Form BP 07 01: Outdoor Signs - A Comprehensive Overview
The BP 07 01 Outdoor Signs endorsement is a crucial component of a Businessowners Policy (BOP) designed to provide specific coverage for direct physical loss or damage to outdoor signs. This form modifies the standard BOP (often the BP 00 03) to address the unique risks associated with signs that are owned by the named insured or are in their care, custody, or control at the premises described in the policy declarations. While the base BOP (BP 00 03) often includes a nominal amount of coverage for outdoor signs attached to the building (e.g., $1,000 per sign or $2,500 total), this endorsement allows businesses to schedule higher limits commensurate with the actual value of their signage.
Classes of Business It Applies To
This endorsement is particularly relevant for businesses that rely heavily on outdoor signage for branding, advertising, and customer attraction. Examples include:
- Retail Stores: Businesses in shopping plazas or standalone locations with prominent storefront signs, pylon signs, or monument signs.
- Restaurants: Especially fast-food establishments or diners with large, illuminated, or electronic messaging signs.
- Hotels and Motels: Properties with large roadside signs to attract travelers.
- Service Businesses: Such as auto repair shops, car washes, or any business with significant investment in freestanding or attached outdoor signs.
- Theaters and Entertainment Venues: Often utilizing elaborate marquees or digital display boards.
Essentially, any business with outdoor signs whose value exceeds the basic coverage provided in the unendorsed BOP should consider the BP 07 01.
Special Considerations
Several important factors come into play when utilizing the BP 07 01 endorsement:
- Valuation: Signs can be valued at Replacement Cost (RC) or Actual Cash Value (ACV). It's critical to ensure the limit of insurance is adequate for the chosen valuation method to avoid underinsurance.
- Covered Perils: Coverage typically aligns with the perils insured under the main property section of the BOP (e.g., "all-risk" or named perils). However, specific exclusions might still apply, such as wear and tear, electrical surge (unless resulting fire ensues), or damage during installation or repair unless specifically endorsed.
- Detached Signs: The standard BOP often provides less coverage, or no coverage, for signs not attached to the building. The BP 07 01 is essential for properly insuring these detached signs.
- Electronic Signs: Digital and electronic message boards have unique exposures, including vulnerability to power surges or specific types of malfunctions that may or may not be covered without further clarification or specific endorsements for equipment breakdown.
- Local Ordinances: If a sign is damaged and local ordinances require a more expensive replacement (e.g., due to new zoning laws or sign codes), Ordinance or Law Coverage (which may be a separate endorsement like BP 04 46) might be needed to cover the increased costs. The BP 07 01 itself primarily addresses direct physical damage.
- Care, Custody, or Control: The form extends coverage to signs the insured is responsible for but may not own, such as a sign provided by a franchisor but contractually the franchisee's responsibility to insure.
Real-world example: A restaurant has a $20,000 freestanding electronic pylon sign. A severe windstorm damages it beyond repair. The standard BOP only provides $2,500 for outdoor signs. With the BP 07 01 scheduling the sign for $20,000, the business can recover the full replacement cost, less any deductible.
Key Information for Agents and Underwriters
Agents and underwriters should consider the following when dealing with the BP 07 01:
- Accurate Scheduling: Ensure each outdoor sign is accurately described and a proper limit of insurance is scheduled on the declarations page or a supplemental schedule. This avoids ambiguity at the time of a claim.
- Risk Assessment:
- Construction & Material: Is the sign made of durable, weather-resistant materials? Is it professionally installed and engineered to withstand typical local weather conditions (wind, hail)?
- Lighting & Electrical Components: Illuminated signs, especially older ones or those with complex wiring, may pose a higher risk of electrical faults or fire. Newer LED signs might have lower electrical risks but could be more susceptible to surge damage.
- Location & Exposure: Is the sign located in an area prone to vandalism, high winds, heavy snowfall, or vehicle impact? Signs close to roadways or in unsecured areas present higher risks.
- Maintenance: Regular maintenance can significantly reduce the likelihood of loss. Underwriters may inquire about maintenance routines.
- Pricing: Premiums will be based on the limit of insurance, type of sign, location, perils covered, and the business's loss history. Higher value, more fragile, or poorly maintained signs in high-risk areas will command higher premiums.
- Coverage Gaps:
- The BP 07 01 covers direct physical damage. It does not typically cover loss of business income resulting from the sign being out of commission, though this might be picked up under the general Business Income coverage if the sign's absence directly halts operations (a rare scenario).
- Mechanical breakdown or electrical derangement of electronic signs may require separate Equipment Breakdown Protection coverage.
- Damage from flood or earthquake is typically excluded unless specifically added back by endorsement (e.g., BP 10 03 for Earthquake).
- Underwriting Guidelines:
- Photographs of the signs are often required, especially for higher-value items.
- Proof of value (e.g., invoices, appraisals) may be requested for expensive or custom signs.
- Insurers may have specific underwriting rules or limitations for signs with older electrical systems, certain types of lighting (e.g., neon), or those exceeding certain height or size thresholds.
- A higher deductible may apply specifically to the outdoor signs coverage.
By carefully considering these aspects, agents can ensure their clients have appropriate coverage for their valuable outdoor signage, and underwriters can accurately assess and price the associated risks.