MSO BUSINESSOWNERS POLICIES
ANALYSIS
(May 2026)
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D. Property Exclusions/Limitations |
This article reviews
the 05 23 edition of the Mutual Services Office (MSO) Businessowners Policy–BU
04 01, with changes from this edition highlighted in bold. Most updates are
editorial and involve minor content changes. Changes from the 01 19 edition have
been archived and are no longer highlighted in this analysis.
A named perils version
of this form, BU 04 02–Named Perils–Businessowners Policy, is available. A comparison
of the two policies is provided at the end of this article.
Coverage A pertains to
certain types of building property as described below. However, coverage only
applies if a limit of insurance is specified on the declarations. This coverage
is also subject to all applicable policy provisions.
A.
Buildings owned by the named
insured that are usual for their business operations are included. The business
operations must be detailed on the declarations. Garages, storage, or other
similar outdoor structures are also considered buildings, but only if they are
related to the business operations.
|
Example:
Paris Jones owns three
buildings in an industrial park. ·
Two
buildings are part of Periwinkle Pigs, Inc. It sells pig iron. ·
The
third building is part of Paris Fun, Inc. It sells water slides. The named insured is Paris Jones and
Periwinkle Pigs, Inc. The business is described as pig iron
sales. In this case, only the two Periwinkle Pigs, Inc. buildings are
covered, even if all buildings are listed on the declarations. |
B. Additions made while
under construction or after completion. This includes alterations or repairs.
Additions under construction are covered
on a primary basis only if no other insurance is available. If other insurance
is available, this coverage becomes excess over other available insurance.
|
Example: Periwinkle Pigs is running out of space
and has contracted with Able, LLC to build an addition to one of its existing
buildings. The contract stipulates that Able must provide builders risk
coverage for the addition. If there is a loss, Able's builders risk policy
will be primary, with this policy providing excess coverage. |
C.
Equipment, fixtures, and machinery permanently installed in
any of the structures described in A. and B. above include examples like
elevators and heating and air conditioning systems. However, coverage is not
limited to just these items.
|
Example: Periwinkle installs heavy-duty rack
storage units throughout its buildings. They are considered part of the
building because they are permanent. |
D.
Fences, lamps, flag poles, and other items considered
outdoor yard fixtures.
E. Any materials or
supplies intended for altering, constructing, or repairing the property
described above are insured. However, this coverage is excess if other
insurance is available.
Theft coverage for this property is
limited to the sub-limit if one is specified on the Declarations Supplement.
|
Example:
Periwinkle intends to upgrade the rack
storage systems across all three buildings. The materials have been delivered
and are temporarily stored in the yard next to building #1. However, during a
storm, strong straight-line winds pick up the material and destroy it. Only the materials to be installed in the two
Periwinkle Pigs, Inc. buildings are covered. The materials designated for the
Paris Fun, Inc. building are not covered, despite being on Periwinkle Pigs,
Inc. property. |
Coverage B pertains to
specific types of BPP as outlined below. To qualify for coverage, the BPP must
be located at the described premises, and a limit must be shown on the
Declarations. This coverage is also subject to all applicable policy
provisions.
A. BPP the named insured owns, and that is tangible,
is covered, but only if it is typical for the insured’s business operations as
listed on the Declarations.
B.
Includes tangible personal
property owned by others and in the care, custody, or control of the named
insured for business purposes. However, it does not cover losses already
insured by others or for which the insured is not responsible. The limit shown in
the Declarations Supplement applies to the insured’s customers' tangible
personal property.
|
Example: Paris Periwinkle has the following property
in building 1:
Coverage B insures the first four items
above. The last two items are not covered because they are not related to the
named insured’s business operations. |
C. Tenants’ improvements
and betterments made to the premises are covered, subject to all of the
following:
·
The
named insured is the tenant.
·
The
named insured may not legally remove the items from the premises.
·
The
items were acquired at the named insured’s expense, or the named insured
installed them.
·
The
named insured is responsible for repairing or replacing them.
·
The
named insured’s rent does not include the cost of the improvements and
betterments.
Coverage is limited to
the remaining interest in improvements and betterments that meet these
criteria.
NOTE: Use interest is based
on the amount of time remaining on the named insured’s lease. Use interest is
100% on the day the lease is signed and 0% on the date the lease ends.
|
Example:
Bliss and Sons rents retail space at
Spencer Mall. Bliss invested $25,000 in improvements when it moved into the
space, but it cannot remove them when it leaves. The lease term is five
years. A fire destroys the store one year into the lease. The most Bliss can collect for the loss is 4/5
(80%) X $25,000 or $20,000. |
D. When Coverage A. is not
applicable to the policy, building glass is covered, but only if both of the
following apply:
·
The glass is not part of a sign
·
The named insured is responsible to someone other
than itself for the loss. The responsibility can have been assumed by contract
or be required by law.
This is
considered an extension of Coverage B, but it does not have a separate limit.
Therefore, the applicable Coverage B limit applies.
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Example: Kettle Crum is the only tenant in the
Glenway Building and is responsible for all glass losses according to its
lease. Vandals break all the windows on the main floor. As they departed,
they set a fire on the staircase leading to the second floor. Firefighters broke
out the second-floor windows to fight the fire. All glass damage is covered
up to Kettle Crum’s Coverage B Limit. |
This coverage applies
only to loss of income and related expenses the named insured sustains, as
described in this section.
A. Coverage
1. This coverage applies
if the named insured’s business or operations are interrupted or if the
described premises cannot be occupied. It covers the business income that would
have been earned if the interruption described below had not occurred. Expenses
related to the business income loss that are actually incurred are also
covered.
a. Loss of income is
determined by adding the reduction of net profits to the operating expenses. Operating
expenses are based on what is normal for the business and must continue even if
a loss has occurred. Examples of continuing expenses include payroll, utilities,
and rent.
It also includes lost income resulting
from a covered loss that canceled or suspended an existing written agreement.
The named insured must prove that it could have completed the agreement under
its terms if the covered loss had not occurred.
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Example:
A fire sweeps through Sweet
Things Bakery. Part of the loss of income claim is the loss of the contract
with Prairie Days Outdoor Theater. Scenario 1: The agreement was pending and had not
been signed at the time of loss. Cancellation of this contract is not a loss
of income. Scenario 2: The agreement was in place, but
Prairie Days told Sweet Things it could no longer accept its products due to
quality issues. Cancellation of this contract is not loss of income. Scenario 3: Prairie Days is devastated by Sweet
Things’ loss but cancels the contract because it must deliver baked goods to
its customers. This cancellation is treated as a loss of business income. |
b.
A reduction in rental income from tenant occupancies at the
described premises, where the named insured rents to others, along with any
ongoing charges usually paid by tenants (as detailed in the lease) that then
become the responsibility of the named insured due to the loss.
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Example: Testing Grounds Industrial Park has four tenants. A
fire damages Building 100 that Park Two occupies. Park Two’s lease states
that it is released from all obligations to Testing Grounds and any utility
companies in case of fire. As a result, Testing Grounds’ business income loss
is the loss of rental income from Park Two plus the Park Two’s utility
obligations. The utility obligations begin at the time of the direct damage
loss. |
c. Extra expenses required
for the named insured to maintain operations are covered, provided they are not
typical company costs and are reasonable. Coverage is limited to expenses
necessary for ongoing business operations.
There is no coverage
for incurred expenses that could have been discontinued during the period when
business operations were interrupted or when the premises could have been
occupied by the tenant but were not.
Trigger Endorsement:
If BU 50 10 appears on
the Declarations, paragraph A.1.a. above does not apply. This means that
business income loss resulting from an interruption of operations is not
covered. However, coverage continues to apply to loss of rental income under
A.1.b. and to extra expense under A.1.c.
NOTE: Rather than attaching an additional
document labeled BU 50 10, the endorsement language is integrated directly into
the policy. This approach is specific to MSO policy design.
Related Article: MSO
Businessowners Policies Trigger Endorsements
2. For any resulting loss
and expenses to be covered, a direct loss must first occur at a premises
described on the policy. This loss must also result in a necessary interruption
and/or damage that renders the premises inaccessible to the tenant, and it must
stem from a loss covered by the policy.
Coverage also applies
if a civil authority prohibits access to a described premises. This prohibition
must originate from a loss at a local property not owned or occupied by the
named insured. The loss must be caused by an event that would be covered under
the policy, as if it affected the insured’s property. This coverage is limited
to 14 consecutive days starting from the date of loss.
NOTE: The term 'local' is not defined, so it could refer to more than just the
neighboring building, but how far could be a subject of discussion.
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Example: The civil authority has closed Highway 267 to all
traffic due to a nearby wildfire. Underwood’s, Inc., situated on Highway 267,
is far from the wildfire but cannot carry out normal operations because
neither staff nor customers are permitted on the road. The wildfire is nearly
10 miles away. Would this situation be classified as local? |
3. The named insured must
take prompt action to minimize the loss of business income. These actions
should be reasonable. They need not be extraordinary. The objective is to reduce
the time during which operations are down or the premises are unavailable to
tenants.
The policy provides
examples of how this can be done: resume partial operations at the existing
site or at a different location, or prioritize expeditious restoration of the
damaged property. These are not requirements. They are only suggestions for
quickly resuming operations.
How the named insured implements this
requirement will affect the business income loss settlement.
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Example: A tornado damages Gracie’s Cat House. No cats or
humans are hurt, but Gracie is shaken and takes two weeks off to recover.
During her absence, the property is unattended, and she is unreachable. She returns
energized and ready to act but is surprised to learn that her insurance
company has declined to cover her lost income for those two weeks. |
B. Coverage Period
This is a time element
coverage, so the amount paid depends on the duration of the loss. Payment is
limited to the expenses incurred and the loss experienced during the shorter of
the following time periods:
1. The time required to
restore the business or operations to their pre-loss levels of productivity and
quality.
NOTE: This means if
the service was poor and the offerings were fairly limited when the loss
occurred, the coverage period ends when the business returns to that same
standard.
2.
Restore, repair, or replace the damaged part of the
property caused by the direct covered loss.
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Example: Gleeful Tea Sippers suffers a significant loss.
Repairs and restoration are expected to take at least six months. Betty, the
owner, discovers that a competitor is going out of business. Gleeful can
relocate to the competitor’s premises and reopen within two months. Betty’s
loss of income coverage ends once she begins operations at the new location. |
Most businesses that experience a loss
cannot resume operations and reach full income potential immediately upon
reopening. To address this, the insurance company provides an extra 30 consecutive
days of coverage. This coverage is provided up until the named insured either
recovers to their previous income level or until 30 days after operations
resume, whichever comes first.
|
Example: Gleeful Tea Sippers sends notices to its former
customers about the location change. Betty announces the grand reopening,
which garners great press coverage. She is surprised and pleased to find her
income after reopening is higher than expected, surpassing her pre-loss
income just one week later. Her loss of income coverage ends at that point. |
This 30-day coverage
extension does not include the 14-day period if a civil authority prevents the
named insured from occupying the property, as described in A.2. above.
The named insured may
occupy a premises they do not own and do not control the repair, replacement,
or restoration. In such cases, the policy covers the necessary time for these
processes to occur or up to 90 days, whichever is shorter.
The policy expiration date does not
affect the coverage period. However, coverage is limited to a maximum of 365
consecutive days starting from the first day of the covered loss.
|
Example: Meckington Coffee Shop is located on the first
floor of a 50-story office building. A fire damages the first four floors,
including all elevators. The fire must be investigated and the building
thoroughly inspected before reconstruction can begin. The entire rebuilding
process is expected to take 14 months. Since Meckington is the building's
main coffee shop serving all tenants, it cannot move elsewhere. Unfortunately,
Meckington’s coverage ends after 365 days, even though the building repairs
are not finished. |
C. Coverage Limitations
There is no coverage if
any of the following prolong a covered loss of income or increase the amount of
income lost:
1.
Lease or other agreement cancellation or suspension, except
for those agreements explicitly outlined in A.1.a. above.
2.
Any loss to electronic data processing equipment, media, or
software used by the named insured in their business or operations that exceeds
30 consecutive days.
3.
When strikers or others interfere with the repair or
replacement of the property. Additionally, there is no coverage if they disrupt
the insured's ability to resume operations at the described location.
|
Example:
We Sell Pets suffers a major loss but
remains determined to rebuild. Animal advocates are equally determined to
prevent the reopening. Scenario 1: Every day, a large group of pet owners and their
pets confronts the contractors hired to repair the building. Over time, the
contractors refuse to cross the picket lines. The standoff lasts for weeks,
but eventually, We Sell Pets reopens. It then files a claim for lost business
income. The insurance company covers the full loss, except for the period of
time when animal advocates halted repairs. Scenario 2: A large group of pet owners and their pets demonstrate
at the local zoning board meetings to prevent We Sell Pets from obtaining
permits for reconstruction. The standoff continues for weeks, but ultimately,
We Sell Pets secures its permits, completes the repairs, and reopens. It then
files a claim for lost business income. The insurance company covers the full
loss, including the time during which animal advocates delayed repairs, as
their interference was not on the described premises. |
D. Limits of Liability/Coverage
1. When “included’ is
specified on the Declarations for Coverage C, Loss of Business Income, or if no
dollar amount is listed, there is no maximum dollar limit.
2. When a dollar amount is
specified on the Declarations for Coverage C, Loss of Business Income, the
maximum paid in a single occurrence is the limit shown.
3. If the words Deleted,
Nil, N/A, Not Applicable, or a similar term appear on the Declarations for this
coverage, all coverage under Coverage C is excluded.
This coverage applies
to money and securities the named insured uses in their business or operations,
up to the limit specified on the Declarations. It is subject to the conditions
outlined below and all relevant policy provisions.
A. On Premises
Money and securities
are covered while either within the premises described on the Declarations or within
a bank. Coverage also extends if the money and securities are within a secure
location similar to a bank.
NOTE: The key word is 'within.' Money and
securities must be both on the described premises and located within that
specific area. This indicates that money and securities outside of an owned
structure or outside the tenant's occupied space are not considered on
premises.
B. Off Premises
Money and securities
are covered while being carried. They can be carried by the named insured, its partners,
an authorized officer, or an employee. Coverage extends to property in transit
to or from the premises, as well as to any safe deposit or bank location.
If a stop is made at the residence of a person carrying the property,
coverage applies during the stop. However, there is no coverage if that residence
is the final destination. The term “employee” used in this coverage is expanded
to include leased employees and temporary workers.
NOTE: Coverage applies when
money and securities are in transit. However, a question arises about how long
the property can remain in the residence and still be considered in transit.
Additionally, does the person transporting the property always have to be
present with it?
|
Example: Max intends to deposit the night deposit from his
store into his bank account. On Friday night, he arrives at the bank but
realizes he left the deposit bag at home. He plans to go Saturday morning,
but he oversleeps and misses making the deposit, and the bank is closed on
Sunday. While attending church on Sunday, a burglar breaks into his house and
steals the deposit and other personal belongings. Does the Off Premises
coverage for money and securities cover this loss? |
C. Deductible
The deductible for any
single occurrence is $200, unless a different amount is specified on the
Declarations or elsewhere in the policy.
D. Condition
Coverage is only
applicable when Expanded Coverage applies to Coverage B. However, if Coverage B
is not included, it may still be available, provided BU 50 01 is listed as an
endorsement on the Declarations.
Trigger Endorsement: BU 50 01 is a trigger
endorsement.
NOTE: Rather than attaching
an additional document labeled BU 50 01, the endorsement language is integrated
directly into the policy. This approach is specific to MSO policy design.
Related Article: MSO
Businessowners Policies Trigger Endorsements
The following
Supplemental Coverages do not alter or expand any policy provisions unless
specifically stated. The limits shown are additional limits, unless that
particular coverage indicates otherwise.
This coverage applies
only if Coverage B is provided.
·
Coverage
applies when the named insured’s accounts receivable, credit card billings, or
digital or cryptocurrency transactions experience a covered loss, and the
amounts due, as documented by the named insured, cannot be collected. Up to the
limit specified on the Declarations Supplement, the total of these
uncollectible amounts will be paid. The basic limit provided per location is
$10,000. This limit can be changed.
·
The
increased collection expenses incurred due to the covered loss.
·
Any
other reasonable and necessary expenses or costs incurred during the process of
re-establishing accounts receivable records following a covered loss.
Two exclusions are
introduced that apply only to this coverage:
A. Loss that is due to any
error or omission in accounting, billing, or bookkeeping
B. Any loss when an audit
or inventory is the only proof that it occurred. These can be used to
substantiate a loss but cannot be the only proof.
This supplemental coverage is not
subject to the deductible.
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Example: Kendra reviews the month’s revenue and
notices that March 24’s revenue is much lower than any Friday night in the
past year. She also notes that there are no credit card receipts for that
night. She realizes that they must have been lost. She searches but cannot
find them and files a claim with her insurance company. The company denies
the claim because there is no proof that a loss actually occurred other than
her own audit. |
The following do not
apply to Accounts Receivable Coverage:
·
Part I D–Property Exclusions / Limitations
·
Part I E–Losses Not Insured
o
However, the following are not included in this exclusion:
§ 8. Intentional Loss
§ 14. A. Wear and Tear and Other Specified Causes of Loss Exclusions
·
Part I – Deductible (Part I G – Special Part I
Conditions: 2. How Losses Are Settled – B. Deductible)
A. Coverage A
The building limits are
automatically increased by the percentage specified on the Declarations. Since
this increase is an annual percentage, it will be on a pro rata basis throughout
the year.
B. Coverage B
The limits for business
personal property automatically increase by 10% during times when the named
insured typically has more business personal property. Examples include holiday
or seasonal sales, but other reasons for such increases are also possible.
To encourage insuring to value, business
personal property limits are automatically increased by 30% during the
specified period if the named insured maintains at least 100% of the average
monthly values for the 12 months prior to the loss date.
|
Example:
Milly
carries a business personal property limit of $40,000. Her typical property
values range from $25,000 to $30,000, but she stockpiles items every August
for her big Milly’s Day Out sale. Milly’s
values are often up to $60,000 just before the sale and drop to less than
$15,000 right after. A tornado destroys the building she occupies the day
before the sale. As part of
the claim investigation, she submits reports of her inventory for the last 12
months, which average $30,000 per month. This means Milly qualifies for the
30% increase. The limit
available to pay for her loss is therefore $40,000 x 1.30 = $52,000. |
A. Coverage A is expanded to include loss or expenses listed in items 1, 2,
and 3 below, which result directly from a covered loss at the described
premises. The coverage limit is calculated by multiplying the Coverage A limit
of insurance by the building code/law coverage factor shown in the
Declarations. The basic factor provided is .10. However, this factor can be
changed.
|
Example: Grady’s Drug Store’s insurance limit for Coverage A
is $1,000,000, and the code/law coverage factor is .10. The building code/law
coverage limit is $1,000,000 X .10 = $100,000. |
This limit is the
maximum amount paid for the total of the expenses described in items 1, 2, and
3 below.
The following items are
covered only if they result from a covered loss that occurs on the described
premises:
1. Losses incurred due to
the enforcement of building, land use, or zoning codes are covered only if
those codes or regulations were in effect at the time of the loss and require
or regulate the following:
·
demolition
of the part of the property not damaged by a covered loss.
·
how
a building or structure must be repaired or constructed.
·
the
types of building or land use occupancy permitted at the premises described.
2. The increase in
expenses the named insured incurs for rebuilding and repairs to meet current
building, zoning, or land use codes, laws, or regulations in effect at the time
of the loss. The rebuilt property should maintain the same occupancy type as
the existing property unless regulations prohibit that occupancy.
3. Expenses the named
insured incurs to demolish undamaged portions of the building and to clear the
site to comply with building, zoning, or land-use codes, laws, or regulations
in force on the date of loss.
Coverage C – Part I A–Main Property
Coverages – Coverage C – Loss of Income Resulting from Direct Covered Loss – B.
Coverage Period is extended to include the time needed to comply with 3.A.1.
above. However, the entire Coverage C time period remains limited to a maximum
of 365 consecutive days that start with the date of loss.
|
Example:
Grady’s Drug Store owns a 100-year-old
building. It occupies the first floor and rents the two apartments on the
second floor. A fire that starts in the kitchen of one of the apartments
damages 60% of the building. Because more than 50% of the building was
damaged, several regulations enacted over the past 100 years are enforced during
the renovation. The additional expenses are as follows:
|
B. This supplemental coverage has two specific payment limitations:
1. No payment is made until the property is actually repaired or replaced,
subject to Part I G – Special Conditions – item C of the How Losses are Settled
Condition. The replacement can be at either the existing premises or another
premises, if permitted or required by the policy. The insurance company must
agree in writing that the property can be rebuilt at another premises.
2. No payments will be
made for any costs associated with pollutants, fungi, mold, lead, or asbestos,
even if those costs are related to building codes or regulations. This includes
no coverage for treatment, containment, monitoring, detoxification, removal,
testing, cleanup, or neutralization of these contaminants.
C. The most the insurance company will pay for items A.1. through A.3. above
combined under this Supplemental Coverage is the cost of demolishing and
clearing the site, plus the expense of replacing or rebuilding the property on
the described premises. This is subject to the property limit shown on the
Declarations and the Limits of Liability outlined in Part I G – Special Part I
Conditions – A. How Losses are Settled.
NOTE: The cost to rebuild at the described premises requirement does not mean
that the property must be rebuilt on the same site. It only means that payment
will not exceed the cost of rebuilding at the same or another site.
|
Example:
Grady’s Drug Store examines
its options: ·
The
cost to construct a frame building at the current location is $1,000,000. ·
It
costs $1,500,000 to rebuild it to meet city regulations. ·
Grady
has a $100,000 limit for building code/law coverage. ·
He
can rebuild outside the city limits for only $1,050,000. Grady has decided to proceed with the
move. He will continue to receive additional coverage since he still needs to
demolish the undamaged part of the building, clear the site, and ensure the
new structure meets ADA standards. However, he is no longer required to
construct a masonry, noncombustible building. |
D. This coverage applies only when the building or structure is insured on a
replacement cost basis. No coverage is provided if it is insured with actual
cash value.
A. Coverage A Extension
If Coverage B is not
included in the policy, the following personal property are covered under
Coverage A, but only if they are owned by the named insured.
1. Property furnished by the insured, who is the landlord, within an apartment.
2. Air conditioners, fire
extinguishers, floor coverings, maintenance equipment, and similar property
used to service or maintain the described premises. Appliances used for
laundry, refrigeration, ventilation, cooking, or dishwashing are also included.
3.
Furniture used outdoors.
|
Example:
Jerry owns a
building that combines commercial and residential spaces. The first floor
contains three retail stores, while the second to fifth floors are
residential units. His property values are as follows: ·
Building (without
Coverage A Extension): $1,250,000 ·
Coverage A
Extensions: $250,000 ·
The building rate
is .50. ·
The premium is .50
X 1,500,000 = $7,500. Jerry opens his own business in one of the retail
store spaces and needs $50,000 in business personal property coverage.
However, a problem occurs when he adds Coverage B to his building policy. The
Coverage A Extension becomes Coverage B. This means the pricing changes as follows: ·
Building: .50 X
1,250,000 = $6,250. ·
Coverage A
Extension (now Coverage B): 1.25 X 250,000 = $3,125. ·
Coverage B (retail
store): 1.25 X 50,000 = $625. Jerry’s premium increases to $10,000 because he
added Coverage B. |
B. Consequent Loss Coverage (Spoilage)
Property that spoils
due to the consequence of a disruption of power, cooling, heating, or
refrigeration service is covered under Coverage B – Business Personal Property,
but only up to the limits shown on the Declarations Supplement. If there is no
Coverage B, this coverage does not apply.
The only property
covered is property located inside a building or structure on the described
premises. The services disrupted must be due to one of the following:
1.
Loss of Utility
Services
Loss of utility
services to the described premises resulting from direct damage to the utility
company's property, that would be covered by this policy.
2.
Mechanical Breakdown
This is a mechanical
breakdown or sudden malfunction caused by an unexpected, accidental event. For
instance, refrigerant leakage qualifies as faulty operation only if it is
sudden and accidental; a slow leak would not be covered. The affected equipment
must be located on the described premises and must supply cooling,
refrigeration, electrical, or heating services to those premises.
This coverage applies
only to losses beyond the named insured's control. This means losses caused by turning
power on or off, by failure to connect units to power, by insufficient fuel, or
by poor maintenance are not covered.
When a spoilage loss
covered under this policy results from damage to equipment located on the
described premises, it is not limited by the amount specified in the
Supplemental Declarations. Instead, the loss is covered up to the Coverage B –
Business Personal Property limit stated on the Declarations. The loss must
result from a loss of power, cooling, heating, or refrigeration supplied to the
equipment.
Trigger Endorsement:
If endorsement BU 50 12
appears on the Declarations, Consequent Loss Coverage Supplemental Coverage
does not apply.
NOTE: Rather than attaching an additional
document labeled BU 50 12, the endorsement language is integrated directly into
the policy. This approach is specific to MSO policy design.
Related Article: MSO
Businessowners Policies Trigger Endorsements
C. Off Premises Coverage
Personal property,
including property described in Coverage A extension, as well as property
covered under the definition, is protected against loss when outdoors, provided
it is within 100 feet of the described premises.
Property located more
than 100 feet away is covered under the following conditions:
Coverage A (Buildings)
The limit on the Declarations Supplement
is the most paid if Coverage A property is located away from the described
premises. Coverage applies only if the property is temporarily off-premises due
to repair, maintenance, or service reasons. This is an extension of Coverage A,
and the limit on the Declarations is a sub-limit of the Coverage A limit.
|
Example: George takes his air conditioning unit to the
authorized service center for repairs. The Coverage A extension covers it
while off-premises. |
Coverage B (Business Personal Property)
The limit on the
Declarations Supplement is the most paid if property that Coverage B insures is
off the described premises, either in transit or at either of the following
locations:
·
Any
location, but only if temporary.
·
A
rented storage unit.
When property is in
transit, coverage is extended to include direct physical loss due to any of the
following:
·
Vehicles
derailing, colliding, or crashing
·
Vessels
sinking or being stranded
·
Collapsing
bridges, culverts, docks, or wharves
|
Example: George has both Coverage A and Coverage B. As a
result, he does not have any Coverage A Extensions. He sends his air
conditioning unit to the authorized service center for repair. Coverage B
insures the unit while it is off premises and in transit. This means there is
coverage if the ferry transporting it sinks. |
D. Personal Effects
This extension applies
only to Coverage B – Business Personal Property. The default limit is $3,00 per
location and cannot be changed. If Coverage B is not included in the policy,
this additional coverage is not applicable.
This supplemental
coverage insures against loss of the named insured's personal effects,
including those of its directors, employees, volunteers, or officers. Coverage
applies only if the qualified party claiming the loss owns the property and the
personal effects were on the described premises at the time of the loss. The
most paid in a single occurrence is the limit shown in the Declarations
Supplement.
This coverage applies only if no other
insurance is available to cover the loss.
|
Example: A windstorm damages Pleasant Valley Office
Services. Peter, Jeff, Sally, and Greta each lose $500 worth of personal
items from their offices. Peter and Jeff each have a $1,000 deductible on
their homeowners policies, so they are eligible to collect under Pleasant
Valley’s Personal Effects Extension. Sally has only a $250 deductible, so she
does not receive any payment because there is insurance. Greta does not have
homeowners coverage, so she can also collect. |
E. No Additional Amount of Coverage
Each of the Business
Property Coverages above are extensions and do not provide additional insurance
amounts. Coverage 4.B. – Consequent Loss Coverage (Spoilage) above is excluded
from this provision.
A. Coverage applies if a
building or part of it collapses, as outlined in this supplemental coverage.
The collapse must be a consequence of the following causes:
1.
A cause of loss outlined in Coverage B Basic Plus Coverage.
This applies to both buildings and business personal property.
2.
Decay hidden and unknown to the insured before a collapse.
3.
Insect or vermin damage hidden and unknown to the insured
before a collapse.
4.
The cumulative weight of people, equipment, animals, or
contents.
5.
The weight of rain when it accumulates on a roof.
6.
Defective materials or methods used to construct, remodel,
renovate, or repair the building or structure.
B. There is a limitation
on the types of property that items A.2. through A.6. above insure. Collapse
coverage applies only to the following property when a building or a structural
part of the building collapses, and that collapse causes the listed property to
collapse:
·
antennas
o
This
includes towers, masts, and lead-in wiring.
·
awnings
·
beach
or diving platforms
o
This
includes equipment and structures that provide support to them.
·
wharves
·
decks
·
docks
·
piers
·
gutters
and downspouts
·
fences
·
outdoor
swimming pools.
o
There
is no limitation on indoor pools.
·
any
paved surface
o
This
includes, but is not limited to:
·
retaining
walls
·
yard
fixtures
This coverage does not provide
additional limits of insurance.
|
Example:
The Donaldson Dairy Ice
Cream Store collapses. The event causes the following damage: ·
The
building is destroyed. ·
The
cell phone antenna on the roof was destroyed when the building collapsed. ·
Falling
debris shreds the gutters, downspouts, and awnings of the building owned next
to the ice cream store. ·
Falling
debris damages the privacy fence behind the store. The investigation reveals that the
collapse was caused by a carpenter ant infestation. The loss adjuster
interviewed all insureds and confirmed that none of them knew about the ants.
Coverage applies to all property items
listed. |
A. Coverage extends up to
the limit shown in the Declarations Supplement. The basic limit provided is
$2,500 per location, but it can be changed. Loss due to a financial loss
resulting from any of the following is covered:
1. Legal obligations of
the named insured regarding credit or fund transfer (debit) cards issued to it,
for amounts required to be paid due to unauthorized use.
2. Activity not authorized
by the named insured but occurring in the insured’s name through online or
electronic payment services or cryptocurrency or blockchain transactions.
3. When checks, drafts,
notes, or other negotiable instruments are forged or altered.
4. Credit or debit card
transactions accepted by the insured’s business that were fraudulent or
disputed. This coverage is limited to the insured’s legal responsibility and
does not include costs covered by a bank or covered by other insurance.
5. When the insured
accepts counterfeit paper money from the United States or Canada.
At the insurance
company’s discretion, it will provide defense if a lawsuit is filed against the
insured under points 1., 3., and 4. above, using its preferred
legal counsel.
NOTE: The policy
does not identify which party bears the cost of the defense or whether that
defense is subject to the limit in the Declarations Supplement.
B. There is no coverage
for financial loss caused by:
1.
Any of the following while providing services or acting
beyond the scope of service to the insured, whether alone or in collusion with
others:
·
employees
·
trustees
·
directors
·
authorized
representatives
2.
Any person entrusted with anything described in A.1.
through A.5. above.
C.
Multiple acts by one person or involving one person as a
suspect constitute a single occurrence.
|
Example: Presley is delighted when Katie accidentally leaves
her wallet at the restaurant. He discreetly takes it and quickly departs to
make several purchases. Katie is stunned when she reviews her online
accounts; despite multiple transactions and banks, this is regarded as one
incident. |
D.
The deductible per occurrence for this coverage is $100,
but it can be changed.
|
Example: Katie is subject to a single $100 deductible
because Presley’s spending spree is considered a single occurrence. |
A. This coverage pays for
the necessary and reasonable costs to remove debris from a covered property
loss. Items B. and C. below specify the amounts the insurance company will pay.
B. The only costs covered
are those incurred by the insured. However, some costs might not be covered
because the coverage limits are capped in two ways:
·
The
debris removal coverage payable is limited to the total covered loss amount
multiplied by the Debris Removal factor specified on the Declarations
Supplement.
·
Debris
removal is not additional insurance. This means the sum of the covered loss and
the incurred debris removal expense cannot exceed the limit of insurance.
|
Example:
The General Store sustained a $125,000 covered
property damage loss with $40,000 in debris removal expense. The limit of insurance is $150,000, and the debris removal
factor on the Declarations Supplement is .25. The maximum amount paid for debris removal is as
follows: ·
$125,000 X .25 = $31,250 (This must then be compared to the limit of insurance.) ·
$125,000 for
covered property damage + $40,000 for debris removal = $165,000 total loss
amount ·
$150,000 limit of
insurance - $125,000 covered damage = $25,000 After covering the property damage costs, only $25,00
of the total limit remains for debris removal expenses. The General Store is
responsible for the additional $15,000 needed to cover the debris removal
costs. |
C. There is additional
coverage available due to the shortfall in B. above. This special limit is
listed on the Declarations Supplement. The applicable limit is whichever of the
following provides the least amount of coverage:
1. The costs for debris
removal surpass the amount of coverage available, as calculated in paragraph
7.B. above.
2.
The total expenses for debris removal and any other
payments the insurance company owes for the covered physical loss exceed the
maximum liability limit for that loss.
|
Example:
The Special Limit for Debris
Removal is $10,000. Using the General Store scenario above:
·
The
maximum limit available under the first item is $31,250 + $10,000 = $41,250 ·
The
maximum limit available under the second item is $150,000 + $10,000 = $160,000 $160,000
- $125,000 = $35,000 Since $35,000 is the lowest calculated
amount, it is used to cover the debris removal expense. While this still
leaves the insured with $5,000 out of pocket to remove the debris, it provides
an additional $10,000 in coverage. |
D. Not all debris removal
expenses are covered. This supplemental coverage does not cover the following:
1. The expense associated
with removing tree debris or any of its parts.
2. The cost of removing
pollutants, whether on land or in water, and regardless of property coverage.
Expenses associated with the safe disposal of pollutants, when required by law
or regulation, are also not covered.
3. The expense to remove,
replace, or restore land or water because it is polluted or considered a
pollutant. Expenses associated with the safe disposal of pollutants, when
required by law or regulation, are also not covered.
4.
Costs associated with removing volcanic ash, dust, or
particulate matter are not covered if they do not damage any covered property.
However, if removal is required because the ash, dust, or particulate matter
causes property damage, the cost of removal is covered.
|
Example: A dormant volcano near the Windermere
Apartments suddenly erupts, spewing ash throughout the area. The ash lands on
the apartment complex's roof, causing it to collapse. The cost to clean up
the ash from the roof is considered a covered debris removal expense.
Meanwhile, ash also coats the Stormy Hill Barber Shop, but since no damage
occurred, the ash removal cost for the shop is not covered. |
E. This coverage is
limited in time and only covers expenses reported to the insurance company
within 180 days of the date of a covered direct physical loss.
F.
Apart from 7.C. above, this coverage extension does not
provide additional coverage. This means coverage is within the coverage limit.
This coverage is
subject to an annual aggregate limit. Annual aggregate means that once the
limit is exhausted, coverage ceases for the remainder of the coverage term.
A. Coverage applies to
expenses the named insured incurs to restore or replace electronic data that
has been destroyed or corrupted. The data loss must result from a covered
direct physical loss. Coverage is available up to the limit specified on the
Declarations Supplement.
B. Part 1 E–Losses Not
Insured, Exclusion 2. Computer Hacking and Computer Virus Exclusion does not
apply to this coverage. However, an important exception does apply: there is no
coverage if an employee or a party the named insured hires to work on the
computer or computer system manipulates the computer, its system, or data in a
way that causes a loss.
C.
The special limit on the Declarations Supplement is the
total amount the insurance company will pay for each annual or 12-month policy
period. This is not a cumulative limit. Additionally, a loss can start in one
year and extend into the next. In such cases, only the limit in effect at the
time the loss begins will be applicable.
|
Example:
Viola’s Violins policy term is
01/01/2025 to 01/01/2026. In December 2025, Viola detects an issue with her
electronic data but attempts to bypass it to manage the Christmas season.
Later, she enlists her son to inspect the entire system, and he discovers it
is severely compromised. Viola must replace the hard drive and spend
considerable time and effort to recover her data. She files two claims with
her insurance company. ·
The first claim is for the policy year 01/01/2025 to 01/01/2026. ·
The second claim is for the policy year 01/01/2026 to 01/01/27 because the damage occurred in both years. The insurance
company investigates and informs Viola that it will only pay $10,000 for the 01/01/2025 to 01/01/2026 policy year. Further investigation reveals that a former
employee introduced a virus into the system on the day Viola fired him, out
of anger. The insurance company then denied all coverage because he was still
considered an employee when he corrupted the system. |
If the named insured
knows that their property faces imminent danger from a covered cause of loss
and takes steps to remove it from the threat, this coverage applies. The
property removed remains covered against all causes of loss, regardless of location,
for up to 30 consecutive days from the date of loss.
The following
provisions do not apply to this supplemental coverage:
·
Part
1 E – Losses Not Insured
·
Part
I B – Supplemental Coverages, 4. Business Property Coverages, C.
– Off-Premises Coverage
This is not additional insurance because
the property is already covered and would have been lost to a covered cause of
loss had the named insured not taken the prudent steps to remove it.
|
Example: A wildfire is heading towards town. Ridley quickly
loads as much of his inventory as possible into his van and drives away to
escape the flames. His goal is to beat the evacuation order and protect his
property. Near his destination, an emergency vehicle clips the van, causing
it to crash into a creek. Ridley escapes unharmed, but all his belongings are
destroyed. Fortunately, the entire loss is fully covered without any
limitations. |
A. Coverage applies when an employee's dishonest act causes a loss to the named
insured’s money, securities, or other business personal property. Coverage applies
whether the employee acts alone or in collusion with others. The limit on the
Declarations Supplement is an occurrence limit, and all acts related to one
another are treated as a single occurrence.
B. The limit for this
coverage is not cumulative. Losses discovered during the current policy year
and up to 12 months after the policy expires are covered. Coverage also applies
if the loss is discovered within 12 months after the previous policy expired, but
only if that policy will not cover the loss.
Since limits are not
cumulative, only one limit applies to losses spanning two or more years,
regardless of the number of acts, years, or policy terms involved.
Related Court Case: Embezzlement
over Five-Year Period Was a Series of Acts: Per Occurrence Limit Applied
|
Example: Billy, the loyal butcher, worked at Mel’s Meats for
15 years. Unbeknownst to Mel, Billy ran a side business supplying his
brother’s restaurant with special cuts of meat. One day, Mel’s son witnessed
a delivery and confronted Billy. Billy confessed to stealing from Mel for
years. The total loss of $100,000 could be covered if the limits were
cumulative, but the payment is limited to $5,000 as shown on the Declarations
Supplement. |
C. This supplemental
coverage requires physical evidence of a loss. It does not cover cases where
the only sign of a loss is an inventory shortage or discrepancies in a profit
and loss statement. However, while these cannot be the only evidence,
inventories and profit and loss statements can support the existence of a loss.
D. If the named insured, a
director, officer, partner, or trustee, knows before coverage begins that an
employee has engaged in dishonest or fraudulent conduct, there is no coverage
for any losses caused by that employee.
E. If the named insured, a
director, officer, partner, or trustee, learns an employee has committed a
dishonest or fraudulent act, coverage for that employee becomes void as soon as
any of these individuals becomes aware of the act. This applies even if a claim
is not reported to the insurance company.
F. The deductible for this
coverage is $200 per occurrence, but it can be changed.
The Part I G – Special Part I Conditions: 2. How Losses Are Settled – B. Deductible does not apply to A. or B. of this supplemental coverage.
A.
Fire Department Service
Charges
Coverage is provided if
the named insured is contractually required to pay service charges to a fire
department. The most paid is the limit specified on the Declarations
Supplement. This coverage applies only if all of the following conditions
apply:
·
The
obligation is in writing
·
The
fire department service is to protect or save insured property
·
The
direct physical loss for which the department is called is covered under the
policy
·
The
service call was made after the contract had been executed
·
The
call was not a false alarm
B.
Fire Extinguisher
Recharge Expense
Any extinguishing
equipment that needs recharging after its use to fight a fire on the described
premises is covered under this supplemental coverage. The applicable limit for
all equipment requiring recharge at a single location is the amount specified
on the Declarations Supplement.
NOTE: Only equipment used to
extinguish a fire is covered; accidental discharges are not included. As well,
the policy does not specify whether cleanup expenses related to any discharge
are covered.
|
Example: Rough and Ready Outdoors Store has a service
agreement with the volunteer fire department. When Corey smells smoke, he
grabs a nearby fire extinguisher. Sally calls 911 to summon the fire
department. Corey manages to contain the fire using several fire extinguishers,
but the fire department is needed to fully extinguish it. This coverage helps
pay for the fire department's service charge and the cost to recharge the
fire extinguishers, up to the limit of insurance, without the application of
a deductible. |
Coverage is provided under various
crime policies when items are stolen or given away under threat. However, if
items are given away without a threat, coverage does not apply, even if the
instructions given were initially accepted as legitimate but later found to be
fraudulent. This supplemental coverage aims to close the coverage gap.
A.
Subject to the limit on the
Declarations Supplement, coverage is provided for financial loss to an insured
when the loss is a direct result of either or both of the following:
NOTE: The Editors
added titles to enhance clarity.
1. Fraudulent Instructions to
Financial Institutions
This applies
only if an employee of the named insured executes a transaction instructing a
financial institution to transfer, pay, or deliver funds from the insured’s
account or to debit that account. The employee must carry out this transaction
based on fraudulent instructions and act in good faith.
2. Fraudulent Entries into the Named
Insured’s Computer Equipment
This applies only when an employee
of the named insured makes an electronic data entry or alters information
related to the named insured’s owned, operated, or leased computer equipment.
Such an entry must lead to the transfer, payment, or delivery of money,
securities, or other property from the insured’s account, or result in the
account being debited or deleted. The employee performing this action must do
so in good faith, based on fraudulent instructions.
|
Example: Archer is out of the
office meeting with clients. His administrative assistant, Patricia, received
a call from Archer’s wife, who explained that Archer had asked her to call
because he was busy in a meeting. She informed Patricia that he needed $5,000
transferred from the company account to a vendor’s account to finalize a
deal. Following proper procedures, Patricia asked Connie in accounting to
transfer the funds immediately. The next day, Patricia
was eager to hear about the deal when Archer came into the office, but she
was not so excited when Archer said he had no idea what she was talking
about. The Fraudulent Transfer of Funds Coverage supplement would respond to
this loss. |
B.
A single act can lead to multiple
occurrences and involve one or more employees. Regardless of how many
occurrences or employees are involved, the maximum amount paid for a single
consolidated financial loss resulting from that act is the limit specified in
the Declarations Supplement for this coverage.
NOTE: The limit on the Declarations Supplement is $5,000,
and there is no indication it can be increased. This is a coverage limit, NOT a
location limit, meaning the $5,000 limit applies to all locations.
C.
The deductible amount is $500 for
each occurrence. This deductible can be changed on the Declarations Supplement.
NOTE: The deductible is per occurrence,
but the limit of insurance is per consolidated financial loss. This could
result in multiple deductibles being applied to that single financial loss.
|
Example:
Millie receives an email request from
John to modify some programming. That simple change results in a $25.00 debit
from Bare Bone’s account every day. The amount is small and goes unnoticed
for months. An audit identifies the charge and the
change to the program. An investigation leads back to Millie, who provided
the documentation of John emailing her to make the change. John denies making
the request. Further investigation reveals that John’s email
account was hacked. A claim for fraudulent transfer of funds is made. The
insurance company agrees that coverage applies but does not pay anything
because each debit was a separate occurrence that was less than the
deductible. |
If the named
insured incurs expenses due to the loss or theft of key cards or door keys,
costs for repairing, reprogramming, or replacing locks and keys are covered,
but only at the premises described on the Declarations. This coverage includes
door locks, lock tumblers, and similar locking mechanisms. The coverage limit
is specified on the Declarations, and no deductible applies.
Part I E – Losses
Not Insured – 3. Disappearance or Dishonesty Exclusion does not apply to this supplemental
coverage.
A.
Coverage C Extension
This coverage protects
the named insured against loss of business income and related expenses caused
by a direct covered loss to a dependent property, which interrupts the named
insured’s operations or business.
Coverage is limited to the amount
specified in the Declarations Supplement. The default limit is $5,000, but this
can be modified.
|
Example: Mowry’s Lawn Equipment has an exclusive contract to
sell Best Ever Lawnmowers. When Best Ever has a fire that shuts down
production for six months, Mowry’s income drops dramatically. This coverage
pays for Mowry’s loss of income. |
B.
Resumption of
Operations
If the named insured can resume
operations by using materials from a different supplier or selling products or
services through another outlet, the amount that would otherwise be paid under
this coverage is reduced. This reduction depends on how much these alternatives
shorten the downtime. The options may involve partial or entire replacement.
|
Example: Mowry’s Lawn Equipment offers more than just Best
Ever lawn mowers. Although he can order different lawn mowers, he chooses not
to due to concerns about the long-term effects on his Best Ever franchise.
This decision results in a reduced payout from his insurance company. |
C.
Coverage Period
The coverage period begins when the
direct physical loss occurs at the dependent location. It ends when the
dependent location should be able to resume operations. The duration is based
on what should occur, not on what actually occurs. The duration may be shorter
than needed if the dependent property does not exercise all due diligence and
ongoing effort to replace damaged property and resume operations.
|
Example:
Best Ever Lawnmower’s president
assesses the best approach after the fire, deciding whether to buy a new
plant or repair the damaged one. He visits several existing plant sites and
often takes his family on extended vacations. It took him three months to
choose repair over replacement. Mowry’s insurance company argues that all
reconstruction could have been finished in five months, but Best Ever’s
three-month delay extends the total construction time to eight months.
Consequently, Mowry’s insurer covers only five months of downtime. |
This coverage is
subject to an annual aggregate limit of $10,000 for each scheduled location.
Once this annual aggregate is reached, coverage ends for that coverage period.
NOTE: The Editors added titles to B. and C. to enhance clarity.
A. Coverage C Extension
The loss of income the
named insured incurs when computer operations are interrupted due to corrupted
or destroyed electronic data is covered. The corruption or destruction of the
data must result from one of the specified causes of loss, computer hacking, or
a computer virus.
NOTE: When comparing the causes of loss under Supplemental Coverages 8.
Electronic Data Coverage above with this coverage. Electronic Data Coverage
covers direct physical loss as covered by this policy. However, this coverage
is limited to specified causes of loss, computer hacking, or computer virus. As
a result, a direct damage loss might be covered, but the resulting income loss
from the same loss is not.
|
Example: Burglars broke into Merydale’s offices and stole
all the laptops and external hard drives. These drives contained backups of
all computer programs, and some employees stored their primary information on
them instead of on their C drives. The direct damage caused by the theft is
covered, but the loss of income is not because theft is not one of the
specified causes of loss. |
B. Computer Hacking and
Computer Virus Exclusion – Removed
Part 1 E–Losses Not
Insured – 2. Computer Hacking and Computer Virus Exclusion does not apply to
this supplement, but there is a key exception: coverage is not provided if an
employee or a retained party alters the computer, its system, or data in a way that
causes or results in a loss.
C. Special Limit
The special limit on
the Declarations Supplement is the total amount the insurance company pays for
each annual policy term or 12-month period. This limit applies regardless of
the number of occurrences or total expenses incurred. It is not a cumulative limit
from period to period. A loss that begins in one policy year and extends into
another is subject only to the limit in place when the loss began.
D. Resumption of
Operations
If the named insured
can resume operations by using another source for computer operations, the
amount that would otherwise be paid under this coverage is reduced. The options
may involve partial or full replacement.
E. Coverage Period
The coverage period
begins on the date of the computer operation interruption and ends when the
necessary period to restore computer operations is complete. It indicates what
should happen, not what actually occurs. The duration may be shorter if the named
insured does not exercise all due diligence and continual effort to resume
computer operations.
A. Coverage may be
extended to property the named insured acquires during the policy term. The
locations are covered only if the operations conducted at them are similar to
the business described on the Declarations or will be used as private
warehouses. The amount varies by coverage type as follows:
Coverage A – Buildings
·
The
maximum coverage available is 25% of the limit of liability of Coverage A for
newly acquired buildings.
·
If
multiple buildings described on the Declarations are involved, the limit is
based on 25% of the highest available limit listed on the Declarations.
·
If
the named insured adds an addition to an existing building described on the Declarations,
the maximum limit available is 25% of the specific property to which the
addition is made.
|
Example: Realistic, Inc. has four buildings with the
following limits: |
|||||||||||||||
|
|||||||||||||||
|
Realistic purchases a fifth building for $150,000
and adds an addition to Building 1. ·
Only a $45,000 limit is available for the newly
acquired building ($180,000 X .25). ·
The maximum available for the addition is $37,500
($150,000 X .25). |
Coverage B – Business Personal Property
When the named insured
acquires a new location, the maximum available coverage for Coverage B –
Business Personal Property is 25% of the liability limit for Coverage B shown
on the Declarations.
When multiple buildings are involved,
the maximum limit available is 25% of the highest Coverage B – Business
Personal Property limit shown on the Declarations. This applies only to
business personal property at a newly acquired location. It does not apply to
newly acquired business personal property at an existing location.
|
Example: Realistic purchased $25,000 in business personal
property for the newly acquired building, location #5. The maximum limit available
is $25,000 ($100,000 X .25). |
Coverage C – Loss of Income
Coverage C is not
unlimited, unlike the business income coverage in the policy. The maximum that
can be applied is the amount available under Coverage A and/or Coverage B at
the acquired location.
The applicable limit available
for a covered loss will depend on which coverage sustains a loss that triggers
Coverage C.
Coverage A—Building
If a newly acquired
building sustains a covered loss to the building that includes loss of income,
the Coverage A limit shown on the Declarations multiplied by the .25 factor is
available for Coverage C.
Coverage B—Business
Personal Property
If a newly acquired
location sustains a covered loss to Business Personal Property that includes
loss of income, the Coverage B limit shown on the Declarations multiplied by
the .25 factor is available for Coverage C.
Coverage A and B
If a newly acquired location sustains a
covered loss to the Building and Business Personal Property that includes loss
of income, the sum of the Coverage A limit shown on the Declarations and the
Coverage B limit shown on the Declarations, each multiplied by the .25 factor,
is available for Coverage C.
|
Example:
Realistic sustains a covered loss to
their newly acquired Building and BPP. This means the maximum available to
Realistic for Loss of Income coverage at Building 5 is $70,000. ·
Highest Building coverage limit available $180,000 x .25= $45,000 ·
Highest BPP coverage limit available $100,000 x .25 = $25,000 $45,000 + $25,000 =
$70,000 maximum limit available for Coverage C–Loss of Income |
B. The supplemental coverage
described above lasts only 45 days after the acquisition date. This period is
also limited by the policy’s expiration date. The policy could be canceled,
terminated, or expired before the 45-day period ends. In such cases, coverage
ends on the policy’s cancellation, termination, or expiration date.
Additionally, this supplemental coverage terminates once the values of the
acquired property are reported to the insurance company.
|
Example: Realistic acquires building #5 on December 15. The
policy expires on January 1. Coverage for the newly acquired property ends on
January 1. As a result, building #5 has no coverage if it is not added to the
policy at renewal. |
Coverage extends to
direct physical loss of outdoor signs and satellite dishes at the specified
premises. The posts and poles supporting these signs are also included. When
coverage applies to interior building signs and entrance signs, the term
"outdoor" is replaced with "exterior."
The default limit is
$2,500, which can be modified and a $100 deductible that cannot be modified.
The following do not
apply to this supplemental coverage:
·
Part
1 D–Property Exclusions / Limitations
·
Part
1 E–Losses Not Insured
o
But
the following do apply to this supplemental coverage:
§ Exclusion 7.
Intentional Loss
§ Paragraph A. of
Exclusion 12. Wear, Tear, and Other Specified Causes of Loss Exclusions
·
Part I G – Special Part I Conditions: 2. How
Losses Are Settled – B. Deductible does not apply.
A. This very limited supplemental
coverage and is subject to all of the following:
·
A
covered cause of loss causes direct physical damage to covered property.
·
A
pollutant is released onto land or into water as a direct consequence of a covered
loss.
·
The
pollutant is emitted, escapes, migrates, seeps, or is discharged or dispersed
onto covered property as a result of a covered loss.
·
The
polluted land or water is on the described premises.
The expenses to remove
the pollutants are covered, but only if both of the following apply:
·
They
are actually incurred.
·
They
must be reported in writing to the insurance company within 180 days of the
direct physical loss that caused the pollution event.
The most the insurance company pays is the
limit on the Declarations Supplement. This is an aggregate limit that applies during
a 12-month period. The basic limit provided is $10,000, but it can be modified.
|
Example:
A fire at Janey’s Picture Framing
results in lacquer and paint discharging into the pond on the insured
property, costing Janey $7,000 to remove. Shortly after reopening, a
windstorm causes the same substances to be discharged into the pond again,
and Janey spends an additional $5,000 to clean it up. Janey’s supplemental pollution coverage limit is
$10,000, so she receives $7,000 for the first incident but only $3,000 for
the second, due to the annual aggregate of $10,000. |
B. This coverage does not
cover any costs related to extracting radioactive or nuclear materials of any
kind.
C. There might be a
specific deductible on the Declarations Supplement for this supplemental
coverage. If present, this deductible replaces any other deductible. If absent,
the standard policy deductible applies.
This supplemental
coverage extends Coverage A – Building to lawns, vegetated roofs, decorative
trees, shrubs, and other plants for loss up to the limit specified on the
Declaration Supplement. The basic coverage limit provided is $2,500 and cannot
be changed. There is also a limit of $500 per tree, plant, or shrub. Coverage
includes debris removal expenses associated with a covered loss.
Losses caused by any
covered perils are included. However, the following perils are not covered:
|
·
hail |
·
snow |
|
·
ice |
·
wind |
|
·
sleet |
|
Property held or grown
for business purposes is not covered. Additionally, this supplemental coverage
does not increase the coverage limit. This means the applicable limit is
included within the limits of insurance.
NOTE: Debris removal in this supplemental
coverage is very important because it covers debris removal of a tree instead
of coverage that applies under Supplemental Coverages 8. Debris Removal
Coverage. The term “decorative tree” must also be considered.
Part 1. D–Property
Exclusions/Limitations exclude all coverage for trees, shrubs, plants, lawns,
and growing crops except as this coverage provides. However, this coverage insures
only “decorative trees.” The policy does not specifically define “decorative
tree,” so the common meaning will apply. Merriam-Webster Dictionary defines “decorative”
as purely ornamental, so a decorative tree could be considered an ornamental
tree.
Coverage B–Business
Personal Property must be provided for this coverage to apply.
This coverage insures the
expenses the named insured incurs to replace or restore valuable papers and
records damaged or lost due to a covered direct physical loss. Covered expenses
include the cost of research.
The following do not
apply to this supplemental coverage:
·
Part
1 D–Property Exclusions / Limitations
·
Part
1 E–Losses Not Insured
o
But
the following do apply to this supplemental coverage:
§ Exclusion 7.
Intentional Loss
§ Paragraph A. of
Exclusion 12. Wear, Tear, and Other Specified Causes of Loss Exclusions
·
Part I G – Special Part I Conditions: 2. How
Losses Are Settled – B. Deductible does not apply.
The most paid for these
expenses is the limit on the Declarations Supplement. The standard limit is
$10,000 per location, but it can be increased.
The full Coverage B limit covers costs
for blank forms needed to replace records or papers, as well as expenses
incurred by the named insured to copy or transcribe written records. However, coverage
does not apply to electronic records.
|
Example:
Graves has a $50,000 Coverage B limit
and a $10,000 Valuable Papers and Records limit. A flood causes the following
loss: ·
The records are
waterlogged and ruined but can still be read and duplicated. Transcribing
them costs $7,000, and the materials needed to do so cost an additional
$2,000. The $50,000 Coverage B limit applies to this loss. ·
A few valuable
manuscripts are also lost, and replacing them with similar books costs
$5,000. This loss is covered under the $10,000 Valuable Papers and Records
limit. |
This coverage includes
the definition of valuable papers. Items such as the following, along with
similar records, are regarded as valuable papers and records:
·
abstracts
·
books
of accounts
·
documents
·
deeds
·
manuscripts
|
Example:
Graves has a $50,000 Coverage B limit
and a $10,000 limit for Valuable Papers and Records, as listed on the
Declarations Supplemental. A flood causes the following loss: ·
Records are
waterlogged and ruined, but they can be read and duplicated. It costs $7,000
to transcribe them, and the materials needed to do so cost an additional
$2,000. o The $50,000 limit under Coverage B applies to this
loss. ·
A few valuable
manuscripts are also destroyed. It costs $5,000 to replace them with similar
books. o
The $10,000
Valuable Papers and Records limit applies to this loss. |
Coverage B extends to the
named insured’s motorized land vehicles under limited circumstances:
·
Such
vehicles must be on the described premises.
·
They
must be used to service the premises or the business operations.
NOTE: The term “principally” is used. This means
that vehicles temporarily off premises or that are occasionally being used for
purposes other than servicing the premises or business operations are still
covered.
Forklifts, lawnmowers,
electric carts, and tractors are just a few examples of the type of vehicles
covered, but many other types may qualify.
The following types of
vehicles are excluded:
·
Vehicles
licensed for use on public roads
NOTE: This does not indicate that the vehicle
must be licensed; it only states that it is licensed. Therefore, an unlicensed
yard truck that meets all other conditions is also covered.
·
Vehicles
not principally kept at the described premises
·
Vehicles
specifically insured elsewhere
If the policy does not
include Coverage B, this coverage extends Coverage A when the vehicles are used
to exclusively (not principally) for premises service.
No additional limit of
insurance is provided under this supplemental coverage. This means coverage is
within the limit of insurance.
A. If a covered Sprinkler
Leakage or Water Damage loss occurs, the following additional expenses are
covered as an extension of Coverage A:
1. The cost to repair
parts of the building damaged to gain access and repair the appliances, systems,
or equipment from which the water was escaping.
2.
The cost to either repair or replace the part of the item
allowing the water to escape. This cost must be incurred at the same time the
building was being damaged to gain access to that item.
|
Example:
John noticed water pooling on the
floor. He could hear water but could not determine its source. The plumber
arrived and began searching for the problem area. After four unsuccessful
attempts, he located the problem area. He replaced the valve but told John
that additional work was needed to prevent a recurrence. The cost to repair all five access points is
covered. The cost to replace the valve is covered. The cost to return and
repair other objects to prevent a recurrence is not covered. |
B. This supplemental
coverage does not apply to the following:
1. Coverage does not
extend to the cost of repairing or replacing appliances, equipment, or systems,
except for the specific defective or damaged part mentioned in A.2. above.
Additionally, there is no coverage for repairing or replacing any property,
except for the particular item that directly caused the water damage.
2. There is no coverage if
another party is contractually or by law responsible for paying these expenses.
No additional limit of insurance is provided
under this supplemental coverage. This means coverage is within the limit of
insurance.
Loss can result from
accidental direct physical damage or destruction of covered property due to a
covered cause of loss, unless it is explicitly excluded or limited. Loss means
unexpected physical harm or destruction, including theft if it is covered, as
well as damage resulting from such theft. A covered cause of loss is a specific
cause listed in the policy that applies to the covered property.
This means consequential losses, such as
loss of use, loss of income, and spoilage, are not covered unless specifically
provided in the policy. An example of a covered consequential loss is Loss of
Income under Coverage C.
|
Example:
Marvin and Sons have the following
losses:
|
When the Basic Plus
Coverage is selected on the Declarations, only fortuitous direct damage losses
from the following causes of loss are covered:
Coverage A
All fortuitous direct
damage losses to Coverage A – Building property are covered, subject to all of
the policy’s other parts and provisions.
Coverage B
The only fortuitous
direct damage losses to Coverage B – Business Personal Property are those
caused by the following. These causes of loss are subject to all policy provisions:
·
Fire
that is hostile
·
Aircraft
·
Explosion
·
Falling
Objects
·
Glass
Breakage
·
Lightning
·
Riot
or Civil Commotion
·
Sinkhole
Collapse
·
Smoke
·
Sprinkler
Leakage
·
Vandalism
·
Vehicles
·
Volcanic
Eruption
·
Weight
of Ice, Sleet, or Snow
·
Windstorm
/ Hail
Each cause of loss
listed above is explained in more detail under item 3. – Descriptions of Causes
of Loss later in this same Part. Fire, Explosion, Lightning, Weight of Ice,
Sleet or Snow, and Windstorm/Hail are not specifically explained in 3. below
but are well defined by Common Law and precedent without further explanation.
Related Articles:
Vandalism,
Riot, or Civil Commotion–A Discussion
Windstorm or
Hail–A Discussion
If the Declarations
indicates that Expanded Coverage applies, the policy covers the property
against accidental direct physical loss as described below.
Coverage A and Coverage
B
This policy covers
accidental direct physical loss to property that is not excluded or limited. If
only Coverage B applies, it covers loss (except from fire or explosion) to that
part of a nonowned building used by the named insured or holding their property,
caused directly by theft, if the insured is responsible to others for the loss.
Losses and costs excluded under the
causes of Falling Objects and Sinkhole Collapse also fall within the scope of
Expanded Coverage.
|
Example:
Pesky Perks’ lease specifies that it is
liable for any theft damage to the building it occupies. One evening, Connie
locks up without noticing a customer hiding in a closet. The customer
rummages through the store, steals items, then exits through the back door,
kicking it open and causing damage. Coverage B–Expanded Coverage covers both the stolen
property and the damage to the back door. |
The definitions of the
causes of loss listed in 1. Basic Plus Coverage above are as follows:
A.
Aircraft
Coverage includes loss resulting from
direct physical contact between an aircraft or any part of it and the covered
property. Self-propelled spacecraft and missiles are considered aircraft. This
cause of loss also includes direct damage to covered property from an unmanned
aerial vehicle and its components.
|
Example: Paul is surprised when a piece of metal crushes his
lawn tractor. An investigation reveals it fell from a crop duster plane
operating in the area. This would be classified as a covered aircraft loss. |
B.
Falling Objects
This is damage to
property caused by an object that falls on it.
This cause of loss does
not include the following losses:
·
Damage
to personal property outdoors and not in a building
·
Damage
to a building's interior or personal property inside, unless the falling object
breaks through the building's exterior, such as the roof or an outside wall.
|
Example:
A truck hits a tower next to Joe’s Finer Furniture. The tower and antennas on
it fall onto Joe’s property.
|
C.
Glass Breakage
This refers to damage to other property
caused by glass breakage that is part of buildings.
|
Example: A gutter from an adjacent building detaches and
crashes through the glass at Patrick’s Card Shop. Glass shards embed into the
carpeting and numerous cards. The damage to the carpet and cards is covered
as glass breakage. |
D.
Riot or Civil Commotion
This goes beyond riot
and civil unrest; it also includes, but not limited to, the following two
aspects:
·
Activities
of employees while on strike and occupying the described premises.
·
Looting
occurring amid civil unrest or riots
E.
Sinkhole Collapse
This happens when land
suddenly sinks or collapses into underground voids created by water eroding
limestone or similar rocks. The loss occurs when the collapse damages the
property on that land.
This cause of loss
excludes collapse or sinking into manmade cavities and does not cover the cost
of filling sinkholes.
NOTE: Underground mines are an example of
manmade cavities.
F.
Smoke
This cause of loss
applies only to sudden and accidental smoke that results in physical damage.
NOTE: Industrial smoke
pollution and agricultural smudging are examples of smoke not covered.
|
Examples:
·
Malcolm’s store
windows get dirty from the smoke caused by a wildfire. This damage is not
covered because there's no physical damage to Malcolm’s property. ·
Malcolm’s old
vacuum tube radio overheats, releasing smoke that quickly fills the store.
The smoke damages the circuitry in many of the electronic devices for sale.
This loss is covered because the smoke was accidental and caused physical damage.
|
G.
Sprinkler Leakage
The only damages
covered are those caused by accidental discharge or leakage from an automatic
sprinkler system. This also includes the collapse of any tank that is part of
the system.
H.
Vandalism
This is both willful
and malicious damage to covered property. It includes damage to buildings
caused by burglars breaking in or out. However, it does not include theft
losses or breakage of signs and building glass.
I.
Vehicles
There are two types of covered
vehicle damage:
·
The
vehicle making physical contact with the covered property, damaging it.
·
The
vehicle throwing up an object into covered property, damaging it.
Coverage does not apply if the vehicle
involved in either of the above actions is owned by the named insured or used
for the named insured’s business.
|
Examples:
·
John carries a
television to his car. The car slips out of gear and begins rolling toward
him. He drops the television and jumps into the car to stop it. The
television is damaged by the drop. This loss is not covered. ·
A car passing
Jim’s Barber Shop hits a piece of metal on the road, which then flies through
Jim’s window. The damage caused by the metal is considered vehicle damage. |
J.
Volcanic Eruption
There are only three
types of covered volcanic eruption-related losses:
1. Shock waves or airborne
blast
2. Particulate matter,
ash, and dust are covered only if they cause damage. There is no coverage if
they can be removed without causing physical damage.
3. Flow of lava
NOTE: There is a group of property exclusions
in the policy known as Common Exclusions. 1. Earth Movement/Earthquake/Volcanic
Activity which excludes all volcanic activity that this cause of loss does not
describe.
Each volcanic eruption
is not treated as a separate occurrence. All activity occurring over a 168-hour
period is treated as a single occurrence and a single loss.
K.
Water Damage
This cause of loss
applies to Coverage A. It also applies to Coverage B if Expanded Coverage is selected
on the Declarations.
This loss occurs when an appliance,
piece of equipment, or system breaks or cracks, causing water, steam, or other
liquids or materials to suddenly and accidentally spew out.
|
Example: John notices water pooling on the floor. He hears
the water but cannot pinpoint its source. The damage caused by the water is
covered. However, if John ignores the dripping without taking action, the
further damage will not be covered since it is no longer considered sudden
and accidental. |
If the loss involves an
automatic sprinkler system, refer to G. Sprinkler Leakage cause of loss.
The policy may state that coverage
applies only to specified causes of loss. When it does, only the following
causes of loss apply:
|
·
aircraft |
·
explosion |
·
falling objects |
|
·
fire |
·
lightning |
·
riot or civil commotion |
|
·
sinkhole collapse |
·
smoke |
·
sprinkler leakage |
|
·
vandalism |
·
vehicles |
·
volcanic eruption |
|
·
water damage |
·
weight of ice, sleet, or snow |
·
windstorm/hail |
NOTE: This term is meant to limit
coverage, not expand it. Therefore, if the coverage would be increased by this
listing, such expansion is excluded.
A.
Coverages A and B
Covered losses as
detailed in the Part I C – Loss Insured: General Cause of Loss Conditions – Coverages
A, B, and C.
B.
Coverage C
This relates to the specific context in which Coverage C applies:
1.
Direct covered loss:
This is defined according to the specific type of Coverage C being
provided:
a. When used with Loss of
Income coverage, this refers to the direct covered loss described in the
General Cause of Loss Conditions-Coverages A, B, C that occurs at a described
premises. The named insured must occupy the premises, and the loss must lead to
a loss of income. The occupancy requirement does not apply when Coverage C is
loss of Rental Income.
b. When the term is used
with Loss of Income from Dependent Property coverage, this is the direct
covered loss described in the General Cause of Loss conditions–Coverages A, B,
C that occurs at a dependent property.
2.
Covered Loss
A consequential loss resulting
from a direct covered loss described in 1. above.
The property listed
below is excluded. However, there may be exceptions in other parts of the
policy; these exceptions apply only as explicitly described.
A. All of the following
are excluded except as provided under Part 1 B–Supplemental Coverages 1.
Accounts Receivable and 20. Valuable Papers and Records:
|
·
bills |
·
deeds |
·
evidences of debt |
|
·
money or securities |
·
notes |
·
gold |
|
·
silver |
·
other precious metals |
·
valuable papers and records |
B. The following property
is excluded except as provided under Part 1 B–Supplemental Coverages 17.
Outdoor (Exterior) Signs and Satellite Dish Coverage:
·
Outdoor
(exterior) signs
NOTE: Supplemental Coverage 17. Outdoor signs
is broadened to include signs that are interior but are considered building or
entrance signs. This wording is not used here.
·
Satellite
dishes
C. Any type of creature.
The common definition of this word applies, as there are no other restrictions.
Typically, a creature is any animal, which limits the term to nonhumans.
Alternatively, a broader definition considers a creature as any animate being.
However, this definition excludes insured stocks of animals.
D. The following are
excluded:
·
Land
and the expenses involved in land movement, including excavation, grading, and
general land preparation
·
Driveways,
walks, and other paved surfaces
·
Water
·
Docks,
wharves, piers, and pilings
·
Walls
that serve as retaining structures but not connected to a building
·
Drains,
pipes, and flues located below ground level
·
Foundations
below ground level
·
Foundations
below the subsurface of the lowest basement
NOTE: Since this
property is excluded, the client can omit its value when calculating insurance to
value, which can reduce the premium.
E. Electronic data
There are two
exceptions:
·
Coverage
provided under Part 1 B–Supplemental Coverages 8. Electronic Data Coverage
·
Prepackaged software but only if it is considered
the named insured’s stock.
|
Example: An electrical short ignited a fire at Mary’s Office
Services, damaging all computers and destroying all data and programs stored
on them. This loss is not covered due to this exclusion. However, the good
news is that her prepackaged software stock sold to her customers is covered,
with limited coverage available under Part I B–Supplemental Coverages 8.
Electronic Data Coverage. |
F. Any property this
policy does not describe
IMPORTANT NOTE: This statement covers
a lot of ground. If a particular type of property is not mentioned in the
policy, it won't be covered. This can sometimes give insurance providers room
to deny claims. It's really important to carefully check the details of what's
included in Coverage A, Coverage B, and the Supplemental Coverage, since
anything else will not be covered.
G. Any property also
covered under Coverage B but is specifically described and insured by this
policy or another policy.
H.
All trees, shrubs, plants, lawns, and growing crops. This
property is not required to be outdoors, so landscaping and indoor plants are
also excluded. There is an exception under Part 1 B–Supplemental Coverages 19. Trees,
Shrubs, and Plants Coverage.
|
Example: The Exquisite Office Tower features a large indoor
garden with small decorative trees, shrubs, and plants. When smoke from a
small fire damages plants in the garden, the only coverage available is under
Part 1 B–Supplemental Coverages 19. Trees, Shrubs, and Plants Coverage.
Fortunately, Exquisite’s insurance agent accounted for this garden and
coordinated with the underwriter to increase the coverage limit for trees,
shrubs, and plants to $25,000, with a per-item limit of $2,000. As a result,
this loss is covered. |
I.
Vehicles
The following vehicles
are not covered except for those under the control of the named insured for the
purpose of selling, servicing, or repairing:
·
aircraft
·
unmanned aerial vehicles
·
land
vehicles that are motorized
·
watercraft
The equipment, motors,
accessories, parts, and trailers part of any of the above are also not covered.
The only exception is provided in
Supplemental Coverage 21. Vehicle Coverage.
The following
restrictions apply only to Coverage B property that is insured and considered
covered property. These restrictions apply only when the cause of loss is other
than a specified cause of loss.
A.
Breakage
Glass breakage is not
covered, including fragile items similar to glass and glass-like items.
However, there are
exceptions:
·
Photographic
and scientific lenses are covered.
·
Bottles
and similar type containers are also covered.
B.
Furs
The limit on the Declarations Supplement
– Property Restrictions – Furs is the maximum amount paid for all loss in a
single occurrence involving furs and garments trimmed with fur. The limit
provided on the Declarations Supplement is $3,000 per location and is an
aggregate limit.
|
Example: A fire destroys My Ladies Clothing store. The
damage to fur-trimmed items is fully covered since the loss falls under a
specified cause of loss. |
C.
Jewelry
The limit on the
Declarations Supplement–Property Restrictions–Jewelry is the most paid for all
loss in a single occurrence to the following property:
·
Jewelry,
jewels, and pearls
·
Semi-precious
and precious stones
·
Watches.
This also includes watch movements.
·
Gold,
silver, and other precious metals in any form, including bullion.
The only exceptions are watch items or
jewelry items valued at less than the Value Waiver Limit on the Declarations
Supplement. The Jewelry aggregate limit is $3,000 per location, and the Jewelry
Value Waiver limit is $100.
|
Example:
Jewelry and clothing were
stolen from Jules Boteque. The property loss was reimbursed, but limited as
follows:
|
NOTE: Also review
the Common Exclusion–Parts I and II sections towards the back of the policy,
which contain exclusions for earth movement, war, and nuclear events.
This policy does not
cover direct or indirect losses resulting from any of the following causes. The
exclusion applies even if the loss happens at the same time as a covered loss
or if another loss contributed to it.
The only exceptions are
those specifically provided by the policy.
Related Article: Concurrent
Causation and Anti-Concurrent Causation Clauses–A Discussion
When laws regulating construction,
repair, demolition, or debris removal are enforced, the building owner might
face financial loss for reasons like tearing down undamaged property, modify an
existing structure, or incur additional costs to rebuild according to legal
standards. This policy does not include coverage for these or similar actions,
except for what is covered under Part I B–Supplemental Coverages 3. Building
Code/Law Coverage.
|
Example:
Kittly’s is a 50-year-old
masonry building in downtown Middlebury. A tornado damages over 60% of the
building. Kittly’s applies for a building permit but is told they must
demolish the undamaged part and reconstruct the entire building using masonry
noncombustible materials. Additionally, Kittly’s must upgrade to meet current
ADA standards. There is no coverage for demolishing
the existing structure, the value of the 40% undamaged part, the upgrade to
masonry noncombustible construction, or the ADA compliance upgrades, except
for the limited coverage available under Part 1 B–Supplemental Coverages 3.
Building Code/Law Coverage. |
This excludes any loss
due to computer hacking or a computer virus. The only exception is provided under
Part 1 B–Supplemental Coverages 8. Electronic Data Coverage.
Coverage does not
include property that disappears mysteriously or is missing without any
explanation. This also applies to shortages of inventory and money and
securities. Additionally, shoplifting, pilfering, and the misappropriation of
property are excluded.
|
Example: Magda conducts an inventory monthly.
Her March count shows $15,000 worth of stock missing. She is unsure of its
whereabouts, as it isn't on her shelves. It seems the stock simply
disappeared! This loss is excluded. |
Losses resulting from dishonest,
criminal, or fraudulent acts are excluded only if they are carried out by the
named insured, other insureds, its directors, employees, partners, or trustees.
These losses are also excluded if committed by any entity that holds possession
of the property. The only exception is loss to property while it is in a hired
bailee’s possession.
|
Example: Magda knows that stock cannot simply vanish. She
begins her own investigation. Based on the evidence she develops, she
confronts her store manager, who confesses. The loss is still excluded
because of this exclusion. However, there is coverage under Part 1 B –
Supplemental Coverages 10. Employee Dishonesty Coverage. |
Coverage does not apply
to any loss caused by artificially generated electrical currents going to or
through any of the following:
·
appliances
·
devices
·
wiring
·
computer hardware
·
computer components
·
computer equipment
There is an exception. A fire loss
resulting from such an excluded loss is covered. However, the fire loss must
not be excluded elsewhere in this policy.
|
Example: A faulty circuit breaker allows the
coffee maker to overheat, destroying it. The heat ignites the filters sitting
next to it. Damage to the circuit breaker and coffee maker is not covered.
Damage to the filters and any other damage caused by the fire is covered. |
If the named insured
owns or is in control of steam boilers, engines, pipes, or turbines, there is
no coverage if they explode. However, there are two exceptions:
·
Coverage
applies if a fire or another explosion occurs as a result of an excluded
explosion, but only if the fire damage is not excluded by the policy. The
coverage is limited to damages from the fire and the secondary explosion,
excluding the initial explosion.
·
If
gas or fuel explodes inside the combustion chamber, flue, or firebox of the
above described equipment causing a loss, that loss is covered.
|
Examples:
The steam boiler in the Sherwood Forest
Office Building explodes. ·
Maureen’s Bakery
is located directly above the boiler and sustains damage when a part of the
boiler that explodes breaks through the floor. Maureen’s loss is covered
because she does not own, operate, or control the boiler. ·
The boiler is
destroyed, and the basement walls suffer heavy damage. The ceiling above the
boiler and Maureen’s Bakery floor is also damaged. The Sherwood Forest Office
Building policy does not cover this damage, as it owns the boiler. ·
The explosion
triggers a fire at Maureen’s Bakery, which then spreads to three other
occupants in the building. The policy for the Sherwood Forest Office Building
covers the damage caused by the fire. |
The following perils listed
below are not covered. Additionally, any flooding or flood damage caused by
natural or human forces, or by weather conditions such as rain, snow, or wind,
is not covered. They are also not covered if resulting from any other covered
cause of loss.
·
surface
water
·
waves
·
storm
surge
·
tidal
water or waves
·
streams
or other bodies of water overflowing
·
spray
from any of the above
However, coverage
applies if fire, explosion, or theft occurs due to the above causes of loss, provided
the policy includes such coverage.
In the 05 23 edition, this
exclusion was moved into its proper placement in the policy.
A. Hot Water Boilers
If a loss occurs to hot
water boilers or any other water-heating equipment, it is excluded, regardless
of their condition or cause.
However, if a loss
occurs due to an explosion, coverage is provided.
B. Steam Equipment
If a loss occurs to
steam boilers, engines, pipes, or turbines, it is excluded, regardless of their
condition or cause.
However, if a loss
results from a gas or fuel explosion within the firebox, combustion chamber, or
flues, coverage applies.
Coverage is not
provided if a loss occurs because of an insured's action or instruction with
the intent to cause the loss.
However,
coverage applies if a loss occurs when the insured uses reasonable force to
protect people or property.
|
Example:
A fire damages John’s Candy Store. Scenario 1: John placed a candle next to flammable material,
intending to start a fire. The resulting fire damage is excluded. Scenario 2: John always kept candles burning in his store. He
was called away for a family emergency and did not put them out before
leaving. The fire damage is covered. Scenario 3: Sally is John’s business partner. She places a
candle next to a combustible material, intending to start a fire. John is
unaware of her plan. The fire damage is excluded because Sally is an insured.
Scenario 4: John is working late and often keeps candles lit
in his office. He hears a break-in at the store and calls 911 just before the
burglar charges at him. To defend himself, John throws a candle at the
attacker, causing the burglar’s clothes to ignite. The candle then falls onto
papers, igniting a fire. All fire damages are covered because John’s
intentional act was reasonable force used to protect himself. |
Coverage does not apply
to any leakage or overflow damage that occurs when both of the following
conditions are met:
·
The
building is unoccupied or vacant
·
Plumbing,
heating, air conditioning, or other equipment or appliances freeze
Damage caused by
freezing to plumbing, heating, air conditioning, or other equipment or
appliances is also not covered.
However, coverage
applies when either of the following preventative measures are taken:
·
The
building is maintained with adequate heat.
·
Water
is drained from all appliances, and the water source is shut off.
|
Example: Pauline leaves the country for a six-month mission
trip, suspending operations at the Dairy Barn. She turns off all utilities
except for heat, setting it to a low level, and asks her friend Jeff to check
the premises periodically. A severe storm causes extensive damage to the
local utility, resulting in a seven-day power outage. When power is restored,
the building’s pipes thaw and burst. The loss is covered because Pauline took
reasonable steps by maintaining the building's heat. |
Related Court Case: Water Damage
from Frozen Pipe Covered: Frozen Plumbing Exclusion Did Not Apply
There is no coverage
for damages the named insured sustains because it cannot use or sell property.
There is also no coverage for damages the named insured sustains because it
must delay activity.
No coverage applies when there's a loss
of utility services, power, heating, cooling, or if there are fluctuations in
temperature or humidity.
|
Example:
The extreme heat causes an
overload on the electrical grid, resulting in Mainville losing power.
Consequently, Quincy’s cash registers, lighting, air conditioning, and
refrigeration systems stop functioning. The following damages Quincy
sustained are not covered. ·
Six
days of income lost due to business disruptions ·
The
fish that died in the aquarium ·
The
refrigerated stock that spoiled |
However, there is an
exception under Part 1 B–Supplemental Coverages 4.B. Business Property Coverages–B.
Consequent Loss Coverage (Spoilage).
In the 05 23 edition, this
exclusion was moved into its proper placement in the policy.
A. Unauthorized Transfer
Losses related to
property given or transferred to any person at any location not on the
described premises, caused by false or unauthorized instructions, are excluded,
regardless of the method of giving or transferring.
B. Voluntary Transfer
Losses involving
property owned by the named insured or another person to whom the property was
entrusted are excluded if the property was voluntarily given or transferred due
to false pretenses, a fraudulent scheme, device, or trick.
A. Coverage does not apply
to loss due to sub-surface, underground, or surface water that flows, leaks, or
seeps through or exerts pressure on any of the following:
·
basements
·
doors,
windows, or other openings
·
driveways
·
floors
·
foundations
·
sidewalks
or other paved surfaces
·
swimming
pools
·
walls
NOTE: Mudflow and
mudslide are not excluded here, but they are covered as excluded under Part 1
E–Losses Not Insured – 14.E. Wear, Tear, and Other Specified Causes of Loss
Exclusions.
B. Any loss or damage
caused by water or sewage backing up through a sewer or drain is not covered.
Additionally, if water or sewage overflows a sump and causes damage, this is
also not covered.
There is an exception to both A. and B.
above: if any water damage losses that are excluded lead to a fire, sprinkler
leakage, or theft, coverage will apply to those subsequent losses.
|
Example: Surface water floods a small business district.
Investigators block off the area for a week to find the cause. During this
period, thieves disguised in official looking uniforms steal several items
from Paul’s Pharmacy. The damage from water is not covered, but the stolen
items are. |
Trigger Endorsement
If BU 50 02 is listed
on the Declarations as an endorsement, paragraph 13.B of this exclusion
does not apply.
If BU 50 03 is listed
on the Declarations as an endorsement, coverage is provided as if paragraph 13.B.
of the exclusions did not apply, but only up to the limit for Water Damage –
Sewer/Drain Backup shown on the Declarations.
NOTE: Rather than attaching an additional
document labeled BU 50 02 or BU 50 03, the endorsement language is integrated
directly into the policy. This approach is specific to MSO policy design.
Related Article: MSO
Businessowners Policies Trigger Endorsements
Loss caused by any of
the listed exclusions below may still be covered if it results from a Specified
Cause of Loss. However, if a collapse occurs under paragraph B. or E., no
coverage is provided for the collapse damage.
Related Court Case: Anti-Concurrent Causation (ACC) Clause in Insurance Contract Barred Recovery
A. Many causes of loss are
excluded under this paragraph:
·
Wear
and tear
·
Animals
(domestic only), birds, insects, raccoons, rodents, vermin.
NOTE: Limiting
coverage to domestic animals means that damage caused by wild animals is
covered unless the animals are vermin, rodents, or raccoons. For example,
damage caused by a bear, monkey, or deer is covered.
·
Contamination
or pollution, including but not limited to the following:
o
The
discharge, dispersal, emission, escape, migration, release, or seepage of
pollutants
o
The
costs related to enforcement of any government directive, law, or ordinance
that requires the named insured or others to clean up, contain, detoxify,
monitor, neutralize, remove, test for, or respond in any way to pollutants,
asbestos, fungi, mold, or lead contamination, or to assess their effects.
o
corrosion,
deterioration, decay
o
errors,
omissions, or deficiencies in design, materials, plans, or workmanship
o
disease
o
dry
rot or wet rot
o
natural
growth such as, but not limited to, fungi, mold, spores, mildew, and bacterium
o
inherent
vice, but only if the vice is common to that property
o
latent
defect provided it was part of the property’s original condition and led to the
loss
o
mechanical
breakdown
o
rust
B. This item may seem to
only apply to the building, but it can also apply to business personal
property. Damage caused by buckling, bulging, contraction, cracking, expansion,
settling, shrinkage, or sinking is not covered.
C. Property may be
contaminated by a virus or a pathogen. In such cases, damages to the property
and expenses incurred to comply with any governmental directives related to
that contaminated property are not covered.
Pathogens or viruses
intended for exclusion must have the potential to cause disease in animals,
humans, or other creatures. Those that only threaten plants might potentially
be covered.
D. Coverage does not apply
if water leaks or seeps continuously or repeatedly due to a problem or
condition in an appliance or system that the named insured was aware of but
failed to repair.
E. Movement of land,
ground, or earth, whether on the surface or beneath it, is excluded. This
movement can result from natural or human activities. This exclusion applies to
the following but is not limited to only these:
·
collapsing
of land, ground, and/or earth, except for sinkhole collapse
·
pressure,
rising, shifting, sinking, sliding
·
subsidence
·
landslide
·
mine
subsidence
·
mudflow/mudslide
·
rockslides/falls
NOTE: This is not
the only exclusion related to earthquake or earth movement. Refer to Common
Exclusions–Parts I and II. 1. Earth Movement/Earthquake/Volcanic Activity is
the other.
F. Damage to personal
property caused by marring or scratching
G. Coverage excludes smog,
which is a mixture of vehicle and industrial emissions, as well as smoke
generated by agricultural or industrial activities.
A.
Coverage B
The following exclusions
apply only to Coverage B–Business Personal Property:
1. Loss resulting from
temperature fluctuations or extremes, as well as from atmospheric moisture
levels being damp or dry is not covered.
2. There is no coverage
for damage to business personal property inside a building or structure when that
damage is caused by hail, ice, rain, or snow entering the building.
However, coverage
applies in the following situations:
a. When Expanded Coverage
is selected on the Declaration and applicable to the building or structure.
b. When elements enter the
building or structure through openings in the exterior walls or roof caused by
any covered cause of loss.
3. When business personal
property is outdoors, it is not covered for any losses caused by any of the
following:
·
Freezing
·
Rain
·
Hail
·
Ice
·
Sleet
·
Snow
B.
All Property
The following
weather-related exclusions apply to all covered property:
1. Drought
2. Any and all other weather
conditions not drought related.
This part of the
exclusion applies only when such conditions contribute with an event,
condition, or cause the policy otherwise excludes.
NOTE: This is an anti-concurrent causation
exclusion.
Related Article: Concurrent
Causation–A Discussion
If a loss covered by
this policy occurs, the resulting loss is covered.
The following optional
coverages do not change or expand any policy provisions except for those
explicitly specified in the selected optional coverage.
The
only options that apply to the policy are those specifically listed in the
Declarations or the Declarations Supplement.
This optional coverage covers
the named insured against loss caused by burglary or robbery of the following
property:
A. Property covered under Coverage B – Business personal property. There is
no sublimit, so the full limit shown on the Declaration for all other causes of
loss applies to a burglary or robbery loss.
B. Money or securities
used by the named insured in its operations. There is a sublimit for this
coverage, which is indicated on the declarations. Separate limits are required
for On-premises and Off-premises coverage.
1.
On Premises
Money and securities
are covered when kept within the premises listed on the Declarations or within
a bank. If located within a premises similar to a bank, coverage applies.
NOTE: A keyword is 'within'. Money and
securities must be located inside the premises. If money and securities are
outside an owned building, leased space, or a financial institution location,
it would not be considered on premises.
2.
Off Premises
Money and securities
are covered while being transported. They can be carried by the named insured,
a partner, an authorized officer, or an employee. Coverage applies only when
moving between on-premises locations, such as from the named insured’s office
to the bank. It also includes stops made along the way or at the carrier's
living quarters, as long as those quarters are not the final destination.
NOTE: Coverage is provided when money and
securities are en route. A question arises as to how long the money and
securities can remain in the living quarters and still be considered en route.
Another question is whether the person carrying the items must always keep them
with them for coverage to apply. However, these questions do not appear to
hinder coverage since they are unspoken.
C. This optional coverage
is subject to a $200 deductible. Another deductible may apply if shown in the
policy or on the Declarations.
D.
This optional coverage is only available if Coverage B is
subject to Basic Plus Coverage.
|
Example: Juanita is assaulted, and the deposit she had
prepared is stolen from her. Scenario 1: The attack takes place inside her office suite.
This is covered as on premises burglary and robbery. Scenario 2: The attack happens in the building's common
hallway near the elevator. This is covered as an off premises burglary and
robbery. Scenario 3: The attack happens at Juanita’s home. This is
covered as off premises burglary and robbery, but only if the deposit was in
transit to the bank. Scenario 4: The attack occurs inside Juanita’s bank. This is
covered as on premises burglary and robbery. |
This optional coverage
includes direct physical loss to outdoor building and entrance glass at the
described premises. It also covers encasing frames and any lettering or ornamentation
on the glass.
The glass must either
be owned by the named insured or be in their care, custody, and control, and it
must be located on the premises the named insured occupies.
The following expenses
are also covered, but only if they are incurred due to a covered loss:
·
Boarding
up damaged openings
·
Temporary
repairs
·
Temporary
plate glass
·
Removing
obstructions in order to repair the glass
The word “exterior' replaces “outdoor”
when insuring building and entrance glass.
|
Example: Patty’s Make up Mart is located inside the Fashion
Mall. The store features two plate glass windows facing the mall’s interior,
which are considered exterior glass and are covered. |
All exclusions under
Part I E – Losses Not insured are eliminated, except for the following which
will continue to be excluded:
·
7.
Intentional Loss Exclusion
·
12.
A. Wear, Tear, and Other Specified causes of Loss Exclusions.
No deductible applies.
NOTE: The three Parts I and II Common
Exclusions continue to apply.
The following duties
apply not only to the named insured but also to any other insured and to anyone
who would benefit from this coverage.
A.
Report the Loss
Immediate written notice
must be provided to the insurance company. If a violation of the law has
occurred, the police must also be immediately notified.
The insurance company
should receive additional details about the loss, such as when, where, and how
it happened, as soon as possible. "Immediately" refers to the notification,
while "as soon as possible" refers to the details.
NOTE: This indicates that
even if the insured party does not have all the details right away, they are
still required to report the loss.
B.
Protect Property
The named insured,
other insureds, and beneficiaries are responsible for protecting the property.
They must act if the property faces imminent danger or after a covered loss has
happened to prevent further damage. Examples include boarding up windows and
doing temporary repairs. The insurance company will cover these costs if they
are reasonable and necessary.
NOTE: If the loss is not
covered, the insurance company will not pay for these expenses. However, it is
essential for the insured to understand that mitigation should be performed
regardless of coverage to protect their property.
The named insured must
take necessary steps at their own expense to prevent damage to the insured
property. Once they, their employees, or anyone operating under their authority
notices a condition that could cause a loss, they are required to undertake
reasonable maintenance, construction, or repair measures to prevent it. Several
examples are given, but as the policy states, it is not realistic to list all
possible conditions. Ultimately, the named insured should act as a responsible
tenant and/or building owner, ensuring roofs are repaired, leaks are fixed, and
floor supports are installed as needed.
The policy does not
cover any additional loss resulting from the named insured’s failure to fulfill
these duties. The named insured must use other insurance or pay for the loss
out of pocket.
C.
Cooperation on the Loss
The insurance company
has specific requirements or requests that must be fulfilled if a loss occurs.
These steps might need to be repeated, but they must be reasonable.
1. Covered property that
is damaged or undamaged must be accessible for the company’s inspection or
examination. The insurance company may also take samples of such property for
further examination.
2.
The following records and documents must be submitted for
review and copying.
|
·
accounting procedures |
·
documents |
·
leases |
|
·
affidavits |
·
evidence |
·
receipts |
|
·
books of accounts |
·
financial records |
·
records |
|
·
bills |
·
inventory (see d. below) |
·
tax returns |
|
·
contracts |
·
invoices |
·
vouchers |
|
·
deeds |
·
liens |
·
other sources of information or facsimiles acceptable to
the insurance company |
3. All must be willing to
be examined under oath and have the interview recorded by audio or on video.
Each person must sign and swear to their own statement. If several statements
are needed by different people, the insurance company can interview each person
separately.
4. Cooperation is expected
during the insurance company's investigation or settlement of any claim.
D.
Inventory
An inventory must be
prepared when requested by the insurance company. It must be signed before
submission. The inventory needs to list both damaged and undamaged items,
including the following details for each one:
·
age
·
description
·
quantity
·
actual
cash value (if property is valued this way)
·
replacement
cost (if property is valued this way)
·
source
·
amount
of loss claimed
The damaged property
should be separated from the undamaged items to facilitate inspection by the
insurance company. As much as possible, the damaged property should be arranged
in an orderly manner for examination.
E.
Statement of Loss / Proof
of Loss
A statement must be
provided to the insurance company and must include the information described in
items C.2. and D. above. The insurance company may request additional
information, but any such request must be reasonable. This information will be
used to determine the following:
·
coverage
·
the
insurance company’s liability
·
amount
of loss
·
scope
of the loss
·
specifications
of the buildings that were damaged
The statement must also
include repair estimates, along with all supporting details.
Only when specifically
required by the insurance company, a signed and sworn proof of loss must be
submitted within 60 days of the request. The proof of loss must include the
following:
·
All
information described in the paragraphs above.
·
Other
relevant information known and available to the named insured and others, such
as:
o
Time
of loss
o
Cause
of loss
o
The
named insured’s interest in the property
o
The
interests of all parties involved in the property, including any encumbrances
o
Any
insurance policies that could cover the loss
o
Details
of any changes during the policy period related to occupancy, title to, or use
of the property.
If any of the above or
policy conditions are not met, the insurance company’s obligations under this
policy may be altered or completely nullified.
A.
Limits of Liability
The items to be
evaluated for settling losses are listed below. The insurance company's
liability is the smallest of the following:
1. The replacement cost or
actual cash value of the property at the time of loss, depending on the
valuation specified on the Declarations. However, this amount is limited and
cannot exceed the lesser of the following:
·
The
cost to repair or replace the property with like kind and quality at the
described premises and intended for the same use.
NOTE: There is no requirement for the building to be rebuilt on the described
premises or to have the same occupancy. It only limits the payment amount to
the cost of rebuilding on the described premises with the same occupancy.
|
Example: Presley Office Supplies
operates two retail stores and one warehouse. The warehouse suffers damage
due to a covered loss. Presley intends to use the claim proceeds to relocate
and convert the warehouse into a retail space. The costs are as follows:
The insurance company will pay no more than
$170,000, so Presley will need to pay the remaining $130,000. |
·
The
actual amount spent to repair or replace the property. This applies even if the
actual cash value is higher.
2. The insurance limit
shown on the Declarations or the Declarations Supplement that applies to the
loss.
3. The insurable interest
of the named insured or any mortgagee as listed on the Declarations.
B.
Deductible
The insurance company
pays for the loss amount in a single occurrence that exceeds the deductible
listed on the Declarations. Coverage C is not subject to a deductible.
C.
Bases of Settlement
1.
Replacement Cost
Losses under Coverage A
and Coverage B are typically determined using replacement cost valuation unless
the policy states otherwise. This valuation generally applies only if the
repair or replacement occurs at the specified premises, although the insurance
company might waive this requirement. One common reason for waiving it is if
building regulations prohibit rebuilding on the original site. Other
justifications can be presented to the insurer; if they accept these reasons,
the replacement cost will be provided even if rebuilding occurs off the
described premises.
The company is not
required to pay replacement cost until the repair or replacement is completed.
The only exception is when the total cost of the repair or replacement is less
than the replacement threshold on the Declarations Supplement.
The named insured can
initially settle the claim based on actual cash value and later request payment
based on replacement cost after repairs are finished. This replacement cost
claim must be submitted in writing within 180 days of the actual cash value settlement.
If the insurance company proposes to settle on actual cash value and the named
insured rejects this offer, the 180-day deadline starts from the date the
company made the initial offer.
2.
Actual Cash Value
Replacement cost is the
standard valuation for Coverage A and Coverage B. However, for certain property
types and situations, the loss is settled based on the covered property’s
actual cash value at the time of loss. There are several factors involved in
calculating the actual cash value, which are detailed in the Glossary section
of this policy.
3.
Money or Securities
The insurance company
will not pay more than the lesser amount specified below for any covered loss
involving money or securities:
a. At the time of loss, the
actual cash value of the money or securities.
b. At the time of
settlement, the cost to replace the securities with equivalent property at
market value.
NOTE: Valuing
securities based on their market value at settlement, rather than at the time
of loss, might adversely affect the insured. This approach differs from the ISO
method, which determines value based on market value at the time of loss.
If multiple locations
are covered, the Off Premises limits are not cumulative. Each location limit
applies only to losses at that location.
4.
Tenant’s Improvements
and Betterments
If the named insured
pays to replace or repair the improvements or betterments they have made in a
building they occupy as a tenant, a settlement will be based on either the
actual cash value or the replacement cost. The default valuation is replacement
cost but can be actual cash value if specified on the Declarations or elsewhere
in the policy.
If the named insured
does not cover the cost of replacing improvements or betterments, the
settlement will be proportional to the actual expenses they paid. The
proportion is calculated based on the remaining lease term and the timing of
when the improvements and betterments were made.
D.
Abandonment of Property
The insurance company
has the exclusive right to determine when to take property as salvage. No one
can compel the insurance company to accept property regardless of its location
or condition.
E.
Appraisal
1. The insurance company
and the named insured may negotiate but might not agree on the values or the
amount of a loss. If that happens, either party can request an appraisal to
determine the loss amount or value. After that, each party has 30 days to choose
an independent, qualified appraiser and notify the other party of their choice.
2. An umpire is then
chosen. The appraisers must collaborate to pick an umpire who is both impartial
and qualified. They have 15 days to make this decision. If they fail to agree,
either party can ask the court of record in the jurisdiction to appoint the umpire.
3. Appraisers are
responsible for determining the values or the amount of loss within a limited,
reasonable timeframe. If they are unable to do so, they must submit the
differences to the umpire. Any agreement between two of the parties, whether
written or verbal, confirms the value or the loss amount.
4. The cost of this
condition is outside the policy's limits. As a result, each party pays its own
expenses and the cost of its own appraiser. They split the umpire's cost.
5. This condition
establishes only the values and/or the loss amount; it does not define
coverage. Therefore, the insurance company may still deny the claim even after
the appraisal process.
F.
Loss to a Portion of a
Pair or Set of Articles – Coverage B
1.
One or more portions of a pair or set may be damaged or
sustain loss. In that case, it is not considered a total loss unless the
remaining parts have no use value and it is unfeasible to repair or replace the
remaining portion.
2.
When the insurance company declares the loss as total, the
remaining parts of the set or pair must be handed over to the insurance company
before any payment is made. This requirement applies only if the insurance
company requests the remaining portions.
NOTE: There is no
proportional adjustment if a set loses part of its value but not all of it.
This means the set’s value is not considered unless it is a total loss. For
example, a table with four chairs is not a total loss if only one chair is
damaged. In that case, the damaged chair is valued as just one chair, not the
difference between the full set and the remaining three chairs.
G.
Our Liability and
Satisfaction of Your Loss
This policy’s limit of
insurance might not fully cover the named insured’s loss. If that happens, the
named insured can either seek coverage through another insurance policy or
handle the remaining cost of loss themselves.
This policy’s limit of
liability is not reduced when a loss is paid, unless that limit is subject to
an aggregate.
H.
Our Options in Settling
Losses–Coverages A and B
1. The insurance company
may settle the loss by paying money.
2. According to policy
provisions, all or part of the property may be repaired or replaced. The
insurance company may take all or part of the property based on a mutually
approved value or appraisal.
The insurance company
must notify the named insured of its intended course of action within 30 days
of receiving proof of loss and accepting liability for the loss.
3. The claim may be
settled with the named insured, a loss payee if listed in the policy, or any
other legally entitled party. If the property belongs to someone else, the loss
is settled directly with the property owners. Once the owners agree, any claim
the named insured has for that property is considered settled.
The insurance company
has the right to manage and oversee the defense if a legal case is filed
against the named insured due to a claim. The defense expenses are covered
within the policy limits.
NOTE: This means
that each dollar of defense reduces the liability limit by one dollar to cover
any claim.
I.
Recovery of Covered
Property
NOTE: This condition gives the named insured
all of the options.
Either the named
insured or the insurance company can recover lost property once the company has
settled the loss. In such cases, the named insured has two options:
·
keep
the settlement and let the insurance company keep the property that was recovered.
·
keep
the recovered property and return the payment received.
It is important to note
that the named insured must notify the insurance company if they recover the
property.
J.
When Loss Becomes
Payable / Payment to Others
1. The insurance company
is required to pay a covered loss within 30 days of reaching a written
agreement with the relevant parties or after an award is filed, as per policy
conditions. Making this payment does not reduce the amount of insurance
available for future claims.
2. The insurance company
determines how it compensates other interested parties involved in the loss.
These parties may include:
·
Governmental
entities
·
Mortgagees
·
Secured
parties
·
Others
with contractual, legal, or statutory loss payable rights
The insurance company
may make a joint payment to all involved parties. Alternatively, it can choose
not to pay a loss assignee if the named insured has not provided an assignment
of the loss.
3. The insurance company
can negotiate and make payments to an insurance trustee named in the policy.
Payments are limited to the interests represented in the policy.
A.
Mortgagee Clause
Mortgagees named on the
policy are entitled to the benefits specified in this condition. Their coverage
extends to loss, but is limited to their interest in the property and following
their order of precedence, such as first mortgagee, second mortgagee, and so
on. The sequence in which they are listed on the declarations does not change
this order.
This condition also
extends to trustees and secured parties named on the policy, provided they
adhere to the following policy conditions.
Coverage is provided
only if the mortgagee:
1. Notifies the insurance
company immediately of any of the following that it becomes aware of:
·
Ownership
change
·
Occupancy
change
·
Foreclosure
proceeding
·
Increased
hazard
2. Pays the premium
required by the insurance company if the named insured does not.
3. Provides proof of loss
within 60 days after the insurance company requests it, if the named insured
does not.
4. Waives its rights to
seek recovery from others responsible for the loss. However, this does not affect
its right to recover the full amount of the claim.
5. Allows the insurance
company to receive full assignment of the mortgage after it pays the loss. The
insurance company must satisfy other mortgage requirements to obtain the
assignment and also receive any collateral securities that accompany the debt.
NOTE: This means the insurance company becomes
the named insured’s new mortgagee if it decides to pursue the full assignment.
The insurance company protects
the mortgagee’s interest even if it denies the claim made by the named insured.
The insurance company may
cancel the policy in accordance with the cancellation provisions outlined in
the Common Condition.
B.
No Benefit to Bailee
The policy does not
cover any party holding the insured’s property for a fee or payment, including
for-hire carriers.
C.
Vacancy, Unoccupancy,
and Other Increase in Hazard
1. Coverage is suspended
if a covered building remains vacant for more than 60 consecutive days. A
vacant building is defined as one no longer containing typical contents for its
usual use. The only exception is buildings under lawful construction or
renovation.
Related Court Case: Sprinkler
System Renovation in Building Did Not Render It Occupied: Vacancy Exclusion
Applied
2. Coverage is suspended
if a covered building remains unoccupied for more than 60 consecutive days. The
only exception is during seasonal periods when the building is normally closed,
in which case it is not considered unoccupied.
3. The insurance company’s
liability covers the hazards contemplated in the application and supplemental
information. However, it does not cover exposures not considered in the
application, within the insured’s control, or resulting from hazards caused by
others when the named insured allows them to manage the premises in their
absence, which increases the risk exposure.
Lawful building
modifications, routine maintenance, repairs, or construction do not constitute
increased hazards unless they increase the risk and exposures.
4. An increase in hazard
includes any changes that affect any of the following:
·
use
of the premises
·
rates
for this insurance
·
acceptability
of the hazard or risk to the insurance company, including any breach of
conditions that formed the basis of acceptance
·
conditions
the underwriter established to write the risk
·
physical
conditions required for the specific hazard
·
ongoing,
consistent use and effectiveness of all protective safeguards required by the
insurance company or those for which the premium was developed.
NOTE: Usually, a discount is
given because these types of protective devices help mitigate loss. If
discounted, the insurance company expects them to be functioning properly and
used consistently.
·
circumstances
that would affect the coverage scope, covered causes of loss, or insurance
amounts typically accepted for the hazard or risk.
Insurance under this
policy applies to liability only if it arises from the following:
·
The
named insured’s premises
·
The
named insured’s operations or business
·
Coverage
applies only if the premises, operation, or business is stated on the
Declarations or elsewhere in the policy.
·
New
premises, operations, and businesses the named insured acquires are covered as
defined in the definition of insured in the Common Glossary–Parts I and II. All
provisions for the insured’s business, operations, and premises also apply to
new acquisitions unless the policy states otherwise.
The liability coverage
is provided only as described and limited in the policy.
The insurance company
has no obligation to offer any insurance, service, or cover any expenses or
amounts beyond those explicitly outlined and insured in the policy.
A. The insurance company
will only pay if the insured is legally responsible for bodily injury or
property damage covered by this policy. Payments are made for the benefit of
insureds, not just the named insured. The amount paid is limited to the
liability limits specified in the Declarations.
The considerations for
bodily injury and property damage depend on the specific time and place, as
follows:
1. The event that leads to
bodily injury or property damage must occur within the coverage territory. This
territory is specified in Common Conditions–Parts I and II 6. Coverage
Territory.
2. The bodily injury or
property damage must occur during the policy term.
3. Before the policy
started, neither the insured nor any employee authorized by the named insured
to handle claim notices knew if bodily injury or property damage had occurred,
whether fully or partially. If any insured was aware of the injury or damage before
the policy began, then any new development, ongoing issue, or recurrence of the
injury or property damage during or after the policy period will be regarded as
known prior to the policy's inception.
The term damages as it
relates to bodily injury covered by this policy encompasses more than just
physical harm to the injured party. It also covers claims made by others for
care, death, or loss of services resulting from that bodily injury.
B. This policy applies to
bodily injury or property damage that occurs during the current policy period
and continues or resumes after the policy ends, provided that one of the
following conditions is met:
·
The
bodily injury or property damage did not occur before the start of the current
policy period.
·
The
bodily injury or property damage occurred before the current policy period, but
neither the insured nor an authorized employee was aware of it.
C. It is very important to
determine when bodily injury or property damage is known to have occurred. That
date determines which policy pays the loss. It is the earliest of the following
times for any insured or employee authorized to receive or give notice of
either a claim or an occurrence:
·
Reports
bodily injury or property damage to the insurance company that issued the
policy or to any other insurance company. The report may cover only part of the
injury or damage, or it may cover all of it.
·
Receives
a demand, claim, or legal action for damages resulting from bodily injury or
property damage. This demand, claim, or suit can be made verbally or in
writing.
·
Is
made aware that bodily injury or property damage has taken place or is actively
happening. This includes any indication of a loss.
D. The insurance company
is not required to pay for damages not covered by the policy or to pay more
than the policy’s liability limits for a covered loss.
A. Medical expenses
incurred by others due to an accident are covered. These expenses must be
reasonable and necessary, and must be reported to the insurance company within
three years of the accident. The claim can be reported by either the named
insured or the person receiving the benefit. Payment is limited to the limit of
liability shown on the Declarations.
Coverage applies if the
accident occurs within the coverage territory and during the policy period as
defined in the Common Conditions. The accident must occur as follows:
·
On
the named insured’s premises; or
·
Away
from the named insured's premises, but only if the accident arises out of a
condition at those premises or out of the business/operations covered by the
policy.
This coverage does not
require proving fault or legal responsibility for it to apply. It also means
that the insurance company paying the medical expenses does not admit liability
for the injury. If the bodily injury from the accident is covered by this policy,
then the medical expenses are also covered. Conversely, if the bodily injury is
not covered under the policy, the medical expenses are not covered either.
B. The only expenses paid
under this coverage are as follows:
·
Services
for:
o
ambulance
o
dental
o
funeral
o
hospital
o
medical
o
professional
nursing
o
surgical
o
x-ray
·
prosthetic
devices
·
drugs
·
surgical
supplies
None of the policy
provisions are changed by any of the following supplemental coverages, except
when a specific change is explicitly stated within a particular supplemental
coverage.
A. The insurance company
defends lawsuits filed against insureds, but this is not unconditional. The
damages claimed must relate to covered bodily injury, property damage, or
personal/advertising injury. The insurance company chooses the legal counsel
for the defense.
There will be no
investigation and/or defense for any claim or insured when:
·
Suits
are seeking damages not covered by this policy.
·
Allegations
made within a lawsuit are not covered by the policy.
·
The
insurance company's payments for judgments and settlements have been exhausted.
B. The insurance company
decides which claims to settle and which suits to defend. Its decisions must be
reasonable.
NOTE: This means
even if an insured believes a defense should be provided to protect its
reputation, the insurer can proceed with the settlement. The only recourse for
the insured is to assume the defense and relinquish its right to insurance
coverage.
C. The insurance company
covers various defense costs, which are separate from the liability limits for
claims. These costs are only paid when the company defends a lawsuit, and the
expenses are related to that specific case. The expenses paid are as follows:
1. All expenses incurred
by the insurance company.
2. Interest that accrues
from the date a judgment is entered until the insurance company pays, offers to
pay, or deposits with the court the amount of the judgment within the limit of
liability.
3. Prejudgment interest
charged to any insured on the portion of the judgment the insurance company
pays. However, an exception applies: prejudgment interest is not paid from the
time the company offers to pay its liability limit.
4. Costs the court taxes
against the insured
5. Costs of appeal bonds
or bonds to release attachments. These costs are limited to the bond amount
within the limit of liability. This means the insurance company will pay up to the
limit of liability, and the insured will be responsible for any amount
exceeding that limit. The insurance company is not required to supply the bonds
or to find a market that will do so.
6. Expenses the insured
incurs at the insurance company’s request, including up to $250 per day for
lost earnings while it assists the insurance company.
NOTE: The insured
can choose to attend court daily. However, the $250 applies only on the days
when the insurance company requests their presence.
The term suit is broadened
to include alternative dispute resolution proceedings under either of the
following circumstances:
·
The
insured is required to submit to the proceedings.
·
The
insured chooses to submit to the proceedings with the insurance company’s prior
written approval.
A. Coverage E extends to
cover the named insured’s liability for damages to others, including bodily
injury or property damage, if applicable under the policy and if the insured
explicitly assumes liability for another through the following oral or written agreements.
Item 1
·
A
required indemnity agreement with a municipality must be based on a law or
ordinance. It does not include any agreement related to work performed for the
municipality, except as specified in Item 2 below.
·
Easements
do not cover work on railroads or within 50 feet of them. Similarly, any risks
associated with railroad-type activities are not included under Item 2. below.
·
Premises
lease or elevator maintenance agreement, excluding fire or explosion damage
·
Sidetrack
agreement
Item 2
Any contract where the
named insured expressly assumes another party’s tort liability. The bodily
injury or property damage must be partly or fully caused by the named insured
or by others acting on its behalf. The liability is limited to the amount contributed
by the named insured or those acting on their behalf.
This item does not
apply to contracts described in item 1. above. It also does not apply to tort
liability imposed by law when there is no contract.
Related Court Case: Teacher's
Alleged Negligence on School Trip Deemed Covered
B. Part II C – Liability
Not Insured 2. Automobiles / Aircraft / Watercraft and Unmanned Aerial Vehicles
/ Drones Exclusion does not apply to any covered contracts described in Item 2.
above that pertain to maintaining, using, or owning aircraft, watercraft, or unmanned
aerial vehicles.
C. This Supplemental
Coverage only covers contracts related to the premises described in the policy
or the insured's business operations. Coverage applies to bodily injury or
property damage that occurs after the contract is signed.
A. This Supplemental
Coverage applies exclusively to Coverage E – Liability to Others. It covers
bodily injury or property damage resulting from the use of nonowned automobiles
in the named insured’s business. The coverage also includes loading and
unloading activities for these vehicles. However, this coverage is only
applicable under the following conditions:
1. Use can be by anyone
with the named insured’s permission. It is limited exclusively to nonowned
four-wheel private passenger automobiles, station wagons, or private passenger type
four- or six-wheel vans.
This supplemental
coverage does not apply if the named insured, their partners, or members of
either of their households use the nonowned vehicle.
2. Employees of the named
insured occasionally and infrequently use a nonowned truck-type vehicle. These
vehicles must be designed to carry goods or materials on public roads.
B. The following are not
regarded as insureds under this Supplemental Coverage:
·
When
a partner, executive officer, or a household member owns the nonowned vehicle,
they are not an insured under this coverage.
·
The
owner of any nonowned automobile, along with the owner's agent and employee,
are not considered insureds.
C. This supplemental
coverage applies only if the primary automobile liability insurance is provided
under another policy carried by others or the named insured.
Trigger Endorsement: If BU 50 04 is shown on
the Declarations as an endorsement, this Supplemental Coverage – 3. Employers
Liability of Nonowned Auto Coverage does not apply.
Related Article: MSO
Businessowners Policies Trigger Endorsements
D. Glossary
This Supplemental
Coverage defines a nonowned automobile as having the following characteristics:
·
not
owned by the named insured
·
not
leased or hired directly by the named insured or by anyone acting on behalf of
the named insured
·
not
registered to the named insured’s
·
not
loaned to the named insured unless it is loaned by any of the following to the
named insured:
o
named
insured’s employees
o
named
insured’s executive officers
o
named
insured’s partners
o
members
of any household listed above
Reasonable medical
expenses incurred during first aid to others following an accident are covered,
provided they are administered at the scene. The only exception is if the
policy excludes coverage for bodily injury.
Part II C – Liability
Not Insured – 1. Alcoholic Beverage Exclusion eliminates coverage in most
situations involving the use, serving, or furnishing of alcohol. However, this
Supplemental Coverage extends Coverage E–Liability to Others for situations where
the insured furnishes, gives, serves, or uses alcoholic beverages. It covers
bodily injury or property damage caused by the named insured allowing specific
activities, as long as a license is not required. Coverage applies as follows:
A. When the named insured
serves, provides, or distributes alcoholic beverages free of charge.
B. When the named insured permits others to bring alcoholic beverages onto
the described premises without charging and allows these beverages to be
consumed on the premises.
C. Trigger Endorsement:
If BU 50 05 appears on the Declarations as an endorsement, this
Supplemental Coverage extends to cover situations where a charge is made for
alcoholic beverages or where others are permitted to bring such beverages onto
the premises for consumption.
This exception applies only when alcohol-related activities are minor or
incidental to the named insured’s business. Operations involving the
distribution, manufacture, or sale of alcoholic beverages are excluded and must
not be part of the insured's operations.
Related Article: MSO
Businessowners Policies Trigger Endorsements
This Supplemental
Coverage extends Coverage E–Liability to Others. It covers bodily injury or
property damage due to the following:
A. The parking of any
automobile on the named insured’s premises is permitted, but only if the
vehicle is not borrowed, owned, or rented by any insured.
B. The operation of any of
the following, but only if they are permanently attached to an automobile:
·
air
compressors
·
generators
·
pumps
·
equipment
used to clean buildings or for geophysical exploration
·
lighting
·
spraying
·
welding
·
well
servicing
·
devices
used to raise or lower workers. An example is a cherry picker.
C. Operating a device
permanently attached to mobile equipment. However, coverage does not apply if
the mobile equipment is subject to compulsory or financial responsibility laws,
or similar motor vehicle laws, in the state where it is principally garaged.
NOTE: See the definition of
mobile equipment for qualifying equipment.
This Supplemental
Coverage extends Coverage E–Liability to Others. Coverage applies only to
property damage. It has a separate liability limit listed on the Declarations,
located next to Fire and Explosion Liability. The basic limit is $50,000, but
this limit can be modified.
A. Coverage is provided for property damage caused by a fire or explosion at a
premises not owned by the named insured but rented or occupied by the named
insured.
B. Trigger Endorsement: If BU 50 08 appears on
the Declarations as an endorsement, coverage also extends to property damage
caused by any accidental and physical loss that occurs at a nonowned premises,
which is either rented or occupied by the named insured.
Related Article: MSO
Businessowners Policies Trigger Endorsements
This Supplemental
Coverage extends Coverage E–Liability of Others. It does not apply to any
insured or any indemnitee of an insured engaged in the business or profession
of supplying medical services, nursing services, drugs, or medical supplies.
Coverage applies to
bodily injury caused when the named insured provides incidental medical
services, nursing services, drugs, or related supplies, but only if both of the
following apply:
·
service
is provided for the benefit of others
·
no
charge is made for the service
|
Example: Great Ice Cream Shop is selling ice
cream at a community market event. Marcia, an employee, sees Jerry trip and
fall. She quickly uses a first aid kit to help, applying ointments and
bandages that seem suitable. Jerry leaves looking fine. However, Marcia is
surprised to learn that Jerry is suing Great Ice Cream and Marcia due to an
allergic reaction from the ointment and bandages. Great Ice Cream Shop’s
Incidental Medical Malpractice will cover the loss. |
This Supplemental
Coverage expands Coverage E–Liability of Others to include mobile equipment,
covering bodily injury or property damage caused by owning, maintaining, using,
loading, or unloading such equipment.
This Supplemental
Coverage extends Coverage E–Liability of Others to include bodily injury or
property damage arising due to any of the following:
A. Watercraft ashore and
on the premises of the named insured. This excludes premises the named insured
has sold, transferred to others, or abandoned.
B. The named insured's
direct actions cause the incident. The watercraft cannot be owned, loaned, or
rented to any insured. This direct action does not include supervising others
or entrusting watercraft to others.
C. Watercraft under 26
feet not owned by the named insured, provided no fee is charged when used to
transport people or cargo.
A. Liability to Others
The insurance company
will cover personal injury or advertising injury losses covered under this
policy, provided the insured is legally liable. Payments are made on behalf of
all insured parties, not just the named insured. The total payout is limited to
the liability limits specified on the Declarations or Declarations Supplement.
The offense leading to
personal injury or advertising injury must occur:
·
Within
the coverage territory or it may take place through an electronic means of
communication such as the internet. The coverage territory is defined in Common
Conditions Parts I and II – 6. Coverage Territory.
·
During the policy term.
The Supplemental
Coverage applies only to the following:
1. Advertising Injury
Covers offenses that
occur when the named insured advertises goods, products, or services related to
their business or operations covered by this policy.
2. Personal Injury
Covers offenses arising
from misconduct in the named insureds business or operations covered by this
policy. However, this excludes those offenses related to advertising,
broadcasting, publishing, or telecasting conducted by you or on your behalf.
B. Liability Not Insured (Additional Exclusions)
The following
exclusions apply to this Supplemental Coverage – 11. Personal Injury /
Advertising Injury Coverage. It does not apply if damages or liability are
directly or indirectly caused by, result from, or worsened by any of the
following:
Personal Injury / Advertising Injury Exclusions
1.
There is no coverage for injury
arising from material published, orally, in writing, or electronically if all
of the following apply:
·
An
insured or someone acting under any insured's direction published the material.
·
An
insured or someone acting at any insured's direction knew the material was
false or that it violated another's rights.
·
The
insured or someone acting at any insured's direction knew that the publication
of the material would inflict injury.
2.
Coverage does not apply to
injuries caused by material published, whether orally, in writing, or
electronically, if that material was initially published before the policy
period began.
3.
If professional advice or
services are provided and an injury results, that injury is not covered. This
applies even if the injury occurred because the required advice or service was
not provided, but it should have been.
4.
When an insured assumes liability
in any form, whether implied, explicit, oral, or written, there is no coverage
for injuries related to that assumed liability. However, there is an exception
if the liability would have been covered without the assumption of liability.
5.
If the named insured is a joint
venture, partnership, or limited liability company, then when the injured party
is the named insured, including its members or partners.
6.
There is no coverage for injuries
resulting from an insured hosting, owning, or controlling an electronic
bulletin board, social media platform, chat room, or blockchain.
NOTE: This applies only when the insured
hosts, owns or controls. Coverage remains for those who utilize these products
and services.
7.
Injury due to methods used to
mislead current or potential customers of others through the unauthorized use
of the other’s name or product in any of the following is not covered:
·
The
named insured’s email address
·
The
named insured’s domain name
·
The
named insured’s metatag
·
The
named insured’s social media pages
Methods that are
similar but not explicitly described above are also not included. This
additional item is necessary because technology changes rapidly.
Advertising Injury–Additional
Exclusions
1.
If an injury occurs due to a
breach of contract, there is no coverage. However, there is an exception:
coverage applies to breaches of implied contracts, but only if the breach
involves the misappropriation of an advertising idea.
|
Example:
Kelly is excited about her fantastic
advertising idea for her favorite clothing store, Manny’s Fashions. She feels
so confident about her idea and the product that she emails it to Manny’s.
She later receives a reply thanking her for her support. To Kelly’s surprise, she sees a commercial three
years later that uses her idea. She then sends another email asking for
recognition and compensation. Manny’s refuses. Kelly then sues Manny’s for
breach of contract. Manny’s insurance company defends Manny because of
the exception in the exclusion. |
2.
If an injury occurs because
goods, products, or services fail to meet the advertised quality or
performance, that injury is not covered.
3.
There is no coverage if an injury
results from inaccurate descriptions of the advertised price of goods,
products, or services.
|
Example: Jessie’s Appliance Shop’s
advertisement should have advertised ten notebooks for $1.00 each, but it
only mentioned ten notebooks for $1.00. Jessie is sued for false advertising
after refusing to honor the advertised price. Her insurance company declines to
defend her due to this exclusion. |
4.
An injury caused by offenses
committed by an insured in any of the following types of businesses is not
covered.
a. Telecasting, broadcasting,
advertising, or publishing
b. Designing websites for
clients, including determining the content.
c. Providing
Internet-related services, content, access, and search functionalities.
C. Glossary
This glossary applies specifically to Part II B – Supplemental Coverage –
11. Personal Injury / Advertising Injury Coverage.
Advertising Injury
1. Infringing on copyright,
slogan, title, or trade dress
2. Misappropriating ideas
related to advertising or business practices. This essentially amounts to
theft.
3. Distributing content
through oral, written, or electronic means that does one of the following:
·
Libel
or slander directed at an organization or individual.
·
Belittles
an organization or individual's goods, products, or services.
4. Publishing material,
whether orally, in writing, or electronically, that infringes upon an
individual's right of privacy.
NOTE: This item does not
mention violating an organization’s right of privacy.
Personal Injury
1. Wrongful imprisonment,
detention, or arrest
2. Deliberately pursuing a
malicious prosecution.
3. Publishing material orally, in writing, or electronically that does one
of the following:
·
Libel
or slander directed at an organization or individual.
·
Belittles
an organization or individual's goods, products, or services.
4. Publishing material,
whether orally, in writing, or electronically, that infringes upon an
individual's right of privacy
5. This item applies only if the landlord, owner, or lessor of the premises
commits, or has others commit on its behalf, any of the following acts:
·
Unlawfully
entering any private premises a person occupies
·
Unlawfully
evicts a person from a private premises they occupy
·
Unlawfully
invades a person’s right of private occupancy of their private premises
Advertising
Injury / Personal Injury does not include bodily injury or property damage.
|
Example: Gratings, Inc. issues a public statement claiming
their former CEO, Jessica, was dismissed due to inappropriate conduct. Her
family abandons her, and she faces rejection from her industry. Despite
denying the allegations, Jessica falls into depression and attempts to take
her life. Although she survives, she incurs substantial medical costs. After receiving therapy, she stabilizes and files a
lawsuit against Gratings for personal injury and injuries related to her
suicide attempt. The company's insurance will cover and defend the personal
injury claim but will not cover the injuries resulting from the suicide
attempt. |
The only exclusions in
Part II C – Liability Not Insured that apply to Personal Injury / Advertising
Injury are:
·
5.
Data Breach Exclusion
·
6.
Electronic Aggression Exclusion
·
7.
Employee, Employment, and Related Injury Exclusions
·
9.
Fungi / Mold Exclusion
·
11. Pollution / Environmental
Damage Exclusion
·
14. Silica Exclusion
·
15.
Unmanned Aerial Vehicles / Drones Exclusion
A statement is then
included clarifying that personal injury / advertising injury does not cover
any expense, liability, damage, or loss that Coverage E–Liability to Others
explicitly excludes.
NOTE: This final
statement seems to be trying to clarify the coverage, indicating that some
items might be considered covered because they're not explicitly excluded here,
but they are actually excluded in Part II C – Liability Not Insured.
The following
exclusions apply to liability, damages, costs, or expenses. These exclusions
apply whether the damages are direct, indirect, partial, or complete. They also
apply even if such damages worsen or stem from a covered loss that occurs
concurrently or sequentially. The only exceptions are those stated in the
specific exclusion.
Most modifications in
this section of the 05 23 edition involve adding phrases such as arising out
of, caused by, or resulting from. Although our review may not include these
phrases, one or more of them are present in the following exclusions.
·
2.
Automobiles / Aircraft / Water Craft
·
3.B.,
E., and F. Business Activities / Business Risk
·
5.A.
Data Breach
·
9.
A. Fungi / Mold
·
10.
Mobile Equipment
·
11.A.
Pollution / Environmental Damage
·
13.
Professional Activities
·
14.A.
Silica
·
15.
B. Unmanned Aerial Vehicles / Drones
·
16.
Virus Contamination a. and B.
Bodily injury and
property damage resulting from any of the following alcohol-related activities
is excluded:
·
Contributing
to the intoxication of any person.
·
Providing
alcoholic beverages to anyone under the legal drinking age or already
intoxicated.
·
Selling,
distributing, providing, or using alcoholic beverages in a manner that violates
applicable laws, ordinances, or regulations.
Coverage also does not apply to any claim due to allegations of:
·
Wrongdoing or negligence related to the hiring,
training, supervision, monitoring, or hiring of others.
·
Providing or not providing transportation to an
individual suspected of being under the influence of alcohol.
These are all exceptions to Part II B–Supplemental Coverages 5.
Incidental Alcoholic Beverage Coverage.
NOTE: This exclusion
applies to all entities, not just those that furnish, serve, sell, or
manufacture alcoholic beverages.
Bodily injury or
property damage caused by or resulting from any automobile, aircraft, or
watercraft operated, owned by, or loaned or rented to any insured is excluded
due to the following:
·
Loading
or unloading
·
Loading
·
Maintenance
·
Operation
·
Renting
·
Use
·
Entrustment
to others (supervised or unsupervised)
This exclusion also applies
to bodily injury or property damage caused by items attached to such automobiles,
aircraft, or watercraft. Examples of such items are devices, equipment,
machinery, parts, trailers, and semi-trailers.
There are several
exceptions to this exclusion under Part II–Supplemental Coverages. See the
following:
·
3.
Employers Liability for Nonowned Automobile Coverage
·
6.
Incidental Automobile Coverage
·
10.
Incidental Watercraft Coverage.
A. Property damage to the
named insured’s work or product is excluded when any part of the named
insured’s work or product causes the damage.
There are two
exceptions for damage to the named insured’s work:
·
There
is coverage if, at the time of the loss, the work was still in progress and not
abandoned.
·
There
is coverage if the damaged work or the work from which the damage arose was
performed by a subcontractor working on the named insured’s behalf.
There are no exceptions
for damage to the named insured’s products.
B. Property damage caused
by impairment without actual damage is excluded if it results from one of the
following causes:
·
The
product or work of the named insured is insufficient, flawed, defective, or in
a dangerous condition.
·
The
named insured or others acting on its behalf delay or fail to fulfill
contractual agreement terms.
There is an exception. If a sudden
accident related to the named insured’s work or product occurs after it has
been put to its intended use and causes other property to become unusable, the
loss of use of that other property is covered.
|
Example: The old switch on the Print By Demand printing
press has been replaced with a new Switching Places switch. It functioned
well for two days, but then suddenly shorted out without warning, rendering
the press inoperable. Print By Demand could not use the press for five days
as they waited for a replacement switch. The loss of use claim filed by Print
By Demand against Switching Places is covered. |
C. Coverage does not
include recalls of the named insured’s product, work, or any impaired property,
regardless of who initiates the recall or the reason behind it. Costs,
expenses, liability, and losses resulting from a recall due to the product or
work being dangerous, defective, deficient, or inadequate are specifically
excluded.
NOTE: Coverage may
apply if the named insured did not recall the items and a loss occurred unless
otherwise excluded. This exclusion clarifies that the insurance company will
not pay for a recall, even if doing so may be to its advantage.
Recall involves more
than simply requesting the return of the product, work, or defective item. It
also includes any of the following actions:
·
The adjustment, disposal, inspection, loss of use,
recall, removal, repair, replacement, or withdrawal of the named insured
products, work or impaired property.
·
Costs related to marketing, legal representation,
communication, shipping, postage, and materials when associated with a recall.
D. Property damage in the
following situations is excluded except for liability assumed under a sidetrack
agreement:
1. The named insured may
work on a section of real property and cause damage. In such cases, there is no
coverage for that particular part of the property. This applies whether the
work is performed by the named insured, a contractor, or a subcontractor working
on its behalf.
2. The named insured may
work on a part of property that must be repaired, replaced, or restored because
the quality of the workmanship was poor. In that case, there is no coverage for
that part. This does not apply to property damage included in the
products/completed operations hazard.
E. Bodily injury arising from
any of the following is excluded: (05 23 edition)
·
Body
massage
·
Chiropody
·
Ear
piercing
·
Services
or preparations for weight reduction or slenderizing
·
Sun
or tanning lamps and similar devices
NOTE: Cosmetic was
removed from the exclusion list in the 05 23 edition.
F. Bodily injury arising
from any of the following is excluded:
·
Body
or skin piercing
·
Tattooing
or dyeing the skin
·
Permanent
cosmetic or make-up applications or injections
G. Glossary
This glossary applies specifically to Part III C – Liability Not Insured
– 3. Business Activities / Business Risk Exclusions.
Impaired property
This refers to tangible
property not included in the named insured’s products or work. It is physical
property that cannot be used or is less useful due to one or both of the
following reasons:
1. It includes the
products or work of the named insured that are known or suspected to be
dangerous, defective, deficient, or inadequate, and can be corrected by
adjusting, removing, repairing, or replacing them.
2. The named insured has
not satisfied the terms of an agreement or contract regarding the property, but
the property can be restored to its previous useful condition once the
agreement or contract is fulfilled.
There is no coverage
for bodily injury or property damage for which the insured is liable to pay
damages because it assumed liability in an implied, verbal, or written
contract. There are two exceptions:
·
Part
II B–Supplemental Coverages 2. Contractual Coverage applies, but it does not
cover damage to premises loaned or rented to the named insured. Additionally,
there is no coverage for indemnifying another party for fire or explosion
damage to such premises, nor if the bodily injury or property damage occurred
before the contract was in effect.
·
If
the contract provides liability for damages that would have been covered
without the existence of the contract that liability remains covered.
Bodily injury, property damage, advertising injury, or personal injury
due to a data breach is not covered.
Any expenses, losses, liabilities, or costs incurred by the named insured
or any other party due to a data breach. This includes all of the following.:
·
notification costs
·
expenses related to credit monitoring
·
forensic expenses
NOTE: These are the
expenses to track down the cause of the breach.
·
expense of public relations
·
any other loss, cost or expense related to a data
breach
Bodily injury, property damage, advertising injury, or personal injury
caused by electronic aggression is not covered. This exclusion applies if the
damage or injury results from, is caused by, or stems from that aggression.
NOTE: This applies regardless of who carries out the aggression.
|
Example: Nadine began receiving what she felt were
threatening notices on Facebook after her first order with Middling Fair.com.
She believes these notices are connected to that purchase. The distress
causes her to lose sleep, and she repeatedly contacts Middling Fair.com,
begging them to stop. Eventually, she sues Middling Fair for bodily injury
and personal injuries caused by the harassment. Middling Fair’s MSO BOP will
not respond to the lawsuit or provide any defense. |
A. There is no coverage
for any of the following (and similar) obligations any insured may have:
·
Disability
Benefits
·
Unemployment
Compensation
·
Workers
Compensation
B. Bodily injury to the
named insured’s employees when the injury is directly related to their employment
by the named insured is not covered.
C. Bodily injury and
personal injury due to any of the following are not covered. These are usually
referred to as employment-related injuries:
·
Employment-related
acts, omissions, policies, or practices including, but are not limited to,
harassment, humiliation, discipline, demotion, coercion, evaluations,
discrimination, and reassignments.
·
Refusal
to employ
·
Ending
or discontinuing employment
D. The following
employee-related situations are not covered for bodily injury and personal
injury:
·
Sustained
by a brother, sister, child, parent, or spouse due to an employee's injury as
described in Exclusions B. and C. above.
·
This
limits who qualifies as an insured. If an employee causes injury to the named
insured, its partners, members, or a fellow employee while working for the
named insured, that employee is not an insured under the policy.
|
Example: Patricia and Maurice are employees of Dandylion,
LLC. Patricia propagates a harmful rumor about Maurice. As a result, Maurice
sues Patricia and Dandylion, LLC. Since Patricia is not considered an insured
in this situation, Dandylion’s insurance policy does not provide coverage. |
E. The insurance company
does not share with or reimburse any damages to others who must pay for bodily
injury described in Exclusions B., C., or D. above.
Exclusions B., C., D.,
and E. above apply regardless of who initiates the suit and whether it is
because the named insured is liable as an employer. However, there is a key
exception: Exclusion B. does not apply to liability assumed through a contract
under Part II B–Supplemental Coverages 2: Contractual Coverage.
Coverage does not cover
bodily injury or property damage caused by an insured's willful misconduct or
actions that knowingly endanger others. This exclusion applies regardless of
the insured's intent or expectations regarding such bodily injury or property
damage.
This does not apply if reasonable actions are taken to protect persons or
property.
A. The insurance company
does not cover bodily injury, property damage, personal injury, or advertising
injury arising out of, caused by fungi, or resulting from fungi
exposure. Coverage is excluded if the loss stems from the absorption,
existence, exposure, contact, inhalation, ingestion, or mere presence of fungi.
B. The insurance company
does not cover any loss, expense, cost, or liability due to the following:
·
Any
request, directive, order, or demand that any insured or others evaluate or
address fungus or its effects in any way.
·
Claims
or suits by any governmental authority (or on its behalf) for reimbursement or
damages due to any response to fungus or its effects in any way
There is one exception.
No part of this exclusion applies to bodily injury caused by ingesting
products, foods, or goods intended for human consumption.
To fully understand
this exclusion, it is important to review the definition of Mobile Equipment in
the Glossary and Part II B – Supplemental Coverages – 9. Incidental Mobile
Equipment Coverage.
Coverage does not apply
to bodily injury or property damage due to any of the following:
A.
When mobile equipment is not
specifically included under Part II B–Supplemental Coverages 9. Incidental
Mobile Equipment Coverage.
B.
When transporting mobile equipment with
an auto owned, operated, borrowed, or rented by an insured, even if the policy
covers this equipment.
NOTE: The auto
insurance policy covering the vehicle transporting the mobile equipment should
be the policy to cover the mobile equipment being transported.
C.
When mobile equipment is used in pre-arranged stunt
activities, racing, demolition, or speed contests, or during preparation or
practice for these events. This applies even if the policy otherwise covers
such mobile equipment.
A. There is no bodily
injury, property damage, advertising injury, or personal injury caused by
pollutants, whether actual, alleged, or threatened, from any of the following.
|
·
discharge |
·
dispersal |
|
·
emission |
·
escape |
|
·
flowing |
·
leakage |
|
·
migration |
·
release |
|
·
seepage |
·
other similar forms of environmental damage |
This exclusion applies
regardless of the location or manner of these events.
However, there is an
exception. Paragraph A. above does not cover bodily injury, property damage,
advertising injury, or personal injury caused by products of combustion
originating from the named insured’s premises. The causes of loss are limited
to soot, smoke, heat, or fumes but not from burning pollutants.
For controlled fires,
specific conditions must be met for this exception to apply. They are as
follows:
1. The materials burned or
being burned must be usual materials for a building fire.
2. The fire itself cannot be
part of business, industrial, manufacturing or processing activities.
3. The site, premises, or
location where the controlled fire is located must never have been used for
waste disposal, handling, processing, storage, or treatment by any insured.
B. There is no coverage
for treatment, containment, monitoring, detoxification, removal, testing,
cleanup, or neutralization of pollutants, including costs, expenses, liability,
or loss, for either of the following:
·
Demand,
directive, request or order to the insured or others
·
Claim
or suit by a government authority for damages or reimbursement
The following exclusions
apply only to property damage coverage.
A. Personal property
borrowed by the named insured or held in the care, custody, or control of any
insured is excluded. However, this exclusion does not apply if liability is
assumed under a sidetrack agreement.
|
Example:
Scenario 1: Jerry’s Shoes employs John. When
John’s brother asks him to store some items in the backroom while he’s on
vacation, John agrees. However, he finds all the items missing when he
arrives at work one day. He learns that a store supervisor came in during the
night and cleared out the items to make space for a new shipment of shoes.
John’s brother sues for the value of the lost items, but the insurance
company denies coverage because the items were in the insured’s care,
custody, or control. Scenario 2: John borrows his brother’s game system
to use as a store display. However, the system is stolen, and his brother
submits a claim. Coverage may apply if no other exclusion applies, since John
borrowed the system, not Jerry’s Shoes, the named insured. |
B. Coverage does not apply
to damages caused by any part of a premises the named insured has abandoned,
sold, or transferred to others.
However, this exclusion does not apply
to premises that are regarded as the named insured’s work and has not been
occupied by them or rented out to others.
|
Example: Clearview Homes built five model homes
for its new development. Although Clearview used one of the garages as an
office, it never occupied any of the others. Coverage for property damage
applies to the four model homes because Clearview neither occupied nor rented
them. However, because of this exclusion, coverage does not apply to the
model home that Clearview occupied as an office. |
C. Property damage
coverage does not apply to damage to property the named insured occupies,
rents, or owns, except as provided in Part II B–Supplemental Coverages 7.
Incidental Fire and Explosion Legal Liability Coverage.
D.
If the named insured
is a joint venture, LLC, or partnership, coverage does not apply to property
damage caused by an employee, other employees, or members or partners of the
named insured when it involves property they own, borrow, occupy, or rent.
The insurance company
does not cover bodily injury or property damage arising from the giving or
failure to give professional advice, products, or services. This exclusion
applies whether the activities were performed by an insured, their indemnitee,
the insured’s employee, or an employee of the indemnitee.
There is an exception located
under Part II B–Supplemental Coverages 8. Incidental Medical/Professional
Liability Coverage.
A. Coverage does not apply
to bodily injury, property damage, personal injury, or advertising injury due
to silica. It is excluded if any loss occurs due to the absorption, existence,
exposure to, contact with, inhalation of, ingestion of, or the mere presence of
silica.
B. No coverage is provided
for costs, expenses, liability, or loss related to treatment, containment,
monitoring, detoxification, removal, testing, cleanup, or neutralization of
silica for either of the following cases.
·
Demand,
directive, request, or order to any insured or others
·
Claim
or suit by a government authority or on their behalf for damage or reimbursement
Silica in this
exclusion refers to any form of silica, including particles, dust, and any
substance or product that contains silica in any amount.
A.
Bodily injury, property damage,
advertising injury, personal injury or medical payments are not covered if due
to any of the following unmanned aerial vehicle activities:
·
Loading or unloading
·
Loaning, renting or entrusting to others
·
Maintenance
·
Use
Coverage also does not
apply to bodily injury, property damage, advertising injury, personal injury,
or medical payments if any equipment, device, machinery, or part is attached to
or part of the unmanned aerial vehicle or drone.
B.
Damages, expenses, liability, or
loss due to an unmanned aerial vehicle are not covered. This applies regardless
of the UAV's role in the activity. It may worsen or cause the problem, whether
it stems from the UAV or results from it; it is not covered.
Examples include, but are not limited to, the following situations:
·
when an object falls from the UAV
·
collision of a UAV or any of its components with an
animal, person, or property
·
any form of invasion of privacy
·
interruption of business
·
state or federal law or regulation is violated
A. There is no coverage for bodily injury, property damage, or medical
payments at the described location if caused by a virus or infectious agent
that causes illness or disease in humans, animals, birds, or other creatures.
This exclusion applies whether the exposure is actual, alleged, or threatened.
B. There is no coverage
for costs related to treatment, containment, monitoring, detoxification,
removal, testing, cleanup, or neutralization of the virus, including any
expenses, liabilities, or losses for either of the following:
·
demand,
directive, request or order to the insured or others
·
claim
or suit by a government authority or on its behalf for reimbursement
There is an exception
to this exclusion. It does not apply to bodily injury caused by ingesting
products, foods, or goods meant for human consumption. This is often referred
to as the salmonella or food poisoning exception.
Coverage does not apply
to medical expenses related to bodily injury within the products/completed
operations hazard.
Medical expenses
related to bodily injury are not covered for any of the following persons:
A. Any and all insureds
B. An individual eligible for benefits under laws such as disability,
workers compensation, or similar programs due to an injury they have suffered.
C. An individual hired to carry out work for an insured, on their behalf, or
for the insured’s tenant.
D. Tenants or other
individuals on the named insured’s property who are injured in the area they
typically occupy.
Medical expenses related
to bodily injury are not paid to anyone who participates in athletic
activities.
A. There is no coverage
for medical expenses related to services provided by the named insured, their
employees, or others under a contract to provide medical care, including first
aid costs incurred during an accident that would otherwise be covered under
Part II B – Supplemental Coverages – 4. First Aid Expense Coverage.
|
Example:
Pamela slips and falls at Merry Mini
Mall. Scenario 1: Kelly, the owner of Merry Mini Mall, has
contracted with a doctor who rents space in the mini mall to provide care in
case of any emergency. When the doctor arrives and administers care, none of
the expenses he bills Kelly are covered. Scenario 2: Kelly calls 911 and waits for the ambulance to
arrive. All claim-related costs are covered within the limit of insurance. |
B. There is no coverage for medical expenses
related to bodily injury excluded from the policy.
The named insured, all
other insureds, and any party benefiting from this coverage must perform all of
the following:
A.
All information related to a claim must be provided to the
insurance company immediately. This also applies to any incident that could
potentially lead to a claim. The relevant information includes the following:
·
the
named insured
·
when
and where the injury occurred
·
circumstances
surrounding the incident
·
names
and addresses of injured parties
·
names
and addresses of witnesses
·
other
circumstances related to the occurrence
B.
Bills, notices, papers, summonses, and any documents
related to the claim or suit must be immediately sent to the insurance company.
This requirement applies to claims against any insured as well as to any medical
expense claims.
C.
Cooperation with the insurance company is necessary but
only to the extent that it pertains to the specific claim or lawsuit. The
following areas are where assistance is specifically required:
·
attending
trials and court hearings
·
providing
evidence
·
enforcing
contribution or indemnity rights against others
·
when
investigating occurrences
·
in
making settlements
·
obtaining
information or records
·
arranging
for witnesses to attend trials or hearings
D.
Agree to be examined and provide all statements under oath.
This may also require a signature and swearing to such statements. The
insurance company also has the following options:
·
to
examine each individual separately, and without others present, when there are
two or more people to examine
·
to
make a video or audio recording of the examinations
E.
The insurance company controls the payments it makes. An
insured may choose to make voluntary payments, take on obligations, or incur
defense, investigative, or other types of expenses without prior written
approval from the insurance company. However, if this occurs, the insured will
bear the cost and should not expect reimbursement from the insurance company.
This condition does not
apply to first aid given at the time of an accident, as covered under Part II B
– Supplemental Coverages 4. First Aid Expense Coverage.
F.
This condition applies only to Coverage F – Medical
Payments to Others. Beneficiaries of this coverage must, as often as reasonably
requested by the insurance company, perform the following actions:
·
the
insurance Provide a written proof of loss; the insurance company might require
it to be sworn.
·
Undergo
physical examinations conducted by physicians selected and paid for by the
insurance company.
·
Grant
company authorization to obtain medical records.
If the insured does not
comply with these or any other conditions, the insurance company's obligations
under the policy may be affected or rendered void.
The following items
detail the maximum total amount the insurance company will pay for all losses,
liabilities, injuries, or damages. This limit applies regardless of the number
of claims, lawsuits, or insureds involved. The insurance company’s duty to pay
ends once the liability limit for judgments or settlements is reached.
A. General Coverage Limits
The limits below apply
to each occurrence, accident, or injury, covering all related medical expenses
and damages incurred.
1. Occurrence Limits – Coverages E and F
The most the insurance company
will pay in a single occurrence is the limit specified for these coverages on
the Declarations. It is also important to recognize that Part II B–Supplemental
Coverages 7. Incidental Fire and Explosion Legal Liability Coverage has a
separate sub-limit.
2. Accident Limit / Per Person Limit–Coverage F
The most the insurance company will pay
for a single person in a single accident is the per person limit for this
coverage, as shown on the Declarations.
|
Example: The First Church choir is singing
carols through downtown Hometown. They step into a Main Street Shopping
Emporium to warm up, enjoy some hot chocolate, and catch their breath, but
soon they begin to stumble. The first caroler falls, causing a chain reaction
as the others follow, until all ten are on the ground. Ambulances arrive, and
everyone is transported to the hospital, treated, and later discharged. Each
person can receive up to the maximum medical payment limit specified in Main
Street’s Declarations. |
3. Personal Injury / Advertising Injury Limits
The maximum amount
payable to any one person or organization for all personal/advertising injury
claims is the limit specified on the Declarations or Declarations Supplement.
B. Aggregate / Total Limits
This section discusses
the limits available for all damages or medical expenses from all occurrences,
accidents, or injuries during the period described in item C below.
1.
Aggregate/Total Limit –
General Coverages
The general
aggregate/total limit listed on the Declaration is the maximum payable for the
sum of:
·
Coverage
E
·
Coverage
F
·
Personal
Injury/Advertising Injury
NOTE: This aggregate limit
does apply to the products/completed operations hazard, as it has its own
separate aggregate listed below.
If the Declarations
does not specify an aggregate or total limit, then neither the general
aggregate nor the total limit applies to that coverage. In such cases, only the
occurrence limit is relevant for each claim, regardless of the total sum of the
losses incurred during each term period.
2.
Aggregate / Total Limit
– Products / Completed Operations Hazard
The total payable
amount for all liability, as outlined in section C. below – Application of
Limits, is limited by the Products / Completed Operations Aggregate limit
listed on the Declarations. This applies to all damages related to the Products
/ Completed Operations Hazard.
C. Application of Limits
1. A policy is issued as a
standard 12-month policy term
The policy period
begins on the date specified on the Declarations. The limits described in
paragraphs B.1 and B.2 apply separately to each consecutive 12-month period beginning
with the policy inception date listed on the declarations.
2. A policy is issued at
inception for more than 12 months, for example, a 27-month policy term
This is a policy issued with a term
period greater than 12 months at its original issue. Since this policy period
cannot complete a full 3 consecutive 12-month periods, the final 3 months of
the policy period will have its own policy limit.
|
Example:
Here’s how the policy limits apply when a policy is originally issued for
more than 12 months. We’ll use the 27-month policy period: ·
The first 12
months of the policy period receives its own policy limit; ·
The second 12
months of the policy period receives its own policy limit; and, ·
The remaining 3
months of the 27-month policy period receives its own policy limit. There are essentially three separate policy limits
that will apply. |
·
A policy is originally issued for 12 months but is then extended
by an endorsement
This policy is issued
for a standard 12-month term, but the policy period is then extended beyond the
12-month period through an endorsement. This is similar to how a short-term
policy would function.
o
The
original 12-month policy period has its own dedicated policy limit.
o
Subsequently,
both the renewal 12-month period and the 3-month extension period made by
endorsement share a single policy limit. This is due to the extension period
being added by endorsement rather than being part of the original policy period
when the policy was issued.
|
Example:
Here’s how the policy limits apply when a policy is originally issued for 12
months and is then extended to 27 months by an endorsement. ·
The first 12
months of the policy period receives its own policy limit; ·
The second 12
months and the remaining 3 months receive their own policy limit. There are only two separate policy limits available
when the policy is endorsed to extend the policy period. |
NOTE: The policy refers to a
terminal period. A terminal period is the final duration of a policy, which can
last from one day to several years before coverage ends.
A. The first named
insured, as defined in the Common Glossary, has special considerations
regarding limits of liability and the duties and rights assigned to it in the
Common Conditions. Otherwise, this insurance applies separately to each insured
as follows:
·
as
though it is the only insured
·
against
whom a suit is brought, or a claim is made
B. The insurance company
remains responsible under this policy even if the insured becomes bankrupt.
C. Two or More Policies
Issued by Us
The insurance company
may have issued multiple policies to the named insured covering the same loss.
In such cases, the maximum paid is limited to the highest liability limits
among those policies. This also applies if another policy was issued by an
affiliated company of the insurance company. This insurance does not add to or
serve as excess coverage over any other policies.
However, this condition does not apply
to any umbrella or excess liability policy issued by the insurance company or
its affiliates specifically providing excess coverage over this policy.
|
Examples:
Scenario 1: OK Insurance Company has two affiliated insurance
companies, Good Insurance Company and Great Insurance Company. Paul Peppers purchases
insurance as follows:
An occurrence on 5/01/2023 results in bodily
injuries that span all policy years. The first claim is filed on 02/01/2025.
The highest limits available are $1,000,000/$3,000,000. This is the highest
limits available to pay for all claims. Scenario 2: Paul Peppers maintains excess coverage with OK and
its affiliates across all four years. The excess policy's limits are separate
and do not impact this policy’s coverage. |
The following
Exclusions apply to Parts I and II. These are Common Exclusions and are in
addition to those specified under other coverage sections. Coverage does not
apply to damages, expenses, liability, or loss that are directly or indirectly,
wholly or partly, arise out of, caused by, or result from any of the
following, even if the loss is otherwise covered and occurs at the same time or
in any sequence.
Related Article: Concurrent
Causation and Anti-Concurrent Causation Clauses–A Discussion
The following
exclusions apply to Part I–Property Coverages:
This exclusion applies
to the following:
·
Earthquake
·
Volcanic
activity such as volcanic explosions, eruptions, or effusion. However, this
does not include items described in Part I C – Losses Insured—General Cause of
Loss Conditions Coverage A, B, C—3. Descriptions of Causes of Loss—J. Volcanic
Eruption
·
All
other earth movement of a catastrophic nature
Loss resulting from
fire, explosion, or theft due to earth movement or activity is covered if the
policy includes such coverage.
Loss or damage due to any fracking is not covered. This includes, but is
not limited to, damage from earthquakes, earth movements, or sinkholes
resulting from fracking.
Loss resulting from
fire, explosion, or theft due to fracking is covered if the policy includes
such coverage.
A. War, rebellion,
insurrection, civil war, revolution, invasion, and seizure of power.
War is considered
excluded, regardless of formal declaration. Similarly, any actions taken to
defend against the excluded acts are also excluded, whether these acts actually
occurred or were only anticipated.
NOTE: It’s important
to carefully consider the wording of this exclusion, as it does not require
involvement from governmental authorities. It could possibly also cover local
militia, as well as foreign and domestic terrorism.
B. Violations of laws or
ordinances the insured knowingly commits, or others commit with their consent,
are not covered. This exclusion also includes liability, statutory fines,
punitive damages, and exemplary damages.
C. Regulations or
legislation related to customs, quarantine, or drug enforcement leading to
loss, seizure, or confiscation. If property is considered contraband, there is
no coverage. Also, any property lost due to illegal transportation or trade is not
covered.
D.
Damage or destruction ordered by civil authorities is not
covered. However, if immediate destruction is required to prevent a fire from
spreading, coverage applies, but only if the initial cause of the fire is a
covered cause of loss.
|
Example: The Organization to Regain Sanity (ORS)
attempts to overthrow Middleburg City, starting a fire at the courthouse that
quickly gets out of control. The National Guard takes control of ORS as the
fire continues to burn. The fire department then destroys Janie’s Floral
Designs and other buildings to create a firebreak. The loss from this fire is
excluded because the cause of loss is insurrection, which is an excluded
cause of loss. |
A. These are nuclear
events, occurrences, and operations. Some examples include explosions,
reactions, radiation of a nuclear nature, and radioactive contamination. None
of these are considered fire, explosion, smoke, or any other type of covered
loss.
If a fire occurs due to
any of the above, coverage applies to the direct damage caused by the fire, but
not to any other type of loss.
B. Properties of nuclear
or radioactive materials that are explosive, radioactive, toxic, or otherwise
harmful, regardless of whether these materials are natural or manmade.
The following
exclusions apply to Part II – Liability Coverages:
Earthquake is excluded.
There is no specific definition for it, so a standard definition would apply. This
exclusion pertains only to earthquakes, not to earth movements.
A. Bodily injury, property damage, advertising injury, personal injury, or
medical payments are not covered if due to fracking.
Damages, expenses, liability, or loss related to fracking are not
covered. This exclusion applies regardless of the role fracking played in the
activity. It may have worsened the situation or caused it. The issue may
originate from or be due to fracking.
The following are not covered when caused by fracking:
1. Earthquake, earth movement, or sinkhole collapse
2. Fracking fluids, pollutants, or similar environmental contaminants said
to have threatened, entered, or been confirmed to enter a lake, body of water,
or water sources, whether aboveground or underground. These substances can
reach these water bodies through dispersing, emission, escape, flow, leak,
migration, release, or seepage.
3. Contamination that involves a
pathological agent, like a virus, which causes illness or disease in animals,
birds, other creatures, or humans.
4. The named insured leasing or renting its premises when the purpose of the
lease or rental is fracking.
5. Wastewater or other chemicals being removed, stored, or transported from
the site where fracking is occurring.
6. Pollutants and/or fracking fluids being extracted from water or land as a
result of fracking.
7. The process of removing, replacing, or restoring land or water
contaminated by fracking fluids or other pollutants due to fracking.
B. There is no coverage for costs related to treatment, containment,
monitoring, detoxification, removal, testing, cleanup, or neutralization of
fracking processes, including expenses, liabilities, or losses for either of
the following:
·
Demand, directive, request or order to the insured
or others
·
Claim or legal action initiated by a government
authority or on its behalf for reimbursement
The insurance company
does not cover bodily injury, property damage, advertising injury, personal
injury, or medical payments in any of the following situations:
A. War, rebellion,
insurrection, civil war, revolution, invasion, and seizure of power are all
excluded. This exclusion applies regardless of whether they are formally
declared. It also excludes any actions taken to defend against these acts,
whether they actually occurred or were expected to occur.
NOTE: It’s important
to carefully consider the wording of this exclusion, as it does not require
involvement from governmental authorities. It could possibly also cover local
militia, as well as foreign and domestic terrorism.
B. Violations of laws or
ordinances the insured knowingly commits, or that others commit with its
consent, are excluded. This also includes illegal trade, statutory fines and
liabilities, and punitive or exemplary damages.
C. There is no coverage
when material or information is transmitted, communicated, distributed, sent,
or transmitted in violation of an ordinance, regulation, or statute that
restricts or bans such activities. Examples of such federal regulations
include:
·
Telephone
Consumer Protection Act (TCPA)
·
CAN-SPAM
Act of 2003
·
Fair
and Accurate Credit Transactions Act (FACTA)
·
Fair
Credit Reporting Act (FCRA)
D. There is no coverage
for any loss if customs, drug enforcement, or quarantine legislation or
regulations seizes or confiscates property.
Bodily injury or property damage is not covered
for any of the following:
A. If an insured also
holds a nuclear energy liability policy, they are not regarded as covered for
bodily injury and property damage under this policy. This applies even if they
would have been covered by that policy, except that it was terminated because
its limits were exhausted.
B. There is no coverage if
nuclear material's hazardous properties lead to bodily injury or property
damage, under the following conditions.
·
A
person or organization must maintain financial protection in accordance with
the Atomic Energy Act of 1954 or its amendments.
·
The
insured is entitled to compensation from the United States of America or its
agencies according to any relevant agreement, or would be eligible for
indemnity from the USA if this policy were not in effect.
C. There is no coverage if
nuclear material's hazardous properties cause bodily injury or property damage,
provided either of the following conditions apply:
·
An
insured owns or operates a nuclear facility, with nuclear material either at
the site or dispersed or discharged from it. This also applies if another party
operates the facility on the insured's behalf.
·
The
nuclear material is contained within spent fuel or waste during any phase of
disposal, handling, possession, processing, storage, transportation, or usage
by or on behalf of any insured.
D. When the insured
provides equipment, materials, parts, or services associated with the
construction, maintenance, operation, planning, or use of any nuclear facility.
However, if the nuclear facility is located
within the United States, its possessions, territories, or Canada, the
exclusion applies only to property damage involving the facility and property
at that site.
E. Glossary
The following
definitions apply only to the Nuclear Energy exclusion.
1. Hazardous Properties
These include properties
such as toxicity, explosiveness, or radioactivity.
2. Nuclear Facility
This is any of the
following:
a. Nuclear reactors
b. Equipment or device
designed for or actually used for:
·
separation
of uranium or plutonium isotopes
·
spent
fuel processing or utilization
·
waste
packing, processing, or handling
c. When a facility
contains more than 25 grams of plutonium, uranium-233, or their combinations,
or exceeds 250 grams of uranium-235. Any device or equipment at the facility
involved in processing, fabricating, or alloying special nuclear material is
considered a nuclear facility.
d. Any of the following prepared
or used for storage or disposal of waste:
·
basin
·
excavation
·
place
·
premises
·
structure
e. The site where a., b.,
c., or d. above is located. All activities conducted at this site and all
premises used for these activities are also regarded as a nuclear facility.
3. Nuclear Material
·
source
material
·
special
nuclear material
·
by-product
material
NOTE: All the above are
defined by the Atomic Energy Act of 1954.
4. Nuclear Reactor
A device designed to do
either of the following:
·
Sustain
nuclear fusion in a self-supporting chain reaction.
·
Contain
fissionable material that has achieved critical mass.
5. Property Damage
This term is broadened
to include radioactive contamination of property.
6. Source Material,
Special Nuclear Material, and Byproduct Material
The policy does not
define these terms; they are defined by the Atomic Energy Act of 1954.
7. Spent Fuel
This refers to fuel
within a nuclear reactor, which can be a component or an element in solid or
liquid form. However, it must have been used in the reactor or exposed to
radiation in that reactor.
8. Waste
This material comes
from operating a nuclear facility as defined above in 2.a. and 2.b. and must
include by-product material. However, tailings or waste generated during the
extraction or concentration of thorium or uranium from source material ore is
not considered waste.
The following
definitions apply to both Part I – Property Coverage and Part II – Liability
Coverage. It consists of specific terms and phrases used in the insurance
policy highlighted in italics.
When the Declarations list named insureds, the first one listed is the
first named insured. If only one insured is listed, then that individual is the
only insured.
Fracking is a process that involves breaking up shale rock underground to
release natural gas and oil. It is carried out by injecting high-pressure
substances like chemicals, gas, propane, gel, sand, water, or other materials
into the subsurface area.
The following are all
considered fungi. Each also includes organisms similar or related to it.
·
fungus
·
mold
·
mildew
·
spores
·
algae
·
smut
NOTE: This is a fungal disease of grains.
·
protists
·
rust
·
rot
and decay organisms
Fungi includes the
following if produced by fungi:
·
mycotoxins
·
substances
·
compounds
·
chemicals
·
mists
·
vapor
·
by-products
·
waste
·
similar
or related organisms
Fungi does not include
any fungi meant for eating.
NOTE: Mushrooms are examples of fungi
intended for consumption.
These are irritants or
contaminants that can be gaseous, solid, or thermal. Some examples include:
·
acids
·
alkalis
·
chemicals
·
fumes
·
smoke
·
soot
·
vapors
·
waste
Waste includes not just
items meant for destruction or disposal but also reclaimed, reconditioned, or
recycled materials.
The decomposition of
physical property by any living organism.
Drones are a type of unmanned aerial vehicle, but the term is not limited
to just drones. It refers to an aerial vehicle powered and capable of flying
either autonomously or via remote control. No human operator is onboard the
vehicle.
This refers to the
insurance company named on the policy that provides the coverage.
These are the named
insureds listed on the Declarations. This definition also includes any business
or organization a named insured acquires or establishes during the policy
period.
The following
definitions apply only to Part I - Property Coverage. It consists of specific
terms and phrases used in the insurance policy highlighted in italics.
While the common use of
this term is the property Replacement Cost minus Depreciation, it is not
explicitly stated this way in the definition, but it is implied by the
definition as follows:
The actual cash value
calculation will consider all of the following, as well as any other relevant
factors that could reasonably impact the property value.
·
age
·
condition
·
cost
of repairing, restoring, or replacing property subject to depreciation
·
deterioration
·
economic
value
·
market
value
·
structural
or functional obsolescence
·
original
cost
·
use
·
utility
1. This is a fire protection or extinguishing system that functions
automatically. All of the following are included in this definition, but only
when connected:
A. ducts, fittings, pipes, valves
B. pumps and mains part of private fire protection, not public fire
services
C. nozzles or sprinklers used for discharge
D. tanks, their component parts, and supports
2. The following are included in this definition but only when supplied
by the same automatic fire protection system as above:
A. Standpipes, outlets and hydrants (these would not involve public fire
protection)
B.
A fire protection or
extinguishing system that does not operate automatically.
This occurs when
insured property is removed from a premises. The property must be removed with
evidence of utilizing one of the following methods:
·
By
a person who has either entered or exited unlawfully.
·
Through
actual force or violence, not just threats.
Marks must be visible
at the interior or exterior point of entry or exit. These can result from
physical damage, chemicals, electricity, tools, or explosives.
This occurs when a
building or a part of its structure suddenly and abruptly caves in or
collapses. It does not have to be the entire building but structural elements
of the building must fall.
Collapse does not
include any of the following:
·
The
building or a section of it is at risk of collapsing or caving in.
·
A
section of a building that remains standing but has become detached from
another part of the building
·
bulging
·
cracking
·
expanding
·
settling
·
shrinking
This is any unauthorized
intrusion into a computer network, hardware, software, or website. Adware,
spyware, computer worm, or Trojan horse are examples of such intrusions.
Whatever method is used, one or more of the following must occur from the
intrusion:
·
The
integrity, quality, or performance of computer media, data, programs, hardware,
or software compromised through alteration, contamination, corruption,
degradation, destruction, or modification.
·
Data
records, programs, applications, and proprietary software are copied, observed,
or scanned.
·
Hardware
or media used with hardware is corrupted, damaged, degraded, destroyed,
malfunctioning, or rendered inadequate.
·
Software
is modified, deleted, destroyed or generated
·
The
named insured’s computer network, hardware, or website denies access or service
This is a
self-replicating malicious code introduced into electronic data processing,
software, hardware, or a website, intended to cause one or more of the
following issues, among other potential issues.
·
The
integrity, quality, or performance of computer media, data, prepackaged
programs, hardware, or software is altered, contaminated, corrupted, degraded,
destroyed, or modified.
·
Hardware
or associated media are corrupted, damaged, degraded, destroyed, made to
malfunction or become inadequate.
·
Software
is modified, deleted, destroyed or generated
·
The
named insured’s computer network, hardware, or website denies access or service
This is property others
own or operate. The named insured must depend on that property to do one or
more of the following:
·
Accept
the named insured services or products
NOTE: This could be a recipient location, a
client, or a customer.
·
Draw
customers to the named insured’s business
NOTE: This could be a
leader location.
·
Bring
materials or services to the named insured or on their behalf, excluding
suppliers of communication, power, water, or other utility services.
NOTE: This could be
a supplier or transporting location.
·
Manufacture
products according to a sales contract for the customers of the named insured.
NOTE: This is a manufacturing
location.
Any directive or order received via cable, electronic transmission, or
fax that appears to come from the named insured or another insured, but was
actually sent by an unauthorized person without their knowledge or consent.
Fraudulent instructions also include legitimate directives or orders issued by
the named insured or another insured that have been copied, forged, or altered
by someone else without permission.
This refers to the
entity or individual listed as insured on the Declarations.
Money is defined as follows:
·
bank
notes
·
bearer
bonds
·
bullion
·
coins
·
currency
·
lottery
tickets
·
money
orders
·
prepaid
phone cards
·
registered
checks
·
stored
value cards
·
traveler’s
checks held for sale to the general public
Securities are
representations. They can be negotiable or non-negotiable but are contracts
with the obligation to pay either money or property. Some examples include but
not limited to:
·
accounts
·
bills
·
deeds
·
debt
evidences
·
notes
·
revenue
and various types of stamps
·
tickets
·
tokens
currently being used
No form of money is
considered a security.
This occurs when covered
property is taken by any of the following methods:
·
Actual
or threatened violence against a messenger or custodian, or causing them to
fear violence.
·
Any
other criminal act occurring in front of a messenger or custodian, provided
they are aware and the insured’s officers, employees, or partners are not
involved in committing the act.
·
The
messenger or custodian is either killed or rendered unconscious when the
insured property is in their direct care and custody.
The following
definitions apply only to Part II – Liability Coverage. It consists of specific
terms and phrases used in the insurance policy highlighted in italics.
1. A vehicle or trailer
designed for use on public roads and land based. The definition also includes
semitrailers. Additionally, machinery or equipment attached to the vehicle,
trailer, or semitrailer is regarded as part of the automobile.
2. Any land-based vehicle
not described above that is subject to financial responsibility or similar
motor vehicle regulations. The determining factor for this criterion is the
state where the vehicle is primarily garaged.
Any vehicle classified
as mobile equipment under this policy is not regarded as an automobile.
This refers to bodily
harm, sickness, or disease affecting a person. The bodily harm, sickness, or
disease must stem from an event covered by this policy. Death caused by these
conditions is included in this definition, regardless of when it occurs.
This refers to the loss or theft of a person’s or organization’s personal
or confidential information. It also includes accidental release, disclosure,
or publication of such data. The following types of information are regarded as
confidential or personal:
1.
Identifiable information about a
person includes the following examples:
A.
Details such as contact
information and identification
B.
Identification numbers issued by
the government
C.
Any type of financial information
2.
Health information safeguarded by
the Health Information Portability and Accountability Act (HIPAA), including
all amendments and additions.
3.
Information not accessible to the
public. This includes, but is not limited to, the following examples:
·
customer lists
·
financial information
·
formulas
·
patents
·
processing methods
4.
Any other nonpublic information
outlined in Title V of the Gramm-Leach-Bliley Act of 1999, including amendments
or additions to the law.
Any kind of bullying or harassment conducted through electronic means.
Examples include, but are not limited to, the following:
·
blogs
·
chat rooms
·
email
·
instant messaging
·
social networking
·
text messaging
This refers to a person
the named insured employs or a worker the named insured leases. Temporary
workers and independent contractors are not employees.
An executive officer is
a person holding an officer role defined by the governing documents of the
named insured, such as a constitution, bylaw, charter, or similar document.
The Declarations must
identify the specific type of business the insured is involved in. If there are
multiple named insureds, there may be multiple designations. Who qualifies as
an insured is determined by the following designations:
1.
Individual
The named insured and
their spouse are considered insureds. However, this coverage applies only to
activities related to the business or operations for which the named insured is
the sole proprietor.
2.
Partnership, Joint Venture,
or Limited Liability Company
The named insured,
along with its partners, members, and their spouses, are considered insureds.
Their insured status is restricted to engaging in the business or operations of
the partnership, joint venture, or limited liability company.
3.
Other Organization
NOTE: This includes corporations.
The organization is an
insured. Its directors and executive officers are insureds but only when acting
within the scope of their duties. Stockholders are also insureds but only with
respect to their liability as stockholders.
4. Employees of the named
insured who are not executive officers are considered insureds, but only when
acting within the scope of their duties as employees.
5. Real estate managers
are considered insureds. This can be an individual or an organization, but it
cannot be an employee.
6. Any business entity
newly formed or acquired by the named insured, but only if the following apply:
·
It
is not a partnership, joint venture, or limited liability company.
·
The
named insured is the majority owner.
·
Ownership
can only be up to 120 days after initial acquisition or formation, or until the
policy ends, whichever occurs first.
·
No
other insurance is available.
·
An
accident, occurrence, or offense occurs after the entity has been formed or
acquired.
Coverage does not apply
to any partnership, joint venture, or limited liability company in which the
insured is a partner or member unless the partnership, joint venture, or
limited liability company is specifically listed on the policy.
This is a person who is
leased to the named insured to perform duties that relate to the named
insured’s business/operations. The person must be leased from a labor leasing
company. There must be an agreement between the named insured and the labor
leasing company, but there is no requirement that the agreement be in writing.
A temporary worker is not a leased worker.
This describes the
process of moving property, which has three steps:
Step 1: Begins where the property is accepted for transfer
and is moved into or onto an auto, aircraft, watercraft, or UAV.
Step 2: When the property is on or inside the aircraft,
watercraft, automobile, or UAV.
Step 3: When the property arrives at its final destination
and is transferred from the aircraft, watercraft, auto, or UAV to the
acceptance location. Any movement after acceptance is not considered loading
and unloading.
Property moved by a mechanical
device is not considered loading and unloading. However, the following exceptions
apply:
·
If
the mechanical device is attached to an aircraft, watercraft, auto, or UAV, it
is considered part of loading and unloading.
·
If
the device is a hand truck, its movement can be considered loading and
unloading, provided it satisfies the other criteria for these processes.
|
Example:
Jerry uses a hand truck to transport a
pallet of boxes to the loading dock, while the delivery driver uses a hand
truck to load the boxes onto his truck. Jerry’s use of the hand truck involves moving the
property to a designated pickup area, so it is not considered loading and
unloading. However, the delivery driver’s use of the hand
truck is classified as loading and unloading because he transfers the
property from the point of acceptance to the vehicle. |
1. Mobile equipment refers
to land vehicles that meet specific criteria. It includes equipment or
machinery that is either an integral part of or permanently attached to these
land vehicles, as outlined below.
A. Any vehicle used
exclusively at the named insured's described premises.
NOTE: A vehicle designed to
be used on the public roads but is only used at the named insured premises
could be considered mobile equipment.
|
Example: Cramer owns a small 1947 pickup used
on his premises to haul items from one building to another. It is not
licensed and is never taken off the premises. As long as the vehicle is never
used off premises, coverage applies. |
B.
Any vehicle designed primarily for use off public roads.
Examples include bulldozers, farm machinery, forklifts, and similar commercial
(as opposed to personal) devices.
|
Example: Paul uses his bobcat to clear debris alongside the
highway, working on one side then crossing to the other. During his crossing,
he hits another vehicle. Coverage applies because the bobcat is intended for
off-road use. |
C. Any vehicle whose
primary purpose is to make the following equipment mobile:
·
Concrete
mixers. This excludes mix-in-transit mixers and applies only when the equipment
is permanently attached to the vehicle or is an integral part of it.
·
Diggers,
drills, loaders, power cranes, or shovels
·
Graders,
rollers, scrapers, and other similar equipment used for road construction and
resurfacing, but only when the equipment is permanently attached to the vehicle
or is an integral part of it.
D. Vehicles that are not
self-propelled and are mainly used to move equipment permanently attached to or
integral to the vehicle, such as:
·
Air
compressors, generators, or pumps
·
Equipment
used to clean buildings, for geophysical exploration, lighting, spraying,
welding, or to service wells
·
Devices
used to lower or raise workers, such as a cherry picker.
E. Any vehicle that moves
on crawler treads.
F. Any vehicle not listed
above and primarily used for purposes other than transporting people or cargo.
However, this does not include any of the following self-propelled vehicles
described below or those that have these devices permanently installed:
·
Any
vehicle designed primarily to maintain roads, clear snow, or clean streets.
This excludes equipment used for constructing or resurfacing roads.
·
Any
vehicle equipped with the following:
o
Air
compressors, generators, and pumps
o
Equipment
used to clean buildings, for geophysical exploration, lighting, spraying,
welding, or to service wells
·
Any
device attached to a vehicle chassis, such as a cherry picker, used to lift or
lower workers.
All three bulleted
items in 1.F. are considered automobiles. However, refer to Part II B – Supplemental
Coverages – 6. Incidental Automobile Coverage for details on coverage of the
operation of specified devices.
2. None of the equipment
listed above qualifies as mobile equipment if it is subject to compulsory or
financial responsibility laws, or similar motor vehicle regulations, in the
state where it is licensed or principally garaged. Such land vehicles are considered
automobiles.
This is considered an
accident. It involves ongoing or repeated exposure to harmful conditions. To be
regarded as the same occurrence, the conditions must be deemed essentially the
same.
This refers to bodily
injury and property damage arising out of the named insured products, or the
named insured’s work that occurs away from the described premises, but excludes
the following situations:
1. Tools, equipment not yet
installed, or any abandoned or unused materials.
2. Products in physical
possession of the named insured.
Trigger Endorsement: If BU 50 06 appears as
an endorsement on the Declarations, the products/completed operations hazard
applies only if bodily injury or property damage from the named insured’s
product occurs away from the described premises.
3. Property being
transported. An exception applies when a condition in or on a vehicle, caused
by loading or unloading, results in the occurrence.
4. Any work the named
insured did not finish or abandoned. The work of the named insured is
considered complete at the earliest of the following:
A. When the named insured
has a contract, work is considered completed once the work specified in that
contract is finished.
B. When the named insured
has a contract involving multiple locations, work is considered completed on a
location-by-location basis. This means that at each location, work is deemed complete
once all contract requirements for that specific location are fulfilled.
C. When that portion of
work at a job site is utilized by any individual or organization other than a
different contractor or subcontractor engaged in the same project.
Any work related to final corrections,
replacements, repairs, maintenance, or servicing is considered complete.
|
Example:
Ernie’s
Electrical is a subcontractor working with Total Contracting on a new
apartment complex. The development includes 15 buildings in total. Once each
building is finished, the apartments are rented out immediately. Scenario 1: Joe’s Drywall experiences a loss due to an issue
caused by Ernie’s work. Joe’s work is located in a building within the
complex that remains unfinished. This loss does not qualify as completed
operations because the building is not yet used for its intended purpose. Scenario 2: Joe’s Drywall experienced a loss due to an issue
caused by Ernie’s work. The loss stems from a tenant complaint about one of
the finished buildings. This loss is considered completed operations because
the building has been put to its intended use, even though the overall
project is still unfinished. |
Property damage due to a
covered occurrence is as follows:
·
When
tangible property is directly damaged. If the property becomes unusable due to
the damage, this loss of use is considered property damage. The time of loss of
use is considered the moment the property was damaged.
·
Accidents
can happen even when tangible property remains physically undamaged if
circumstances render it unusable. In such cases, the loss of use for the
undamaged property is covered from the moment the loss begins.
This individual is not
an employee or a leased worker but is provided to the named insured for one of
the following reasons:
·
A
person provided to serve temporarily as a replacement for a permanent employee
during their leave.
·
A
person provided to meet short-term or seasonal workload demands.
The premises of the
named insured, regardless of whether listed on the Declarations or noted
elsewhere in the policy, are as follows:
·
any
premises owned by, occupied by, or rented to the named insured
·
any
premises the named insured sold, transferred to others, or has abandoned
The following are
considered your products:
·
Products
or goods manufactured, sold, distributed, or handled by any of the following:
·
Parts,
equipment, containers and materials provided with the named insured’s goods or products.
A vehicle is not considered a container.
·
Warranties
or representations regarding the durability, fitness, performance, or use of
the named insured product, whenever made.
·
Instructions
and warnings provided or that should have been provided.
The following are not
considered your products:
·
Real
property
·
Vending
machines
·
Other
property not sold but is instead rented out or made available for the use of others.
The following are
considered your work:
·
Work
or operations carried out either by the named insured or by others acting on
their behalf.
·
Equipment,
materials, or parts supplied for the work or operations.
·
Warranties
or representations regarding the durability, fitness, performance, or use of
the work by the named insured, whenever made.
·
Instructions
and warnings provided or that should have been provided.
The following
conditions apply to Part I – Property and Part II – Liability. They apply in
addition to the conditions listed under the separate coverage parts.
A state mandated
endorsement included elsewhere in this policy outlines the conditions and
timeframes for initiating actions or suits against the insurance company.
An action cannot be
brought against the insurance company until both of the following conditions are
met:
·
All
policy conditions are complied with
·
The
insured’s obligation is established through either a court judgment or a
written settlement approved by the insurance company. This is the only
obligation covered by this policy.
This policy does not
grant the named insured or others the right to involve the insurance company in
any legal action against any insured.
The insurance company
is not obligated to honor any interest assignment in this policy unless it
provides written consent. However, there is an exception. If the named insured
is an individual and dies, the following individuals automatically become
insureds, but only under these specified conditions.
A. The legal
representative of the named insured, but only when performing their duties.
B. Any party that holds
custody of the named insured’s property before a legal representative is
appointed.
A.
General
·
Only
the first named insured has the authority to cancel the policy.
·
The
cancellation will apply to all other named insureds, insureds, and any other
interests named on the policy.
·
The
policy can be canceled by surrendering it by mail to either the insurance
company or its agent. Additionally, the named insured may send written notice
to request cancellation at a future date. The date of cancellation must be provided.
NOTE: Typically, when a
policy is surrendered to the company or the agent, it is canceled flat on the
renewal date.
·
Cancellations
are processed on a pro-rata basis, subject to any minimum earned premium. The
insurance company refunds any return premiums to the first named insured within
30 days of the cancellation date.
·
If
the named insured replaces this policy with another insurer and either fails to
pay the premium for this policy or misses a due installment, the termination
date of the policy is the date when the new insurance coverage became
effective.
·
If
the named insured sells the business or premises described, the policy coverage
terminates when ownership transfers to the new owner, unless the named insured
maintains an insurable interest.
B.
Our Right to Cancel or
Terminate
A state mandatory
endorsement is provided elsewhere in this policy to describe the conditions and
time frames under which the insurance company can cancel or terminate this
policy.
NOTE: An insurance
company's ability to cancel or nonrenew depends heavily on state law. MSO’s
choice to omit any cancellation rights from the policy helps avoid confusion.
The policy becomes void
if any insured party engages in any of the following actions related to this
insurance:
·
misrepresents
a material fact or circumstance
·
conceals,
with full knowledge, a material fact or circumstance
·
commits
fraud
·
swears
falsely
This applies whether it
is done before or after a loss, occurrence, or claim. It also applies if it
pertains to the information provided for issuing this policy.
If the insurance company chooses not to
void the entire policy, it will still not cover the insured who engaged in any
of the actions described above.
|
Example: Bill Young, president of Young at
Heart, LLC, has his secretary, Connie, fill out the insurance application.
She is unsure about several details but completes them in a way she thinks
will favor the company. Bill signs the application without reviewing it.
After a loss, the claims adjuster finds discrepancies between the application
and the actual facts. He informs Bill that the policy is void because, even
though Connie submitted fraudulent information, Bill signed the application. |
Related Court Case: Insured’s
Material Misrepresentation Entitled Carrier to Rescind Policy
The insurance company
agrees to modify this policy to meet all applicable statutory requirements.
NOTE: Discussing
conformity with the insured is crucial because it can complicate clients'
understanding of policies, as they might not be familiar with the amendatory
statutes or their benefits. This concern is especially important when policies
span multiple states.
Coverage applies to
loss or damage occurring in any of the 50 U.S. states, their possessions or
territories, the District of Columbia, Canada, or Puerto Rico.
Coverage is limited as
follows:
A. Any of
the 50 U.S. states, their possessions or territories, the District of Columbia,
Canada, or Puerto Rico.
B. The coverage territory
is international waters or airspace when bodily injury or property damage
occurs during transit, but only if the transportation takes place between
locations within the coverage territory outlined in A above.
C. The coverage territory
is anywhere in the world if the bodily injury or property damage is due to the
following:
·
Activities
of a person whose permanent residence is in the coverage territory described in
paragraph A. above but is temporarily away for a brief period to conduct
business or operations covered by this policy.
·
Products
or goods the named insured manufactures or sells within the coverage territory
specified in A. above.
An additional
restriction applies to this condition: suits and settlement agreements made
with the insurance company’s written consent must occur within the coverage
territory described in A. above.
A. The insurance company
reserves the right to inspect the property and operations of the named insured
at any time. They can perform surveys and provide recommendations. Inspection
and rating bureaus may also conduct inspections. It’s important for the named
insured to understand these are for the insurance company's benefit. These
inspections do not imply compliance with any laws or regulations, nor do they
guarantee health or safety.
B. The insurance company
has the right to audit the named insured's books and records at any time within
three years after the policy ends. Only books and records related to premiums
paid or the coverage provided can be audited or reviewed. The first named insured
must keep these records accessible for the audit and may need to send copies to
the insurance company.
C. The insurance company
has the right to adjust the premium due to any of the following:
·
The
results of an audit and/or inspection.
·
Premises
used in ways not described by the policy, or other types of additions subject
to rating.
·
Business
entities newly acquired or formed during the policy term.
D. Part II–Liability
Coverage does not require the insurance company to extend coverage to new
entities, additions, changes, or premises not described in the policy.
Additionally, such items are not covered in any renewal of the policy unless
the named insured identifies and reports them to the insurance company and they
are included in the renewal policy’s Declarations.
However, an exception applies whereby
coverage may apply if additions or changes were made within 60 days prior to
the policy renewal date. This exception does not apply to newly formed
entities.
|
Example:
The Blue
Shoes policy period was 10/1/2025-10/1/2026 and was renewed for the period
10/1/2026-10/1/2027. Sue audited the initial period on 11/1/2025 and found
that Blue Shoes was storing shoes at a location not listed on the policy. Scenario 1: Blue Shoes stored their shoes at that location for
many years. Upon renewal, there is no liability coverage for any loss at that
premises. Scenario 2: Blue Shoes entered into a contract to store shoes
on 9/1/2025. Upon renewal, the coverage includes the premises. However, Blue
Shoes should anticipate contact from the underwriter to their agent. |
If multiple coverage
under the policy apply to the same loss, the insurance company will only be
responsible up to the limit of liability and will not pay more than the actual
loss incurred.
The insurance company
may extend coverage in the policy. Such changes automatically apply to
coverage, but only if all of the following conditions are met:
·
The
change must be approved during the policy period or within 45 days before its
inception.
·
The
change must broaden coverage.
·
The
change must apply to a coverage included in the policy.
·
The
change must not incur a premium charge.
·
A
decrease in coverage should not occur alongside the change that expands it.
A. If the named insured has other available insurance for a loss covered under
this policy, but that other policy does not have the same provisions as this
policy, then this policy's coverage is considered excess over the other
insurance. This applies even if the named insured cannot recover from the other
insurance for any reason.
B. If this policy is
excess based on paragraph A. above, the insurance company will cover its
portion of the remaining loss that exceeds the total of the following:
1. The total amount
payable by the other insurance, as described, without considering this
insurance; and
2. The total of
deductibles and self-insured retentions under the other policies.
The excess amount
calculated is then further shared with any other insurance that is not excess.
Additionally, any
remaining loss is divided between the insurance company and other insurers
covering the loss, in accordance with the provisions outlined in item C. below.
C. Insurance available to
the named insured under the same terms as this policy is paid as follows:
1. All other insurance may
pay on an equal contribution basis. If so, this policy also pays
proportionally. All insurers involved contribute equal shares until their
coverage limits are exhausted or the claim is fully paid, whichever happens
first.
2. When other insurers do
not contribute equally, this insurance pays a proportional share. The
proportion is calculated by dividing this policy's coverage limit by the total
coverage from all insurers. This proportion is then multiplied by the loss
amount to determine this insurance's payment.
A.
This
insurance serves as excess coverage beyond any other insurance under any
circumstance as follows:
1. Coverage that lacks the
same provisions as this policy, except for umbrella or excess policies that
apply in excess of the limits of this policy.
2. Property insurance
covering the named insured’s work or any premises they rent or occupy. This
includes fire, allied lines, or inland marine policies.
3. Liability insurance
covering aircraft, automobiles, watercraft, UAVs, or pollution. This includes
both primary and/or excess policies. The excess coverage offered by this policy
applies only to the coverage specified in this policy.
4. Primary liability
insurance is available to the named insured because they are also listed as an
additional insured under another policy. This applies when damages arise from a
business, operations, or premises covered and described by that other policy.
B. When this policy is
excess, as explained in paragraph A., the insurance company responds as
follows:
1. The insurance company is not obligated to defend or offer any defenses.
However, it may choose to do so under certain conditions as follows:
·
When
no other company offers a defense. In this case, the insurance company secures
the insured’s rights against those other insurance companies.
·
If
it elects to collaborate with the other insurer(s) in providing a defense.
·
If
it elects to provide its own defense.
2. The insurance company
covers its portion of any remaining loss exceeding the total of the following:
·
The
total amount payable by the other insurance, as described, without considering
this insurance; and
·
The
total of deductibles and self-insured retentions under the other policies.
Additionally, any
remaining loss is divided between the insurance company and other insurers
covering the loss, in accordance with the provisions outlined in item C. below.
C. Insurance available to
the named insured under the same terms as this policy (or where this insurance
company along with others is primary) is paid as follows:
1. All other insurance may
contribute equally. In that case, this policy also pays proportionally. All
parties pay equal shares until their insurance limits are exhausted or the loss
is fully paid.
2. When any carrier does
not contribute equally, this insurance pays a proportionate amount. The
proportion is calculated by dividing that carrier's insurance limit by the
total insurance available from all carriers. This percentage is then multiplied
by the loss amount to determine the amount of loss it pays.
All premium payments
are the responsibility of the first named insured. They are required to pay the
premium on time and will receive any refunded premiums. When a premium
adjustment, such as an audit, is made, the premium due notice is sent to the
first named insured. That notice is due and payable upon receipt.
The insurance company
may make payments to an insured or other parties for a covered loss. In such
cases, the payee's rights against others for that loss transfer to the
insurance company. These rights are limited to only the actual amount paid for
the loss. The payee must preserve these rights and cooperate with the insurance
company to protect them.
The named insured (but
not any other insured) can waive its rights of recovery to any party but only
prior to a loss. After a loss occurs, the named insured can waive its rights of
recovery related to that loss only under either of the following conditions:
A. The recovery rights are
directed against another insured listed on the policy.
B. The rights of recovery
are against a business that is either owned or controlled by the named insured,
or a business that owns or controls the named insured.
The insurance company has no obligation
to pay if the rights of recovery are waived under any circumstances other than
those described above.
|
Example:
A bulldozer
mistakenly turns right instead of left, damaging the sign at Healthy Fitness.
The insurance company pays the loss and subsequently asks Healthy to assist
in recovering damages from the bulldozer driver and his employer. Scenario 1: Healthy had waived its right to recover in a
contract with the bulldozer driver. Coverage still applies. Scenario 2: The silent investor in Healthy operated the
bulldozer, and Healthy waives any rights of recovery against that investor.
Coverage still applies. Scenario 3: The bulldozer driver pleads with Healthy not to
sue because he forgot to request a waiver beforehand. Healthy signs the
waiver after the incident, which then voids the coverage. |
The policy begins and
expires at 12:01 a.m. standard time at the location specified on the
declarations. A loss is only covered if it occurs during the policy period.
NOTE: The beginning and
ending of the policy period are based on the described premises, not the
mailing address.
|
Example: Penelope Pages has two bookstore locations: one in
Indianapolis, IN, and another in Scottsdale, AZ. The policy term is
01/01/2025 to 01/01/2026. Coincidentally, fires broke out at both locations
simultaneously on 12/31/2025 at 11:59 PM Mountain Standard Time, which
corresponds to 01/01/2026 at 1:59 AM in Indianapolis. The Indianapolis loss
is not covered under the policy, but the Scottsdale loss is. |
The loss of income
coverage described in Coverage C – Loss of Income clarifies that the policy's
expiration date does not affect the coverage period. The loss must occur within
the policy period, but the coverage is not limited to that period. However,
coverage is limited to a maximum of 365 days from the first day of the covered
loss.
The policy begins and
expires at 12:01 a.m. standard time at the location specified on the
declarations.
NOTE: The beginning and
ending of the policy period are based on the described premises, not the
mailing address.
|
Example: Priscilla is in Japan on a buying trip and rushing
to a meeting when she collides with Peggy, a buyer from a nearby competitor.
After returning to the U.S., Peggy files a lawsuit against Priscilla. The
accident occurred at 12:59 PM Tokyo time on January 1, 2026, which
corresponds to 11:59 AM on December 31, 2025, at the specified location. The
1/1/2025 – 1/1/2026 policy would cover this loss. |
The first named insured is the only
person authorized to request a policy change. However, the insurance company is
not obligated to approve the request. Any policy modifications are only valid
if they are in writing, signed by the insurance company’s agent, and attached
to the policy. The insurance company's exercise of its rights under the policy
does not imply that it waives any other policy terms or conditions.
|
Example: Mabel’s Fine Foods is sued. Quality
Insurance Company questions whether the policy covers the claim, but it will
provide a defense during its investigation. Exercising its right to defend
and investigate does not prevent Quality from denying coverage later. |
The final sentence of the paragraph is
crucial as it clarifies that the policy includes all agreements between the
insurance company and the named insured.
|
Example: Jay reviews his Declarations and sees that Location
2 is missing. He contacts Peter, his insurance agent, who confirms there was
an error. Despite this, no steps are taken, and a loss happens at Location 2.
The claim is denied because the location isn't listed. The discussion between
Jay and Peter does not extend the coverage to include this loss. |
BU 04 01 – Businessowners
Policy and the BU 04 02 – Named Perils Businessowners Policy are similar. This
section addresses only the sections of the policies that are different.
E. Supplies and
materials
This coverage is altered
because BU 04 02 does not cover theft of building materials. However, BU 04 02
can provide coverage by selecting the Burglary and Robbery Optional Coverage
and showing a limit for building materials on the Declarations. Coverage is
then provided up to the limit shown.
This coverage is not
part of BU 04 02. Burglary and Robbery is an optional coverage available elsewhere
in the policy.
BU 04 01 has 21
coverages. BU 04 02 has only 18. BU 04 02 does not include the following
coverages:
·
5.
Collapse Coverage
·
22.
Water Damage/Related Damage Repair Expense Coverage
The causes of loss
provided in the Basic Plus Coverage under Coverage B – Business Personal
Property in BU 04 01 are similar causes of loss provided for Coverages A, B,
and C in BU 04 02.
The following causes of
loss are not included in the BU 04 02:
·
Weight
of ice, sleet, or snow
·
k.
Water damage
·
4.
Specified Causes of Loss
BU 04 02 under 1.I does
not include the verbiage related to Vehicle Coverage under Part I B –
Supplemental Coverage. However, 20. Vehicle Coverage under Part I B –
Supplemental Coverage appears to be identical in both policies.
·
BU
04 01 limits coverage for breakage of fragile items, furs, and jewelry if the
loss results from other than one of the Specified Causes of Loss.
·
BU
04 02 lacks these restrictions because coverage is limited to only those causes
of loss that are named in the policy.
The following
exclusions listed in BU 04 01 but are not present in BU 04 02. This is because BU
04 02 is a named-perils policy and does not cover these types of causes of loss
anyway.
·
9.
Leakage from Frozen Equipment Exclusion
·
11.
Water Damage Exclusions
·
14.
Wear, Tear, and Other Specified Causes of Loss Exclusion
·
15.
Weather/Related Exclusion
Both BU 04 01 and BU 04
02 offer this optional coverage. However, it is available under BU 04 01 only
if Basic Plus Coverage is selected. It is not needed when Expanded Coverage is
purchased because theft coverage for personal property is provided, and
Coverage D–Money and Securities is also provided.
When the option is
selected under BU 04 02, fur and jewelry restrictions are added similar to the
Property restrictions above.
This option is only available
in BU 04 01. It is not available in BU 04 02.
The term “Collapse” is
used in BU 04 01, but not in BU 04 02 since sinkhole collapse is the only peril
covered. All other terms are identical.
All other sections of these policies are
identical.