Casualty Insurance Glossary

Question 1

(BAP)

Answer 1

Business Auto Policy

The BAP offers specified liability and physical damage coverage for risks associated with business use of the auto and “covered autos” will fall into one of the categories of covered autos listed in the Declarations

Question 2

Garage Coverage Form

Answer 2

The garage policy is designed as a specialized form for commercial entities in which the primary focus of the business functions are related to auto including the business of selling, servicing, or repairing vehicles.

covers all of the garage owner’s property and liability needs in this single form.

Question 3

Truckers Coverage Form

Answer 3

Trucker coverage forms protect business that carry the property on what is known as a “for hire” basis while another related coverage historically a motor carrier policy was used that carry private or public loads.

Question 4

Business (Commercial) Auto Policy

Answer 4

The insuring agreement of states that the insurer will pay all sums for which the insured is legally liable and for which coverage exists for all losses causing bodily injury or property damage caused by accident (therefore, BAP is not occurrence coverage) and attributed to owning, maintaining or use of an auto that is covered. Also covered by the liability insuring agreement is bodily injury or property damage caused by “covered pollution cost or expense.”

Question 5

Garagekeepers Coverage

Answer 5

The Garage Coverage Form provides liability coverage to the insured garage owner/operator for his liability arising from damage to his customer’s auto. It deals with the care, custody and control associated with legal bailment (property entrusted by its owner to a business for a legitimate business reason).

Question 6

Trailer Interchange

Answer 6

Coverage Trailer Interchange Coverage covers damage done by the insured to the truck trailers of others. The exact language of the insuring agreement states: “We will pay all sums you legally must pay as damages because of loss to a trailer you don’t own or its equipment…”.

Question 7

Covered pollution cost or expense

Answer 7

includes cost of:

• Any order or statutory or legal requirement of an insured to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, the effects of pollutants; or
• Any claim by a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing the effects of pollutants.

Question 8

Pollutants

Answer 8

means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

Question 9

Trailer

Answer 9

includes semitrailer, or a dolly used to convert a semitrailer into a trailer. But for Trailer Interchange Coverage only, trailer also includes a container.

Question 10

Trucker

Answer 10

any person or organization engaged in the business of transporting property by auto for hire.

Question 11

Individual Named Insured

Answer 11

Under a business auto policy (BAP) when an individual is a named insured the Individual Named Insured (INI) endorsement must be added at no additional premium charge but is subject to insurer underwriting. The INI creates liability and physical damage coverage that is the same found in the Personal Auto Policy (PAP). This coverage extends to not only the named insured but also to the spouse and other resident family members and it automatically deletes the “fellow employee” liability exclusion found in the BAP.

Question 12

Insurable Interest

Answer 12

An insured must prove to an insurance company that they have a legitimate interest in preserving the property they seek to insure at both the time the coverage is purchased as well as when loss may occur in the future.

Question 13

Expense Ratio

Answer 13

calculated by dividing the total of all incurred losses (including payments to surplus reserves) by all earned premiums with the resulting percentage expressing the expense ratio of that carrier.

Question 14

Combined Ratio

Answer 14

totals an insurer’s losses and expenses (cost to acquire, service, underwrite and reinsure risks) and divides that total by the cumulative amount of earned premiums, the percentage calculated equals the combined ratio of that insurance company. It measures whether or not the underwriting of the company is financially sound.

Question 15

Loss Ratio

Answer 15

The loss ratio compares the total incurred losses of the insurer with the total collected insurance premiums but does not take into account the underwriting expenses like the combined ratio does. It is a measurement of the actual losses of an insurer relative to the total premiums collected for line of insurance.

Question 16

Class Rating

Answer 16

takes into consideration a group of insured that have similar loss exposure and are therefore assessed equal premium ratings. They are created under the math principle that there is safety in a large group of insureds who share similar exposures to loss who can be charged in a similar fashion.

Question 17

Individual Rating

Answer 17

If an insured has a complicated property need then specified rating will have to be created by the underwriter to reflect the unique aspects of a single individual risk. The judgment of an individual underwriter using their experience and training becomes the basis for the premium charged finally assessed.

Question 18

Loss Costs

Answer 18

sometimes called pure premium, are costs an insurance company must pay for claims and include the expenses of administration and claims investigation and is one of the factors in creating viable premium charges.

Question 19

Hazard

Answer 19

A hazard creates an increased possibility that a peril (a cause of a loss) will actually occur.

Question 20

Physical Hazards

Answer 20

are physical or tangible conditions existing in a manner which makes a loss more likely to occur.

Question 21

Moral Hazard

Answer 21

makes loss more likely to occur due to the dishonest character of the insured

Question 22

Negligence

Answer 22

Individuals can be held legally accountable for their negligent (careless) acts. To establish the legal standard for negligence, our legal system uses the “prudent person” standard to decide whether or not the insured used reasonable care under the circumstances. This prudent person standard helps the insurer and courts to decide whether or not the insured is liable for the loss caused by their action.

Question 23

Absolute Liability

Answer 23

exists when a person subjects another party to a dangerous or hazardous condition present on their property, including the idea of harboring a wild animal on the premises. When a victim is hurt in an absolute liability situation, they do not have to establish negligence to collect money damages. All the victim must do is establish that the cause of the injury was the result of the presence of a dangerous or hazardous condition (or wild animal) on the premises of the at-fault party.

Question 24

Strict Liability

Answer 24

applies to a manufacturer of products. When a manufacturing puts a product in the market and a consumer purchases it and uses it as directed but the product injures them, there is strict liability.

Question 25

Insuring Clause

Answer 25

The insuring clause (also known as the insuring agreement) is the section of an insurance policy that spells out the specific obligation being assumed or promised by the insurance company on behalf of the insured in a situation where a covered loss occurs. The insuring agreement also may state the perils covered, indicating whether they are named or open.

Question 26

Endorsements

Answer 26

re written additions or changes to an existing contract of insurance that is currently in force. These written addendums can change the policy terms, coverages or conditions in some way. Any change to a policy must be evidenced in writing to be valid. An endorsement can be used to add or delete coverage.

Question 27

Business Owners Policy

Answer 27

is a stand-alone package policy, designed to meet the comprehensive property and casualty needs of small to medium sized business that qualify for its very reasonably priced premium. Eligible risks are limited to 35,000 square feet of space (earlier editions of BOP used 25,000) and gross annual sales not exceeding $6,000,000 (earlier editions of BOP had a limit of $3,000,000).

Question 28

Hired Auto and Non-owned Auto Liability

Answer 28

A hired auto is a vehicle used by the insured business that is either leased, hired, rented or borrowed by the insured but does not include a vehicle owned by an employee of the insured that is used for business. A non-owned auto is a vehicle owned by the employee of the insured that is used for company business. The hired auto and non-owned auto liability endorsement (BP 04 04) is warranted when the insured business uses such vehicles, autos the business does not own, for business reasons that may create liability to the business from their use. The endorsement creates bodily injury and property damage liability to protect the business under these auto usage situations.

Question 29

Commercial Package Policy (CPP)

Answer 29

The basic needs of business centers around not only perils to buildings and the personal property of business, but it extends to cash flow and interrupted income as well.

Question 30

Bodily Injury (B.I.)

Answer 30

defined as injury to the body, sickness or disease suffered by a person including the death that is a result of bodily injury, sickness or disease.

Question 31

Medical Payments

Answer 31

Medical Payments (also referred to as MedPay) Coverage C” of the commercial general liability policy agrees to pay medical expenses which are incurred within 12 months of any accident that causes bodily injury.

Question 32

Advertisement

Answer 32

means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. This includes notices that are published by any media (print, radio, TV, Internet).

Question 33

Coverage territory

Answer 33

The USA (including its territories and possessions), Puerto Rico and Canada as well as international waters or airspace if the injury or damage occurs in the course of travel or transportation between any places included in the coverage territory. There is world-wide coverage if the injury or damage arises out of: goods or products made or sold by the insured within the coverage territory.

Question 34

Trigger

Answer 34

The “trigger” is the event causing loss that makes the CGL respond to a claim. If the event causing the loss happened before the retroactive date of the policy in force then the event is called an “occurrence trigger” and the insurer that provided liability insurance to the business in the past when the occurrence actually happened is liable for the loss, not the current in force claims–made contract.

Question 35

Retroactive Dates

Answer 35

The retroactive date of a claims made policy is the date when a claims made form actually replaces an occurrence form. The retroactive date restricts coverage in a claim made form by limiting it to any claims arising from events that occur on or after the stated retroactive date.

Question 36

Robbery

Answer 36

The robber takes property that does not belong to them by threatening the property owner with harm or violence (robbers are often armed with weapons) if they do not relinquish the property to them (the robber is up close and personal and will hurt you unless you give up the goods he wants).

Question 37

(MD)

Answer 37

Mysterious Disappearance

The property loss is a mystery, it was there then it was not, and it is not known what happened to it. Since it is uncertain if the missing property was stolen or not, theft loss may or may not be covered depending upon the way the contract is worded and whether or not mysterious disappearance is included in the definition of theft loss. Often mysterious disappearance is not covered because a definite theft loss cannot be established. MD can be added by endorsement with some insurers.

Question 38

Employee Theft

Answer 38

is the insuring agreement in the Commercial Crime Form that will pay for loss of or damage to money and securities and to other property (property other than money and securities) directly from theft committed by an employee.

Question 39

Inside the Premises - Theft of Money and Securities

Answer 39

Money and securities are defined very broadly, and this form pays for loss inside the insured premises or banking premises which directly results from theft, disappearance or destruction. Although the coverage in on premises one exception is a principal of the o is robbed in route to deposit the money in the bank or other legitimate business depository.

Question 40

Outside the Premises

Answer 40

This form covers the theft, disappearance and destruction of money and securities outside the premises which is in the possession of a messenger or armored car firm and loss of other property which is in the possession of a messenger or armored car firm which is caused by actual or attempted robbery.

Question 41

Guests’ Property

Answer 41

The insured who would purchase this endorsement is a business that houses guests like a hotel, motel or hospital, for example.

Question 42

Safe depository

Answer 42

This endorsement is purchased by businesses that are not financial institutions but are renting safe deposit boxes to the general public.

Question 43

Farm Property Coverage Form

Answer 43

is used to insure farms on a commercial basis that are owned and occupied by the insured. It covers the dwelling, other private structures appurtenant (this means detached structure) to the dwelling, household personal property, farm personal property on either a scheduled or unscheduled basis, and barns and other farm structures. Causes of Loss must be selected as either Basic, Broad or Special causes, but the coverage is incorporated in the form. Personal line HO forms do not apply to this commercial coverage.

Question 44

Bodily Injury and Property Damage Liability

Answer 44

The insuring agreement of Coverage H states that the insurer will pay all sums for which the insured is legally liable and for which coverage exists for all losses causing bodily injury or property damage. The carrier has a duty to defend any claims brought against the insured to which the coverage applies and may investigate and settle any claim for any amount which the company deems appropriate.

Question 45

Personal and Advertising Injury Liability

Answer 45

The insuring agreement of Coverage I states that the insurer will pay all sums for which the insured is legally liable and for which coverage exists for all losses causing personal injury or advertising injury. The carrier has a duty to defend any claims brought against the insured to which the coverage applies and may investigate and settle any claim for any amount which the company deems appropriate.

Question 46

Custom Farming

Answer 46

means performance of specific planting, cultivating, harvesting or similar specific “farming” operations by an “insured”, at a farm that is not an “insured location”, when the performance is for, and under the direction or supervision of, the owner or operator of the farm or the authorized representative of the owner or operator.

Question 47

Farm Employee

Answer 47

means any “insured’s” employee whose duties are mostly to maintain or use of the “insured location” as a farm. These duties include the maintaining or using the insured’s farm equipment. But “farm employee” does not mean any employee while engaged in an “insured’s” “business”.

Question 48

Indemnitee

Answer 48

means a person or organization whose liability for payment of damages because of “bodily injury” or “property damage” covered under this Coverage Form has been assumed by an “insured” under an “insured contract”.

Question 49

Occurrence

Answer 49

means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Question 50

Broad Form

Answer 50

Broad Form is a Named Perils coverage on both dwelling and contents. It is replacement cost coverage on the dwelling and any detached structure while providing actual cash value coverage (ACV) on contents (personal property).

Question 51

Tenant Broad

Answer 51

Tenant Broad is a Named Perils (same perils as those found in HO-2 Broad) to protect contents of renters who are occupying a building as a non-owner. Since there is no real property ownership, the renter does not require coverage on dwelling or buildings (Coverage A and B). Also included are Loss of Use (Coverage D) and Comprehensive Personal Liability (Coverages E and F.).

Question 52

Comprehensive Form

Answer 52

HO 5, the Comprehensive Form, offers Open Perils on both dwelling and contents. It is replacement cost coverage on the dwelling and any detached structure while providing actual cash value coverage (ACV) on contents (personal property).

Question 53

Residence Employee

Answer 53

A “residence employee” is an employee or leased employee of the insured whose duties are related to the maintenance of the “residence premises” or one who performs similar duties elsewhere. This does not include a temp employee furnished to the insured to substitute for a permanent residence employee or on leave to meet seasonal or short term workloads.

Question 54

Waiver

Answer 54

Waiver is a voluntary relinquishment of a known right and must be made in writing by an insurer to be valid.

Question 55

Limit of Liability

Answer 55

The liability limit shown in the Declarations for Coverage E is for a single occurrence no matter how many people are affected or claims brought Under Coverage F the most paid for medical payments to one person is listed in the Declarations.

Question 56

First Aid Expenses

Answer 56

First Aid Expenses includes reimbursement for any expenses incurred by the insured for rendering first aid to others as a result of bodily injury actions that are covered under this policy, but it does not cover first aid expenses to any insured.

Question 57

Residence Premises

Answer 57

A “residence premises” is a one to four unit dwelling structure in which the insured resides which is indicated in the Declarations of the policy and includes other structures or grounds at the same location.

Question 58

Personal Umbrella/Excess Liability

Answer 58

An umbrella liability policy is an excess liability (a large extra amount of coverage) and is a broad form of liability insurance coverage for both general liability and automobile liability. It is purchased separately from, and in addition to, the separate basic liability contracts of general liability and automobile liability coverage.

Question 59

Errors and Omissions

Answer 59

Typical candidates for E&O insurance include many occupations, especially insurance agents and real estate agents. It protects the insured from liability that arises from their negligent acts in the market places they serve when making mistakes (errors). It also protects insureds when loss is created because they do not provide information to clients that should have been provided (omissions).

Question 60

Physicians Professional Liability Insurance

Answer 60

These include individual coverages purchased by physicians, surgeons, nurses and dentists. There are many reasons why a medical practitioner would need this coverage including the vast sums of money the coverage may pay on behalf of the insured for specific costs.

Question 61

Hospital Professional Liability (HPL)

Answer 61

An HPL plan pays the legal losses a hospital must pay when malpractice, professional error or property damages are created by a doctor or other staff member. Coverage also extends to the actions of the hospital board and committee members. Also covered are expenses associated with defending legal action which can be large sums even if the hospital wins the lawsuit against them.

Question 62

Directors and Officers Liability

Answer 62

This coverage protects individuals that serve as officers and board of director members for organizations including for profit businesses and non-for-profit concerns. This specialized coverage is necessary because no other personal liability coverages protect the individual serving in this capacity. The policy pays for officers and director for liability created by them by engaging in “wrongful acts.”

Question 63

Fiduciary Liability

Answer 63

A fiduciary is person who is placed in a position of trust, a person who is supposed to be operating for the benefit of anther party. In the area of managing pension plans, few things are more sacred to a person then the investments they make over their working lifetime to assure they will be comfortable in their final years when they are not working.

Question 64

Liquor Liability

Answer 64

A dram shop is an archaic term for a business establishment serving and selling alcohol in small amounts per serving known as a “dram.” Dram shop laws refer to state statutes that make the sellers of alcohol like bars, taverns and restaurants financially responsible when they serve customers alcohol and then those customers harm others as a result, even after the customer has left the establishment.

Question 65

Employment Practices Liability

Answer 65

Employment Practices Liability Insurance provides protection for an employer against claims made by employees, former employees, or potential employees covering discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment related allegations.

Question 66

Employee Benefits Liability (EBL)

Answer 66

The proper administration of employee benefits is a fiduciary responsible on the art of a company toward employees, but mistakes and omission frequently occur that harm the employee. These errors and omissions are unrelated to fiduciary funds and are more related to paperwork issues.

Question 67

Surety Bond

Answer 67

A surety bond is a guarantee for performance (a promise) made by a Principal (also known as the “obligor”) to an Obligee (usually a customer or business associate of the principal who has made a promise to perform to the obligee) which is financial backed by a Surety (an insurance company also called the “Guarantor”).

Question 68

Judicial Bonds

Answer 68

Judicial bonds are referred to as litigation bonds and are commonly used to guarantee the costs of civil court proceedings with be paid with respect to the legal action involved. A more general term used to describe guarantees for all manner of legal proceedings is court bonds which include the categories of judicial and probate bonds.

Question 69

Ocean Marine Insurance

Answer 69

Ocean marine insurance can be used to cover ships at sea on a property and/or liability basis. Three basic coverage are for the hull and machinery, cargo and protection and indemnity.

Question 70

P & I

Answer 70

Protection and Indemnity

P&I is liability insurance for vessel owners. The policy will indicate period of coverage, describe the vessel, the limit of liability, premium cost and any deductible. If a vessel is sold during the coverage period, the insured is entitled to a refund of unused premium and terms conditions under which the parties can cancel are included in the policy.

Question 71

Boatowners

Answer 71

A boatowners policy is a form of inland marine insurance and is often sold as a package covering property damage, liability for bodily injury and property damage to others, medical payments and uninsured boatowners in a single contract.

Question 72

Recreational Vehicles

Answer 72

Recreational vehicles, referred usually as an RV, is a trailer or motor vehicle housing living quarters designed for the needs of the RV owner. RV’s include many diverse types of vehicles.

Question 73

The Jones Act

Answer 73

The Jones Act reads in part: “A seaman injured in the course of employment or, if the seaman dies from the injury, the personal representative of the seaman may elect to bring a civil action at law, with the right of trial by jury, against the employer. Laws of the United States regulating recovery for personal injury to, or death of, a railway employee applies to an action under this section.”

Question 74

Fellow-Servant Rule

Answer 74

If the injury to an employee was caused by another worker and the employer showed good judgment in the hiring of the other employee, the employer was not liability.

Question 75

Contributory Negligence

Answer 75

Employee had to prove employer was 100% at fault, anything less and the employee loses.

Question 76

Workers Compensation Laws

Answer 76

Means the statutory requirements of each state or territory named in the Information Page and includes any amendments in effect at the time the policy is issued. However, the policy does not include federal workers or federal compensation law.

Question 77

Remuneration

Answer 77

The basic premium calculation multiplies the job classification rate by every $100 of payroll, a process known as remuneration and the insured is required to pay the indicated premium in full when it is due.

Question 78

Dual-Capacity

Answer 78

Under the concept of dual capacity, the injured worker is hurt not at work but instead as a customer of the employer. This worker can sue under a product liability theory and is not barred from bringing a suit solely because they also happen to be an employee.

Question 79

Long Term Policy

Answer 79

If a policy period is longer than 1 year and 16 days it will be treated like a new policy was issued.

Question 80

Sole Representative

Answer 80

The first Named Insured will act on the behalf of all insureds, receive any cancellation notice, and receive any unearned premium.

Question 81

Experience Modification Factor

Answer 81

The experience modification is a factor used in the insurance industry to adjust workers compensation premiums based on the loss experience of an individual employer. A complicated formula has been created to calculate these factors and it can have a huge impact on workers compensation insurance costs.

Question 82

Personal Umbrella/Excess Liability

Answer 82

An umbrella liability policy is an excess liability (a large extra amount of coverage) and is a broad form of liability insurance coverage for both general liability and automobile liability. It is purchased separately from, and in addition to, the separate basic liability contracts of general liability and automobile liability coverage.

Question 83

Physicians Professional Liability Insurance

Answer 83

These include individual coverages purchased by physicians, surgeons, nurses and dentists. There are many reasons why a medical practitioner would need this coverage including the vast sums of money the coverage may pay on behalf of the insured for specific costs.

Question 84

Hospital Professional Liability (HPL)

Answer 84

An HPL plan pays the legal losses a hospital must pay when malpractice, professional error or property damages are created by a doctor or other staff member. Coverage also extends to the actions of the hospital board and committee members. Also covered are expenses associated with defending legal action which can be large sums even if the hospital wins the lawsuit against them.

Question 85

Directors and Officers Liability

Answer 85

This coverage protects individuals that serve as officers and board of director members for organizations including for profit businesses and non-for-profit concerns. This specialized coverage is necessary because no other personal liability coverages protect the individual serving in this capacity. The policy pays for officers and director for liability created by them by engaging in “wrongful acts.”

Question 86

Fiduciary Liability

Answer 86

A fiduciary is person who is placed in a position of trust, a person who is supposed to be operating for the benefit of anther party. In the area of managing pension plans, few things are more sacred to a person then the investments they make over their working lifetime to assure they will be comfortable in their final years when they are not working.

Question 87

Liquor Liability

Answer 87

A dram shop is an archaic term for a business establishment serving and selling alcohol in small amounts per serving known as a “dram.” Dram shop laws refer to state statutes that make the sellers of alcohol like bars, taverns and restaurants financially responsible when they serve customers alcohol and then those customers harm others as a result, even after the customer has left the establishment.

Question 88

Employment Practices Liability

Answer 88

Employment Practices Liability Insurance provides protection for an employer against claims made by employees, former employees, or potential employees covering discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment related allegations.

Question 89

(EBL)

Answer 89

Employee Benefits Liability

The proper administration of employee benefits is a fiduciary responsible on the art of a company toward employees, but mistakes and omission frequently occur that harm the employee. These errors and omissions are unrelated to fiduciary funds and are more related to paperwork issues.

Question 90

Surety Bond

Answer 90

A surety bond is a guarantee for performance (a promise) made by a Principal (also known as the “obligor”) to an Obligee (usually a customer or business associate of the principal who has made a promise to perform to the obligee) which is financial backed by a Surety (an insurance company also called the “Guarantor”).

Question 91

Judicial Bonds

Answer 91

Judicial bonds are referred to as litigation bonds and are commonly used to guarantee the costs of civil court proceedings with be paid with respect to the legal action involved. A more general term used to describe guarantees for all manner of legal proceedings is court bonds which include the categories of judicial and probate bonds.

Question 92

Ocean Marine Insurance

Answer 92

Ocean marine insurance can be used to cover ships at sea on a property and/or liability basis. Three basic coverage are for the hull and machinery, cargo and protection and indemnity.

Question 93

Protection and Indemnity

Answer 93

P&I is liability insurance for vessel owners. The policy will indicate period of coverage, describe the vessel, the limit of liability, premium cost and any deductible. If a vessel is sold during the coverage period, the insured is entitled to a refund of unused premium and terms conditions under which the parties can cancel are included in the policy.

Question 94

Boatowners

Answer 94

A boatowners policy is a form of inland marine insurance and is often sold as a package covering property damage, liability for bodily injury and property damage to others, medical payments and uninsured boatowners in a single contract.

Question 95

Recreational Vehicles

Answer 95

Recreational vehicles, referred usually as an RV, is a trailer or motor vehicle housing living quarters designed for the needs of the RV owner. RV’s include many diverse types of vehicles.