BOP Liability, Medical Expenses and Limits

BOP Liability, Medical Expenses and Limits

The package and its liability section

A Businessowners Policy combines selected property, business income and liability protection for eligible businesses. The standard national program's liability and medical-expense provisions resemble CGL Coverages A, B and C, but they are integrated into the BOP rather than reproduced as identical separate coverage parts. Carrier forms and newer editions can differ. The 2013 ISO specimen below illustrates the limit structure; use the issued form in a claim.

Business liability addresses qualifying bodily injury, property damage and personal/advertising injury. It includes defense of covered suits under the terms, and the duty ends as the policy provides after applicable limits are exhausted by payments. A property limit for inventory does not finance a liability judgment, and a liability aggregate does not replenish an exhausted building limit.

Medical expenses pay qualifying accident expenses without proving negligence, subject to eligible claimant, accident location/activity, incurred/reported requirements and the medical-expense per-person limit. They are not employee health insurance. Insured persons, hired workers, persons occupying their own portion of premises, athletics, workers-compensable injuries and products-completed operations have specified restrictions.

Covered exposures and exclusions

Premises and ongoing operations can produce a slip-and-fall or accidental damage while work is performed. Products/completed operations can produce injury after goods leave the premises or work is complete. Personal/advertising injury addresses the defined offenses. A dissatisfied customer demanding a refund for poor workmanship does not automatically allege covered property damage or a covered advertising offense.

Exclusions are similar to the CGL's expected/intended injury, contractual liability, liquor, workers compensation/employers liability, pollution, aircraft/auto/watercraft and business-risk provisions. Exceptions matter. The insured-contract exception does not make every contract covered; a liquor exposure depends on the business and policy text; property in the insured's control needs its own analysis.

Employees, volunteers, executives, managers and other insured roles have defined scope. A new additional insured requires the appropriate endorsement or automatic grant. Do not use a certificate as a substitute for the coverage language. A tenant's property and a landlord's property may be subject to different owned/control exclusions even where both are associated with the same building.

How limits differ from the CGL

Under ISO BP 00 03 07 13, the liability and medical expenses limit combines the described injury/damage/medical payments arising from one occurrence and the described personal/advertising injury sustained by one person or organization. The medical-expenses each-person limit and damage-to-premises-rented limit remain applicable sublimits. This integrated structure differs from the CGL's separately displayed each-occurrence and personal/advertising-injury limits.

The specimen's products-completed operations aggregate is twice the liability and medical expenses limit. Its other aggregate, including non-products injury/damage, medical expenses and personal/advertising injury, is also twice that limit. Limits apply under the form's annual-period rules. Additional insureds, more claimants or several locations do not automatically multiply a single aggregate; an endorsement can modify the structure.

Assume a $1 million liability/medical expenses limit, $5,000 medical-expense each-person limit and ordinary specimen aggregates. The two aggregate limits are each $2 million. A $4,000 eligible medical payment uses the medical sublimit and relevant occurrence/aggregate; it does not create another $1 million limit independent of the occurrence.

Applying the architecture

Suppose three customers suffer covered bodily injuries in one store accident, with damages totaling $1.3 million. Under an assumed unmodified $1 million occurrence limit, the occurrence cap is $1 million before considering remaining aggregate and other terms. Three claimants do not create $3 million coverage. Allocation of a limited settlement fund requires proper claim handling; the example does not instruct the adjuster to prefer the first claimant.

Now suppose prior covered premises claims have used $1.7 million of the $2 million other aggregate. Only $300,000 remains for this category in the assumed annual period, despite the $1 million occurrence limit. A separate products-completed operations claim may use its own aggregate if the hazard definition applies. The date of the lawsuit alone does not determine which aggregate applies; establish when and how the injury occurred and whether work/products were complete.

Duties and records

The insured must give prompt notice, identify the event and claimant, transmit legal papers, cooperate and avoid unauthorized voluntary settlements under the actual terms. The insurer still must investigate potential coverage and meet California claim standards. A late notice defense requires the applicable policy and law; it is not a universal automatic forfeiture.

The adjuster should keep a limit worksheet showing coverage category, occurrence/offense, sublimit, aggregate, prior payments and any defense-cost treatment. Track property and liability payments separately. A broad BOP package can simplify purchasing but does not eliminate the need to identify each limit. Read endorsements before assuming the standard specimen's two-times aggregate is unchanged.

Source: ISO BP 00 03 07 13 specimen.

Comparison for claim analysis