Form BP 21 03: Micro-Businessowners Professional Services Exclusion
1. What the form is
Form BP 21 03, the Micro-Businessowners Professional Services Exclusion, is an endorsement used with the Micro-Businessowners Coverage Form (BP 00 04). Its primary purpose is to explicitly exclude liability coverage for claims arising from the rendering of, or failure to render, any professional services. While the form lists common professions such as legal, accounting, and medical services as examples, it clarifies that the exclusion is not limited to these specific professions. Essentially, this endorsement removes coverage for any and all professional liability exposures a micro-business might have. It's important to note that the base Micro-Businessowners Coverage Form (BP 00 04) does not automatically exclude professional services; this endorsement must be added to effectuate such an exclusion.
2. Classes of business it applies to
This endorsement is designed for "micro-businesses," which are generally defined by ISO/Verisk as businesses with up to four employees (including the owner) and sales not exceeding $500,000. It can apply to a wide array of service and retail risks that fit this micro-business profile. Since the Micro-Businessowners program is tailored for smaller operations, often home-based or operating out of small, leased locations, this exclusion would be relevant for businesses where professional liability is either not a significant exposure or is covered under a separate, standalone professional liability policy.
Examples of businesses where this form might be used include:
- A freelance graphic designer who primarily creates marketing materials but does not offer strategic consulting that could be construed as a professional service leading to financial loss for a client.
- A small retail shop that also offers minor repair services for the products it sells, where the primary risk is premises liability or products liability, not professional advice.
- A home-based bakery that wants to ensure their Businessowners Policy clearly excludes any liability that could arise from, for example, nutritional advice if they were to offer it.
3. Special considerations
A key consideration is that the Micro-Businessowners Coverage Form (BP 00 04) itself does not contain a professional services exclusion. Therefore, if an underwriter or agent intends to exclude professional liability for a micro-business, this BP 21 03 endorsement must be added to the policy. Without it, there could be unintended coverage for professional services under the base form.
It's crucial to understand that this endorsement broadly excludes all professional services, not just those explicitly listed. This means if a micro-business provides any service that could be deemed "professional" in nature (requiring specialized skill or knowledge), liability arising from that service would be excluded by this endorsement.
Conversely, if a micro-business does have a professional liability exposure that needs to be covered, this endorsement should not be used. Instead, the business might need a separate Professional Liability policy or, if available and appropriate for their specific services, the Micro-Businessowners Professional Liability endorsement (BP 22 02), which can add back coverage for specific professional services listed in its schedule.
4. Key information for agents and underwriters
For agents, it's vital to have a clear understanding of the client's operations to determine if any professional services are being rendered. If so, and this exclusion is applied, a significant coverage gap will exist. Agents should discuss the implications of this exclusion with the insured and recommend appropriate standalone professional liability coverage if needed.
For underwriters, the BP 21 03 provides a tool to manage unwanted professional liability exposure within the Micro-Businessowners program. When evaluating a micro-business, underwriters should assess whether the nature of the business involves any professional services. If the intent is to provide general liability and property coverage only, without covering professional E&O risks, this endorsement is necessary. The pricing of the Micro-BOP would reflect the absence of professional liability coverage when this endorsement is attached. Failure to attach this endorsement when professional services are indeed an exposure could lead to claims that were not anticipated or priced for. Underwriters should ensure that the application and any supplementary information clearly detail the services provided by the micro-business to make an informed decision about the necessity of this exclusion. The presence of this endorsement signals a clear intent to not cover professional liability, which should align with the underwriter's risk assessment and the insured's coverage needs.