Property & Casualty Flashcards
Abandonment Condition
A condition often contained in property insurance policies that states that the insured cannot abandon damaged 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 operations may be held liable for the damages of another even though he individual was not negligent.
Accident
A loss that occurs at a specific time and place
Accounts receivable insurance
Filed commercial inland marine form that insures against the loss the insured suffers because of 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, less an allowance for depreciation; often used to determine the amount of reimbursement for a loss.
Additional 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; also called the “coverage extensions,” other coverages, and extended coverages.
Additional Insured
An individual or company, in addition to the insured, who is listed in the declarations; an example is a mortgage company that has insurable interest in the property insured.
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; an insurance policy is an adhesion contract - the insurer is the one with more power.
Adverse Selection
The tendency of insureds with a greater-than-average chance of loss to purchase insurance.
Agency
Principles of governing the authority of any agent that represents the principal.
Agent
An individual or organization that legally represents another; a 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 specified total amount for all losses occurring within the policy period.
Aleatory Contract
A contract that is contingent on an uncertain event (a loss); an insurance policy is an aleatory contract.
Alien Company
An insurance company incorporated in a country other than the United States that is doing business in the US.
A.M. Best Company
Organization 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 or outgoing shipments of goods during a year.
Apparent Authority
Legal doctrine that states that an agent has whatever authority a reasonable person would assume she has.
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 - the insured and the insure each select an appraiser; the two appraisers select an umpire; if the appraisers cannot agree on the amount of loss, the umpire is consulted; the amount agreed to by any two of the three parties is the amount paid for the loss.
Appurtenant Structures
Buildings of lesser value that are on the same premises as the main building insured under a property policy; they are usually covered by the policy
Arbitration Condition
Policy condition that is similar to the appraisal condition; may be used to resolve other areas of disagreement besides those regarding the value of a loss.
Assessment Mutual Company
Mutual insurance company that charges members a pro-rate 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 unless the company consents to the transfer in writing.
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 a state insurance department’s standards and is authorized to do business in that state; also called an admitted insurer.
Automobile Insurance Plan
A state-sponsored plan that provides automobile insurance to those who are uninsurable under standard insurance policies.
Aviation Hull Insurance
Insurance that provides coverage for physical damage to aircraft.
Aviation liability Insurance
Insurance provided for owners of aircraft that covers liability for bodily injury, injury to passengers, and property damage; also provides medical payments coverage.
Bailee
A person or organization that has temporary position of someone else’s personal property ((dry cleaner, parking valet, jewelers, repairers, etc.).
Bailee’s Customer Policy
Nonfiled commerical inland marine form obtained by a bailee to cover loss or damage to customer’s property in the bailee’s custody without 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.
Bid Bond
Type of bond that guarantees that if a contractor’s bid is accepted, the contractor will enter into a contract and provide the required performance bond.
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 form 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
Defined in most policies to include injury, sickness, disease, and death resulting from any of these at any time.
Broad Theft Coverage Endorsement
Dwelling policy endorsement that covers theft, attempted theft and vandalism, and malicious mischief resulting from theft; property is covered while it is on or off the premises.
Broker
Individual that represents the client, 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.
Burglary
As defined in crime insurance forms, the taking of property by a person unlawfully entering or leaving the premises as evidenced by visible signs of forced entry or exit.
Business Auto Coverage Form
One of the commercial auto coverage forms; business’s owned, non-owned, and hired autos against liability and physical damage losses.
Business Auto Physical Damage Coverage Form
One of the commercial auto coverage forms; covers business’s owned or hired business autos for physical damage 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, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage.
Business Income 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 business conducted away from the residence premises.
Businessowners Policy (BOP)
Package designed to provide broad property and liability coverage for small business; eligibility requirements are more strict than the CPP’s (no bars, no cars, etc.).
Cancellation
Termination of an insurance policy by the insured, or the insurance company during the policy period.
Casualty Insurance
Line of insurance that includes a wide variety of unrelated coverages, including liability, auto, workers’ compensation, aviation, crime, and surety bonds.
Causes of Loss Form
Separate form used with the commercial property coverage part of the commercial package policy that lists covered perils and exclusions; several different versions provide increasingly broader coverage from basic to broad to special; a causes of loss form takes place for 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.
Claim Adjuster
Person employed by or acting on behalf of an insurance company to evaluate and settle insurance claims; the adjuster must determine the cause of loss; whether the loss is covered by the policy,the value of the loss, and the amount of loss payable by the policy.
Claims-Made Form
Commercial general liability coverage form that pays BI or PD losses for which a claim was first made against the insured during the policy period.
Coinsurance
Policy condition that requires an insured to pay part of a loss if the amount of insurance carried on the property is less than a specified percentage of the value of the property at the time of loss.
Coinsurance Penalty
The amount not paid by the insurance company because the insured failed to comply with the coinsurance condition.
Collision Coverage
In auto insurance, a type of physical damage coverage that covers loss that occurs when the insured auto strikes another object or vehicle; may also include upset or overturn of the insured auto.
Combined Ratio
The sum of the loss ratio and the expense ratio; a ratio of 100% is the breakeven point; a ratio below 100% indicates an underwriting profit; a ratio above 100% indicates a loss.
Commercial Auto Coverage Part A
A part of the commercial package policy that provides liability and physical damage coverage for business’s autos, including garage, trucking, and motor carrier businesses.
Commercial Blanket Bond
Type of fidelity bond that covers loss arising from the dishonesty of one or more employees acting separately or in collusion; the limit of liability applies separately to each loss, regardless of the number of employees involved.
Commercial General Liability
A part of the commercial package policy that provides liability coverage for businesses.
Commercial Lines
Insurance designed for businesses, institutions, or organizations
Commercial Package Policy
The insurance services office (ISO) commercial policy that contains two or more lines of insurance or two or more coverage parts; it will include some forms and/or endorsements that are common to all lines of insurance or coverage parts, as well as the individual forms and endorsements required for the individual coverages selected; the CPP can include almost any commercial coverage the insured might need, with the exception of ocean marine, aviation, and workers’ compensation insurance; most risks are eligible for the CPP.
Commercial Property Coverage Part A
A part of the commercial package policy that provides insurance for a business’s real and business personal property.
Commercial Property Floater Risks
Category of the nationwide definition that includes a number of commercial inland marine forms, such as Bailee’s customer forms, equipment forms, business floaters, and dealer policies.
Common Policy Conditions
Form that must be included in the commercial package policy; it contains conditions that apply to all coverages issued under the CPP.
Common Policy Declarations
Form that must be included in the commercial package policy; contains information about the insured that applies to all coverages issued under the CPP.
Comparative Negligence
Law that allows an injured party to collect from another party for a loss, even when the injured party contributed to her own loss. Damages are reduced to the extent of the injured party’s negligence.
Compensatory Damages
Damages that reimburse an injured party for losses that were actually sustained.
Competent Parties
One of the requirements of a legal contract; state that for a contract to be valid, it must be made between parties who are considered competent under the law.
Competitive State Fund
Method of providing workers’ compensation coveragei in some states; employers may either purchase insurance from a private insurance company or a state fund.
Completion Bond
Type of surety bond that guarantees that when contractors borrow money to fund construction projects, the project will be carried out and the work will be delivered free and clear of liens or encumbrances.
Comprehensive Coverage
In auto insurance, a broad physical damage that covers all property losses except collision and those perils or property that are specifically excluded; also called (other than collision coverage, OTC).
Concealment
The with-holding of a material fact involved in the contract on which the insurer relies.
Concurrent Causation
A situation where two or more perils act concurrently (at the same time or in sequence), to cause a loss; some courts ruled that losses from concurrent causation are covered even when one of the perils that contributed to the loss is excluded under the policy; these rulings led property insurers to revise policy language to clarify the intent of the policy.
Conditions
Portion of an insurance policy that describes the rights and duties of the insured and the 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 that the insured gives is the premium payment; the consideration that the insurer gives is the promise to pay for certain losses suffered by the insured.
Contract
A legal agreement between two 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 bonds, labor and materials bonds, performance bonds, payment bonds, supply bonds, and the completion bonds.
Contractors Equipment Floater
Nonfiled commercial inland marine form that covers the 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 remainder of the loss until the loss is paid in full or all policy 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 insuring 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 (triggers) coverage under a commercial general liability coverage form under the occurrence form, the coverage trigger is bodily injury or property damage that occurs during the policy period; under the claims-made form, the trigger is BI or PD, that occurs on or after the retroactive date, if any, for which a claim is first made against an insured during the policy period.
Custodian
As defined in crime insurance forms, an insured, partner, or employee who has care and 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 each covered 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 or 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 one person to another; also called “standard of care”
Difference in Conditions Insurance (DIC)
Type of commercial property policy that 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 involved.
Direct Writer
Insurance marketing system where the company’s agents are also employees of the company.
Directs and Officers Liability Insurance (D&O)
Types of errors and omissions policy written for directors and officers 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 the policy expires; 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 that 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 for 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; the limits of liability increase as construction of the building progresses.
Earned Premium
Premium an 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 the dwelling, homeowners, and commercial property policies.
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 of 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 diseases.
Employment Practices Liability Insurance
Type of policy that covers a business’s losses arising out of wrongful termination, discrimination, sexual harassment and other employment-related practices.
Endorsement
Document attached to an insurance policy that changes the policy in some way.
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, custody or control.
Errors and Ommisions Insurance (E&O)
Professional liability coverage that protects the insured against liability for committing an error or omission in the performance of professional duties (Insurance agents, lawyers, doctors, etc.).
Estoppel
Principle that states 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 guilty party may be legally prohibited from asserting that the fact does not exist.
Excess Insurance
When two or more policies or coverages apply to the same loss, the one that applies only after the limits of the primary coverage have been exhausted.
Excess Lines Agent
Agent licensed by the state to handle the placement of business with nonadmitted insurers; also called surplus lines agent.
Exclusions
Section of an insurance policy that 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 “captive agent”
Exclusive Remedy Doctrine
One 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; it is 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.
