D, E & F Definitions Flashcards
Define
Damages
Damages:
Monetary compensation awarded by a court to an injured party. Damage awards may be “compensatory,” to make the injured party whole again or “punitive,” awards made against the negligent party as a form of punishment.
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DCBS
DCBS:
Department of Consumer and Business Services
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Declarations
Declarations:
Personalizes the policy to the insured
Attached to and made part of the policy; personalizes the policy to the insured; identifies the Named Insured and Additional Insureds, as applicable; lists provided coverages and associated premium; specifies the policy period and coverage territory, when applicable.
Define
Declination
Declination:
Rejection of an application by the insurer
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Deductible
Deductible:
The insured’s obligation relative to a covered claim (loss), which must be satisfied before the insurer has a financial obligation to pay. Deductibles may be expressed as stated dollar amounts, relative to time or a percentage of the loss or limit of insurance. Once the deductible has been satisfied, the insurer pays the remainder of each covered loss up to the limit of insurance.
Define
Defense Costs
Defense Costs:
Legal expenses incurred by the insurer to defend suits brought against insureds. Defense costs are paid in addition to payments for BI or PD claims, i.e. in addition to the limit of insurance.
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Definitions
Definitions:
Section of an insurance policy that clarifies the meaning of certain terms used in the policy.
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Degree Of Care
Degree Of Care:
Extent of legal duty owed by one person to another. Also called standard of care.
Define
Deposit Premium
Deposit Premium:
The initial premium paid, which is based upon an estimate of the loss exposure during the policy period. A deposit premium is also referred to as a “provisional” or “advance” premium, because the initial premium paid is subject to a premium audit at the end of the policy period with adjustment to the overall premium based upon the actual loss exposure during the policy period. Premium adjustments are based on reports submitted to the insurer by the insured at the end of the policy period.
Define
Direct Loss
Direct Loss:
Financial loss resulting directly from a loss or damage to property, e.g. a building destroyed by fire.
NOTE - The fire department is dispatched to the fire and extinguishes the fire with water, the water damage is also considered to be a direct loss.
See Also Indirect Loss.
Define
Direct Response Insurer
Direct Response Insurer:
Insurance company that sells insurance through the mail or over the phone. No agents are involved.
Define
Direct Writer
Direct Writer:
Insurance marketing system where the company’s appointed agents are also employees (salaried) of the company. A Direct Writer does not have an agency field force, applicants for insurance and insureds deal directly with the insurer.
Define
Discovery Period (Condition)
Discovery Period (Condition):
Provision found in Commercial Crime forms; which provides a period of time following the expiration of the policy, during which losses that occurred during the policy period, but discovered after expiration will be covered.
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Dividend
Dividend:
The proportionate share of surplus (profits), as declared by the Board of Directors of the company, which is paid to the owners and to participating policyholders. Cash dividends paid to stockholders (stock insurer) are income taxable to the recipient, however, policy dividends paid relative to participating policies (mutual insurer) are considered to be a return of excess premiums paid, and therefore non-taxable.
Define
Divisible Surplus (Profits)
Divisible Surplus (Profits):
Profits of the insurer, resulting from savings in claims, i.e. how well has the insurer underwritten its book of business, interest (earnings), i.e. investment returns, and expenses, i.e. how well has the insurer controlled its operating costs.
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Doctrine of Reasonable Expectations
Doctrine of Reasonable Expectations:
Legal principle that provides that an insurance policy includes coverages that an average person would reasonably expect it to include, regardless of what the policy actually provides.
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Domestic Company (Insurer)
Domestic Company (Insurer):
Insurance company doing business in the state in which it is incorporated.
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Excess Insurance
Excess Insurance:
When two or more policies or coverages apply to the loss, the one that applies only after the limits of the primary coverage have been exhausted is considered excess loss coverage..
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Domicile
Domicile:
(1) The state under which, the insurer is incorporated and maintains its principal place of business.
(2) An individual’s state of residence.
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Duplication of Benefits
Duplication of Benefits:
A situation where identical or overlapping coverage exists between two or more insurance companies or service organizations.
Define
Duties
Duties:
Duties After a Loss (Occurrence); Condition found in property-casualty policies that explains the insured’s responsibilities after a loss occurs.
Define
Earned Premium
Earned Premium:
The portion of premium payment that has been paid for protection that is deemed earned by the insurer, e.g. the insured pays a full years premium in advance and the contract is terminated mid-year, the insurer has only earned premium effective with the date of termination.
See Also Pro-Rate, Short Rate and Flat Rate.
Define
Endorsement
Endorsement:
Document attached to an insurance policy that changes the policy in some way. An endorsement may be used to add coverage to a policy or limit coverage. An endorsement (change in the basic policy) is not effective unless accepted by the insurer, which is evidence by a signature of an executive officer of the insurer and endorsed to the policy.
Define
Errors & Omissions (E&O) Liability
Errors & Omissions (E&O) Liability:
Professional liability assumed by an insurance producer in the course of doing business; liability for errors or omissions he/she may incur or commit in recommending, providing, continuing or failing to recommend, provide or continue the insurance coverage clients require. An insurance producer can protect him/herself by purchasing adequate amounts of E&O liability insurance. Insurers recommend and most require evidence of satisfactory E&O insurance as a condition of appointment.
Define
Estimated Premium
Estimated Premium:
See Deposit Premium
Define
Estoppel
Estoppel:
Principle that protects one party from being harmed by another party’s voluntary conduct. Voluntary conduct may be an action or inaction e.g. silence or concealment of a material fact. In insurance, if one party voluntarily gives up previously known right, that party is henceforth “estopped” from exercising that right in the future. An example exists in property insurance relating to a “binder” due to the law of agency, which states that a contract entered into by an appointed agent is considered entered into by the principal (insurer). If an appointed agent issues a binding without a disclaimer, indicating that the binder is temporary coverage only; allowing the insurer an opportunity to evaluate the risk, the insurer may be prohibited from denying coverage.
Define
Excess Lines Producer
Excess Lines Producer:
See surplus lines producer.
Define
Exclusions
Exclusions:
Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy. It is important to note; there are no true “all risk” policies, therefore, it is more important to discuss what is not covered than what is covered
Define
Exclusive Agent
Exclusive Agent:
See Captive Agent
Define
Express Authority
Express Authority:
Legal doctrine that states that an appointed agent has the authority specifically given, either orally or in writing, by the principal. An insurance producer becomes an appointed agent of the insurer (principal) and as such is granted certain authority to act on behalf of the insurer, which is “expressed” in the contract of appointment.
See also Apparent Authority and Implied Authority.
Define
Exclusive Remedy Doctrine
Exclusive Remedy Doctrine:
One of the precepts upon which the Workers Compensation system was founded; which 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 (state law).
Define
Exemplary Damages
Exemplary Damages:
See Punitive Damages
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Experience Modification Factor
Experience Modification Factor:
In experience rating, the factor applied to reduce the premium when loss experience is better than expected or to increase premium rates when loss experience is worse than expected.
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Experience Rating
Experience Rating:
Type of merit rating that determines premium based on previous loss experience. Experience rating imposes a rate adjustment to premium going forward based upon past experience.
Define
Exports
Exports:
Category of the Nationwide Definition that includes risks eligible for Ocean Marine insurance.
See also Imports
Define
Exposure
Exposure:
A condition or situation that presents a possibility of loss.
Define
Fair Credit Reporting Act
Fair Credit Reporting Act:
Federal law that applies to all financial institutions (including insurance companies) that base eligibility (in all or in part) on third-party (consumer) reports and allows consumers who are denied insurance because of information contained in a report (credit or investigative consumer report) to be notified and allowed to obtain the information used in the report from the reporting agency.
Define
FAIR Plan
FAIR Plan:
Program established by law that makes Property insurance available to insureds who might otherwise by uninsurable in the regular market. FAIR plans provide property coverages only; no liability coverage and only those unable to obtain insurance in the regular markets are eligible for coverage under the FAIR Plan.
FAIR stands for Fair Access to Insurance Requirements.
Domestic Risk
Domestic Risk: Resident of this state, including someone or something located or to be performed
within this state.
Define
Federal Employers Liability Act (FELA)
Federal Employers Liability Act (FELA):
Federal law that provides benefits to injured Railroad employees who are exempt under state Workers Compensation laws.
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Fellow Servant Rule
Fellow Servant Rule:
Common law defense against liability that allowed employers to escape liability for injury to an employee if another employee’s carelessness had contributed to or caused the injury.
Define
Fiduciary
Fiduciary:
Person who stands in a special relationship of trust to another person. A person in possession and/or control of someone else’s property, e.g. a trustee on a trust account, a guardian of a minor child who has control of the minor child’s assets, etc.
Field Underwriting
Field Underwriting:
An insurance producer appointed by an insurer to act as its agent is then considered to be a “field underwriter” in the application process. It is the field underwriter’s responsibility to provide full disclosure in the application process. It is also important to remember that an appointed agent represents the insurance company in the insurance transaction.
Define
File And Use
File And Use:
Method of rate and form ratification used by some state insurance departments that allows a company to begin using forms or rates as soon as they are filed with the department. The department eventually reviews the filing and officially accepts or rejects it.
Define
Financial Responsibility Laws
Financial Responsibility Laws:
State laws that require owners and/or operators of motor vehicles to provide evidence that they have sufficient funds to pay for bodily injury and/or property damage claims for which they might become liable, resulting from an auto accident. Insurance is the usual method for providing this evidence to the state.
Define
First Named Insured
First Named Insured:
First person listed in the Declarations as an insured. The first named insured may have a higher level of duties or rights under the policy. Commercial policies require a First Named Insured by designated, who then authorized to act on behalf of the company (insured).
Define
First Party Loss
First Party Loss:
Loss or damage to property owned by or controlled by the insured where the insured has a contractual obligation to insure. In other words; first party losses covered by insurance benefit the insured.
See also Third Party Loss (Claim).
Define
Flat Rate Cancellation
Flat Rate Cancellation:
Cancellation of a policy by the insured or the insurance company coincident with its effective date.
Define
Floater
Floater:
Insurance policy that covers property wherever it is located. A floater follows the property.
Define
Foreign Company (Insurer)
Foreign Company:
An insurance company doing business in a state other than the one in which it is incorporated.
Define
Fraternal Benefit Society
Fraternal Benefit Society:
An unincorporated 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. Fraternal benefit societies offer insurance that is available only to members
Define
Fraud
Fraud:
An intentional misrepresentation, concealment or omission of a material fact. An intentional action made by one person with the intent to gain an advantage and relied upon by a second party. In insurance, a material fact is information, had the insurer known may have altered the insurer’s decision relative to issuance of a policy and/or administration of a claim.
Define
Functional Replacement Cost
Functional Replacement Cost:
Method to determine reimbursement for some losses, particularly those associated with antique, ornate or custom construction. The damaged property is repaired or replaced with less expensive, but functionally equivalent, materials and methods
