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FIL 350 - Chapter 11

Businessowners Policies

Businessowners Policy (BOP) - Designed for small/medium sized businesses - Simple alternative to CPP - Provides both prop and liability coverage
Advantages of BOP - One policy meets insurance needs of many - Packaging coverages reduces adverse selection and streamlines costs - Simplified rating (easier for agents/brokers) - More automation in underwriting decisions
BOP eligibility requirements - Size constraints (ex: max square foot of bldg = 35,000 ft or 6 story max) - Annual sales restriction (up to $6 million) - Occupancy restrictions - Lower complexity of exposures
Basic structure of BOP - Section I: property insurance similar to BPP, and business income coverage (w/ extra expense) - Section II: Liability similar to CGL
Differences between BOP and BPP - direct property coverage - Two separate limits: bldg & PP - Personal Prop includes prop in care, custody, control of insured - Fewer exclusions - Broader coverage for E-data & computers (dmg due to breakdown or power surges, utility services- $10k limit), theft of supplies
3 Differences between BOP and BI + EE 1. No coinsurance requirement or penalty under the BI portion of BOP 2. BOP limit is 12 months of BI + EE, no dollar deductible 3. Payroll is ltd to 60 days after direct loss
Additional Coverages in BOP - Same six as BPP but more coverage and limits for E-data - Same BI additional coverages for civil authority, EBI after reopening, interruption of computer operations
Unique Additional Coverages in BOP - BI for dependent properties (up to $5k) - Some crime insurance agreements: forgery or alteration up to $2.5k, money orders and counterfeit $ up to $1k. - Recharge expense for fire extinguishing systems up to $5k
BOP Coverage Extensions - Many similar to BPP: newly acquired prop, PP off premises ($10k), outdoor prop, personal effects ($2.5k), valuable papers & records ($10k) - Damage to customer records (up to $10K, similar to valuable papers provision)
Optional coverages in BOP - Outdoor signs. - Limited form of mech breakdown that only covers prop dmg (non-mfg boilers, small AC units, some additional protection) - Crime insurance (employee dishonesty, $/securities)
BOP Liability coverages - Business liability (bodily injury & prop dmg (CGL Cov A), personal/adv injury (Cov B). - Medical expenses (Cov C) - Legal defense
BOP Liability exclusions Professional liability, but endorsements are available for some - Auto liability
Seasonal Increase Provision Enables fluctuation of personal property values by increasing amount of insurance for certain tie periods by 25% if limit is 100% or more of insured's average monthly personal property value for twelve months preceding loss.
What cause of loss form property coverage is the BOP similar to? Special Form Causes of Loss because property coverage has open perils coverage.
What method of valuation is typically used for settlement of building and personal property? Replacement value.
Created by: FIL350
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