Policy Edition Dates, BAPs, LLCs

The Critically Important Policy Edition Dates
When a coverage question is submitted to the VU “Ask an Expert” service, the form number and edition date if it is an ISO form must be provided. For example, a business income question involving a loss due to on-premises power failure might be based on the CP 10 30 Special Causes of Loss form.

However, to answer the question, the edition date is needed as well. Is the form the CP 10 30 06 95 or the CP 10 30 06 07? The former excludes power failure claims that occur outside a building, while the latter only excludes them if they occur off the premises.

At times, “Ask an Expert” submitters don’t know why edition date is critical or they don’t know how to distinguish between ISO and company forms. With regard to the latter, a statement on the form that it “Includes material copyright 20xx by Insurance Services Office” means that it is not an ISO form.

To learn more about ISO’s form numbering system, how to read it and how to distinguish ISO from non-ISO forms, read the entire article.

The BAP and Temporary Substitutes
An ISO Business Auto Policy (BAP) is written on several vehicles and includes Symbol 7 for physical damage. One of the autos will be in the shop for two weeks for repairs. Since the insured will rent a vehicle during this time, it will be a temporary substitute auto and the BAP, like the ISO Personal Auto Policy (PAP), responds to physical damage claims…right?

Unfortunately, there is no physical damage coverage for “temporary substitute” autos. The “Certain Trailers, Mobile Equipment and Temporary Substitute Autos” section of the BAP makes it clear that only liability, not physical damage, coverage extends to temporary substitutes.

For the customer’s temporary substitute vehicle to be covered, Symbol 8 physical damage coverage would need to be provided. Another example of a customer who needs to have Symbol 8 for physical damage is a business with employees who travel and rent cars for business purposes. If the BAP does not include Symbol 8 for physical damage and the rental car is damaged, the policy does not provide coverage.

One possible explanation for why some people think the BAP provides physical damage coverage for a temporary substitute is because the standard PAP usually does when at least one declared vehicle has physical damage coverage. Unfortunately, that’s not the case with the BAP.

More information, along with two additional articles on this topic, is available here.

Insuring Homes Owned by LLCs
An agency customer’s accountant set up an LLC, transferring ownership of his home to his three children. The children are the LLC members and now rent the home under a triple net lease to the customer requiring him to insure it. The insured currently has an HO policy in his name and the agency has advised that he is no longer eligible for the HO program. The accountant is livid that they won’t provide this coverage. What can the agency do?

The bottom line is that the HO program simply is not designed to insure properties owned by corporations and LLCs. If the accountant wants someone to be upset with, he should look inward; the insurance implications and costs should have been considered as part of the rationale for making this change.

For some suggestions made by VU faculty and links to several related articles, visit the VU.

Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University, an online learning center for agents and brokers.