Understanding business income protection does little good if the information cannot be translated to the underwriter via the application. The ACORD 810 is the industry-standard application used to provide the insurance carrier with all the information necessary to deliver the proper business income and/or extra expense program. While some carriers use proprietary forms, this commentary focuses on ACORD's form.

Each section is individually described to assure that the proper information is provided. Some data requested on this form is antiquated and does not apply to the current BI coverage forms; however, the questions have yet to be removed from the form.

Be aware, business income is "location specific" and not eligible for blanketing. Business income information is required of each insured location; this necessitates a separate business income report/worksheet (CP 15 15) and application for each property.

ACORD 140 - The Property Application

Understanding the steps necessary to indicate the desire for business income and or extra expense protection in the Property Application (ACORD 140) is required before moving to the supplemental application (ACORD 810). Again, the business income and extra expense information must be entered for every location so these coverages and limits cannot be shown in the blanket limit (if applicable).

"SUBJECT OF INSURANCE": Three options related to "business income" (BI) and/or "extra expense" (EE) are available to be entered here. The agent can input:
• "BI w/EE" to indicate the insured's desire to purchase "Business Income and Extra Expense" protection prompting the underwriter to use the CP 00 30. The definition of BI is more thoroughly defined in the supplemental application;
• "BI" indicates that the insured wants "business income coverage" only. The underwriter should know from this that the CP 00 32 is desired; or
• "EE" tells the underwriter that pure extra expense coverage is desired leading them to attach the CP 00 50 Extra Expense Coverage Form.

"AMOUNT": The desired coverage amount is input here. This can be the amount developed using the CP 15 15 multiplied by the chosen coinsurance percentage or the "guesstimate" amount chosen by an insured using either the Monthly Limit of Indemnity or the Maximum Period of Indemnity options.

"COINS %": Only applies when the insured is using the unaltered coverage form or the Business Income Agreed Amount option. The applicable percentage (50-125%) is entered.

"VALUATION": This can be left blank as it does not necessarily apply to time element coverage. If the insured is using the coinsurance option, "ALS" (meaning "actual loss sustained") could be input; however that might just cause confusion. Best just left blank.

"CAUSES OF LOSS": Same as the property coverage forms.

"INFLATION GUARD %," "DED" and "BLKT #": Leave all three blank as none of these really apply to time element coverages.

"ADDITIONAL INFORMATION": Remember to check the "BUSINESS INCOME/EXTRA EXPENSE" box pointing the underwriter to the ACORD 810.

ACORD 810 - Information the Underwriter Needs

Every section of the ACORD 810 supplemental application is detailed in the following paragraphs.

"PREMISIS INFORMATION": Remember, time element coverage is location specific so each premises will require this supplemental information.

"Coverage Desired": Two of five blocks next to the premises information may need to be checked; unless the insured only wants Extra Expense protection or doesn't desire coverage for the loss of rents. One of the first three blocks MUST be checked and the remaining two are optional based on the coverage desired:
• "Business Income / Extra Expense": Check this block if the insured wants both BI and EE. Just like the information provided under "Subject of Insurance," marking this box alerts the underwriter to attach the CP 00 30;
• "Business Income w/o Extra Expense": Alerts the underwriter that only BI coverage is desired and leads the underwriter to attach the CP 00 32;
• "Extra Expense": Used when the insured only wants EE protection. The underwriter knows to sue the CP 00 50.

If either of the two business income options is checked, one of the two remaining blocks regarding "rental value" may also need to be checked. If no "rental value" coverage is desired, these can be left blank. The two rental value options are:
• "Business Income / Rental Value": This box is checked if the insured needs to cover rental value as part of the total business income coverage; or
• "Rental Value": Checking this box indicates that the insured ONLY wants Rental Value coverage. If this box is checked, no income other than loss of rents is protected.

"TYPE OF BUISNESS": Pretty self-explanatory. Simply choose whether the insured is a non-manufacturing entity (NON MFG), a manufacturing operation (MFG) or a MINING operation. Indicating the business type aids the insured in knowing which parts of the business income report/worksheet to complete and clues the underwriter to specific endorsements required.

This block is also the place to indicate the chosen coinsurance percentage by filling in the blank next to "% COINS."

"ORDINARY PAYROLL": There are two main options under ordinary payroll: 1) Excluded (EXCL); and 2) Included (INCL). If Excluded (EXCL) is checked, the underwriter knows to attach the CP 15 10 and the insured must deduct some or all ordinary payroll from Total Revenues (Line "H") in the business income worksheet.

Checking "EXCL" also requires the agent to stipulate how long ordinary payroll is provided. The insured decides how long they would like to continue covering the cost of their ordinary payroll and indicates the number of days here. There are two options presented: 90 days and 180 days. There are also two blank lines allowing the insured to make other choices. One allows a number of days of coverage (i.e. none or 60) and the second indicates an amount of payroll to be excluded.

"EXT PERIOD": If the insured desires extended business income coverage beyond the automatic 30 days provided by the Extended Business Income provision, this box is checked and the number of days of additional coverage is indicated. The amount of additional coverage should already be indicated on Line "K.2." of the CP 15 15.

"MO PERIOD": This box is checked if the insured wants the Monthly Limit of Indemnity non-coinsurance option. In the block the limit of coverage desired is indicated. Indicate the desired percentage (1/3, 1/4 or 1/6) in the "OTHER COVERAGES" section by referencing "MO PERIOD."

"MAX PERIOD": The second non-indemnity, non-coinsurance option is Maximum Period of Indemnity. If the insured desires this option, simply check the block and indicate the limit of coverage. There is no need to do anything else since the policy already limits coverage to 120 days.

"POWER/HEAT": Checking this block is only necessary if the insured can deduct the cost of power or heat by contract. The amount of the deduction (DED) is found in the CP 15 15 as a deducted, non-continuing production-related expense. Checking this block prompts the underwriter to attach the CP 15 10.

"ELEC MEDIA": This block in NO LONGER necessary. It is a hold-over from the 1995 and earlier editions of the business income forms when coverage for electronic media was limited to 60 days. This coverage is now limited by an aggregate limit of coverage.

"ORD OR LAW": Check this block if the insured needs Ordinance or Law coverage. The CP 15 31 is attached. DO NOT choose a number of days, this is not necessary. The endorsement states that the policy will include any increase in rebuilding time due to the application of a "building code" as part of the "period of restoration." The request for a number of days must be left over from an old edition of the endorsement but is not necessary now.

"CIVIL AUTH": If the insured needs to extend the coverage for actions by a civil authority beyond the four weeks or one mile parameters provided in the policy, this box is checked. Within the block there is only room to increase the number of days; there is no space to change the mileage limitation. To change the mileage parameters to something greater than one mile utilize the "OTHER COVERAGES" section. The underwriter should attach the CP 15 32 if this box is checked.

"OFF PREM POWER": The terminology is antiquated but the intent is the same; this block would probably be better termed "OFF PREM UTILITY" as this is the block checked if the insured desires to extend business income protection to cover losses resulting from an interruption of one of the subject utilities: 1) POWER; 2) WATER; or 3) Communications (COMM). There is no place to indicate whether the insured wants to include coverage for damage to overhead power lines (power or communications) or not, simply place this information in the "OTHER COVERAGES" section. The off-premises utility must be described in the box between the top section and the "OTHER COVERAGES" section. The CP 15 45 should be attached when this block is checked.

"TUITION FEES": This part only applies if the insured is a school. The definition of "business income" is changed to include as business income only student tuitions and other student-related educational income (i.e. room and board). Educational institutions do not include income derived from bookstores, athletic events, research grants or any activity other than those which generate tuition or other student-related fees in the definition of "business income." Checking this box prompts the underwriter to attach the CP 15 25 endorsement.

"DEPEND PROP": If the insured is extending business income coverage to apply when there is damage to Dependent Properties, this box is checked. The insured indicates which of the five dependent property forms is being used by checking one of the next three boxes. The options are the "BROAD FORM" (CP 15 08), "LIMITED FORM" (CP 15 09) or a blank where one of the other three available forms can be manually entered (see the Dependent Properties commentary for details).

The "COIN ________ %" line within the "DEPEND PROP" section is where the agent indicates the coinsurance applicable to the policy has a whole. This is the same percentage as that listed in the "TYPE OF BUISNESS" block. This line does not really appear to be necessary as none of the dependent property forms reference coinsurance. Four of the forms require the insured to pick a specific limit for this coverage extension, only the CP 15 08 Broad Form extends the full amount of business income protection to any loss caused by a dependent property, so there does not appear to be any need for the percentage.

Although dependent property limits must be specifically chosen and listed in four of the five forms there is no place in this block to enter that information. Use the "OTHER COVERAGES" section to detail these limits.

Finally, the "DEPEND PROP" section requires the type of dependent property be indicated by checking one of four blocks:
1) "CONT LOC" is "Contributing Location" (Supplier);
2) "REC LOC" is a "Recipient Location" (Buyer);
3) "MFG LOC" is a "Manufacturing Location" (Provider); and
4) "LDR LOC" is a "Leader Location" (Driver).
Describe each dependent property in the section between the top and the "OTHER COVERAGES" sections.

"EXTRA EXPENSE": This is the last section of the supplemental application and applies only if "pure" extra expense coverage is written (using the CP 00 50). As per the extra expense commentary, the extra expense limit is paid out based on the percentages chosen. In this block, the chosen percentages are entered in the blanks provided under "LIMIT LOSS PAY." Generally three blanks will be used; only when the CP 15 07 is attached will the fourth percentage blank be filled.

A second piece of information requested in this block is the estimated period of restoration ("_____ DAYS PERIOD REST"). There is NO need for this information as coverage is not limited to a specific number of days. The only two limitations applying to extra expense coverage are the 30-day percentages (as indicated above and in the previous commentary) and the total coverage limit purchased by the insured. Nothing in the form limits the coverage to a specific number of days so - ignore this block.

Finished

This completes the business income and extra expense series. The next post is a coverage checklist agents can use with clients to build the time element coverage program by applying all the requisite information.

For all the information on Business Income coverage, take a look at Insurance Journal's book, "Business Income Insurance Demystified: The Simplified Guide to Time Element Coverages."