(June 2018)
This endorsement is used with the American Association of Insurance Services (AAIS) Businessowners Policy. It covers direct physical loss or damage to covered property caused by or that results from accidents to covered equipment. It also covers Loss of Income and Utility Service Interruption. It provides limited coverage for Data Restoration, Expediting Expenses, Pollutants, Spoilage, and Environmental, Safety, and Efficiency Improvements.
This section has a space to enter the deductible amount that applies to each loss after all other loss adjustments.
Note: A limit is not needed because this endorsement adds a covered peril, not a separate coverage. This means that the limits on the declarations apply except when this endorsement states otherwise.
The insurance company provides the coverage in this endorsement in exchange for the named insured paying the required premium. Coverage is subject to this endorsement's terms as well as the Common Policy Conditions, Common Policy Definitions, and terms that apply to Property Coverages in the Businessowners Policy.
Note: The following property sections in the Businessowners Policy are changed but only with respect to the coverage this endorsement provides:
This definition deletes
and replaces the definition in the Businessowners Policy.
Restoration period
This Loss of Income coverage term determines when coverage begins and when it ends. It begins on the date when an accident to covered equipment causes a loss. It ends at the earlier date when the property is repaired or when business resumes at a new business location.
The restoration period is not affected by the expiration date. It is not increased when a delay in construction occurs because of enforcing any type of ordinance or law that regulates rebuilding, rezoning, or any pollution-related activity.
The following definitions
are added.
a. Accident
This term means any of the following provided they are both sudden and accidental:
b. Covered equipment
Property that is insured under Coverage A–Buildings or Coverage B–Business Personal Property in the Businessowners Policy and meets any of the following criteria:
The definition of covered equipment changes slightly for Additional Coverage–Spoilage Utility Service Interruption and Coverage C–Loss of Income Utility Service Interruption in this endorsement. Covered equipment is property that meets the following criteria:
Note: The difference between the two paragraphs above is that there is no requirement that covered equipment under the Additional coverage be covered property under Coverage A or Coverage B. The actual description of the covered equipment is identical.
The following equipment is not considered covered equipment:
c. Perishable stock
Business personal
property that must be preserved and maintained under controlled temperature or
humidity conditions. It is susceptible to loss if these conditions change.
d. Vehicle
Any apparatus or machine that moves under its own power or that is used for transportation. Examples are trains, trucks, buses, trailers, cars, watercraft, aircraft, tractors, bulldozers, harvesters, and forklifts. Property permanently installed at a covered location and that receives electrical power from an outside power source is not a vehicle.
This change applies to only BP 0200–Businessowners Special Policy. 2. Boilers in this section of BP 0200 does not apply with respect to the coverage this endorsement provides.
Note: This change is important because it eliminates the potential for duplicate coverage.
The following five coverages are added. The limit for each is a sub-limit of the limit for covered property, not in addition to it.
The insurance company pays the named insured’s costs to research, replace, and restore lost programs and applications, data records, and proprietary programs when the loss or damage is due to an accident to covered equipment. The costs must be both necessary and reasonable.
The most paid for the sum of direct damage and loss of income is $25,000.
This coverage is excess over software coverage provided within this policy.
The insurance company pays reasonable additional costs to reduce the amount of time needed to either replace or repair damaged equipment. This applies only if a covered peril causes damage to covered equipment. Temporary repairs to this equipment are also covered.
The most the insurance company pays is $25,000.
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Example: Diego's Dairy Delights incurs a covered loss to one of its production boilers to the extent that it cannot be repaired, and a new boiler is needed. Delivery and installation usually takes three months but one of Diego's friends has an identical boiler on hand in case it must replace one of its units. The friend offers to sell it to Diego at its going cost plus 10%. Diego accepts the offer because he can resume operations in two weeks instead of three months. Coverage applies to the additional costs because this lets Diego resume operations sooner than expected. |
The insurance company pays additional costs to repair or replace covered property contaminated by pollutants when an accident to covered equipment occurs. Coverage also applies to additional expenses to clean up or dispose of any contaminated property. The amount of additional expense is based on the additional costs to repair or replace the damaged property because it is contaminated. This coverage is excess over any specific Spoilage coverage endorsed to this policy.
This does not include perishable stock that a refrigerant contaminates. Spoilage Coverage insures that.
The $25,000 limit is the most paid for this coverage, including any spoilage or loss of income that results from the contamination.
a. Accident to Covered Equipment
The insurance company pays when the named insured’s perishable stock is spoiled because of an accident to covered equipment. The spoilage must be a direct physical loss. In addition to the loss or damage to the spoiled stock, the following are paid:
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Example: Diego's bad luck continues. An electrical power failure causes a refrigerated line to go down for two hours. If the power is not restored quickly, the raw milk product being processed will spoil and must be discarded. This coverage applies to the entire $10,000 value of the spoiled milk. However, Diego’s good friend has a generator he is willing to rent to Diego! The cost to rent, transport, and operate the generator is $1,000. The expense to rent the generator is paid because its cost is less than the $10,000 value of the spoiled milk. |
b. Utility Service
Interruption
The insurance company
pays when the named insured’s perishable stock spoils because of an accident to
non-owned covered equipment. The spoilage must be a direct physical loss. The covered equipment must be owned by a
utility, a landlord, a landlord’s utility, or another supplier that provides
the named insured with any of the following utility services:
c. Valuation
The valuation of stock is based on whether the named insured can replace the perishable stock before the date it was to be sold. The valuation is based on the Valuation of Property Losses in the Businessowners Policy if it can be replaced that quickly. If not, the insurance company pays the perishable stock’s selling price at the time of loss. That selling price is reduced by the expenses and discounts the named insured does not incur because the stock was not sold.
d. Coverage Limit
The most the insurance company pays under this Additional Coverage is $25,000. This coverage is excess over any other Spoilage coverage the policy otherwise provides.
When covered equipment is damaged by an accident to that equipment and must be replaced, the insurance company will do more than just replace it with like kind and quality. It will pay up to 150% of the replacement cost for the insured to replace that damaged one with one that is safer, more efficient equipment or that is better for the environment.
This Additional Coverage does not include any property subject to the Actual Cash Value basis.
This is a new exclusion added to Loss of Income coverage.
Customer Agreement
The amount of the loss of income loss does not increase because of agreements made between the named insured and its customers or suppliers. Examples of such items that could increase the loss of income but that are not covered are late fees, demurrage charges, contingent bonuses (or penalties), liquidated damages, and demand charges.
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Example: Diego has a contract with the Marquette School District to supply milk to it. If the milk does not arrive as the contract requires, Diego must pay a penalty in addition to losing the revenue from the milk that was not delivered. The loss of revenue is covered as Loss of Income. The penalty is not covered. |
Utility Service Interruption
The insurance company
pays the loss of income and necessary extra expenses because of an accident to
non-owned covered equipment. The
covered equipment must be owned by a utility, a landlord, a landlord’s utility,
or another supplier that provides the named insured with any of the following
utility services:
There is a waiting period for this coverage extension. Coverage begins 24 hours following the direct physical loss or damage to the non-owned property. It ends when full utility service is completely restored to the named insured's premises.
Perils Covered is replaced by:
Perils Covered applies to Coverage A–Buildings, Coverage B–Business Personal Property, and Coverage C–Loss of Income.
The insurance company insures against direct physical loss or damage to covered property due to an accident to covered equipment. There is no coverage if an excluded peril causes the loss or damage.
The following exclusions replace the exclusions in the Businessowners Policy. Their wording is identical to the wording in the policy except that all exception wording is removed.
The following two exceptions are added for this endorsement only.
The coverage this endorsement provides is not subject to the following exclusions in either of the Businessowners Policies:
The following exclusions are part of BP 0200–Businessowners Special Policy. They are removed and replaced with exclusions that have identical wording except that all exceptions are removed and then an exception to pay for resulting loss or damage to covered equipment is added to each.
a. Animals
b. Contamination or
Deterioration
c. Wear and Tear
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Example: Years of steady use result in centrifugal force that causes a machine to disintegrate and its parts to scatter throughout the building. Coverage applies to the damage to walls, floors, ceilings, and other equipment that the flying parts cause. |
d. Data and Computer Errors
a. Discharge of Water
Coverage does not apply to loss or damage caused because water or other extinguishing agents are used to fight a fire.
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Example: The steam engine was red hot when the water from the hose the fire department used to fight the fire made contact with it. The engine’s metal immediately cracked. This endorsement does not cover this loss. |
b. Testing
There is no coverage for loss or damage caused by or that results from hydrostatic, pneumatic, or gas pressure tests of any boiler or pressure vessel. Coverage also does not apply to insulation breakdown tests of any electrical equipment.
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Example: A city inspector ordered that pressure be applied to the
boiler to verify its safety. Due to an error in applying the pressure, it exceeded
the boiler’s maximum pressure requirements and caused it to explode. This endorsement
does not cover this loss. |
c. Maintenance
Losses that occur because of poor or defective maintenance are excluded. This means that losses due to improper alignment or calibration and losses because equipment is tripped to go off-line are also excluded. In addition, losses caused by a condition that could have been corrected by adjusting, cleaning, tightening, or resetting it is excluded as well as losses caused by any other condition that could be corrected by performing maintenance. The only exception is that coverage applies to the damage that results from an accident to covered equipment.
d. Other Perils
The insurance company does not pay for any loss insured by Perils Covered in either of the Businessowners Policies.
Note: The ONLY covered peril in this endorsement is an accident to covered equipment. It is not the covered perils in the Businessowners Policies.
This deductible provision deletes and replaces any other deductible with respect to the coverage this endorsement provides.
Deductible
The deductible amount on this endorsement’s schedule applies to each loss after making all other loss adjustments.
Note: This is an each loss deductible, not an occurrence deductible.
The insurance company agrees to perform required inspections on covered equipment to comply with state or municipal boiler and pressure vessel regulations. It performs these inspections on the named insured's behalf. The endorsement points out that this is not a safety inspection or a report that conditions surrounding the inspected equipment comply with any health or safety standards.
Any representative of the insurance company may immediately suspend insurance coverage against loss or damage to any covered equipment found to be in or to be exposed to a dangerous condition.
The suspension must be in writing and can be mailed or delivered to the named insured's address on the declarations or to the address where the equipment is located. The insurance company can only reinstate suspended coverage by an endorsement for that covered equipment. Suspended insurance entitles the named insured to a pro rata premium refund, but the suspension is effective even if a refund has not been offered or made.
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Example: Bodacious Boilers Insurance Company insures Diego's Dairy Delights. Bodacious' equipment inspector notices certain equipment operating at temperatures that exceed their operating range. He issues a written suspension order to the shift manager that immediately ends coverage. However, Diego's shift manager ignores the order. The suspended equipment starts a fire a week later. Based on its copy of the inspector's written order, Bodacious denies the claim because coverage had been suspended. |