1. Forms
2. BP
3. BP-00-03

Form BP 00 03: Businessowners Coverage Form

The Businessowners Coverage Form (BP 00 03) is a cornerstone of the Businessowners Policy (BOP) program. It's a package policy that combines both property and liability coverage for eligible small to medium-sized businesses. This form simplifies insurance for businesses by bundling essential coverages into a single, comprehensive contract rather than using separate monoline commercial property and general liability forms. The BP 00 03 itself is a lengthy document that outlines the property and liability coverage provisions, as well as all policy conditions. It serves as the foundation of the BOP, which can then be tailored with various endorsements to meet specific needs of the insured or requirements of the insurer.

Classes of Business It Applies To

The BP 00 03 is designed for a wide array of "Main Street" businesses that fit within certain size and operational parameters. Eligibility is a key factor, and while specific insurer rules may vary, the ISO (Insurance Services Office) guidelines provide a general framework. Typically, eligible businesses have no more than $6 million in annual gross sales and occupy no more than 35,000 square feet per location (excluding certain basement areas). Examples of eligible business classes include:

• Apartment buildings (including residential condominium associations) of any size.
• Office buildings up to six stories and 100,000 total square feet.
• Retail stores, including internet retailers.
• Service or processing businesses (e.g., dry cleaners that clean on premises).
• Contractors, with restrictions such as payroll not exceeding $300,000 annually and work not performed at heights over three stories.
• Restaurants, including limited cooking, quick service, full service, and fine dining establishments, often with size limitations (e.g., up to 7,500 square feet for fast food).
• Convenience food stores, grocery stores, and supermarkets, sometimes with specific requirements if they sell gasoline (e.g., minimum 3,000 square feet).
• Motels not exceeding three stories, with no square footage restriction, but typically excluding seasonal operations.
• Self-storage facilities.
• Wholesale risks.
• Certain light manufacturing businesses.

It's important to note that businesses like manufacturers, auto repair/service stations, bars, amusement parks, and financial institutions are generally ineligible under standard ISO BOP rules, regardless of size.

Special Considerations

Several factors must be considered when using the BP 00 03:

• Eligibility is paramount: Insuring an ineligible risk on a BOP can distort loss ratios for both the BOP program and the specific business class. If eligibility is questionable, it's often better to submit the risk for a Commercial Package Policy (CPP) and request BOP treatment if the insurer's guidelines permit.
• Property Valuation: The BP 00 03 typically offers replacement cost coverage for property, provided the limit of insurance at the time of loss is at least 80% of the property's replacement value. Underinsurance can result in a penalty, potentially adjusting the loss to an actual cash value basis.
• Coverage Breadth: The property coverage in a BOP is often broader than an unendorsed standard commercial property policy. However, the standard BP 00 03 provides "special perils" (open perils) coverage, meaning it covers direct physical loss unless specifically excluded or limited. Named perils coverage can be achieved by attaching an endorsement like BP 10 09.
• Built-in Coverages: The form includes several additional coverages, such as debris removal, business income, and extra expense. For example, business income coverage can apply if a civil authority prohibits access to the premises due to a covered loss at a nearby property. Personal property off-premises is also covered up to a certain limit (e.g., $10,000, though higher limits are available). Outdoor property like trees and shrubs has limited coverage.
• Limitations and Exclusions: The form contains specific limitations and exclusions. For instance, there are exclusions related to water damage (like flood and sewer backup) and specific limitations for items like fragile articles or vegetated roofs.
• Endorsements: While comprehensive, the BP 00 03 often requires endorsements to tailor coverage. The ISO BOP program has around 170 available endorsements. For example, BP DS 00 refers to declarations and schedules, while BP 04 04 is an endorsement for Hired Auto and Non-Owned Auto Liability. Ordinance or Law Coverage (BP 04 46) is another common endorsement to cover increased costs of construction due to local ordinances.
• Related Forms: The BP DS 00 is the declarations page, which includes specific details of the insured, premises, coverages, limits, and forms applicable to the policy. The BP 04 04 endorsement adds Hired and Non-Owned Auto liability coverage, which is crucial for businesses with auto exposures not covered by a separate commercial auto policy.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriting a BOP has evolved from a homeowners-like approach to a more commercial underwriting process. Key factors include management quality, premises condition, public and private fire protection, and controls to prevent accidents and losses.
• Accurate Information: Since insurers may not inspect all BOP risks, the agent's knowledge and the accuracy of the application, loss reports, and rating bases (like sales or payroll) are critical for proper underwriting and pricing.
• Insurance-to-Value: Ensuring accurate property valuation is vital not only for adequate recovery for the insured but also for correct premium calculation and maintaining eligibility for replacement cost coverage.
• Coverage Gaps: While broad, the BOP may not cover all exposures. Agents should identify potential gaps, such as professional liability (often excluded but can sometimes be added back by endorsement) or specific perils like flood. The standard BOP (BP 00 03) generally doesn't include building coverage if the insured is a tenant, though it may cover tenant's improvements and betterments and exterior building glass under business personal property in such cases.
• Distinction from Micro-BOP: ISO also offers a Micro-Businessowners Policy (using form BP 00 04) for very small businesses (e.g., up to four employees, sales under $500,000). The Micro-BOP is more streamlined, typically doesn't cover buildings, and provides named perils property coverage, which is a significant reduction compared to the special perils coverage in the standard BP 00 03.
• Liability Coverage: The liability section of the BP 00 03 is comparable to an occurrence-based Commercial General Liability (CGL) form, covering premises/operations, products/completed operations, and personal and advertising injury. However, there can be differences, so a careful review is necessary.