THE BOP VS THE CPP... THE BATTLE OF THE CENTURY! SPONSORED BY

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1 THE BOP VS THE CPP... THE BATTLE OF THE CENTURY! SPONSORED BY

2 BOP vs CPP Michael C. D Orlando, CIC, LIA, CPIA Insurance Training & Consulting Services 11 Lake Shore Drive Amesbury, MA mcdorlando@aol.com (978)

3 Bldg & Pers. Prop. Form (CP ) BOP (BP ) 1. Covered Property 1. Covered Property a. Building, meaning the building or structure described in the Declarations, including: (1) Completed additions; (2) Fixtures, including outdoor fixtures; (3) Permanently installed: (a) Machinery and (b) Equipment; (4) Personal property owned by you that is used to maintain or service the building or structure or its premises, including: (a) Fire extinguishing equipment; (b) Outdoor furniture; (c) Floor coverings; and (d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering; (5) If not covered by other insurance: (a) Additions under construction, alterations and repairs to the building or structure; (b) Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the building or structure. a. Buildings, meaning the buildings and structures at the premises described in the Declarations, including: (1) Completed additions; (2) Fixtures, including outdoor fixtures; (3) Permanently installed: (a) Machinery; and (b) Equipment; (4) Your personal property in apartments, rooms or common areas furnished by you as landlord; (5) Personal property owned by you that is used to maintain or service the buildings or structures or the premises, including: (a) Fire extinguishing equipment; (b) Outdoor furniture; (c) Floor coverings; and (d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering; (6) If not covered by other insurance: (a) Additions under construction, alterations and repairs to the buildings or structures; (b) Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the buildings or structures. Michael C. D'Orlando, CIC, LIA, CPIA Page 1 BOP vs CPP

4 I. Property A. Building Coverage 1. BOP building coverage includes landlord s furnishings 2. B&PP form covers them as personal property Michael C. D'Orlando, CIC, LIA, CPIA Page 2 BOP vs CPP

5 Bldg & Pers. Prop. Form (CP ) BOP (BP ) 1. Covered Property. b. Your Business Personal Property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises, consisting of the following unless otherwise specified in the Declarations or on the Your Business Personal Property Separation of Coverage form: (1) Furniture and fixtures; (2) Machinery and equipment; (3) "Stock"; (4) All other personal property owned by you and used in your business; (5) Labor, materials or services furnished or arranged by you on personal property of others; (6) Your use interest as tenant in improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions: (a) Made a part of the building or structure you occupy but do not own; and (b) You acquired or made at your expense but cannot legally remove; (7) Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Personal Property of Others Covered Property b. Business Personal Property located in or on the buildings at the described premises or in the open (or in a vehicle) within 100 feet of the described premises, including: (1) Property you own that is used in your business; (2) Property of others that is in your care, custody or control, except as otherwise provided in Loss Payment Property Loss Condition Paragraph E.5.d.(3)(b); (3) Tenant's improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions: (a) Made a part of the building or structure you occupy but do not own; and (b) You acquired or made at your expense but cannot legally remove; (4) Leased personal property which you have a contractual responsibility to insure, unless otherwise provided for under Paragraph 1.b.(2); and (5) Exterior building glass, if you are a tenant and no Limit of Insurance is shown in the Declarations for Building property. The glass must be owned by you or in your care, custody or control. 5. Coverage Extensions b. Personal Effects And Property Of Others You may extend the insurance that applies to Your Business Personal Property to apply to: (1) Personal effects owned by you, your officers, your partners or members, your managers or your employees. This extension does not apply to loss or damage by theft. (2) Personal property of others in your care, custody or control. The most we will pay for loss or damage under this Extension is $2,500 at each described premises. Our payment for loss of or damage to personal property of others will only be for the account of the owner of the property. B. Business Personal Property Michael C. D'Orlando, CIC, LIA, CPIA Page 3 BOP vs CPP

6 1. BOP automatically covers Personal Property of Others in the insured s care, custody or control 2. B&PP form provides only $2,500 for property of others as a coverage extension, unless a higher limit is specified on the Dec Page Michael C. D'Orlando, CIC, LIA, CPIA Page 4 BOP vs CPP

7 Building & Pers. Prop. Form (CP ) 2. Property Not Covered Covered Property does not include: a. Accounts, bills, currency, food stamps or other evidences of debt, money, notes or securities. Lottery tickets held for sale are not securities; b. Animals, unless owned by others and boarded by you, or if owned by you, only as "stock" while inside of buildings; c. Automobiles held for sale; d. Bridges, roadways, walks, patios or other paved surfaces; e. Contraband, or property in the course of illegal transportation or trade; f. The cost of excavations, grading, backfilling or filling; g. Foundations of buildings, structures, machinery or boilers if their foundations are below: (1) The lowest basement floor; or (2) The surface of the ground, if there is no basement; h. Land (including land on which the property is located), water, growing crops or lawns; i. Personal property while airborne or waterborne; j. Bulkheads, pilings, piers, wharves or docks; k. Property that is covered under another coverage form of this or any other policy in which it is more specifically described, except for the excess of the amount due (whether you can collect on it or not) from that other insurance; l. Retaining walls that are not part of a building; m. Underground pipes, flues or drains; n. Electronic data, except as provided under Additional Coverages Electronic Data. Electronic data means information, facts or computer programs stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software), on hard or floppy disks, CD-ROMs, tapes, drives, cells, data processing devices or any other repositories of computer software which are used with electronically controlled equipment. The term computer BOP programs, referred to in the foregoing description of electronic data, means a set of related electronic instructtions which direct the operations and functions of a computer or device connected to it, which enable the computer or device to receive, process, store, retrieve or send data. This Paragraph n., does not apply to your "stock" of prepackaged software. o. The cost to replace or restore the information on valuable papers and records, includeing those which exist as electronic data. Valuable papers and records include but are not limited to proprietary information, books of account, deeds, manuscripts, abstracts, drawings and card index systems. Refer to the Coverage Extension for Valuable Papers And Records (Other Than Electronic Data) for limited coverage for valuable papers and records other than those which exist as electronic data. p. Vehicles or self-propelled machines (includeing aircraft or watercraft) that: (1) Are licensed for use on public roads; or (2) Are operated principally away from the described premises. This paragraph does not apply to: (a) Vehicles or self-propelled machines or autos you manufacture, process or warehouse; (b) Vehicles or self-propelled machines, other than autos, you hold for sale; (c) Rowboats or canoes out of water at the described premises; or (d) Trailers, but only to the extent provided for in the Coverage Extension for Non- Owned Detached Trailers. q. The following property while outside of buildings: (1) Grain, hay, straw or other crops; (2) Fences, radio or television antennas (including satellite dishes) and their leadin wiring, masts or towers, trees, shrubs or plants (other than "stock" of trees, shrubs or plants), all except as provided in the Coverage Extensions. Michael C. D'Orlando, CIC, LIA, CPIA Page 5 BOP vs CPP

8 C. Property Not Covered BOP 2. Property Not Covered Covered Property does not include: a. Aircraft, automobiles, motortrucks and other vehicles subject to motor vehicle registration; b. "Money" or "securities" except as provided in the: (1) Money and Securities Optional Coverage; or (2) Employee Dishonesty Optional Coverage; c. Contraband, or property in the course of illegal transportation or trade; d. Land (including land on which the property is located), water, growing crops or lawns; e. Outdoor fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs or plants, all except as provided in the: (1) Outdoor Property Coverage Extension; or (2) Outdoor Signs Optional Coverage; f. Watercraft (including motors, equipment and accessories) while afloat; g. Accounts, bills, food stamps, other evidences of debt, accounts receivable or "valuable papers and records"; except as otherwise provided in this policy; h. "Computer(s)" which are permanently installed or designed to be permanently installed in any aircraft, watercraft, motortruck or other vehicle subject to motor vehicle registration. This paragraph does not apply to "computer(s)" while held as "stock"; i. "Electronic Data", except as provided under Additional Coverages Electronic Data. This Paragraph i. does not apply to your "stock" of prepackaged software. j. Animals, unless owned by others and boarded by you, or if owned by you, only as stock while inside of buildings The following are Not covered on the B&PP form, but Are covered on the BOP: d. Bridges, roadways, walks, patios or other paved surfaces f. The cost of excavations, grading, backfilling or filling g. Foundations of buildings, structures, machinery or boilers if their foundations are below: (1) The lowest basement floor; or (2) The surface of the ground, if there is no basement i. Personal property while airborne or water-borne j. Bulkheads, pilings, piers, wharves or docks k. Property that is covered under another coverage form of this or any other policy in which it is more specifically described, except for the excess of the amount due (whether you can collect on it or not) from that other insurance l. Retaining walls that are not part of a building Michael C. D'Orlando, CIC, LIA, CPIA Page 6 BOP vs CPP

9 D. Additional Coverages 1. Both forms include the following: a. Debris Removal... 25% of paid loss plus deductible, plus additional $10,000, if needed (Note: B&PP 12 ed. & BOP 13 ed. Increased to $25,000) b. Preservation of Property... true all-risk coverage! c. Fire Department Service Charge Difference (1) B&PP form = $1,000 (2) BOP = $2,500 d. Pollutant Clean Up and Removal... $10,000 annual aggregate e. Increased Cost of Construction Difference (1) B&PP form = Lesser of $10,000 or 5% of limit (2) BOP = $10,000 f. Electronic Data Difference (1) B&PP form = $2,500 annual aggregate (2) BOP = $10,000 annual aggregate Michael C. D'Orlando, CIC, LIA, CPIA Page 7 BOP vs CPP

10 2. BOP adds more Additional Coverages not found in B&PP form: a. Business Income months actual loss sustained No dollar limit, but time cannot be increased b. Extended Business Income days Again, no dollar limit, but time cannot be increased c. Extra Expense months actual loss sustained d. Civil Authority... 3 weeks - Business Income & Extra Expense e. Interruption of Computer Operations... $10,000 annual aggregate f. Business Income from Dependent Properties... $5,000 g. Money Orders & Counterfeit Money... $1,000 h. Forgery or Alteration... $2,500 i. Fire Extinguisher Systems Recharge... $5,000 Michael C. D'Orlando, CIC, LIA, CPIA Page 8 BOP vs CPP

11 Building & Pers. Prop. Form BOP d. Property Off-Premises (1) You may extend the insurance provided by this Coverage Form to apply to your Covered Property while it is away from the described premises, if it is: (a) Temporarily at a location you do not own, lease or operate; (b) In storage at a location you lease, provided the lease was executed after the beginning of the current policy term; or (c) At any fair, trade show or exhibition. (2) This Extension does not apply to prop erty: (a) In or on a vehicle; or (b) In the care, custody or control of your salespersons, unless the property is in such care, custody or control at a fair, trade show or exhibition. (3) The most we will pay for loss or damage under this Extension is $10,000. e. Outdoor Property You may extend the insurance provided by this Coverage Form to apply to your outdoor fences, radio and television antennas (including satellite dishes), trees, shrubs and plants (other than "stock" of trees, shrubs or plants), including debris removal expense, caused by or resulting from any of the following causes of loss if they are Covered Causes of Loss: (1)Fire; (2)Lightning; (3)Explosion; (4)Riot or Civil Commotion; or (5)Aircraft. b. Personal Property Off Premises You may extend the insurance provided by this policy to apply to your Covered Property, other than "money" and "securities", "valuable papers and records" or accounts receivable, while it is in the course of transit or at a premises you do not own, lease or operate. The most we will pay for loss or damage under this Extension is $10,000. c. Outdoor Property You may extend the insurance provided by this policy to apply to your outdoor fences, radio and television antennas (including satellite dishes), signs (other than signs attached to buildings), trees, shrubs and plants, including debris removal expense. Loss or damage must be caused by or result from any of the following causes of loss: (1)Fire; (2)Lightning; (3)Explosion; (4)Riot or Civil Commotion; or (5)Aircraft. The most we will pay for loss or damage under this Extension is $2,500, but not more than $1,000 for any one tree, shrub or plant. The most we will pay for loss or damage under this Extension is $1,000, but not more than $250 for any one tree, shrub or plant. These limits apply to any one occurrence, regardless of the types or number of items lost or damaged in that occurrence. Michael C. D'Orlando, CIC, LIA, CPIA Page 9 BOP vs CPP

12 E. Coverage Extensions 1. Both forms include: a. Newly Acquired or Constructed Property... $250,000 building... $100,000 Personal Property b. Valuable Papers & Records Difference (1) B&PP form = $2,500 (2) BOP = $10,000 on premises/$5,000 off premises c. Property Off-Premises... $10,000 Difference (1) B&PP form... $10,000 with numerous limitations (2) BOP... $10,000 at locations not owned, leased or operated by insured and while in transit d. Outdoor Property Difference (1) B&PP form = $1,000 total / $250 max per tree, shrub or plant (2) BOP = $2,500 total / $1,000 max per tree, shrub or plant e. Personal Effects... $2,500 Michael C. D'Orlando, CIC, LIA, CPIA Page 10 BOP vs CPP

13 2. B&PP form includes coverage for Non-Owned Detached Trailers, not found in BOP... f. Non-Owned Detached Trailers (1) You may extend the insurance that applies to Your Business Personal Property to apply to loss or damage to trailers that you do not own, provided that: (a) The trailer is used in your business; (b) The trailer is in your care, custody or control at the premises described in the Declarations; and (c) You have a contractual responsibility to pay for loss or damage to the trailer. (2) We will not pay for any loss or damage that occurs: (a) While the trailer is attached to any motor vehicle or motorized conveyance, whether or not the motor vehicle or motorized conveyance is in motion; (b) During hitching or unhitching operations, or when a trailer becomes accidentally unhitched from a motor vehicle or motorized conveyance. (3) The most we will pay for loss or damage under this Extension is $5,000, unless a higher limit is shown in the Declarations. (4) This insurance is excess over the amount due (whether you can collect on it or not) from any other insurance covering such property. Michael C. D'Orlando, CIC, LIA, CPIA Page 11 BOP vs CPP

14 3. BOP includes Accounts Receivable, not found in B&PP form... f. Accounts Receivable (1) You may extend the insurance that applies to Business Personal Property to apply to accounts receivable. We will pay: (a) All amounts due from your customers that you are unable to collect; (b) Interest charges on any loan required to offset amounts you are unable to collect pending our payment of these amounts; (c) Collection expenses in excess of your normal collection expenses that are made necessary by loss or damage; and (d) Other reasonable expenses that you incur to re-establish your records of accounts receivable; that result from direct physical loss or damage by any Covered Cause of Loss to your records of accounts receivable. (2) The most we will pay under this Coverage Extension for loss or damage in any one occurrence at the described premises is $10,000, unless a higher Limit of Insurance for accounts receivable is shown in the Declarations. For accounts receivable not at the described premises, the most we will pay is $5,000. Michael C. D'Orlando, CIC, LIA, CPIA Page 12 BOP vs CPP

15 BOP 4. Building Limit Automatic Increase a. The Limit of Insurance for Buildings will automatically increase by the annual percentage shown in the Declarations. b. The amount of increase will be: (1) The Building limit that applied on the most recent of the policy inception date, the policy anniversary date, or any other policy change amending the Building limit, times (2) The percentage of annual increase shown in the Declarations, expressed as a decimal (example: 8% is.08), times (3) The number of days since the beginning of the current policy year, or the effecttive date of the most recent policy change amending the Building limit, divided by 365. Example: If: The applicable Building limit is $100,000. The annual percentage increase is 8%. The number of days since the beginning of the policy year (or last policy change) is 146. The amount of increase is $100,000 x.08 x = $3, Business Personal Property Limit Seasonal Increase a. The Limit of Insurance for Business Personal Property will automatically increase by 25% to provide for seasonal variations. b. This increase will apply only if the Limit of Insurance shown for Business Personal Property in the Declarations is at least 100% of your average monthly values during the lesser of: (1) The 12 months immediately preceding the date the loss or damage occurs; or (2) The period of time you have been in business as of the date the loss or damage occurs. Michael C. D'Orlando, CIC, LIA, CPIA Page 13 BOP vs CPP

16 F. Exclusions 1. BOP Power Failure exclusion does not apply to loss to computers and electronic data 2. BOP Mechanical Breakdown exclusion does not apply to computers G. Limits of Insurance 1. BOP has a built-in inflation guard... Building Limit Automatic Increase 2. BOP includes Business Personal Property Limit Seasonal Increase (a mini-peak season endorsement ) Michael C. D'Orlando, CIC, LIA, CPIA Page 14 BOP vs CPP

17 d. Except as provided in Paragraphs (2) through (7) below, we will determine the value of Covered Property as follows: (1) At replacement cost without deduction for depreciation, subject to the following: (a) If, at the time of loss, the Limit of Insurance on the lost or damaged property is 80% or more of the full replacement cost of the property immediately before the loss, we will pay the cost to repair or replace, after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts: (i) The Limit of Insurance under Section I Property that applies to the lost or damaged property; (ii) The cost to replace, on the same premises, the lost or damaged property with other property: i. Of comparable material and quality; and ii. Used for the same purpose; or (iii) The amount that you actually spend that is necessary to repair or replace the lost or damaged property. If a building is rebuilt at a new premises, the cost is limited to the cost which would have been incurred had the building been built at the original premises. (b) If, at the time of loss, the Limit of Insurance applicable to the lost or damaged property is less than 80% of the full replacement cost of the property immediately before the loss, we will pay the greater of the following amounts, but not more than the Limit of Insurance that applies to the property: (i) The actual cash value of the lost or damaged property; or (ii) A proportion of the cost to repair or replace the lost or damaged property, after application of the deductible and without deduction for depreciation. This proportion will equal the ratio of the applicable Limit of Insurance to 80% of the cost of repair or replacement. Michael C. D'Orlando, CIC, LIA, CPIA Page 15 BOP vs CPP

18 H. Property Loss Conditions (Good News/Bad News) 1. BOP does not have coinsurance 2. BOP has valuation clause similar to Homeowners Policy Michael C. D'Orlando, CIC, LIA, CPIA Page 16 BOP vs CPP

19 I. Optional Coverages 1. B&PP form a. Agreed Value... Not available on BOP b. Inflation Guard... automatically on BOP c. Replacement Cost... automatically on BOP for insured s property as long as limits are at least 80% to value, however, BOP pays ACV for Property of Others 2. BOP... (not available on B&PP form, but can be purchased on Inland Marine, Crime and Equipment Breakdown forms) a. Outdoor signs b. Money & Securities c. Employee Dishonesty d. Mechanical Breakdown Michael C. D'Orlando, CIC, LIA, CPIA Page 17 BOP vs CPP

20 J. General Liability 1. Exception to Watercraft exclusion... B&PP form This exclusion does not apply to: (1) A watercraft while ashore on premises you own or rent; (2) A watercraft you do not own that is: (a) Less than 26 feet long; and (b) Not being used to carry persons or property for a charge; BOP This exclusion does not apply to: (1) A watercraft while ashore on premises you own or rent; (2) A watercraft you do not own that is: (a) Less than 51 feet long; and (b) Not being used to carry persons or property for a charge; Michael C. D'Orlando, CIC, LIA, CPIA Page 18 BOP vs CPP

21 2. Who is an Insured Newly Acquired Organizations are automatically insured on the CGL, but are not automatically covered on the BOP Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization. However: a. Coverage under this provision is afforded only until the 90th day after you acquire or form the organization or the end of the policy period, whichever is earlier; 3. Limits Losses paid under Damage to Premises Rented to You (aka Fire Legal Liability) do not reduce the aggregate limit Michael C. D'Orlando, CIC, LIA, CPIA Page 19 BOP vs CPP