Businessowners Program Eligibility

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GENERAL ELIGIBILITY CRITERIA

Rule 22 in the Businessowners Section of the Insurance Services Office (ISO) Commercial Lines Manual (CLM) establishes specific eligibility rules, requirements, and guidelines for the ISO Businessowners Program. A particular risk that does not meet the eligibility requirements should not be written in this Program. In addition, many insurance companies have their own separate eligibility requirements that must be considered along with ISO’s.

The ISO Businessowners Program has its own separate classification table. A risk that is not one of the classes of business listed is not eligible. In addition, every risk must meet certain additional criteria, depending on the class of business and the occupancy group.

Unless otherwise indicated, 35,000 square feet is the largest area the risk can occupy. Annual gross sales cannot exceed $6,000,000.

APARTMENTS AND RESIDENTIAL CONDOMINIUM ASSOCIATIONS

  • All buildings are eligible, regardless of square foot area.
  • Certain incidental occupancies are permitted. Offices are permitted without limitation. Mercantile, service, wholesale, contracting, or processing occupancies or permitted if this program considers them to be eligible. However, the total square footage of all such occupancies must be less than 35,000 square feet in area and also must be considered incidental to the apartment or condominium occupancy.
  • Certain incidental occupancies are permitted. Offices are permitted without limitation. Mercantile, service, wholesale, contracting, or processing occupancies are also permitted but only if they meet the square foot area eligibility requirement. In addition, all such occupancies must be less than 35,000 square feet in area and be incidental to the apartment or condominium occupancy.
  • Contracting operations may not occupy more than 7,500 square feet or 15% of the building area.
  • Personal property of the building owner in eligible apartment buildings is eligible.

CONDOMINIUM COMMERCIAL UNIT-OWNERS

Business personal property that belongs to owners of condominium units used for eligible mercantile, service, wholesale, contracting, office, processing, or service occupancies is eligible.

CONTRACTORS

Only contractors listed in the classification table are eligible. In addition to the general eligibility criteria above, an eligible contractor must not:

  • Have payroll that exceeds $300,000
  • Work at heights above three stories
  • Subcontract more than 10% of its annual gross sales
  • Lease or rent equipment to others
  • Derive more than 25% of its total annual gross sales from operations other than installation, service, or repair

CONVENIENCE FOOD STORES, GROCERY STORES, AND SUPERMARKETS

These establishments, with or without gasoline sales, and with or without limited cooking or fast food restaurants as defined below, are eligible, subject to the rules that apply to these classes. In addition to the general eligibility criteria indicated above, the following requirements also apply:

  • It must have at least 3,000 square feet of total floor area when it also sells gasoline. Otherwise, it is a gasoline station and is not eligible.
  • It must not do automobile service or repair work.
  • Car wash operations are not permitted.
  • It must not fill propane or kerosene tanks.

MERCANTILE RISKS

In addition to the general eligibility criteria indicated above, the risk must be an eligible business listed in the classification table.

MOTELS

The 35,000 square foot area requirement does not apply to motels. However, sales must not exceed $6,000,000. The following describe eligible motels:

  • Less than three stories in height
  • Part of it may be an eligible restaurant as described in the restaurant class below.
  • It must not be seasonal. A seasonal motel is one that closes for more than 30 consecutive days.
  • It must not contain a bar or cocktail lounge.

OFFICES, INCLUDING OFFICE AND COMMERCIAL CONDOMINIUM ASSOCIATIONS

Buildings primarily occupied for office purposes that are not more than six stories high or that have 100,000 square feet or less are eligible. Business personal property in offices that occupy 35,000 square feet or less is also eligible. In addition, these incidental occupancies are permitted:

  • Apartments
  • Eligible mercantile, wholesale, processing, service, and contracting occupancies that make up less than 35,000 in total square foot area
  • Contractors that occupy 15% or less of the total area, subject to a maximum of 7,500 square feet. Otherwise, the building must be reclassified as a contractor’s office.

PROCESSING AND SERVICE RISKS

Subject to the general eligibility criteria indicated above, only processing and service businesses listed in the classification table are eligible. An additional requirement is that not more than 25% of annual gross sales can be generated by off-premises operations.

RESTAURANTS

This category includes operations with limited cooking exposures or operations that qualify as fast food restaurants. It also includes casual dining restaurants and fine dining restaurants. Each type of restaurant has its own definition and eligibility criteria.

Limited Cooking Restaurants

These are restaurants where the food is prepared cold or cooked using equipment that does not require National Fire Protection Association (NFPA) approved commercial exhaust systems. Examples include most domestic pizza and other small ovens, grills, toasters, and warmers. Any cooking that generates significant amounts of grease-laden vapors disqualifies the risk from eligibility. The following additional eligibility criteria apply:

  • Floor area cannot exceed 7,500 square feet.
  • Seating capacity is limited to 75 persons.
  • The risk may or may not provide table service.
  • Sales of beer or wine cannot exceed 25% of total sales. Serving hard liquor is not permitted.
  • No bars or cocktail lounges.
  • Catering operations and serving food off premises cannot generate more than 10% of total sales.
  • Seasonal operations are not eligible. These are defined as operations that are closed over 30 consecutive days.
Fast Food Restaurants

These restaurants have limited types of cooking devices. Restaurant operations that produce grease-laden vapors to the extent they need exhaust systems are eligible. However, they are eligible only if grilling enclosed broiling, deep fat frying, roasting, or barbecuing produce the vapors. Open broiling and cooking that uses solid fuel such as charcoal or hardwood is not eligible. The following additional eligibility criteria apply:

  • Floor area cannot exceed 7,500 square feet.
  • Seating capacity is limited to 150 persons.
  • Table service is not permitted.
  • Sales of beer or wine cannot exceed 25% of total sales. Serving hard liquor is not permitted.
  • No bars or cocktail lounges.
  • Catering operations and serving food off premises cannot generate more than 10% of total sales.
  • Seasonal operations are not eligible. These are defined as operations that are closed over 30 consecutive days.
  • The risk must install and maintain an automatic extinguishing system for cooking equipment that meets or exceeds NFPA Standard #96.
Casual Dining Restaurants

These restaurants serve moderately priced food in a casual setting. Patrons are seated, place their orders and are served, usually paying afterwards. They may include buffets and take-out service. They may or may not serve beer, wine, and/or liquor. Other eligibility requirements include:

  • Floor area cannot exceed 7,500 square feet.
  • Seating capacity is limited to 150 persons.
  • Sales of beer, wine, and/or liquor cannot exceed 50% of total sales.
  • Catering operations and serving food off premises cannot generate more than 10% of total sales.
  • Seasonal operations are not eligible. These are defined as operations that are closed over 30 consecutive days.
  • The risk must install and maintain an automatic extinguishing system for cooking equipment that meets or exceeds NFPA Standard #96.
  • Dancing is not permitted.
  • Live entertainment, including karaoke, is prohibited. However, incidental music, such as playing a piano, is permitted.
  • “Happy hour” and similar promotions are prohibited.
  • Bar operations cannot be conducted at times when full table service is not available. In addition, bar operations conducted exclusively for the purpose of consuming alcoholic beverages are prohibited.
Fine Dining Restaurants

These restaurants serve high quality food prepared by well-trained chefs served by an attentive wait staff. Alcoholic beverages are served. Their décor is usually valuable and extensive and includes furniture, tableware, lighting, and art. Other eligibility requirements include:

  • Floor area cannot exceed 7,500 square feet.
  • Seating capacity is limited to 150 persons.
  • Sales of beer, wine, and/or liquor cannot exceed 75% of total sales.
  • Catering operations and serving food off premises cannot generate more than 15% of total sales.
  • Seasonal operations are not eligible. These are defined as operations that are closed over 30 consecutive days.
  • The risk must install and maintain an automatic extinguishing system for cooking equipment that meets or exceeds NFPA Standard #96.
  • Dancing is not permitted.
  • Live entertainment, including karaoke, is prohibited. However, incidental music, such as playing a piano, is permitted.
  • “Happy hour” and similar promotions are prohibited.
  • Bar operations are for only customers seated in the restaurant or for those waiting to be seated.
  • The Maitre’d supervises the wait staff and controls customer turnover.
  • The chef supervises food preparation and other kitchen operations.
NFPA 96

ISO uses NFPA Standard #96-Standard for Ventilation Control and Fire Protection of Commercial Cooking Operations to determine restaurant acceptability. Adhering to these guidelines is vital to controlling the risk of fire. ISO provides a summary of the standards to assist to determine eligibility but it is not a complete description. Restaurants with cooking that produces grease-laden vapors should meet at least the following requirements:

  • Have an automatic extinguishing system. It must extend into hoods, ducts, and cover all surfaces of grills, ranges, deep fat fryers, and broilers. Kidde and Ansul provide these systems.
  • Have an inspection and maintenance contract for the extinguishing system. The inspection should include hood and ducts to prevent grease accumulation on the interior. The inspection and maintenance should be at least semi-annual but risks that produce heavy amounts of vapor are better served by quarterly or even monthly visits.
  • Have a manual release for the system that employees can easily pull as they exit the cooking area
  • Have detectors above or below the filters that can determine when the temperature exceeds specified limits
  • Have portable fire extinguishers that use extinguishing agents that work with the hood and duct fire protection system in the kitchen area and employees trained to use them properly.
  • Have deep fat fryers equipped with automatic fuel shut off valves that trigger when the temperature exceeds a certain temperature.
  • Have a minimum amount of clearance between the combustible material in the wall, ceiling, or roof and the hood and ducts. This means that the metal that the grease laden vapors heats must not be located against a combustible material that could burst into flames because of that heated metal. A number of inches of clear space are required but that space can be reduced by introducing fire retardant material. The goal is to keep the combustible items cool even though the inside of the hood or duct is hot.

SELF-STORAGE FACILITIES

These facilities are not subject to the total square foot area limitation. However, buildings cannot be more than two stories high. Self-storage facilities that involve refrigerated goods, industrial materials, chemicals, pollutants, and waste are not eligible.

WHOLESALE RISKS

Subject to the general eligibility criteria, only wholesale risks listed in the classification table are eligible. The following additional restrictions apply:

  • Retail sales cannot represent more than 25% of annual gross sales.
  • Not more than 25% of the total square foot area can be open to the public.
  • Operations that involve contractors and manufacturers’ representatives are not eligible.

INELIGIBLE OCCUPANCIES

These break down into two different categories.

General – This is a list of ineligible occupancies and property.

Contractors – This is a list of specific ineligible contractor operations.

Rule 22. Eligibility

This rule has two additional notes:

  • Both building and business personal property under the same ownership must be included in the same policy.
  • Basement areas not open to the public are not used to determine square foot floor areas.