The business owners policy (BOP) is the commercial equivalent of the homeowners policy. It provides property and liability protection for small businesses. The BOP offers business property and liability protection for small and medium sized offices, apartments, manufacturing, service and processing businesses. It provides broad coverage on a simplified basis. The BOP contains its own declarations and common conditions form similar to those found in the commercial package policy for larger businesses.
Whether or not a business is eligible for a BOP depends upon the size of the area of the small business. Office buildings may be no more than 6 stories high and contain no more than 100,000 square feet, and apartments and wholesale services may not exceed 25,000 total square feet with less than $3 million in gross annual sales.
Property coverage is provided under one of two available forms:
These coverage forms include a definitions section, as well as conditions and exclusions. Property coverage is subject to a deductible. The standard form provides coverage against the cause of loss, including:
The Special Form provides open-peril coverage except for those causes of loss that are specifically excluded.
Both forms have available optional coverages for an additional premium. Optional coverages available under the Standard Form include:
The optional coverages available under the Special form include money and securities in addition to the available coverages of the Standard form.
The BOP is comprised of Section I and Section II coverages. Section I covers the insured’s buildings and business personal property. The business personal property is covered in the covered building, on the covered building or anywhere within 100 feet of the insured premises.
Section II of the BOP provides coverage for commercial liability similar in scope to that provided by the CGL. Coverage is provided for the legal liability of the insured arising out of the ownership of the business premises and the business activities. Products liability, fire legal liability, medical payments and supplementary payments are also provided by the liability section in the same fashion they are provided by CGL coverage. The basic liability limit is $300,000 and can be increased to $500,000 or $1,000,000.
There are several classes of risks that are not eligible for BOP coverage including but not limited to:
As mentioned previously, only certain types of small businesses are eligible for BOP coverage. The following are examples of eligible risks for BOP coverage:
Under both policy forms, losses, except money and securities, are settled on a replacement cost basis. This includes coverage for the buildings and the business personal property. Deductibles are available starting at $500 (standard and may be increased to reduce the premium (maximum of $2,500).
The property not covered by the BOP is very similar to the excluded property listed in a CGL.
Several endorsements may be attached to a BOP, including:
This endorsement extends to cover damage to perishable stock owned by or in the insured’s care, custody, or control at the insured premises. It includes 3 covered causes of loss including:
This endorsement extends liability protection for hired autos and non-owned autos. Hired auto liability covers bodily injury and property damage to others as a result of operating autos that it leases. Non-owned auto coverage protects the small business insured who operates a vehicle owned by another.
This endorsement covers loss to valuable papers and records that the insured possesses (except money and securities).
This endorsement will provide liquor liability coverage in limited instances. The insured must list the specific functions at which liquor will be sold. An insured who is engaged in fundraising or social activities may add this endorsement to extend liability coverage.
Provides up to $10,000 coverage for the costs of extracting pollutants from land or water at the insured’s premises as a result of a covered loss.
Pays loss of income that the insured sustains due to actions of civil authorities that prohibit access to the insured premises because property other than at the insured premises was damaged by an insured peril. Coverage begins 72 hours after the action by the civil authority and is available for up to three consecutive weeks.
Workers Compensation insurance provides protection for employees who are injured as a result of their employment. This type of insurance coverage also protects an employer against legal action that an injured employee (or survivors) may pursue. Workers Compensation law is based on the following principles:
Workers Compensation insurance is available from commercial insurers. Premium charges are based on the type of business involved (work or job classification), the number of employees, and the total payroll. If an employer is qualified, it may self-insure. If an employer is unable to secure Workers Compensation insurance in the standard market, most states operate an assigned risk pool which allows these employers to obtain Workers Compensation protection.
The Workers Compensation policy consists of several parts.
Coverage under Part I applies to mandated or statutory benefits. The insurer providing coverage agrees to pay the injured employee all benefits required by the Workers’ Compensation law. The benefits available to an employee who is injured as a result of his/her employment include:
Medical Expense Benefits
Income Benefits
Dependent Funeral Expense Benefit
Restoration Benefits
Part II of the Workers Compensation policy is Employer’s Liability coverage and protects an employer against legal suits filed by an employee. The standard limits of liability presently available for this protection is $100,000 per accident; $100,000 per occupational disease; and a $500,000 aggregate for occupational diseases. An employer may purchase higher limits for an additional premium.
Part III of the Workers Comp policy provides optional “Other States” insurance coverage. Part I and II are mandatory if the policy is purchased. Other States insurance provides Workers Compensation coverage in additional states to which an employee may travel as part of his/her employment duties.
A Workers Compensation policy also includes the following policy sections:
All premiums will be determined by the insurer and will be based upon the type of work in which the employer is involved, the payroll of all workers, and the number of workers employed.
Experience Modification Factor is a numerical representation of claims history used to increase or decrease a company’s worker’s comp premiums at time of renewal. It is the ratio of the costs of a company’s actual workers’ compensation claims compared to the expected costs for companies of similar size in the same industry. It can be either above or below the industry average of 1.0. Above 1.0 means the claims history is worse than the industry’s average (increased premium) while below 1.0 means it is better (decreased premium).
Compensation and medical benefits for disabled or deceased employees of maritime employments are provided under federal law. Employments such as longshoring, harbor work and ship repairing fall under federal guidelines. Coverage is furnished by a Workers Compensation policy with an added endorsement. The employee’s death or disability must result during travel upon navigable waters of the U.S.
The Jones Act, a section of the Merchant Marine Act, allows an injured seaman to elect to sue for damages and to have a jury trial. Insurance is provided under the Employers Liability section, but when the exposure exists, the insurer usually requires the Maritime Coverage Endorsement that actually limits the insurance and adds a few more exclusions.
Employees of the federal government are provided (civilian employees) benefits administered by the federal government. Private insurance is not involved.
This Act protects interstate railroad workers only. It allows the injured worker (or representative of the deceased worker) to sue the employer for negligence and removes contributory negligence and assumption of risk (two common law defenses).
Business Owners Policy (BOP) provides property and liability protection for small businesses. Key points about BOP include:
Endorsements that can be added to a BOP include Spoilage, Hired and non-owned auto, and more. Workers Compensation Insurance offers protection for work-related injuries; key points include:
Other insurance policies related to workers’ compensation include the Longshoremen and Harbor Workers Compensation and the Jones Act for maritime employees’ coverage. Federal Employees Compensation Act provides benefits for federal government employees, while the Federal Employers Liability Act protects interstate railroad workers by allowing negligence claims against the employer.
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