HO 04 12─INCREASED LIMITS ON BUSINESS PROPERTY

(July 2020)

This endorsement allows an insured to increase the policy’s coverage for eligible business property. The HO 04 12 alters the policy by increasing the $2,500 sub-limit that applies to business property located on the residence premises. The amount that appears either on the endorsement or elsewhere is added to the $2,500, on-premises, business property sub-limit.

Example: Diane Digita is a manager with I-Bet-my-Net.com, an E-tailer that sells novelty and gaming products on-line. Diane’s department is responsible for I-Bet’s on-line catalog. In order to handle her job, she has a laptop that is usually kept at her home. It allows her to make corrections or updates to their Website after hours or on weekends. It also acts as I-Bet’s backup server.

Diane’s laptop and related equipment have a cost new of nearly $8,000, so her homeowner policy has a HO 04 12 endorsement with an increase of $5,500 for a total limit of $8,000. Diane is comfortable that the I-Bet equipment is protected against a loss that may occur at her home.

Related Article: ISO HO 00 03 Special Homeowners Coverage Form Analysis – contains more information on Coverage C and the special limits on certain types of personal property.

This form may also be used to increase protection for business property that is away from the insured’s premises. By attaching the endorsement, the basic policy’s limitation on business property away from the premises is automatically increased to equal 60% of the on-premises business property limit that appears on the endorsement schedule.

Example: Let’s visit Diane Digita again. Diane gets a call from her insurance agent, Cynda. Cynda is checking to make sure that Diane is happy with how quickly the HO 04 12 endorsement was added to her policy. Cynda also reminds Diane that, by adding coverage for her on-premises business property, she has automatically increased the protection available for her off-premises business property. In her case, Diane’s policy (with the HO 04 12) offers the following protection:
Increased Limits On Business Property
Increase in Limit of Liability	Total Limit of Liability	* Off-premises limit of liability
$5,500	$8,000	$4,800
* 60% of the TOTAL limit of liability that applies to on-premises business property.

Coverage Limitations

There are some areas of concern regarding the coverage provided by the Increased Limits on Business Property endorsement. The protection does not apply to business property that is any of the following:

· A sample that is being stored or kept at the insured premises

· Available for sale but is being stored or kept at the insured premises

· Sold but is being held on the premises awaiting its delivery

· Related to business activity conducted on the insured location.

In light of these limitations, it can be difficult to determine coverage. Eligibility revolves around the nuances surrounding why the property is at the insured’s home.

Example: Rollie is a salesperson for DownState Furnishings and, occasionally, he keeps property at his home:
Scenario 1: Rollie has an executive desk that is kept in his home over the weekend before taking it to a new office location. This property may be covered.	Scenario 2: Rollie keeps an executive desk in his basement until similar units are sold at DownState and room is available in its showroom. This property would not be covered.

How Coverage Applies

It is also important to consider how coverage applies under the HO 04 12–Increased Limits On Business Property endorsement. Use of this endorsement does NOT increase overall coverage under Coverage C but REDISTRIBUTES protection.

Example: Brendyn Underkalm has a homeowner policy that is endorsed with a HO 04 12 form. Brendyn has the following coverage:
Coverage A	$100,000
Coverage B	$10,000
Coverage C	$50,000
Coverage D	$20,000
HO 04 12	$10,000
Brendyn is very upset with his insurer. After his home and contents were destroyed by his home’s collapse, he is given a check for $50,000 to cover his lost personal property. Brendyn lost an estimated $53,000 in personal property along with $10,000 of business property. Brendyn’s adjuster points out that, because of the HO 04 12, a total of $10,000 of the Coverage C limit acts as a special sub-limit of liability. The result is that the Coverage C limit remains a maximum of $50,000.