Casualty Insurance: Unit 7

December 10, 2012 by

Business Owners Liability Coverage

Overview

The Business owners Policy is a package policy designed for small – to medium- sized business firms that don’t require extensive underwriting. The Business owners Policy accomplishes for an eligible business what a Home owners Policy accomplishes for a private residential property in that the policy is multi-line, combining both property and liability coverages under its own form. The property related coverage was previously discussed and the liability related coverage will be addressed in this chapter.

Glossary

Business Automobile Coverage Form:  One of the commercial Automobile coverage forms; covers a business’s owned, nonowned and hired automobiles against liability and physical damages losses.

Business Automobile Physical Damage Coverage: One of the commercial Automobile coverage forms; covers a business’s owed or hired business automobiles for physical damage only.

Business Income Coverage Forms: Commercial Property coverage forms that pay for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired. Rebuilt or replace with reasonable speed. Available with or without Extra Expense coverage.

Business Income from Dependent Properties – Broad Form: Commercial Property coverage form designed for insureds whose business income is dependent on the ongoing operations of other businesses they don’t own.

Business Liability: Liability that arises out of the conduct of a business.

Businessowners Policy (BOP): Package policy designed to provide broad Property and Liability coverage for small businesses. The insured can choose one of two property forms, but there is only one liability form. Eligibility requirements are more strict that the CPP’s.

Coverages

  1. Business Liability
    1. The form covers sums for which the insured becomes legally liable to pay as damages for bodily injury, property damage, or personal injury, to which coverage applies, including liability assumed under an insured contract.
    2. Coverage applies to:
      1. Bodily injury or property damage caused by an occurrence that takes place in the coverage territory during the policy period.
      2. Personal injury and advertising injury caused by an offense arising out of the insured’s business, but only if the offense takes place in the coverage territory during the policy period.
    3. Bodily injury includes damages claimed by any person or organization for care, loss of services, or death resulting at any time from the bodily injury.
    4. Coverage Extension – Supplementary Payments
      1. In addition to the limit of insurance for Section II – Liability, the insurer will pay:
        1. All expenses incurred by the insurer.
        2. Up to $250 for the cost of bail bonds, required because of accidents or traffic violations arising out of the use of any vehicle to which coverage for bodily injury applies.
        3. The cost of bonds to release attachments, but only for bond amounts within the limit of insurance.
        4. All reasonable expenses incurred by the insured, at the request of the insurer, including actual loss of earnings for up to $250 per day for time off work.
        5. All costs taxed against the insured in a suit.
        6. Prejudgment interest awarded against the insured on the part of any judgment the insurer pays.
        7. All interest on the full amount of any judgment that accrues before the judgment is paid.
      2. The insurer will also defend an indemnity of the insured, if named as a party to a suit along with the insured, and if certain conditions specified in the coverage forms are met.
  2. Medical Expenses
    1. Covers medical expenses for bodily injury, caused by an accident, occurring on the premises the insured owns or rents, or due to the insured’s operations.
    2. The accident must take place in the coverage territory and during the policy period.
    3. The expenses must be incurred within one year of the date of the accident,
    4. Payments are made regardless of fault.
    5. The insurer will pay reasonable expenses for:
      1. First aid administered at the time of an accident.
      2. Necessary medical, surgical, x-ray, and dental services, including prosthetic devices.
      3. Necessary ambulance, hospital, professional nursing, and funeral services.

Exclusions

  1. Applicable to Business Liability Coverage:
    1. Expected or Intentional Injury.
    2. Contractual Liability.
    3. Liquor Liability.
    4. Worker’ Compensation.
    5. Employer’s Liability.
    6. Pollution.
    7. Aircraft, Auto, or Watercraft.
    8. Mobile Equipment – Transportation of mobile equipment.
    9. War.
    10. Professional Services.
    11. Damage to Insured’s Property.
    12. Damage to Insured’s Product.
    13. Damage to Insured’s Work.
    14. Damage to Impaired Property or Property Not Physically Injured.
    15. Recall of Products, Work, or Impaired Property.
    16. Personal and Advertising Injury – Arising out of material known to be false, or took place before the beginning of the policy period, as well as losses arising out of breach of contract, failure to conform to advertised quality, or the wrong price. Also excluded are injuries committed by an insured whose business is advertising, broadcasting, publishing or telecasting.
  2. Applicable to Medical Expense Coverage:
    1. To any insured, except volunteer workers.
    2. To a person hired to do work for, or on behalf of, any insured or tenant of any insured.
    3. To any person, if benefits for the bodily injury are payable, or if benefits must be provided under Workers’ Compensation.
    4. To a person injured on that part of the premises that the insured owns or rents and that the person normally occupies.
    5. To a person injured while taking part in athletics.
    6. To bodily injury incurred within the products/completed operations hazard.
    7. To bodily injury excluded under Business Liability Coverage.
    8. Due to war, including civil war, insurrection, rebellion, or revolution.
  3. Nuclear Energy Liability Exclusion – Applicable to Both Business Liability Coverage and Medical Expense Coverage:
    1. Bodily injury or property damage when an insured under the policy is also an insured under a Nuclear Energy Liability Policy issued by the Nuclear Energy Liability Insurance Association.
    2. Medical expenses incurred with respect to bodily injury resulting from the hazardous properties of nuclear material, and arising out of the operation of a nuclear facility by any person or organization.

Who is Insured

  1. Those that are designated in the Declarations as:
    1. A sole proprietorship – The named insured and their spouse are insureds under the policy.
    2. A partnership or joint venture – The named insured, members, partners, and their spouses, are insureds under the policy.
    3. A limited liability company – The named insured, members, and managers are insured under the policy.
    4. An organization other than a partnership, joint venture, or limited liability Company – the named insured, executive officers, and directors, and stockholders are insureds under the policy.
  2. Each of the following is also an insured:
    1. Volunteer workers, while performing duties related to the conduct of the insured’s business, and employees of the named insured, while acting within the scope of their employment.
    2. Any person or organization, while acting as the named insured’s real estate manager.
    3. Any person or organization having temporary custody of the named insured’s property, until a legal representative is appointed if the named insured dies.
    4. The insured’s legal representative if the named insured dies.
  3. Anyone driving the named insured’s mobile equipment along a public highway with the named insured’s permission.

Note: No person is an insured with respect to the conduct of any current or past partnership, joint venture, or limited liability company, who isn’t shown as a named insured in the Declarations.

Liability and Medical Expenses Limits of Insurance

  1. The limits of Insurance for Section II – Liability shown in the Declarations, fix the most the insurer will pay regardless of the number of insureds, claims made or suits brought, or persons or organizations making claims or bringing suits.
  2. The liability and Medical Expenses limit shown in the Declarations applies per occurrence for bodily injury, property damage, and medical expenses, and per person or organization for personal injury and advertising injury.
  3. The Medical Expenses limit shown in the Declarations is the most the insurer will pay for all medical expenses sustained by any one person.
  4. The Damage to Premises Rented to You limit shown in the Declarations applies to damage arising out of any one fire or explosion for property damage caused to premises rented to the insured or temporarily occupied by the insured with the permission of the owner.
  5. Two aggregate limits apply, one to losses falling within item a and one to losses falling within item b.
    1. Bodily injury, or property damage during the policy period that falls within the product/completed operations hazard, is twice the Liability and Medical Expenses limit shown in the Declarations.
    2. Losses, except those which fall within the product/completed operations hazard, plus medical expenses, plus all personal injury and advertising injury caused by offenses committed, is equal to twice the Liability and Medical Expenses limit shown in the Declarations.
    3. The aggregate limits don’t apply to losses that involve Damages to Premises Rented to You.

Note: The limits of Insurance for Section II – Liability apply separately to each consecutive annual period.

Liability and Medical Expenses General Conditions

1. Bankruptcy – Bankruptcy or insolvency of the insured or of the insured’s estate doesn’t relieve the insurer of its responsibilities under the policy.
2. Duties in the Event of Occurrences, Offense, Claim, or Suit – The insurer must be notified, as soon as possible, of an occurrence or an offense which may result in a claim.
3. Financial Responsibility Laws – When the policy is certified as proof of financial responsibility for the future under the provisions of any motor vehicle financial responsibility law, the insurance provided by the policy will comply with that law.
4. Legal Action Against the Insurer – No person or organization has a right under the policy to sue the insurer unless all terms of the policy have been fully complied with.
5. Separation of Insured’s – Insurance applies as if each insured were the only named insured, and separately to each insured against who claim is made or suit is brought.

Liability and Medical Expenses Definitions

The Business owners Coverage Form Section II – Liability, contain a list of definitions that clarify the policy language. This section is similar to the definitions section found in the Commercial General Liability Coverage Forms of the Commercial Package Policy. The definitions of an insured’s product includes:

1. Warranties and representations and representation relating to the fitness of the product.
2. Warnings and instructions for safe use of the product.
3. Containers for the product.
Note: The definition doesn’t include vending machines used to distribute the insured’s product.

Business owners Coverage Form Section III- Common Policy Conditions

The Common Policy Conditions of the Business owners Coverage Form applies to both Section I – Property, and Section II – Liability

Selected Endorsements

Comprehensive Business Liability Exclusion ( BP 04 01)

1. The purpose of this endorsement is to exclude specific projects, location hazards, operations, or equipment.
2. The specific project, location hazard, operations, or equipment must be clearly separable and definable.

Hired Automobile and Non – Owned Automobile Liability Endorsement (BP 04 04)

1. This endorsement provides liability coverage for hired and non-owned automobiles used in the insured’s business, and is available only to insureds that don’t have separate commercial automobile insurance.
2. Hired automobile liability coverage applies to automobiles leased, hired, or borrowed by the named insured, such as the rental of a vehicle while traveling on company business.
3. Non-owned liability coverage applies only to those non-owned automobiles used by persons other than the named insured in the course of the named insured’s business, such as an employee using their own vehicle in the course of the insured’s business. In the case of non-owned automobile liability coverage, the employee would have to rely on their own automobile insurance for liability coverage, as it is the business owner who is provided coverage.

Fungi or Bacteria Exclusion (Liability) (BP 05 77)

1. This endorsement amends the Business owners Coverage Form Section II _ Liability, by excluding bodily injury, property damage, and personal and advertising injury that wouldn’t have occurred in whole or in part but from the actual, alleged, or threatened inhalation or exposure to fungi or bacteria,
2. Limited fungi or bacteria coverage, however, may be purchased through the following endorsement.

Limited Fungi or Bacteria Coverage (Liability) (BP 05 78)

1. The purpose of this endorsement is to modify the Business owners Coverage Form Section II – Liability, to cover bodily injury or property damage arising out of a fungi or bacteria incident that otherwise would be excluded by the preceding endorsement.
2. A separate fungi and bacteria liability aggregate limit is indicated in the endorsement schedule.

Limited Pharmacists Liability Coverage (BP 08 06)

1. This is a new endorsement under the (‘02) program now excludes professional liability services as a pharmacist.
2. The addition of this endorsement restores coverage for bodily injury, property damage, personal and advertising injury, or other injuries arising out of the rendering of, failure to render, professional services as a pharmacist.

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Filed Under: Casualty Insurance