BP 00 03–BUSINESSOWNERS COVERAGE FORM ANALYSIS

(September 2010)

 

SECTION III COMMON POLICY CONDITIONS (APPLICABLE TO SECTION I–PROPERTY AND SECTION II–LIABILITY)

The Businessowners Coverage Form combines several different coverages. Most have their own coverage descriptions, definitions, causes of loss and conditions. The two areas all coverages share in common are the declarations and the common policy conditions.

Related Article: BP DS 01–Businessowners Policy Declarations

A. Cancellation

1. The first named insured person or organization on the declarations can cancel, as well as make changes, pay premiums, receive cancellation notices and request cancellation.

Note: It is important to select the correct first named insured for communication purposes and to be certain that all rights are properly protected.

2. The insurance company can cancel the policy by mailing or delivering written notice of cancellation to the first named insured at least:

a. Five days' before cancellation takes effect under the following circumstances:

(1) If the building is vacant 60 or more consecutive days. , Buildings that experience normal seasonal unoccupancy or those under construction are not subject to this item. Vacant means 65% or more of rental units or floor area is vacant.

Example: Supersnob Department Store moves out of Magnificent Mall, which is insured by Conservative Mutual. Supersnob was the mall anchor and occupied 70% of the retail space. As a result of the move and the resulting vacancy, Conservative Mutual sends Magnificent Mall five days notice of cancellation.

(2) If repairs have not begun or been contracted for within 30 days after a covered loss is initially paid.

Note: Initial payment can include a minimum down payment against the total future payment.

(3) If the building has an outstanding order to vacate, an outstanding demolition order, or was declared unsafe by a government authority

(4) If repaired and salvageable items were or are being removed and will not be replaced. This does apply if goods are removed to allow for renovation will eventually be returned.

(5) Necessary heat, water, sewer or electricity has not been provided for 30 days unless due to normal periods of seasonal unoccupancy. Also if property taxes have not been paid for a year, unless there is a legitimate dispute with the taxing authority over the tax payment

b. Ten days when the reason for cancellation is nonpayment of premium.

c. Cancellation for any reason other than as listed above requires 30 days' advance written notice.

3. All cancellation notices are sent to the first named insured at the last mailing address known to the insurance company

4. The cancellation notice must state the effective date that the cancellation takes effect. That is the date that the policy period ends.

5. The first named insured receives any premium refunds. Refunds are pro rata if the insurance company cancels. If the named insured cancels, the refund may be less than pro rata. Cancellation is not dependent upon a refund being made or offered.

6. Proof of mailing is sufficient proof of notice, unless this condition is superseded or replaced by a state law requiring certified mail or some other form of postal verification.

Note: The cancellation notice periods indicated above may be different in certain states based on laws that usually require longer notice periods.

B. Changes

This coverage form contains all the agreements and terms between the parties and can be changed or waived only by endorsements the insurance company issues.

C. Concealment, Misrepresentation Or Fraud

This coverage form is void in case of fraud by the named insured as it relates to the coverage provided. It is also void if the named insured or any other insured at any time intentionally conceals or misrepresents a material fact. However the material fact must concern the coverage form, covered property, interests of any insured in the covered property, or a claim.

Example: Mary stated on her application that her dog's name was Spot but its real name was Rover. This was not a material fact and would not affect her coverage. However if she stated that Spot/Rover was a Teacup poodle and it was actually a Doberman retriever guard dog, that could be a material fact that could affect coverage and may result in it being voided.

D. Examination Of Your Books And Records

The insurance company can examine or audit the named insured's books as they relate to the insurance provided at any time during the policy period and up to three years after.

E. Inspections And Surveys

1. The company may make surveys and inspections at any time. These reports may be given to the named insured along with recommendations to improve conditions.

2. Inspections are not required. The insurance company uses them only to determine insurability and premiums to be charged. Such inspections do not warrant that a location meets safety or health requirements or that it complies with local, state or federal ordinances or regulations.

3. The provisions in 1. and 2. above also apply to rating, advisory, rate service, and similar organizations that conduct similar inspections and surveys and makes similar reports and recommendations.

4. The provisions in 2. above does not apply to insurance company inspections, surveys, reports or recommendations with respect to certification, ordinances, or regulations of boilers, pressure vessels or elevators under state or municipal statutes.

Note: A number of states noted that insurance companies regularly went into buildings to make inspections. This drew the attention of legislators who attempted to have the industry become the watchdog for various safety and health issues. These paragraphs represent the insurance industry's response.

F. Insurance Under Two Or More Coverages

Only the actual amount of loss or damage is paid if two or more coverages apply to the same loss or damage.

Note: This eliminates double coverage and duplicate loss payments.

G. Liberalization

If the insurance company adopts revisions that broaden coverage during the policy period, or within 45 days before it begins that do not require additional premium, the broadened coverage applies immediately.

Note: However, any restrictions similarly adopted at the same time do not apply in the same way.

H. Other Insurance

1. If other insurance covering the same loss or damage applies, this insurance is excess over the amount due from that other insurance, whether it can be collected or not. However, the insurance company never pays more than the Section I–Property Limit Of Insurance that applies.

2. Business Liability insurance is excess over any other insurance that insures for direct physical loss or damage. This means it is excess over Section I of this coverage form, a commercial property coverage form, auto physical damage coverage, and other first party insurance coverage. It is also excess over any other primary insurance where the named insured has been added as an additional insured.

3. If other insurance is excess, the insurance company does not pay defense costs that the other company should pay. If the other company refuses to defend, the company has the option to do so. If it does, it assumes the rights of the insured under the other policy to proceed against the other insurance company.

I. Premiums

1. The first named insured pays all premiums due and receives all return premiums.

2. The premiums on the declarations are based on rates in effect at issuance. Renewal premiums are subject to change, based on rules and rates in effect at the time.

3. Insurance coverage can continue in force year after year, subject to insurance company approval, if the named insured pays the premium before the anniversary date. However, any rate changes are reflected in that renewal premium and any forms changes apply. If the renewal premium is not paid, coverage ends on the first anniversary that the insurance company did not receive the premium.

4. Changes in the named insured's operations or exposures, such as what it does or who it is, during the policy period may require an additional premium charge. Rates and rules for these changes apply as of the effective date of the change and not the rules and rates in effect at inception.

J. Premium Audit

1. If the policy is written subject to premium audit, the premium on the declarations is an advance premium. The insurance company calculates the final premium after the actual exposures are determined.

2. The advance premium is actually a deposit premium. The actual earned premium is calculated at the end of the audit period. When that is done, the first named insured must pay any additional premium due on the date specified on the billing. If the advance premium exceeds the earned premium, the first named insured receives a premium refund.

3. The first named insured must keep records of the information the insurance company needs to calculate the actual earned premium and send that information to the company when requested to do so.

K. Transfer Of Rights Of Recovery Against Others To Us

1. With respect to property coverage, the named insured can waive its rights of recovery against other parties in writing prior to a loss. However, it cannot do anything after a loss to impair the company's rights to recovery. The named insured can waive its rights to recovery after a loss only if it controls or owns the other business, if the business owns or controls the named insured, or if the individual or other business is the named insured's tenant. The named insured can accept normal bills of lading that limit the liability of carriers without restricting its insurance.

2. With respect to liability coverage (but not medical payments), the insured must ensure that the insurance company has the right to recover all payments it made, help it enforce them, and not do anything after a loss to impair them. The insurance company can request that the insured bring suit or transfer such rights to it and require the insured to assist in enforcing them.

L. Transfer Of Your Rights And Duties Under This Policy

The named insured may not transfer its rights under the policy without the insurance company's written approval to do so. However, practical considerations apply when an individual named insured dies. When that happens, the named insured's rights and duties transfer to his or her legal representative. The representative has insured status only while acting within the scope of its duties as a legal representative. Anyone having proper temporary custody of the deceased named insured's property assumes the named insured's rights until a proper legal representative is appointed.