DBIC insurance terms

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y

- A -

Actual cash value (ACV) - A method for placing value on property as of the time of its loss or damage. ACV may be determined by market value (the current price for a like item in the same general condition) or replacement cost new less use depreciation (the cost of the same item brand new minus the insured’s contribution to pay for the added life expectancy of the property new property). The insured may generally select whichever method is more favorable. Contrast with replacement cost.

Actuary - A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics. (Americanism: In most other countries the individual is known as "mathematician.")

Additional insured - One who qualifies as "insured" under the terms of a policy even though not named as insured. Officers of a corporation may be included as insureds under the terms of a policy written in the name of the corporation.

Adjuster - A person may act either on behalf of the insurance company or the insured in the settling a claim. Independent adjusters represent the insurance company on a fee basis; public adjusters represent the insured on a fee basis.

Admitted company - An insurance company that is licensed (admitted) to conduct business within a given state.

Admitted Assets - Assets permitted by state law to be included in an insurance company's annual statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate.

Agent - individual who sells and services insurance policies in either of two classifications:
1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

Aggregate Limit - Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.

Anniversary date - The anniversary of the original date of issue of a policy as shown in the declarations.

Arbitration - An alternative method for resolving disputes that allows the parties to define the process.

Assets - Assets refer to "all the available properties of every kind or possession of an insurance company that might be used to pay its debts." There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real estate. All other assets refer to nonincome producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some states don't permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them "nonadmissable."

Assigned risk - A risk that may not be generally acceptable to any insurance company but for which the law says that insurance must be acquired. Personal auto liability is one such necessary coverage. Insurance companies doing personal auto business in a state can be required to accept assignment of a portion of the state’s unacceptable drivers as insureds.

Avoidable Consequences - Consequences that are caused by lack of care on the part of an individual, and that could have been avoided had the individual exercised proper care. Generally refers to events that occur following a loss as the result of a person’s failure to take steps to prevent the consequences.

- B -

Balance Sheet - An accounting term referring to a listing of a company's assets, liabilities and surplus as of a specific date.

Basic named perils - Covered perils in a property insurance contract: fire, lightning, windstorm, civil commotion, smoke, hail, aircraft, vehicles, explosions and riot.

Binder - An insurer’s agreement, by way of an agent, to provide non-life insurance on the spot, pending issuance of the policy contract.

Blanket coverage - A means of insuring various items of property under one limit of liability.

Blanket insurance - Insurance covering multiple items of property as a group. Covered property may be at one location or several.

Bodily Injury - In Commercial General Liability insurance, refers to injuries to a person, as well as sickness, disease and death.

Bond - A document for expressing surety. A bond engages three entities; the "surety" (bonding company) sells the bond to the "principal" for the purpose of paying off the party the principal will owe to the "obligee" upon failure of the "principal" to perform some act or provide some service under agreed terms.

Bond, surety - A surety bond is the financial assumption of responsibility by one or more persons for fulfilling another’s obligations.

Broad form perils - A property insurance designation for coverage that extends beyond the basic named perils.

Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Broker-Agent - Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.

Builders risk insurance - A variation of property coverage specifically applicable to construction projects. It is commonly written in an amount to cover the value of the structure when completed. The premium charged takes into account that values at risk increase gradually over the term of the policy.

Business Auto Policy (BAP) - A standardized contract for writing liability and property coverage on commercial autos.

Business income coverage - Insurance protecting the income derived from an insured’s business activities when curtailed peril. Coverage includes reasonable extra the insured undertakes to expedite return to business operations.

Business Owners policy (BOP) - A package of property and liability insurance for small and medium size businesses, the BOP owes its origin to the success of the homeowners policy.

Business personal property - A tern relating to "contents" of a commercial enterprise, it may include furniture, fixtures, machinery and equipment as well as stock, all other chattels owned by the insured, and even use interest in building improvements and betterments.

- C -

Cancellation; flat, pro rata, or short rate - In a flat cancellation the full premium is returned to the insured. A pro rata cancellation means the insurer has charged for the time the coverage was in force. Short rate cancellation entails a penalty in excess of pro rata for early termination.

Casualty - Liability or loss resulting from an accident.

Casualty Insurance - That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.

Certificate of insurance - A written description of insurance in effect as of the date and time of the certificate. The certificate does not ordinarily confer any rights on the holder, i.e., the issuing insurer does not promise to inform the holder of change in or cancellation of coverage.

Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy. A demand to recover under an insurance policy for loss. In Commercial General Liability insurance, a policy for loss. In Commercial Liability insurance, the claim may be against the insured by a third party under the insurance policy held by the insured. In this case, claims are referred to the insurer to handle on behalf of the insured in accordance with the term of the policy.

Claim expenses -  fees charged by attorneys designated by the insurance company or by the Insured with the Company’s written consent; and  all other reasonable and necessary fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a claim if incurred by the insurance company, or by the Insured with the written consent of the insurance company, including, but not limited to, premiums for any appeal bond, attachment bond or similar bond but without any obligation of the insurance company to apply for or furnish any such bond.  Claim expenses with respect to a claim may be paid first and payment may reduce the amount available to pay damages. Claim expenses may or may not include fees, costs or expenses of employees or officers of the insurance company.

Claims Expenses within the Limits - Claims expenses are paid first by an insurance company and reduces the amount available to pay damages.

Claims Expenses outside the Limits - Claims expenses paid by an insurance company do not reduce the amount available to pay damages. This type of coverage is usually limited to a set dollar amount. If claims expenses exceed this set aside dollar amount, the excess expenses usually will begin to reduce the amount available to pay damages (the policy limit).

Claims Made Basis Liability Coverage - method of determining whether or not coverage is available for a specific claim. If a claim is made during the time period when a liability policy is in effect an insurance company is responsible for its payment, up to the limits of the policy, regardless of when the event causing the claim occurred. Typically this type of coverage is endorsed with a prior acts date or retroactive date before which the insurance company has excluded coverage.

Claims-Made Policy - A type of public liability insurance that responds only to claims for injury or damage that are brought (to the insurer) during the policy period (or during a designated extended reporting period beyond expiration). In Commercial General Liability insurance, a policy that pays for events occurring during a specified period and for which a claim is made during the policy period, subject to stipulated limitations and extensions. Typically endorsed with a prior acts date or retroactive date before which the insurance company has excluded coverage. This is different than most public liability policies which are written on an "occurrence" basis, covering injury or damage occurring during the policy period even if a claim is brought months or even years later.

Claims Reserves - Under a claims-made policy, claims reserves are funds set aside to satisfy those claims that have been reported to the company but have not yet been resolved or paid. Under an occurrence policy, an additional reserve must be set aside for incidents that occurred but were not formally reported during the policy year and are expected to be reported after the close of the policy year. A company that underestimates its claims reserves may face future financial difficulties. A company that overestimates its reserves could be charging unnecessarily high premiums.

Coinsurance clause - "Coinsurance" refers to the bargain between commercial property owners and the insurance industry. The clause in property policies encourages the property owner to gauge coverage needs by possible, not probable, maximum loss. With $1 million at risk but a probable maximum loss of $100,000, for example, the property owner would probably buy $100,000 insurance and bank on avoiding the larger disaster. The bargain offered by the insurance industry is a reduced rate per $100 of coverage if the owner agrees to buy coverage at a specified relation (80% commonly) to value (to possible maximum loss in other words). If the insured accepts the bargain but events prove the amount of insurance is inadequate to the stated coinsurance percentage, the insured becomes "co-insurer" in the same ratio as the amount of insurance bears to the amount that should have been carried.

Combined Single Limit (CSL) - Liability policies commonly offer separate limits that apply to bodily injury claims for property damage. "50/100/25" is shorthand under such a policy for $50,00 per person/$100,000 per accident for bodily injury claims and $25,000 for property damage. A combined single limits policy might cover for $100,000 per covered occurrence whether bodily injury or property damage, one person or many.

Commercial General Liability (CGL) - The CGL policy is an ISO form, widely used to provide commercial enterprises with premises and operations liability coverage, products and completed operations insurance and personal injury coverage. Premises medical payments coverage is often included as well.

Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.

Commercial Package Policy (CPP) - The Insurance Services Office (ISO) commercial lines 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. In order to quality as a CPP, the policy must include two or more of these coverage parts: Commercial General Liability, various other liability coverage parts, Commercial Property, Commercial Crime, Commercial Inland Marine, Boiler and Machinery, Farm or Commercial Auto. Individual insurers may have similar commercial packages with different requirements.

Commissioner of Insurance - The official in a state (or territory) responsible for administering insurance regulation: sometimes called the Superintended of Insurance.

Compensatory damages - The award, usually monetary, that is intended to compensate the claimant for injury sustained.

Contract - A legal agreement between two or more parties. An insurance policy is a contract.

Contractual liability - Liability that does not arise by the way of negligence but by assumption under contract. For example, in certain leases, a tenant may assume a landlord’s liability to others unsafe conditions on the premises. Some such assumptions are covered automatically under the Commercial General Liability form.

Contributory negligence - A defense to a negligence action in which it is asserted that the claimant failed to meet the standard required for his or her own protection, and that the failure contributed to the loss.

Coverage - The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.

Covered loss - An accident, including accidental damage by forces of nature, that brings a contract of insurance into play.

- D -

Declaration page - That part of a property or liability insurance policy that discloses information pertinent to the coverage promised including names, addresses, limits, locations, term, premium, forms, and so on. The same information, perhaps in a shorthand version, is contained as well in the daily.

Deductible - The part of the loss that is to be borne by the insured; it comes off the top of any payment from the insurer.

Depreciation - A property ages and becomes worn it often loses value and that has to be taken into account in any property insurance that covers loss of actual cash value.

Dividend - The return of part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.

- E -

Earned Premium - The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

Economic Damages - Out-of-pocket expenses, such as medical bills incurred, lost wages, etc.

Effective date - AKA Inception Date. The date at which an insurance policy goes into force, usually shown in the declarations page of the policy.

Employers Liability Insurance - Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers' compensation law.

Employment practices liability - Coverage against allegations of illegal or discriminatory hiring firing practices, sexual harassment of employees, an so on.

Encumbrance - A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of the encumbrance.

Endorsement - An amendment to a policy form.

Errors and omissions coverage - polices generally available to the various professions that require protection for negligent acts and/or omissions resulting in bodily injury, personal injury, and/or property damage liability to a client. For example, law firms are often exposed to the claim that inadequate or improper legal advice was provided, resulting in a claim by the client that they suffered a loss. 

Excess insurance - Coverage that applies on top of underlying insurance that is primary, i.e., that pays until its coverage limit is exhausted at which point that excess coverage takes over.

Excess or surplus lines market - The range of insurance available through non-admitted insurers, i.e., insurance companies that are not licensed in a particular state or territory. Specific provisions of state or territorial law control placements.

Exclusion - Anything specifically stated in an insurance policy as not covered by the policy.

Exposure - Measure of vulnerability to loss, usually expressed in dollars or units. 

Experience - A record of losses.

Experience modification - The rising or lowering of premiums under term of an experience rating plan.

Expiration Date - termination date of coverage as indicated on the insurance policy. Typically 12:01 A.M. Standard Time at the address of the Named Insured as stated on the declarations page of the policy.

Extended period of indemnity - A time of recovery of proved business income loss after physical property is restored and business reopened. The 30-day extension of business income forms may be extended by endorsement.

- F -

Fiduciary liability insurance - The insurance covers claims arising from a breach of the responsibilities or duties imposed on a benefit administrator, or a negligent act, error, or omission of the administrator.

First named insured - An insurance policy may have more than one party named as insured. In such cases, the first named insured attends to policy "housekeeping," i.e., pays premium, initiates (or receive notice of) cancellation, or calls for interim changes in the contract. This is spelled out in commercial policies in the "common policy conditions."

Floater - An inland marine form covering movable property wherever located within territorial limits.

Fraud - The intentional perversion of the truth in order to mislead someone into parting with something of value.

- G -

Commercial General Liability Insurance - Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.

- H -

Hazard - A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.

Health Maintenance Organization (HMO) - Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.

Hold harmless agreement - A contractual assumption by one party of the liability exposure of another. Lease agreements, for example, commonly require the tenant to hold the landlord harmless for bodily injury to property damage experienced by others on the premises.

- I -

Inception Date - AKA Effective Date. The date at which an insurance policy goes into force, usually shown in the declarations page of the policy.

Indemnity - A fundamental concept governing insurance: compensation for loss or injury sustained.

Independent agent - A "retailer" of insurance who, by contractual arrangement with a number of insurance companies, sells, and services property and liability insurance. The independent agent "owns" the policy information and expiration dates of his client’s coverage and thus controls renewals and their placement.

Inflation guard endorsement - An endorsement attached to an insurance policy whereby the limits of liability on a piece of property are increased on a regular basis by a certain percentage in order to offset increasing building costs associated with inflation.

Insurable risk - The exposure to significant, measurable accidental loss from identifiable perils. The exposure, while not catastrophic, must be shared by a sufficient number of potential insureds so that the cost of loss for one can be measured and affordably shared throughout the market.

Insurance - A mechanism whereby risk of financial loss is transferred from individual, company, organization, or other entity to an insurance company.

Insurance Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an "as needed" basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee. A.M. Best's Directory of Recommended Insurance Attorneys and Adjusters lists independent adjusters only.

Insurance Attorneys - An attorney who practices the law as it relates to insurance matters. Attorneys might be solo practitioners or work as part of a law firm. Insurance companies who retain attorneys to defend them against law suits might hire staff attorneys to work for them in-house or they might retain attorneys on an as-needed basis. A.M. Best's Directory of Recommended Attorneys and Adjusters lists insurance defense attorneys who concentrate their practice in insurance defense such as coverage issues, bad faith, malpractice, products liability, and workers' compensation.

Insurance policy - The document containing the contract between the insured and the insurer which defines the right and duties of the contracting parties.

Investment Income - The return received by insurers from their investment portfolios including interest, dividends and realized capital gains on stocks. It doesn't include the value of any stocks or bonds that the company currently owns.

- J -

- K -

- L -

Liability - Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.

Liability Insurance - Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.

Licensed - Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.

Limits of Insurance - The greatest amount of insurance a policy will provide; the amount beyond which the insurer is no longer required to pay.

Liquidity - Liquidity is the ability of an individual or business to quickly convert assets into cash without incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick liquidity refers to funds--cash, short-term investments, and government bonds--and possessions which can immediately be converted into cash in the case of an emergency. Current liquidity refers to current liquidity plus possessions such as real estate which cannot be immediately liquidated, but eventually can be sold and converted into cash. Quick liquidity is a subset of current liquidity. This reflects the financial stability of a company and thus their rating.

Lloyd's - Generally refers to Lloyd's of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd's Corp. provides the support facility for their activities.

Loss Adjustment Expenses - Expenses incurred to investigate and settle losses.

Loss Control - All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A combination of risk control techniques with risk financing techniques forms the nucleus of a risk management program. The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.

Loss experience - What the loss history has been on a particular line or book of business.

Loss exposure - A set of circumstances presenting the possibility of loss, whether or not the loss actually occurs.

Loss Ratio - The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company's underlying profitability, or loss experience, on its total book of business.

Loss Reserve - The estimated liability, as it would appear in an insurer's financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amounts not yet due. For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.

- M -

Medical malpractice - Professional negligence—an abrogation of a duty owed by a health care provider to the patient; it is the failure to exercise the degree of care used by reasonably careful practitioners of like qualifications in the same or similar circumstances. For a plaintiff to collect damages in a court of law, the plaintiff’s attorney must show that the provider owed the patient a duty and that the provider’s violation of the standards of practice caused the patient’s injury.

Minimum premium - An insurer’s lowest charge for an insurance policy.

Misrepresentation - Generally, misstatement of facts made on an application for insurance. May also be misstatement of coverage made by an agent to an insured.

Monoline policy - An insurance policy covering one subject of insurance, as opposed to a combination of multiline policy.

- N -

Named insured - The party of parties specifically named as insured in the insurance contract. Others may have claim on the coverage of a policy by way of internal provisions, but any such right is by way of the agreement between the named insured and the insurance company.

Named Perils - A formal and specific listing of perils covered in a policy providing property insurance. A policy covering for damage by fire is said to cover for "the named peril" of fire.

Noneconomic Damages - Pain, suffering, inconvenience, loss of consortium, physical impairment, disfigurement, and other nonpecuniary damages.

Nonstandard Auto (High Risk Auto or Substandard Auto) - Insurance for motorists who have poor driving records or have been canceled or refused insurance. The premium is much higher than standard auto due to the additional risks.

- O -

Occurrence - An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.

Occurrence Policy - In Commercial General Liability insurance, a policy that pays for events that occur during its policy term, regardless of when a claim is filed. That is, an expired occurrence policy will pay a valid claim even if the claim is made years later, provided that the event occurred while the policy was in effect.

Other Income/Expenses - This item represents miscellaneous sources of operating income or expenses that principally relate to premium finance income or charges for uncollectible premium and reinsurance business.

- P -

Peril - The cause of a possible loss.

Policy Limits - It important that policy limits are adequate to cover both the cost of Defense and Damages. In choosing a limit the insured must consider any number of factors including size of firm, areas of practice, claims history, case size, and any other circumstance that will help him determine the maximum loss the firm may suffer in a worse case situation. Of course, higher limits increase the policy premium. However, since few claims rise to the level of maximum possible loss the extra charge for higher limits is on a sliding scale and therefore affordable. Policy limits are available on both a Single Limit and on a Per Claim and Aggregate basis. The latter allows for multiple claims up to a per claim limit that the insured has determined adequate for any one claim, and is less expensive than choosing a single limit to cover multiple claims, where no one claim exceeds the per claim limit. In other words, a single limit of $3,000,000 would cost more than a per claim and aggregate limit of $1,000,000/$3,000,000 and would serve no better in the described example. One final thought in choosing an adequate limit is that multiple claims that result from a single or related group of incidents usually will be considered as one claim under most policies.

Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners insurance.

Personal liability insurance - Insurance for individuals or members of a household offering protection against claims by third parties. (outsiders) alleging bodily injury or property damage due to negligence.

Policy - The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

Policy period - means the period of time between the inception date and time, and the expiration date and time, each as shown in the Declarations, unless this Policy is earlier terminated, in which event such period of time shall end as of the date and time of such earlier termination.

Premium - The price of insurance protection for a specified risk for a specified period of time.

Premium Earned - The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

Premium Unearned - That part of the premium applicable to the unexpired part of the policy period.

Prior Acts Coverage - liability insurance coverage for claims arising from acts that occurred before the beginning of the policy period. Policies written on a claims made basis, such as MALPRACTICE LIABILITY INSURANCE and ERRORS AND OMISSIONS LIABILITY INSURANCE, cover only claims made during the policy period. Prior acts coverage is necessary for covering a claim made during a current policy period for an event that happened before a policy was in force.

Prior Acts Date - The Prior Acts date is also referred to as Retroactive Date. The date that defines the extent of coverage in time under claims-made liability policies. The prior acts date is usually the same date from which continuous coverage was first obtained by the current or predecessor firm. Claims resulting from occurrences prior to the policy’s stated retroactive date are not insured.  Policies can contain a Prior Acts Date or be designated as having Full Prior Acts. The first year a firm is covered, their prior acts date will most likely be the date of policy inception. It is critical that coverage is maintained continuously to preserve a firms prior acts date and thus coverage of work performed back to that date. A gap in coverage will jeopardize a firms prior acts date. If a firm changes insurance carriers, it is important that the same prior acts date appears on the new policy. With the exception of some non-admitted carriers, most insurance companies will honor a firms prior acts date when switching carriers.

Products and completed operations liability - The liability exposure of the manufacturer whose malfunctioning products may cause injury or property damage or of the contractors whose failed structures or projects may do the same. Coverage of the exposure is a feature of the commercial general liability policy. The insurance does not in any way constitute a guarantee of either the insured’s product or work. Contrast with "premises and operations liability.."

Products-Completed Operations Hazard - Refers to bodily injury and property damage that occur somewhere other than the insured’s premises, and involve the insured’s products or work, subject to the limitations and parameters specified in the Commercial General Liability coverage forms.

Professional liability - A form of errors and omissions insurance, (sometimes called "malpractice" coverage of errors alleged against those in the healing and legal professions). Arbitrarily it seems, "error and omissions" is the term applied most often to insurance covering liability for mistakes in matters affecting property, i.e., coverage for "Insurance Agents E&O," "Architects E&O while "professional liability" is used in reference to coverages such as "Druggists Professional Liability," Physicians and Surgeons Professional Liability," and "Lawyers Professional Liability."

Proximate cause - That event which, in an unbroken sequence, results in direct physical loss under an insurance policy. For example, wind is the proximate cause of loss when a windstorm blows out a window that in turn topples a lit candle that sets fire to a structure and burns it down.

Property Damage - In the Commercial General Liability coverage forms, refers to physical damage to tangible property and to loss of use tangible property, whether or not physically damaged.

Punitive Damages - Also called exemplary damages. Optionally covered by professional liability insurers. A few states require that punitive damages be covered. Other state laws prohibit insurance companies from covering punitive damages because such damages are intended to punish the defendant for willful, fraudulent, oppressive, malicious, or otherwise outrageous behavior that should not be covered by insurance.

- Q -

Qualifying Event - An occurrence that triggers an insured's protection.

- R -

Reinsurance - In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period. 

Renewal - The automatic re-establishment of in-force status effected by the payment of another premium.

Reserve - An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.

Retroactive date - The Retroactive Date is more commonly referred to as a Prior Acts Date.  The date that defines the extent of coverage in time under claims-made liability policies. The prior acts date is usually the same date from which continuous coverage was first obtained by the current or predecessor firm. Claims resulting from occurrences prior to the policy’s stated retroactive date are not insured.  Policies can contain a Prior Acts Date or be designated as having Full Prior Acts. The first year a firm is covered, their prior acts date will most likely be the date of policy inception. It is critical that coverage is maintained continuously to preserve a firms prior acts date and thus coverage of work performed back to that date. A gap in coverage will jeopardize a firms prior acts date. If a firm changes insurance carriers, it is important that the same prior acts date appears on the new policy. With the exception of some non-admitted carriers, most insurance companies will honor a firms prior acts date when switching carriers.

Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

Reunderwriting - The process by which a company re-evaluates policyholders and imposes surcharges, deductibles, or nonrenewal as necessary in cases where the policyholder’s claims history or other experience presents a consistent pattern that creates an undue liability risk.

- S -

Schedule - List of items on a policy declaration, sometimes also showing descriptions and values.

Special form - In contrast to the named perils forms in property insurance, those forms that list specific perils for coverage, the special form contract covers simply risk of direct physical loss, relying on exclusions to delimit an define the protection intended.

Split limits - As in auto insurance, where rather than one liability amount applying on a per-accident basis, separate amounts apply to bodily injury and property damage liability.

Standard Auto - Auto insurance for average drivers with relatively few accidents during lifetime.

Stop Loss - Any provision in a policy designed to cut off an insurer's losses at a given point.

Subrogation - The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.

- T -

Tail Coverage (Extended Reporting Coverage) - Coverage that protects the insured against all claims that arise from professional services performed while the claims-made policy was in effect, but which were reported after the termination of the policy.

Term Life Insurance - Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the nonforfeiture values associated with whole life policies.

Tort - A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.

Total Loss - A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.

- U -

Umbrella liability - A liability contract with high limits covering over top of primary liability coverages and, subject to deductible, covering exposures otherwise uninsured.

Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

Underwriting - The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not quality.

Unearned Premiums - That part of the premium applicable to the unexpired part of the policy period.

Uninsurable risk - An uninsurable risk is one which is literally uninsurable because loss is certain rather than possible.

Universal Life Insurance - A combination flexible premium, adjustable life insurance policy.

- V -

Valuation - A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.

Variable Life Insurance - A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.

Variable Universal Life Insurance - A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.

Vicarious liability - The condition arising where one person is responsible for the actions of another, as a parent is often held responsible for the vandalism damage a minor child does to a school.

- W -

- X -

Waiver of subrogation - An insurer has the right of subrogation; however, it may waive that right through this method.

Whole Life Insurance - Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.

- Y -