Businessowners Injury and Damage Protection

Section II Liability Coverage and the Duty to Defend

Section II of the Businessowners Policy provides commercial liability protection for small to mid-sized businesses. The standard Businessowners Policy form writes this liability coverage on an occurrence basis. Under Business Liability, Section II pays sums the insured becomes legally obligated to pay as damages because of bodily injury, property damage, or personal and advertising injury; a separate Medical Expenses coverage addresses medical payments. Under this coverage, bodily injury means physical injury, sickness, or disease sustained by a person, including death resulting from any of these conditions.

Property damage encompasses two distinct situations. It means physical injury to tangible property, including the resulting loss of use of that property. It also includes the loss of use of tangible property that is not physically injured. For example, if your retail store delivery cart dents a customer's vehicle, repair costs address the physical damage, and reasonable rental car costs may be damages for the resulting loss of use.

The insurer has the right and duty to defend the insured against any suit seeking covered damages. Defense costs under Section II are paid in addition to the policy limits as supplementary payments. The insurer's duty to defend ends when the applicable limit has been used up by payment of judgments, settlements, or covered medical expenses.

Personal and Advertising Injury

Personal and advertising injury covers injury arising from specified offenses rather than physical accidents. These covered offenses include false arrest, detention, or imprisonment, as well as malicious prosecution. The coverage also applies to wrongful eviction, wrongful entry, or invasion of the right of private occupancy. For instance, if a store manager wrongfully detains a customer under suspicion of shoplifting without justification, the resulting lawsuit falls under this section.

This coverage also addresses injury caused by published statements and communication. It includes oral or written publication of material that slanders or libels a person or organization, and the publication need not be an advertisement. It also protects against oral or written publication of material that disparages goods, products, or services, as well as material that violates a person's right of privacy. Commercial offenses are also covered, including the use of another's advertising idea in your advertisement, and the infringement of another's copyright, trade dress, or slogan in your advertisement.

The policy contains specific restrictions on who can claim this protection and under what circumstances. The standard form generally excludes personal and advertising injury offenses committed by an insured in an advertising, broadcasting, publishing, or telecasting business, though the exclusion has exceptions for certain offenses, including false arrest and malicious prosecution. In addition, the policy excludes injury arising from material published by or at the direction of an insured who knew it was false. It also generally excludes injury arising from breach of contract, except an implied contract to use another's advertising idea in your advertisement.

Medical Expenses Coverage and Exclusions

Medical expenses coverage under Section II pays necessary medical, surgical, dental, ambulance, hospital, and professional nursing services. This coverage applies to accidents that occur on premises you own or rent, on ways next to those premises, or because of your business operations. A key feature of this coverage is that medical payments under the Businessowners Policy are paid without regard to legal fault or negligence. To be covered, medical expenses must be incurred and reported within one year of the accident date.

Medical expenses coverage can pay for eligible people injured on covered premises, on ways next to those premises, or because of your operations, subject to the policy exclusions. It also excludes injury to a person hired to do work for or on behalf of any insured or a tenant. In addition, coverage excludes any person injured on that part of premises normally occupied by that person as a tenant, as well as any injury sustained while practicing, instructing, or participating in physical exercises, games, sports, or athletic contests.

Medical expenses coverage excludes an injury when benefits are payable or must be provided under workers compensation, disability benefits, or a similar law. If a customer slips and falls on a wet floor in your grocery store, their immediate medical evaluation can be covered under medical expenses without establishing fault. If your own employee slips on that same floor, the medical expenses coverage will not pay.

Products-Completed Operations and Core Policy Exclusions

The products-completed operations hazard addresses distinct post-delivery risks. The products hazard covers liability arising from products manufactured, sold, handled, or distributed by the insured. For products coverage to trigger, the bodily injury or property damage must occur away from premises the insured owns or rents, and physical possession of the product must have been relinquished to another party. For example, if a customer buys a toaster at your appliance store, takes it home, and it catches fire three weeks later, that claim falls within the products hazard.

The products-completed operations hazard includes bodily injury or property damage arising out of your completed or abandoned work when the injury or damage occurs away from premises you own or rent, subject to the form's definitions. Work is deemed completed when all work specified in the contract has been completed, or when all work at a specific job site has been completed if the contract calls for work at multiple sites. Work is also deemed completed when the part done at a job site has been put to its intended use by someone other than another contractor or subcontractor working on the same project. Work that requires service, maintenance, correction, repair, or replacement, but is otherwise complete, is treated as completed.

Section II contains several major liability exclusions. Expected or intentional injury caused by the insured is excluded, except for reasonable force used to protect persons or property. Contractual liability is excluded unless liability would exist without the contract or is assumed in an insured contract, such as a lease of premises, a sidetrack agreement, certain easement agreements, or a qualifying contract assuming another party's tort liability for bodily injury or property damage. Liquor liability is excluded for insureds in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. The policy excludes obligations under workers compensation and similar laws and generally excludes bodily injury to an employee arising out of employment or duties related to the business, but the employee-injury exclusion has an exception for liability assumed under an insured contract. In addition, pollution liability is broadly excluded, subject to specific, limited exceptions for building heating equipment or hostile fires. Aircraft, auto, and watercraft liability are generally excluded, subject to policy exceptions; the professional services exclusion applies to injury or damage caused by rendering or failing to render a professional service, not to every business error or omission.

Property damage coverage also excludes damage to property you own, rent, or occupy, though the standard form provides limited coverage for certain damage to premises rented to you. Coverage excludes damage to your product for property damage to the product itself arising out of the product or any part of it. Similarly, damage to your work excludes property damage to your completed work arising out of the work itself, unless performed by a subcontractor. Finally, the recall of products, work, or impaired property exclusion eliminates coverage for expenses incurred in recalling defective items.