Insurance 101: General Liability, Commercial Property & the Business Owners Package Policy

August 27, 2013

insurance_policyMost architects and engineers are required to have General Liability and Business Property insurance coverage. The former shows up in most design contracts, while the latter is an essential part of a design firm’s office lease agreement.

Needless to say, we get several common questions regarding these coverages:

What is General Liability coverage? What is Business Property coverage? What’s the difference between these coverages/policies and a Business Owners Package (BOP) Policy?

In an effort to demystify some of the concepts and to provide a quick reference a/e ProNet gathered some of its finest insurance minds and put together this basic manual: Insurance 101 for Design Professionals. This is not intended to be an exhaustive source of information but rather a primer designed to answer basic questions and to put the reader on the right track if more information is needed. a/e ProNet strongly recommends that the reader seek advice from an agent or broker specialist who is best equipped to understand the exposures to loss of each individual design firm.

The following is an excerpt from our Insurance 101 page, specifically defining General Liability, Business Property, and Business Owners Package (BOP). Access the full set of policy and coverage terms on our website.

COMMERCIAL PACKAGE AND BUSINESS OWNER PACKAGE POLICIES   

Insurance companies will combine frequently requested coverages under one economical package known as Commercial Package Policies or Business Owners Policies (BOP). One policy is designed to include among other coverages:

  • General Liability
  • Commercial Property
  • Non-Owned/Hired Automobile
  • Valuable Papers and Records
  • Business Interruption/Business Income Equipment Breakdown
  • Accounts Receivable

BOPs tend to be prepackaged policies available to smaller firms with little flexibility (other than limits) on available coverages. Commercial Package policies are offered to larger firms and provide a wide range of coverage options. Insurance companies that offer these policies to design professionals may require the insured to maintain professional liability insurance as a prerequisite to obtaining a package policy.

COMMERCIAL GENERAL LIABILITY INSURANCE

General Liability insurance is designed to pay on behalf of the insured firm, all sums which the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by an “occurrence” – defined to be an accident including continuous or repeated exposure to substantially the same general harmful conditions.

The policy typically includes coverage for “personal injury” including libel and slander.

Landlords will require their tenants to provide General Liability insurance as a requirement in a lease. Since the A/E and its employees are regularly at job sites it is important to purchase a policy that will insure against claims arising from the firm’s operations away from the office premises in addition to premises accident claims. Project owners often require A/E consultants to maintain General Liability including the owner as an “additional insured.” General Liability will specifically exclude coverage for architects and engineers professional liability.

Design professionals usually obtain this coverage as part of a package policy as described above that may include coverage for business owned property, business interruption, hired and non-owned automobiles and other coverage extensions.

BUSINESS PROPERTY INSURANCE

Whether you lease or own your office; office equipment, furniture, fixtures, computer equipment, phone systems, fax and copy machinery, valuable papers and fine arts need to be insured for fire, theft and water damage. Insuring these valuables for “replacement cost” on an “all-risk form” provides the best protection that your business will be reimbursed properly for a covered loss. When leasing furniture and equipment, the lessor will require this coverage and be designated as a “loss payee.”

Landlords of rented property usually require their tenants to maintain property coverage for the rented space to cover improvements and betterments provided to the leaseholder. Since most design firms are heavily dependent on computer systems, it is important to properly inventory equipment and software. The cost to reproduce plans and specifications kept on computer files is significant when considering the insured value of valuable papers and records. However, no limit of insurance is an adequate substitute for reliable backup protection and procedures.

We’ll definitely have subsequent posts on more specific property coverages, such as Valuable Papers and Business Interruption, which are especially important for Architects and Engineers. So be sure to subscribe!

Visit (and bookmark!) the full Insurance 101 for Design Professionals today.

DISCLAIMER This information is for illustrative purposes only and is intended to provide only a general overview of the insurance policies described. It is important to review actual policy terms, coverage conditions and exclusions with a qualified insurance professional. Not all policies shown are necessarily recommended for all A/E firms.

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