(September 2019)
All PF&M
subscribers are permitted to reprint the following sample insurance proposal
language when preparing insurance presentations for their commercial insurance
customers. Other uses require permission from The Rough Notes Company, Inc.
The following paragraph or similar language
needs to be included in all insurance proposals:
Consult
the policy for definitions and limitations. The terms of this proposal do not
represent contract terms. The policy is subject to company underwriting
practices.
This proposal language is not intended to be
an entire insurance proposal. A client specific section that includes the name
and address of the insured, the insurance company(s) and the agent, and
information about them, a list of locations, limits, deductibles, and similar
customer specific items are not included and should be prepared.
The intent of any insurance proposal is not
to be a reproduction of the insurance policy but to give a summary of possible
coverages.
Paragraphs that explain coverages unique to
this coverage form may be the most important addition to your insurance
proposal and sales effort. Coverage examples can be tailored to your individual
customer. Be careful when altering any proposal language not to broaden
coverage beyond what the coverage form intends.
This proposal should be combined with
proposals for other lines of business, such as automobile, umbrella liability,
and workers compensation for a complete account proposal.
Related Articles:
ISO
Businessowners Program Available Endorsements and Their Uses
ISO
Businessowners Program Endorsements Checklist
The ISO Businessowners Coverage Form provides property and liability coverage for eligible businesses in a single unified policy. It provides broad coverage on real and personal property. It covers loss of income and extra expense on an actual loss sustained basis limited to a 12 month time period. It provides commercial general liability coverage for both premises and products-completed operations on an occurrence basis. It includes defense costs outside of limits and a number of limits options. There are numerous other coverage endorsements available. Conditions, duties required of both the insurance company and the policyholder, and loss payment details are listed as well as the exclusions and definitions that establish the boundaries of the coverage.
The insurance company pays for direct physical loss or damage to covered property at premises listed and described on the declarations but only if the loss or damage is caused by or that results from a covered cause of loss.
Buildings and structures at locations on the declarations are covered. This includes the following:
The following property is covered business personal property while in or on buildings situated at the described premises. They are also covered business personal property if they are in the open or in or on a vehicle but only if within 100 feet of building or structures or within 100 feet of the described premises, whichever distance is greater:
Coverage does not apply to the following:
Coverage applies to direct physical loss unless the coverage form limits or excludes the loss.
Limitations must be examined carefully because of exclusions, exceptions, conditions, and restrictions not fully explained below. The insurance company does not pay for loss or damage to:
Any of the $2,500 sub-limits of insurance can be increased.
Additional Coverages must be examined carefully because of exclusions, exceptions, conditions, and restrictions not fully explained below.
The cost to remove debris after a covered loss occurs is limited to 25% of the value of the direct damage loss. However, the total value of the debris removal and the direct damage loss cannot be more than the limit of insurance. An additional $25,000 is available in cases where debris removal costs exceed either of these limitations.
If covered property must be moved to protect it from loss or damage from a covered cause of loss, this additional coverage insures it while in transit and at any location for up to 30 days. Covered property is not subject to any exclusions during the 30-day period.
If assumed by a contract entered into before a loss or if required by a local ordinance, this additional coverage pays for fire department service charges up to $2,500. This is a premises limit that applies regardless of the number of departments that respond or the number of services provided. This limit can be increased.
Coverage for collapse by named perils is included on a limited basis, subject to numerous conditions and restrictions.
· Water Damage, Other Liquids, Powder, or Molten Material Damage
Pays the costs to tear out and replace undamaged property in order to gain access to leaking systems. Coverage does not apply to the costs to repair the leaking vessel or system.
· Business Income
Loss of business income is covered on an actual loss sustained basis during the period of restoration after direct damage from a covered cause of loss for up to 12 months.
· Extended Business Income
This additional coverage applies during the period of restoration after direct damage from a covered cause of loss for up to 30 additional days after the date that normal operations resume.
· Extra Expense
Extra expenses the named insured incurs to continue or expedite returning to normal operations during the restoration period for up to 12 months after the date of the covered direct physical loss or damage are covered.
· Pollutant Cleanup and Removal
Covers the expense to clean up and remove pollutants caused by or that result from a covered cause of loss. The limit is $10,000 per location on an annual aggregate basis
· Civil Authority
Pays for the actual loss of business income and extra expenses sustained due to action that civil authorities take to prohibit access to the named insured's premises. Coverage applies for up to four consecutive weeks. It applies only if the order is due to direct loss or damage from a covered cause of loss at another property not more than one mile away.
· Money Orders and Counterfeit Money
Up to $1,000 is available for a loss that is a direct result of the named insured accepting in good faith money orders that are not paid when presented or counterfeit money it acquired during the normal course of business. The money orders or counterfeit money must have been accepted as payment for merchandise in order to be covered.
· Forgery or Alteration
Pays up to $2,500 for loss that results directly from forgery or alteration of a check, draft, promissory note, bill of exchange, or similar written promise to pay money that the named insured, its agent , or someone who impersonates the named insured or its agent appears to have issued
· Increased Cost of Construction
Pays up to $10,000 for the increased costs incurred to comply with the minimum standards of ordinances or laws that relate to repairing, replacing, or rebuilding damaged parts of buildings or structures
· Business Income from Dependent Properties
Pays up to $5,000 for the actual loss of business income the named insured sustains due to physical loss or damage from any covered cause of loss at a dependent property or secondary dependent property that the named insured depends on to generate revenue
· Glass Expenses
Pays the expenses the named insured incurs to install temporary plates or board up openings due to delays in repairing or replacing damaged glass
· Fire Extinguisher Systems Recharge Expense
Pays up to $5,000 for the costs to recharge or replace accidentally discharged fire extinguishers or fire extinguishing systems in or on the named insured's premises
· Electronic Data
Pays up to $10,000 on an annual aggregate basis for the costs to replace or restore electronic data that a covered cause of loss destroys or corrupts
· Interruption of Computer Operations
Pays up to $10,000 on an annual aggregate basis to extend business income and extra expense to apply to a suspension of operations caused by interruption of computer operations because a covered cause of loss destroyed or corrupted electronic data
· Limited Coverage for Fungi, Wet Rot, or Dry Rot
Pays up to $15,000 on an annual aggregate basis for loss or damage due to fungi, wet rot, or dry rot that results from a specified cause of loss that occurs during the policy period. It applies only if all reasonable means were used to save and preserve the property from further damage at and after the time of the occurrence. There is no coverage for trees, shrubs, plants, and lawns on vegetated roofs.
These extensions apply to property located in or on the covered building. They also apply to property located either in the open or in or on a vehicle, provided the property is within 100 feet of the premises. Some extensions also apply off the premises. As a result, it is important to read each extension’s exceptions. The limits for these extensions are additional amounts of insurance.
Covers this property for a $250,000 limit for up to 30 days after is acquired or constructed
Covers this property at a newly acquired location or at a newly constructed or acquired building at a described premises for a $100,000 limit for up to 30 days
Covers personal property in transit or at non-owned locations for a $10,000 limit
Covers this property for limited causes of loss for a $2,500 limit but not more than $1,000 on any one tree, shrub, or plant. The $2,500 limit can be increased.
Covers this property of the named insured, its officers, partners, members, managers, employees, leased employees, and temporary employees for a $2,500 limit at each insured location. This extension does not include tools or equipment used in the business or loss or damage by theft.
Covers loss or damage to this property for a $10,000 limit at scheduled and described locations and $5,000 at other locations. It is not subject to as many exclusions as other property.
Covers loss or damage to this property for a $10,000 limit at scheduled and described locations and $5,000 at other locations. It is not subject to as many exclusions as other property.
This property is covered for a $10,000 limit while in temporary storage units on the described premises for up to 90 days.
Exclusions are part of every insurance coverage form or policy. It is important to be aware of these exclusions before a loss occurs so additional insurance may be purchased or cash reserves set aside to handle them. These exclusions apply regardless of any contributing events or if the event causes widespread damage.
Excludes any increase in a property loss' expense because of enforcing or complying with ordinances or laws. This applies even in cases where the building must be torn down and rebuilt to meet and comply with building codes and ordinances.
Excludes any form of earth movement, aftershocks, and tremors, including earthquake, mudslide, mudflow, and volcanic eruption. Sinkhole collapse is not excluded. There is limited coverage for loss or damage due to volcanic action.
There is no coverage when the government takes over property for any reason and damages it unless the damage results from an attempt to stop a fire from spreading.
Excludes loss or damage that nuclear radiation, radioactivity, and similar events causes, except for loss or damage caused by fire that results from the nuclear hazard
Excludes loss or damage due to failure of power, water, all types of communications, other utility services, lack of sufficient capacity, reduction in supply, and power surge that occurs away from the covered premises. Coverage does apply to loss or damage due to covered causes of loss the failure causes. This exclusion also applies if utility supplied equipment on the insured premises causes the failure. It does not apply to loss or damage to computers and electronic data.
Excludes any kind of war or military action that causes loss or damage
Excludes water damage of any kind, including flood, tidal waves, storm surges, tsunamis, backup of sewers and drains, wind driven rain, waterborne material, and similar events. Coverage does apply to loss or damage due to fire, explosion, or sprinkler leakage that results from the water damage.
Excludes loss or damage due to any failure, malfunction, or inadequacy. Coverage does apply to loss or damage by specified causes of loss that result from these computer failures.
Excludes loss or damage due to the presence, growth, proliferation, spread, or any activity of fungi, wet rot, or dry rot that causes loss or damage. However, this exclusion does not apply to loss or damage that results from fire or lightning or to losses caused by specified causes of loss that result from fungi, wet rot, or dry rot.
Excludes loss or damage that results from any virus, bacteria, or other microorganism that causes physical illness, distress, or disease. This exclusion is separate from and supersedes any pollution exclusion.
The insurance company does not pay for loss or damage caused by any of the following. However, each is subject to conditions, exceptions, and limitations that may result in some limited coverage.
Excludes loss or damage due to artificially generated electrical current, electric arcing, microwaves, and electromagnetic energy or waves that disturb electrical or electronic devices, appliances, systems, or networks. However, loss or damage that a resulting fire causes is covered.
Excludes losses due to delay, loss of use, or loss of market
Excludes loss or damage due to smoke, vapor, or gas from agricultural smudging or industrial operations
Excludes loss or damage due to explosions that involve steam boilers, steam pipes, steam turbines, or steam engines the named insured owns or leases, except for gas or fuel that explodes in a firebox, combustion chamber, or flue
Excludes loss or damage caused by frozen plumbing, heating, air conditioning, and other appliances due to water, liquids, powders, and molten materials leaking or flowing from them. This exclusion does not apply if the building is heated or if the equipment is drained and the water supply shut off if the building is not heated. It also does not apply to fire protection systems.
Excludes loss or damage caused when the named insured, others that have an interest in the insured property, employees, authorized representatives, partners, officers, members, managers, directors or trustees commit dishonest acts. Theft by a person entrusted with property is also excluded.
Excludes loss or damage due to any voluntarily parting with or giving away title to any property as a result of a fraudulent scheme, trick, or device
Excludes loss or damage to personal property in the open due to rain, snow, ice, or sleet damage
All collapse is excluded unless a specified cause of loss, breakage of building glass, or weight of ice and snow causes it. Some coverage also applies under Additional Coverage–Collapse. However, if a collapse results in a covered cause of loss, the damage it causes is covered.
Excludes loss or damage caused by or that results from release or escape of pollutants unless caused by a specified cause of loss. If pollution results in a specified cause of loss, the damage it causes is covered.
There is no coverage if the named insured does not take reasonable steps to protect and preserve property during and after a loss.
Loss or damage from any of the following is excluded. However, if a specified cause of loss or glass breakage occurs, the ensuing loss or damage it causes is covered.
This is a risk of doing business that insurance does not cover.
This is fog that has become mixed and polluted with smoke.
This also includes any object that ruptures or bursts due to centrifugal force.
Excludes loss or damage due to extremes of temperature, humidity, dampness, dryness, marring, or scratching
Excludes loss due to computer operations or electronic data programming, processing, storing, copying, or processing of valuable papers or records. However, coverage applies to direct physical loss or damage by a resulting fire or explosion if this coverage form insures fire or explosion.
Excludes loss due to errors or deficiencies in design, installing, testing, maintaining, modifying, or repairing computer systems and electronic data. However, coverage applies to direct physical loss or damage by a resulting fire or explosion if this coverage form insures fire or explosion.
Excludes loss or damage due to electrical disturbance, magnetic injury, disturbance, or erasure of electronic data other than as a coverage extension provides. However, coverage applies for direct loss or damage that lightning causes.
Excludes
loss or damage due to water that seeps
or leaks continuously or the presence of humidity, moisture, and vapor through
condensation for 14 or more days
Loss or damage caused directly or indirectly by any of the following causes of loss is excluded. However, if the excluded cause of loss triggers a loss that involves a covered cause of loss, coverage applies to that ensuing loss or damage.
Excludes loss or damage due to weather conditions that combine with any of the primary property exclusions above to cause or worsen a loss. However, coverage applies to loss or damage that results from a covered cause of loss.
Excludes loss or damage that results from persons, governmental bodies, groups, or organizations acts or decisions as well as their failing to act or decide
Excludes loss caused by damage to property located on or off the described premises caused by any of the following ,due to faulty, inadequate, or defective:
Loss or Damage to Products
The insurance company does not pay for loss or damage to any property due to anyone's errors or omissions in any stage of developing, producing, or using the product that compromises the product's form, substance, or quality. If the error or omission results in a covered cause of loss occurring, the company pays for the loss or damage it causes.
The insurance company does not pay for any increase in business income or extra expense loss caused by or that results from the following:
These exclusions apply to the Accounts Receivable Coverage Extension. The insurance company does not pay for loss or damage due to any of the following:
This section explains exactly how the limits apply in addition to any special restrictions or extensions.
Deductibles apply as follows:
This section explains the duties of the named insured and the insurance company following a loss.
The named insured cannot abandon damaged property to the insurance company without its consent.
Explains how the named insured and the insurance company resolve disputes and agree on the value of lost, damaged, or destroyed property
Explains what the named insured must do after a loss to preserve property and save it from further damage in order to maintain coverage. It also explains the notifications and reports the named insured must make to the insurance company.
Explains that legal action cannot be brought against the insurance company until all terms and conditions in the coverage form have been met. In addition, the action must be brought within two years after the date of direct physical loss or damage.
Explains how the insurance company handles and pays losses that involve different types of covered property
States what the named insured and the insurance company must do if property is recovered after the claim for it is paid
States that business income and extra expense losses are reduced to the degree that the named insured resumes normal operations to the extent possible as soon as practicable
Vacancy is defined differently for a tenant and a building owner. The conditions that apply when a building is vacant over 60 consecutive days are detailed. After a property is vacant more than 60 consecutive days, losses due to certain causes of loss are not covered at all and other losses are reduced by 15% before they are paid.
Certain general conditions apply to all property coverages.
States that any act or neglect of others beyond the named insured's direction or control does not affect coverage
These parties have special rights that extend beyond those of the named insured. However, they must take the initiative, take certain steps, and do certain things to keep those rights. This condition explains the mortgageholder's rights and responsibilities if a covered loss occurs.
States that this insurance does not benefit any party that has custody of insured property
States that only losses that occur during the policy period and within the coverage territory are covered
Coverage for any of the following applies only when there is a limit of insurance for it on the declarations. All optional coverages are subject to the terms and conditions that apply to property coverage, unless other terms and conditions apply.
Pays for direct physical loss or damage to all outdoor signs that the named insured owns listed and described on the declarations. It also covers listed signs owned by others at the covered location in the named insured’s care, custody, or control.
Pays for loss of money and securities used in the business that results from theft, disappearance, or destruction at covered locations, at certain other locations, and in transit between such locations
Pays for direct loss or damage to business personal property, money and securities that results from dishonest acts committed by any employee acting alone or in collusion with other persons. The intent must be to cause the named insured loss or damage and to financially benefit that employee or other persons.
Pays for direct loss or damage to covered electrical, mechanical, or pressure machinery and equipment caused by an electrical failure or mechanical breakdown
Refer to the coverage form for these very important definitions because they do impact coverage.
The insuring agreement requires the insurance company to pay amounts an insured becomes legally obligated to pay as damages because of bodily injury, property damage, or personal and advertising injury as long as this insurance provides coverage. Damages include care, loss of services, and death. This obligation includes a duty on the insurance company’s part to defend any suit that seeks damages. The duty exists only if the loss is or may be covered and ends only when loss payments use up the limits of insurance. The coverage form identifies situations that are covered as well as those that are excluded. It also specifically states that coverage applies to only incidents that are not carryovers from prior policies or prior policy periods.
The insurance company pays a number of expenses that usually occur in conjunction with investigating and settling claims or suits. These payments are in addition to the limits of insurance.
*The insurance company is not obligated to furnish the actual bail bonds or bonds to release attachments.
This insuring agreement specifically identifies and defines covered medical expenses. The insurance company pays medical expenses for bodily injury caused by an accident:
Payments are made provided that:
Payments are made regardless of fault but do not exceed the liability limits of insurance. Payments are for:
Many of these exclusions have exceptions, conditions, or limitations that must be examined carefully. Coverage for some may be available through other insurance coverage forms or policies written through specialty markets. Coverage does not apply to:
Excludes bodily injury and property damage that the insured expects or intends. However, coverage applies to bodily injury that results from the named insured using reasonable force to protect persons or property.
Excludes bodily injury or property damage the insured must pay as damages because it assumed liability in a contract or agreement. This exclusion does not apply to certain specifically defined insured contracts or for liability the insured has without a written contract or agreement.
Excludes liability imposed on the insured for bodily injury or property damage due to the intoxication of others. The exclusion applies even for allegations of negligence in supervision, hiring, employing, monitoring, or training others and appropriate involvement in transporting an intoxicated person. This exclusion applies only if the named insured manufactures, distributes, sells, serves, or furnishes alcoholic beverages. Bring your own alcohol establishments are not subject to this exclusion.
Excludes the insured's obligation under workers compensation, disability benefits, unemployment compensation, or similar laws
Excludes bodily injury to the insured’s employee that arises from his or her employment. It also applies to actions brought by the employee's family members.
Excludes bodily injury or property damage from the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at any location that any insured currently or ever owned, occupied, or rented. There are a number of exceptions.
Excludes bodily injury or property damage that arises from owning, maintaining, using, or entrusting any aircraft, auto, or watercraft that any insured owns, rents, operates, or has loaned to it. There are a number of exceptions.
Excludes bodily injury or property damage from transporting such equipment by an auto any insured owns, or using such equipment in any racing, stunt, speed, or demolition activity.
Excludes bodily injury, property damage, or personal and advertising injury caused directly or indirectly by any act of war. Undeclared civil war, warlike action, insurrection, rebellion, revolution, usurped power, or action a government authority takes to hinder or defend against any of these are also considered war.
Excludes bodily injury, property damage, or personal and advertising injury caused by rendering or failing to render any professional services. Nine services are listed but the list is illustrative, not exhaustive.
Excludes damage to any of the following:
Each of these exclusions is subject to one or more exceptions.
Excludes property damage to the named insured's product when the product or any part of it causes the damage
Excludes property damage to the named insured's work when the work or any part of it causes the damage.
Excludes property damage from a defect, deficiency, inadequacy, or dangerous condition in the product or work. It also excludes the named insured delaying or failing to perform a contract or agreement according to its terms.
Excludes damages claimed for any loss, cost, or expense involved with a recall or withdrawal of the named insured product or work
Excludes damage from loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data. It does not apply to liability for damages because of bodily injury.
Excludes personal and advertising injury that result from criminal acts committed by the insured or at its direction
Excludes bodily injury, property damage, or personal and advertising injury that arises directly or indirectly from any action or omission that violates or allegedly violates the TCPA, FCRA, CAN-SPAM Acts, and other federal, state, or local ordinances or regulations that address recording or distributing material or information
The insurance company does not pay expenses for bodily injury:
This is an elaborate and extensive exclusion of incidents and materials related to nuclear energy of every kind and description. It has its own set of definitions that specifically relate to the exclusion. Its intent is to exclude any bodily injury or property damage covered by any nuclear energy liability insurance policy and to exclude coverage for companies required to maintain financial protection by any of a number of federal laws and acts related to nuclear energy. It excludes all medical payments of any kind and excludes nuclear discharge, leaks, waste, or the work performed at any nuclear facility. Refer to the coverage form for a list and description of nuclear energy liability definitions.
This is based on the legal entity designated on the declarations.
The individual and spouse are insureds but only with respect to conduct of the insured business.
The partnership or joint venture are insureds. Members, partners, and their spouses are also insureds but only with respect to the insured business.
The limited liability company is an insured. Members and managers are also insureds but only with respect to conduct of the business or performance of their duties.
The organization is an insured. Officers and directors are insureds but only with respect to their business duties. Stockholders are also insureds but only with respect to their liability as stockholders.
The trust is an insured. Trustees who act within the scope of their duties as trustees are also insureds.
Each of the following is also an insured:
The insurance company is not relieved of its
obligations under this coverage form if the insured or the insured's estate
becomes bankrupt or insolvent.
Any insured that becomes aware of an occurrence, offense, claim or suit must notify the insurance company. Swift action on the part of the named is required so it is important to be aware of these duties.
The insurance company is not a party to any suit brought against an insured and it cannot be sued until all conditions of the coverage form are met.
The limits of insurance apply to each named insured as though it is the only named insured and separately to each insured a claim is made or a suit is brought against. This is subject to the limits of insurance.
Refer to the coverage form for a list and description of liability and medical expenses definitions. There are 22 definitions and they can both provide coverage and exclude coverage. A definition in the coverage form supersedes the common meaning of the word or phrase.
The first named insured can cancel at any time by telling the insurance company that it plans to do so. The insurance company can cancel under only certain circumstances and with the advance number of days notice the circumstances permit, such as ten days advance notice for non-payment of premium or 30 days advance notice for any other reason. Notice periods vary, depending on the state where the named insured's business is located.
Changes to terms in the coverage form can be made only by endorsements the insurance company issues.
Any of these acts by the named insured at any time with respect to a material fact that relates to the coverage provided voids coverage.
The insurance company has the right to examine the named insured's books and records that relate to this coverage form at any reasonable time and as often as necessary during the policy period and for up to three years after coverage ends.
The insurance company can conduct inspections and surveys at any time and they are for its benefit, with no expressed or implied warranties to other parties. The insurance company also has the right to not make inspections or surveys if it so chooses.
The most paid if a covered loss occurs is the actual value of the loss, regardless of the number of coverages that apply to it.
Revisions to the coverage form that broaden coverage without an additional premium charge automatically apply if they become effective during the policy term or within 45 days before its inception date.
The first named insured pays the premium and receives all returns. Policies issued on a continuous basis are not continued if the premium is not paid prior to the anniversary date. Premiums can be adjusted because of changes to the named insured’s operations during the policy year.
The policy is subject to audit after expiration. The final premium is based on the actual exposures during the policy term if the premium on the declarations is an advance or deposit premium. It details the conditions that apply to the audit and the requirements and responsibilities of each party.
The insurance company receives the rights to recover from other parties that may have caused a loss it paid. The named insured can exclude certain entities from being subject to recovery efforts if it does so in writing before a loss occurs.
The named insured's rights and duties cannot be transferred without the insurance company's written consent. A specific exception and condition applies if an individual named insured dies that involves appointing a proper legal representative.