Risk Management

BOP Packages Property and Liability Coverage

By Jillian Brandt, CIC
OMIC Insurance Agency and Group Products Manager

[Digest, Spring 1998]

Purchasing property and general liability insurance for an ophthalmic practice used to mean sorting through a laundry list of optional coverages to supplement the basic policy. In addition to the base policy premium, a practice could expect to spend hundreds of dollars on individual supplemental policies and still not be sure it was covered for all daily operating exposures. Relief arrives in the 1960s in the form of a commercial package policy that allowed two or more property and liability coverage lines to be combined within a single policy. What later became known in the insurance industry as a BOP (Business Owners Policy) made it possible for carriers to charge a single premium for a broad range of coverages at rates that were usually lower than what those coverages would cost if purchased separately. Ophthalmic practices and other small businesses could obtain coverage for exposures they otherwise might not be able to afford with fewer gaps and overlaps in coverage.

Who Needs this Coverage?

Anyone operating a business who could be held legally, financially or professionally liable for losses resulting from damage to the building housing the business and the property within it (such as that caused by fire, theft, vandalism or water damage) or from the illegal actions of persons employed by that business needs business owners insurance. Most ophthalmologists carry business owners insurance because they are legally required to do so: building landlords require it under the terms of a lease, medical equipment companies require it in their contracts, banks require it as part of loan agreements. Under the terms of a BOP, coverage extends to an individual (and the individual’s spouse) in the conduct of business of which that individual is the sole owner. It also extends to partnerships, joint ventures, limited liability companies and any other organization with executive officers and/or stockholders.

What is Covered?

Under a BOP, property exposures are covered for loss, damage or destruction, property being any item of value that is owned, leased, used or depended upon as source of income or service. Examples of insurable property include medical equipment, office furniture, computers and office record systems. Coverage can be extended to such items as property in transit, valuable papers, computer programs and data, and personal property.

General liability exposures also are covered under a BOP. In an ophthalmic practice, liability exposures can arise from a number of situations: automobile liability exposures caused by or to their parties, premises operations (slips and falls), and personal injuries caused by false or misleading advertising, among other things.

More than other lines of insurance, BOPs tend to vary considerably from one carrier to the next as insurance companies have tailored their BOP programs over the years to meet the specific coverage needs of the businesses they insure. The office form BOP allows for protection of almost anything in an ophthalmic practice from almost any peril. Special form perils coverage covers all causes of loss unless specifically excluded by the policy. This is the broadest coverage form available in the marketplace today and is the form available to members of the American Academy of Ophthalmology through OMIC and The Hartford Insurance Company.

How are Rates Determined?

BOP rates are determined by the amount of coverage selected and the value of the property insured. Underwriters look at a number of factors when developing a premium: amount of property to be insured, office location and building construction. They also consider an organization’s overall management and risk classification, taking into account past loss experience, employee selection, training and supervision, and housekeeping and safety procedures. Ophthalmic practices have a better than average risk classification for office programs.

In 1997, OMIC and the American Academy of Ophthalmology teamed with The Hartford to offer a Spectrum BOP program for ophthalmologists. This program provides the most comprehensive property and general liability package available for the ophthalmic practice. Included are 15 coverages especially packaged for office building owners and occupants, including coverage for losses associated with accounts receivable, computers and media, employee dishonesty, forgery and alterations, and property off premises and in transit. Through the Spectrum BOP, these coverages are available at a cost of hundreds of dollars less than if they were purchased separately.

For information on this program, please contact the Underwriting Department at (800) 562-6642, extension 639 oromic@omic.com.