Great New Business Income Endorsement-CP15 04


     This is a BIG Deal. This is a new endorsement that can be used with Business Income (since it starts with a “15” you knew it related to Time Element-----RIGHT??!!). Business Income pays NET Income and Continuing Expenses. It is amazing how many people think that Business Income will pay Gross Sales which is totally wrong. Business Income is an “indemnification” form. While the form makes it ‘clear’ that it will only pay  Continuing Expenses the word Continuing is not defined by the policy. The normal definition is that it is an expense that MUST be paid during the downtime. It “continues” whether the insured is in business or not. It is a NECESSARY expense that still must be made to get the business back during the downtime.

    Business Income states that payroll is an expense to be paid (assuming that it is not endorsed off) but that is not enough. Even if the payroll is not endorsed off it will ONLY be paid if it is “necessary” to get the business back. The standard ISO worksheet does not really get into this. It just overviews in a very BIG picture sense. If you check the References section of these Webpages you will find a link to a Zurich Calculator and many carriers have their own. I have one that I got from St. Paul MANY years ago but I still use it as I really love it. It was, at that time, one of the few that pushed the producer and client to take a look at expenses that might not continue. St. Paul called it Step #2. Here is a link. St. Paul--Step #2.pdf   It really makes one think about many expenses that might not be necessary and therefore should not be included in the limit. Why pay a premium for something that will not be paid? On the back is space to add this stuff up. You will notice that the #1 one item is payroll. Really think whether it will be necessary.

    I thought for many years that payroll would always be paid unless it was excluded off. I have been told many times that this is not true from real loss examples. This is especially true if the loss is long. This is a MAJOR area of confusion and VERY bad feelings between client/producer/company. As a consequence it does make sense to use the Ord. Payroll Exclusion Endorsement. But what if the INSURED/CLIENT wants to make it clear what payroll will definitely be covered. Can this be done? Enter the CP 15 04. I gave you a miniature version of this endorsement at the top of this page but here is link for a better copy CP15046Q.pdf ----I think this is a GREAT endorsement that is long overdue. This can be used to take the guesswork out of what payroll is going to be paid. The endorsement now states affirmatively that certain job classifications or individuals (you can choose) will be paid (along with their benefits, etc.) REGARDLESS of whether such payment is “Continuing/Necessary” by the normal calculations. The client now decides what is necessary. 

    Anything that helps to take the confusion out of Business Income is a good thing and this helps with a key area. Check it out and think about using it-------TODAY! Also, really stop and think about some of your other clients. Does their Business Income limit include dollars for many expenses that might not continue? If they do not continue they will not be paid. While Business Income limits are often too low they are often too high!  The BOP has made many of us lazy. Since the BOP covers BII with no limit (same rules apply to what is covered, however) we don’t stop and think about all this the way you use to and NEED to when the risk does not qualify for a BOP. Even if the risk does qualify for a BOP it is important that the client realize that the BII coverage will not pay ALL expenses and will NEVER pay gross sales.