BP 0816-POLICY AMENDATORY ENDORSEMENT

(June 2018)

INTRODUCTION

The BP 0816-Policy Amendatory Endorsement is a nine-page mandatory endorsement. The numerous changes throughout this policy are substantial. It was introduced and filed in 2015 but adoption occurred throughout the latter part of 2015 and 2016.

Because the changes are significant and are policy wide, we have taken an unusual approach and actually inserted all of the changes into our analysis of the BP 0200–Businessowners Special Policy and BP 0100–Businessowners Standard Policy Analysis and updated them as though the BP 0816 was a policy edition change rather than an endorsement so that the changes could be viewed in context.

This article will look at only the changes within the endorsement and provide additional explanations of the changes.

PROPERTY COVERAGES

Definitions

Three definitions are changed and one definition is added.

CHANGED DEFINITIONS

3. Dependent locations (BP 0816 changes)

The term supplier is eliminated from the definition of a contributory location and replaced by the more precise explanation that these locations deliver material and services. In addition, wastewater removal services were added as never being considered a contributing location.

4. Earth movement (BP 08 16 change)

The definition of earth movement was moved from the earth movement exclusion to the definition section in the 06 12 edition of this form. That was a significant change but this one is even more so because it is even more specific and, in some ways, expansive in attempting to eliminate earth movement coverage.

a. The initial change is that earth itself, as used in this definition, is itself defined. Earth is not only earth but also substrates, strata, soil, ground, and sediment.

b. Earth movement is defined as the movement of earth. When read with the newly introduced definition of earth, this is a much more expansive exclusion. The movement of substrates, strata, soil, ground, and sentiment is excluded. The following six items are then provided as examples of types of excluded earth movement but the exclusion continues to be that earth movement itself is excluded. The prior edition stated the earth movement was only the five items listed but this one merely says that movement of earth is excluded and provides six examples of that movement. This could be a significant difference.

1) Earthquake

Earthquake is the first example of earth movement, but it is listed as earthquake, earth tremor or earth temblor. Previously earth temblors weren’t mentioned and only tremors before, during or after a volcanic eruption were excluded. Aftershocks following earthquakes are part of both definitions but the current definition includes aftershocks of the earth tremor or earth temblor which the prior one didn’t and the prior definition referred to only land aftershocks while the current refers to only aftershocks.

The new definition explains that these items are earth movement regardless of the manifestation. Possible manifestations are shaking and ground displacement but this definition applies regardless of the manifestation.

2) Liquefaction of soil

This example refers back to earthquake, earth tremblors or earth tremor. If soil liquefies because of those three or for any other reason it is still earth movement.

The prior definition didn’t mention liquefaction of soil.

3) Volcano

All of the movement around a volcano is earth movement. The eruption, explosion, and effusion are earth movement and were part of the prior definition. The definition in this endorsement adds the shaking and ground rupture before, during, and after a volcanic eruption as earth movement too.

4) Landslide

The term landslide was part of the prior definition but without any further explanation. This definition adds the material that is moving with or being carried with the landslide as earth movement.

5) Mine subsidence

This term did not change.

6) Any other earth movement

This term did not change from the prior definition except for a slight format change. The prior version could have limited the term “that causes cracking, setting or shifting of covered property” to apply to the movement of water under the surface of the ground. The reformatting makes is clear that the term applies to all movement described within item 6).

The next part of this definition is new. This would appear to have been added as a response to the significant increase of earthquakes in parts of the country using hydraulic fracturing (fracking).

c. Acts, errors, or omissions that result in earth movement regardless of where the act, error or omission takes place is also earth movement. Examples include the following:

1) Excavating or construction

2) A blast or vibration without regard as to where it came from

3) Any type of process that extracts natural resources underneath the earth’s surface. Examples of processes are hydraulic fracturing, drilling, mining, and the extraction of geothermal energy but not limited to these. Examples of natural resources are gas, heat, minerals, water, and oil but not limited to these.

4) Any injection under the earth’s surface. Examples are water and wastewater but could be any material natural resource or substance.

5) The storage of a natural resource, material or substance beneath the earth’s surface. Carbon dioxide is one example.

6) Any of the above in combination with each another.

12. Specified Perils (BP 0816 change)

The BP 0816 change is a reformatting that lists each of the perils separately while previously they are listed all in a single paragraph. In doing this they moved the explanations of falling objects and water damage from being separate paragraphs to being described within the peril itself.

The falling object definition is unchanged.

The water damage peril has been changed significantly so that it lines up with the Water Exclusion that was added to the 06 12 edition.

The first paragraph of the water damage explanation is unchanged. This second paragraph is added as follows:

2) Water damage is the sudden or accidental discharge or leakage of water or material that is waterborne but only if all of the following occur:

· Direct result of water or sewer pipe breaking or cracking

· The breaking or cracking is due to wear and tear

· The water or sewer pipe is part of a municipal sanitary sewer system

· The sewer system is not on the named insured’s premises

The other change, that applies to both water damage paragraphs, is that the Water Exclusion’s paragraphs on surface water and water damage below the surface of the ground do not apply if coverage is provided within this definition of water damage.

NEW DEFINITION

This definition was added and is used in the dependent earning additional coverage. It is an important addition due to the way companies operate. Often the company upon which the named insured is dependent is itself dependent on another company for part of the product it will be providing to the named insured.

Secondary dependent location

A location within the basic territory that is neither owned nor operated by a dependent location but it does one or both of the following:

Supplies services or materials to the dependent property which are then used by the dependent property to supply services or materials to the named insured.
Receives products from a dependent location that receives products from the named insured.

Transit type structures such as airfields, bridges, pipelines, road, tunnels, and waterways are excluded from this definition. Water, communication and power suppliers are also excluded from the definition as are wastewater removal services.

Property Covered

Coverage B–Business Personal Property

The following is added:

If the named insured only occupies part of a building or structure, the business personal property must be within 100 feet of that building or structure and either in the open or in or on a vehicle in order to be covered.

This change is particularly useful for an occupant of a multistory building whose property might be delivered to a common parking area. Under the 06 12 edition property damaged while it is in the open or it is in or on a vehicle might not be covered because it would not be within 100 feet of the premises of a named insured occupant located higher in the multistory building. (Remember is just says 100 feet not whether it is horizontal or vertical feet.) This revision would provide the coverage as long as the property was within 100 feet of the building in which the premises is located.

Property Not Covered

5. Data Records and Programs

This change is a positive for the named insured because an exception is added. Electronic data records, software programs, applications, and proprietary software programs that are part of the building’s HVAC, lighting, elevators, or security systems provided that they are integrated into those systems are covered.

6. Land, Water, Growing Crops, or Lawns

This is a positive for the named insured because lawns that are part of a vegetated roof are covered.

9. Trees, Shrubs, or Plants

This is a positive for the named insured because trees, shrubs, or plants that are part of a vegetated roof are covered.

Additional Property Excluded and Limitations

CHANGED ADDITIONAL PROPERTY EXCLUDED AND LIMITATIONS

5. Interior of Building or Structure (BP 0816 change)

This is a coverage restriction. It adds damage to business personal property caused by rain, snow, sleet, ice, sand, or dust causes as being not covered on the same terms as the interior of the building or structure in which it is located.

6. Jewelry, Watches, Jewels, Pearls, Precious Stones, or Metals

The only change is that the $2,500 theft limit can be increased on the Declarations

NEW ADDITIONAL PROPERTY EXCLUDED AND LIMITATIONS

Lawns, Trees, Shrubs, or Plants That Are Part of a Vegetated Roof

Vegetated roof lawns, trees, shrubs, and plants are covered as any other type of property because of changes made to the Property Not Covered Section that is described above.

There are certain types of exposures that are unique to such items that are not (and should not) be covered. The four new exclusions for only these items are:

Temperature changes or extremes
Disease
Atmosphere or soil being too dry or too damp
The perils of rain, snow, sleet ice, frost, or hail

Additional Coverages

4. Debris Removal

Coverage is expanded to include the cleaning up of the debris of other property and not only covered property. Because of this change, restrictions are added that may appear to restrict coverage but those restrictions are only restricting the newly added coverage.

These added restrictions are that the following are not covered.

Items within the property not covered section
Property of others that would not qualify as covered property under this policy
Mud or deposits of earth from the premises grounds

None of these items would have previously been covered but with the other property expansion the wording needed to be added.

However, there are some actual restrictions too.

· The cost to remove the debris of trees, shrubs, or plants that are covered property only under Tree, Shrubs and Plants extensions of coverage is not covered because the cost of their removal is part of that extension of coverage.

· Mud or deposits of earth from the premises grounds. This was never stated before and, while it might have been implicit before, it is now explicit.

The additional limit has changed in the following two ways:

· The additional limit of $25,000 for covered property debris removal can be increased on the Declarations.

· A limit of $5,000 applies to debris of other property when there has not been a direct loss to covered property.

5. Fire Department Service Charges

A very important restriction is added. The limit applies per occurrence regardless of the number of fire departments responding or the number of services being performed. Although the prior version of this additional coverage stated it was per occurrence its wording was ambiguous enough that it could have applied per occurrence per department. The good news is that the limit can be increased on the declarations which might be a great idea if the named insured has entered into multiple contracts.

10. Limited Fungus and Related Perils

The only change in this additional coverage is to specifically not cover any vegetated roof’s lawns, trees, shrubs, or plants. This is not a reduction in coverage because under prior forms there were no special exceptions for these items.

Extensions of Coverage

CHANGED EXTENSIONS OF COVERAGE

3. Trees, Shrubs, and Plants

Under the debris removal additional coverage, there is no coverage for the removal of any trees, shrubs, or plants because those costs are to be included within this extension of coverage. The change in this endorsement is that the cost to remove debris of other property consisting of trees, shrubs, and plants that lands on the premises is also part of this extension. This is an expansion of coverage that works with the Debris Removal Additional Coverage.

Because of the expansion of coverage for vegetated roofs and for debris coverage for other property two restrictions are added

· Coverage does not apply to vegetated roof’s trees, shrubs, or plants

· Debris removal of other property that belongs to the named insured’s landlord is not covered.

4. Data Records and Programs

The following items are not part of this extension because they are exceptions to the Data Records and Programs described in the Property Not Covered Section. This is not a restriction but more of a consistency that prevents duplicate coverage and ambiguity.

The following are not covered:

Prepackaged software that the named insured holds for sale.
Electronic data records, software programs, and applications, and proprietary software programs that are part of the building’s HVAC, lighting, elevators, or security systems if they are integrated into those systems.

ADDED EXTENSIONS OF COVERAGE

Business Personal Property – Portable Storage Units

This extension provides coverage for the business personal property while it is temporarily stored in a portable storage unit on the named insured’s premises or within 100 feet of the premises or within 100 feet of the building in which the premises is located.

There are significant restrictions

Only losses that happen within 90 days of the business personal property being placed in the unit or trailer are covered.
Only losses that happen within 90 days of the actual unit or trailer being placed on the premises are covered. However, to apply, the 90 days must be consecutive. This means that removing the unit on day 89 and then returning it the next day would restart the 90-day clock.
Any loss or damage that is due to rain, snow, sleet, ice, sand, or dust is not covered. This restriction does not apply if the actual unit or trailer was damaged by a covered peril first and that damage allowed those excluded perils to enter or when snow, sleet, or ice on the unit or trailer thaws and enters the unit or trailer.
Any loss covered elsewhere in the policy or endorsement is not covered.
No coverage applies for loss or damage to the trailer or unit.

The coverage is subject to a $10,000 per occurrence limit that applies over covered property that is in such trailers or unit. This is NOT a per trailer, per unit limit or even per premises limit. It is a strictly per occurrence limit meaning that the most that will be paid for damage to all business personal property stored in temporary portable storage units is limited to $10,000 in a single occurrence. This limit can be increased on the declarations.

Coverage C–Loss of Income

This is an expansion of coverage similar to the one provided in the Business Personal Property above. It deals with the reality that being within 100 feet of a premises that is part of a multistory building may not be sufficient.

This expansion states that coverage also applies if the damage is to property that is in the open, or in or on a vehicle but only if that property is within 100 feet of the described premises or the building or structure that contains the premises.

Loss of Income Coverage Extension

4. Period of Loss Extension

The only change is that the number of days during which coverage applies is increased from 30 to 60 days.

Additional Loss of Income Coverages

2. Earnings from Dependent Locations

The only change, which is a significant change, is that this coverage applies to not only loss of earnings due to direct damage to a dependent property but also loss of earnings due to direct damage to a secondary property.

Perils Covered

The Perils Covered is changed from “risks of direct physical loss or damage” to “direct physical loss or damage.” The word “risks of” are removed.

Perils Excluded

2. Earth Movement

As with all of the changes in the earth movement definition, the changes in this exclusion are put in place to further clarify that earth movement is not covered. The first paragraph adds the wording that earth movement is not covered under any of the following:

The earth movement is the result of natural causes
The earth movement is the result of manmade activities
The origination of the earth movement is the covered property. The cause can be on the covered property or under it.
Activities that the named insured requested to be performed or that were being performed for the benefit of the named insured resulted in the earth movement.

No other changes were made to this exclusion but when combined with the change in the earth movement definition, there has been a significant change in the earth movement exclusion.

9. Water

The only change in this exclusion is in item b.1). This item is a clarifying item emphasizing that the exclusion applies if the water or the material in the water described earlier in the exclusion is the result of an act of nature or is the result of an act of man.

Additional Exclusions

5. Criminal, Fraudulent, Dishonest, or Illegal Acts

The only change in this exclusion is that the exception for acts of destruction by the named insured’s employees also applies to acts of the named insured’s authorized representatives. Theft by either remains excluded.

Optional Property Coverages

1. Employee Dishonesty

The only change is that the following exclusion is added:

The theft or other dishonest act by an employee who was known to have committed theft or dishonest acts prior to this policy’s effective date is excluded. A requirement for this exclusion to apply is that named insured, a partner, director, trustee, joint venture, member of manager are the ones who must have had knowledge of that prior act. There is an exception. If the one with such knowledge was in collusion with that dishonest employee, this exclusion will not apply.

COVERAGE L–BODILY INJURY LIABILITY AND PROPERTY DAMAGE LIABILITY

2. Exclusions

i. Liquor Liability

Three significant changes were made in the liquor liability exclusion.

The first two are new exclusions:

There is no coverage because of allegation that the hiring, employment, monitoring, or training of others who committed any of the four excluded actions resulted in the bodily injury or property damage.
There is no coverage when it is noticed that a person is intoxicated and transportation was either provided to that person or it should have done so but failed to provide such transportation. It applies when any of the four excluded actions are alleged to have caused the bodily injury or property damage.

The third change is an affirmation of coverage when the named insured, which does not serve alcoholic beverages but does allow others to bring such beverages onto its premises, is not subject to the liquor exclusion even if a license is required to operate this way. This applies even if a fee is charged for the privilege of consuming the beverages on the premises.

x. Electronic Data Records

The only change is that this exclusion applies only to property damage. Previously the exclusion also applied to bodily injury.