1. Forms
2. BP
3. BP-04-12

What the form is

The BP 04 12, Limitation Of Coverage To Designated Premises, Project Or Operation, is an endorsement used with the Businessowners Policy (BOP). Its primary function is to restrict the liability coverage afforded by the policy to specific locations (premises) or particular projects or operations that are explicitly listed in the endorsement's schedule. This means that for bodily injury, property damage, personal and advertising injury, or medical expenses to be covered, the incident must arise out of the ownership, maintenance, or use of the scheduled premises or the designated project/operation. The 04 17 edition of the form was introduced, in part, to address court interpretations that had found coverage for off-premises incidents under previous versions, thereby clarifying and potentially narrowing the scope of coverage.

Classes of business it applies to

This endorsement is typically used when an insurer intends to provide coverage for only a well-defined portion of an insured's exposures. Examples include:

• Contractors: When coverage is intended only for a specific job site or project (e.g., a builder constructing a particular building).
• Businesses with multiple, distinct locations: If an insurer only wants to cover one or a few specific locations out of several owned or operated by the insured.
• Rental Dwellings and Condominium Residential Unit-Owners: This form is noted to be attached to Businessowners policies insuring these types of properties.
• Specific Operations: If a business has diverse operations, this endorsement can limit coverage to only those operations listed.

Special considerations

• Restrictive Nature: This is a significant coverage-limiting endorsement. Policyholders must understand that exposures not listed on the schedule are likely not covered.
• Scheduling Accuracy is Critical: Extreme care must be taken to ensure that the premises, project, or operation shown in the schedule accurately and completely reflects the intended scope of coverage. Errors or omissions can lead to serious coverage gaps.
• Interaction with Other Coverages: When other coverages, such as Hired and Non-Owned Auto Liability (e.g., BP 04 04), are part of the policy, this limitation endorsement can inadvertently restrict that coverage if not carefully considered. For instance, auto liability might be unintentionally limited to accidents occurring only on the scheduled premises unless the "Project Or Operation" part of the schedule is drafted to include such auto use.
• 2017 Revision Impact: The 04 17 edition was viewed by some industry experts as a significant reduction in coverage compared to previous versions, aiming to eliminate ambiguities that had led to broader court interpretations.
• Negotiability: In some cases, it may be possible to negotiate the removal of this endorsement, particularly if the insured requires broader coverage and the underwriter is willing to provide it, possibly for an additional premium.

Key information for agents and underwriters

• Risk Assessment: Agents and underwriters must work closely with the insured to clearly define and document the specific premises, projects, or operations to be covered. Vague descriptions can lead to disputes.
• Pricing Implications: While this endorsement can help in tailoring coverage to a specific risk and potentially affect pricing by limiting exposure, the primary impact is the narrowing of coverage.
• Identifying Coverage Gaps: Agents have a crucial role in explaining the restrictive nature of this endorsement to insureds. They should highlight potential scenarios where coverage would not apply (e.g., operations at an unscheduled location, new projects not yet added to the schedule).
• Underwriting Intent: Underwriters use BP 04 12 to precisely define the scope of accepted risk, especially for insureds with operations that might otherwise present broader or less predictable exposures. It's a tool to avoid providing coverage for exposures the insurer did not intend to cover or underwrite. The schedule must be explicit.
• Documentation: All parties should maintain clear records of the discussions and decisions regarding the scope of the designated premises, project, or operation.