CHAPTER SIX - BUSINESSOWNERS  &  FARMOWNERS / RANCHOWNERS POLICIES

 

The Businessowners Policy is a special package policy designed specifically for the small business, including apartments and offices.

Coverage is afforded for both first party property and third party liability, and the Insured is offered a series of optional coverages such as

 

 

Glass Coverage

 

 

 

Signs

 

 

 

Employee Dishonesty

 

 

 

 

Boiler Explosion

 

 

 

 

Earthquake and Volcanic Eruptions. 

 

 

 

 

 

This policy is quite popular, and many insurers have their own individual forms which differ from the standard forms which will be discussed in this text.

The policy has been designed for the smaller risk.  For instance, it is offered to apartment risks of not more six stories and with no more than 60 apartment units.  For some businesses, it is limited to 7,500 feet of mercantile space.  For office buildings it is limited to up to three stories in height or not more than 100,000 square feet.  Banks, credit unions and other financial institutions are also eligible.  Mercantile buildings with public area space of 7,500 square feet can be covered, except if they are occupied in part for purposes of manufacturing, processing or service operations, or as an automobile business.  Amusement places are not acceptable.  Wholesalers or restaurants are also not acceptable.

The Businessowners Policy offers insurance on personal properties, including money and securities, on insured - owned real estate, loss of income, and public liability.  Also, several optional coverages are available.

 

 

 

COVERAGES

 

Coverages on personal property and buildings are written on a Standard (named perils) Form, or on a Special Form. 

 

STANDARD FORM

In addition to coverage against the perils of the Extended Coverage endorsement, the Standard Form provides coverage against:

 

 

Fire

 

 

 

 

 

 

 

 

Lightning

 

 

 

 

 

 

Vandalism

 or

 Malicious Mischief

 

 

 

 

 

 

 

Sprinkler Leakage

 

 

 

 

 

Debris Removal.

 

 

 

 

LIABILITY COVERAGE

The Standard Form covers the Insured for liability arising out of the premises owned, leased or operated, and

• Personal Injury,
• Employers Non - Owned Automobiles,
• Legal Liability for damage to buildings,
• Blanket Contractual (on written contracts only),
• Employees as additional Insureds,
• Broad Form Property Damage ,
• Host Liquor Law Liability, and
• Personal Liability.

Options:

Lessors of the premises occupied by an Insured can be added to the policy for liability insurance.

Burglary and Robbery Option - Coverage on merchandise and or money and securities against these perils may be added by endorsement.  (The Special Form includes these perils under the basic policy, and no endorsement is necessary.) 

 

SPECIAL FORM

Written on an “all risk” basis. 

Coverage:  building and general property and includes Burglary. and Theft and Money and Securities.

Options:

Boiler Explosion - This optional coverage is available to cover boiler and other pressure vessels and air conditioning units.

Exterior Grade Floor Glass - Extends the policy to cover exterior glass and lettering but does not have a $75 limit on the cost of repairing frames, removing obstructions, etc.

Signs - Optional coverage may be added to cover outdoor signs on a scheduled basis.

Employee Dishonesty - Coverage against loss caused by employee dishonesty is available, up to $5,000.

Volcanic Action - Similar to that discussed in the Earthquake Damage Assumption clause.

 

 

EXCLUSIONS

 

The exclusions mirrors the individual forms very closely.

LIMIT AND AMOUNTS

 

Real and Personal Property -  Replacement cost coverage is provided on real property but real property may also be insured on an actual cash value (optional).  No Coinsurance clause.  Provides for automatic increase of 2% quarterly, which can be increased by endorsement.

Personal Property Off Premises - Coverage on losses to property, occurring off the insured premises is generally limited to $1,000 and does not apply to money or securities.

Newly, Acquired Property - The policy affords $10,000 of coverage on newly -  acquired personal property, for 30 days or to the expiration of the policy, whichever is earlier.

Peak Season Value on Personal Property -  If the Insured has carried insurance in the amount of 100% to actual value for twelve months, the policy affords an automatic increase of 25% during peak seasons.

 

Valuable Papers and Computer Media Coverage -  Limited to the replacement cost of the blank materials and the expense of reproducing the records.

 

 

 

Tapes, discs and other media for electronic data processing are covered only for the cost of the blank media.

 

 

 

 

Loss of Income -  The actual loss of income sustained and the extra expense borne by the Insured after a loss covered under the policy are covered for a period of up to twelve months.  No dollar limit and No Coinsurance requirements.

 

 

Burglary Coverage -  Loss by burglary is covered automatically under the Special Form up to the limit of the amount of insurance and is applicable to personal property.  Optional under the Standard Form with a limit of 25% of the limit in the policy on personal property, with aggregate limits on furs, jewelry and watches.

 

 

Money and Securities -  Coverage on moneys and securities is part of the Special Form. optional under the Standard Form regarding Burglary insurance with stated limits under both forms.

 

  

 

 

 

 

COMPARISON BETWEEN COMMERCIAL PACKAGE POLICY   VS

BUSINESSOWNERS POLICIES

 

 

 

 

 

 

FARMOWNERS - RANCHOWNERS POLICY

 

The Farmowners  -  Ranchowners Policy program offers Property and Liability insurance coverages in one policy.  All farms and ranches can be covered, with the following exceptions:

• Farms that supply commodities for manufacturing or processing by the Insured, and offering such for sale to others, such as dairy farms that operate freezing or dehydrating plants.  Poultry factories are also excluded.  Dairy Farms that operate only as such farms, are NOT excluded.
• Farms or ranches engaged principally in the raising of horses for racing or show purposes.
• Vacant farms or ranches.
• Mobile homes or trailer homes, or their contents, may be written under the policy, but only for certain coverages.

 

COVERAGE:

  This policy furnishes several coverages, as follows:

 

 

 

Residence

 

 

 

Household Personal Property

 

 

 

 

Other Structures Appurtenant to the Residence

 

 

 

 

Loss of Use and Additional Living Expense

 

 

 

 

 

Other Farm Structures

 

 

 

 

 

Scheduled & Unscheduled Farm Personal Property

 

 

 

Physical property insurance may be written in a form as follows:

 

• Basic Form,
• Broad Form,
• Contents Broad Form,
• Scheduled Farm Personal Property,
• Unscheduled Farm Personal Property, and a
• Barns, Buildings, Structures and Additional Dwelling Form.

 

Farmowners - Ranchowners Program also offers liability coverage and Medical payments.

 

LIMITS

 

The Program provides that the coverages be written with certain stated minimum limits under the separate sections, typically as such:

• Coverage Dwelling - Type A - $2,000, Type B - $10,000, Type C - $8,000.
• Coverage B - Unscheduled Personal Property - 50% of limit on Coverage dwelling.
• Coverage C - Additional Living Expense - 10% of limit on Coverage Dwelling (Coverage A).
• Coverage E - Farm Personal Property (Blanket) - $15,000 minimum.

Deductibles - The Property coverages are subject to a $100 flat Deductible under all of Section 1, except additional living expenses and fire department service charges.

Optional deductibles of $250 or $500 are available, as above.  An optional $250 deductible applicable only to loss by theft is available.

The limit on money, bullion, securities, numismatic property, accounts, bills, deeds, evidences of debt, letters of credit, notes, passports, railroad and other tickets, stamps and stamp collections may be increased by endorsement.

OPTIONAL COVERAGES

Property Damage Coverages - The coverage under this section may be amended as follows:

Additional Living Expense - The limit in the basic policy may be increased.

Building Additions and Alterations - The limit in the basic policy may be increased.

Unscheduled Personal Property  - The limit in the basic policy, may be increased, decreased, or the coverage eliminated entirely.

Scheduled Personal Property - Subject to certain exceptions, coverage may be provided on an all - risk basis.

The following coverages may be added to the policy by endorsement:

 

Credit Card and Depositors Forgery

 

 

 

 

 

Earthquake

 

 

 

 

 

Fire Department Service Charges

 

 

 

 

 

 

Glass Coverage to cover scheduled items of glass

 

 

 

 

Inland Marine Coverage on farm personal property, agricultural machinery, livestock and other property.

 

 

 

 

LIABILITY COVERAGES

The following coverages may be added to the Liability section of the policy by endorsement:

a)   Additional residence premises rented to others.

b)   Business pursuits of the insured other than businesses of which he is the sole owner.

c)   Custom farming.  Incidental custom farming is covered under the basic Liability section Where such activity, is more than incidental, coverage may be provided by, endorsement.

d)   Employers liability.

e)   Farms rented by the insured to others or held by him for rental or sale are not covered under the basic Liability section of the policy, and must be declared and specifically insured.

f)    Liability coverage for outboard motors of more than 25 horsepower or other watercraft not covered under the basic policy may be insured against liability claim by endorsement.

 

 

STUDY QUESTIONS

 

1.  Which of the following is not an acceptable risk on a Businessowners policy:

        A.  Sam’s Pool Hall

        B.  First National Bank

        C.  City Employees Credit Union

        D.  Mike’s Landscaping Service

 

2.  The Businessowners policy, Standard Form, providers coverage against

        A.  Theft by employees.

        B.  Lightning damage.

        C.  Earthquake damage.

        D.  Boiler explosion.

 

3.  Which is an option available on the Special Form, Businessowners Policy?

        A.  Boiler explosion.

        B.  Fire.

        C.  Lightning.

        D.  Vandalism.

       

4.  In case of a covered loss under the Businessowners Policy, valuable papers and computer data

        A.  is not covered.

        B.  is replaced on the basis of the loss of income to the business.

        C.  is limited to the replacement cost of the blank material & the expense
             of reproducing the records.

        D.  is fully replaced, including programming expense.

 

5.  Which of the following is not a typical coverage under a Farmowners Policy:

        A.  Physical damage to a race horse.

        B.  Fire damage to barns or other structures on the farm.

        C.  Fire damage to a Farm Residence.

        D.  Lightning damage to Farm Personal Property.

 

6.  Farms and Ranches can be covered, except for

        A.  dairy farmers.

        B.  poultry factories.

        C.  cattle ranches.

        D.  hog farms.

 

7.  Farmowners Physical property insurance can be written in a

        A.  Basic, Broad, Contents Broad Form, and Scheduled Personal
             Property, or Unscheduled Personal Property form.

        B.  Special All-Risks coverage form only.

        C.  Broad or Special Form only.

        D.  Scheduled Umbrella coverage form only.

 

8.  Thomas Enterprises is a large land-owning company that buys and sells ranches and farms.  They have  Farmowners and Ranchowners policies in place on their owned property.  They recently purchased a dairy farm that does no milk processing on the property, a cattle ranch that raises buffalo and cattle (beefalo) and they most recently bought the Sunshine Stables, a well known racing stable that raises and trains thoroughbred horses, and its sister farm, the Sunshine Arabian Farms that breeds, trains, shows and sells Arabian horses.  Which of these recent purchases will not be eligible for Farmowners or Ranchowners insurance?

        A.  They will all be grandfathered in and coverage available for each.

        B.  They can all be covered, except for the dairy farm.     

        C.  The ranch that raises the buffalo cannot be insured as the stock is
            considered as “exotic” and requires special policies. The rest are all OK.

        D.  The 2 stables will not be eligible for coverage, the remainder will be OK.

 

9.  One of the big differences between the Commercial Package Policy (CPP) and the Businessowners policy (BOP) is

        A.  the CCP has lower limits on property coverage.

        B.  the crime coverages are not available under the BOP.

        C.  Pharmacies and pharmacists are included in the BOP, others by
            endorsement, whereas professional liability is not included in the CPP

        D.  Coinsurance is not required in the CPP, but mandatory in the BOP.

 

10.  The Standard BOP does not cover the insured for liability arising out of

        A.  personal injury.

        B.  employers non-owned automobiles.

        C.  personal liability.

        D.  boiler explosions.

 

 

ANSWERS TO STUDY QUESTIONS

 

1A     2B     3A     4C     5A     6B     7A     8D     9C     10D