15.6 Section I Loss and General Conditions

Section I of the Businessowners Policy (BOP) contains several common property conditions, including:

Common Property Conditions	Common Property Conditions	Common Property Conditions
Abandonment	Appraisal	Recovered Property
Mortgage Holders	Policy Period, Coverage Territory	—

Duties in the Event of Loss or Damage

Following a covered loss, the insured must:

• Notify the police if a law may have been broken.
• Promptly notify the insurer of the loss and describe the property involved.
• Provide details about how, when, and where the loss occurred as soon as possible.
• Take reasonable steps to protect covered property from further damage and keep records of any related expenses.
• Provide inventories of damaged and undamaged property at the insurer's request, including quantities, costs, values, and the amount of loss claimed.
• Allow the insurer to inspect the damaged property and examine books and records as reasonably necessary, including taking samples or making copies.
• Submit a signed, sworn proof of loss within 60 days after the insurer requests it.
• Cooperate with the insurer during the investigation and settlement of the claim.
• Resume business operations, in whole or in part, as quickly as reasonably possible.

Any insured may be required to submit to an examination under oath, separately from other insureds, regarding any matter related to the policy, the claim, or the insured's books and records. The insured must sign the examination.

Legal Action Against Us

Any legal action against the insurer must be brought within 2 years after the date of the direct physical loss.

Loss Payment

After a covered loss, the insurer may choose to:

• Pay the value of the lost or damaged property.
• Pay the cost to repair or replace the property.
• Take possession of all or part of the property at an agreed or appraised value.
• Repair, rebuild, or replace the damaged property with property of like kind and quality.

Covered property is generally settled on a replacement cost basis. Although the BOP does not include a traditional coinsurance clause, it contains an Insurance to Value provision. If the property is insured for less than 80% of its replacement value, the claim payment is reduced by a penalty. Some insurers may waive this requirement by endorsement. If the Insurance to Value requirement is met, the insurer pays replacement cost only after the damaged property has been repaired or replaced, which should be completed as soon as reasonably possible after the loss.

The insured may choose to have building losses settled on an actual cash value (ACV) basis instead of replacement cost. However, certain types of property are always valued on an ACV basis, including:

• Used property and secondhand merchandise held in storage for sale.
• Property of others.
• Household contents, except personal property in apartments or rooms furnished by the insured as a landlord.
• Works of art, antiques, manuscripts, and other rare articles, such as etchings, paintings, and statuary.

A party wall is a wall shared by adjoining buildings or units owned by different parties. If a covered loss occurs, the insurer pays the insured's proportional share of the damage. If the adjoining owner does not repair or pay for their share, the insurer may pay for the entire wall and then seek reimbursement (subrogation) from the adjoining owner.

Resumption of Operations

The policy reduces Business Income coverage to the extent the insured could resume operations by using damaged or undamaged property at the described premises or another location, even if the insured chooses not to resume operations.

Vacancy

The Vacancy condition in the Businessowners Policy (BOP) is the same as the Vacancy condition found in the Building and Personal Property Coverage Form of the Commercial Package Policy.

For purposes of the Vacancy condition:

• If the insured is a tenant, the rented unit is considered vacant if it does not contain enough business personal property to conduct customary operations.
• If the insured is the building owner, the building is considered vacant if less than 31% of its total square footage is rented to tenants or subtenants, or used by the owner to conduct customary operations.
• Buildings that are under construction or renovation are not considered vacant.

Example

A building insured under a Businessowners Policy contains four units. The owner uses one unit as a business office, while the other three units are vacant. Because only 25% of the building is occupied, the building is considered vacant.

If the owner leases at least one additional unit to another business or uses it for their own operations, 50% of the building is occupied. Because more than 31% of the building is being used for customary operations, the building is not considered vacant.

If the building where the loss occurs has been vacant for more than 60 consecutive days immediately before the loss, the insurer reduces the claim payment by 15%. In addition, the policy provides no coverage for losses caused by the following perils:

• Vandalism
• Sprinkler leakage, unless the system is protected against freezing
• Building glass breakage
• Water damage
• Theft or attempted theft

Controlled Property

Acts or neglect by someone other than the insured that occur beyond the insured's direction or control do not affect coverage. Likewise, a breach of a policy condition at one insured location does not affect coverage at any other location where no breach exists.

No Benefit to Bailee

Except for the insured, no person or organization that has custody of covered property is entitled to benefits under the policy. For example, a business repairing the insured's property is not covered by the policy. However, if the insured has Business Personal Property coverage that includes the personal property of others, the insured may be covered for damage to that property while it is in the insured's care.