Businessowners Policy (BOP) - Liability Provisions

Fast Facts

Section II - Liability Coverage

The BOP’s liability section (Section II) uses a single "business liability" category to cover all liability risks.

Coverage Categories

• Business Liability: Pays damages the insured is legally liable for, subject to limits.
• Supplementary Payments: Covers claim/lawsuit expenses (e.g., legal defense, court costs), not subject to policy limits.
• Medical Expenses: Pays for accident-related medical costs on insured’s premises/operations, regardless of fault, reported within one year.

Business Liability Coverage

Applies to injuries/property damage during the policy period within the coverage territory. Covers:

• Bodily Injury: Injury, sickness, disease, death.
• Property Damage: Physical damage to tangible property, including loss of use; includes fire/explosion damage to rented premises (fire legal liability).
• Personal and Advertising Injury: Slander, libel, privacy violation, false arrest, malicious prosecution, copyright/trade dress/slogan infringement in advertising.

Note: Fire legal liability covers tort liability for fire/explosion damage to leased premises, not contractual liability or property insurance replacement.

Supplementary Payments

Covers costs beyond policy limits, including:

• Investigation and defense (e.g., attorney fees, court costs).
• Prejudgment and post-judgment interest on amounts the insured is ordered to pay.

Defense Costs: Insurer pays legal defense costs until case resolution or policy limit is exhausted, but only for covered damages.

Medical Expenses

Pays medical costs for accidents on insured’s premises/operations, regardless of fault, if reported within one year. Exclusions:

• Bodily injury to insureds, tenants, hired workers, or those covered by workers compensation.
• Injuries from sports, games, or physical exercises.

Limits of Insurance

• Liability and Medical Expenses: $300,000–$2 million per occurrence (bodily injury, property damage, medical expenses).
• Medical Expenses: $5,000 per person.
• Fire Legal Liability: $50,000–$1 million per occurrence for fire damage to rented premises.
• Products-Completed Operations Aggregate: 2x liability and medical expenses limit, per policy period.
• General Aggregate: 2x liability and medical expenses limit, per policy period for other injuries/damages.

Who Is an Insured

• Individual: Named insured and spouse, for business conduct.
• Partnership/Joint Venture: Members, partners, and their spouses, for business conduct.
• Limited Liability Company: Members for business conduct; managers for managerial duties.
• Organization: Executive officers/directors for duties; stockholders for liability as stockholders.
• Trust: Trust and trustees, for trust-related duties.
• Employees/Volunteers: Covered for acts within employment scope, excluding injuries to themselves/other employees or property damage to their own/other employees’ property.
• Others: Real estate managers, executors, trustees, or legal representatives for relevant duties.

Exclusions

Liability risks excluded (some insurable via endorsements/separate policies):

• Expected/Intended Injury: Excludes intentional injury/damage, except reasonable force to protect people/property.
• Contractual Liability: Excludes liability assumed via contract, except for insured contracts (e.g., premises lease, elevator maintenance).
• Liquor Liability: Excludes liability for businesses selling/serving alcohol; host liquor liability covered for non-alcohol businesses.
• Workers Compensation: Excludes employee injury claims covered by workers compensation.
• Pollution: Excludes most pollution-related claims, except specific cases (e.g., hostile fire smoke, off-site work materials).
• Auto/Watercraft/Aircraft: Excludes liability from owned/used vehicles, except non-owned watercraft <51 feet, parked autos, or specific equipment.
• Professional Liability: Excludes liability from providing/failing to provide professional services.
• War: Excludes all liability from war-related damages.
• Product Recall: Excludes expenses for recalling defective products.
• Personal and Advertising Injury: Excludes criminal acts, known false publications, pre-policy publications, and certain intellectual property infringements.
• Electronic Data: Excludes damages from loss/inability to use electronic data.
• Statutory Violations: Excludes damages from violating laws like TCPA, CAN-SPAM, or FCRA.
• Nuclear Energy Liability: Excludes liability covered by nuclear energy policies or U.S. government indemnification.

Test Your Knowledge

Why does the BOP’s fire legal liability coverage not eliminate the need for property insurance?

Fire legal liability covers tort liability for fire/explosion damage to leased premises, not the cost to repair/replace the property itself, which requires separate property insurance.

Key Review Points