The following glossary contains terms used within this risk management guide as well terms that may be used within the risk management, legal, emergency medical and insurance industries. Use this glossary as a helpful tool when your organization is confronted with terms you may be unsure of.
Avoidance - The act of responding to an identified risk by agreeing not to conduct the project.
Accident Medical Coverage - Coverage for medical expenses (doctor bills, ambulance, hospital, and medication bills) incurred as a result of an injury while participating in an insured activity. This is typically written on an excess basis over any other collectible medical insurance the injured person might have available to them. The coverage responds only to injuries sustained while that person is participating in your covered activities.
Accidental Death & Dismemberment - Coverage for the accidental death, or the loss of limb or limbs as a result of participation in an insured activity or event.
Aggregate - A limit, specified in the policy, which is the maximum total amount that the policy will pay for all losses sustained during the policy period. Aggregate limits typically appear in General Liability policies, but are not often used in property insurance, except with respect to certain catastrophic exposures such as earthquake or flood. There may be several aggregates within the policy. One is a coverage aggregate, while the other is a policy aggregate. The coverage aggregate is the most that particular coverage will pay for all losses incurred during the policy period. The policy aggregate is the most the policy will pay for all coverages for all losses incurred during the policy period.
Application - A questionnaire that is completed by a person seeking a coverage quotation from an insurance company. The questionnaire contains information required by the insuring company to evaluate the risk, underwrite the exposure, and rate the hazards and coverages being requested. The insured party typically completes applications, but the party's representative (agent or broker) may also complete the form on the party's behalf. There may be multiple applications, depending on the scope of the coverage being requested. Most applications, particularly in Personal Insurance, are attached to and made a part of the insured's policy.
Assumption of Risk - A contract under which one party's legal liability for damages is assumed by the other party to the contract.
Audit - An examination of the books of accounts, vouchers or other records of a person, corporation, firm or other organization for the purposes of ascertaining the accuracy or inaccuracy of the record ( in insurance, the rating base).
Automatic Additional Insured - A clause in the policy that extends coverage to specified persons or organizations that may be involved in your activities or operations, without you having to specifically request them by name. Typically these are landlords, lessors or equipment or municipalities. However, coverage will usually extend as their interest may appear in your activities or operations only.
Automobile Liability Coverage - Protection for the insured (you) against loss arising out of legal action (liability) when his/her auto injures others or damages their property (includes Bodily Injury Liability and Property Damage Liability).
Automobile Physical Damage - The Collision and Other Than Collision coverage provisions in the Automobile insurance policy.
Best’s Rating - A rating given to insurance companies by the A.M. Best Company, an insurance industry ratings agency. The ratings range from A++ (Superior) to D (below minimum standards). Ratings of E and F are given to companies under state supervision or in liquidation. The ratings reflect A.M. Best’s evaluation of an insurance company’s financial strength and operating performance relative to the norms of the property and casualty insurance industry.
Bind Order - The oral or written acceptance of a quotation of insurance by the insured party.
Binder - A written document reflecting immediate insurance protection, valid for a specified period of time. Designed to provide temporary coverage until the actual policy can be issued. The binder provides a summary of coverage to be provided by the policy, along with pertinent information such as limits and coverages.
Blanket Coverage - A blanket form is one in which property is insured under a single amount applying to several different pieces of property rather than a specific amount of insurance on each property.
Bodily Injury Liability Insurance - This coverage protects an insured against legal action (liability) for injury to another person arising from an accident or occurrence.
Boiler & Machinery - Mechanical Breakdown - This form of insurance provides mechanical breakdown coverage generally not available under any other insurance policy. This provides protection against the catastrophic effects of property loss, such as a steam boiler explosion or an expensive breakdown of machinery and equipment. This includes more than just boilers and steam vessels, but also includes refrigeration equipment, air conditioning equipment, various types of piping, turbines, engines, pumps, compressors, blowers, gearing, shafting, electric motors, generators, transformers, and assorted other types of mechanical and electrical equipment.
Bound - The past tense of bind, an account that has already had the quotation of coverage accepted by the insured party.
Business Income - Coverage for loss of income in case the insured's business is shut down by a covered cause of loss. It often pays for such expenses as the rebuilding of an accounts receivable data base, cleaning computers, leasing temporary office space, and similar losses associated with a disaster.
Business Interruption Insurance - (See Business Income above)
Cancellation - The discontinuation of the insurance policy before its normal expiration date.
Carrier - The insurance company or the party who agrees to pay for covered losses.
Casualty Insurance - (also referred to as liability insurance) Insurance primarily concerned with the legal liability for losses caused by injury to persons or damage to property of others. Also includes, among other coverages, automobile, workers' compensation, employer's liability, general liability, plate glass, theft and personal liability. It excludes life, fire and marine insurance.
Citizen Responder - A layperson (someone who does not have special or advanced medical training or skill) that recognizes an emergency and decides to help.
Claim - A written notice, demand, lawsuit, arbitration proceeding, or screening panel in which a demand is made for money or a bill reduction, and which alleges injury, disability, sickness, disease, or death of a patient arising from the physician’s rendering or failing to render professional services.
Claims-Made Form - A type of liability policy that covers claims that are presented to the carrier while the policy is in effect. Once the policy has expired, no claim is paid under the policy that had not been presented to the carrier, even if the claim occurred during the policy period.
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 - A provision in the property insurance policy that requires the insured to carry insurance equal to a certain specified percentage of the value of the property for the insured to receive full payment of a loss up to the amount of the policy. Otherwise, payment would be only a percentage of the actual loss (penalty), the percentage is determined by the amount of insurance carried to what should have been carried, as determined by the carrier.
Collision Insurance - Protection against loss resulting from any damage to the policyholder's automobile caused by a collision with another vehicle or object, or by upset of the insured automobile, whether it was the insured's fault or not (other than his/her own willful act).
Combined Single Limit - A liability coverage limit that combines both Bodily Injury and Property Damage into one aggregate amount.
Commercial General Liability Policy - Often referred to as CGL, this policy provides broad protection for situations in which a business must defend itself against lawsuits or pay damages for personal injury or property damage to third parties. The two basic coverage forms available under the CGL are a claims-made form and an occurrence form which provides an extended reporting period. These forms include the following coverages: (Bodily Injury and Property Damage Liability; Personal Injury and Advertising Injury Liability;
Medical Payments; and as applicable, Products and Completed Operations coverage.) Unless modified, an aggregate limit applies to the first three coverages, and a separate aggregate applies to the Products and Completed Operations coverage. Coverage is provided for most of the premises, products, completed operations, personal injury, advertising, and contractual liability exposures of an organization. This coverage form may be issued as a stand-alone policy, or in conjunction with other coverage forms like
Commercial Auto, Property, or Inland Marine.
Commercial Multi-Line Policy - Package type of policy that includes a wide range of essential property and liability coverages for servicing businesses.
Comparative Negligence - A rule of law applied in accident cases to determine responsibility and damages based on the negligence of every party directly involved in the accident.
Compulsory Auto Liability Insurance - Insurance laws in some states require motorists to carry at least certain minimum auto liability coverages for bodily injury and property damage.
Conditions - Provisions of the insurance policy that state the rights and duties of the insured and insurer.
Consent - Permission to give care, given by the victim to the rescuer.
Contract - A formal agreement to transact business between two parties, conveyed into legal form.
Contractual Liability Insurance - Provides coverage for claims arising out of liability that has been assumed by the insured under a written or oral contract.
Contributory Negligence - A doctrine of common low that if a person was injured in part due to his/her own negligence (his/her negligence ‘contributed’ to the accident), the injured party would not be entitled to collect any damages from another party who supposedly caused the accident.
Coverage - The scope of the protection provided under a contract of insurance; any of several risks covered by the policy.
Covered / Insured Peril - The perils of loss you are protected against by the insurance policy. Examples of perils include, fire, lightening, theft, and vandalism.
Crime - This insurance is designed to protect you from loss of money and securities resulting from a theft, or employee dishonesty.
Damage to Premises Rented To You - Under General Liability Insurance, this coverage will pay for damages to any one premises you rent, but do not occupy, or in the case of fire or explosion, while rented to you or temporarily occupied by you with permission of the owner, but only to the limit designated on the policy declaration page.
Declarations - That part of the policy describing the named insured, address, effective date, term of the policy, applicable coverages, the amount of insurance and the premium.
Deductible - A provision in an insurance contract stating that the insurer will pay that amount of any insured loss that is in excess of a specified amount. The specified amount is the deductible.
Defendant - The party sued in a civil lawsuit or charged with a crime in a criminal prosecution. In some types of cases a defendant may be called a respondent.
Directors & Officers Liability - Designed for the Directors and Officers of boards, corporations, or nonprofit organizations, this coverage provides protection for claims arising from the fiduciary duties owed the corporation, shareholders, or other third parties from certain fiduciary, tortuous conduct, fraud or deceit, or the violation of certain statutes.
Duty of Care - A requirement that a person act towards others and the public with the watchfulness, attention, caution, and prudence that a reasonable person in the circumstances would use. If a person’s actions do not meet this standard of care, then the acts are considered negligent, and any damages resulting may be claimed in a lawsuit for negligence.
Earned Premium - That part of the total policy premium earned by the insurance company which applies to the expired portion of the policy period.
Emergency - A situation requiring immediate action.
Emergency Action Steps - Three basic steps you should take in any emergency- check, call and care.
EMS Professional - Trained and equipped community-based personnel often dispatched through a local emergency number who provide emergency care for ill or injured victims.
EMS System - A network of community resources and medical personnel that provides emergency care to victims of injury or sudden illness.
Emergency Medical Technician (EMT) - A person who has successfully completed a state-approved emergency medical technician training program. The different levels of EMTs include the EMT-Basic, EMT-Intermediate and EMT-Paramedic.
Employee Benefit Liability - This coverage protects you, an employer, from claims by employees or former employees resulting from negligent acts or omissions in the administration of your employee benefits programs. Employee Benefits programs can be defined to include group life, health, and accident insurance, profit sharing plans, employee stock subscription plans, and workers' compensation, unemployment insurance, social security benefits, disability benefits, etc.
Employers' Liability Insurance - Provides protection for the employer for those bodily injuries, whether accident or disease, sustained by employees in the course of employment, not otherwise covered under workers' compensation law.
Endorsement - An additional document, which was not part of the original insurance contract, that cites certain terms, conditions, or changes, and which becomes a part of the insurance contract. Additions to personal lines insurance policies are accomplished through the use of riders, which are similar to endorsements.
Employment Related Practices Liability - This insurance defends and pays losses incurred by you for wrongful employment acts. Wrongful employment acts includes alleged acts of discrimination, harassment, negligent hiring and/or inappropriate employment decisions made by you, against employees, both past and present, or an applicant for employment.
Errors & Omissions Liability - This insurance provides defense and pays losses which you are legally obligated to pay for monetary losses incurred by third parties as a result of your wrongful acts (errors or omissions committed solely in the performance of, or failure to perform professional services). Unlike Directors & Officers coverage, which is restricted to those individuals, this coverage is typically written for the corporation or organization.
Excess / Umbrella - This type of liability insurance provides coverage over a single underlying policy, or several different underlying policies. The limits provided by this policy will not respond to the loss until after some specified underlying policies limits are spent, exhausted, or otherwise not available. If underlying limits are not available, and the coverage is not excluded from the Excess/Umbrella coverage, this policy will respond as primary.
Exclusion - A provision in the insurance policy which denies coverage for certain perils, persons, property or locations.
Extra Expense - This insurance is designed to pay for costs in excess of normal operating expenses that are incurred by a business in order to continue operations without interruption after a direct property loss, or in order to minimize the interruption. This coverage is not a substitute for Business Income (Interruption) coverage, as this coverage does not provide any recovery for any loss of income, despite all efforts to continue operations.
Exposure - This term in the insurance field may have several meanings: (1) possibility of loss; (2) a loss potential as measured by type of construction, area or values; (3) a possibility of a loss being communicated to an insurance risk from its surroundings; or (4) the unit of measure of the amount of risk a company assumes (for example 50,000 spectators are a single event).
Fire Damage Legal Liability (Damage to Property Rented to You) - Contained within the Commercial General Liability coverage part, this coverage provides protection for damage to property rented to you (landlord's building), should damage occur as a result of fire. This coverage is provided at a separate limit from the property damage liability limit, typically at a lesser amount.
Fire Insurance - Coverage is provided to protect the insured property from the peril of fire and lightening.
First Aid - Immediate care given to a victim of injury or sudden illness until a more advanced care can be obtained.
First Responder - A person trained in emergency care who may be called upon to provide such care as a routine part of his or her job such as an EMT, Firefighter or Police Officer.
Fleet Policy - An auto policy covering a number of vehicles owned by a single insured.
Floater - A form of insurance that applies to movable property, whatever its location, within the territorial limits imposed by the contract. The coverage "floats" with the property.
Flood Insurance - Coverage against loss resulting from the flood peril, widely available under a program developed in 1968 by the private insurance industry and the federal government.
Garage Liability - Insurance to protect garages, service stations, vehicle rental agencies, car washes, owners of automobile, trailer, or RV vehicle dealerships from liabilities arising out of their business operations and the sale or use of autos, from claims alleging bodily injuries or property damage caused by the operator's negligence.
Garagekeepers' Liability (Garagekeepers Legal Liability) - An insurance contract that protects a garage operators against direct damage or legal liability for damage to vehicles in his care, custody or control caused by specific perils. This coverage is included as part of a garage coverage or as a separate endorsement.
General Liability Insurance - A broad term meaning liability insurance, other than automobile liability or employers' liability, written to cover professional and commercial risks. In respect to commercial liability, various available coverages could cover such risks as premises and operations, contractual liability, products and completed operations. A form of insurance designed to protect owners and operators of businesses from a wide variety of liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of an insured, products sold by the insured, operations completed by the insured and liabilities assumed by the insured through specific types of contracts.
Glass Insurance - Protection for loss of or damage to glass and its appurtenances.
Good Driver Plan - An auto insurance rating program that reflects the insured's accident and traffic violation record as a factor in determining the premium.
Good Samaritan Law - Any person who, in good faith, renders emergency medical care or assistance to
an injured person at the scene of an accident or other emergency without the expectation of receiving or
intending to receive compensation from such injured person for such service, not constituting gross
negligence in the course of such care or assistance.
Gross Negligence - Carelessness which is in reckless disregard for the safety or lives of others, and is so great it appears to be a conscious violation of other people’s rights to safety.
Hazard - The presence of a condition that could cause loss or injury to property or persons. For example, smoking in bed increases the chance for loss of property and life resulting from fire.
Health Insurance - There are two major types: Disability income insurance pays for loss of income due to disability; medical expense insurance pays for hospital, doctor and other medical expenses. Both of these generally pay for losses arising from sickness or accidents. Some policies, referred to as "accident policies," do not cover sickness.
Hold Harmless - A promise to pay any costs or claims, which may result from an agreement. Quite often this is part of a settlement agreement, in which one party is concerned that there might be unknown lawsuits or claims stemming from the situation, so the other party agrees to cover them.
Implied Consent - A legal concept that assumes a person would consent to receive emergency care if he or she were physically able to do so.
Improvements and Betterments (Tenants) - Insurance coverage that protects a tenant or lessee of real property against loss as a result of a covered cause of loss, of improvements made by him/her to the real property in which he/she resides. Some property policies use the term "improvements and additions" in describing the coverage.
Indemnity - In general, means reimbursement for loss, but also is used to define a benefit provided by a policy.
Independent Agents - Independent Agents can sell policies from several different companies. They obtain the insurance from Brokers, Underwriting Facilities or direct from Insurance Companies.
Inland Marine - This insurance coverage (sometimes referred to as a floater) is just property insurance for property loss exposures which cannot be conveniently or reasonably confined to a fixed location or a standard form. This may include movable property, instrumentality's of transportation and communications (such as bridges, roads, piers, and television and radio towers), and the legal liability coverage of bailees. This also includes electronic data processing equipment.
Insurance Brokers - Insurance Brokers work similar to an Independent Agent, however they not only represent insureds, but also place coverage for Independent Agents with Underwriting Facilities or Insurance Companies.
Insurance Companies - Insurance Companies are the insurers and the insurance policy is the contract between your organization and the Insurance Company. For sports and recreation insurance, many Insurance Companies heavily rely on specialized Underwriting Facilities to facilitate the coverage.
Insurance to Value - Insurance written in an amount approximating the value of the property insured.
Insured- A person covered by an insurance policy.
ISO - The abbreviated reference to Insurance Services Office, Inc. . The organization, whose members are insurance companies nationwide, is the largest rating bureau in the United States. ISO is responsible for many lines of insurance, including fire, commercial and personal auto, homeowners, general liability, inland marine, and crime. It handles both personal and commercial lines, as well as both property and liability. The main function of ISO is the development of standardized industry coverage forms and rates.
Kidnap and Ransom Insurance - Written for financial institutions and other corporations, this insurance covers named employees for individual or aggregate amounts paid as ransom, with deductibles requiring the insured to participate in approximately 10% of any loss.
Knowledge of Occurrence - Typically in a policy, this will describe when knowledge of an accident or occurrence is considered to be known to the insured person. Language may read as follows: Knowledge of the occurrence, claim or suit by the agent, servant, or employee of an insured shall not in itself constitute your knowledge unless one of your offices, managers or partners have received notice of the occurrence, claim or suit. Failure by the agent, servant or employee of an insured (other than an officer, manager or partner) to notify us of an occurrence shall not constitute a failure to comply with the provision in your policy.
Legal Liability to Participants - This coverage typically refers to persons while practicing for, or participating in contests or exhibitions of an athletic or sports nature. The coverage responds to and defends the Policyholder in a suit being made against the Policyholder, by a participant in a contest or exhibition (of an athletic or sports nature) which the Policyholder controls, promotes, or sponsors.
Liability - The state of being criminally or civilly liable for the actions of yourself, your club, or its members.
Liability Limits - The stipulated sum or sums beyond which an insurance company is not liable to protect the insured.
Limit - The maximum amount of benefit that an insurer agrees to pay in the event of a loss.
Line of Insurance - A type or kind of insurance.
Litigation - The process of a lawsuit.
Liquor Liability - This type of liability insurance provides coverage for bodily injury or property damage for which you may be held liable by reason of:
- Causing or contributing to the intoxication of any person;
- Furnishing alcoholic beverages to a person under legal drinking age or under the influence of alcohol; or
- Violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.
This coverage only applies if you are involved in the following activities:
- Manufacturing, selling, or distributing alcoholic beverages;
- Serving or furnishing alcoholic beverages for a charge, whether or not such activity requires a license or is for the purpose of financial gain or livelihood; or
- Serving or furnishing alcoholic beverages without a charge, if a license is required for such activity.
Loss - An occurrence that is the basis for submission and/or payment of a claim. Losses can be covered, limited or excluded from coverage, depending on the terms of the policy.
Loss Control Representative - Insurance company employee or subcontractor that perform loss control surveys (for underwriting purposes) and prepare written loss control reports that outline their findings. The Loss control representative provides a value added risk control service to the policyholder.
Loss Experience - The loss record of an insured or of a particular class of coverage.
Malpractice Insurance - Coverage afforded to a professional practitioner, such as a doctor or a lawyer, against liability claims for damages resulting from alleged negligence in the performance of the insured's services.
Marine Insurance - (See Inland Marine or Ocean Marine Insurance).
Medical Emergency - A sudden illness requiring immediate medical attention.
Medical Expense Payments - This is a coverage provided under the General Liability policies. This coverage will reimburse an injured party for medical and/or funeral expenses incurred as a result of bodily injury or death sustained by accident under the conditions specified in the policy, regardless of whether you are liable or not. The most an insurance company will pay for any one person is the limit specified in the policy.
Medical Payments Automobile Insurance - Coverage, in states which are other than a no-fault state, which pays medical and hospital expenses and the expense of funeral services resulting from an automobile accident, regardless of the liability of the insured. This is a first-party coverage.
Minor - In most states, a person under the age of 18 or 21.
Multi-Peril Policy - A package policy that provides protection against a number of separate perils. Multi-peril policies are not necessarily multiple-line policies, since the combined perils may be all within one insurance line, such as property.
Multiple-Line Policy - A package policy which combines coverages from both the traditional property and liability lines.
Named Perils - Coverage in a property policy that provides protection against loss from only the perils specifically listed in the policy rather than protection from physical loss. Examples of named perils are fire, windstorm, theft, smoke, etc.
Negligence - A tort that deals with the concept of duty of care, preventability, and foresee ability of anincident.
Occurrence - means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Ocean Marine Insurance - Coverage on all types of vessels, including liabilities connected with them, and coverages on their cargoes.
Other Than Collision Coverage - Protection against loss resulting from damage to the insured auto, commonly called "comprehensive auto coverage". Broad coverage is provided and includes protection from such hazards as fire, theft, glass damage, wind, hail and malicious mischief. This is a first-party coverage.
Partial Disability - An impairment that prevents the insured from performing one or more, but not all, important duties of his/her job.
Peril - The cause of a possible loss, such as fire, windstorm, theft, explosion or riot.
Personal Injury Liability Insurance - Protection against liability for damages other than physical injury arising out of false arrest, detention or imprisonment, or malicious prosecution; libel, slander or defamation of character; invasion of privacy, wrongful eviction or wrongful entry.
Personal Injury Protection (PIP) - That section (in a no-fault state) of the automobile policy that covers the treatment of injuries to the driver and passengers of an insured's car.
Personal Lines - Types of insurance written for individuals or families, rather than for businesses.
Plaintiff - The party who initiates a lawsuit by filing a complaint with the clerk of the court against the defendant(s) demanding damages, performance, and/or court determination of rights.
Policy - The term generally used to define the written contract of insurance.
Policyholder - The person who owns the insurance policy. Their name appears on the Declarations under the title of Named Insured or Policyholder.
Pollution Insurance - This is a coverage that protects an insured from property loss or liability arising from pollution-related damages. Pollution may be the contamination of water, soil, or air by means of solid, liquor or gaseous (vapors, smoke or heat) contaminants.
Pre-Existing Condition - A physical condition that existed prior to the issuance of the insurance policy.
Premises - The buildings, other structures and land where the insurance protection is applicable. It is usually described and defined in the property casualty policy.
Premium - The amount of money charged to the policyholder for the insurance policy.
Premium-to-surplus Ratio (P/S) - The ratio of net written premium to surplus. This ratio reflects a company’s financial strength and future solvency. The ratio should not exceed 3:1.
Product Liability - The responsibility of manufacturers, distributors, and sellers of products to the public, to deliver products free of defects which harm an individual or numerous persons and to make good on that responsibility if their products are defective.
Professional Liability - There are many occupations and fields of endeavor which are regarded as "professional" in today's society. This coverage is designed to provide protection for liability claims resulting from errors in judgment, breach of duty, failure to conduct one's self to a professional standard of care, act or omission.
Profit or Loss - Underwriting results are combined with investment income, expenses, and taxes to calculate profit or loss. Actual profit results from underwriting profit plus investment income that exceeds losses, expenses, and taxes or from investment income that offsets the underwriting loss, expenses, and taxes. Actual loss results if the investment income does not offset the underwriting loss, expenses, and taxes. Actual losses must be offset by drawing on the company’s surplus. Companies offering assessable policies can impose payments on their policyholders to amend the loss.
Proof of Loss - Documentation presented to the insurance company by the insured in support of a claim so that the insurer can determine its liability under the policy.
Property Damage Liability Coverage - Protection against loss from legal action (liability) for damage to the property of others.
Property Insurance - Provides protection against loss or damage to the insured's (your) property, caused by the specified Causes of Loss (perils) as appear in the policy
Property / Casualty Insurance - One of the three (3) larger classifications of insurance (the other two are Life, Health and Accident, and Surety & Bonds). Property and Casualty refers to the group of coverages including Property, Crime, Liability, Auto, Workers' Compensation and Errors and Omissions. This group of coverages is further broken down in to two subgroups, Personal and Commercial insurance. Personal insurance is typically issued to an individual, and includes coverages like Homeowners, Personal Auto and Personal Umbrellas. Commercial Insurance is typically issued to corporations or organizations, or to the individual who owns a business operation, and includes coverages like Commercial Property, Commercial Auto, and Commercial General Liability.
Proximate Cause - The dominate cause of loss or damage; an unbroken chain of events between the occurrence of an insured peril and the damage to property. As an illustration, weather damage occurring from fire-fighting activities is covered under the fire policy because fire was the proximate cause of the loss.
Public Liability Coverage - A generic term meaning insurance to cover risks against liability exposures other than those involving employees, or arising out of the use of autos, aircraft, or watercraft. This is frequently interchanged with the terms General Liability or Commercial General Liability.
Purchasing Group - An entity that offers insurance to a group of homogeneous (similar) businesses with similar exposures or potential for similar exposures.
Rain Insurance (Cancellation Insurance) - Insurance protection against loss due to rain, hail, snow or sleet, which causes cancellation or reduced earnings of an outdoor event.
Rate - A charge per unit in determining insurance premiums.
Reduction - The act of reducing the club or individual’s risk by taking steps to either control the potential risk or to finance it (or both).
Reinstatement - The restoration of a lapsed insurance policy to its original provision, being in full force and effect.
Reinsurance - An agreement between insurance companies under which one accepts all or part of a risk or loss of the other. Most primary companies insure only part of the risk on any given policy. The amount varies among carriers. The remainder of the policy limits are covered by reinsurance entities. The less primary risk that a company insures, the more premium it has to pay to the reinsurer to cover the remaining policy limits. In general, smaller companies are able to cover only a relatively small proportion of the liability limit. This results in large premium payments to reinsurers. Larger companies can safely cover a large proportion, thus reducing the payments they must cede to reinsurers, which indirectly reduces the cost of insurance to their policyholders.
Retention - A sum built into a project budget to cover contingent items.
Risk Assessment - A detailed process of analyzing an identified risk to determine the potential financial or other harm that could be caused were this risk not to be addressed. This potential harm should also be weighed against the potential benefits of the action or project (“cost-benefit analysis”).
Risk Control - The process of putting controls in place on a project to lessen the risk of an incident occurring.
Risk Financing - The act of financing a potential loss through the project, either by building a contingency into the budget or buying additional insurance.
Risk Identification - A detailed process of examining the potential for risk in a project activity.
Risk Management - An organized system of processes and procedures designed to identify risk and use to reduce it in a reasonable manner wherever it is identified.
Risk Purchasing Group - Risk purchasing groups (RPGs) came into existence as a result of the federal Risk Retention Act of 1986. Unlike a risk retention group (RRG), an RPG is not an insurance company but an association of insurance buyers with a common identity (e.g., a medical specialty society) who form an organization to purchase liability insurance on a group basis. Since an RPG purchases coverage from an insurance carrier, no capital contributions are required in order to join. The company from which the RPG purchases insurance need not be licensed in every state. The purchasing group’s insurer must indicate how much premium was generated by the purchasing group in each state on its National Association of Insurance Commissioners’ annual statement. Physicians considering purchasing insurance through an RPG should inquire about the strength of the insurance company that provides coverage to the purchasing group.
Risk Retention Group - Risk retention groups (RRGs) came into existence as a result of the federal Risk Retention Act of 1986. That act allows an RRG to form as an insurance company and requires that it follow the insurance laws of at least one state. When first joining an RRG, a physician is typically required to pay a capital contribution in addition to the annual insurance premium.
An RRG is governed by the regulations of the state in which it is domiciled. If an RRG is appropriately capitalized and operated, it can be a viable insurance alternative. As there is less regulatory scrutiny in some states, however, some RRGs are inadequately capitalized and charge inadequate premiums. As a result, insolvencies that imperil the coverage of the insureds have occurred among RRGs.
An RRG must file an annual financial statement with its chartering state and all other states in which it operates. Doctors considering purchasing insurance from an RRG should review that statement. They should also carefully evaluate the degree to which the state in which the RRG is domiciled requires them to meet the high standards of solvency and effective management necessary to ensure that the company is able to fulfill its insurance obligations.
Schedule - A list describing the property or items insured under the policy and the extent which they are insured.
Self-Insurance - A form of risk financing through which a firm assumes all or a part of its own losses. Self-Insurers may purchase insurance to cover excess losses.
Severity - The size of the impact of an incident happening.
Standard of Care - The standard determined that a club or member owes to any individual or group becoming involved in a function or project.
Statute - Act of Parliament or of Provincial or Territorial Assembly. Typical statutes are the Occupiers’ Liability Act and the Liquor Act.
Strict Liability - Automatic responsibility (without having to prove negligence) for damages due to possession and/or use of: equipment, materials, or possessions, which are inherently dangerous, such as explosives, wild animals, poisonous snakes, or assault weapons. This analogous to the doctrine of res ipsa loquitur in which control, ownership, and damages are sufficient to hold the owner liable.
Subrogation - A principle of law incorporated in insurance policies that enables the insurance company, after paying a loss to its insured, to recover the amount of the loss from another who is legally liable for it.
Theft Insurance - Protection for loss of property due to stealing, including burglary, robbery and larceny.
Third Party - A person who files a liability insurance claim against another person or entity (first party).
Tort - A civil wrong, such as negligence, trespass or defamation. A criminal act may not have been committed for a civil tort action to be started.
Transfer (risk control perspective) - The act of transferring a risky item to another party.
Transfer (risk financing perspective) - The act of transferring the financial responsibility for a potential risk to another party. (i.e. buying insurance)
Umbrella Coverage - (See Excess/Umbrella Coverage)
Underwriter - An employee of an insurance company who is a selector of risks. The underwriter is expected to select business that will produce an average risk of loss no greater than anticipated for the class of business. The term may also be an agent or other field representative who is referred to as a "field underwriter".
Underwriting Facility - Underwriting Facilities usually specialize in one niche of insurance. Both Independent Agents and Insurance Brokers place business with these facilities. Underwriting Facilities are similar to Insurance Companies as they underwrite (determine coverage and cost) and conduct policy issuance on the behalf of the Insurance Company.
Underwriting Results - The profit or loss of the insurance company, calculated by subtracting from earned premium those amounts paid out and reserved for losses and expenses. Any residual amount is called an underwriting profit. If deductions exceed earned premium, it is called an underwriting loss. Underwriting results do not include investment income.
Unearned Premium - The portion of a property/casualty insurance premium that applies to the unexpired portion of the policy period.
Uninsured Motorists Coverage (UM) - Pays the policyholder and passengers in his/her car for losses sustained by reason of bodily injury, sickness, disease or death caused by the owner or operator of an uninsured automobile or a "hit-and-run" driver.
Uninsured Motorists Property Damage Coverage (UMPD) - Provides coverage to a vehicle involved in an accident with an uninsured motorist. UMPD is similar to "collision coverage", and is not available to those who purchase "collision coverage".
Unintentional Error or Omission - Typically in the policy, this will describe the effect upon the policy of an error, omission or misrepresentation of information on your application, or with information presented at the time of a claim. Language may read as follows:
Any unintentional error or omission in the description of or failure to completely describe, any premises or operations intended to be covered by this Coverage Part will not invalidate or affect coverage for those premises or operations. However, you must report such error or omission to us as soon as practicable after its discovery.
Valuation - The process of determining the company's liabilities under the policy obligations is known as policy valuation. The process of determining the value of the company's investments is known as asset valuation. Minimum valuation standards are usually prescribed by state laws.
Vicarious Liability - A principle of law which holds that a club or principal is responsible for the actions of a member in the event that a loss is sustained if the individual is conducting club business when the incident occurs.
Waiver and Release of Liability - An agreement obtained by an insured from an individual or group whereby they forfeit their rights to take legal action against that insured. An illustration of this would be an individual wishing to participate in a sport might have to sign a "waiver and release" stating they will not sue if they are injured while playing the sport, whether there is negligence or not.
Waiver of Right of Recovery - In the insurance policy, if a claim is paid under the policy, which is also covered by another person, organization, or other insurance policy, the insured or the insurance company has the right to pursue collection of the amount paid, or any portion there under, from that other party. A Waiver of Right of Recovery means that the insured has agreed, prior to a claim that the insured will not attempt to collect (sometimes referred to as subrogation) from the other party, any amounts paid under the insurance policy, even if those amounts should have been paid by them or their insurance. If the insurance company has agreed to put the Waiver of Right of Recovery provision in the policy, it typically acknowledges that its right of recovery is forfeited, provided the insured has so agreed with another party to waive their right of recovery. Typical language to this effect can be seen below:
We waive all rights of recovery when you have agreed to waive your rights of recovery when required by a written contract. However, this provision only applies if the written contract was executed prior to the date of the occurrence.
Weekly Indemnity - The insurance will pay, after an established waiting period, an agreed weekly sum for lost wages incurred by person (if at the time of the injury they were gainfully employed), if they are unable to work as a result of injuries incurred during a covered activity, operation or event.
Workers' Compensation - A system (established under state laws) under which employers provide insurance for benefit payments to employees for their work-related injury, death and disease regardless of fault. Not to be mistaken as health insurance. This coverage form provides coverage in two ways; (1) compensation for the employee for job-related injuries, irregardless of negligence, and (2) protection (Employers Liability) from liability suits brought by workers against the employer.