1. Forms
2. BP
3. BP-20-02

Form BP 20 02: Micro-Businessowners Service Endorsement

1. What the form is

The BP 20 02, Micro-Businessowners Service Endorsement, is designed to modify the Micro-Businessowners Coverage Form (BP 00 04) specifically for small service-oriented businesses. Its primary function is to tailor the policy to address the unique risks faced by these enterprises. Key modifications include:

• Theft of Property of Others: It adds the peril of theft for property belonging to customers that is in the insured business's care, custody, or control. This is a crucial enhancement for service businesses that regularly handle client property. However, this coverage excludes losses arising from dishonest acts by the insured or their employees, and losses due to false pretenses.
• Reward Coverage: The endorsement provides coverage for rewards, typically up to $500, paid for information leading to the arrest and conviction of individuals who have committed theft or other covered losses against the insured business.
• Key/Lock Replacement: It includes coverage, often up to $1,000, for the cost of replacing keys and locks if, for example, a client's key is lost or stolen while in the insured's possession.
• Blanket Additional Insured Status: A significant modification to Section II - Liability is the inclusion of blanket additional insured status for other entities when this is required by a written contract. This means the policy automatically extends liability coverage to these entities without needing to name each one individually on the policy.

2. Classes of business it applies to

This endorsement is specifically intended for "micro-businesses" in the service sector. Generally, a micro-business is defined as having a small number of employees (e.g., up to four, including the owner) and limited annual sales (e.g., not exceeding $500,000). Given that the base Micro-Businessowners Coverage Form (BP 00 04) is designed for businesses where building coverage is usually not needed and focuses on business personal property, this endorsement is well-suited for service businesses that operate out of leased spaces, co-working environments, or even home-based businesses.

Real-world examples of businesses that would benefit from this endorsement include:

• Cleaning services: They have care, custody, or control of clients' keys and are on clients' premises.
• Repair services (e.g., electronics, small appliance): They handle customers' valuable items.
• Pet sitters or dog walkers: They are responsible for clients' pets and often have access to their homes.
• Consultants or freelancers who work at client locations and might be contractually required to list clients as additional insureds.
• Locksmiths: They handle keys and work on security systems for clients.

3. Special considerations

• Care, Custody, or Control Exposure: The primary driver for this endorsement is the exposure related to having clients' property in the business's possession. The added theft coverage is a key benefit here.
• Exclusions for Dishonesty and False Pretense: It's critical to understand that the theft coverage for property of others has specific exclusions. If a loss occurs due to a dishonest act by the insured or their employees, or if property is voluntarily parted with due to a scam or trick (false pretense), there would be no coverage under this provision. Separate crime or fidelity coverage might be needed for employee dishonesty exposures.
• Contractual Requirements for Additional Insured Status: The blanket additional insured provision is activated when a written contract requires the insured to provide such status. Businesses should review their contracts carefully to understand their obligations. This feature simplifies compliance for businesses that frequently enter into such agreements.
• Named Perils Basis: The underlying Micro-Businessowners Coverage Form (BP 00 04) typically provides property coverage on a named perils basis, which is more restrictive than "open perils" or "special form" coverage. This endorsement adds theft as a named peril for property of others, but the overall policy limitations should be understood.
• Limited Scope of Micro-BOP: The Micro-BOP is a streamlined policy designed for smaller, less complex businesses. It generally does not cover buildings or stock (unless added by another endorsement like BP 20 01 for retail risks).

4. Key information for agents and underwriters

• Risk Assessment:
  • Evaluate the nature of the service provided and the extent to which the business takes possession of client property. Businesses with higher values of client property or more frequent handling may represent a greater risk.
  • Assess the insured's procedures for safeguarding client keys and property. Are there good controls in place to prevent loss or theft?
  • Consider the contractual obligations of the insured. Do they frequently sign contracts requiring them to name others as additional insureds?
• Pricing: The premium for this endorsement will reflect the added coverages. The limits provided for rewards ($500) and key/lock replacement ($1,000) are relatively modest but address common small loss scenarios for service businesses.
• Coverage Gaps:
  • Employee Dishonesty: Since the theft coverage for property of others excludes dishonest acts of employees, agents should discuss the potential need for a separate Commercial Crime policy or fidelity bond if this is a significant exposure.
  • Professional Liability: This endorsement does not add professional liability (Errors & Omissions) coverage. If the service business provides advice or specialized services where errors could cause financial harm to clients, a separate professional liability policy or endorsement (like BP 22 02 Micro-Businessowners Professional Liability) would be necessary.
  • Cyber Liability: While this endorsement doesn't directly address cyber risks, service businesses increasingly handle sensitive client data. Agents should assess the need for cyber liability coverage.
  • Sufficient Limits: The standard property limit in the Micro-BOP is often low (e.g., $2,500), though higher limits can be requested. Ensure the limits are adequate for the business's personal property and any client property they might be responsible for.
• Underwriting Guidelines:
  • Verify that the business meets the eligibility criteria for the Micro-Businessowners program (typically based on employee count and sales).
  • Ensure the business activities align with a "service" classification.
  • The blanket additional insured status simplifies administration but underwriters should be aware that it extends coverage automatically based on contractual agreements.