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EARNED COMMISSION

See Commission.

EARNED DIVIDEND

See Dividend.

EARNED PREMIUM

See Premium.

EARNINGS INSURANCE

A type of business interruption insurance for small mercantile and non-manufacturing businesses which is a relatively simple form, and requires no coinsurance. It provides payments for loss of business during a shut-down period while the damaged property is being repaired, and is a simplified version of the Gross Earnings form. While no coinsurance is required, the policy does include a limitation of 1/6, 1/4 or 1/3 of the amount of insurance during any 30 day period of delay. The face amount of the policy therefore, should be at least six, four or three times the monthly needs, depending on the limitation selected. See also Business Interruption, Gross Earnings Form and Time Element.

EASEMENT

The right to pass over or through the property of another.

EFECTIVE DATE

The date and hour at which an insurance policy or endorsement goes into force. The Standard Fire Policy provides that insurance takes effect "at Noon, Standard Time at the Location of the property involved." "Standard Time" is generally regarded by the courts as "Daylight Savings Time" if that is legally in effect at the location of the insured property. Most policies covering real or personal property become effective at 12:00 Noon, while most casualty policies become effective at 12:01 A.M. This arrangement was suitable a few years ago when by charter, companies were permitted to write either Property or Casualty Insurance, but not both types. When statutes permitting companies to write both property and casualty lines in a single policy, the definition of “Effective Time” became a problem. Since that time, multi-line (multiple-peril) policies with a common effective time have been approved in practically all states.

ELECTRONIC DATA PROCESSING (EDP)

See Data processing.

EMBEZZLEMENT

The fraudulent appropriation of property (usually money) to which the individual has been entrusted. Although this usually means an employee, it also could be an attorney, an attorney-in-fact, one -who has power of attorney, or any other fiduciary. Conversion has the same meaning, but is restricted to property rather than money.

EMINENT DOMAIN

The right of government to appropriate private real property for public use; to confiscate or condemn any property for the common good. When the property taken results in a necessary public benefit, the owner is entitled to fair compensation.

EMPLOYEE, RESIDENCE

See Residence Employee.

EMPLOYERS’ LIABILITY

The common law doctrine placing legal liability on the employer for injuries to his employees. Modified through the years by statute, Employers’ Liability has now been largely replaced by Worker’s Compensation Insurance, which provides protection for employees whether or not negligence can be shown. Since Worker’s Compensation Insurance covers only the obligations of the employer under the various Worker’s Compensation Laws, no such law covers every situation in which an employee may seek to recover damages from his employer. In such cases the employee is free to take legal action against his employer for recovery. Inasmuch as all other Liability Policies specifically exclude coverage for employees, there has been included in the Worker’s Compensation Policy a second Insuring Agreement, Coverage B, Employers’ Liability, to cover the gap. While there is no dollar limit of coverage under the Worker’s Compensation contract itself (any and all sums must be paid in accordance with the state regulations, regardless of amount). Employers’ Liability (Section B) does have a limit. The limit applies per occurrence, with no separate limit per person.

EMPLOYERS’ NON-OWNERSHIP LIABILITY

See Non-Ownership Liability.

ENCUMBRANCE

Property (real and for personal) to which the owner does not have complete and clear legal title is said to be "encumbered." "Encumbrance" may be in the form of a mortgage, lien for unpaid taxes, "Mechanic’s Lien" for materials and/or labor, attachment (to secure claims by others for alleged obligations of the owner not necessarily related to the property), survivor’s rights or other legal restrictions.

ENDORSEMENT

A printed or otherwise written or typed statement attached to and made a part of an insurance policy, amending, clarifying, restricting or expanding the declarations or conditions of the policy. Changing circumstances often require that alterations be made to an existing insurance contract. Addition or elimination of a mortgagee or loss payee, change in coverage or limits, change of classification or basis of rating are just a few of the many changes which are made possible by the use of an endorsement. Were it not for endorsements, the alternative would be cancellation of the existing policy and issuance of a replacement to accomplish changes. This would be going from bad to worse, or much more worse. A “Rider” accomplishes the same purpose, but applies to bonding, health and accident and life insurance. The two terms have, unfortunately, been often used interchangeably.

ENGINEER

See Safety Engineer.

ENTITY

A unit recognized as being responsible under the law for its (his, her, their) acts or omissions which may affect the physical, mental or financial condition of another entity. An individual, a partnership, a corporation or association is considered an "Entity" under the law.

EQUIPMENT

Term used in insurance describing personal (movable) property owned by a business, not including items of inventory or supplies.

EQUITY

Literally, "Justice." Financially, the owner’s portion of the value (as measured in terms of money) of his property after the amount of (see) encumbrance (mortgage, lien, etc.) is deducted from the value of the property.

EQUITY RATING

A form of rating based on the insured’s experience. Similar to Experience, Merit and Retrospective Rating, but usually used on the very large risks for those insureds with better than average experience.

ERRORS AND OMISSIONS INSURANCE (E & 0)

Coverage for liability resulting from errors or omissions in the performance of professional duties (other than medical (see) Malpractice). Applicable as a general rule to professional business activities such as banking, accounting, law, insurance and real estate. With regard to insurance, covers loss occasioned by failure, whether by error or omission, to have adequate or valid insurance in force, including failure to renew without prior notice to the insured.

ESCROW

A deed or any instrument of property or an amount of money as part of an agreement which is entrusted to a third party (the "Escrowee" or "Escrow Agent") to be held by him until certain obligations of one of the parties to the agreement are fulfilled, at which time the deed, instrument or money is given to that party.

ESTIMATED PREMIUM

See Premium.

ESTOPPEL

A legal term referring to the prevention of a party from making. a claim which he might ordinarily have a right to make, except for a previous action taken by him (e.g., waiver or release) or by a court of law.

EVIDENCE OF FINANCIAL RESPONSIBILITY

See Financial Responsibility.

EX DOCK, NAMED PORT OF IMPORTATION

An ocean marine agreement under which the seller is responsible for all charges involving delivery of goods (including duty) to the designated port of entry. Under this agreement seller must also provide and pay for marine insurance (including War Risk) and is and remains responsible for the goods after delivery to the named port until the buyer or his authorized agent (not his insurance agent) takes physical control of the goods or until the time stipulated in the agreement expires, whichever comes first.

EX GRATIA PAYMENT

Payment by an insurance company of a loss for which it is not obligated to pay under the policy. This is sometimes done because of an error, oversight or misunderstanding on the part of the company, the agent or the insured. Payment is made entirely at the discretion of the company for various reasons, among which may be: to save a favorite agent’s face; to preserve the company’s image; to avoid litigation or simply to keep a prized account.

EX POINT OF ORIGIN’

An ocean marine contract under which the seller agrees to deliver goods to a designated location (warehouse, etc.) on or before a particular date (or within a stated period of time). On the agreed date or upon the expiration of the period of time specified, the goods become the responsibility of the buyer, whether or not he or his authorized agent takes physical possession.

EX WORKS

An agreement in ocean marine under which the buyer is responsible under a purchase agreement for transportation, insurance, duties and all other expenses involved, from the premises of the seller to the final destination of the goods.

EXAMINER, CLAIMS

See Claims Examiner.

EXAMINER, INSURANCE DEPARTMENT

An employee or other authorized representative of a state insurance department whose duties include the examination of the books and the reviewing of the procedures required of insurance companies licensed in that state to verify that the department’s regulations are being followed.

EXCEPTED PROPERTY

Term generally used to refer to property not covered by a policy but which may be added by endorsement. "Uninsurable Property," by contrast, cannot be covered.

EXCEPTIONS, STATE

See State Exceptions.

EXCESS AND SURPLUS LINES

When a risk cannot be placed in either the (see) Voluntary or Residual market, the agent or broker has the option of placing it with a "Non-Admitted" company through an "Excess" or "Surplus Lines" broker who must be licensed under the laws of your state to represent the non-licensed underwriter, such as Lloyd’s of London or other non-licensed facility. Any domestically licensed agent or broker may legally accept a commission for the placement of such a risk. (See Non-Admitted Company, Voluntary Market, Residual Market.)

EXCESS COVER

See Reinsurance.

EXCESS INSURANCE

Insurance which pays only after the amount of a loss exceeds a previously agreed amount which may or may not be insured under another primary policy or policies. An excess policy does not contribute in the event of a loss and until applicable primary insurance is exhausted, and where other excess insurance exists, it contributes only its proportionate share of such excess loss. (See also Primary Insurance, Reinsurance and Retrocession.)

EXCESS OF LOSS REINSURANCE, AGGREGATE

A reinsurance contract under which an insurance company may make certain that it does not exceed a predetermined net loss ratio. Should the company (the "ceding carrier") exceed the net loss percentage, the reinsurance company (the "assuming carrier") is bound by the agreement to reimburse the primary company the amount necessary to bring its net loss ratio back to the agreed percentage. See Reinsurance.

EXCLUSION(S)

Specific reference to exposure(s), condition(s), situation(s). or item(s) not covered in a policy.

EXEMPLARY DAMAGES

See Punitive Damages.

EXPENSE CONSTANT

An amount added to the premium charged on small policies to help cover the cost of handling such policies. This charge is applied to Worker’s Compensation policies, and is usually $15 or less. The charge depends on the total policy premium developed, rather than the classification of the risk. Generally speaking, on a risk with premiums in excess of $500, no charge for Expense Constant is made. (See also Loss Constant.)

EXPENSE RATIO

The relationship between a company’s (or a line’s) expenses and its premium, expressed in percentage.

class="quest2">EXPENSE, ADDITIONAL LIVING

See Additional Living Expense.

EXPERIENCE

The record of the ratio of premiums to losses of a given insured, agent, area, class of coverage, company, or the industry as a whole.

EXPERIENCE RATING

A system of estimating rating based on loss experience of an industry. Also known as "Merit Rating" or "Judgment Rating."

EXPIRATION DATE

The date (and time) on which insurance protection under a given policy is scheduled to cease. See discussion under Effective Date.

EXPLOSION

This term is generally not specifically defined in insurance policies except for exclusions (see below). A definition widely accepted by the courts is that an explosion is evidenced by a sudden and violent bursting and breaking or expansion of a container caused by an internal force or pressure, with material going outward from the center and usually accompanied by a noise. The following are not considered "explosions" for insurance purposes: 1.) electrical arcing, 2.) water hammer, 3.) rupture or bursting of pipes, 4.) "Sonic Boom" and 5.) rupture or bursting of rotating or moving parts of machinery caused by mechanical breakdown or centrifugal force.

EXPOSURE (OR HAZARD)

A condition, material, activity or situation, or the proximity to any of these, which creates or increases the possibility of a loss. Also, the measure of such possibility. Two risks may be insured against the same exposures (or hazards), but the possibility of loss may be far greater in one (type of construction, operation, materials handled, etc.) than in the other. The greater exposure to loss should determine the rate or premium charged and certainly should be a factor in deciding the acceptability of the risk. Exposure is also defined as the source of possible loss--wind, fire, explosion, earthquake, etc. The terms Exposure and Hazard are often used interchangeably with the word "Peril."

EXTENDED COVERAGE

Extends the coverage of a fire policy (which covers for fire and lightning only) to include loss due to Windstorm, Hail, Explosion, Riot, Riot attending a strike, Civil Commotion, Damage by Aircraft, Motor Vehicles or Smoke Damage. The endorsement excludes Vandalism and Malicious Mischief which may be added by endorsement for an additional premium. The Extended Coverage Endorsement does not apply to a standard fire policy unless a specific additional premium is charged; it must be written for the same amount as the fire policy; it must apply to all items covered by the policy and it does not act to increase the amount of insurance afforded by the policy to which the endorsement is attached.

EXTRA EXPENSE INSURANCE

A "Time Element" form of insurance which helps to pay for loss due to suspension of operations caused by a covered hazard. It is designed to pay for the "extra expenses" involved in continuing operations with a minimum of interruption until such time as the damaged premises can be repaired or a different usable premises can be obtained. Unlike "Business Interruption" coverage, which pays for loss due to suspension of operations, Extra Expense Insurance enables a business to continue necessary operations (health care facilities, laundries, newspaper publishing, etc.) which, if interrupted for any length of time, could seriously, if not fatally, damage a business operation. "Time Element" insurance may be tailored to the particular business, and may be added to the regular property insurance policy or may be written as a separate contract.