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ABANDONMENT

From Standard Fire Policy: "There can be no abandonment to this company of any property." From Insurance Service Office Homeowners Policy: "We need not accept any property abandoned by any insured." These provisions mean that the insured cannot force the company to accept possessions of property damaged under a covered loss. The option is solely that of the company.

ABOVE-NORMAL LOSS

A loss which is made more costly than would normally be expected because of extenuating circumstances such as sub-zero weather, heavy rain, faulty or delayed alarm, traffic congestion, etc.

ACCIDENT

An event which occurs by chance: Unforeseen, unexpected and unplanned, resulting in injury and/or property damage. (See also Occurrence.)

ACCIDENT CONTROL OR PREVENTION’

See Loss Prevention Service.

ACCIDENTAL MEANS

The cause of an occurrence which is unexpected and unintentional; a fortuitous cause. (See Occurrence.)

ACCOMODATION LINE

A Line of insurance accepted by a company (which otherwise would be rejected) strictly as an accommodation to a good agent. (See Line.)

ACCORD

An acronym for Agency-Company Organization for Research and Development, a coalition of agents, companies and rating organizations with the purpose of standardizing forms and procedures. Its functions are now performed by a corporation of the same name with headquarters in New Jersey.

ACCOUNT CURRENT

A detailed statement, usually prepared by the agent, of business written by him for a particular company as of the end of each month.

ACQUISITION COST

An insurance company’s cost of obtaining business: services to insureds, agent’s commissions, advertising, etc.

ACT OF GOD

An event which is the result of action of natural forces over which man has little or no control: earthquake, tornado, lightning, flood, etc.

ACTUAL CASH VALUE (A.C.V.)

The cost measured in terms of money to replace or restore any item of property at the time of the loss, less depreciation (except where "Replacement Value" is covered). See also Depreciation, Replacement Value and Stated Amount.

ACTUARY

A mathematician trained in statistics employed by an insurance company or rating bureau who applies the theories of probability to insurance practice; the person who supplies the “educated guess” by predicting the anticipated experience projections upon which the rates and/or premiums for various classes of risks are based.

ADDITIONAL INTEREST

An individual, partnership or corporation, other than the actual named insured, who has an insurable interest. (See "Insurable Interest.") For example, an employer or a salesman who owns his own car which is used in the employer’s business. Should the employee become involved in an accident while on company business, the employer would most likely be named in any action for recovery by an injured party. In this event he (the employer) has a possible loss which can be measured in terms of money, and he therefore has an insurable interest which can be protected by naming him in the employee’s policy as "Additional Interest." (See also Insurable Interest and Non-Ownership Liability, Automobile.)

ADDITIONAL LIVING EXPENSE

(Coverage D in the Homeowners Policy.) The money, above and beyond normal living expenses, which becomes necessary in the event of a loss covered by the policy. For example: A fire loss covered by a Homeowners Policy so damages the home that it is uninhabitable for three weeks. Normal activities of the family (eating, sleeping, laundry, etc.) cannot be carried on as usual during this period. As a result, they must eat out, live in a motel, send out laundry and so on. Additional Living Expenses coverage supplies the extra money (up to the policy limits, and only the additional amount required) to live under these conditions, as opposed to living under normal conditions.

ADDITIONAL PREMIUM

See Premium.

ADJACENT

Term used to describe structures which are near each other, but not physically connected.

ADJOINING

Structures are "Adjoining" when they are physically separated, but are connected or touching.

ADJUSTER

An individual who negotiates on behalf of an insurance company with all parties concerned following a loss to determine the proper settlement of any claim(s). An Independent Adjuster is an individual who adjusts losses for insurance companies, but is paid on a fee basis, and is not an employee of any insurance company. An adjuster who is employed full time by an insurance company is known as a Staff Adjuster. A Public Adjuster is one who, for a fee, negotiates with an insurance company or companies on behalf of the insured(s) in the event of a loss. (See also Arbitration.)

ADMIRALTY COURTS

Courts of law having jurisdiction over ocean marine matters. Legal differences are settled by Courts of Admiralty under rules, procedures and precedents which differ considerably from those of other courts. Their area concerns matters of happenings at sea, marine insurance contracts and settlements of disputes arising from interpretations of provisions of maritime contracts, insurance or otherwise.

ADMITTED COMPANY (OR CARRIER OR INSURER)

A company licensed by a state under the laws of the state, but whose home office is located in another state or country. (See also Alien, Foreign or Domestic Company.)

ADVANCE PREMIUM

See Premium.

ADVERSE SELECTION

The practice by insureds of purchasing insurance protection against only those exposures or perils which they believe will most likely cause a loss. When large number of insureds bought only selective types of certain coverages (although some of these certainly got burned), the result was that a disproportionate number of poorer risks were more heavily insured for certain exposures than the better risks which insured “across the board.” This had the effect of defeating the purpose of the “Spread of Risk” doctrine. (This is not to mention the additional cost of issuing and servicing the many individual policies.) With the coming of the “Package” policies in the 1950’s, the problem of adverse selection was largely eliminated.

ADVISORY RATES OR PREMIUMS

Rate or premium schedule promulgated by a rating bureau which may or may not be adopted by a subscribing company, at its option.

AFTER CHARGE

Rate or premium schedule promulgated by a rating bureau which may or may not be adopted by a subscribing company, at its option.

AGE GROUP

A grouping of motor vehicles based on model year for the purpose of automobile physical damage insurance rating.

AGENCY AGREEMENT

A contract between an insurance company and an agent spelling out all the conditions upon which the agreement is based, covering the rights and the obligations of both the company and the agent.

AGENCY PLAN

Term used to describe all of a company’s agents as a group.

AGENT

An individual, partnership or corporation licensed by the state to act for a particular company or companies in soliciting, negotiation, effecting and servicing insurance contracts. By the terms of his contract and bylaw, he is, in many cases, the company. (See also Captive Agent under Direct Writer, Broker, General Agent, Special Agent, State Agent, and Local Agent.)

AGENT OF RECORD

See Broker of Record.

AGGREGATE EXCESS OF LOSS REINSURANCE

See Excess of Loss Reinsurance, Aggregate.

AGGREGATE LIMIT

See Limit(s) of Liability.

AGREED AMOUNT CLAUSE

A provision in fire policies under which the insured agrees to carry an amount of insurance specified by the company (usually 80 to 90% or more of value) and the company in return agrees to waive the requirements of the coinsurance clause. (See Coinsurance.)

ALIEN COMPANY (OR CARRIER OR INSURER)

An insurance company whose home office is located in a foreign country.

ALIENATED PREMISES

Premises transferred to another owner.

ALLIED LINES

Lines of insurance which are allied to Property Insurance, such as Water Damage, Rain Insurance, Business Interruption or Sprinkler Leakage, etc.

ALL-RISK

Term generally found in Inland Marine insurance indicating coverage for losses caused by perils not specifically excluded in the policy. Automobile Comprehensive coverage could be considered "All Risk." (See also Inland Marine, Floater, and Named Perils.)

ALTERATION

See Forgery.

AMENDMENT(S)

See Endorsement.

AMERICAN AGENCY SYSTEM

The system of selling and servicing insurance by means of independent agents who may represent more than one company, and who derive their income from commissions on insurance sold. (For contrast, see Direct Writer.)

AMERICAN INSTITUTE FOR PROPERTY AND LIABILITY UNDERWRITERS

An organization which supports and promotes insurance education and encourages professionalism establishing standards to that end. Those qualified who successfully pass the examinations prepared and conducted by the institute are awarded the designation “Chartered Property and Casualty Underwriter” (CPCU). It is equal to the "CLU" and "CPA" designations awarded in life insurance and public accounting, respectively.

AMERICAN LLOYDS

See Lloyd’s of London.

ANALYTIC SYSTEM

See Dean Schedule.

ANNUAL STATEMENT

An insurance company’s annual report to the -State Insurance Department(s) in the state(s) in which it is licensed. The report, containing information regarding the company’s financial condition, is required bylaw. The form containing the data may vary from state to state, by must include the particulars spelled out by the supervising authority of the state in which the company is licensed.

ANNUALIZATION

See Deferred Premium Payment.

ANTIQUE AUTOMOBILE

A motor vehicle of the private passenger type which is 25 or more years old, maintained solely for use in exhibitions, parades, club activities and occasionally used for other purposes.

APPLICATION

A written statement based on information supplied by a prospective insured, giving full details concerning the risk as may be required by the company and upon which the company relies in rating and underwriting. In some forms of insurance, the application becomes an integral part of the policy.

APPORTIONMENT

The determination of the extent to which each applicable policy must share in a loss when two or more policies cover the same loss. The portion of the loss paid by the sharing policy is called its “Contribution.” For example, in a loss of $16,000, where two concurrent policies contribute “Pro Rata,” one policy (A) is written for $35,000, and the other (B) is for $45,000, the total amount of the insurance applicable to the loss is $80,000. The "A" policy pays 35/80ths (7/1 6ths) of the $16,000 loss, or $7,000. Policy "B" ($45,000) pays 45/80ths (9/1 6ths) of the loss, or $9,000. In this example, the process is known as "Apportionment," and the amount of the loss paid by each policy is called its 'Contribution.'

APPRAISAL

Determination of the insurable value of any given property. Also, determination of the extent of financial loss or damage. A clause in some policies (Fire, for example) provides for an appraisal by impartial experts to determine the amount of damage or loss. The terms of the policy provide that such appraisal must be made on demand of either the insured or the insurance company. Appraisals of property to be insured may be required by the insurance company prior to the issuance of the policy, and may constitute a part of the policy, when issued.

APPRAISAL CLAUSE

A condition in a property policy which provides for (see) arbitration in the event of a disagreement between the company and the insured as to the amount of a loss. Either party has the right to request an appraisal; each appraiser is paid by the party selecting him, and other expenses for the (see) umpire, if one is necessary, are shared equally by the company and the insured.

APPRECIATION

The increase in value (in terms of money) of property as the result of market pressure, inflation and/or rarity.

APPROVED

Term indicates meeting or exceeding a set standard, such as "Approved Roof," "Approved Fire Hydrant," etc.

ARBITRATION (AND ARBITRATION CLAUSE)

Most policies provide the mechanics for resolving disputes between the insured and the company when the amount of a loss cannot be agreed upon. The usual procedure is for each party to choose a qualified disinterested person, both of whom in turn select a third party as “umpire.” Both the company and the insured agree beforehand that the decision of the arbitrators will be binding. (See Disinterested Party.)

ARSON

The willful, malicious or fraudulent burning of real and/or personal property.

ASSAILING THIEVES

Term used in ocean marine referring to persons who steal or rob by violence or force. Included as a "Specified Peril" in marine policies. Excludes loss as a result of petty thievery or pilferage.

ASSESSABLE POLICY

See Mutual Company.

ASSETS

Owned property, real and personal, including money, accounts receivable and other evidences of debt. Liquid assets are those which are readily available (cash, negotiable instruments) to pay obligations.

ASSIGNED RISK

A "pool" arrangement among subscribing insurance companies, whereby the companies agree to write automobile liability and/or physical damage insurance for risks unable to obtain coverage in the open ("voluntary") market. The assignment of risks is based on the proportionate share of premiums written in the voluntary market by the participating companies. Those undesirable risks are politely referred to as the "Residual Market." The plans and their administration are known variously as "The Blank(State) Automobile Insurance (Assigned Risk) Plan," "Joint Underwriting Association," or ‘Reinsurance Facility.'

ASSIGNMENT

1.) The written transfer of interest (legal rights) in an insurance policy from one Party to another, in most cases only with the consent of the insuring company. 2.) The legal transfer of rights or obligations from one party to another. 3.) The designation of a participating company in a "pool" agreement. (See Assigned Risk)

ASSUMED LIABILITY

Liability (other than Legal Liability--see "Liability Insurance") which is assumed by contract or other agreement. Liability assumed by the insured results in exposures which are excluded under most liability policies. (See Contractual Liability Insurance.)

ASSUMING CARRIER

See Reinsurance.

ASSUMPTION BY CONTRACT

Basic liability policies do not contemplate exposures beyond the policy provisions created by liability assumed by contract between the insured and another party. Liability protection of this nature may be obtained by (see) Contractual Liability insurance for an additional premium.

ASSUMPTION OF RISK

One of the defenses which may be used by the party being sued for negligence is that the claimant assumed the risk of suffering injury when he was (or should have been) aware that he was exposing himself to injury when he took action or failed to take action.

ASSURED

See Insured.

ATTACH

A policy or endorsement is said to 'attach' when such policy or endorsement becomes effective.

ATTORNEY-IN-FACT

An individual who has been given authority by another to act in his behalf in certain specifically defined transactions. (See also Power of Attorney.)

ATTRACTIVE NUISANCES

An object or situation which normally would not be considered dangerous (such as an abandoned refrigerator) but could cause injury or death to one (such as a child) who is "attracted" to it as a plaything.

AUDIT

An examination of the insured’s records (payroll, inventory, receipts, sales, etc.) in order to determine the actual premium developed when the basis of premium is on factors which cannot be pre-determined. Worker’s Compensation (payroll) and Product Liability (sales, receipts or other units) are examples of policies requiring audit. Such policies are called "Audit Policies," and sometimes "Automatic Policies."

AUDIT BUREAU

See Stamping Office.

AUTHORIZED INSURER

See Admitted Company.

AUTOMATIC COVER CLAUSE

Provides increase in amount of insurance to cover added or transferred property automatically (within limits). Insured is required to report such property additions within 60 days and pay a pro rata additional premium from date of acquisition. Coverage is usually available only to Government, Hospital or Educational Institutions.

AUTOMATIC REINSTATEMENT

Most policies provide automatic reinstatement of the original amount of insurance without payment or additional premium after payment of a loss and effective upon the restoration of the property involved in the loss.

AUTOMATIC REMOVAL

This provision affords coverage for removal of property from one location to another, pro rata at each location. Property in transit is limited to amount provided by the policy for property away from the original premises. Coverage is limited to 30 days from date of removal. Not to be confused with (see) Pro Rata Distribution Clause.

AUTOMOBILE INSURANCE

See Physical Damage, Automobile; Medical Payments, Automobile;Comprehensive Coverage, Automobile; Family Automobile Policy, Basic Automobile Policy.

AUTOMOBILE INSURANCE PLANS

See Assigned Risk.

AUTOMOBILE MEDICAL PAYMENTS

See Medical Payments, Automobile.

AVERAGE CLAUSE

(Also called "Average Distribution Clause.") See Pro Rata Distribution Clause.

AVERAGE RATE (OR PREMIUM)

An average rate or premium is a rate applying to several (2 or more) items under a blanket policy which is generally determined from the average of values and the published rates applicable to each item of property covered.

AVERAGE WEEKLY BENEFIT

The weekly indemnity as prescribed under worker’s compensation law for disability or death. Based on a percentage of the average weekly wage of the worker, the amount of compensation is subject to a minimum and maximum. Determination is made by formula according to the law of the state in which the claim is made. Under “No-Fault” reparations, weekly benefits for work loss are also based on a percentage of income prior to the date of the claim.

AVERAGE, GENERAL; AVERAGE PARTICULAR

See General Average, Particular Average.