1. Forms
2. BP
3. BP-21-02

Form BP 21 02: Micro-Businessowners Employment-Related Practices Exclusion

1. What the form is

The BP 21 02, Micro-Businessowners Employment-Related Practices Exclusion, is an endorsement used in conjunction with the Micro-Businessowners Coverage Form (BP 00 04). Its primary purpose is to explicitly exclude coverage for liability claims arising from employment-related practices. This means that if this endorsement is attached to the policy, the insurer will not cover losses related to allegations such as wrongful termination, discrimination, harassment, or other similar employment-related misconduct. This exclusion applies to "bodily injury" or "personal and advertising injury" to a person arising out of such practices. It is often considered a standard exclusion on policies providing general liability coverage.

2. Classes of business it applies to

This endorsement is specifically designed for "micro-businesses" that are eligible for and covered under the Micro-Businessowners Coverage Form (BP 00 04). A micro-business is generally defined by ISO/Verisk as having very few employees (typically up to four, including the owner) and limited annual sales (often not exceeding $500,000). Examples of businesses where this form would be applicable include:

• Small retail shops (e.g., a sole proprietor boutique with one part-time employee).
• Home-based businesses (e.g., a freelance graphic designer who occasionally hires a temporary assistant).
• Small service providers (e.g., a local bakery with the owner and two employees).

Essentially, any very small business qualifying for the Micro-BOP that has any employees, even just one, could see this endorsement attached to their policy to remove employment practices liability from their general liability coverage.

3. Special considerations

• Mandatory Nature in Micro-BOP: The Micro-Businessowners program (BP 00 04) is intended to be a streamlined and typically lower-cost insurance solution for very small enterprises. The BP 21 02 exclusion helps maintain this streamlined nature by carving out complex and potentially costly employment-related exposures.
• Coverage Gap Created: It is crucial for insureds to understand that with this endorsement, their Micro-Businessowners policy will not respond to lawsuits or claims stemming from employment practices. This creates a significant coverage gap if the business has employees and faces such allegations.
• Need for Separate EPLI: Businesses that have employees and are concerned about employment-related lawsuits (which can be filed against even the smallest employers) would need to secure separate Employment Practices Liability Insurance (EPLI). The Micro-BOP with this exclusion attached will not provide this protection. While some standard Businessowners Policies (BOPs) might offer an option to buy back limited EPLI coverage through a different endorsement, the BP 21 02 explicitly removes it from the Micro-BOP.
• Impact of Having Employees: The presence of any employees, regardless of full-time, part-time, or temporary status, triggers the potential for employment-related claims. Therefore, this exclusion is relevant even for businesses with minimal staff.

4. Key information for agents and underwriters

• Risk Assessment: For underwriters, the key is identifying whether the micro-business has any employees. If so, the employment practices exposure exists. Attaching BP 21 02 is a common way to manage this exposure within the simplified Micro-BOP framework by excluding it. The underwriter is essentially affirming that the Micro-BOP is not the vehicle for EPLI coverage.
• Clarifying Coverage Gaps: Agents have a critical role in explaining the implications of this exclusion to their micro-business clients. It must be made clear that there is no coverage for employment-related claims under the policy if BP 21 02 is attached. Agents should discuss the potential risks of employment claims and the availability of separate EPLI policies.
• Pricing Implications: The Micro-BOP is generally priced to be an affordable option for very small businesses. Excluding potentially volatile and costly exposures like employment practices liability helps keep the premium for the base Micro-BOP coverage lower. If a micro-business requires EPLI, it will be an additional cost, either as a standalone policy or a specific EPLI endorsement if available and appropriate for that risk profile.
• Underwriting Guidelines: This endorsement is typically standard for Micro-BOPs, reinforcing the program's intent to provide basic, streamlined coverage. Underwriters will likely ensure this exclusion is in place for any micro-business with employees to avoid unintended coverage for employment-related liabilities under a policy not designed or priced for such risks. The focus of the Micro-BOP (BP 00 04) is on general liability and property coverage for smaller, less complex operations.