Business Owners Policy

What Is a BOP?

BOP is shorthand for “Business Owner’s Policy,” and they are created specifically for small- and medium-sized businesses. Smaller businesses usually have fewer exposures and may achieve sufficient coverage by purchasing two fundamental policies: General Liability and Commercial Property Insurance.

What Is Included in a BOP?

The BOP is usually divided into two parts: The Liability Portion and the Property Damage portion.

The General Liability portion of the BOP covers a business owner’s risks when they deal with anyone who is not an owner or an employee of the business. These people are described as “third parties,” and they might claim a business owner…

• Created an unsafe environment.
• Caused a physical injury.
• Damaged their personal property.
• Used copyrighted materials without permission.

General Liability can cover lawsuits over each of these events. So if someone sues a business owner for, say, a slip-and-fall injury, the insurance company can pay for business’s legal expenses. It might also cover the injured party’s medical bills and damaged property in order to avoid a lawsuit in the first place.

What Does General Liability Insurance Cover?

General Liability policies can cover a broad range of events. If your client is sued by a third party for one of these covered events, the policy pays attorney fees, court costs, and witness expenses. It may also cover settlements, judgments, and any court-ordered compensation up to stated policy limits.

Here is a list of the events a GL policy typically covers. For the sake of illustration, we’re going to assume you’re working to insure a restaurant owner:

• Bodily Injury: General Liability Insurance covers medical expenses, loss of services, funeral expenses, and court-ordered compensation when your client’s business is found to have injured a customer or another non-employee. For example, a customer brings a suit against your client, claiming she slipped in water on his premises and broker her leg. If the court finds your client liable, a GL policy will pay the judgment.

• Property Damage: A GL policy will pay to repair or replace damaged property when your client’s business is found to be responsible for the damage. This coverage applies whether the damage is the result of the client’s actions, like spilling coffee on a customer’s laptop, or neglect like failing to maintain the restaurant’s equipment.

• Completed Products: In some cases, a customer may claim your client’s product or service caused physical harm or property damage. Completed Products covers legal fees and any court-awarded damages if your client is found liable.

• Personal and Advertising Injury: Many General Liability policies cover non-physical damages as well. These damages can arise from copyright or brand infringement, unlawful eviction, libelous or slanderous material, malicious prosecution, and privacy violations.

• Liquor Liability: While this insurance will not cover a business that manufactures or sells alcohol as its primary function, it may cover alcohol-related accidents when your client serves alcohol at a business event (like the holiday party).

Bonus – Medical Expense Coverage: This differs from Bodily Injury coverage in that it provides compensation for small, immediate expenses when a non-employee is injured by your client’s business. The easiest example to illustrate this to your clients is paying the cost of an ambulance when a customer is injured. Insurance carriers that include this coverage in their General Liability policies hope to minimize their future costs by providing care in the moment.

The Property Insurance in a BOP is pretty straightforward. It insures the business owner’s commercial assets against loss or damage caused by…

• Theft.
• Vandalism.
• Fire.
• Windstorms.

Some BOPs also include Business Interruption Insurance, which kicks in when property damage shuts down operations. It can reimburse the owner for…

• Lost income.
• Employees’ wages.
• The cost of renting temporary office space.

Business Interruption Insurance is not a blank check, though. Insurers usually limit the coverage to a 12-month span following a covered shutdown, and many policies invoke waiting periods before taking effect.

Finally, don’t assume that a BOP is a one-size-fits-all kind of policy. Even though the basics are covered, you may have a small-business client who needs endorsements to truly meet their insurance requirements. For example, a client might want to add…

• Flood Insurance.
• Liquor Liability Insurance.
• Commercial Auto Insurance.
• Earthquake Insurance.