15.4 Section I Exclusions
The Businessowners Policy (BOP) excludes many of the same causes of loss found in other commercial property policies. Unless coverage is specifically provided elsewhere in the policy, losses resulting from the following are excluded:
| Excluded Cause of Loss | Excluded Cause of Loss | Excluded Cause of Loss |
|---|---|---|
| Ordinance or law | Earth movement, including earthquake and landslide | Governmental action |
| Nuclear hazard | War and military action | Fungi, wet rot, or dry rot |
| Collapse | Pollution | Neglect |
| Water, such as flood, mudslide, and sump pump backup | Consequential losses, such as delay, loss of use, or loss of market | Smoke, vapor, or gas from agricultural smudging or industrial operations |
The policy also contains several additional exclusions that limit or eliminate coverage for certain types of property or causes of loss.
Off-Premises Utility Services
Losses resulting from the off-premises failure of power, communication, water, or other utility services are excluded from coverage, including losses caused by a power surge resulting from the failure. Communication services include internet access and cellular network services.
This exclusion does not apply to computers or electronic data. In addition, if the utility failure or resulting power surge is caused by a covered cause of loss, the damage caused by that covered peril is covered.
Electrical Apparatus
Losses resulting from artificially generated electrical, magnetic, or electromagnetic energy that damages or disrupts the operation of an electrical device, appliance, system, or network are excluded from coverage.
However, if the excluded event causes a fire, the resulting fire damage is covered. In addition, damage to computers caused by artificially generated electrical, magnetic, or electromagnetic energy is covered if the occurrence takes place within 100 feet of the described premises, including damage resulting from a power interruption or power surge.
An Insurance Story
A power outage shuts down Coffee Café's point-of-sale and office computer systems. When power is restored, a power surge damages an office computer beyond repair. Whether the outage or surge was caused by a natural event, such as lightning, or by an artificially generated event, such as an overloaded electrical circuit, the damage to the computer is covered if the occurrence took place within 100 feet of the described premises.
However, if the same outage or power surge causes the café's refrigeration system to fail and milk spoils, that loss is not covered if the outage or surge was artificially generated or resulted from an off-premises utility service failure.
Electrical Disturbance
Except as provided by the Additional Coverages, the policy excludes loss resulting from the electrical or magnetic injury, disturbance, or erasure of electronic data. However, this exclusion does not apply when the damage is caused by lightning.
Certain Computer-Related Losses
The policy does not cover the failure or malfunction of any computer hardware, software, operating system, network, or microprocessor caused by its inability to correctly recognize or process a date or time.
Errors or Omissions
The policy excludes losses resulting from errors or omissions in programming or storing data, as well as errors in processing or copying valuable papers and records.
Installation, Testing, Repair
The policy excludes losses resulting from errors or deficiencies in the design, installation, testing, maintenance, or repair of the insured's computer system or electronic data.
Steam Apparatus
The policy excludes losses resulting from the explosion of steam boilers, steam pipes, steam engines, or similar equipment. This exclusion complements the policy's limitation that excludes direct damage to the steam equipment itself, while also excluding resulting damage to other covered property caused by the explosion. Coverage for these losses is available through the Equipment Breakdown Protection Optional Coverage or a separate Equipment Breakdown policy.
Frozen Plumbing
The policy excludes loss caused by water or other substances that leak from plumbing, heating, or air conditioning systems due to frozen plumbing. However, coverage may apply if the insured used reasonable care to maintain heat in the building.
Continuous or Repeated Seepage or Leakage of Water
The policy excludes losses resulting from the continuous or repeated seepage or leakage of water over a period of 14 days or more. This exclusion also applies to the continuous or repeated presence or condensation of humidity, moisture, or vapor over the same period.
Virus or Bacteria
The policy excludes loss or damage caused by any virus, bacterium, or other microorganism that is capable of causing physical distress, illness, or disease.
Dishonesty
The policy excludes losses resulting from dishonest or criminal acts, including theft, committed by the insured, anyone with an ownership interest in the property, or the insured's partners, members, officers, managers, employees, directors, trustees, or authorized representatives. Coverage for employee theft may be added through the Employee Dishonesty Optional Coverage or obtained under a separate Commercial Crime policy.
False Pretense
The policy excludes losses resulting from voluntarily transferring or surrendering property after being induced by a fraudulent scheme, trick, or false pretense.
Exposed Property
The policy excludes loss or damage caused by rain, snow, ice, or sleet to personal property in the open.
Other Types of Loss
This exclusion includes several causes of loss that are commonly excluded under commercial property policies, including:
| Excluded Peril | Excluded Peril | Excluded Peril |
|---|---|---|
| Wear and tear or latent defect | Rust, corrosion, decay, or deterioration | Smog |
| Settling, cracking, shrinking, or expansion | Nesting or infestation of insects, birds, rodents, or animals | Mechanical breakdown, except for breakdown of computers |
| Humidity damage to personal property | Extreme temperatures that damage personal property | Marring or scratching of personal property |
The following perils are also excluded. However, if they result in a covered cause of loss, the resulting damage is covered:
- Weather conditions
- Acts or decisions of any person, group, organization, or governmental body
- Negligent work, including faulty zoning, design, construction, materials, or maintenance
Loss or Damage to Products
The policy excludes loss or damage to merchandise, goods, or other products caused by an error or omission during any stage of the product's development, production, or use. This includes errors in planning, testing, processing, packaging, installation, maintenance, or repair.
Business Income and Extra Expense Exclusions
The policy excludes extra expense and additional business income loss resulting from delays in repairing or rebuilding damaged property or from interference by striking workers at the repair site. It also does not cover increased expenses caused by the suspension, lapse, or cancellation of a license, lease, or contract.
Exclusion to the Accounts Receivable Coverage Extension
The policy excludes loss or damage to accounts receivable caused by alteration, falsification, concealment, or destruction intended to hide wrongful acts. It also excludes losses resulting from errors or omissions in bookkeeping, accounting, or billing.