Property & Casualty Flashcards
1
Q
Abandonment Condition
A
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.
2
Q
Absolute Liability
A
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.
3
Q
Accident
A
A loss that occurs at a specific time and place
4
Q
Accounts receivable insurance
A
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.
5
Q
Actual Cash Value (ACV)
A
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.
6
Q
Additional Coverages
A
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.
7
Q
Additional Insured
A
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.
8
Q
Additional Insured - Lessor Endorsement
A
Commercial auto endorsement used to make leased vehicles considered owned vehicles for coverage purposes.
9
Q
Adhesion Contract
A
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.
10
Q
Adverse Selection
A
The tendency of insureds with a greater-than-average chance of loss to purchase insurance.
11
Q
Agency
A
Principles of governing the authority of any agent that represents the principal.
12
Q
Agent
A
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.
13
Q
Aggregate Limit
A
Type of policy limit found in liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
14
Q
Aleatory Contract
A
A contract that is contingent on an uncertain event (a loss); an insurance policy is an aleatory contract.
15
Q
Alien Company
A
An insurance company incorporated in a country other than the United States that is doing business in the US.
16
Q
A.M. Best Company
A
Organization that rates the financial stability of insurance companies doing business in the US.
17
Q
Annual Transit Policy
A
Nonfiled commercial inland marine transportation form that insures a property owner’s incoming or outgoing shipments of goods during a year.
18
Q
Apparent Authority
A
Legal doctrine that states that an agent has whatever authority a reasonable person would assume she has.
19
Q
Application
A
Questionnaire filled out by an agent and the prospect who is seeking insurance; the form contains information used to underwrite and rate the policy.
20
Q
Appraisal Condition
A
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.
21
Q
Appurtenant Structures
A
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
22
Q
Arbitration Condition
A
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.
23
Q
Assessment Mutual Company
A
Mutual insurance company that charges members a pro-rate share of losses at the end of each policy period.
24
Q
Assignment Condition
A
Condition in insurance policies that specifies that the policy cannot be transferred to another unless the company consents to the transfer in writing.
25
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.
26
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.
27
Automobile Insurance Plan
A state-sponsored plan that provides automobile insurance to those who are uninsurable under standard insurance policies.
28
Aviation Hull Insurance
Insurance that provides coverage for physical damage to aircraft.
29
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.
30
Bailee
A person or organization that has temporary position of someone else's personal property ((dry cleaner, parking valet, jewelers, repairers, etc.).
31
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.
32
Bailment
Delivery of property by the owner to someone else to be held for some special purpose and then returned to the owner.
33
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.
34
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.
35
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.
36
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.
37
Bodily Injury
Defined in most policies to include injury, sickness, disease, and death resulting from any of these at any time.
38
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.
39
Broker
Individual that represents the client, instead of the insurance company in the insurance transaction.
40
Builders Risk Coverage Form
One of the commercial property coverage forms; covers commercial, residential, or farm buildings that are under construction.
41
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.
42
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.
43
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.
44
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.
45
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.
46
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.
47
Business Liability
Liability that arises out of the conduct of a business.
48
Business Pursuits Endorsement
Homeowners policy endorsement that provides liability coverage for business conducted away from the residence premises.
49
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.).
50
Cancellation
Termination of an insurance policy by the insured, or the insurance company during the policy period.
51
Casualty Insurance
Line of insurance that includes a wide variety of unrelated coverages, including liability, auto, workers' compensation, aviation, crime, and surety bonds.
52
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.
53
Certificate of Insurance
Written form that verifies a policy has been written; provides a summary of the coverage provided under the policy.
54
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.
55
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.
56
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.
57
Coinsurance Penalty
The amount not paid by the insurance company because the insured failed to comply with the coinsurance condition.
58
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.
59
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.
60
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.
61
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.
62
Commercial General Liability
A part of the commercial package policy that provides liability coverage for businesses.
63
Commercial Lines
Insurance designed for businesses, institutions, or organizations
64
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.
65
Commercial Property Coverage Part A
A part of the commercial package policy that provides insurance for a business's real and business personal property.
66
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.
67
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.
68
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.
69
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.
70
Compensatory Damages
Damages that reimburse an injured party for losses that were actually sustained.
71
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.
72
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.
73
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.
74
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).
75
Concealment
The with-holding of a material fact involved in the contract on which the insurer relies.
76
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.
77
Conditions
Portion of an insurance policy that describes the rights and duties of the insured and the insurance company under the policy.
78
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.
79
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.
80
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.
81
Contract
A legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration.
82
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.
83
Contractors Equipment Floater
Nonfiled commercial inland marine form that covers the heavy machinery equipment, and tools a contractor uses in business.
84
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.
85
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.
86
Countersignature
Signature of a licensed agent that, in most states, must appear on the policy to validate the contract.
87
Court Bond
Type of surety bond used to settle legal arguments that do not involve monetary damages.
88
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.
89
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.
90
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.
91
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.
92
Damages
Monetary compensation awarded by a court to an injured party.
93
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.
94
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.
95
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.
96
Definitions
Section of an insurance policy that clarifies the meaning of certain terms used in the policy.
97
Degree of Care
Extent of legal duty owed by one person to another; also called "standard of care"
98
Difference in Conditions Insurance (DIC)
Type of commercial property policy that covers most insurable perils but excludes basic fire and extended coverage perils.
99
Diminution of Value
An actual or perceived loss of an auto's resale or market value that results from a direct, accidental loss
100
Direct Loss
Financial loss resulting directly from a loss to property
101
Direct Response System
Insurance Company that sells insurance through the mail or over the phone; no agents involved.
102
Direct Writer
Insurance marketing system where the company's agents are also employees of the company.
103
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.
104
Disability Insurance
Line of insurance that protects the insured against loss of income resulting from injury or sickness.
105
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.
106
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.
107
Domestic Company
Insurance company doing business in the state in which it is incorporated.
108
Domestic Shipments
Category of the nationwide definition that includes coverage for cargo in transit over land.
109
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.
110
Duties Following Loss
Condition found in property-casualty policies that explains the insured's responsibilities after a loss occurs.
111
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.
112
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.
113
Earned Premium
Premium an insurance company has actually earned by providing insurance protection for the designated period of time.
114
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.
115
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.
116
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.
117
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.
118
Endorsement
Document attached to an insurance policy that changes the policy in some way.
119
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.
120
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.).
121
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.
122
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.
123
Excess Lines Agent
Agent licensed by the state to handle the placement of business with nonadmitted insurers; also called surplus lines agent.
124
Exclusions
Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy.
125
Exclusive Agent
An agent who markets insurance for a single company; also called "captive agent"
126
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.
127
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.
128
Experience Modification Factor
In experience rating, the factor applied to reduce the premium when loss experience is better than expected.
129
Exports
Category of the nationwide definition that includes risk eligible for ocean marine insurance.
130
Exposure
A condition or situation that presents a possibility of loss.
131
Express Authority
Legal doctrine that states an agent has the authority specifically given to the agent either orally or in writing, by the principal.
132
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.
133
Extended Reporting Period
Period of time provided by claims-made commercial general liability coverage form during which coverage will be provided for claims made after the expiration date of the policy if certain conditions are met; the basic ERP runs 60 days and can be extended to five years; the supplemental ERP runs for an unlimited duration, but is available only by endorsement for an additional premium.
134
Extra Expense Coverage Form
Commercial property coverage form that covers additional expenses incurred by the insured business to continue operations following a direct loss by a peril insured against.
135
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 the information used in the report from the reporting agency.
136
Fair Access to Insurance Requirements (FAIR)
Program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market.
137
Federal Employees Liability Act (FELA)
Federal law that provides benefits to injured railroad workers are exempt under state workers' compensation laws.
138
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 the loss.
139
Fidelity Bond
Class of bonds that guarantees an employee's honest discharge of duty; written to protect an insured from dishonest acts by employees.
140
Fiduciary
Person who stands in a special relationship of trust to another person.
141
Fiduciary Bond
Type of surety bond that guarantees that a fiduciary will fulfill its obligations set forth by law.
142
Fiduciary Liability Policy
Insurance that protects people who manage private pension and employee benefit plans against liability for violation of federal ERISA law.
143
Field Underwiting
Selection of clients by the agent accordance with company standards.
144
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 by the department; the department eventually reviews the filing and officially accepts or rejects it.
145
Filed Form
Standardized inland marine form that can be written under the commercial inland marine coverage part of the commercial package policy.
146
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.
147
First Party Loss
Property insurance loss.
148
Floater
Insurance Policy that covers property wherever it is located.
149
Foreign Company
An insurance company doing business in a state other than the one in which it is incorporated.
150
Fraud
A deliberate misrepresentation that causes harm; an all-out effort by one party to deceive and cheat the other.
151
Functional Replacement Cost
Method to determine reimbursement for some losses, particularly those antique, ornate, or custom construction; the damaged property is repaired or replaced with less expensive, but functionally equivalent materials.
152
Garage Coverage Form
Commercial auto coverage form that provides liability , garagekeepers, and physical damage coverages for vehicle dealers; including dealers that have repair operations on the business premises.
153
Garagekeepers Insurance
Coverage that is part of the garage coverage form; covers a garage risk's legal liability for customers' autos in the care, custody, or in control of the garage; at the insured's option and for an additional premium, can also apply without regard to fault.
154
General Conditions Form
Separate form that lists the conditions that apply to a policy.
155
Hazard
Something that increased the chance of loss.
156
Hired and Nonowned Auto Liability Endorsement
Businessowners policy endorsement used to cover hired or nonowned autos used by the business.
157
Home Day Care Coverage Endorsement
Homeowners policy endorsement used to provide coverage for home day care business.
158
Homeowners Policy
Personal multiline policy for homeowners that includes both property and liability coverages; there are different forms that provide varying degrees of property coverage; liability coverage is the same in all forms.
159
Implied Authority
Authority given by the principal to the agent that is not formally expressed or communicated.
160
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 guidelines about the types of incidental businesses permitted, but examples include business or professional offices and private schools or instructional studios.
161
Incurred Losses
One of the components used to calculate the loss ratio; it includes paid losses and certain expenses associated with claim handling.
162
Indemnity
Principle of insurance that provides that when a loss occurs, the insured should be restored to approximate financial condition he occupied before the loss occurred, no better or no worse.
163
Independent Adjuster
Claim handler who works independently instead of for a particular insurer.
164
Independent Agent
Agent who represents many insurance companies, rather than a single company; also called a "nonexclusive agent."
165
Indirect Loss
Loss that is a result or consequence of a direct loss; also called a consequential loss.
166
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 any auto.
167
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 insurance; commercial inland marine insurance can be included in the commercial package policy.
168
Installation Policy
Nonfiled 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 installation, testing, building, renovating or repair.
169
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.
170
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.
171
Insurance Commissioner
Head official of a state insurance department; may also be called an Insurance Director or Insurance Superintendent
172
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.
173
Insured Contract
Term used in the 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."
174
Insuring Agreement
Section of an insurance policy that describes what is covered and the perils the policy insures against.
175
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.
176
Joint Ownership Coverage Endorsement
Personal auto policy endorsement that allows the policy to be issued to two or more persons who live in the same household or two or more individuals who are related in another way besides husband and wife.
177
Judgement Rating
Method of rating that establishes premiums based on a careful evaluation of each individual risk without the use of manuals or tables.
178
Law of Large Numbers
Principle that states that the more examples used to develop any statistic, the more reliable the statistic will be.
179
Legal Liability Coverage Form
Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured's care, custody or control.
180
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.
181
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.
182
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.
183
Licensee
Person on the premises with the property owner's consent but for the sole benefit of the visitor.
184
Limitations
Policy language that eliminates or reduces coverage under certain circumstances or when specified conditions apply.
185
Liquor Liability Coverage Form
CGL coverage form that provides coverage for liquor liability excluded by standard CGL policies for those who are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
186
Lloyd's Assocation
A voluntary association of individuals or groups of individuals who agree to share in insurance contracts; each individual or syndicate is individually responsible for the amounts of insurance they write.
187
Loss Cost
Factor used in figuring insurance rates that represents how much an insurance company needs to collect to cover expected losses.
188
Loss Provisions
General term used to describe policy conditions that specify what the insured and insurer must do after a loss.
189
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.
190
Loss Sustained During Prior Insurance Condition
Condition found in loss sustained version of 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.
191
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.
192
Malpractice Insurance
Term used to describe professional liability insurance issued to medical professionals or institutions.
193
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.
194
Material Fact
A fact that would cause an insurer to decline a risk, charge a different premium, or change the provisions of the policy that was issued.
195
MCS-90 Endorsement
Endorsement attached to the truckers coverage form to provide public liability coverage.
196
Merit Rating
Method of determining premiums where a manual rate is modified to reflect the risk's unique characteristics.
197
Messenger
As defined in crime insurance forms, an insured, partner, or employee who has care and custody of insured property outside the premises.
198
Miscellaneous Type Vehicle Endorsement
Personal auto policy endorsement that provides coverage for vehicles that are usually excluded by the policy , such as motorcycles, motor homes, golf carts, mopeds, and other recreational vehicles.
199
Misrepresentation
Written or verbal misstatement of a material fact involved in the contract on which the insurer relies.
200
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. In addition, there is a mobile homeowners endorsement that can be attached to an HO-2 or HO-3 to modify coverage for mobile homeowners.
201
Moral Hazard
Hazard created by an individual who would be wiling to create a loss situation on purpose just to collect from the insurance company.
202
Morale Hazard
Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness.
203
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.
204
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.
205
Monoline vs. Multiline
Insurance company that carries/writes for one line of insurance versus more than one line of insurance.
206
Mutual Company
Insurance company owned by its policyholders; the policyholders share in profits made by the company through dividends or reductions in future premiums.
207
Mysterious Disappearance
Vanishing of property with no explanation.
208
Name Insured
Person, business, or other entity named in the declarations to whom the policy is issued.
209
Named Nonowner Coverage Endorsement
Personal auto policy endorsement that provides coverage for the use of nonowned autos to individuals who do not own a car.
210
Named Peril Policy
Insurance policy that insures only against perils specifically listed in their policy; also called specified peril policy.
211
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.
212
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.
213
Negligence
The lack of reasonable care that is required to protect others from the unreasonable chance of harm.
214
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.
215
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.
216
Nonadmitted Insurer
Company that is not authorized to do business in a particular state; also called an "unauthorized insurer."
217
Noncurrency
Situation that exists when the same property is covered by more than one policy, but the policies are not identifical as to the extent of coverage provided.
218
Nonfiled Form
Type of commercial inland marine form that is not standardized and cannot be included in the commercial in the commercial inland marine coverage part of the commercial package policy.
219
Nonrenewal
Decision made by an insured or insurance company to not continue coverage for another policy period after the current policy period expires.
220
Nonreporting Policy
Type of insurance policy for which a flat premium is charge everytime the policy is renewed.
221
Obligee
In bonds, the party to whom the principal makes the promise and for whose protection the bond is written.
222
Occurence
A loss that occurs at a specific time and place or over a period of time.
223
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.
224
Offer and Acceptance
One of the elements of a legal contract; means that a contract must involve two parties: one who makes an offer and another who accepts the offer; called "agreement."
225
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."
226
Optional Limits Transportation 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.
227
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.
228
Other Insurance Condition
Policy Condition that sets out how any other insurance that applies to the same loss will affect reimbursement under the policy.
229
Other than Collision Coverage (OTC)
Comprehensive Coverage.
230
Owners and Contractors Liability Coverage Form
Commercial general liability coverage form that covers claims caused by the negligence of a contractor or subcontractor hired by the insured.
231
Package Policy
Policy that includes more than one type of insurance coverage; also called a multiline policy.
232
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.
233
Payment Bond
Type of surety bond that guarantees bills for labor and materials will be paid to the contractor as they are due; also called "labor and materials bond."
234
Peril
The cause of loss.
235
Permitted Incidental Occupancies Endorsement
Homeowners policy endorsement that covers the insured's business activities conducted on the residence premises.
236
Personal Auto Policy
Auto policy that provides property and liability coverage for both owned and non-owned autos used, maintained, or operated by he insured and her family members.
237
Personal Contract
One of the characteristics of an insurance contact; means that an insurance contact insures a person, not property.
238
Personal Injury
Injury other than bodily injury arising of such things as libel, slander, false arrest, wrongful entry, violation of privacy, and malicious prosecution.
239
Personal Injury Endorsement
Homeowners policy endorsement that modifies the definition of bodily injury to include personal injury.
240
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.
241
Personal Lines
Insurance Coverage that protect individuals and their families.
242
Personal Property Form
Personal inland marine form that provides open peril coverage for personal property.
243
Personal Property Floater Risks
Category of the nationwide definition that includes risks eligible for personal inland marine insurance.
244
Personal Property Replacement Cost Endorsement
Homeowners policy endorsement that adds replacement cost coverages for personal property.
245
Physical Hazard
Hazard that arises from the condition, occupancy, or use of the property itself.
246
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 it a complete policy; also called a skeleton policy.
247
Policy Period
The date and time specified in the declarations for when coverage begins and ends.
248
Policy Territory
Place where coverage under a policy applies.
249
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.
250
Pollution Liability Coverage Form
CGL coverage for that provides certain pollution coverages that are excluded under the standard CGL; includes coverages for pollution clean-up costs.
251
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 pollution clean-up costs.
252
Premises and Operations
Business liability exposure arising out of the business location or the activities of the business; covered under the CGL.
253
Primary Insurance
When two or more coverages or policies apply to the same loss, the one that pays first, up to its limit of liability or the amount of the loss, whichever is less.
254
Principal
In bonds, the party who promises to do or not to do a specific thing; in agency law, the person or company being represented.
255
Prior Approval
Method of rate and form ratification used by some state insurance departments that requires a company to obtain official approval before using new forms or rates.
256
Producer
General term used to describe someone who sells insurance, such as an agent, broker, or solicitor.
257
Products and Completed Operations
Business liability exposure arising out of defects in the company's products or completed operations; covered by the CGL.
258
Professional Liability
Liability arising out of rendering or failing to render services of a professional nature.
259
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.
260
Proof of Loss
Form completed by an insured after a loss that provides an official inventory of damages.
261
Property Damange (PD)
Damage to or destruction of property, including loss of use of the property.
262
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.
263
Pro Rate Other Insurance
Method of handling insurance when more 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 to the total limit of liability under all applicable insurance; also called "contribution by limits."
264
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 resuliting from collision.
265
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.
266
Proximate Cause
An action that, in natural and continuous sequence, produces a loss.
267
Public Official Bonds
Type of surety bond furnished by principals who are elected or appointed to fill positions of trust that guarantee their faithful and honest performance in office.
268
Punitive Damanges
Type of damages intended to punish the defendant and make an example out ofher to discourage others from behaving the same way; also called "exemplary damages."
269
Pure Risk
A risk in which there is no chance of gain, only loss.
270
Quotation
A summary of coverages and premiums proposed by an agent to a prospective client.
271
Rate
The basic charge an insurance company sets for various types of insurance.
272
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.
273
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.
274
Reciprocal Company
An unincorporated group of members that share insurance responsibilities with other members; it is managed by an attorney-in-fact.
275
Reinsurance
Acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer.
276
Repair Cost
The cost to repair a damaged or destroyed item of property. May be the basis of reimbursement for some losses.
277
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.
278
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 based, from these status reports, premiums are calculated and charged against the deposit.
279
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.
280
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.
281
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."
282
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.
283
Retrospective Rating
Type of merit rating that bases the insured's premium on loss incurred during the policy period.
284
Risk
The chance or uncertainty of loss.
285
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.
286
Salvage
Damaged property that can be retrieved, reconditioned, and sold to reduce an insured loss.
287
Schedule Rating
Type of merit rating that applies a system of debits or credits to reflect characteristics of a particular insured.
288
Scheduled Coverage
Property that is specifically listed in the declarations and covered for a specific amount; also called "specific insurance."
289
Scheduled Personal Property Endorsement
Homeowners policy endorsement that provides open peril, scheduled coverage for nine optional calsses of property.
290
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.
291
Service Bureau
Organization that gathers, pools, and analyzes statistics from its member insurance companies to establish loss costs used to determine insurance rates.
292
Single Limt
One policy limit that applies to both BI and PD losses; may also be called "combined single limit."
293
Special Damages
Type of compensatory damages that reimburse the injured party for direct and specific expenses involved in the loss, such as medical expenses.
294
Specified Causes of Loss
One of the physical damage coverage options in the commercial options in the commercial auto coverage forms; provides more limited coverage than comprehensive, insuring only against specified perils, such as fire, flood or explosion.
295
Speculative Risk
A risk that may result in a loss or gain.
296
Split Limits
Policy limit that provides separate limits BI and PD.
297
Spread of Risk
Principle of insurance that states that insurers should spread their insured risks over a large geographic area , rather than insuring a large number of people in a small area.
298
Status of limitations
Law that provides that a certain types of suits must be brought within a specified time of the occurrence to be valid under the law.
299
Subrogation
The transfer to the insurance company of the insured's right to collect damages from another party.
300
Supplementary Payments
Provide extra coverage over and above the insured's limit of liability; commonly included are defense costs, first aid expenses, bond premiums, and post-judgement interest.
301
Supply Bond
Type of surety bond that guarantees that a supplier will furnish supplies, products, or equipment at an agreed-upon time and price.
302
Surety
In bonds, the party (often the insurance company) that agrees to be responsible for loss that may result if the principal does not keep his promise.
303
Terrorism Risk Insurance Act of 2002
Federal law designed to ensure that insurance coverage for terrorism losses under commercial lines policies will be available and affordable; it requires insurers to pay a specified amount for terrorism losses in a given calendar year; once that limit is reached, the federal government will reimburse insurers 85% of insured losses that exceed the limit.
304
Theft
In crime insurance, a broad term encompassing any unlawful taking of property, including burglary and robbery.
305
Third Party Loss
A liability loss.
306
Time Element Coverage
Coverage for the loss of business income over a period of time that results from direct physical loss.
307
Tort
A civil wrong for which monetary damages may be provided; does not include losses arising out of contracts.
308
Underinsured Motorists Coverage
Auto coverage that pays the difference between the insured's actual damages for bodily injury and the amount of liability insurance carried by the at-fault driver; may be added to the personal or commercial auto policy by endorsement.
309
Underwriting
Insurance company function that involves researching and evaluating insurance applicants to decide which ones are acceptable to the company as insureds
310
Unilateral Contract
A type of contract that is one sided; an insurance policy is one sided because only the insurance company is legally bound to perform its part of the agreement.
311
Uninsured Motorists Coverage
Automobile coverage designed to provide protection for the insured if she is involved in an accident in which an uninsured motorist is at fault; uninsured motorists include those who do not carry insurance, motorists whose insurance does not meet state's minimum financial responsibility laws, drivers whose insurance companies are insolvent, and hit-and-run drivers who cannot be identified.
312
Unoccupancy
The absence of people from a premises; property coverage is often restricted if there are long periods of unoccupancy.
313
Use and File
Method of rate and form ratification used by some state insurance companies to file rates and forms within a certain period of time after they are first used.
314
Utmost Good Faith
A characteristic of insurance contracts meaning that the insurance company must be able to rely on the honesty and cooperation of the insured, and the insured must rely on the company to fulfill its obligations.
315
Vacancy
The absence of both people and property from a premises; property coverage is often restricted when there are long periods of vacancy.
316
Valuation
Method used by the insurance company to determine the appropriate payment for a loss.
317
Valued Policy
Policy written for a specified amount that lists the value of the insured property as agreed to by both the insured and insurer; this amount is sued to value losses; also called an agreed amount policy.
318
Vicarious Liability
Liability that a person or business incurs because of the actions of others, such as family members or employees; also called imputed liability.
319
Waiver
The intentional relinquishment of a known right.
320
Warranty
A specific agreement between the insured and the insurer that becomes a part of the insurance policy; a breach of warranty can void the policy.
321
Watchperson
As defined in crime insurance forms, someone retained specifically by the insured whose sole duty is to have care and custody of property inside the premises.
322
Written Premium
One of the components used to calculate the expense ratio; it is the gross amount of premium income on the company's books, which includes both earned and unearned premium.
