8.2 Businessowners Section II Liability, Section III Common Conditions & Endorsements

8.2 Businessowners Section II Liability, Section III Common Conditions & Endorsements

Quick Answer: Section II of the ISO Businessowners Policy (BP 00 03) integrates occurrence-based Commercial General Liability (CG 00 01) protection directly into the BOP—setting both the General Aggregate and Products-Completed Operations Aggregate at 2 times (2x) the Per-Occurrence Limit and building in a Professional Services Exclusion. Section III provides 11 self-contained Common Policy Conditions, while Optional Coverages in the policy text let the insured activate Employee Dishonesty, Money and Securities, Outdoor Signs, and Mechanical Breakdown simply by showing a limit on the Declarations.

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1. Section II — Businessowners Liability (BP 00 03)

A. Coverages: Business Liability and Medical Expenses

Section II combines all three standard CGL coverage parts (Coverages A, B, and C of CG 00 01) into two core insuring agreements:

1. Business Liability (Bodily Injury, Property Damage, and Personal and Advertising Injury):
   • Pays those sums the insured becomes legally obligated to pay as damages because of Bodily Injury, Property Damage, or Personal and Advertising Injury to which this insurance applies, and gives the insurer the right and duty to defend the insured against any "suit" seeking those damages.
   • Bodily Injury and Property Damage must be caused by an "occurrence" (an accident, including continuous or repeated exposure to substantially the same general harmful conditions) in the "coverage territory" during the policy period.
   • Covers Premises and Operations, Products-Completed Operations Hazard, Contractual Liability for "insured contracts" (L-E-A-S-E-T: Lease of premises, Sidetrack agreement, Easement or license agreement, Municipal indemnification ordinance, Elevator maintenance agreement, and Tort liability of another assumed in a business contract), and Host Liquor Liability (when the insured is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages).
   • Damage to Premises Rented to You (Fire Legal Liability): Covers Property Damage by fire to premises while rented to the insured or temporarily occupied with the owner's permission, up to the Damage to Premises Rented to You limit (default $50,000), regardless of rental length. Additionally, if premises and contents are rented for 7 or fewer consecutive days, Section II covers Property Damage from any non-excluded peril (other than fire) up to that same limit.
2. Medical Expenses (Default $5,000 Per Person):
   • Pays no-fault medical, surgical, dental, ambulance, hospital, professional nursing, prosthetic device, and funeral expenses for bodily injury caused by an accident on the insured's premises, on ways next to the premises, or because of the insured's operations—without regard to fault.
   • To be covered, medical expenses must be incurred and reported to the insurer within 1 year of the date of the accident. Excludes injury to any insured, employees, persons hired to work for the insured, tenants regularly occupying the premises, athletic participants, and Products-Completed Operations injuries.

B. Supplementary Payments (Paid in Addition to Limits)

Defense and investigation expenses do not reduce the Limits of Insurance. In addition to defense costs, Supplementary Payments pay:

• Up to $250 for the cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which Business Liability applies;
• The cost of bonds to release attachments (for bond amounts within the applicable policy limit);
• Reasonable expenses incurred by the insured at the insurer's request to assist in the investigation or defense of a claim or suit, including actual loss of earnings up to $250 a day because of time off from work; and
• All court costs taxed against the insured in the suit, plus pre-judgment and post-judgment interest.

C. Who Is An Insured & Limits of Insurance (The 2x Aggregate Rule)

• Who Is An Insured:
  • Individual: The named individual and spouse with respect to the conduct of the sole proprietorship.
  • Partnership or Joint Venture: The partnership/joint venture, its members, partners, and their spouses with respect to the business.
  • Limited Liability Company (LLC): The LLC, its members (for conduct of the business), and its managers (for duties as managers).
  • Corporation or Other Organization: The organization, its executive officers and directors (for corporate duties), and its stockholders (for liability as stockholders).
  • Additional Automatic Insureds: Employees and Volunteer Workers (while acting within the scope of employment/duties), plus any non-employee person or organization acting as the insured's Real Estate Manager.
  • Critical Exam Contrast with CGL (CG 00 01): Unlike the standalone CGL form (which automatically grants 90 days of insured status to newly acquired or formed organizations), the standard BOP Section II does NOT automatically cover a Newly Acquired or Formed Organization. The insured must notify the insurer and add any new entity by endorsement!
• Limits of Insurance (2x Per-Occurrence Rule):
  • The Declarations offer standard Liability and Medical Expenses Per-Occurrence Limits of $300,000, $500,000, $1,000,000, or $2,000,000.
  • Both the General Aggregate Limit (for all damages and medical expenses except Products-Completed Operations) and the Products-Completed Operations Aggregate Limit automatically equal 2 times (2x) the Per-Occurrence Limit (for example, a $1,000,000 Per-Occurrence Limit automatically provides a $2,000,000 General Aggregate and a $2,000,000 Products-Completed Operations Aggregate).

D. Key Section II Exclusions (Including Built-In Professional Services Exclusion)

Section II contains the standard CGL exclusions—Expected or Intended Injury (preserving the reasonable force exception to protect persons or property), Contractual Liability (except insured contracts), Liquor Liability (for alcohol-related businesses), Workers' Compensation and Employer's Liability, Pollution (preserving hostile fire and building heating/HVAC exceptions), Aircraft, Auto or Watercraft (preserving the exception for non-owned watercraft under 51 feet not carrying persons/property for a fee), Damage to Your Product, Damage to Your Work (preserving the Subcontractor Exception when the damaged work or the work out of which the damage arises was performed on the insured's behalf by a subcontractor), Damage to Impaired Property, Recall of Products/Work (Sistership), and Electronic Data.

• Built-In Professional Services Exclusion (Major Exam Distinction!): Unlike a standalone CGL policy (which requires attaching a separate professional exclusion endorsement), the base BOP (BP 00 03) automatically builds in a broad Professional Services Exclusion. It excludes bodily injury, property damage, or personal and advertising injury caused by the rendering of or failure to render any professional service, including legal, accounting, advertising, architecture, engineering, surveying, medical, surgical, dental, X-ray, nursing, health/therapeutic treatment, optical, hearing aid, pharmacy, cosmetology/tonsorial/ear-piercing, and veterinary services. (Targeted professional liability endorsements are available for druggists, optical/hearing aid stores, barbers/beauticians, veterinarians, and funeral directors.)

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2. Section III — Common Policy Conditions

Because the BOP is a self-contained policy, Section III replaces the CPP's IL 00 17 and adds several property/liability coordination rules across 11 Common Policy Conditions:

1. Cancellation: The First Named Insured may cancel at any time by mailing advance written notice. The insurer must provide written notice (5 days for specified anti-arson/abandoned/uninhabitable building conditions, 10 days for nonpayment of premium, or 30 days for any other reason, subject to Michigan Changes BP 01 11).
2. Changes: Only the First Named Insured may request policy changes, which take effect only by written endorsement issued by the insurer.
3. Concealment, Misrepresentation or Fraud: Voids coverage if any insured intentionally conceals or misrepresents a material fact concerning the policy, covered property, insured's interest, or a claim.
4. Examination of Your Books and Records: The insurer may examine and audit books and records during the policy period and for up to 3 years after policy expiration.
5. Inspections and Surveys: The insurer has the right (not the duty) to inspect the premises and recommend loss-control changes.
6. Insurance Under Two or More Coverages: If two or more policy coverages apply to the same loss, the insurer will not pay more than the actual amount of the loss.
7. Liberalization: If the insurer adopts any revision that broadens Section I coverage without an additional premium charge within 45 days prior to or during the policy period, the broadened coverage immediately applies to the BOP.
8. Other Insurance: Under Section I, the BOP pays excess over other insurance covering the same loss; under Section II, Business Liability is primary except over specific fire, builder's risk, watercraft/aircraft/auto, or endorsed primary policies.
9. Premiums & 10. Premium Audit: The First Named Insured is solely responsible for paying all premiums, receives any return premiums, and must maintain records needed for final premium audit computation.
10. Transfer of Rights of Recovery Against Others to Us (Subrogation): Under Section I, the insured may waive recovery rights in writing against any party before a loss—and may also waive subrogation in writing after a loss if the party is: (a) another insured under the policy, (b) a business firm owned or controlled by the insured (or that owns/controls the insured), or (c) the insured's tenant.
11. Transfer of Your Rights and Duties Under This Policy (Assignment): May not be transferred without the insurer's written consent, except automatically to a legal representative/temporary custodian upon the death of an individual Named Insured.

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3. Selected BOP Optional Coverages & Endorsements