Wednesday, November 23, 2011

Habitational Business Owners Policy- Qualified or Not?


A Habitational BOP is a wonderful product to have if you own rental properties. It not only provides Real Property Coverage, but also affords your company (LLC or Corporation) Business General Liability Insurance and Business Personal Property, all in one policy. Commercial Auto can also be added and Employers Practices Liability Iinsurance if so desired.

Listed below are the "General" guidelines for this one product and that being said ALL insurance policies have similiarly complicated structures. Make sure the product you purchase for your property meets ALL the eligibility guidelines prescribed to by the insurer or you could be denied coverage should you suffer a loss and it is determined the property did not fit the product purchased.

Buyer Beware

(see below and there are additional guidelines for eligibility beyond these. I show these to convey the complexity of insurance, not for you to have to understand just for your reference)

General Guidelines (Eligibility) for a Habitational BOP

Real and Personal Property must be insured to 100% replacement cost. Marshall and Swift/Boeckh Commercial Building Valuation System (BVS) will be considered in valuation of buildings. Deviation in values in excess of 10% compared to the BVS require documentation and verification. Valuation through BVS for single family dwellings is not available. Selection of the '0000-Single Family Dwelling' occupancy code in Express will refer the User to the Personal Lines Valuation tool for replacement cost verification.

All Habitational risks including subsidized housing program and other risks with unique exposures as detailed below will be written using the HAB BOP form and are subject to the following guidelines.

Buildings built prior to 1955 must have renovated plumbing, heating, wiring and roofing. This means that the roof, electrical, heating and plumbing systems have been duly maintained and regularly updated for the operations carried out in the building. Information regarding updates must accompany the application or be available upon request if submitted through eCLS.
Occupancy rate of at least 85% of living units in each building is required at policy inception and through the policy period for continued coverage. Existing accounts, which fall below the minimum requirement, may jeopardize the ongoing acceptability of the risk*.
Incidental occupancies (up to 25% of the total square footage) are permissible if the type of business would be eligible under other Farmer's Programs.
Incidental Restaurants (other than those with no cooking) are genera
lly not eligible, however under certain underwriting guidelines outlined below such exposures will be considered. Refer to Underwriting
Businesses must be located in protection class 1-8.
Risks must comply with state and federal laws and requirements.
Risk must furnish verifiable loss history from prior carrier reflecting an acceptable claims experience for the length of time in business or the last consecutive three years, whichever is less.

Buildings over six stories tall must have a fully operational automatic sprinkler system. Fire extinguishers and standpipe hoses must be located on each floor in accordance with NFPA standards.

In buildings of more than two stories, all vertical or horizontal openings(stairways, air conditioning systems, heating ducts, air and elevator shafts) must be protected.
All units and common areas must be equipped with working smoke detectors.

All life safety standards must be met:

Lighted exit signs on all exits.
Emergency lighting systems in exit halls and stairwells.
The maximum number of living units in a fire division is 24.
Management must offer tenants a reasonably secure environment.
Recreational facilities must be responsibly managed: (see specific rules for playgrounds)
Swimming pools must be fully enclosed with at least a 5' fenced, self-locking gate, and a non climbable fence (no chain link fence allowed).
No diving board or slides present.
All pools/spas must be equipped with an anti-entrapment device and/or system for drain cover as per the Pool Safety Act.

Link to more information on acceptable/non-acceptable pool drain covers: Drain Descriptions and symbols that indicate compliant drains: Symbols of Compliance
Must meet current code requirements.

*This guideline does not apply to timeshares and short term rentals.

Habitational Properties With Unique Exposures:

Listed below are accounts with unique exposures which will now be considered on a submit for approval basis to be written under the Habitational program with specific guidelines in addition to those stated above. Please contact the Underwriting Department for consideration.

Apartments and condominiums in buildings in excess of 7 stories. The following additional guidelines apply:

Current management should have a minimum three years experience with verified loss experience.
Property fully sprinklered, to include garbage chutes. Alarms both local and central which extends to all common areas and habitable units.
Self closing fire rated doors present at the end of each hall/stairwell.
Proof of fire divisions supported by the building blueprints, or pre quote loss control.
Filed, approved and posted evacuation plans.
Stand pipes on each floor
100% of all life safety measures and updated building codes are met.
All such properties are subject to PML calculations requirements.
Buildings constructed for occupancies other than Habitational and that were subsequently converted may be considered if:
The conversion process must be 100% complete.
All state building codes must be met for the current occupancy-type.
No future conversions in planning
Unusual or excessive hazards arising from the nature of the conversion may make the risk ineligible.
Note: Endorsement E6288 - Exclusion - Building Conversions applies to all Habitational policies and excludes coverage for certain damages arising out of a conversion project, as defined in the endorsement.
Apartments and Condominiums in buildings with mixed occupancy greater than 25%, including those with cooking facility restaurants, will be considered only if:
Buildings built to code in anticipation of a restaurant exposure.
Buildings are 10 years old and newer.
Restaurants must be eligible for Farmer's Restaurant program to be considered with the habitational exposure.
These exposures are subject to loss control verification of sufficient fire protection and adherence to codes requirements.
Buildings with exhaust venting through the center of the building are ineligible.

Condominiums complexes with marinas docks, or lake front properties. The following additional guidelines apply:

Policy developed premium threshold must be $10,000 or greater.
The Apartment owner, or HOA be named Additional Insured on the marina or golf course policy and a hold harmless agreement favoring the insured is on file.
Dock will be considered Specified Property.
Must be private dock or lake front accessed only from the property, and no public use.
CC&R's address liability and responsibility of usage of the dock.
The docks must be well lit and signs posted "for tenant use only; no trespassing, private property" must be posted and visible.
Docks must have a slip-resistent surface.
Boats are for private use only with no public access.
Boats are restricted to 26 feet long
The entire body of water is no wake zone.
No water skiing allowed.
No boat drivers under 14 years of age.

Apartment or condominium complexes with golf courses - The following additional guidelines apply:

These properties will be eligible as long as the HOA or the apartment owner is not part owner of or involved in any way in the operation of either the marina or the golf course or any facility associated with same.

The Apartment owner, or HOA be named as Additional Insured on the marina or golf course policy and a hold harmless agreement favoring the HOA is on file.

Time share, time share condominiums and single family rental homes in resort areas will be considered with the following restrictions:

The complex or units are managed by a property management company
Single family rental homes can be written on the habitational program with weekly rentals only. Shorter rentals could be considered in resort areas when managed by a property Management Company. Single family rental homes are subject to company placement by Predictive Model in Business Insurance Express; all other accounts not subject to Predictive Model will continue to be placed in FIE only.

Only risks located in resort communities or within city limits are eligible.
Risks located in heavily wooded areas or are not accessible by road year round are not eligible.
The following Guidelines apply to PUD's and Homeowners Associations:
Any association that has municipality type exposures is ineligible. By that we mean association that provides police, fire and water department type services.

Associations that insure all or none of the residential buildings are eligible. An association will not be eligible if some but not all of the residential buildings are on the master policy for property coverage for the residential structures.
If the CC&R in a PUD requires the association to insure all residential and common structures it will be written as a Condo, subject to all four unit owner coverage options (none, included, per unit, blanket).

If stores, restaurants, golf courses and/or marinas are part of the development, those must be separately insured and confirmed by a certificate of insurance provided by the association.
The same selection criteria used to underwrite a condominium (insurance to value, age, condition of the buildings, hazards such as lakes, golf courses) will be used to determine acceptability.

The rating base for liability is the total number of all residential units in the development regardless of whether the residential buildings are written.
D&O and Fidelity coverages can be written subject to the same rules that currently apply to Condominium exposure.

The Name Insured is always the Association as it holds title to the common properties and as such has an insurable interest in the common areas (buildings and contents), however, when the

CC&Rs obligates the association to maintain insurance on the individually owned structures the named insured should read:

"ABC Association and individual homeowners as their building property interests may appear"
Note: Underwriters should be aware that an order for Loss Control survey on a PUD should include comments as to particular buildings to be surveyed - such as clubhouse or pool restroom or all structures which are property owned and under the Association control.

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