AINS 21 Glossary

loss exposure
any condition or situation that presents the possibility of a loss
law of large numbers
a mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcomes (losses) based on these exposure units also increases
exposure unit
a measure of the loss exposure assumed by the insurer, used in pricing insurance
property loss exposure
any condition or situation that presents the possibility that a property loss will happen
real property
land, buildings, and other structures attached to the land or embedded in it
personal property
all tangible or intangible property that is not real property
net income
revenue minus expenses and taxes during a given time period
net income loss
an indirect loss caused by a reduction in revenue, an increase in expenses, or both during a given time period
liability loss exposure
any condition or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party
liability loss
a claim for monetary damages because of injury to another party or damage to another party’s property
personal loss exposure
any condition or situation that presents the possibility of a financial loss to an individual or a family by such causes as death, sickness, injury, or unemployment
personnel loss exposure
any condition or situation that presents the possibility of a financial loss to a business because of the death, disability, retirement, or resignation of key employees
indemnify
to restore a party who has sustained a loss to the same financial position that party held before the loss occurred
fire and allied line insurance
insurance that covers direct damage to or loss of insured property
business income insurance (business interruption insurance)
insurance that covers the loss of net income or additional expenses incurred by a business as the result of a covered loss to its property
crime insurance
insurance that covers money, securities, merchandise, and other property from various causes of loss such as burglary, robbery, theft, and employee dishonesty
ocean marine insurance
insurance that covers ships and their cargo against such causes of loss as fire, lightning, and “perils of the seas”
inland marine insurance
insurance that covers miscellaneous types of property, such as movable property, goods in domestic transit, and property used in transportation and communication
auto physical damage insurance
insurance that covers loss of or damage to specified vehicles from collision, fire, theft, or other causes
auto liability insurance
insurance that covers an insured’s legal liability arising out of the ownership, maintenance, or use of an automobile
commercial general liability insurance
insurance that covers liability loss exposures arising from a business organization’s premises and operations, its products, or its completed work
personal liability insurance
insurance that provides liability coverage to individuals and families for bodily injury and property damage arising from the insured’s personal premises or activities
professional liability insurance
insurance that provides liability coverage to professionals for errors and omissions arising out of their professional duties
whole life insurance
life insurance that provides lifetime protection, accrues cash value, and has premiums that remain unchanged during the insured’s lifetime
cash value
the monetary amount, considered to be a form of savings, that accumulates in a whole life insurance policy
term insurance
life insurance that provides coverage for a specified period, such as ten or twenty years, with no cash value
universal life insurance
insurance that provides life insurance protection and a savings component
medical insurance
insurance that covers medical expenses that result from illness or injury
disability income insurance
a type of health insurance that provides periodic income payments to an insured who is unable to work because of sickness or injury
stock insurer
an insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders
mutual insurer
an insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them
demutualization
the process by which a mutual insurer owned by its policyholders becomes a stock company, which is then owned by its stockholders
reciprocal insurance exchange (interinsurance exchange)
an insurer owned by its policyholders, formed as an unincorporated association for the purpose of providing insurance coverage to its members (called subscribers) and managed by an attorney-in-fact
subscribers
the policyholders of a reciprocal insurance exchange who agree to insure each toher
attorney-in-fact
in a reciprocal insurance exchange, the contractually authorized manager of the reciprocal who administers its affairs and carries out its insurance transactions
captive insurer (captive)
an insurer formed as a subsidiary of its parent company, organization, or group, for the purpose of providing all or part of the insurance on the parent company or companies
reinsurance
a contractual agreement that transfers some or all of the potential costs of insured loss exposures from policies written by one insurer to another insurer
primary insurer
the insurer that transfers some or all of the potential costs of its insured loss exposures to another insurer in a reinsurance contractual agreement
reinsurer
the insurer that assumes some or all of the potential costs of insured loss exposures of the primary insurer in a reinsurance contractual agreement
monopolistic state fund
a state workers’ compensation insurance plan that is the only source of workers’ compensation insurance allowed in that state
competitive state fund
a state workers’ compensation insurance plan that competes with private insurers to provide workers’ compensation insurance
residual market plan (shared market plan)
a program that makes workers’ compensation insurance available for those who cannot obtain voluntary coverage from private insurers
guaranty fund
a state fund that provides a system to pay the claims of insolvent insurers, generally funded by assessments collected from all insurers licensed in the state
National Association of Insurance Commissioners (NAIC)
an association of the commissioners of the insurance departments of each state, the District of Columbia, and the U.S. territories and possessions, whose purpose is to coordinate insurance regulation activities among the various state insurance departments
model law
a document drafted by the NAIC, in a style similar to a state statute, that reflects the NAIC’s proposed solution to a given problem or issue and provides a common basis to the states for drafting laws that affect the insurance industry
ratemaking
the process insurers use to calculate the rates that determine the premium to charge for insurance coverage
rate
the amount per exposure unit for insurance coverage, used to arrive at a premium when multiplied by the number of exposure unites
premium
the price of the insurance coverage provided for a specified period
actuary
a person who uses complex mathematical methods and technology to analyze loss data and other statistics and to develop systems for determining insurance rates
actuarial equity
a ratemaking concepts through which actuaries base rats on calculated loss experience to place insureds with similar characteristics in the same rating class
social equity
a rating concept that holds that rate structures discriminate unfairly if they impose a higher rate on an insured for factors beyond the insured’s control, such as age or gender
unfair discrimination
applying different standards or methods of treatment to insureds who have the same basic characteristics and loss potential, such as charging higher-than-normal rates for an auto insurance applicant based solely on the applicant’s race, religion, or ethnic background
prior-approval law
an insurance rating law that requires rates to be approved by the state insurance department before they can be used
flex rating law
an insurance rating law that requires prior approval only if the new rates are a specified percentage above or below previously filed rates
file-and-use law
an insurance rating law that requires insurers to file rates with the state insurance department but does not require insurers to wait for approval before using the rates
use-and-file law
an insurance rating law that requires rates to be filed within a specified period after they are first used in the state
open competition (no-file law)
an insurance rating law that does not require rates to be filed with the state
state-mandated rates
an insurance rating law that requires all insurers to adhere to rates established by the state insurance department for a particular type of insurance
exempt commercial policyholders
an organization with sufficient size and sophistication to be permitted to buy property, liability, and automobile insurance using rates and/or policy forms not filed with state insurance departments
non-filed inland marine
classes of inland marine insurance that are exempt from filing requirements
solvency
the ability of an insurer to meet its financial obligations as they become due, even those resulting from insured losses that may be claimed several years in the future
solvency surveillance
the process, conducted by state insurance regulators, of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business
Insurance Regulatory Information Systems (IRIS)
an information and early-warning system established and operated by the NAIC to monitor the financial soundness of insurers
licensed insurer (admitted insurer)
an insurer authorized by the state insurance department to sell insurance within that state
domestic insurer
an insurer incorporated in the same state in which it is writing insurance
foreign insurer
an insurer licensed to operate in a state but incorporated in another state
alien insurer
an insurer licensed in a U.S. state but incorporated in another country
market conduct regulation
regulation of the practices of insurers in regard to four areas of operation: sales, practices, underwriting practices, claim practices, and bad-faith actions
standard market
collectively, insurers who voluntarily offer insurance coverages at rates designed from customers with average or better-than-average loss exposures
excess and surplus lines (E&S) insurance
insurance coverages unavailable in the standard market that are written by nonadmitted insurers
nonadmitted insurer (unlicensed insurer)
an insurer that is not licensed in many of the states in which it operates and that writes E&S insurance coverages
paid loss
a claim payment that an insurer has made
incurred losses
the sum of paid losses and changes in loss reserves for a particular period
loss reserves
amounts designated by insurers to pay claims for losses that have already occurred but are not yet settled
net investment gain or loss
an insurer’s gains or losses from the sale of invested assets plus net investment income
net underwriting gain or loss
an insurer’s earned premiums minus its losses and underwriting expenses for a specific period
overall gain or loss from operations
net investment gain or loss plus net underwriting gain or loss
assets
types of property, both tangible and intangible, owned by an entity
admitted assets
types of property, such as cash and stocks, that regulators allow insurers to show as assets on their financial statements
nonadmitted assets
types of property, such as office furniture and equipment, that regulators do not allow insurers to show as assets on financial statements because these assets cannot readily be converted to cash at or near their market value
liabilities
financial obligations, or debts, owed by a company to another entity, usually the policyholder in the case of an insurer
loss reserve
the amount estimated and set aside by insurers to pay claims for losses that have already occurred but are not yet settled
unearned premium reserve
the total of an insurer’s unearned premiums on all policies at a particular time
policyholders’ surplus
an insurer’s total admitted assets minus its total liabilities
balance sheet
a financial statement that shows a company’s financial position at a particular point in time. For an insurer, it includes the insurer’s admitted assets, liabilities, and policyholders’ surplus.
income statement
a financial statement that shows a company’s revenues, expenses, and net income for a particular period, usually one year
loss ratio
an insurer’s incurred losses (included loss adjustment expenses) for a given period divided by its earned premiums for the same period
expense ratio
an insurer’s incurred underwriting expenses for a given period divided by its written premiums for the same period
dividend ratio
an insurer’s policyholder dividends for a given period divided by its earned premiums for the same period
combined ratio
the sum of the loss ratio and the expense ratio
investment income ratio
net investment income divided by earned premiums for a given period
overall operating ratio
the combined ratio minus the investment income ratio
capacity ratio (premium-to-surplus ratio)
written premiums divided by policyholders’ surplus
producer
a person who sells insurance products for one or more insurers
agency
a legal relationship that exists when one party, the agent, represents or acts on behalf of another party, the principal
agent
in the agency relationship, the party that is authorized by the principal to act on the principal’s behalf
principal
in the agency relationship, the party that authorizes the agent to act on its behalf
insurance agent
a legal representative of one or more insurers for which the representative has a contractual agreement to sell insurance
agency contract (agency agreement)
a written agreement between an insurer and an agent that specifies, among other things, the scope of the agent’s authority to conduct business for the insurer
errors and omissions (E&O)
negligent acts (errors) committed by a person conducting insurance business that give rise to legal liability for damages; a failure to act (omission) that creates legal liability
express authority
the authority that the principal specifically grants to the agent
binding authority
an insurance agent’s authority to effect coverage on behalf of the insurer
binder
an oral or written agreement to provide temporary insurance coverage until a formal written policy is issued
implied authority
the authority implicitly conferred on an agent by custom, usage, or a principal’s conduct indicating intention to confer such authority
apparent authority
a third party’s reasonable belief that an agent has authority to act on the principal’s behalf
independent agency
a business, operated for the benefit of its owner (or owners) that sells insurance, usually as a representative of several unrelated insurers
independent agent
a producer who works for an independent agency who can be either the owner or an employee of the agency
agency expiration list
the record of an insurance agency’s present policyholders and the dates their policies expire
insurance broker
an independent business owner or firm that sells insurance by representing customers rather than insurers
managing general agency (MGA)
an independent business or organization that appoints and supervises independent agents for insurers that use the independent agency system
exclusive agent
an agent that has a contract to sell insurance exclusively for one insurer or a group of related insurers
direct writing system
a system of insurance marketing that uses sales representatives who are employees of the insurer
direct response
a system of insurance marketing that relies primarily on mail, phone, and/or Internet sales, without the services of an agent
mixed marketing system
an insurer’s use of more than one marketing system or distribution channel
sales commission (commission)
a percentage of the premium that the insurer pays to the agency or producer for new policies sold or existing policies renewed
contingent commission
a commission that an insurer pays, usually annually, to an independent agency that is based on the premium volume and profitability level of the agency’s business with that insurer
marketing representative
an insurer employee who visits agents representing the insurer, develops and maintains sound working relationships with those agents, and motivates the agents to produce a satisfactory volume of profitable business for the insurer
production underwriter
an insurer employee who works in the insurer’s office in an underwriting position but also travels to visit and maintain rapport with agents and sometimes clients
unfair trade practices law
state law that specifies certain prohibited business practices
rebating
a practice, prohibited in most states, of offering a cash payment or something of value to an applicant as an inducement to buy or maintain insurance
underwriting
the process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decisions made
underwriter
an insurer employee who evaluates applicants for insurance, selects those that are acceptable to the insurer, prices coverage, and determines policy terms and conditions
adverse selection
a situation that occurs because people with the greatest probability of loss are the ones most likely to purchase insurance
capacity
the amount of business an insurer is able to write, usually based on a comparison of the insurer’s written premiums to its policyholders’ surplus
class rate (manual rate)
a type of insurance rate that applies to all insureds in the same rating category or rating class
merit rating plan
a rating plan that modifies class rates to reflect loss characteristics of a particular insured
individual rate (specific rate)
a type of insurance rate that reflects the unique characteristics of an insured or the insured’s property
judgment rate
a type of individual rate that is used to develop a premium for a unique exposure for which there is no established rate
standard form
a policy form that contains standard insurance wording; it is used by insurers that subscribe to the services of insurance advisory organizations
hazard
a condition that increases the frequency or severity of a loss
book of business (portfolio)
a group of policies with a common characteristic, such as territory or type of coverage; can also refer to all policies written by a particular insurer or agency
treaty reinsurance
an arrangement whereby a reinsurer agrees to automatically reinsure a portion of all eligible insurance of the primary insurer
facultative reinsurance
an arrangement whereby the primary insurer chooses which policies to submit to the reinsurer and the reinsurer can accept or reject any policies submitted
underwriting authority
the scope of decisions that an underwriter can make without receiving approval from someone at a higher level
underwriting audit
a process in which members of the home office underwriting department examine files to see whether underwriters are following underwriting guidelines
expert systems (knowledge-based systems)
computer software programs that supplement the underwriting decision-making process; ask for the information necessary to make an underwriting decision, ensuring that no information is overlooked
moral hazard
a condition that may lead a person to intentionally cause or exaggerate a loss
attitudinal hazard (morale hazard)
a hazard that involves carelessness about, or indifference to, potential loss on the part of an insured or applicant
physical hazard
a tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss
legal hazard
a characteristic of the legal or regulatory environment that hampers an insurer’s ability to collect a premium commensurate with the exposure to loss
claim
a demand by a person or business seeking to recover from an insurer for a loss that may be covered by an insurance policy
claimant
anyone who submits a claim to an insurer
first party
the insured in an insurance contract
third party
a person or business who is not a party to the insurance contract but who asserts a claim against the insured
claim representative (adjuster)
a person responsible for verifying coverage, determining the cause of loss, determining the amount of damages or extent of loss, and settling or otherwise concluding a claim
staff claim representative
an insurer employee who performs some or all of the insurer’s claim handling activities
inside claim representative
an insurer employee who handles claims that can be settled by phone, mail, or email from inside the insurer’s office
outside claim representative (field claim representative)
an insurer employee who handles calims that cannot be handled easily by phone, mail, or email
independent adjuster
a claim representative who offers claim handling services to insurers for a fee
settlement authority
authority expressly given to a producer by an insurer to settle and pay certain types of claims up to a specified limit
public adjuster
a person hired by an insured to represent the insured in handling a claim
self-insurance plan
an arrangement in which an organization pays for its losses with its own resources rather than by purchasing insurance
third-party administrator (TPA)
an organization that contracts to provide administrative services, including claim handling, to other businesses
reservation of rights letter
a notice sent by the insurer advising the insured that the insurer is proceeding with a claim investigation but that the insurer retains its right to deny coverage later
insurable interest
a coverage verification criterion that exists when a person or other entity would suffer a financial loss if the subject property were damaged
actual cash value (ACV)
the cost to replace property minus an allowance for the property’s depreciation
depreciation
the allowance for physical wear and tear or technological or economic obsolescence
replacement cost
the cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation
agreed value
a method of valuing property in which the insurer and the insured agree, at the time the policy is written, on the maximum amount that will be paid in the event of a total loss
subrogation
the insurer’s right, assumed from the insured, to recover payment from a third party this is legally responsible for the loss
salvage rights
the insurer’s rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss
constructive total loss
a loss such that property cannot be repaired for less than its actual cash value minus the anticipated salvage value
damages
money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible
compensatory damages
damages intended to compensate a victim for actual harm suffered; include special damages and general damages
special damages
compensatory damages for specific, out-of-pocket expenses, such as doctor and hospital expenses
general damages
compensatory damages awarded for losses that do not have a specific economic value, such as pain and suffering
punitive damages
damages awarded by a court to punish wrongdoers who cause bodily injury or property damage to others and to deter others from committing similar wrongs
case reserve
a loss reserve assigned to an individual claim
unfair claim practices law
a state law that specifies illegal claim practices
policy
a complete written contract of insurance
contract
a legally enforceable agreement between two or more parties
consideration
something of value given by each party to a contract
conditional contract
a contract in which one or more parties must perform only under certain conditions
utmost good faith
an obligation to act in complete honesty and to disclose all relevant facts
concealment
an intentional failure to disclose a material fact
material fact
in insurance, a fact that would affect the insurer’s decision to provide or maintain insurance or to settle a claim
misrepresentation
a false statement of a material fact on which a party relies
contract of adhesion
a contract to which one party (the insured) must adhere as written by the other party (the insurer)
contract of indemnity
a contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss
principle of indemnity
the principle that insurance should provide a benefit no greater than the loss suffered by the insured
valued policy
a policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss), regardless of the actual value of the loss
declarations page (declarations, dec)
an insurance policy information page or pages providing specific details about the insured and the subject of the insurance
insuring agreement
an insurance policy statement indicating that the insurer will, under certain circumstances, make a payment or provide a service
exclusion
a policy provision that eliminates coverage for specified exposures
policy condition
any provision that qualifies an otherwise enforceable promise of the insurer
manuscript policy (manuscript endorsement)
an insurance policy that is specifically drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer
self-contained policy
a single document that contains all the agreements between the insurer and the insured; forms a complete policy by itself
endorsement
a document that amends an insurance policy
modular policy
a policy consisting of several different documents, none of which by itself forms a complete contract
cancellation
termination of a policy, by either the insurer or the insured, during the policy term
pro rata refund
the unused premium (based on the pro rata portion of the premium for the number of days remaining in the policy) returned to the insured when a policy is canceled
short rate refund
a refund of premium that is less than what the pro rata refund would be; sometimes used when the insured cancels a policy midterm
liberalization clause
a policy condition providing that if a policy form is broadened at no additional premium, the broadened coverage automatically applies to all existing policies of the same type
assignment
the transfer of rights or interest in a policy to antoher party by the insured
money
currency, coins, bank notes, and sometimes traveler’s checks, credit card slips, and money orders held for sale to the public
securities
written instruments representing either money or other property, such as stocks and bonds
auto
in insurance, a broad term that includes cars, trucks, trailers, buses, and other motorized vehicles designed for road use
mobile equipment
various types of land vehicles and the equipment attached to them, such as tractors, bulldozers, forklifts, and backhoes, designed primarily for off-road use
recreational vehicle
a vehicle used for sports and recreational activities, such as a dune buggy, all-terrain vehicle or dirt bike
cause of loss (or peril)
the actual means by which property is damaged or destroyed
named peril
a specific cause of loss listed and described in an insurance policy; also used to describe policies containing named perils
special form (or open perils policy)
a policy that provides coverage for any direct loss to property unless the loss is caused by a peril specifically excluded
mortgagee (or mortgageholder)
a lender that loans money on a home, building, or other real property
mortgagor
the person or organization that borrows money from a mortgagee to finance the purchase of real property
bailee
a person or business in possession of property entrusted to them by others
property insurance
any type of insurance that indemnifies an insured who suffers a financial loss because property has been lost, stolen, damaged, or destroyed
floater
a policy designed to cover property that floats, or moves, from location to location
friendly fire
a fire that stays in its intended place, such as a fire in a fireplace
hostile fire
a fire that leaves its intended place, such as a spark that escapes a fireplace and sets the carpet on fire
proximate cause
the event that sets in motion an uninterrupted chain of events contributing to a loss
vehicle damage
damage caused by a motor vehicle to some other kind of property
vandalism
willful and malicious damage to or destruction of property
sprinkler leakage
accidental leakage or discharge of water or other substance from an automatic sprinkler system
sinkhole collapse
a cause of loss involving the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or similar rock formations
mine subsidence
a cause of loss involving the sinking of ground surface when underground open spaces, resulting from the extraction of coal or other minerals, are gradually filled in by rock and earth from above
volcanic action
a cause of loss involving lava flow, ash, dust, particulate matter, airborne volcanic blast, or airborne shock waves resulting from a volcanic eruption
burglary
the taking of property from inside a building by someone who unlawfully enters or exits the building
robbery
the taking of property from a person by someone who has caused or threatened to cause the person harm
theft
any act of stealing; includes burglary and robbery
collision
damage to a motor vehicle caused by its impact with another vehicle or object, or by the vehicle’s overturn
other than collision (or comprehensive)
losses to a covered auto by fire, theft, vandalism, falling objects, flood, and various other perils
specified causes of loss
for other than collision coverage in commercial auto policies, a named perils alternative that is less expensive than comprehensive because fewer causes of loss are covered
direct loss
a reduction in the value of property that results directly and often immediately from damage to that property
time element loss (or indirect loss)
loss of income or extra expenses resulting from direct loss to property
extra expenses
expenses that reduce the length of a business interruption or enable a business to continue some operations when the property has been damaged by a covered cause of loss
additional living expense
a coverage in homeowners policies that indemnifies the insured for the additional expenses that are incurred following a covered property loss so that the household can maintain its normal standard of living while the dwelling is being restored
named insured
the policyholder whose name(s) appears on the declarations page of an insurance policy
first named insured
the person or organization whose name appears first as the named insured on a commercial insurance policy; this person or organization is usually responsible for paying premiums and has the right to receive any return premiums, to cancel the policy, and to receive the notice of cancellation or nonrenewal
mortgage clause (or mortgageholders clause)
a clause in a property insurance policy that protects the insurable interest of the mortgagee by giving it certain rights, such as the right to be named on claim drafts for losses to insured property and the right to be notified of policy cancellation
loss payee
a lender, named on an insurance policy, who has loaned money on personal property, such as a car
loss payable cause
a clause that provides that a loss will be paid to both the insured and the loss payee as their interests appear and gives the loss payee certain rights
deductible
a portion of a covered loss that is subtracted from the amount the insurer would otherwise be obligated to pay the insured
insurance-to-value provision
a provision in property insurance policies that encourages insureds to purchase an amount of insurance that is equal to, or close to, the value of the covered property
coinsurance
an insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced
legal liability
a person or an organization’s status as legally responsible for injury or damage suffered by another person or organization
constitutional law
the Constitution itself and all the decisions of the Supreme Court that involve the Constitution
statutory law
the formal laws, or statutes, enacted by federal, state, or local legislative bodies
common law (or case law)
a body of principles and rules established over time by courts on a case-by-case basis
criminal law
the category of law that applies to wrongful acts that society deems so harmful to the public welfare that government takes the responsibility for prosecuting and punishing the wrongdoers
civil law
the category of law that deals with the rights and responsibilities of citizens with respect to one another; applies to legal matters not governed by criminal law
contract law
the branch of civil law that deals with contracts and settles contract disputes
tort
a wrongful act, other than a crime or breach of contract, committed by one party against another
tort law
the branch of civil law that deals with civil wrongs other than breaches of contract
negligence
a person or an organization’s failure to exercise the level of care that a reasonably prudent person would have exercised under similar circumstances
tortfeasor
a person, a business, or another party who has committed a tort
vicarious liability
legal responsibility that occurs when one party is held liable for the actions of another party
intentional tort
a deliberate act (other than a breach of contract) that causes harm to another person
assault
the intentional threat of bodily harm
battery
unlawful physical contact with another person
defamation
an intentional false communication, either written or spoken, that damages another’s reputation or good name
slander
a spoken untrue statement that damages a person’s reputation
libel
a written or printed untrue statement that damages a person’s reputation
false arrest
any unlawful physical restraint of another’s freedom
invasion of privacy
an encroachment on another person’s right to be left alone
strict liability (or absolute liability)
legal liability that arises from inherently dangerous activities or dangerously defective products that result in injury or harm to another, regardless of how much care was used in the activity; also used to describe the liability imposed by certain statutes, such as workers’ compensation laws
hold-harmless agreement
a contractual provision that obligates one party to assume the financial consequences of legal liability for another party
warranty
a promise, either written or implied, such as a promise by a seller to a buyer that a product is fit for a particular use
statutory liability
legal liability imposed by a specific statute or law
liability insurance
insurance that covers losses resulting from bodily injury to others or damage to the property of others for which the insured is legally liable and to which the coverage applies
bodily injury
as defined in many liability policies, any physical injury to a person, including sickness, disease, and death
property damage
insurance term referring to physical injury to, destruction of, or loss of use of tangible property
personal injury
injury, other than bodily injury, arising from intentional torts such as libel, slander, or invasion of privacy
supplementary payments
various expenses the insurer agrees to pay under a liability insurance policy (in addition to the liability limits) for items such as premiums on bail bonds and appeal bonds, loss of the insured’s earnings because of attendance at trials, and other reasonable expenses incurred by the insured at the insurer’s request
prejudgment interest
interest that may accrue on damages before a judgment has been rendered
postjudgment interest
interest that may accrue on damages after a judgment has been entered in a court and before the money is paid
medical payments coverage
coverage that pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of whether the insured was at fault
occurrence basis coverage
coverage for liability claims that occur during the policy period, regardless of when the claim is submitted to the insurer
claims-made coverage
coverage for liability claims that are first made against the insured during the policy period for covered events that occur on or after the retroactive date and before the end of the policy period
retroactive date
the date in a claims-made policy on or after which injury or damage must occur in order to be covered
each person limit
the maximum amount an insurer will pay for injury to any one person for a covered loss
each occurrence limit
the maximum amount an insurer will pay for all covered losses from a single occurrence, regardless of the number of persons inured or the number of parties claiming property damage
aggregate limit
the maximum amount an insurer will pay for all covered losses during the covered policy period
split limits
separate limits for bodily injury and property damage liability coverage
single limit
the maximum amount an insurer will pay for the insured’s liability for both bodily injury and property damage that arise from a single occurrence
risk management
the process of managing exposures to accidental losses
loss frequency
how often a loss occurs in a given period
loss severity
monetary amount of damage that results from a loss
risk control
a risk management technique that attempts to decrease the frequency or severity of losses
avoidance
a risk control technique that eliminates a loss exposure and reduces the chance of loss to zero
loss prevention
a risk control technique that seeks to lower the frequency of loss from a particular loss exposure
loss reduction
a risk control technique that seeks to lower the severity (decrease the dollar amount) of losses
separation
a risk control technique that isolates loss exposures from one another to minimize the adverse effect of a single loss
duplication
a risk control technique that uses backups, spares, or copies of critical property, information, or capabilities
risk financing
a risk management technique that includes steps to pay for or transfer the cost of losses
retention
a risk financing technique that involves retaining all or part of a particular loss exposure
noninsurance transfer
a risk financing technique in which one party transfers the potential financial consequences of a particular loss exposure to another party that is not an insurer