9.5 Commercial Property Endorsements and the BOP

Key Commercial Property Endorsements

The BPP form is rarely issued bare; endorsements tailor it to the risk.

Ordinance or Law is the most-tested endorsement: the base forms exclude the extra cost of meeting newer building codes, so a 40-year-old building that is 60 percent destroyed may by code have to be fully torn down — only CP 04 05 funds the demolition and the code-upgraded rebuild.

What a BOP Is

The Businessowners Policy (BOP) is a pre-packaged policy that bundles commercial property and commercial liability for small and mid-size businesses into one form with built-in enhancements — no hand-assembly, generally no coinsurance, and broad coverage by default.

Eligibility

Ineligible classes include auto dealers/repair shops (need a Garage form), bars and taverns (liquor liability), most manufacturers (products exposure), banks/financial institutions, and large or tall buildings.

Section I — Property (Automatic Enhancements)

Section II — Liability

Typical limits are $1,000,000 each occurrence and a $2,000,000 general aggregate, with defense costs paid in addition to the limits — exactly as under the CGL.

BOP vs. CPP

Worked Scenario

A 12,000-sq-ft accounting office with $2M in revenue grows to $20M and adds a manufacturing arm. It has now exceeded the revenue cap and added an ineligible class (manufacturing), so the insurer must move the account from a BOP to a hand-assembled CPP with separate property and CGL coverage parts and a chosen Causes of Loss form.

Common Traps

• BOP building coverage is Special / open-peril at replacement cost automatically — do not assume Basic or ACV.
• BOP business income has no coinsurance and no waiting period, unlike CP 00 30's 72-hour wait.
• Auto dealers/repair, bars, and most manufacturers are ineligible for a BOP.
• Defense costs are paid in addition to the liability limits.
• Outgrowing size/revenue limits or shifting to an ineligible class forces a move from BOP to CPP.

Ordinance or Law: The Three Coverages

Because Ordinance or Law is the single most-tested commercial property endorsement, know its three distinct parts:

Coverage 1 attaches to the building limit; Coverages 2 and 3 require their own limits on the dec. Worked scenario: a 1975 retail strip is 55 percent destroyed by fire and the local code orders full demolition because more than half is gone. The base policy pays only for the fire damage; CP 04 05 pays to raze the surviving 45 percent (Coverage 1 + 2) and to rebuild the whole structure to today's code (Coverage 3).

How a BOP Is Rated and Enhanced

Unlike a CPP, a BOP is rated as a package — the underwriter applies a single rate to the building and contents values by eligible class, with no separate coinsurance calculation because the form is written at replacement cost on an actual-loss-sustained basis. Many coverages that cost extra on a CPP are built into the BOP at modest sublimits: money and securities, employee dishonesty/forgery, fire department service charge, pollutant cleanup, and business income from a dependent property.

Optional endorsements then tailor the BOP — examples include hired and non-owned auto liability, employment-practices liability, data-breach coverage, and higher liability limits — without converting the account to a hand-assembled CPP.

Choosing BOP vs. CPP in Practice

The decision turns on eligibility and complexity. A small retailer, office, apartment building, or processing/service risk within the size and revenue caps fits the BOP and benefits from its automatic open-peril, replacement-cost, no-coinsurance design. A large, multi-location, or manufacturing account — or any operation on the ineligible list — must use a CPP, where the agent selects each Causes of Loss form, sets coinsurance, and adds coverage parts line by line.