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ABSOLUTE LIABILITY // Liability that exists and is imposed
upon a party, even though no negligence or fault was committed by
that party. Absolute liability is most often imposed when the circumstances
of the operation, product, or activity is considered highly hazardous
or dangerous.
ACCOUNTS RECEIVABLE INSURANCE // Coverage which protects businesses
against their inability to collect their accounts receivable because
of the loss of supporting records.
ACT OF GOD // An event beyond human origin or control. Lightning,
windstorms, and earthquakes are examples, the damage from which would
not be the responsibility of an insured, although the insured might
be responsible for many other calamities. Acts of God are excluded
by the usual bill of lading, as well as by some insurance policies,
unless specifically included.
ACTUAL CASH VALUE // The basis of loss settlement in property
insurance policies, which takes into consideration factors such as
replacement value less depreciation, market value, rental value, the
use of the building, the area in which it is located, obsolescence,
assessed valuation, and any other factor which would have an effect
upon the value. A working rule-of-thumb definition, however, is "replacement
cost new at the time of loss, less depreciation"
ACTUARY // A social mathematician who uses mathematical skills
to define, analyze and solve complex business and social problems
involving insurance and employee benefit programs. The work of actuaries
involves the various contingencies which face human beings: birth,
marriage, sickness, accident, loss of property, legal liability, retirement,
and death, and the financial effects which these and other contingencies
have on various insurance and benefit programs. Many of these programs
involve long-range financial obligations, for which actuarial forecasts
are fundamental in maintaining a sound financial basis; rate-making,
premium and loss reserving, investment valuation, pension benefits,
and insurance statistics, among others.TOP
ADDITIONAL INSURED // A person, other than the named insured,
who is protected by the terms of the policy. Usually a specified individual
such as a spouse or a member of the insured's family but sometimes,
as in automobile insurance, any person, provided that person is driving
the insured vehicle with the insured's permission.
ADDITIONAL PREMIUM // When a policy has been issued subject
to rate, subject to audit, subject to inspection, is assessable, or
when the policy is endorsed, the additional premium is the extra amount
due, over and above the initial premium stated in the Declarations,
because of the increased exposures, higher rates, retrospective rate
calculations, additional coverage, or premium audit.
ADJUSTER // One who determines the amount of loss suffered.
A "company" adjuster represents the company. A "public" adjuster represents
the policyholder. An "independent" adjuster may be hired by either.
ADMITTED // Company A foreign or alien insurance company which
has been licensed by the insurance department of the state in question,
and which thereby is authorized to conduct business within that state
to the extent licensed. Also called an admitted market or admitted
insurer.
ADVERTISING INJURY // Damages or injury sustained by a claimant
in the course of the advertising activities of the insured which included
such injury as libel, slander, violation of the right to privacy,
misappropriation of advertising ideas, or the infringement of copyright.
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AGENCY // A business office whose function is the sales of
insurance and insurance products. An agency may be owned or run by
a general agent, manager, independent agent, or company manager. The
principal is responsible for the statements and actions of agents
performing within the scope of authorization specified in the agency
agreement.
AGENT OF RECORD // The agent of record who has been legally
granted to an agent in the agency contract between the agent and insurer.
AGGREGATE LIMIT // In a policy providing such an aggregate
limit, the maximum amount the insurer will pay during the policy period,
irrespective of the policy's limit of liability.
AGREED VALUE CLAUSE // A condition of a policy stating that
the insurer agrees to waive the coinsurance requirement in consideration
of the insured's maintaining insurance for the scheduled item, equal
to the value agreed upon at the inception of the policy.
ALIEN COMPANY // An insurance company that is domiciled or
incorporated in a country outside the United States, but which conducts
either insurance or reinsurance operations in the U.S.
ALL-RISK POLICY // A policy which covers loss caused by any
cause of loss which is not excluded, as contrasted to "named peril"
policies which protect against certain perils named in the policies.
Usual to certain types of property and marine insurance contracts,
the term "all risk" frequently appears in quotes, since such coverage
includes "almost" all risks (i.e., all but those excluded).
AMOUNT OF INSURANCE // Based on the terms of a specific policy,
the most an insurer will pay for any single loss. The maximum amount
an insured can collect.
ANNIVERSARY DATE // The anniversary date of policy inception
as listed in the policy Declarations, and each subsequent expiration
and renewal.
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APPORTIONMENT // The process which determines how much each
policy on a risk must pay when there is more than one policy involved
in a loss. Apportionment refers directly to the proportioning or splitting
of the loss amount.
ARBITRATION CLAUSE // Language in most policies of insurance
providing that, in the event the company and the claimant are unable
to agree on the amount due after loss, the matter shall be submitted
to disinterested parties for solution. One party is appointed by the
insured, one by the company, and two appointed arbitrators then picked
a third, the "umpire".
ASSIGNED RISK PLAN // An association of insurers in a given
state in which automobile risks unable to get insurance in the voluntary
market are shared among subscribing insurers in proportion to the
amount of automobile liability insurance each insurer writes in that
state. All companies writing this class are required to participate
in this activity, currently administered by the Automobile Insurance
Plans Service Office, headquartered at Johnston, RI. Also know as
automobile insurance plans, these plans sometimes take the form of
joint underwriting associations.
ASSUMED LIABILITY // Contractual liability which arises from
an agreement between people, as opposed to liability which arises
from common or statute law.
AUDIT POLICIES // These are the types of policies that the
insurer has the right to audit or examine at the end of each policy
term, to determine if the premium charged was adequate based on the
actual final exposure experienced by that insured.
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BAILEE // One who has custody of the property of another. Bailees
"for hire" have certain responsibilities to care for the property
of others that is in their custody.
BID BOND // A bond intended to guarantee that the bidder on
a construction, supply or service contract will enter into the contract
if successful as a bidder. Should the bidder fail to enter the contract,
the surety on the bid bond may be called upon to pay the difference
between the amount of the principal's bid and the bid of the next
lowest qualified bidder.
BLANKET COVERAGE // A single limit of insurance that covers
a number of items, such as one amount of insurance to cover two buildings
or a single building and its contents. A blanket policy usually contains
certain restrictions, which may be absent in "specific" or "itemized"
policies, such as the use of a 90% coinsurance clause.
BODILY INJURY (BI) // Injury, sickness, or disease sustained
by a person, including death at any time resulting therefrom.
BOILER & MACHINERY INSURANCE // Protection against loss from
disruption of boilers and machinery by an insured peril: loss to the
boiler and machinery itself, damage to other property, business interruption
losses, or all three. Also known as machinery breakdown insurance.
BOND // There is more than one type of bond. Insurance bonds
are normally three-party contracts in which one party agrees to guarantee
the act, performance, or behavior of a second party, to a third party.
Two common types of bonds are fidelity and surety.
BOP-BUSINESSOWNERS POLICY // Similar to the commercial package
policy (CPP), it provides broad property and liability protection
in a single contract and is designed for small and medium-sized mercantile,
service, office, or apartment risks.
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BROAD FORM PROPERTY DAMAGE ENDORSEMENT // In endorsement to
a commercial general liability policy which amends or modifies the
care, custody, or control exclusion that normally eliminates this
coverage. A standard endorsement is not currently available to delete
the exclusion; thus each insurer endorsing this exclusion must develop
its own company-specific version. Endorsements vary greatly as to
the extent of coverage.
BROKER OF RECORD // A licensed broker who has been designated
by the policyholder to represent that policy holder.
BUILDERS RISK //
1. A building or a ship in the course of construction.
2. A special form dealing with the unique loss exposure of property
under construction.
BUSINESS INCOME INSURANCE // A time element coverage which
pays for loss of earnings or income when business operations are interrupted,
curtailed or suspended due to property loss as a result of an insured
cause of loss. Also covered are loss of rents and rental value. Extra
expenses incurred to continue operations at another location are included
as long as they reduce the total amount of loss.
BUSINESS INTERRUPTION INSURANCE // A time element coverage
which pays for loss of earnings when business operations are curtailed
or suspended due to property loss as a result of an insured cause
of loss. This coverage is now obsolete and has been replaced by a
more comprehensive and generic business income insurance.
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CASUALTY INSURANCE // Insurance concerned with legal liability
for personal injuries or damage to property of others, including many
other types of insurance, such as worker's compensation, plate glass,
burglary, boiler and machinery, aviation, etc. "Casualty" is generally
accepted to cover all classes outside the definition of "property
insurance," so that a property and casualty company would tend to
handle all forms of insurance other than life.
CAUSE OF LOSS // Previously called "peril" this is the actual
type of event that causes the loss. Examples are: theft, collision,
earthquake, flood, fire, or mischief.
CERTIFICATE OF INSURANCE // A short-form documentation of an
insurance policy.
CGL-COMMERCIAL GENERAL LIABILITY POLICY // The commercial general
liability policy provides comprehensive general liability coverage
for commercial risks covering all liability exposures for all locations
and causes of loss except those specifically excluded or limited either
within the coverage form or by endorsement. Protection may provided
on either an occurrence type of policy or on a claims-made basis.
CLAIM // An amount requested of an insurer, by a policyholder
or a claimant, for an insured loss.
CLAIMANT // One who presents a claim, or one who has suffered
a collectible loss.
CLAIMS MADE // A liability insurance method covering losses
from claims asserted against the insured during the policy period,
regardless of whether the liability-imposing causes occurred during
or prior to the policy period. (However, many underwriters may not
cover liability-imposing causes occurring prior to the policy period.)
The coverage trigger is based on the retroactive date stated in the
Declarations.
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CLOSURE & POST-CLOSURE INSURANCE // Insurance coverage that
is purchased to protect owners and operators of hazardous waste treatment,
storage and disposal facilities, in response to the Resource Conservation
and Recovery Act of 1976 (RCRA).
COINSURANCE // The provision in insurance coverages in which
the insured and the insurer agree to share in the covered losses in
the proportion specified in policy terms and conditions.
COINSURANCE CLAUSE //
1. In property insurance, a clause requiring the insured
to maintain insurance at least equal to stipulated percentage of
value in order to collect partial losses in full. If the insurance
is less than the minimum required, that proportion of the loss-
will be paid which the amount of insurance carried bears to the
amount which should have been carried.
Symbolically: Insurance Ü Carried x Loss = Payment (subject
to policy limit) Insurance Required
2. In major medical insurance, the clause which specifies the percentage
of a loss which the company will pay and the percentage which the
insured will bear (e.g., 80-20, 75-25)
COLLISION DAMAGE WAIVER // When renting an automobile or other
vehicle from a rental agency, the rental agreement between renter
and rental agency may contain an option allowing the renter to pay
an additional fee in exchange for the agreement by the rental agency
to waive their rights to collect any collision losses to the vehicle
from the renter.
COMMERCIAL PACKAGE POLICY (CCP) // A package policy designed
for commercial insureds that can provide in one policy, several lines
of insurance business as needed by that commercial venture. Lines
of business which may be included in the CPP are property/glass, general
liability , inland marine, crime, boiler and machinery insurance,
and commercial automobile.
COMPARATIVE NEGLIGENCE // A more modern system of allocating
damages between two or more persons than the method of contributory
negligence, which remains effective in many states (under which one
cannot collect damages for bodily injury or property damage caused
by another party's negligence if one were oneself in any way negligent).
Under comparative negligence, the damages collectible in relation
to another person are diminished in proportion to one's degree of
negligence. In most instances, damages cannot be collected at all
if the claimant's negligence was greater than that of the other party.
Currently, in a few instances, the courts have awarded both parties
damages as a percent of the total damages, depending on respective
degrees of fault.
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COMPENSATORY DAMAGES // Not to be confused with punitive damages,
which are additional damages requested by an injured party to punish
the party responsible for the loss, compensatory damages are normally
monetary damages alleged by the claimant to compensate for actual
injuries or expenses sustained. These may include all types of medical
expenses, as well as other expenses such as lost wages, legal fees,
pain and suffering mental anguish. Loss of consortium, etc.
COMPLETED OPERATIONS COVERAGE // Protection for a business
which sells service instead of products against liability claims arising
out of work completed away from the business premises. Differs from
products liability coverage, which protects against products liability
claims.
COMPREHENSIVE CRIME COVERAGE ENDORSEMENT // Endorsement (now
obsolete) that at one time could be attached to a special multi-peril
policy providing optional employee dishonesty, money and securities,
money orders, counterfeit paper currency, and depositors' forgery
coverages.
COMPUTER FRAUD COVERAGE FORM // A crime coverage form designed
to protect against loss of money, securities and property when conversion
occurs via computer fraud.
CONCURRENT CAUSATION // Two or more proximate causes of an
insured loss any one of which, according to some courts, will trigger
the insurance, provided such cause is an insured peril.
CONSEQUENTIAL LOSS // A reduction in value of property (not
physically damaged) caused by damage to other property. Examples are
food spoilage from a change in temperature due to the damage of a
refrigerator by fire, while the food itself is not damaged by the
fire, or the reduction in the value of suit jackets whose trousers
have been damaged.
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CONTINGENT LIABILITY // A liability which may be incurred by
an insured as a result of negligence on the part of independent persons
engaged to perform work. The most common example is the contingent
liability of a principal contractor, which may result from construction
operations undertaken by subcontractors. Also applies to the liability
of a principal for the acts of an agent or servant.
CONTINUING EXPENSES // A term used in commercial time element
coverage to indicate those expenses that will continue during the
restoration period after a business is closed because of a loss. These
expenses may include such items as taxes, certain executive and key
person payroll, loan payments, utilities, and other expenses the insured
may be contractually obligated to continue.
CONTRACTORS' EQUIPMENT // Equipment used by contractors in
their business operations. Examples may be anything from concrete
forms, asphalt plants, bulldozers, cherry pickers, and scaffolding,
to small hand tools. This equipment is most often protected by inland
marine insurance coverages due to its mobile nature.
CONTRACTORS EQUIPMENT FLOATER // An inland marine form which
insures the equipment, tools, and materials of a contractor.
CONTRACTORS PROTECTIVE LIABILITY // A policy which provides
liability coverage for the insured for the negligent acts of contractors
and subcontractors hire by the insured. May also cover for their own
negligent supervision of work performed.
CONTRACTUAL LIABILITY // A legal obligation voluntarily assumed
under the terms of a contract, as distinguished from liability imposed
by the law (legal liability)
CONTRIBUTION CLAUSE // The clause in a policy which describes
how much its issuer must pay if there is insurance in more than one
company on a given loss.
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CONTRIBUTORY NEGLIGENCE // A common law defense in which the
plaintiff must be entirely free from fault in order to recover from
a negligent defendant. If the plaintiff has in any way been guilty
of neglect, the plaintiff cannot recover from the defendant. This
principle has been modified in some states by legislation and interpretation
by the courts.
CORRECTIVE ACTION COSTS // Expenses that a party incurs to
clean or correct the damage done by pollutants to the ground, water
or air after the occurrence of a pollution incident. These costs are
usually mandated or assessed in response to a confirmed incident by
the Environmental Protection Agency (EPA).
COVERAGE TRIGGER // The event which determines when coverage
of a liability policy applies. In an "occurrence" policy, the event
is the occurrence of the injury or damage. In a "claims-made" policy,
the event is the notification to the insurer or the insured, whichever
comes first, of the happening of the injury or damage.
CPP-COMMERCIAL PACKAGE POLICY // A package policy designed
for commercial insureds that can provide in one policy, several lines
of insurance business as needed by that commercial venture. Lines
of business which may be included in the CPP are property/glass, general
liability, inland marine, crime boiler and machinery insurance, and
commercial automobile.
CRIME COVERAGES // A generic term used to encompass the variety
of crime coverage forms available to protect against losses of money,
securities and property by such causes of loss as: employee dishonesty,
forgery, theft, burglary, robbery, kidnap, extortion, fraud.
CUT-THROUGH ENDORSEMENT // An addition to an insurance policy
between an insurance company and a policyholder which requires that,
in the event of the company's insolvency, any part of a loss covered
by reinsurance be paid directly to the policyholder by the reinsurer.
The cut-through endorsement is so named because it provides that the
reinsurance claim payment "cuts through" the usual route of payment
from reinsured company-to-policyholder and then reinsurer-to-reinsured
company, substituting instead the payment route of reinsurer-to-policyholder.
The effect is to revise the route of payment only, and there is no
intended increased risk to the reinsurer. Similar to the guarantee
endorsement, the cut-through endorsement is also known as an assumption
endorsement.
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DEBRIS REMOVAL CLAUSE //
A property insurance provision which provides coverage for the cost of cleanup and debris removal after a covered cause of loss has occurred, such as clean up after a fire or windstorm.
DECLARATION //
1. With respect to property and liability insurance, the portion of the insurance policy itself, used to detail the name and address of the insured, the locations covered, the policy period, limits of insurance, endorsements attached and premiums for coverage. Commercial policies also contain such items as the type of entity and type of operation of the insured.
2. A statement made to the company or to its agents by a policyholder upon which the company may rely in undertaking the insurance.
DEDUCTIBLE //
In a policy providing a deductible clause, the amount which must first be subtracted from the total damage incurred before determining the insurance company's liability. Of several types used, the straight deductible establishes the insurer's liability above the deductible but not below it; the franchise deductible establishes the insurer's liability for the entire amount of damage once the deductible amount is exceeded in a loss; and the disappearing deductible establishes the insurer's' liability for the entire amount of damage once the deductible amount is exceeded in a loss; and the disappearing deductible establishes the insurer's liability for an increasing proportion of the loss, as the total damage rises above the deductible, until the deductible finally "disappears." Then the insurer is liable for the entire amount. The deductible may be in the form of an amount of dollars, a percent of the loss, a percent of the value of the insured property, or a period of time, as in health insurance.
DIRECTORS AND OFFICERS LIABILITY INSURANCE //
Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation (and even the officers and directors in some cases) for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.
DISABILITY INCOME INSURANCE //
A form of coverage which provides benefits to employees disabled by sickness or accident not related to employment. An extension of workers compensation acts in New York, New Jersey, California, Hawaii, Puerto Rico, and Rhode Island.
DISCOVERY PERIOD //
A period of time, after cancellation of an insurance contract or bond, during which the insured can discover whether there would have been a recoverable loss if the contract had remained in force. The period varies considerably and, in the case of certain bonds, could be indefinite by statutory requirements.
DIVIDEND //
An amount of money paid to the policyholders of a mutual insurer because of their ownership interest. A stock corporation may also pay a dividend to its policyholders if it writes participating insurance. In either event, the amount is payable on the basis of certain savings in losses or expenses realized by the insurer on that participating class of business.
DUTY TO DEFEND //
A provision in commercial and personal liability insurance policies where the insurer has the right and duty to defend lawsuits against the insured, even when those suits are considered false, groundless, or fraudulent.
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EARNED PREMIUM //
The portion of the policy premium allocable to the expired portion of the policy term.
EARTHQUAKE INSURANCE //
Insurance against damage by earthquakes and earth movement. Written most frequently on the Pacific coast.
ECONOMIC PERILS //
One of the three common categories of perils used in the insurance industry to classify causes of loss. Economic perils are those caused by loss of market, loss of income, local, national, or worldwide economic conditions, inflation, or obsolescence of an industry. The other two common categories of perils are human perils and natural perils.
EDP INSURANCE //
An "all-risk" policy that provides protection on equipment, software and extra expenses incurred as a result of failure of such equipment caused by an insured loss and loss of earnings. Also known as an EDP policy. Coverage may be extended to include liability claims alleging errors and omissions by date processing companies.
EFFECTIVE DATE //
The day upon which a policy first becomes eligible to pay covered losses.
EMPLOYEE BENEFIT PLAN //
The benefit package offered by employers to their employees which may include such items as health, dental, accident, disability, and life insurance, as well as other non-insurance items such as vacation and retirement plans. The cost of the package or plan may be paid in its entirety by the employer, but is most often subsidized by the employer so that the employee pays only a portion of the cost.
EMPLOYERS LIABILITY INSURANCE //
Coverage against the common law liability of an employer for injuries sustained by employees, as distinguished from liability imposed by a workers compensation law.
ENDORSEMENT //
A document with language attached to and becoming part of a basic policy for the purpose of amplifying or modifying it, either at its inception or during its term. Any such modification can become effective only with the agreement of the insured, unless clearly made solely for the benefit of the insured.TOP
ERGONOMICS //
The applied science involving the factors and interaction of the workplace environment on its workers. Although it is most often associated with automation in the workplace, this science covers the cause and effect of any workplace environment.
ERP-EXTENDED REPORTING PERIOD //
In "claims-made" liability policies, only those claims that occur after the retroactive date and are reported or filed against the insured during the policy period, are covered by the policy. The ERP, or tail, is an endorsement available to extend the reporting period for the filing of a claim to give additional time in order to be considered covered.
EXCESS LIABILITY INSURANCE //
Liability insurance designed to provide an extra layer of coverage above the primary layer. The excess insurance does not respond, however, until the limits of liability in the primary layer have been exhausted. Because of the method of response, it is often much less costly than the primary layer, per $1,000,000 of coverage. The excess layer provides not only higher limits, but catastrophic protection for very large losses.
EXCLUSION //
1. That which is not covered by the insurance as stated in the policy.
2. A clause in an insurance policy which specifies that which is excluded from the policy's coverage.
EXPENSE RATIO //
Expenses incurred, expressed as a percentage of net written premiums.
EXPERIENCE RATING //
A form of individual risk rating which takes into consideration the loss experience of the particular risk as a credit or a debit to the manual rate for the insured's classification. As the size and number of exposure units increase (e.g., a multiple location risk), more credibility is given to the insured's experience.
EXTRA EXPENSE INSURANCE //
Reimbursement for additional expenses incurred because of an insured loss. Separate policy or as an endorsement.
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FAULTY WORKMANSHIP EXCLUSION //
Most liability policies contain this property damage exclusion for products-completed operations losses, although it is now more often referred to as the work performed exclusion. The intent of this exclusion is to make sure that insiders are maintaining acceptable standards of performance and are not using the insurance contract to recover for poor training or poor business practices by the insured. Coverage does not exist for property losses to work performed or as a result of the work performed by the insured.
FIDUCIARY LIABILITY INSURANCE //
Protection for those who administer pension and welfare funds, profit-sharing and other employee benefit programs against loss for errors and omissions by the administrator. The need for this coverage was created by the Employee Retirement Income Security Act (ERISA) of 1974. Also known as pension trust liability insurance.
FINANCED PREMIUM //
Insurance premiums that are financed, either by an outside financial institution or, in some cases, through a financing agreement arranged with the insurer, which involves interest and collateral. This is not the same as an installment premium whereby the insurer allows the insured to pay the earned premium as it becomes due on an installment basis.
FIRE INSURANCE //
1. Covers losses caused by fire, lightning and removal of insured property from the premises to avoid further loss. All resultant damage such as that done by water and smoke is also covered. Usually supplemented by extended coverage. Currently, this insurance is referred to as property insurance.
2. A type or line of insurance, as opposed to marine, casualty or fidelity bonding. The term fire insurance is now referred to as property insurance when denoting a line of insurance.
FIRST DOLLAR COVERAGE //
Insurance coverages or benefits that pay the entire covered amount without subtraction of or use of a deductible.
FLAT RATE //
1. In reinsurance, the rate agreed upon between the reinsurer and ceding company to be charged that insured for the coverage, which is a final rate and not adjusted for loss experience, size of the risk, or any other credits or debits.
2. A rate set for a coverage that remains unchanged throughout the policy period, even if the insured suffers unexpected losses.
FLOOD INSURANCE //
Coverage against damage done by the rising or overflowing of bodies of water.
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GARAGE POLICY //
Protects garage or service station operators, vehicle rental agencies, car washes, auto or vehicle dealers, and trailer or RV dealers for claims alleging bodily injury or property damage caused by the operator's negligence in business operations and the sale or use of automobiles.
GENERAL AGGREGATE LIMIT //
The sum or total amount that will be paid in any one policy period, regardless of how many claims, losses, suits, or insureds may be involved. Some policies allow the aggregate limit to be reinstated after it have been exhausted, by endorsement and for additional premium.
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HOLD HARMLESS AGREEMENT //
A contractual arrangement in which one party agrees to assume certain liability which otherwise would be borne by the other party. For example, an insurer may wish to pay a loss when it is uncertain whether it may be called upon a second time to some other party. The payee may be asked to execute an agreement whereby the company will be reimbursed or held harmless by the payee if such request should happen. Another example is when the principal in a large construction project frequently demands hold harmless agreements from all subcontractors in respect to claims made against the principal arising out of the subcontractors' negligence. The principal often stipulates the purchase of a liability policy by the subcontractor to support the hold harmless agreement.
HOST LIQUOR LIABILITY //
A form of liquor liability directed at hosts of business or social functions where liquor or alcohol is served, with or without a charge. The basis for legal liability is a dram shop, liquor control or alcoholic beverage law. The laws vary by state, but most provide that the owner, operator or host serving or selling alcoholic beverages is liable for injury or damage caused by or to an intoxicated person if it can be established that the owner, operator or host caused or contributed to the intoxication of the person through the sale or serving of alcoholic beverages.
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IBNR - INCURRED BUT NOT REPORTED //
The liability for future payments on losses which have already occurred but have not yet been reported to the insurer. This definition may be extended to include expected future development on claims already reported.
INLAND MARINE //
1. The insurance of property (generally on an "all-risk" basis) which is in the course of transportation or is of such a nature that It may easily be transported. Also includes some risks at fixed locations considered "instruments of transportation or communication", such as bridges, tunnels, neon signs, and street clocks, etc., which were accepted as inland marine by custom.
2. Originally meant the I insurance of goods in transit "inland", instead of at sea, by underwriters who specialized in ocean marine insurance.
INSTALLATION INSURANCE //
Protection for the installer of equipment against loss by specified perils or on an "all-risk" basis to property in the course of installation.
INSURANCE SERVICES OFFICE (ISO) //
A voluntary, nonprofit association of property and casualty insurance companies providing a great variety of services on a national basis. Among its operations are rating, statistical, actuarial, and policy form services for all classes of property and casualty businesses. The association also functions, as provided by law, as an insurance rating organization. In addition, where applicable, ISO acts as an advisory organization or as a statistical agent. Established in 1971 by the consolidation of numerous associations and bureaus performing these services for separate class of business and in various parts of the country. Headquarters: New York, N.Y.
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JOINT & SEVERAL LIABILITY //
This type of liability occurs when more than one party is involved in a contract and where both joint liability (that of all the parties to the contract) and several liability (that of each individual party to the contract) promise the action in the contract. If the terms of the contract are not fulfilled, the injured party has the ability to seek a legal remedy from all the parties involved (joint) or each individual party (several).
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KEY EMPLOYEE INSURANCE //
Insurance an employer buys on a key person within the organization to protect that employer from the financial impact that could result should that employee become ill, disabled, or doe. This insurance may be life, health, or disability. Normally, the employee covered has special skills, training, management, or significant attributes that would cause the organization loss of income should that employee become unavailable and a replacement need to be hired or trained.
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????? //
If an owner of a property leases the entire premises to others who assume full control, the chance of being held liable for accidents occurring on the premises is diminished. The owner can insure the liability as "landlords protective liability", at lesser rates than for the normal owners, landlords, and tenants form of policy. This type of policy is rarely requested or used since the advent of the commercial general liability and the use of additional insured endorsements.
LEGAL EXPENSE INSURANCE //
Insurance covering legal costs, written generally on a group basis. Includes the indemnification through providing agreed legal services, as well as the payment of money to compensate the insured for costs. Also referred to as prepaid legal insurance.
LEGAL LIABILITY //
Liability imposed by law, as opposed to liability arising from an agreement or contract.
LIABILITY //
1. An obligation imposed by law or equity.
2. Money owed or expected to be owed. In an insurance company financial statement, the two columns it contains are its "assets" (or the amounts It owns) and the "liabilities" (or the amount it owes or expects to owe). Liabilities generally are defined by state statute or insurance department regulation for use in the annual statement of an insurer. The term is also defined for special purposes by other regulatory officials, such as the Securities and Exchange Commission.
LICENSE AND PERMIT BOND //
A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.
LIMIT OF LIABILITY //
According to the terms of a given policy, the most an insurer will pay for any one loss.
LLOYD'S OF LONDON //
A collection of individuals who assume policy obligations as the individual obligations of each. The formal name id Underwriters at Lloyd's, London. Also, Lloyd's of London is a service organization which provides a central marketplace and ancillary services (such as policy writing accounting, inspections, and adjusting) for its underwriting members and its brokers. TOP
LONG-TERM DISABILITY INSURANCE //
A disability insurance designed to offer income payments for long-term injuries, illnesses or disabilities. Long- term if often considered over 90 days.
LOSS EXPERIENCE //
The loss history for an account, a line of business, a book of business, or some other defining category. Loss experience may include the date of loss, type of loss, amount of loss, whether the loss is open or closed, and a summary of the details of the loss.
LOSS OF USE INSURANCE //
Insurance which compensated the policyholder for the inability to use property destroyed or damaged by an insured peril. For example, if a car is stolen, loss of use insurance will pay or contribute to the cost of hiring a substitute car.
LOSS PAYABLE CLAUSE //
A condition in a policy whereby the company may be directed by the policyholder to pay any loss due the policyholder so some other party designated in the policy. Usually the payment is made by check or draft payable to both the insured and the designated payee.
LOST POLICY RELEASE //
An agreement signed by the policyholder relieving the insurer from liability under an insurance contract which has been lost, misplace, or is otherwise unavailable.
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MACHINERY BREAKDOWN INSURANCE //
Protection against loss from disruption of boilers and machinery by an insured cause of loss, consisting of loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as breakdown insurance.
MANUSCRIPT POLICY //
A nonstandard policy specifically designed to meet the needs of the individual insured. Normally, this type of policy contains nonstandard forms or a combination of standard and nonstandard forms and nonstandard wording which have been developed and tailored to the coverage needs of the client. Unusually this type of approach is used for large insureds or: specialty exposures.
MARKET VALUE CLAUSE //
A clause in which the insurer agrees that the amount it will pay in the event of loss shall be the value of the destroyed merchandise "on the market", which is the amount which could have been realized by selling the merchandise. Obviously, this includes the seller's profit; therefore, the clause is used with caution to avoid the creation of a moral hazard.
MAXIMUM FORESEEABLE LOSS //
The anticipated maximum property fire loss that could result, given unusual or the worst circumstances with respect to the nonfunctioning of protective features (e.g.; firewalls, sprinklers, and a responsive fire department, among others), as opposed to probable maximum loss (PML), which is a similar valuation, but which is made under the assumption that such protective features function normally.
MANAGING GENERAL AGENT //
An individual or organization given the authority to act as an insurer or reinsurer in performing certain functions for that specific insurer or reinsurer, e.g., underwriting, inspection or adjusting. Functions may include the appointment of sales agents or intermediaries. Most MGA's also operated as wholesale excess and surplus lines brokers.
MINIMUM PREMIUM //
1. The minimum or lowest rate that the insurer will charge for the coverage, policy or endorsement.
2. The lowest rate available for the least hazardous exposures within a given classification or coverage.
MOBILE EQUIPMENT //
Vehicles not normally designed for use on public roads and not normally required to be licensed.
MONOPOLISTIC STATE FUND //
A state-controlled workers compensation plan which writes insurance on such risks within the state and prohibits private insurers from doing so.
MORAL HAZARD //
A condition or characteristic by which an insured intends to profit from an insured loss.
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NAMED INSURED //
The person designated in the policy as the insured, as opposed to someone who may have an interest in a policy but who is not shown by name.
NEGLIGENCE //
The failure to exercise the care that an ordinary prudent person would exercise: either doing that which a prudent person would not do, or failing to do that which a prudent person would do.
NONCANCELABLE //
A provision in some policies (crop-hail insurance and ocean marine insurance) that neither policyholder nor insurer may terminate the contract during its term.
NONOWNED AUTOMOBILE LIABILITY INSURANCE //
Coverage for the policyholder against liability incurred while driving an automobile not owned or hired by the policyholder or resulting from the use of someone else's automobile on the insured's behalf, such as an employee using a personal car for the employer's business purposes. This coverage is automatically included in personal and most commercial automobile policies.
NOTICE OF LOSS //
The notice submitted by an insured to the insurer regarding the occurrence of a loss. Policy conditions specify how long the insured has to notify the insurer of the loss, in what format, and the information the loss notice must contain.
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OBLIGEE //
The party in whose favor a bond runs, such as the party protected from loss under the bond.
OBLIGOR //
One bound by the obligation covered by a bond. Also called the principal.
OCCURRENCE //
1. In a non-insurance sense, an incident, event or happening. In insurance, the term may be defined as continual, gradual or repeated exposure to an adverse condition which is neither intended nor expected to result in I injury or damage, as contrasted with an accident, which is a sudden happening. In reinsurance, per occurrence coverage permits all losses arising out of one event to be aggregated instead of being handled on a risk-by-risk basis.
2. One basis or determinant for calculating the amount of loss or liability in insurance or reinsurance when an aggregation of related losses is to constitute a single subject of recovery. For example, in property catastrophe reinsurance treaties, occurrence is usually defined so that all loses within a specified period of time involving a particular peril are deemed an occurrence.
OCCURRENCE POLICY //
The traditional occurrence liability insurance method provides coverage for losses from liability-imposing causes which occurred during the policy period, regardless of when the claim is asserted. Once the policy period is over a claims-made form, the approximate extent of the underwriter's liability is known. With the traditional occurrence liability coverage method, the underwriter may not discover the extent of liability for years to come from losses claimed to have occurred within the policy period.
OCEAN CARGO INSURANCE //
A type of marine insurance that provides property protection for cargo that is being shipped by sea or over water.
ORDINANCE OR LAW COVERAGE //
A property endorsement which provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire. These ordinance or law damages are normally excluded in standard property coverage forms. The coverages available in this endorsement are cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.
OWNERS & CONTRACTORS PROTECTIVE LIABILITY INSURANCE //
Insures the legal liability of contractors and others for the negligent acts of independent contractors engaged by them and also, in some cases, for their own negligent supervision of the work performed.
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PARTIAL DISABILITY INSURANCE //
Insurance coverage for insureds who may suffer a partial disability. Partial disability is defined as the inability caused by a covered accident, injury, or illness to perform one or more of the functions of one's regular job but which does not, however, limit the person's ability to perform other forms of employment. Often this insurance is called on to provide rehabilitation benefits and job retraining.
PAYROLL AUDIT //
An examination and verification of an insured's records for the amount of payroll for classes of employees which is used in determining the premium for certain lines of insurance, such as workers compensation. The company sends out auditors to determine the accuracy of the figures provided by the insured.
PERFORMANCE BOND //
In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract.
PERSONAL INJURY //
Injury, other than bodily injury, resulting from false arrest, false detention, false imprisonment, malicious prosecution, wrongful eviction, wrongful entry, or the invasion of privacy of a premises. It also includes injury caused by oral or written material that slanders a person, goods, products, services, or which violates the right of privacy. TOP
POWER INTERRUPTION INSURANCE //
Property and time element endorsements designed to cover the insured for losses that result from the interruption of services by an insured cause of loss. The current endorsements allow the insured to select coverage for off-premises services, whether supplied by a private or public utility. Protection may be purchased for the following options: water suppliers, communication suppliers, or power supplies.
PREEXISTING CONDITION //
Injuries from accidents which occur earlier than, and sicknesses which begin earlier than, the date on which insurance becomes effective. Individual health insurance policies, and some group policies generally cover only injuries from accidents which occur after the individual's coverage becomes effective, and only sicknesses which begin or are first manifested after the individual's coverage has been in effect for a period of time, often 15 days.
PREMIUM //
The amount of money an insurance company charges to provide coverage. PRIMARY INSURANCE The insurance policy providing the first layer of coverage that will respond first to any loss exceeding the deductible.
PRODUCT-COMPLETED OPERATIONS INSURANCE //
Coverage designed to protect against the liability for injury, loss, or damage which a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.
PRO RATA CANCELLATION //
Termination of a policy by the insurer, for which the return premium due the policy holder is full proportionate part for the unexpired term. In other words, the pro rata refund is not a "short-rate" return.
PROTECTIVE LIABILITY INSURANCE //
Insurance against claims which arise because of some secondary cause, such as the negligent act of some subcontractor engaged by a principal contractor or against an employer for the act of an employee.
PROXIMATE CAUSE //
That which brings about a result without the intervention of any other force. Important in insurance since it establishes which policy(ies) will pay for a loss, i.e.; the one(s) insuring the peril which was the proximate cause of the loss.
PUNITIVE DAMAGES //
Damages awarded separately and in addition to compensatory damages, usually on account of malicious or wanton misconduct, to serve as a punishment for the wrongdoer and, possibly, as a deterrent to others. Sometimes referred to as "exemplary damages" when intended to "make an example" of the wrongdoer.
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RAILROAD PROTECTIVE LIABILITY //
The standard commercial general liability policy excludes liability for construction or demolition operations on or near railroad property, such as tracks, trestles, sidetracks, etc. In order to provide coverage for this exposure, the railroad protective liability policy is available to provide protective liability coverage for railroad owners, property owners, or contracts from the vicarious acts of contractors or subcontractors who are working on their behalf. The policy is purchased by the subcontractor or contractor in the name of the party needing protection. For example, a contractor demolishing a building near a railroad track may need to purchase a railroad protective liability policy for the property owner, the railroad, or both.
RATE //
The price for a unit of insurance; all units in a give policy, multiplied by the rate per unit, produce the premium. In fire insurance, the price per $100 of insurance for one year. The basis for pricing other types of insurance varies greatly; for example, payroll is used in workers compensation. Insurance, area of retail floor space or sales volume is used in certain types of general liability insurance, and so forth.
REPLACEMENT COST INSURANCE //
Protection which pays the cost to restore or replace damaged or destroyed property without deduction for depreciation. Automatically included in homeowners forms.
RETENTION //
1. The amount which an insured or an insurer assumes as its own liability and which is not insured otherwise.
2. In reinsurance, the amount which a primary insurer assumes for its own account. In pro rata reinsurance contracts, the retention may be a percentage of the policy limit. In excess of loss contracts, the retention is a dollar amount of loss.
RETROACTIVE //
The earliest date for which coverage is afforded under a claims-made form. Usually the effective date of the first year of such policy form provided tot he insured.
RISK RETENTION GROUP //
An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state.
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SMOKE DAMAGE //
Damage caused by smoke other than smoke which accompanies a hostile fire. One of the extended coverage endorsement perils, but subject to certain restrictions.
SPECIAL FORM //
One of the extended.
A property coverage form protecting insureds from all causes of physical damage loss unless otherwise limited or excluded.
SPECIFIED PERILS //
An insurance contract that covers only those causes of loss (otherwise known as perils) that are specifically indicated as being covered.
STATE AMOUNT //
When the value of property, either real or personal, is agreed upon at the issuance of the contract and, therefore, coinsurance and any other valuation clauses will not apply at the time of a loss.
STATUTE OF LIMITATIONS //
A statute limiting the time within which a legal action may be brought.
SUBROGATION //
In insurance, the substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for a loss paid by the insurer.
SUBSIDENCE //
Damage due to land movement, e.g., a house on a hill due to heavy rains. Not earthquake damage.
SUNSET CLAUSE //
A clause in a casualty excess of loss reinsurance cover that provides that the reinsurer will respond only to losses reported before some predetermined future date (sunset). The clause is used to limit the reinsurer's exposure to the "long-tail" of liability exposure, particularly in the US.
SUPERFUND //
A governmental program under the auspices of the Environmental Protection Agency (EPA), set up to identify toxic and hazardous waste dump sites. Once the sites are identified, an attempt is made to identify the responsible parties, effect the clean up of the sites, and assess the responsible parties with the costs incurred. TOP
SURETY //
1. The guarantee give for the fulfillment of an obligation.
2. The person or organization guaranteeing the fulfillment of an obligation.
3. The underwriter who guarantees something under a bond.
SURETY BOND //
A written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include payment of debts and responsibility for defaults.
SURPLUS LINE //
A line of insurance provided by insurers not licensed in the states where the risks are located and placed under the surplus line laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence that placements could not be readily made in licensed insurers. Broadly referred to as being all lines of insurance placed with nonadmitted insurers.
SURPLUS LINES INSURANCE //
Insurance written by insurers not licensed in the states where the risks are located and placed with such insurers under the surplus lines laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence reported before some predetermined future date ("sunset").
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THIRD PARTY //
The claimant under a liability policy, so called because the first two parties are the insured and insurer, who enter into the insurance contract, which pays the third party's claim.
TIME ELEMENT INSURANCE //
A coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. The current commercial time element coverage forms are business income and extra expense. Extra expense covers costs incurred to continue operations at another location.
TORT //
A legal wrong arising from a breach of duty fixed by law, except under contract, causing injury to persons or property and redressible by legal action for damages.
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UMBRELLA LIABILITY INSURANCE //
A form of liability insurance protecting policyholders for claims in excess of the limits of their primary automobile, general liability and workers compensation policies, and for some (few) claims excluded by their primary polices which are subject to a deductible, which may range from $250 for a personal umbrella to a minimum of $10,000 for a commercial umbrella.
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