations are insured under “business owners policies” instead of the more cumbersome type of
commercial package policy that includes the various coverage parts such as commercial property, boiler
and machinery, crime and inland marine. Typically, business owners policies provide, in one form, most of
the property coverages needed by small to medium-sized businesses. A business-owners policy ordinarily
includes building and contents coverage, business income and extra expense coverage and, for an
additional premium, crime, boiler and machinery and inland marine coverages. Liability coverage, like that
of Commercial General Liability Coverage Form, is also included in the policy.
The Business Owners Policy provides coverage for the small to medium sized business market. The BOP is
a replacement cost policy written on a Standard or Special Form basis. Industry guidelines permit this type
of policy for use by apartment buildings, office buildings, mercantile, service and processing occupancies.
Examples of eligible risks are bakery shops, deli’s, dry cleaners, TV/VCR repair shops, etc.
BUSINESS OWNER’S COMMON POLICY CONDITIONS
The conditions in the Business Owner’s Policy (BOP) are similar to the conditions of the Commercial
Package Policy (CPP) explained in Chapter 6. They are as follows:
CANCELLATION
TOP 1. First Named Insured as shown in Declarations may cancel the policy by mailing or delivering
advance written notice of cancellation to the insurer.
2. Insurer may cancel the policy by mailing or delivering, to the First Named Insured, written
notice of cancellation at least:
a. Five days before the effective date of cancellation if any one of the following conditions exists
at any building that is covered property in the policy
(1) the building has been vacant or unoccupied 60 or more consecutive days except for:
(a) seasonal unoccupancy
(b) buildings in the3 course of construction, renovation or addition
(ii) after damage by a covered cause of loss, permanent repairs to the building:
(a) have not started
(b) have not been contracted for within 30 days of initial payment of loss
(iii) the building has
(a) an outstanding order to vacate
(b) an outstanding demolition order
(c) been declared unsafe by governmental authority
(iv) fixed and salvageable items have been or are being removed from the building and are not being replaced. This does not apply to such removal that is necessary or incidental to any renovation or remodeling
(v) failure to:
(a) furnish necessary heat, water, sewer service or electricity for 30 consecutive days or
more, except during a period of seasonal unoccupancy
(b) pay property taxes that are owing and have been outstanding for more than one year
following the date due, except that this provision will not apply where the insured is
in a bona fide dispute with the taxing authority regarding payment of such taxes
b. 10 days before the effective date of cancellation if the insurer cancels for nonpayment of premium c. 30 days before the effective date of cancellation if the insurer cancels for any other reason
3. The insurer will nail or deliver the notice to the First Named Insured’s last known mailing
address. Notice of cancellation will state the effective date of cancellation. The policy period
will end on that date.
4. If the policy is canceled, the insurer will send the First Named Insured any premium refund due.
If the insurer cancels, the refund will be pro rata. If the First Named Insured cancels, the refund
may be less than pro rata. The cancellation will be effective even if the insurer has not made or
offered a refund.
5. If notice is mailed, proof of mailing will be sufficient proof of notice.
TOP CHANGES – the policy contains all the agreements between the insured and the insurer concerning
the insured afforded. The First Named Insured shown in the Declarations is authorized to make changes in
the terms of the policy with our consent. The policy’s terms can be amended or waived only by
endorsement issued by the insurer and made a part of the policy
CONCEALMENT, MISREPRESENTATION OR FRAUD – the policy is void in any case of fraud
by the insured as it relates to the policy at any time, it is also void if the insured or any other insured, at any
time, intentionally conceals or misrepresents a material fact concerning:
1. The policy
2. The covered property
3. The insured’s interest in the covered property
4. A claim under the policy
EXAMINATION OF BOOKS AND RECORDS – the insurer may examine and audit the books of
the insured as they related to the policy at any time during the policy period and up to three years afterward.
INSPECTIONS AND SURVEYS – the insurer has the right, but is not obligated to:
1. Make inspections and surveys at any time
2. Give the insured reports on the conditions found
3. Recommend changes
Any inspections, surveys, reports or recommendations related only to insurability and the premiums to be
changed. The insurer does not make safety inspections. The insurer will not undertake to perform the duty
of any person or organization to provide for the health or safety of workers or the pubic. The insurer does
not warrant that conditions:
1. Are safe or healthful
2. Comply with laws, regulations, codes or standards
This condition applies not only to the insurer, but also to any rating, advisory, rate service or similar
organization, which makes insurance inspections, surveys, reports or recommendations.
TOP INSURANCE UNDER TWO OR MORE COVERAGES – If two or more of the policy’s coverages
apply to the same loss or damage; the insurer will not pay more than actual amount of the loss or damage.
LIBERALIZATION- if the insurer adopts any revision that would broaden the coverage under the
policy without additional premium within 45 days prior to or during the policy period, the broadened
coverage will immediately apply to the policy.
OTHER INSURANCE
1. If is other insurance covering the same loss or damage, the insurer will pay only for the amount
of covered loss or damaged in excess of the amount due from the other insurance whether the
insured can collect on it or not. But the insurer will not pay more than the applicable limit of
Insurance.
2. Business Liability Coverage is excess over any other insurance that insures for direct physical
loss or damage.
3. When the insurance is excess, the insurer will have no duty under Business Liability Coverage
to defend any claim or “suit” that any other insurer has a duty to defend. If no other insurer
defends, the first insurer will undertake to do so; but will be entitled to the insured’s rights
against all those other insurers.
PREMIUMS
1. The First Named Insured shown in the Declarations:
a. Is responsible for the payment of all premiums
b. Will be the payee for any return premiums paid
2. The premium shown in the Declarations was computed based on rates in effect at the time the
policy was issued. On each renewal, continuation or anniversary of the effective date of the
policy, the insurer will compute the premium in accordance with their rates and rules in effect
at that date.
3. With the consent of the insurer, the insured continue the policy in force by paying a
continuation premium to each successive one-year period. The premium must be:
a. Paid to the insurer prior to the anniversary date
b. Determined in accordance with paragraph 2 above
The insurer’s forms in effect at this time will apply, the insured does not pay the continuation premium, the policy will expire on the first anniversary date that premium is not received by
the insurer.
4. Undeclared exposures or change in the insured’s business operation, acquisition or use of
locations may occur during the policy period that is not shown in the Declarations. If so, the
insurer may require an additional premium. That premium will be determined in accordance
with the insurer’s rate and rules then in effect.
TOP PREMIUM AUDIT
1. The policy is subject to audit if a premium designated as an advance premium is shown in the
declarations. The insurer will compute the final premium due when they have determined the
insurer’s actual exposures.
2. Premium shown in the policy as advance premium is a deposit premium only. At the close of
each audit period the insurer will compute the earned premium for that period. Audit premiums
are due and payable on notice to the First Named Insured. If the sum of the advance and audit
premiums paid for the policy period is greater than the earned premium, the insurer will return
the excess to the First Named Insured.
3. The First Named Insured must keep records of the information needed by the insurer for
premium computation and send the insurer copies at such times as this information may be requested. BUSINESS OWNER’S POLICY
TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO THE INSURER
1. Applicable to Business-owners Property Coverage: if any person or organization to or for whom
the insurer makes payments under the policy has rights to recover damages from another, those
rights are transferred to the insurer to the extent of the payment made by the insurer. That person
or organization must do everything necessary to secure the rights of the insurer and must do
nothing after loss to impair these rights. These rights against another party may be waived by the
insured, in writing:
a. Prior to a loss to the covered property
b. After a loss to covered property or if, at the time of loss, that party is one of the following:
(i) someone insured by the insurer
(ii) a business firm:
(a) owned or controlled by the insured
(b) that owns or controls the insured
(iii) a tenant of the insured
The insured may also accept the usual bills of lading or shipping receipts limiting the liability of
carriers.
This will not restrict the insurance of the insured.
2. Applicable to Business Owners Liability Coverage: if the insured has rights to recover all or
part of any payment the insurer has made under the policy, those rights are transferred to the
insurer. The insured must do nothing after loss to impair these rights. At the request of the
insurer, the insured will bring “suit” or transfer those rights to the insurer and help the insurer
enforce them. This condition does not apply to Medical Expenses Coverage.
TRANSFER OR INSURED’S RIGHTS AND DUTIES UNDER THE POLICY – the insured’s rights and
duties under the policy may not be transferred without the written consent of the insurer except in the case of the death
of an individual Named Insured. In case of the death of an individual Named Insured, the rights and duties will be
transferred to a legal representative, but only while acting within the scope of duties as the legal representative for the
deceased. Until the legal representative is appointed, anyone having proper temporary custody of the property will have
these rights and duties, but only will respect to that property.
BUSINESS OWNER’S POLICY COVERAGE FORMS
TOP STANDARD FORM – the Standard Form provides for coverage on a named peril basis. They include:
1. Fire
2. Lightning
3. Explosion
4. Windstorm and Hail
5. Smoke
6. Riot or Civil Commotion
7. Aircraft or Vehicles
8. Vandalism
9. Sprinkler Leakage
10. Sinkhole Collapse
11. Volcanic Eruption
12. Transportation (property in transit)
SPECIAL FORM – this coverage provides for risk of direct physical loss unless specifically excluded in
the policy.
PROPERTY COVERED – coverage is provided for:
1. Coverage A – Buildings which includes:
a. complete additions
b. office additions
c. fixtures, including outdoor fixtures
d. permanently installed machinery and equipment
e. personal property to service the business property such as fire extinguishing equipment, outdoor
furniture, floor coverings and appliances used for refrigerating, ventilating, cooking, dishwashing or laundering
f. personal property in apartments or rooms furnished by “you” as a landlord
g. if not covered by other insurance, additions under construction, alterations and repairs to the
buildings or structures, materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the buildings or structures
2. Coverage B – Business Personal Property which includes:
a. furniture
b. stock
c. fixtures
d. machinery
e. property in the care, custody and control
f. tenants improvements and betterments
g. leased personal property
h. property owned by the insured used in the business
TOP PROPERTY NOT COVERED – covered property does not include:
1. Aircraft, automobiles, motor trucks and other vehicles subject to motor vehicle registration
2. Money and securities except as provided in the Money and Securities Optional Coverage or
Employee Dishonesty Optional Coverage
3. Contraband or property in the course of illegal transportation or trade
4. Land (including land on which the property is located, water, growing crops or lawns
5. Outdoor fences, radio or television antennas (including satellite dishes) and their lean-in wiring, masts
or towers, signs (other than signs attached to buildings), trees, shrubs or plants, all except as provided
in the Outdoor Property Coverage Extension or Outdoor Signs Optional Coverage
6. Watercraft (including motors, equipment and accessories) while afloat
PROPERY LOSS CONDITIONS – the following are similar to the conditions found in other policies.
They are:
1. Abandonment – there can be no abandonment of any property to the insurer.
2. Appraisal – in the event the insurer and insured disagree on the amount of loss, standard appraisal
procedures must be followed:
a. Either party may request appraisal in writing
b. Each party will select a competent and impartial appraiser
c. These appraisers will select an umpire
d. If any two agree on the amount of loss the decision is binding
e. If they cannot agree either may request that a judge of a court having jurisdiction make the selection.
f. Each party will pay its chosen appraiser
g. Other expenses of the appraisal and umpire will be shared equally
h. The insurer will still retain their right to deny the claim if there is an appraisal.
3. Duties in the event of a loss or damage
a. The insured must see that the following are done in the event of loss or damage to covered property:
(i) notify the police if a law may have been broken
(ii) give prompt notice of the loss or damage including a description of the property involved to the insurer
(iii) as soon as possible, give the insurer a description of how, when and where the loss or damage occurred
(iv) take all reasonable steps to protect the covered property from further damage and keep a
record of a expenses necessary to protect the covered property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, the insurer will not pay for 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.
(v) at the request of the insurer, give a complete inventory(ies) of the damaged and undamaged property, include quantities, costs, values and amount of loss claimed.
(vi) as often as may be reasonably required, permit the insurer to inspect the property proving
the loss or damage and examine the books and records of the insured. Also permit the
insurer to take samples of damaged and undamaged property for inspection testing and
analysis and permit the insurer to make copies of the insured’s books and records.
(vii) send the insurer a signed, sworn proof of loss within 60 days of date requested, containing the information requested to investigate the claim. The insurer will provide necessary forms.
(viii) cooperate with the insurer in the investigation or settlement of the claim.
(ix) resume all or part of the operations as quickly as possible
b. The insurer 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 the insurance or the
claim, including an insured’s books and records, in the event of an examination, an insured’s answers must be signed.
4. Legal action against the insurer – no one may bring legal action against the insurer under the
insurance unless:
a. There has been full compliance with all of or the terms of the insurance
b. The action is brought within two (2) years after the date of which the direct physical loss or damage occurred.
5. Loss payment – in the event of loss or damage covered by the policy:
a. At the option of the insurer, the insurer will either:
(i) pay the value of lost or damaged property
(ii) pay the cost of repairing or replacing the lost or damaged property
(iii) take all or any part of the property at an agreed or appraised value
(iv) repair, rebuild or replace the property with other property of like kind and quality, subject
to the cost to repair, rebuild or replace does not include the increased cost attributable to enforcement of any ordinance or law regulating the construction, use or repair of any property.
b. The insurer will give notice of their intentions within 30 days after they receive the sworn proof of loss.
c. The insurer will not pay the insured more than their financial interest in the covered property.
Limitations: Electronic Media and Records – the insurer will not pay for any loss of Business
Income caused by direct physical loss of or damage to Electronic Media and Records after the longer
of:
a. 60 consecutive days from the date of direct physical loss or damage
b. The period, beginning with the date of direct physical loss or damage necessary to repair, rebuild or replace with reasonable speed and similar quality, other property at the described premises due to loss or damage caused by the same occurrence.
c. Electronic Media and Records are:
(i) electronic data processing, recording or storage media such as films, tapes, discs, drums or cells
(ii) data stored on such media
(iii) programming records used for electronic data processing or electronically controlled equipment
7. Recovered property – either the insured or the insurer recovers any property after loss settlement,
that party must give the other prompt notice. The insured may opt to retain the property, but then the
amount of settlement paid must be returned to the insurer. The insurer will pay recovery expenses
and the expenses to the recovered property, subject to the Limit of Insurance.
8. Vacancy
a. Description or terms
(i) as used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in (1) and (2) below
(1) when this policy is issued to a tenant, and with respect to that tenant’s interest in
covered property, building means the unit or suite rented or leased to the tenant.
Such building is vacant when it does not contain enough business personal property
to conduct operations.
(2) when this policy is issued to the owner of a building, building means the entire
building. Such building is vacant when 70% or more of its total square footage is not
rented or is not used to conduct costmary operations.
(ii) building under construction or renovation are not considered vacant
b. Vacancy Provisions – if the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs:
(i) the insurer will not pay for any loss or damage caused by any of the following even if they are Covered Causes of Loss:
(a) vandalism
(b) sprinkler leakage, unless the insured has protected the system against freezing
(c) building glass breakage
(d) water damage
(e) theft
(f) attempted theft
(ii) with respect to Covered Causes of Loss other than those listed above, the insurer will
reduce the amount they would otherwise pay for the loss or damage by 15%
9. Resuming operations – the insurer will reduce the amount of the insured’s:
a. Business income loss, other than Extra Expense, to the extent the insured can resume“operations”, in whole or in part, by using damaged or undamaged property (including merchandise or stock) at the described premises or elsewhere.
b. Extra Expense loss to the extent the insured can return “operations” to normal and discontinue such Extra Expense.
TOP DEDUCTIBLES – the standard deductible under the Business Owner’s Policy is $250. No deductible
applies to loss for fire department service charges, business income or extra expense. Vandalism to glass is
limited to $100 per pane.
EXCLUSIONS – the exclusions applicable to the Standard Business Owner’s Form are:
1. Ordinance or Law
2. Earth Movement
3. Governmental Action
4. War and Military Action
5. Water Damage (flood, surface waters, underground waters, etc.)
6. Power Failure
7. Nuclear Hazard
8. Artificially Generated Current
The exclusions applicable to the Special Business Owner’s Form are all the exclusions of the Standard
Business Owner’s Form and the following:
1. Loss of Use or Markets
2. Smoke
3. Vapor or Gas from agricultural or industrial operations
4. Steam Apparatus
5. Frozen Plumbing because of not maintaining heat
6. Dishonesty by the Insured
7. Fraud
8. Exposed property by the elements
9. Pollution
10. Wear and Tear
11. Rust, Corrosion, Decay and Deterioration
12. Hidden or Latent Defect
13. Smog
14. Settling, Shrinking
15. Cracking or Expansion
16. Nesting or Infestation
17. Insects, Birds, Rodents or other animals
18. Mechanical Breakdown
19. Dampness, Dryness
20. Marring or Scratching
21. Fault, Inadequate or Defective Workmanship
TOP OPTIONAL COVERS – Optional Coverages for the Business Owner’s Policy are:
1. Outdoor Signs – without this coverage the policy provides only $1000 for attached signs.
2. Exterior Glass and/or Interior Glass – without this coverage the Standard Form excludes
plate glass and the Special Form applies limits of $100 per pane and up to $500 per occurrence.
3. Crime Coverage – provides burglary and robbery coverage of money and securities under the
Standard Form and broadens the coverage for theft, destruction and disappearance for the
Special Form.
4. Employee Dishonesty – means loss to Business Personal Property including money and
securities by employee. The loss must be discovered within on year of the policy expiration
date. There is no coverage for dishonesty by an insured.
5. Mechanical Breakdown – provides coverage for direct damage to covered property caused by
an accident to the object (boilers, steam heating tanks, etc.). Accident meaning a sudden and
accidental breakdown of the object or a part of the object. At the time the breakdown occurs, it
must manifest itself by physical damage to the object that necessitates repair or replacement.
6. Employee Dishonesty – the insurer will pay for direct loss of damage to Business Personal
Property and “money” and “securities” resulting from dishonest acts committed by any
employee acting alone or in collusion with other persons (except the insured or partners of the
insured) with the manifest intent to cause the insured to sustain loss or damage and obtain
financial benefit (other than salaries, commissions, fees, bonuses, awards, profit sharing,
pensions or other employee benefits earned in the normal course of employment) for any
or other person or organization.
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