Property Casualty Insurance Definitions

Abandonment Condition

a condition often contained in property insurance that states that the insured cannot abandon property to the insurer and demand to be reimbursed for its full value

Absolute Liability

type of liability imposed by law on those participating in certain activities that are considered especially hazardous; a person involved in such activities may be held liable for the damages of another even though the individual was not negligent

Accident

a loss that occurs at a specific time and place

Accounts Receivable Insurance

filed commercial inland marine for that insures against loss the insured suffers because if an inability to collect from customers when accounts receivable records are damaged or destroyed

Actual Cash Value (ACV)

the cost to replace an item of property at the time of loss minus depreciation

Additional Coverages

(coverage extensions, other coverages, extended coverages) supplemental insurance coverages that apply only in certain circumstances, have reduced or separate limits of liability, or require the insured to meet certain requirements before they are applicable

Additional Insured

an individual or company, in addition to the insured, who is listed in the declarations

Additional Insured-Lessor Endorsement

commercial auto endorsement used to make leased vehicles considered owned vehicles for coverage purposes

Adhesion Contract

a contract where one party has more power than the other party in drafting the contract; insurance policy is an adhesion contract, insurer has more power

Adverse Selection

tendency of insureds with a greater-than-average chance of loss to purchase insurance

Agency

principles governing the authority of an agent that represents the principle

Agent

an individual or organization the legally represents another; state-licensed professional who represents the insurance company in the sale and servicing of insurance; the direct link between the insurance company and the policyholder

Aggregate Limit

type of policy limit found in liability policies that limits coverage to a specific total amount for all losses occurring in the policy period

Agreed Value Condition

condition found in some property insurance policies that stipulates a certain value that will meet the coinsurance requirement; if the policy limit equals or exceeds this amount, the insured will not be assessed a coinsurance penalty; also called stated amount condition

Aleatory Contract

a contract that relies on an uncertain event; insurance policy is this

Alien Company

an insurance company that is incorporated in a country other than the US that is doing business in the US

A.M. Best Company

org that rates the financial stability of insurance companies doing business in the US

Annual Transit Policy

Nonfiled commercial inland marine transportation form that insures a property owner's incoming and outgoing shipments of goods during a year

Apparent Authority

legal doctrine that states that an agent has whenever authority a reasonable person who assume they have

Application

questionnaire filled out by an agent and the prospect who is seeking insurance; the form contains information used to underwrite and rate the policy

Appraisal Condition

policy condition that outlines a procedure for when the insured and insurer disagree on the amount of loss; each select an appraiser; appraisers select an umpire; when 2 of 3 agree on an amount, that is the amount paid

Appurtenant Structures

buildings of lesser value that are on the same premises as the main building insured under a property policy; usually covered by the policy

Arbitration Condition

policy condition similar to the appraisal condition, but may be used to resolve disagreements beside those regarding value of loss

Assessment Mutual Company

mutual insurance company that charges members a pro-rata share of losses at the end of each policy period

Assignment Condition

condition in insurance policies that specifies that the policy cannot be transferred to another without the companies written consent

Assumption of Risk

defense against liability based on the common law principle that a person who knowingly exposes himself to danger or injury assumes the risk of loss and cannot hold another person responsible for the loss

Authorized Insurer

company that meets the state insurance department's standards and is authorized to do business in that state; admitted insurer

Automatic Increase in Insurance Endorsement

dwelling policy endorsement that provides an annual increase in the coverage A amount; 4,6,or 8%.

Automobile Insurance Plan

a state-sponsored plan that provides automobile insurance to those who are uninsurable under standard auto policies

Aviation Hull Insurance

insurance that provides coverage for physical damage to the aircraft

Aviation Liability Insurance

insurance provided for aircraft that covers liability for bodily injury, injury to passengers, property damage, and medical payments coverage

Bailee

a person or org that has temporary possession of someone else's personal property

Bailee's Customer Policy

Nonfiled commercial inland marine form obtained by a bailee to cover loss or damage to a customer's property in the bailee's custody with-out regard to liability

Bailment

delivery of property by the owner to someone else to be held for some special purpose and then returned to the owner

Barratry

illegal acts committed willfully by a ship's master or crew for the purpose of damaging the ship or cargo; includes hijacking, abandonment, and embezzlement; this peril is covered in ocean marine insurance

Best's

org that rates the financial stability of insurance companies doing business in the US

Bid Bond

type of surety that guarantees that if a contractor's bid is accepted, the contractor will enter into a contract and provide the required performance bond

Bill of Landing

standardized contract of carriage issued by common carriers to the business for which it is shipping goods

Binder

oral or written statement that provides immediate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied

Blanket Insurance

type of insurance policy that covers more than one item of property at a single location or one or more items of property at multiple locations

Blanket Position Bond

fidelity bond that covers losses arising from the dishonesty of one or more employees acting separately or in collusion; provides a single limit of liability applicable to each employee involved in a loss

Bodily Injury (BI)

defined in most policies to include injury, sickness, disease, and death resulting from any of these at any time

Boiler and Machinery Insurance

insurance that covers the insured for losses arising out of the use of steam boilers or other machinery or equipment; may be included in CPP

Broad Theft Coverage Endorsement

dwelling policy endorsement that covers theft, attempted theft and vandalism, and malicious mischief resulting from theft; property covered on or off the premises

Broker

individual who represents the prospect, instead of the insurance company, in the insurance transaction

Builders Risk Coverage Form

one of the commercial property coverage forms; covers commercial, residential, or farm buildings that are under construction

Builders Risk Reporting Form

optional form used with the commercial property builders risk coverage form; allows insured to purchase a smaller amount of insurance that gradually increases as the value of the building under construction increases

Building and Personal Property Coverage Form

commercial property coverage form that covers buildings, the insured's business property, and the personal property of others located at the business premises

Burglary

as defined in crime insurance forms, the taking of property by a person unlawfully entering or leaving the premises as evidence by visible signs of forced entry or exit

Business Auto Coverage Form

one of the commercial auto coverage forms; covers business's owned, nonowned and hired autos against liability and PD losses

Business Auto PD Coverage Form

on of the commercial auto forms; covers business's owned or hired autos for PD only

Business Income Coverage Forms

commercial property coverage forms that pay for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired or replaced, available with or without extra expense coverage

Business Income From Dependent Properties

broad form commercial property coverage form designed for insureds whose business income is dependent on the ongoing operations of other business they do not own

Business Liability

liability that arises out of the conduct of a business

Business Pursuits Endorsement

homeowners policy endorsement that provides liability coverage for a business conducted away from the residence premises

Businessowners Policy (BOP)

package policy designed to provide broad property and liability coverage for small businesses;eligibility requirements are more strict than the CPP's

Camera and Musical Instruments Dealers Coverage Form

file commercial inland marine form written to cover camera and musical instrument dealers; covers the insured's stock in trade as well as customer property in the insured's care

Cancellation

termination of an insurance policy by the insured or the insurance company during the policy period

Capital

he accumulated, permanent resources a company gets from owners and customers; the value of the portion of assets that a company owns and that are not restricted by obligations to creditors

Cargo Insurance

type of ocean marine insurance that covers goods while that are in transit over water

Casualty Insurance

line of insurance that includes a wide variety of unrelated coverages, including liability, auto, worker's compensation, aviation, crime, and surety bonds

Causes of Loss Form

separate form used with the commercial property coverage part of the CPP that lists covered perils and exclusions; basic, broad, or special; takes place of the policy's perils insured against provisions

Certificate of Insurance

written form that verifies a policy has been written; provides a summary of the coverage provided under the policy

Concealment

the withholding of material fact involved in the contract on which the insurer relies

Concurrent Causation

a situation where 2 or more perils act concurrently to cause loss; some courts rules that losses from concurrent causation are covered even if on of the perils was not covered; caused insurance companies to revise policy language

Conditional Contract

a contract that contains a number of conditions that both parties must comply with; insurance policy is this type of contract

Conditions

portion of an insurance policy that describes the rights and duties of the insured and insurance company under the policy

Condominium Association Coverage Form

commercial property coverage form that covers the buildings in a condominium complex; does not cover the condominium owner's personal property

Condominium Commercial Unit-Owners Coverage Form

commercial property coverage form that may only be purchased by owners of commercial condominiums; covers the condominium's contents, including business personal property and the personal property of others

Consideration

a characteristic of a legal contract; the thing of value exchanged for the performance promised in the contract; with insurance contracts, the consideration the insured gives is the premium payment, consideration the insurer gives is the promise to pay covered losses

Consultant

insurance professionals who, for a fee, offer advice on the benefits, advantages, and disadvantages of various insurance policies; sells advice, not insurance

Contract

a legal agreement between 2 competent parties that promises a certain performance in exchange for a certain consideration

Contract Bonds

category of surety bonds that guarantee the fulfillment of contractual obligations; includes bid, labor, performance, payment, supply, completion and material bonds

Contractors Equipment Floater

nonfiled commercial inland marine form that covers heavy machinery, equipment, and tools a contractor uses in business

Contribution by Equal Shares

type of other insurance condition found in liability policies; it calls for all insurers to contribute equally up to the limit of the policy having the smallest limit, whereupon that company stops paying; the other companies share in the rest of the payment until the loss is paid or all limits are exhausted

Contributory Negligence

common law defense against negligence that states that if an individual contributes to her own loss in any way, then someone else cannot be held liable for the loss

Countersignature

signature of a licensed agent that, in most states, must appear on the policy to validate the contract

Court Bond

type of surety bond used to settle legal arguments that do not involve monetary damages

Coverage Form

document that contains insurance agreements, coverages, exclusions, and conditions; must be attached to a policy jacket to make a complete policy; also called a policy form

Coverage Part

combination of forms and endorsements used to provide a particular commercial coverage; the forms and endorsements available under each coverage part can be used to issue a policy covering a single line of insurance or combined to provide a commercial package policy

Coverage Trigger

event that activates coverage under a commercial general liability coverage form; under the occurrence form the coverage trigger is BI or PD that occurs during the policy period; under claims-made form the trigger is BI or PD that occurs on or after the retroactive date for which a claim is first made

Custodian

as defined in crime insurance forms, an insured, partner, or employee who has care or custody of insured property within the premises; does not apply to watchpersons or janitors

Damages

monetary compensation awarded by a court to an injured party

Declarations

section of an insurance contract that shows who is insured, what property or risk is covered, when and where the coverage is effective, and how much coverage applies

Deductible

dollar amount the insured must pay on each loss to which the deductible applies; the insurance company pays the remainder of the loss, up to the policy limits

Defense Costs

legal expenses incurred by the insurer to defend suits brought against insureds; defense costs are paid in addition to payments for BI and PD claims

Definitions

section of an insurance policy that clarifies the meaning of certain terms used in the policy

Degree of Care

extent of legal duty owed by on person to another, also called standard of care

Deposit Premium

premium paid at the beginning of the policy period that is based on an estimate of what the final premium will be; this premium is adjusted based on reports submitted by the insured to the insurer; also called estimated premium

Difference in Conditions Insurance (DIC)

type of commercial property policy the covers most insurable perils but excludes basic fire and extended coverage perils

Diminution of Value

an actual or perceived loss of an auto's resale or market value that results from a direct, accidental loss

Direct Loss

financial loss resulting directly from a loss to property

Direct Response System

insurance company that sells insurance through the mail or over the phone; no agents are involved

Direct Writer

insurance marketing system where the company's agents are also employees of the company

Directors and Officers Liability Insurance

type of errors and omissions policy written for directors and offices of corporations who may be sued as individuals by stockholders

Disability Insurance

line of insurance that protects the insured against loss of income resulting from injury or sickness

Discovery Form

commercial crime form that covers losses that are sustained at any time and discovered either during the policy period or up to 60 days after expiration; the discovery period for losses related to employee benefit plans extends for up to one year after policy expiration

Doctrine of Reasonable Expectations

legal principle that provides an insurance policy includes coverage that an average person would reasonably expect it to include, regardless of what the policy actually provides

Domestic Company

insurance company doing business in the state in which it is incorporated

Domestic Shipments

category of the nationwide definition that includes coverage of cargo in transit over land

Drive Other Car (DOC)-Broadened Coverage for Named Individuals Endorsement

commercial auto endorsement that extends the definition of a covered auto to include autos the named insured does not own, hire, or borrow while being used by the person named in the endorsement

Duties Following Loss

condition found in property-casualty policies that explains the insured's responsibilities after a loss occurs

Dwelling Policy

policy that provides property coverage to individuals and families; covers dwellings, other structures, personal property, and fair rental value; some versions also cover additional living expense; the unendorsed policy does not provide liability coverage

Dwelling Under Construction Endorsement

dwelling policy endorsement used to provide provisional limits of liability for dwellings under construction; limits increase as the construction of the building progresses

Earned Premium

premium and insurance company has actually earned by providing insurance protection for the designated period of time

Earthquake Insurance

insurance that covers damage to a structure, its contents, or both as the result of an earthquake; available as a separate policy and as an endorsement to dwelling, homeowners, and commercial property policies

Electronic Data Processing Equipment Floater

Non-filed commercial inland marine policy that provides open peril coverage for computer hardware, software, and data that is owned by the insured or in the insured's care; breakdown, extra expense, and business interruption may also be included

Employees as Additional Insureds Endorsement

endorsement used with the business auto coverage form that covers employees while they are using an auto not owned, hired, or borrowed by the business in the business or personal affairs for the named insured

Employers Liability Coverage

coverage included in the workers' compensation and employers liability policy that covers the employer's liability at common law arising out of employees' work-related injuries and occupational disease

Employment Practices Liability Coverage

type of policy that covers a business's losses arising out wrongful termination, discrimination, sexual harassment, and other employee-related practices

Endorsement

document attached to an insurance policy that changes the policy in some way

Equipment Breakdown Protection Coverage Form

title of ISO coverage form used to write what is traditionally called boiler and machinery insurance

Equipment Dealers Coverage Form

filed commercial inland marine coverage form that covers mobile equipment and construction equipment dealers; covers the insured's stock in trade as well as customer property in the insured's care

Errors and Omissions Insurance (E&O)

professional liability coverage that protects the insured against liability for committing an error or omission in the performance of professional duties

Estoppel

principle that if one intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is injured as a result, the legal party my be legally prohibited from asserting that the fact does not exists

Excess Electronic Equipment Endorsement

personal auto policy endorsement that allows the insured to add coverage for tapes, records and disks used with electronic media and to increase the limit for electronic equipment that is permanently installed in an area of the auto not normally used for installing this equipment

Excess Insurance

when 2 or more policies or coverages apply to the same loss, the one that applies only after the limits of the primary coverage exhausted

Excess Lines Insurance

agent licensed by the state to handle the placement of business with non-admitted insurers; also called surplus lines agent

Exclusions

section of an insurance policy the lists property, perils, persons, or situations that are not covered under the policy

Exclusive Agent

an agent who markets insurance for a single company; also called a captive agent

Exclusive Remedy Doctrine

on of the precepts upon which the workers compensation system was founded; stipulates that the only means available to employees to receive compensation from employers for injuries covered by workers compensation laws is through the benefits mandated by those laws

Expense Ratio

ratio that indicates the cost of doing business; calculated by dividing the amount of underwriting expenses by the amount of written premium

Experience Modification Factor

in experience rating, the factor applied to reduce the premium when loss experience is better than expected

Experience Rating

type of merit rating that determines premium based on previous loss experience

Exports

category of the nationwide definition that includes risk eligible for ocean marine insurace

Exposure

a condition or situation that presents a possibility of loss

Express Authority

legal doctrine that states that an agent has the authority specifically given to the agent; either oral or written by the principle

Extended Non-Owned Coverage-Vehicles Furnished or Available for Regular Use Endorsement

personal auto policy endorsement that eliminates most exclusions applicable to autos that are furnished or available for the regular use of the named insured or family members

Extended Reporting Period (ERP)

period of time provided by the claims-made commercial general liability form during which coverage will be provided for claims made after the expiration date of the policy if certain conditions are met; basic ERP runs 60 days and can be extended for 5 yrs; the supplemental ERP runs for an unlimited duration; but is available only by endorsement for and additional premium

Extortion-Commercial Entities Endorsement

endorsement used with the commercial crime policy that covers loss of money, securities, and other property when surrendered away from the premises as a result to do bodily harm to the insured, an employee or relative of either who is being held captive

Extra Expense Coverage Form

commercial property coverage form that covers additional expenses incurred by the insured's business to continue operations after a direct loss by a peril insured against

Fair Credit Reporting Act

Federal law that allows consumers who are denied insurance because of information contained in a credit report to be notified and allowed to obtain information used in the report from the reporting agency

Fair Access to Insurance Requirements Plan (FAIR)

program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market

Farm Coverage

part of the commercial package policy that provides property and liability insurance to farmers for both their personal and business exposures

Federal Employers Liability Act (FELA)

federal law that provides benefits to injured railroad workers who are exempt under state workers compensation

Fellow Servant Rule

common law defense against liability that allowed employers to escape from liability to an employee if another employee's carelessness had contributed to the loss

Fidelity Bond

class of bonds that guarantees an employee's honest discharge of duty; written to protect an insured from dishonest acts by empolyees

Fiduciary Bond

type of surety bond that guarantees that a fiduciary will fulfill its obligations set forth by law

Fiduciary

person who stands in a special relationship of trust to another

Fiduciary Liability Policy

insurance that protects people who manage private pension and employee benefit plans against liability for violation of the federal ERISA law

Field Underwriting

selection of clients by the agent in accordance with company standards

File and Use

method of rate and form ratification used by some insurance departments that allows a company to begin using forms and rates as soon as they are filed by the department; the department eventually reviews the filing and officially accepts or rejects it

Filed Form

standardized inland marine form that can be written under the commercial inland marine coverage part of the commercial package policy

Film Coverage Form

filed commercial inland marine form that covers exposed motion picture film until production is complete and positive prints are made

Financial Responsibility Laws

state law that require owners or operators of autos to provide evidence that they have the funds to pat for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state

First-Named Insured

first person listed in the declarations as an insured; may have a higher level of duties or rights under the policy

First Party Loss

property insurance loss

Flat Cancellation

cancellation of a policy by the insured or the insurance company on its effective date

Floater

insurance policy that covers property wherever it is located

Floor Plan Coverage Form

filed commercial inland marine form that covers stock that is subject to a floor plan arrangement, where a dealer borrows money from a lender with which to pay for merchandise

Foreign Company

an insurance company doing business in a state other than the one in which it is incorporated

Fraternal Benefit Society

an incorporated society or order, without capital stock, that is operated on the lodge system and is conducted solely for the benefit of its members and their beneficiaries and not for profit; offer insurance that is available only to members

Fraud one

a deliberate misrepresentation that causes harm; an all-out effort by one party to deceive and cheat the other

Freight Insurance

type of ocean marine insurance that protects the insured against the loss of shipping costs

Functional Replacement Cost

method to determine reimbursement for some losses, particularly those to antique, ornate, or custom construction; damaged property is repaired or replaced the less expensive but functionally equivalent materials

Garage Coverage Form

commercial auto coverage form the provides liability, garagekeepers, and physical damage coverages for vehicle dealers, including dealers that have repair operations on the business premises

Garagekeepers Insurance

coverage that is part of the garage coverage form; covers a garage risk's legal liability for customers autos in the care of the garage; at the insureds option and for an additional premium, can also apply without regard to fault

General Average Loss

ocean marine term used to indicate a partial loss resulting from a sacrifice of cargo to save remaining property (jettison); each party shares in the loss in proportion to his total interest in the property being transported

General Conditions Form

separate form that lists the conditions that apply to a policy

General Damages

type of compensatory damages that reimburse the injured party for such things as pain, suffering, and disfigurement

Hazard

something that increases the chance of loss

Health Insurance

line of insurance that protects the insured against financial loss due to medical bills

Hired and Non-Owned Auto Liability Endorsement

business owners policy endorsement used to cover hired or non-owned autos used by the business

Hold Harmless Agreement

contractual arrangement where one party assumes the liability of a situation and relieves the other party of responsibility

Home Day Care Coverage Endorsement

homeowners policy endorsement used to provide coverage for home day care businesses

Homeowners Policy

personal multiline policy for homeowners that includes both property and liability coverage; different forms that provide varying degrees of property coverage; liability coverage is the same in all forms

Hull Insurance

ocean marine insurance the provides coverage for physical damage to the ship

Implied Authority

authority given by the principle to the agent that is not formally expressed or communicated

Implied Warranties

in ocean marine insurance, warranties that are not written into the policy, but have become a part of the policy by custom

Imports

category of the nationwide definition that includes risks eligible for ocean marine insurance

Incidental Occupancy

a business conducted in a dwelling used primarily as a residence with no other businesses operating on the same premises; individual insurers have specific guideline about the types of incidental businesses permitted

Incurred Losses

one of the components used to calculate the loss ratio; it includes paid losses and certain expenses associated with claim handling

Indemnity

principle of insurance that provides that when a loss occurs, the insured should be restored to the approximate financial condition he occupied before the loss occurred, no better or no worse

Independent Adjuster

claim handler who works independently instead of for a particular insurer

Independent Agent

agent who represents many insurance companies, rather than a single company; also called a nonexclusive agent

Indirect Loss

loss that is the result or consequence of a direct loss, also called consequential loss

Individual Named Insured Endorsement

commercial auto endorsement that provides coverage similar to that provided under the personal auto policy to family members of the named insured while using an auto

Inland Marine Insurance

form of insurance originally designed as an extension of ocean marine coverage to insure transportation of goods over land; today it covers a variety of portable property, in addition to goods in transit; available as personal or commercial

Installation Policy

non-filed commercial inland marine policy that covers loss to machinery, equipment, building materials, and supplies in transit to or being used with or during the course of installation, testing, building, renovating, or repair

Instrumentalities of Transportation and Communication

category of the nationwide definition that includes a variety of forms closely related to transportation or communication, such as bridges, pipelines, and TV towers

Insurable Interest

any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance from loss or destruction or financial damage or impairment

Insurance

contract or device for transferring the risk of loss from a person, business, or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums

Insurance Commissioner

head official of a state insurance department; may also be called a director or superintendent

Insurance Department

state department charged with controlling insurance matters within the state

Insurance Guaranty Association

state funds created by law that pay claims of insurers domiciled in that state that become insolvent; funds are generated by making assessments against other insurers operating in the state

Insurance Services Office (ISO)

organization established for the benefit of its member insurance companies and other subscriber companies; ISO gathers statistics, provides loss costs, drafts policy forms and coverage provisions, and conducts inspections for rate making purposes

Insured Contract

term used in CGL and businessowners liability forms to describe contracts for which contractual liability coverage is available under the policy, such as leases, sidetrack agreements, and elevator maintenance agreements; also called incidental contract

Insuring Agreement

section of an insurance policy that describes what is covered and the perils the policy is insured against

Interline Endorsement

and endorsement that modifies 2 or more lines of insurance

Intervening Cause

an independent action that breaks the chain of causation and sets in motion a new chain of events; when this occurs, the intervening cause becomes the proximate cause; can serve as a common law defense against liability

Invitee

a person invited onto a premises for some purpose involving potential benefit to the property owner

Jettison

a voluntary action to rid a chip of cargo to prevent further damage or peril; covered in ocean marine policies

Jewelers Block Coverage Endorsement

filed commercial inland marine for for jewelers that covers the insured's stock in trade and the property of others while it is on or off the premises

Joint Ownership Coverage Endorsement

personal auto policy endorsement that allows the policy to be issued to 2 or more persons who live in the same household or 2 or more individuals who are related in another way besides husband and wife

Jones Act

federal law that allows members of a ships' crew to sue their employer/ship owner at common law for injuries caused by the employer's/ship owner's negligence

Judgment Rating

method of rating that established premiums based on a careful evaluation of each individual risk without the use of manuals or tables

Judicial Bond

category of surety bond that guarantees that the principle will fulfill certain obligations set forth by law; includes fiduciary bonds and court bonds

Law of Large Numbers

principle that states that the more examples used to develop any statistic, the more reliable the statistic will be

Legal Liability Coverage Form

commercial property coverage form that covers the insured for liability arising out of a negligent damage to property of others while it is in the insured's care

Legal Purpose

one of the characteristics of a legal contract; means that contracts are only enforceable if they are not obviously illegal, immoral, or against the public good

Liability Insurance

type of insurance that protects an insured from financial loss arising out of liability claims by transferring the burden of financial loss from the insured to the insurance company

Liberalization Condition

condition found in property insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policies or endorsements will be construed to contain the broadened coverage

License and Permit Bond

type of surety bond that is sometimes required in connection with the issuance of licenses by government agencies; they guarantee that the person who posts the bond will comply with all applicable laws pertaining to their activities

Licensee

person on the premises with the property owner's consent but for the sole benefit if the visitor

Life Insurance

insurance that pays a stipulated sum to a designated beneficiary against the financial consequences of the insured's premature death

Limitations

policy language that eliminates or reduces coverage under certain circumstances or when specific conditions apply

Liquor Liability Coverage Form

CGL coverage form that provides coverage for liquor liability excluded by standard CGL policies for those who are in business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages

Livestock Coverage Form

farm coverage form used to provide separate coverage for livestock

Lloyd's Association

a voluntary association of individuals or groups of individuals who agree to share in insurance contracts; each individual or syndicate is individually responsible for amounts of insurance they write

Longshore and Harbor Workers' Compensation Act Coverage Endorsement

endorsement used with the worker's compensation and employer's liability policy that covers the additional benefits required by federal law for maritime workers injured while working on navigable waters or shore-site areas

Lost Cost

factor used in figuring insurance rates that represents how much an insurance company needs to collect to cover expected loss

Loss Provisions

general term used to describe policy conditions that specify what the insured and insurer must do following a loss

Loss Ratio

method used to determine an insurance company;s success in covering current losses out of current premium income; determined by dividing incurred losses by earned premium

Loss Sustained During Prior Insurance Condition

condition found in loss sustained version of the commercial crime forms that allows losses that occurred during a prior policy period to be covered under the current policy if certain conditions are met

Loss Sustained Form

commercial crime form that covers losses that are sustained during the policy period and discovered either during the policy period or up to one year after the policy expires

Mail Coverage Form

filed commercial inland marine form that covers property in transport by registered mail, first class mail, certified mail, or express mail

Malpractice Insurance

term used to describe professional liability insurance issued to medical professionals or institutions

Manual Rating

method of premium determination that uses rates based on collected statistics; the rates, which apply per unit of insurance, are published in manuals; also called class rating

Market Value

the amount property could be sold for at the time of loss; may be used to determine the amount of reimbursement for a loss

Material Fact

a fact that would cause an insurer to decline a risk, charge a premium, or change the provisions of the policy that was issued

MCS-90 Endorsement

endorsement attached to the truckers coverage form to provide public liability coverage

Merit Rating

method of determining premiums where a manual rate is modified to reflect the risk's unique nature; experience rating, retrospective rating, scheduled rating

Messenger

as defined in crime insurance forms, and insured, partner, or employee who has care of insured property outside the premises

Miscellaneous Type Vehicle Endorsement

personal auto policy endorsement that provides coverage for vehicles that are usually excluded in the policy, such as motorcycles, motor homes, golf carts, mopeds, and other recreational vehicles

Misrepresentation

written or verbal misstatement of a material fact involved in the contract on which the insurer relies

Mobile Agriculture Machinery and Equipment Coverage Form

farm coverage form that provides separate coverage for a farmer's mobile agriculture machinery and equipment

Mobile Equipment Endorsement

commercial auto endorsement that makes mobile equipment considered a covered auto for coverage purposes

Mobile Home Insurance

coverage that protects both a mobile home structure and its contents; some companies have mobile home package policies that provide property and liability insurance for owners of mobile homes; an endorsement can also be attached to HO-2 or HO-3 to modify coverage

Monoline Company

insurance company that writes a single line of insurance

Monopolistic State Fund

method of providing workers compensation coverage used in some states; employers must purchase coverage from the state fund, private insurers are not allowed to compete

Moral Hazard

hazard created by an individual who would be willing to create a loss situation on purpose just to collect from the insurance company

Morale Hazard

hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness

Mortgage Condition

condition found in property insurance policies that specifies the rights and duties of the mortgagee under the policy; also called the loss payable condition

Mortgage Rights

rights granted to a mortgagee under a property contract issued by a mortgagor by virtue of the mortgagee's financial interest in the property

Motor Carrier Act of 1980

federal regulation that requires truckers and other commercial carriers to certify they are able to meet financial obligations if they become liable for injury or damage arising from their trucking operations

Motor Carrier Coverage Form

commercial auto coverage form that is an alternate to the truckers coverage form; it can be used to cover anyone who transports property by auto in a commercial enterprise

Motor Truck Cargo Policy

non-filed commercial inland marine policy that protects a carrier against liability for damage to domestic shipments in its custody

Mutual Company

insurance company owned by its policyholders; the policyholders share in profits made by the company through dividends or reductions in future premiums

Mysterious Disappearance

vanishing of property with no explanation

Named Schedule Bond

type of fidelity bond that covers loss only from named employees

Named Insured

person, business, or other entity named in the declarations to whom the policy is issued

Named Non-Owner Coverage Endorsement

personal auto policy endorsement that provides coverage for the use of non-owned autos to individuals who do not own a car

Named Peril Policy

insurance policy that insures only against perils specifically listed in the policy; also called specified peril policy

National Association of Insurance Commissioners (NAIC)

organization made up of individual state insurance commissioners whose purpose is to promote uniformity in regulation by drafting model laws and regulations

National Flood Insurance Program

program run by the federal government that makes flood insurance available to eligible communities at subsidized rates; includes coverage for both buildings and personal property

Nationwide Definition

document that categorizes and classifies risk that are eligible for ocean or inland marine insurance

Negligence

the lack of reasonable care that is required to protect others from the unreasonable chance of harm

No Benefit to Bailee Condition

condition found in some property insurance contracts that states that a bailee is not covered under an insured's policy while the bailee has possession of the insured's property

No-Fault Insurance

form of automobile insurance where each insurance company pays the damages of its own insureds, regardless of who was at fault for the accident; no-fault insurance has been enacted in several states

Nonadmitted Insurer

company that is not authorized to do business in a particular state; also called an unauthorized insurer

Nonconcurrency

situation that exists when the same property is covered by more than one policy, but the policies are not identical as to the extent of coverage provided

Nonfiled Form

type of commercial inland marine form that is not standardized and cannot be included in the commercial inland marine coverage part of the commercial package policy

Nonrenewal

decision made by an insured or insurance company to not continue coverage for another policy period after the current policy period expires

Nonreporting Policy

type of insurance policy for which a flat premium is charged every time the policy is renewed

Obligee

in bonds, the party to whom the principle makes the promise and for whose protection the bond is written

Occurrence

a loss that occurs at a specific time and place or over a period of time

Occurrence Form

commercial general liability coverage form that covers bodily injury or property damage that occurs during the policy period, regardless of when the claim is made

Ocean Marine Insurance

insurance designed to provide broad coverage for cargo and ships in transit over sea; includes cargo insurance, hull insurance, freight insurance, and protection and indemnity insurance

Offer and Acceptance

one of the elements of a legal contract; means a contract must involve 2 parties: one who makes an offer and another who accepts the offer; also called agreement

Open Competition

method of rate and form regulation used by some state insurance departments that allows insurance companies to compete openly with the forms and rates they select, subject only to requirements of adequacy and nondiscrimination

Open Peril Policy

insurance policy that protects the insured from losses caused by any peril that is not specifically excluded by the policy; also called all risk and special coverage

Optional Limits Transportation Expenses Coverage Endorsement

personal auto policy endorsement that allows the insured to select the daily and maximum limits of coverage provided for transportation and loss of use expenses

Ordinance or Law Coverage Endorsement

endorsement used with the commercial property coverage part to provide coverage for demolition costs and increased construction costs required or regulated by law or ordinance

Other Insurance Condition

policy that sets out how any other insurance that applies to the same loss will affect reimbursement under the policy

Outboard Motor and Boat Insurance

insurance against physical damage to boats; usually provided by inland marine forms

Owners and Contractors Protective Liability Coverage Form

commercial general liability coverage form that covers claims caused by the negligence of a contractor or subcontractor

Package Policy

policy that includes more the one type of insurance coverage; also called multiline policy

Pair or Set Condition

loss settlement condition found in property insurance contracts that states that when part of a set is damaged or destroyed, the insured will not be reimbursed for the value of the entire set; various methods are used to determine the amount of reimbursement

Parcel Post Policy

nonfiled commercial inland marine policy that covers mail sent by parcel post

Particular Average Loss

in ocean marine insurance, any partial loss that does not arise from a general sacrifice of property (jettison)

Payment Bond

type of surety bond the guarantees bills for labor and materials will be paid to the contractor as they are due: also called labor and materials bond

Peak Season Endorsement

endorsement attached to the commercial property coverage part to provide increased coverage during particular seasons of the year when the insured's inventory is at higher levels than usual

Performance Bond

type of surety bond that guarantees that jobs will be completed by the contractor according to the contract specifications

Peril

the cause of loss

Perils of the Sea

perils to which property in transit by water is exposed; includes unusual action of wind or waves, stranding, lightning, collision, and sinking

Permitted Incidental Occupancies Endorsement

homeowners policy endorsement that covers the insured's business activities conducted on the residence premises

Personal Articles Form

personal inland marine form that provides scheduled coverage for nine optional classes of property; jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections, and coin collections

Personal Auto Policy

auto policy the provides property and liability coverage for both owned and nonowned autos used, maintained, or operated by the insured and her family members

Personal Contract

one of the characteristics of an insurance contract; means that an insurance contract insures a person, not a property

Personal Effects Form

personal inland marine form that covers an insured's personal belongings, such as baggage while traveling

Personal Injury

injury other than bodily injury arising out of such things as libel, slander, false arrest, wrongful entry, violation of privacy, and malicious prosecution

Personal Injury Endorsement

homeowners policy endorsement that modifies the definition of bodily injury to include personal injury

Personal Liability and Medical Payments to Others Endorsement

endorsement to the dwelling policy that provides liability coverage similar to that provided by Section II of the homeowners policy; may also be purchased as a separate policy

Personal Lines

insurance coverages that protect individuals and their families

Personal Property Form

personal inland marine form that provides open peril coverage for personal property

Personal Property Floater Risks

category of the nationwide definition that includes risks eligible for personal inland marine insurance

Personal Property Replacement Cost Endorsement

homeowners policy endorsement that adds replacement cost coverage for personal property

Personal Yacht Insurance

type of personal watercraft policy written for large pleasure boats

Physical Hazard

hazard the arises from the condition, occupancy, or use of the property itself

Physicians and Surgeons Equipment Form

filed commercial inland marine form that covers medical instruments on and off the premises and furniture and fixtures at the doctor's office against direct physical loss

Policy

an insurance contract

Policy Jacket

document used to assemble an insurance policy; contains general conditions or the declarations page, but provides no coverage in and of itself;a policy form must be attached to make a complete policy; also called a skeleton policy

Policy Limit

maximum amount the insurance company will pay for a particular loss or for losses sustained during a period of time; also called limit of coverage, limit of insurance, and limit of liability

Policy Period

the date and time specified in the declarations for when coverage begins and ends

Policy Territory

place where coverage under a policy applies

Pollution Liability Coverage Extension Endorsement

commercial general liability endorsement that provides coverage for BI and PD claims arising out of pollution losses; excludes coverage for pollution clean-up costs

Pollution Liability Coverage Form

CGL coverage form that provides certain pollution coverages that are excluded under the standard CGL; includes coverage for pollution clean-up costs

Pollution Liability-Limited Coverage Form

CGL coverage form that provides certain pollution coverages that are excluded under the standard CGL; does not include coverage for clean-up costs

Position Schedule Bond

fidelity bond that covers specifically named positions in the company, rather than the individuals who hold these positions

Post-Judgement Interests

interest accruing on a judgment after an award has been made, but before payment is made by the insurance company; usually covered as a supplementary payment in liability policies

Premises and Operations

business liability exposure arising out of the business location or the activities of the business; covered under the CGL

Premium Audit

survey of the insured's financial records to gather information used to calculate the premium, such as exposures and limits

Primary Insurance

when 2 or more coverages or policies apply to the same loss, the one that pays first, up to its limits of liability or the amount of the loss, whichever is less

Principal

in bonds, the party who promises to do or not do a specific thing; in agency law, the person or company being represented

Prior Approval

method of rate and form ratification used by some state insurance departments the requires a company to obtain official approval before using new forms or rates

Producer

general term used to describe someone who sells insurance, such as an agent, broker, or solicitor

Products and Completed Operations

business liability exposure arising out of defects in the company's products or completed operations; covered by the CGL

Professional Liability

liability arising out of the rendering or failing to render services of a professional nature

Professional Liability Policy

insurance coverage issued to a professional that covers the rendering or failing to render services of a professional nature; policies are tailored to fit specific occupational needs

Proof of Loss

form completed by an insured after a loss that provides an official inventory of damages

Property Damage (PD)

damage to or destruction of property, including loss of use of the property

Property Insurance

line of insurance that includes many types of coverages designed to handle the risk that a person will suffer financial loss because something she owns is damaged or destroyed

Pro Rata Other Insurance

method of handling insurance when more than one coverage applies to a loss; each coverage pays a portion of the loss in proportion to the relationship its limit of liability bears too the total limit of liability under all applicable insurance; also called contribution by limits

Protection and Indemnity

form of ocean marine liability insurance that covers a variety of types of liability, such as damage to cargo through negligence and damage to other property or another boat resulting from a collision

Protective Safeguards Endorsement

businessowners policy endorsement that requires the insured to maintain fire or security service on specified property as a condition of the policy

Proximate Cause

an action that, in a natural and continuous sequence, produces a loss

Public Official Bonds

type of surety bond furnished by principles who are elected or appointed to fulfill positions of trust that guarantee their faithful and honest performance in office

Punitive Damages

type of damages intended to punish the defendant and make an example out of her to discourage others from behaving the same way; also called exemplary damages

Pure Risk

a risk in which there is no chance of gain, only loss

Quotation

a summary of coverages and premiums proposed by an agent to a prospective client

Rate

the basic charge an insurance company sets for various types of insurance

Reasonable Person Rule

principle of law that states that each person must behave like a prudent person following those ordinary considerations that guide human affairs

Rebating

giving or offering some benefit other than those specified in the policy to induce a customer to buy insurance; rebating is illegal in most states

Reciprocal Company

an unincorporated group of members that share insurance responsibilities with other members; it is managed by an attorney-in-fact

Reinsurance

acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer

Repair Cost

the cost to repair a damaged or destroyed item of property. May be the basis of reimbursement for a loss.

Replacement Cost

the cost to replace a damaged or destroyed item of property without deduction for depreciation; may be the basis of reimbursement for some losses

Reporting Policy

type of policy that does not charge a flat premium; the insured pays a deposit premium, then submits periodic reports to the insurer showing the status of the factors on which the premium is based; from these status reports, premiums are calculated and charged against the deposit

Representation

statements on an insurance application that the applicant believes are true; a representation is not considered a matter to which the parties contract, so a policy cannot be voided on the basis of a representation

Residual Market Insurance

insurance that is not ordinarily available from private insurers and may be provided by the government; examples include flood insurance, which is provided by the federal government, and workers compensation benefits, which may be provided by state funds

Retention Limit

in an umbrella policy, the amount the insured must pay for a loss that is not covered by an underlying policy before the umbrella will begin to cover the loss; also called self-insured retention

Retroactive Date

under the claims-made CGL form, a date stipulated in the declarations as the first date on which an event may occur and be covered by the policy if a claim is filed

Retrospective Rating

type of merit rating that bases the insured's premium on losses incurred during the policy period

Risk

the chance of uncertainty of loss

Risk Retention Group

insurance company formed by several organizations to cover those organizations' liability loss exposures; risk retention groups are exempt from most state laws that govern insurance companies

Robbery

in crime insurance, the taking or attempted taking of property by one who has caused or threatened to cause bodily harm, or committed a witnessed, obviously unlawful act

Running Down Clause

provisions found in ocean marine hull policies that provides protection if the ship owner is held liable for the negligent operation of the vessel in damaging another ship

Salvage

damaged property that can be retrieved, reconditioned, and sold to reduce an insured loss

Schedule Rating

type of merit rating that applies a system of debits or credits to reflect characteristics of a particular insured

Scheduled Coverage

property that is specifically listed in the declarations and covered for a specific amount; also called specific insurance

Scheduled Personal Property Endorsement

homeowners policy endorsement that provides open peril, scheduled coverage for nine optional classes of property

Self-Insurance

alternative to purchasing insurance where a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such losses

Service Bureau

organization that gathers, pools, and analyzes statistics from its member insurance companies to establish loss costs used to determine insurance rates

Signs Coverage Form

filed commercial inland marine form that insures business against loss to neon, fluorescent, automatic, or mechanical electric signs and lights

Single Limit

one policy limit that applies to both BI and PD losses; may also be called a combined single limit

Solicitor

insurance professional who sells insurance and collects premiums but cannot issue or countersign policies

Special Damages

type of compensatory damages that reimburse the injured party for direct and specific expenses involved in the loss, such as medial expenses and lost wages

Property Casualty Insurance Definitions

Business Administration 415 with Keltgen at Augustana College (SD)

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