1. Forms
2. BP
3. BP-20-01

BP 20 01 - Micro-Businessowners Retail Endorsement

1. What the form is

The BP 20 01, Micro-Businessowners Retail Endorsement, is a modification to the Micro-Businessowners Coverage Form (BP 00 04). Its primary purpose is to tailor the base policy to meet the specific needs of small retail businesses. This endorsement achieves this by:

• Adding 'stock' (merchandise held in storage or for sale, raw materials, and in-process or finished goods, including packing and shipping supplies) to the definition of covered Business Personal Property.
• Introducing the peril of 'theft' specifically for losses to this newly covered 'stock'. This theft coverage is typically subject to a separate, often $500, deductible which can sometimes be increased.
• Amending Section II - Liability to automatically include blanket additional insured status for persons or organizations when required by a written contract or agreement. This is a significant feature for retailers who may have contractual obligations to name other parties (like landlords or event organizers) as additional insureds.

2. Classes of business it applies to

This endorsement is designed for "micro-businesses" engaged in retail operations. ISO/Verisk generally defines a micro-business as one with up to four employees (including the owner) and sales that do not exceed $500,000. The underlying Micro-Businessowners program (using form BP 00 04) is intended for businesses that do not own or lease a commercial space for more than 90 consecutive days, making it suitable for:

• Online Retailers: Businesses selling goods through platforms like Etsy, eBay, or their own small e-commerce sites, where they hold a limited amount of stock.
• Direct Retail Sales: Small businesses that sell directly to consumers, perhaps at markets, pop-up shops, or through home-based operations. For example, a home-based artisan who creates and sells crafts directly to customers.
• Kiosk or Cart Operators: Businesses operating from temporary or mobile retail spaces, such as a t-shirt vendor at a seasonal festival or a food cart selling pre-packaged goods (note: food spoilage may have separate considerations).
• Artisan Manufacturing Retail Sales: Small-scale artisans who manufacture and sell their own products directly. For instance, a candlemaker who sells their products online and at local craft fairs.

3. Special considerations

When utilizing the BP 20 01, several important factors must be considered:

• Theft Coverage Limitations: While theft of stock is added, new exclusions are also introduced. These typically include losses due to:
  • Dishonest or criminal acts by the insured, anyone entrusted with the property (except for acts of destruction by employees or authorized representatives), partners, members, officers, directors, trustees, or joint venturers.
  • False pretense, such as voluntarily parting with property because of a fraudulent scheme or trick.
  • Inventory shortages, meaning losses only identifiable through an inventory count or unexplained disappearance.
• Theft Deductible: A separate deductible (commonly $500) applies specifically to theft losses of stock. This is in addition to any other policy deductible.
• Blanket Additional Insured Provision: While convenient, the blanket additional insured status under Section II - Liability is only conferred when there is a written contract or agreement requiring the named insured to provide such status. Without a written contract, an entity would not automatically be considered an additional insured under this provision.
• Stock Coverage Basis: The BP 00 04, which this endorsement modifies, provides named perils coverage for business personal property. This means stock is covered only for the perils specifically listed in the policy, now including theft via this endorsement.
• Eligibility: The business must meet the eligibility criteria for the Micro-Businessowners program, generally small operations with few employees and limited revenue, and typically without a permanent owned or long-term leased commercial location.

4. Key information for agents and underwriters

Agents and underwriters should pay close attention to the following when dealing with the BP 20 01:

• Risk Assessment for Stock:
  • Thoroughly assess the nature and value of the 'stock'. While the Micro-BOP typically offers a standard business personal property limit (e.g., $2,500, though higher limits up to $25,000 may be available), ensure this is adequate for the insured's inventory.
  • Consider the susceptibility of the stock to theft. High-value, easily portable items might present a greater risk.
• Moral Hazard and Exclusions: The dishonesty, false pretense, and inventory shortage exclusions are critical. Underwriters should be mindful of potential moral hazards, especially with businesses that have poor inventory controls.
• Pricing Considerations: The addition of stock coverage and the peril of theft will influence the premium. The specific type of retail operation and the value/nature of the stock are key rating factors.
• Coverage Gaps:
  • Ensure the insured understands that building coverage is generally not provided by the underlying Micro-BOP. If the retail operation has a permanent physical store they own or are responsible for insuring, a standard Businessowners Policy (BOP) or other commercial property form would be more appropriate.
  • The named perils nature of the property coverage means losses from unlisted perils are not covered.
• Underwriting Guidelines for Micro-Businesses:
  • Verify the business meets the micro-business criteria (typically up to 4 employees, including the owner, and sales under $500,000).
  • Confirm the operational model aligns with the program's intent (e.g., home-based, online, temporary locations like kiosks, not permanent, long-term leased commercial spaces).
• Documentation for Additional Insureds: Advise insureds to maintain copies of all written contracts requiring them to provide additional insured status to others, as this is a prerequisite for coverage under the blanket provision.