5.4 Commercial Package Policies, Businessowners Policies, and Special Multi-Peril Programs
Key Takeaways
An ISO Commercial Package Policy combines common policy declarations, Common Policy Conditions (IL 00 17), and two or more coverage parts, such as commercial property and commercial general liability.
A monoline policy has one coverage part; the package format adds coverage parts to one contract, often with a package modification factor that lowers premium.
The Special Multi-Peril (SMP) program was the earlier package approach that combined property and liability in one policy for commercial risks; the CPP replaced it in ISO's simplified commercial program.
The ISO businessowners policy (BP 00 03) packages building, business personal property, business income, extra expense, and liability for eligible small and mid-sized businesses.
BOP business income pays actual loss sustained for up to 12 months with no dollar limit after a 72-hour waiting period; BOP property has no coinsurance clause but pays full replacement cost only when the limit is at least 80% of replacement cost.
From Separate Policies to Packages
Commercial insureds once bought a separate fire policy, an extended coverage endorsement, a burglary policy, a liability policy, and a boiler policy. Multi-peril and package programs combined them. For a public adjuster, the format matters because the declarations, conditions, and coverage parts that apply to a loss may be spread across several forms in the same policy jacket.
Commercial and Special Multi-Peril (SMP)
The Special Multi-Peril (SMP) program combined property and liability coverage in one commercial policy, usually at a package discount, with sections for property, liability, crime, and boiler coverage. Statutory financial statements still report a "commercial multiple peril" line of business. ISO's simplified commercial lines program of the mid-1980s replaced SMP forms with the modular Commercial Package Policy, but the term remains in exam outlines and in older or nonstandard forms.
The ISO Commercial Package Policy (CPP)
A commercial policy is built from standard modules:
| Module | Content |
|---|---|
| Common Policy Declarations | Named insured, mailing address, policy period, the coverage parts included, and premiums |
| Common Policy Conditions (IL 00 17) | Cancellation, changes, examination of books and records, inspections and surveys, premiums, and transfer of the insured's rights and duties |
| Interline endorsements | Endorsements that apply to more than one coverage part, such as nuclear energy exclusions or state amendatory endorsements |
| Coverage parts | Each has its own declarations, conditions, coverage forms, causes of loss forms, and endorsements |
Monoline vs. package. A policy with one coverage part is a monoline policy. A policy with two or more coverage parts is a Commercial Package Policy. Package policies may receive a package modification factor that reduces premium.
Typical coverage parts
| Coverage Part | Typical Forms | Adjuster Relevance |
|---|---|---|
| Commercial Property | CP 00 90 Commercial Property Conditions; CP 00 10 Building and Personal Property; CP 10 10, 10 20, or 10 30 causes of loss; CP 00 30 Business Income; CP 00 20 Builders Risk | First-party property claims a public adjuster handles |
| Commercial General Liability | CG 00 01 | Third-party liability; not adjusted by public adjusters |
| Commercial Crime | Employee theft, forgery, money and securities | First-party, but often handled as crime claims |
| Commercial Inland Marine | Contractors equipment, bailees, valuable papers, accounts receivable | First-party property claims (see 5.6) |
| Equipment Breakdown | Successor to boiler and machinery | First-party property claims (see 5.5) |
| Commercial Auto | Business auto | Physical damage is first-party, but auto claims are usually outside public adjusting practice |
The Commercial Property Conditions (CP 00 90) apply to the whole property coverage part and include concealment, misrepresentation, or fraud; control of property; insurance under two or more coverages; legal action against the insurer (all terms complied with and suit within 2 years after the date of direct physical loss in the ISO form); liberalization; no benefit to bailee; other insurance; policy period and coverage territory; and transfer of rights of recovery. Illinois tolling under 215 ILCS 5/143.1 still applies to the suit clause.
The Businessowners Policy (BOP)
The ISO Businessowners Coverage Form (BP 00 03) is a self-contained package for eligible small and mid-sized businesses, such as apartment buildings, offices, retail stores, and some service and contracting risks. Eligibility depends on occupancy, size, and revenue under the insurer's rules; restaurants and contractors may be eligible with limits, while high-hazard risks such as bars and large manufacturers are usually excluded.
What the BOP packages
| BOP Section | Coverage |
|---|---|
| Section I: Property | Buildings; business personal property; and built-in additional coverages including Business Income and Extra Expense, debris removal, preservation of property, fire department service charge, collapse, water damage, glass expenses, fire extinguisher recharge, electronic data, forgery or alteration, increased cost of construction, civil authority, and money orders and counterfeit money |
| Section II: Liability | Business liability (bodily injury, property damage, personal and advertising injury) and medical expenses |
| Section III: Common Policy Conditions | Cancellation, inspections, premiums, and similar conditions |
Key differences from the CP 00 10 approach
| Feature | Businessowners Policy (BP 00 03) | Commercial Package Policy property |
|---|---|---|
| Perils | Special form (open perils) with exclusions; named-peril options exist in some programs | Insured chooses Basic, Broad, or Special causes of loss |
| Valuation | Replacement cost is the standard valuation | Actual cash value unless the Replacement Cost optional coverage is selected |
| Coinsurance | No coinsurance clause. Instead, full replacement cost is paid only if the limit is at least 80% of full replacement cost at the time of loss; otherwise the insurer pays the greater of actual cash value or a proportion of the replacement cost, up to the limit | Coinsurance (often 80% or 90%) unless Agreed Value applies |
| Business income | Included; pays actual loss sustained for up to 12 consecutive months after the direct physical loss, with no dollar limit, after a 72-hour waiting period | Separate Business Income coverage form with its own limit and coinsurance |
| Seasonal increase | Business personal property limit automatically increases by 25% for seasonal variations if insured to 100% of average value | Requires peak season or reporting endorsements |
| Liability | Included | Separate CGL coverage part |
Adjuster takeaway. On a BOP claim, check the declarations for the property limits and deductible, and test the 80% insurance-to-value condition instead of a coinsurance formula. Measure the business income loss over the actual period of restoration, up to 12 months, and document extra expenses separately.
Worked Comparison
A florist suffers a $120,000 building fire and a 5-month shutdown with $70,000 of lost net income and continuing expenses.
- BOP (BP 00 03): If the building limit is at least 80% of its replacement cost, the building claim is paid at replacement cost within the limit, subject to the deductible. The $70,000 business income loss is paid as actual loss sustained, because it falls within the 12-month period, with no separate dollar limit.
- CPP with CP 00 10 and CP 00 30: The building is paid under the valuation in the declarations, with coinsurance tested at the time of loss. The business income claim is paid under CP 00 30, subject to its limit, its coinsurance condition, and its 72-hour waiting period, unless an optional coverage suspends coinsurance.
Questions to Ask on Every Commercial Package Claim
- Which coverage parts are listed on the Common Policy Declarations?
- Which causes of loss form attaches to the property coverage part?
- What valuation and coinsurance apply to each building and to business personal property?
- Is business income included in the package, as in a BOP, or written separately?
- Do interline or Illinois amendatory endorsements change cancellation, appraisal, or suit provisions?
A commercial policy contains common policy declarations, the Common Policy Conditions, a commercial property coverage part, and a commercial general liability coverage part. How is it classified?
A monoline policy
A businessowners policy
A Commercial Package Policy
A builder's risk policy
A retail store insured under a standard ISO businessowners policy is closed for 9 months after a covered fire. How is its business income loss paid?
Actual loss sustained for up to 12 months after the loss, with no dollar limit, after a 72-hour waiting period
Up to 25% of the building limit per month
Only for 30 days after the store reopens
Only if the store carried a separate CP 00 30 form
Which program combined property and liability coverage for commercial risks before ISO's modular Commercial Package Policy replaced it?
The Dwelling Policy program
The Special Multi-Peril program
The Nationwide Marine Definition
The Standard Fire Policy
Sections you finish are checked off in the contents.