HO 07 01–HOME BUSINESS INSURANCE COVERAGE

(July 2020)

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This endorsement is quite extensive, providing both property and liability coverage for losses related to a described business that is operated in the insured’s residence or other structure, such as an unattached garage, that is located on the residence premises.

Home–Based Business Considerations
Home–Based Business Questionnaire

SCHEDULE

The endorsement consists of a schedule containing two sections. Under Section 1 – Property, there is space for describing the business (name and type of operation). If the business operates solely from the dwelling where the insured resides a check is placed by item 1. Under business location and no additional information is needed. However, if the business is conducted from another structure, a check must be entered by Item 2. and limit and description of the structure must be provided. Both Item 1. and Item 2. may be selected.

The form of business entity must be entered.

An option to Coverage C protection is to property that is located elsewhere than on the residence premises (as defined by the form) from $5,000 to $10,000.

IMPORTANT – Although this form is quite long and comprehensive, except for the modifications it contains, it is still subject to the HO policy that it amends.

DEFINITIONS

The form contains many defined terms.

Replacement Definitions

The following terms REPLACE items found in the HO policies to which the HO 07 01 is attached (the numbers that appear below are the numbers that appear in the form that is being modified):

3. Business

This form considers a business to be activities (including trade, profession, or occupation) involving the operation described as being conducted at the location (either residence or other structure) on the HO 07 01 form. However, such activity qualifies as a business only when that business is owned by the named insured. The ownership extends to a resident family member’s partnership, joint venture, or family corporation.

Example: Tina owns a home with a pole barn that houses a small print shop. The print shop is listed on the HO 07 01 endorsement attached to her HO policy.
Scenario 1 – the business is owned as a partnership between Tina and her husband, Larry. This qualifies as a business.	Scenario 2 – the business is owned as a partnership between Tina and her brother, Harry, who lives elsewhere. This DOES NOT qualify as a business.

Note: Though, for purposes of this form, the base HO policy's business definition is replaced, you may find it helpful to review the change to that definition made as part of ISO's amendatory endorsement.

4. Employee

This term refers to persons who work for the named insured, including workers gained via a lease. However, the term does not apply to temporary workers (persons who are either hired for seasonal or temporary work or who temporarily replace regular employees).

5. Insured

The HO 07 01 form considers all of the following to be insureds (with notes on any exceptions):

The named insured and his/her resident spouse
Relatives of the named insured and/or his or her resident spouse but only if they are residents of the named insured’s household AND who also participate in the described business as partners, members, or stockholders
Non-related residents of the named insured’s household who participate in the described business as partners, members, or stockholders

Under Section II (Liability) of the HO 07 01 form, insured also refers to:

The named insured and all persons residing in the named insured’s household, but only if those persons (whether relatives or not) are partners, members, or stockholders in the described business – insured status applies only with respect to conducting that business

Example: Pete’s painting business is run from his home and John, his cousin, is a business partner.
Scenario 1 - While preparing for a job, John injures a paint job client when carrying a ladder. John is an insured under HO 07 01.	Scenario 2 – John joins his friend Frank’s work crew to clear a jobsite. John swings a ladder and injures another crew member. John is not an insured because the injury was not related to Pete’s business.

The named insured’s employees, but only when involved in the described business’s activities. However, the HO 07 01 form does not grant insured status under:

o BI or Personal and Advertising Injury

§ To the named insured, the named insured’s partners, the named insured’s business members or to co-employees (including consequential injury to co-employee’s spouse and family). The co-employee limitation applies only when the injury is related to the employment or duties related to the business.

§ Because of an obligation to pay damages along with a third party (or to repay such a party) related to injuries to the named insured, the insured’s employees, and co-employees or to stakeholders in the described business.

§ Any incident involving the provision of professional degrees of health care services – note that, therefore, an exception would exist for loss related to routine aid.

o Property Damage to business property that the named insured owns, occupies, uses, rents or exercises custody or control over. Insured status is also nullified with regard to incidents of business property involving the named insured’s employees, partners, joint venture, or members of the described business.

Persons or entities while acting as a real estate manager. However, insured status is denied to a named insured’s employees who are acting in this role.

Note: The HO 07 01 form states that any reference to “an insured” includes one or more than one insured. This holds true under either Section I or II.

Additional Definitions

The HO 07 01 form adds the following defined terms that apply to its respective coverage for a described business:

a. Advertisement

This is a published notice or broadcast to the general public or specific market segments concerning the named insured's goods, products, or services in order to attract customers or supporters.

With regard to websites, while all of the site information is, technically, published; it is not likely that such content would all be considered advertising. However, it IS likely that specific content that provides information about the named insured's goods, products, or services in order to attract customers or supporters would qualify as advertising.

b. Business Income

This is the sum of the net income that would have been earned plus continuing normal operating expenses. Net income is net profit or loss before income taxes. Payroll is considered a continuing expense.

Net income does not include potential, enhanced revenues created by a covered source of loss affecting other businesses and their customers.

Example: Pete’s painting business is damaged by a storm. His portion of a business income loss claim includes an estimated 17% increase in business because of damage to the neighborhood’s large do-it-yourself store. His insurer rejects that portion of the estimated income loss.

c. Coverage Territory

This is the United States of America, its territories and possessions, Puerto Rico, and Canada. With regard to Section II of this form, the term includes international waters or airspace, but only for injury or damage that occurs during travel or transportation between the United States of America, its territories and possessions, Puerto Rico, and Canada.

Coverage territory includes other parts of the world, if the injury or damage arises out of the following, and subject to the insured's responsibility to pay damages being determined in a suit based on the merits in the territory described above or in a settlement the insurance company agrees to:

Goods or products manufactured or sold by the named insured in the territory described above
Activities of persons whose homes are in the territory described above but who are away on the named insured's business for a short period of time

d. Extra Expense

These are the additional costs the named insured incurs to operate its business during the period of restoration. These costs are in addition to its normal costs of operations during the same period had no covered loss occurred. The term also applies to measures taken to minimize interruption of operations such as repairing and replacing business property and recouping business related data and records. However, such efforts must result in reducing costs that would otherwise be paid by the form’s business income and extra expense sections.

e. Impaired Property

This is tangible property that is NOT the named insured’s work or product but that cannot be used or is less useful because of the insured’s defective, deficient, inadequate, or dangerous product or work that is incorporated into it. Property can also be considered impaired when the named insured has not satisfactorily completed the terms of a contract or agreement. Impaired property must be capable of being restored to use by repairing, replacing, adjusting, or removing the named insured's product or work, or by the named insured fulfilling the terms of the contract or agreement.

Example: Patty’s Powah Printery is sued by a client. Patty failed to finish some graphics for special event flyers in time to distribute and properly promote it. Patty’s insurance company denies the claim. It explains that, while Patty’s failure did cause a loss to her client, the loss did not involve physical injury to any property.

Related Court Case: No Coverage for Damages from Insured’s Inferior Lumber – illustrates the difficulty of identifying situations of impairment.

Note: This provision may bear more scrutiny in light of developments in products involving 3D printing, particularly as it is becoming a trend in in-home businesses.

f. Leased Worker

This is a person a labor leasing firm leases to the named insured under a written contract or agreement to perform duties related to conduct of the named insured's business. This term does not extend to persons considered to be temporary workers.

g. Loading or Unloading

This is handling of property beginning when it is moving from its place of acceptance onto or into a hovercraft, watercraft, auto or aircraft. It continues while it is in or on the hovercraft, watercraft, auto or aircraft. It ends when the property is delivered from the hovercraft, aircraft, auto or watercraft to its final destination. Property being moved by mechanical devices not attached to the watercraft, auto, hovercraft or aircraft is not considered loading or unloading. Hand trucks are not considered mechanical devices and movement by them is considered loading and unloading.

h. Operations

Business activities that occur at the premises described on the declarations.

i. Period of Restoration

The restoration period:

· Under business income coverage begins 72 hours after a covered direct loss or damage event. However, under the extra expense coverage it begins immediately after the time of a covered direct loss or damage. The loss must be due to a covered cause of loss and at a described premises.

· Under both extra expense and business income, coverage ends on either the date when property at the described premises SHOULD be repaired, rebuilt, or replaced or the business reopens at a new location. This definition also states that needed repairs, building or replacement must occur in a reasonable time period, using materials of quality that are similar to what existed at the damaged property.

Example: Chuck’s Small Engine Repair suffered a loss that closed his business. Among the lost equipment was a machine that allowed some custom fabrication. He decided to stay closed as he ordered a replacement. That replacement took an additional three weeks to build and ship. His insurer deducts the amount of his claim by three weeks because the custom machine work was not a significant amount of his work and waiting for that little-used, custom item needlessly stalled resumption of his business.

The period of restoration does not include any increased time period required based on enforcement of any ordinance, regulation or law that regulates construction, use, repair, or demolition of any structure. This can cause a significant coverage gap.

In addition, period of restoration does not include coverage for increased time because of testing, monitoring, cleaning up, removal, containment, treatment, detoxifying, neutralizing or in any way responding to or assessing the effects of pollutants. The expiration date has no impact on the period of restoration.

j. Personal and Advertising Injury

This is any injury that arises out of one or more of the following offenses (including consequential bodily injury):

(1). False arrest, detention, or imprisonment

(2) Malicious prosecution

(3) Wrongful eviction from, wrongful entry or invasion of privacy

This involves violating a right to another party’s lawful occupancy or use of space that party has a right to use or occupy as well as interfering with access to such space and/or any violation of personal privacy. Such incidents commonly involve property owners who rent or lease property to others.

Example: Henrietta is sued by Clem. Henrietta locked Clem out of the home office space she rented to Clem. She did so because she thought that Clem was two months late in paying his rent. Henrietta later finds out that her husband received the rent payment checks and deposited them in his separate bank account (without telling Henrietta). Clem sues Henrietta for the loss of business caused by the unwarranted lockout.

(4). Any oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services. This can take place using any form of communication.

(5) Oral or written publication of material that violates a person's right of privacy. The violation can take place using any form of communication

(6) The named insured using the advertising idea of another in its advertisement

(7) The named insured's advertisement infringing on the copyright, trade dress or slogan of another

Note: This is valuable coverage. In most in-home businesses this may be a minor exposure. However, considering the increasingly wider use of business-related electronic communications, such losses may grow.

k. Pollutants

These are irritants and contaminants such as smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste of a solid, liquid, gaseous or thermal nature. Waste includes property to be disposed of, as well as property to be recycled, reconditioned, or reclaimed.

l. Products-Completed Operations Hazard

This includes all bodily injury and property damage that occurs away from the named insured's residence premises that results from the named insured's product or work. It does not include those products still in the named insured's physical possession or work not yet completed or that has been abandoned.

Work is considered completed when the work called for in the named insured’s contract has been completed. Work at one site that has been completed is a completed operation even if the contract calls for work at more than one site. In addition, part of work done at a site that is put to its intended use by any party other than a contractor or subcontractor still working on the same project is a completed operation. Work is considered completed, even if it may still need service, maintenance, correction, repair, or replacement.

This definition does not include bodily injury or property damage that arises out of any of the following:

· Transportation of property, unless injury or damage is caused by a condition in or on a vehicle not owned or operated by any insured, when that condition is created by loading or unloading that vehicle by any insured

· The existence of tools, uninstalled equipment, or abandoned or unused materials

Example: Clyde, owner of the in-home business, “Clyde’s Wall of Sound,” just finished installing a PA system for a convention center’s permanent stage. Clyde is sued by a convention attendee who is seriously hurt after tripping over some sound baffle materials that Clyde left after completing the job. This loss is excluded under this hazard.

m. Suit

This is a civil proceeding that alleges damages for bodily injury, property damage, or personal and advertising injury that this insurance covers. It includes arbitration or any other forms of alternative dispute resolution when such methods are to resolve damage claims involving the insured. However, the insured’s participation in such resolution has to have the insurance company’s consent.

n. Temporary Worker

This is any person furnished to the named insured to substitute for a permanent employee who, for some reason, is temporarily unavailable to work for the described operations. It also refers to a worker acquired just to handle seasonal or short-term workload conditions.

o. Valuable Papers And Records

Refers to any documents inscribed, printed or written, manuscripts or records, including abstracts, deeds, drawings, films, maps, mortgages and books but not money, securities or any data, converted data, programs and instructions used in electronic data processing operations, including materials that store the data.


Valuable Papers and Records? - YES	Valuable Papers and Records? - NO

p. Your Product

This term refers to the following:

· Any goods or products manufactured, sold, handled, distributed, or disposed of by the named insured, by others trading under the named insured’s name, or by any party whose business or assets the named insured acquired. It includes containers (excluding vehicles), materials, parts or equipment furnished in connection with such goods or products. It does not include real property.

· Warranties or representations made concerning the fitness, quality, durability, performance, or use of the product and providing (or failing to provide) adequate warnings or instructions.

However, the term does not apply to vending machines or other property rented to or located for the use of others. Such items that are sold to others by the named insured would qualify as products.

q. Your Work

Business activities performed by the named insured, or by others on the named insured’s behalf, qualify as the named insured’s work. The term also applies to materials, parts, or equipment furnished in connection with such work. Warranties or representations made concerning the fitness, quality, durability, performance, or use of the work and providing or failing to provide adequate warnings or instructions are all considered Your Work.

Note: This term does not include a requirement that such activity be related to the business described in the HO 07 01 form. This could cause a problem if a loss occurred that was due to work activity that was unrelated to the described operations.

Example: A visitor to Jane’s home is hurt when he trips over materials related to a custom shelf Jane was building. The client had come to Jane’s home to approve some paint colors for a painting job. The description of Jane’s operations on the HO 07 01 form is: Jane’s Custom Painting – we perform professional level painting, stenciling, and wallpapering to transform your inner space! Her insurer disputes coverage since the loss had nothing to do with the described operation.

SECTION I – PROPERTY COVERAGES

The HO 07 01 form adds the following coverages with regard to the business operations on the covered premises:

B. Coverage B – Other Structures

This provision (inapplicable when the form amends either a tenant or condominium policy) only applies to an other structure that is identified by the policy as being used in a described business. The coverage part responds to physical loss to such a structure when that loss is created by an eligible source of loss. The limit that appears on the form is the maximum available amount of coverage.

Example: Raymond’s barn is destroyed in a fire, caused by a short in a circuit breaker. The barn was converted to house Raymond’s tax consulting and preparation service. The converted barn is protected by the HO 07 01 form since the structure and the operations were scheduled on this endorsement.

C. Coverage C – Personal Property

The HO 07 01 form modifies the contents coverage of the form that it is attached to.

1. Covered Property

This provision adds coverage for personal property that belongs to other parties but is in the insured’s care or custody. It also protects personal property that is leased along with a written obligation to insure that property.

Example: Grady’s “Quik Massage” is run out of his home. When business began to grow, his sister became a partner and they decided to lease an additional massage station. As part of the lease agreement, Grady was responsible to insure the massage table for any loss. The table is eligible for protection under Coverage C.

3. Special Limits of Liability

This provision amends items a., b., h., and i.

a. The special limitation on the following:

money	bank notes	bullion
gold other than goldware	silver other than silverware	platinum other than platinumware
coins and medals	scrip	stored value and smart cards

is $1,000. This higher amount, though still modest, is much more useful for homes that contain a home business.

b. Coverage for, essentially, valuable papers coverage is altered. No coverage exists here for expenses related to researching, replacing, or restoring lost information or materials. Rather, this protection is separately provided by the HO 07 01 form’s Additional Coverage Section.

h. The sublimit that applies to property that is generally used for business is deleted since the form’s applicable, full Coverage C limit is available to respond to such property.

i. A $5,000 sublimit applies to property, away from the "residence premises," used primarily for "business" purposes. This sublimit does not apply to money, scrip, stored value cards, smart cards, or securities.

Note: Under the HO 00 08 form, items h. and i. above appear (and are amended similarly) as items e. and f.

4. Property Not Covered

The HO 07 01 form adds an additional, ineligible item. No coverage is available for contraband or for property that is used illegally.

Example: Grady’s home business is burglarized and both of his massage tables are gone. When filing a claim, the insurance company discovers that Grady’s sister and partner used the tables for “special, happy” massages. Due to the illegal use, that portion of Grady’s claim is denied.

E. Additional Coverages

This portion of the HO 07 01 form amends coverage for:

3. Trees, Shrubs and Other Plants–it eliminates the exclusion for recovering for loss to such property when it is grown as an activity of the described business

6. Credit Card, EFT Card, etc.–It permits up to a maximum of $1,000 for loss related to the use of such property when that use is connected to the covered business

13. This portion of the form also adds coverage for:

a. Accounts Receivable–$5,000 on premises and $2,500 off premises coverage for amounts that a covered business is unable to collect from customers because the accounts receivable records were damaged or destroyed by an eligible source of loss. This additional coverage also responds to extra expenses for collecting accounts and interest on loans acquired to compensate for the loss of accounts receivable. The loan interest charges are for the period from when the loan is acquired until payment is made under this provision.

b. Valuable Papers and Records–There is a maximum of $2,500 to deal with expense to recoup loss of valuable papers and records. Such documents must be connected to the covered business.

c. Business Income–This coverage pays a business that loses income after being damaged or destroyed by an eligible source of loss. Coverage also applies to such loss caused by damage or loss to business personal property that is in the open or in a motor vehicle. The coverage applies to loss of income that takes place during the time that operations are being restored (and within 12 months of the loss date).

All payroll is covered for the first 60 days. After 60 days, only the officers, executives, managers, and employees under contract payroll are covered.

This is an additional source of coverage. Payment under this provision does not affect other policy limits.

d. Extended Business Income–Regular business income coverage protects against loss related to a business that is interrupted by a loss. That coverage ends when the business is back in operation. Extended business income assists with the loss experienced in the period immediately after operations resume. Coverage is for 30 days after business resumes or when income is back up to pre-loss level, whichever occurs first.

e. Extra Expense–This is an additional source of coverage. It protects a covered home business for operational expenses created by trying to resume the business after experiencing a physical loss to the business located on the residence premises. Of course, the loss must be caused by an eligible source of physical loss. Eligible extra expense also applies to loss affecting business personal property, either on the premises or in the open. The coverage applies to loss extra expenses that arise during the time that operations are being restored (and within 12 months of the loss date).

No deductible applies to extra expense payments.

f. Civil Authority Prohibits Use–A business is eligible for protection under this coverage no sooner than 72 hours from the loss date. It pays for business income and extra expense loss caused when a civil authority denies access to the covered premises. However, the denied access must be due to an off premises physical loss created by an eligible peril. Coverage applies either for three weeks after the date of denied access or the expiration of the insured’s business income coverage, whichever happens last. The business income coverage starts 72 hours after the civil authority action while the extra expense responds immediately.

SECTION I – EXCLUSIONS

Note: The following amend exclusion A. 10 in ISO’s HO 00 03 and HO 00 05 policies.

10. Besides being subject to exclusions found in the policy amended by the HO 07 01, the endorsement’s protection does not apply in the following instances:

a. Dishonesty―essentially barring losses created by criminal acts of the named insured, persons with financial interest in the described business (partners, business members, employees, etc.) and persons who are given custody to covered property. However, exceptions are granted for destruction of property by employees and, with regard to valuable papers coverage, such loss involving hired carriers.

Example: Marge, who runs ‘Mazin’ Marge’s Catering out of her home, turns in a claim that includes the cost of rebuilding information on sections of client account records that were destroyed during a fire. It’s later discovered that Marge’s partner was underbilling clients and, when learning of the business fire, she burned incriminating records and then put the charred remains in the damaged area – claiming that they were there when the fire started. That portion of the loss is not eligible.

b. False Pretense―no coverage exists for property that is lost because it was surrendered to others voluntarily and it turned out to involve any form of fraud or deceit.

c. Business Income and Extra Expense―no coverage is available for expenses related to delays to restore operations when the delays are caused by labor conflicts or protestors but only when such interference takes place at the location. Neither are losses caused by license, lease or contract suspensions or terminations covered unless they occur as a direct result of the interrupted covered business activity. However, any such payments would only be made during the restoration period. Finally, no coverage exists for indirect (consequential) losses.

d. Accounts Receivable and Valuable Papers and Records―this item has a lot of caveats considering its modest amount of coverage. Under this item, the form advises the two referenced coverages are subject to all of the exclusions appearing in this form except for the Business Income and Extra Expense exclusions.

However, with regard to the policy form that it amends, the only excluded sources of loss that apply to these coverages are neglect, nuclear hazard, war, and intentional acts.

The Home Business form bars accounts receivable and valuable papers losses when they involve:

Programming error, mistaken instructions, or improper installation (or maintenance) of data processing equipment (including parts) that cause damage (such as corruption) or erasure of electronic information.

Example: Pete’s Painting Pros files a claim for $320 to cover his cost to rebuild his customer database. His insurer turns down the claim. The claim details reveal that the information was lost when Pete’s assistant downloaded a software upgrade improperly, overwriting all of the business’ account files.

But such loss is covered when it is the direct result of lightning damage.

Contraband or any property used in illegal activities

No coverage is permitted for Valuable Papers and Records losses involving:

Processing or copying mistakes. But an exception is made of direct loss from fire or explosion

Example: Jeff’s Homespun Legal Aid loses hundreds of dollars of records. They were destroyed when the drying element in his copier overheated and a fire erupted. This loss is covered (up to the coverage limit).

Wear and tear

No coverage is permitted for Accounts Receivable losses involving:

Any incidence of covering up illegal handling of money, securities, or property but only for the amount of loss directly attributable to such acts
Mistakes (including omissions) in records keeping, accounting, and/or billing
Amounts that arise only due to auditing or inventories

SECTION I – CONDITIONS

J. Loss Payment

This form alters the base policy’s loss payment section in the following ways:

1. Property of Others

Here, the insurer states its right to compute the value of loss to property that is in an insured’s care according a consideration for depreciation. Any payment for such property is also limited to the amount of the loss that can be attributed to the named insured, along with labor costs, materials or value of service contributed to the lost or damaged property. However, those contributions must have been either furnished or arranged by the named insured.

2. Valuable Papers and Records

The insurance company’s computation of valuable papers and records losses are based on the value of blank materials that are needed for record reproduction and transcribing costs. This valuation applies to both hard copy and electronic records. However, it does not include the cost of commercially available, packaged software; nor does it apply to records and papers that have already been replaced or restored. Considering the last item, it would be to the named insured’s advantage to seek coverage first (though this may be impractical).

3. Accounts Receivable

This part of the provision is used when the named insured is unable to accurately support the amount of an accounts receivable claim. In such instances, a monthly accounts receivable average can be used. The figures from the 12 months just before the loss month are the basis of the calculation, but the insured must modify the calculation by accounting for any unusual monthly account activity.

Example: Over the course of a normal year, Harry’s Tailoring experiences a fluctuation of 15% in monthly revenue. In the 12 months before a reported loss, the business experienced a 45% increase in one month’s revenues. Harry would have to dismiss most of that abnormal percentage increase in determining his recent accounts receivable loss.

Further, any accounts receivable loss payments will be reduced by the amount of retained receivables, amounts that are reestablished/collected, adjustments for normal, uncollectible payments and by any unearned interest and service charges.

M. No Benefit to Bailee

This provision replaces any such provision found in the amended policy. This insurance does not provide coverage for parties who have possession of the covered property as part of a bailment.

Q. Policy Period and Coverage Territory

This provision replaces the amended policy’s Policy Period provision. Losses qualify under this endorsement only when they take place during the policy period and within this form’s definition of covered territory.

T. The HO 07 01 form adds the following conditions:

1. Coverage Territory

Losses that begin within the defined territory or, for property that is being transported, which occurs between two points within the defined territory, are eligible for coverage.

2. Resumption of Operations

Under this provision, any business income and extra expense losses are reduced to the degree that normal business activities are restarted after a covered loss. The reductions are for activities that are resumed at the applicable residence.

3. Limitation – Electronic Media and Records

a. The coverage this form grants for business income losses that involve tangible loss to electronic media and records is limited. Specifically, no coverage is available after either 60 consecutive days beyond the eligible loss date or after the post-loss date when necessary repairs, rebuild or replacement could have reasonably been made (assuming use of similar quality material), whichever occurs latest. The form includes two examples that attempt to illustrate how the time limitation works.

b. Electronic Media and Records are defined to include:

· Items that process, record, or store electronic data

· The data that is actually stored

· Programs used for processing date or controlling related equipment

SECTION II – LIABILITY COVERAGES

A. Coverage E – Personal Liability

This section extends the form’s liability coverage incidents of Bodily Injury and Property Damage, which are the result of an occurrence that takes place in the defined coverage territory and during the policy period. In addition, personal and advertising injury is covered only if the offense which caused the injury is committed in the defined coverage territory and during the policy period. The offense must be related to the covered business operation.

B. Coverage F – Medical Payments to Others

This section extends the form’s medical payments coverage to incidents of accidental Bodily Injury when triggered by events that take place in the defined coverage territory. However, such events must also occur within the policy period and must be related to the covered business operation.

SECTION II – EXCLUSIONS

E. Coverage E – Personal Liability and Coverage F – Medical Payments to Others

This form replaces two exclusions found in the base policy it amends.

2. Business

No coverage is provided for loss connected to any form of business activity (essentially actions performed for income or compensation) with the exception of the business activity specifically covered (and described) under the amended policy. The exception extends to products and work that is directly related to the covered operation.

Example: Mason turned in a claim. He was sued by a piano student who lost the use of a hand after it was crushed while Mason closed a piano key cover. However, the claim was rejected as the business described and covered on Mason’s HO policy was “Mason’s Munchies” – a catering service. His piano teacher activities were ineligible.

3. Professional Services

No coverage for either bodily injury or property damage is granted when any form of professional-level service is involved with the loss. The exclusion applies to situations where a named insured either provides or fails to provide services such as:

Legal, insurance, accounting, or advertising
Preparing or approving maps, drawings, reports, opinions, orders, design, and similar plans
Supervisor, inspections, or engineering activities
Medical, surgical, or related services, including advisory
Health or therapy advice or instruction
Cosmetology services or advice
Vision or hearing related services
Body piercing
Pharmaceutical services

Note: The above list is illustrative; many other, unlisted, services could also be deemed professional and, therefore, excluded.

Example: Bill operates an appraisal service from his home and it’s covered by a HO 07 01 endorsement. Bill is sued by a neighbor. The neighbor sued because he lost a business client who was dissatisfied by a highly inaccurate inspection that the neighbor hired Bill to perform. Bill’s policy will not respond to the loss as it involved a professional service.

F. Coverage E – Personal Liability

The HO 07 01 form adds several exclusions that only apply to the described business.

7. Damage to Impaired Property or Property Not Physically Injured

The HO 07 01 endorsement does not cover property damage to property that has not been tangibly harmed including impaired property. The exclusion applies when such property is affected by a deficiency, defect or other problem with the named insured’s product or work. It also applies when such harm is due to the named insured’s (or the insured’s agent’s) failure or delay in handling contractual responsibilities.

However, a coverage exception applies when the property of others is harmed when the named insured’s product or work is accidentally damaged after it has begun use as intended.

8. Damage to Particular Property

There is no coverage for property damage involving premises no longer used by the named insured due to the insured’s selling, donating, or abandoning the premises.

An exception exists when the premises represents the insured’s work which had never been occupied, rented by, or made available for rent by the insured.

Also, real property that is damaged by the work performed on such property by either the named insured or a subcontractor is ineligible for coverage.
Further, repairs, replacement or restoration of property triggered by the named insured’s errant work on that particular property is disqualified from coverage.

Example: Carla’s Cozy Painters is sued by a client whose home’s exterior, aluminum-sided walls were damaged. Carla used the wrong type of paint which failed to adhere to the worn siding. The paint ran off, staining the expensive, decorative walkways surrounding the home. The loss to the walls is not eligible for coverage.

However, coverage does exist to the extent available under this form’s “Products-completed operations hazard.”

9. Damage to Your Product

No coverage applies to the named insured’s products when such loss is caused by the product.

10. Damage to your Work

When the named insured’s work is damaged by any part of that work or that arises out of that work, there is no property damage coverage if that work is included within the products-completed hazard. However, coverage does exist when the damaged work or damage related to that work was performed by a subcontractor operating under the direction of the named insured.

11. Employer’s liability

Bodily injury to an employee of the insured as a result of his or her employment by the insured or performing duties in conjunction with the conduct of the insured’s business is excluded. Bodily injury to the spouse, children, parents, brothers, or sisters of that employee as a consequence of the employee's bodily injury is also excluded.

This exclusion applies whether the insured is liable as an employer or in any other capacity, or whether it must share damages with or repay someone else who must pay damages because of the injury. However, it does not apply to liability the insured assumes under an insured contract.

12. Personal and Advertising Injury

Note: The headings used for items 12 a. through 12.j. are descriptive and do not appear in the form.

No coverage under the HO 07 01 form for Personal Injury and Advertising Injury involving the following:

a. Knowing Violation of Rights of Another

The insurance company does not pay for personal and advertising injury that the insured causes or directs. This exclusion applies only if the insured knew that the act would violate the rights of another and result in personal and advertising injury.

b. Material Published With Knowledge of Falsity

Coverage does not apply when personal and advertising injury is caused by material published (or broadcast) by or at the insured's direction with its knowledge that the information was false.

Example: Klara writes an article in her subscription Antique Collector’s blog that a well-known quilt collector has fake quilts displayed at an area library’s craft exhibit. Klara is well aware that the quilts are authentic, but she wrote the article in order to hurt that collector’s popularity. Regardless, the exhibit is cancelled and the quilts removed from display. Klara has no coverage when the collector later sues her for defamation.

c. Material Published Prior To Policy Period

There is no coverage for personal and advertising injury arising out of oral or written publication of material that first began before the coverage inception date.

d. Criminal Acts

Insurance does not apply to personal and advertising injury arising out of a criminal act committed by the insured or at its direction.

e. Contractual Liability

There is no coverage for liability the insured assumed in a contract or agreement. However, this exclusion does not apply to liability the insured has without a contract or agreement.

f. Breach of Contract

Coverage does not apply to personal and advertising injury arising out of breach of contract. However, this exclusion does not apply to an implied contract to use the advertising idea of another in the named insured's advertisement.

Example: Geri runs a subscription website for model cars and model railroad enthusiasts. She is paid to run a series of ads for a large collectors’ exhibit and swap meet. Unfortunately, Geri forgets to do so until the last day of the weeklong event. The event’s sponsor sues Geri because of the low attendance – no coverage is available for this loss.

g. Quality or Performance of Goods–Failure To Conform To Statements

Personal and advertising injury that arises out of failure of the named insured's goods, products, or services to conform to statements of quality or performance stated in its advertisement is excluded.

h. Errant Price Information

The insurance company does not pay for personal and advertising injury that arises out of incorrect descriptions of goods, products or services as stated in the named insured's advertisement.

i. Media-Related Businesses

There is no coverage for personal and advertising injury committed by an insured in the businesses of advertising, broadcasting, publishing, or telecasting. There is also no coverage if the insured’s business designs or determines website content for others, or provides Internet search, access, content, or service.

There is an exception. This exclusion does not apply to the sections of the definition of personal and advertising injury that address false arrest, detention or imprisonment, malicious prosecution, or wrongful eviction, entry, or invasion of privacy.

j. Resultant Bodily Injury losses

If personal injury or advertising injury results in a bodily injury, there is no coverage for that bodily injury under personal or advertising injury coverage. The bodily injury could be covered under bodily injury and property damage coverage though.

13. Pollution

Under standard policies, pollutants are defined broadly, referring to any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste (includes materials being recycled, reconditioned, or reclaimed).

Pollution Exclusion and Limited Coverage

a. Coverage does not apply to bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(1) At or from any location or site any insured ever owned, occupied, rented, or had loaned to it.

(2) At or from any location or site any insured or others ever used to handle, store, dispose of, process, or treat waste

(3) That any insured (or any other party the named insured is legally responsible for) ever transported, handled, stored, treated, disposed of, or processed as waste

(4) At or from any location or site where any insured, its contractors, or subcontractors are performing operations if the pollutants are brought to the location or site in conjunction with such operations or if the operations involve testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way.

Note: Bodily injury or property damage that arises out of heat, smoke or fumes from a hostile fire is NOT subject to the pollution exclusion.

Example: Jayla runs a housecleaning business out of her two-family home. One day a fire starts in a large closet where Jayla stores cleaning supplies including ammonia. The fire causes some ammonia containers to burst and fumes are inhaled by the family that rents the upper floor. The renters sue Jayla for their hospitalization and treatment expenses. Jayla’s HO 07 01 will permit response to this loss.

b. Coverage does not apply to any loss, cost or expense that arises out of any:

(1) Request, demand, order, or statutory or regulatory requirement for any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, respond to, or assess the effects of pollutants in any way

(2) Claim or suit by a governmental authority (or on its behalf) for damages relating to testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or otherwise evaluating pollution’s aftermath.

14. Recall Of Products, Work Or Impaired Property

Coverage does not apply to damages claimed for any loss, cost or expense the named insured or others incurs for loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of the named insured's product, work, or impaired property. This exclusion applies if the withdrawal or recall is because of a known or suspected defect, deficiency, inadequacy, or a dangerous condition in the item recalled.

15. Employment-related Practices

Under the HO 07 01 form, no protection exists for either bodily injury or personal and advertising injury losses arising from how a home-business deals with employees and prospective employees. Specifically, no coverage is granted for:

A grievance by a job applicant who fails to get hired
Any claim by a current employee who is terminated
Any claim for a person who alleges harm from acts (including any failure to act), coercion, employee evaluation, demotion, defamation, harassment, humiliation, job or duty reassignment discipline or discrimination.

It does not make a difference if a spouse or relative makes a claim for harm from consequences of a named insured’s actions. Derivative claims are also ineligible for coverage.

Note: It is the type of acts that are excluded. The fact that an insured is not in the specific role of employer has no effect – related losses are still barred from coverage.

G. Coverage F – Medical Payments to Others

This form adds several exclusions, eliminating payments for medical and treatment expenses related to the described business for:

Persons who otherwise qualify as insureds under the amended policy
Any person performing work for or as a representative of an insured or a person renting premises from an insured

Example: Joe rents a finished basement from Aurora whose home, along with its accounting business, is insured under a HO 03 with a HO 07 01 endorsement. Joe has hired painters to work on his kitchen basement. One painter is severely injured when he trips on the home’s basement stairs. The painter’s medical expenses aren’t eligible for medical payments coverage.

Persons who are hurt while participating in sports or similar activities
Expenses that qualify for coverage under this form’s “products-completed operations hazard”
Incidents that are barred from coverage under this form’s personal liability exclusion section

SECTION II – ADDITIONAL COVERAGES

C. Damage to Property of Others

This endorsement modifies the coverage existing in the HO form so that it extends to the named insured’s operations that is described in the HO 07 01 endorsement. The coverage makes a maximum of $2,500 available to pay third parties for loss or destruction of their property.

Example: Harry operates and insures a small appliance and engine repair service out of his home. A windstorm blows down one of his trees which falls against and collapses a wall. Several lawn mowers Harry had taken in for service were destroyed. The loss involving his customers’ property is eligible for coverage.

However, that coverage is subject to the All Other Business Liability aggregate limit that appears in the form’s schedule.

Otherwise, all the other property-related exclusions found in the amended HO form apply to this coverage addition.

SECTION II – CONDITIONS

The HO 07 01’s Section II Conditions modifies (specifically, replaces) the HO base form’s Limit of Liability, Severability of Insurance, and Policy Period provisions.

A. Limit of Liability

1. Aggregate Limits

a. Products-completed Operations Hazards Liability

This informs that any payments for bodily injury or property damage that are related to the products-completed operations peril are capped (in a given policy period) by the amount of that hazard’s aggregate limit that appears in the form’s schedule. The aggregate is independent of the number of occurrences, insured, filed claims, lawsuits and/or persons who are injured in such losses.

b. All Other Business Liability

This informs that payments for all other liability other than product-completed operations hazard liability that are related to the covered business are capped (in a given policy period) by the amount of the aggregate limit for all other business liability that appears in the form’s schedule. The aggregate is independent of the number of occurrences, insured, filed claims, lawsuits and/or persons who are injured in such losses.

2. Sublimit of Liability

A separate sublimit applies to payments for medical expenses. The sublimit that appears in this form’s schedule is the maximum amount of such coverage available to a given person under a given occurrence for bodily injury. This amount is a sublimit of the form’s other liability limit aggregates so, amounts paid under this coverage also reduce the available coverage under those aggregates.

B. Severability of Insurance

This insurance applies separately to each "insured" for a given, eligible loss. However, the applicability of this provision will not increase the HO 71’s aggregate liability limits that appear in the schedule.

Related Court Case: Severability Clause Could Not Serve to Avoid Policy Exclusions – illustrates how this distinct provision serves its purpose without undermining other policy provisions.

I. Policy Period and Coverage Territory

The HO 07 01’s coverage only applies to losses that take place during the policy period and within the defined coverage territory. These limitations apply to eligible incidents of bodily injury, property damage and personal and advertising injury.

SECTION I And II – CONDITIONS

This endorsement adds one condition that applies to Sections I and II.

H. Examination of Your Books and Records

Under this provision, the insurance company reserves the right to examine and audit the records that are relevant to the covered business. That right exists not only throughout the policy period, but up to three years after that period’s expiration.