office-property-premises-liability wallace specialty insurance
office-property-premises-liability wallace specialty insurance

Office Property/Premises Liability

A Business Owner Policy (BOP) is a versatile policy that is issued to cover the commercial or business property and the general (public) liability for a small business.  The two coverage sections of a BOP policy are:

  1. Property:  Coverage can be extended to commercial real estate (building) and/or commercial property/office contents (furniture, fixtures, equipment, supplies, inventory, etc.).  That means the policy can be used to insure an office building owned by a client and the office contents of the building on the same policy if the client also occupies the building.  Conversely, we can insure only the office contents for an office in a leased space. 
  2. General Liability: Liability for property damage and/or bodily injury suffered by a third party (person or property not owned or employed by the business) accidentally caused as a result of normal business operations of the insured. 

Most small main street businesses are eligible for BOP coverage.  Certainly most office exposures qualify.  We can cover multiple locations on a BOP policy.  Each location needs to be engaged in the same business activities (same business class) but they do not have to function under the same entity name.  If the ultimate ownership of each business location is the same, the business locations can be combined on the same policy. 

On the simplest level, we are trying to insure the business property (building, contents or both) at a limit that will represent 100% of the replacement cost.  We use replacement cost as a benchmark because the property coverage is offered on a replacement cost basis (no depreciation on damaged or destroyed property).  If insuring a building, a coverage amount specifically for the building must be chosen.  The same holds true for office contents coverage.  When insuring office contents only, it's important to take into account the cost of leasehold improvements.  Leasehold improvements include cabinetry, carpet, light fixtures, wallpaper and even interior partition walls and doors.

In addition to the chosen coverage limit for property, a BOP policy can and should include coverage for other types of business risk that don't involve a direct loss to owned property.  Every company offers a basic property policy form and then generally a series of expanded coverage property forms that offer coverage for additional perils.   The expanded coverage forms should always be considered.  Following is a list on ancillary coverage that should be included on a good BOP policy.

  1. Broad Form Water:  Covers the back up of sewers or drains.  This becomes an exception to the rising water (flood) exclusion on the policy.  Flood is never covered by a BOP policy. 
  2. Loss of Business income:  Covers actual loss of income if business premise is damaged past the point of use (due to a covered cause of loss).  Standard is 12 months unlimited coverage (actual loss sustained).
  3. Employee Dishonesty:  Coverage for employee theft or embezzlement. 
  4. Utilities Services Interruption:  Covers loss of income due to loss of utility (most commonly electrical).  There does not need to be any actual damage to the insured premises. 
  5. Utilities Services Direct Damage:  Covers damage to insured equipment caused by a power surge.  Otherwise, power surge is not covered by the policy unless dues to a lightning strike. 
  6. Off Premises Property:  The standard policy covers insured property within 1000 feet of insured location.  Coverage can be secured for property temporarily away from insured premises.
  7. Employment Practices Liability (EPLI):  Defense and indemnity coverage for a suit brought against the insured by employee, former employee or job applicant for alleged discrimination, sexual harassment or wrongful termination. 
  8. Data Breach/Cyber Liability:  Coverage that will defray the costs to the insured associated with a breach of their computer system compromising patient or client information.  Helps cover the cost of notification and credit monitoring (first party coverage).
  9. Fine Arts Coverage:  Agreed amount of coverage for the actual market value of fine arts in the office.
  10. Plate Window Glass: Often a retail lease for commercial office space makes the tenant responsible for broken window glass.  The policy can be endorsed to cover this.  Some policies we sell automatically do so.

As mentioned, General Liability covers the property damage or bodily injury suffered by a third party (excludes coverage for property owned by insured or injuries to insured or employees) as a result of the actions (business operations) of the insured.  General Liability on a BOP policy is actually a combination of the following coverage types:

  1. General Liability: Basic 3rd party property damage and bodily injury liability.
  2. Products and Completed Operations liability:  A little bit like professional liability but most often associated with the blue collar trades.
  3. Personal & Advertising Injury: Limited defense and indemnity coverage for allegations of liable, slander and advertising misrepresentation, etc. made against the insured.
  4. Fire Legal Liability (Tenant Legal Liability):  In its basic form, it covers the liability for damage caused to a third party due to a fire that the policy holder is held legally liable ( found legally negligent) for.  Tenant legal liability broadens this coverage. 
  5. Medical Payments:  No fault coverage generally reserved for 3rd party injuries on the insured's premises.  Can be used to cover the medical expenses of the insured party even if the injury in not the fault of the insured.
  6. Hired & Non-Owned Auto Liability:  This is an optional coverage but needs to be added to every BOP policy unless there is also a separate commercial auto policy in place for the business.  All small businesses have a commercial auto liability exposure when owners or employees use their personal vehicles for business purposes.  This coverage protects the business with regard to this exposure.