1. Forms
2. HO
3. HO-07-55

What the form is

The HO 07 55, Special Coverage–Spoilage Of Perishable Stock endorsement, is an addition to a homeowners policy, specifically intended to be used with the HO 07 01 Home Business Insurance Coverage endorsement. Its purpose is to provide coverage for perishable stock related to the insured's home-based business that is kept under controlled temperature or humidity conditions. The endorsement covers direct physical loss or damage to this stock if the loss is a result of mechanical breakdown of refrigeration or climate control equipment, contamination by a refrigerant, or a power outage. The form includes definitions for key terms such as “perishable stock,” “breakdown or contamination,” “power outage,” and “loss of power.” A specific limit of liability for this coverage must be shown in the endorsement's schedule, and the covered stock must be located at the business location described on the HO 07 01 form.

Classes of business it applies to

This endorsement is applicable to individuals who operate eligible home-based businesses and maintain perishable stock that requires controlled temperature or humidity for preservation. Examples could include:

• A home-based florist with a stock of fresh flowers requiring refrigeration.
• An artisan who creates products using temperature-sensitive materials.
• A home-based business storing certain types of chemicals or supplies that would spoil without proper temperature control (subject to eligibility).

It's important to note that the eligibility rules for the underlying HO 07 01 endorsement may not contemplate operations involving the manufacture, sale, or distribution of food, or the sale or distribution of any personal care products manufactured by the insured. Therefore, businesses like home-based catering or food sales might not be eligible for this specific spoilage coverage under the HO 07 55, depending on the insurer's interpretation and the specifics of the HO 07 01.

Special considerations

• Attachment to HO 07 01: This endorsement is not a standalone coverage and must be used in conjunction with the HO 07 01 Home Business Insurance Coverage endorsement.
• Scheduled Limit: A specific limit of liability for the perishable stock coverage must be entered in the schedule of the HO 07 55. This limit should accurately reflect the maximum potential loss of perishable stock.
• Covered Causes of Loss: Coverage is specifically for spoilage due to mechanical breakdown, contamination by refrigerant, or power outage. Other causes of loss to perishable stock would not be covered by this endorsement unless provided elsewhere in the policy.
• Location of Stock: The perishable stock must be at the business location described on the HO 07 01 endorsement.
• Eligibility: The eligibility of the home-based business itself under the HO 07 01 is a primary consideration. As mentioned, businesses involving food manufacturing or distribution may face limitations.

Key information for agents and underwriters

• Risk Assessment: Underwriters need to carefully assess the nature of the home-based business and the type and value of perishable stock. This includes understanding the temperature control measures in place and the susceptibility of the stock to spoilage.
• Setting Limits: Agents should work with insureds to determine an adequate limit of liability for the perishable stock, considering the maximum value at risk at any given time.
• Clarify Definitions: It's crucial for agents to explain the definitions of “perishable stock,” “breakdown or contamination,” and “power outage” to the insured so they understand the scope of coverage.
• Underlying Coverage: Remind insureds that this endorsement modifies the HO 07 01, and all other terms and conditions of the homeowners policy and the HO 07 01 apply unless specifically modified by the HO 07 55.
• Potential Gaps: Be aware of potential coverage gaps. For instance, spoilage due to causes other than those listed (e.g., flood, fire unless it causes a covered power outage or mechanical breakdown) would not be covered by this endorsement. Also, businesses dealing with food might need to seek specialized commercial coverage if not eligible under the home business endorsements.