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PACKAGE POLICY

A policy containing protection against a number of different exposures in a single contract such as fire, theft, burglary and liability. Other all-risk options such as scheduled items for all-risk coverage are available at the option of the insured. Personal Package Policies are usually of the Broad Form or Special Dwelling Policies, or, more frequently the Homeowners Policies. Commercial Package Policies are also now available under the Special Multi-Peril (SNP) Forms, and may be tailor made for particular businesses, such as Motels, Hotels, various Mercantile and Office Risks and others. Also known as "Combination Policy."

PAIR OR SET CLAUSE

Clause found in inland marine policies which provides that in the event of covered loss of one item of a pair or one or more items of a set, the company is liable only as the value of the item(s) lost bears to the total value of the complete pair or set, and the loss of the item(s) shall not be construed as the total loss of the entire pair or set. For example, the loss of one of a pair of earrings would require the company to pay the reasonable and fair proportion of the total value of the pair, some consideration being given to the importance of the lost item. -Some years back, the settlement would have been half the value of the set, no questions asked. Today, however, adjustment is frequently made by replacing the set in exchange for the remaining piece for salvage. This practice does not usually hold, however, in matters of loss or damage of a part of a set which is made up of a number of parts, where the individual parts are not considered for their value as part of a complete set. For example, it two units of a twenty unit set, each unit being of equal value, are lost or damaged (2/20th or 1/10th), then the company would pay 10% (1/10th) of the total value of the set.

PARTICIPATING POLICY

A policy which entitles the policy holder in a stock insurance company to share in the underwriting and/or investment profit (if any), based on a percentage of the premium paid, in the form of dividends based on individual earned premiums. (See also Stock Participating Company.)

PARTICULAR AVERAGE

See General Average.

PARTNERSHIP

A legal entity created by combining the work, talents, money and other assets of two or more individuals in order to accomplish more than any one could do alone. A copy of the partnership agreement must be filed in the county (or equivalent) clerk’s office for notice to the public that a partnership exists. Many partnerships have been highly successful, but there are many dangers to the participants in this type of arrangement. Unlike a (see) Corporation, the liability of each partner is not limited to the extent of his investment. If the firm fails and its obligations exceed its assets, creditors may recover from assets of the individuals involved. In addition, all partners are bound by the acts of one of them. (See Corporation, Entity.)

PARTY

An individual or other legal entity (partnership, corporation, unincorporated association) who is or becomes principal in a contract or other legal action. An entity whose physical or financial condition may be altered as a result of the settlement of a claim or judgment in litigation is referred to as an "Interested Party" or as a "Party at Interest." A "Disinterested Party" is one who has knowledge of a contract or an occurrence resulting in litigation, but who has no personal or financial interest in the parties involved. An "Uninterested Party" is one who doesn’t care one way or the other. And we can’t resist the story Bob Steele of WTIC, Hartford, Connecticut, tells about when he asked someone "What is the difference between ‘ignorance’ and ‘apathy?.’ The answer was, "I don’t know and I don’t care." (See also Contract and Claim.)

PARTY WALL

A wall constructed on the building line dividing two pieces of property, the use and the responsibility of which is common to both owners of the adjoining property.

PAYMENT BOND

A bond guaranteeing the owner of a building under construction that the building will be turned over to him upon completion free and clear of any liens for unpaid labor or materials or other encumbrances. (See Bond.)

PAYMENT PLAN

Any of the various premium payment plans for the convenience of payment of premium.

PAYROLL AUDIT

When the premium for certain types of policies is based on payroll (Worker’s Compensation, for example) a "payroll audit" may be made by the insurance company in order to verify the figures supplies by the insured. (See Audit.)

PENALTY

The limit of liability or the maximum amount of insurance of the company (the Surety) writing a bond.

PERFORMANCE BOND

A bond guaranteeing the satisfactory performance of a contract (usually construction). This bond is sometimes erroneously referred to as a "Completion Bond." See that term elsewhere for correct definition. (See also Payment Bond.)

PERFORMANCE VEHICLE’

A private passenger automobile which is more highly powered, relative to its size and weight, than would be expected for the normal operation of private passenger vehicles. A "performance vehicle" is usually subject to a surcharge for liability and physical damage, and may be identified as such in the Symbol and Identification of the Private Passenger Automobile Manual.

PERIL

See Exposure.

PERILS OF THE SEA

The hazards insured against in an ocean marine policy which refer to unusual (but natural) action of heavy seas or high winds resulting directly in sinking, collision or stranding on reefs, rocks or shoals. The usual action of the winds, waves or tides does not come under the meaning of this term.

PERILS ON THE SEA

A reference to hazards in an ocean marine policy which are not the result of "Perils of the Sea," but instead are losses or damage caused by such things as theft, pilferage, non-delivery, fire, breakage, shifting of cargo, condensation in the hold, contact with other cargo and other occurrences brought about by external causes. Excepted are losses which are described in certain warranties, such as -those resulting from capture, seizure, strikes, lockouts, riots, war risks, etc.

PERIPHERAL DEVICES (PERIPHERALS)

Equipment used primarily for the processing of punched cards (key punchers, sorters, reproducers, collators, etc.). These devices are not connected directly to the computer. They are not part of the computer system, but serve an important role in the operation of the data processing function by reducing the burden of card processing on the computer. (Punched cards have been for the most part replaced by other storage devices.)

PERJURY

The willful making of a false statement concerning a material fact under oath in a legal proceeding; false testimony.

PERSONAL ARTICLES FLOATER

A policy used to provide coverage for a variety of valuable personal articles, such as furs and jewelry, cameras and equipment, silverware, golfer’s equipment, musical instruments, fine arts, stamp collections and coin collections on an all-risk basis. The items to be covered are "scheduled" (described in detail and evaluated, and coverage is usually world-wide but may sometimes be limited to the United States and Canada), and, unlike the Personal Effects Floater, cover at the residence of the insured. The floater form may be attached to and made a part of the Homeowners policy.

PERSONAL AUTOMOBILE POLICY (PAP)

See Family Automobile Policy.

PERSONAL EFFECTS FLOATER

(Also known as "Tourist Floater.") This form covers personal articles such as are usually carried by tourists or travelers belonging to, used by or worn by the insured and members of his immediate family residing together against practically all risks or loss or damage anywhere in the world except in the insured’s residence premises or in storage except that which might be incidental to travel. Property is not "scheduled" but does have limitations (jewelry and the like, for examples is limited to 10% of the policy amount or $100 on any one article, whichever amount is less) and exclusions such as borrowed or rented property, theft from unattended automobile, or from premises of schools, dormitories or fraternity or sorority houses. Coverage under the Personal Effects policy is now covered to a large degree by the Homeowners policy.

PERSONAL INJURY

Physical damage to the human body, as opposed to damage to property. (See also discussion under Injury.)

PERSONAL INJURY PROTECTION (PIP)

See No-Fault Auto Insurance.

PERSONAL LINES

Various forms of insurance written to cover the activities and movable property of individuals as opposed to those of business. (See Commercial Lines.)

PERSONAL PROPERTY

In insurance terms, Personal Property is movable property as opposed to Real Property (land and buildings).

PERSONAL PROPERTY FLOATER (P.P.F.)

A broad form inland marine type policy covering all types of personal and household property anywhere on an "all-risk" basis with certain exclusions. This form is now seldom written since much of the protection afforded is now covered under the Homeowners form, particularly under Homeowners HO-5 and "C" policies.

PERSONAL PROPERTY REPLACEMENT COST ENDORSEMENT

Except for such personal property as jewelry, silver, coin collections, etc., written on a "Stated Value" basis and scheduled on a (see) floater policy or endorsement, personal property has always been subject to depreciation, and loss adjustment subject to "Actual Cash Value." The Replacement Cost Endorsement is now available in some states for attachment to homeowners policies. As expected, it has some restrictions. Ineligible property (which will be adjusted on an actual cash value basis) are such things as antiques, fine arts, paintings and similar articles of rarity or antiquity which are irreplaceable; memorabilia, collectibles and similar articles whose age or history contribute to their value; articles that are not maintained in good workable condition or that are outdated, obsolete or not being used. There are also limits, such as policy or special limits, beyond which the company will not pay. Consult manual for availability, additional charges and other specific limitation and conditions. (See Actual Cash Value and Valued Policy.)

PERSONAL PROPERTY, UNATTENDED

See Unattended Automobile.

PHILATELIC PROPERTY

Stamps and stamp collections.

PHYSICAL DAMAGE (AUTOMOBILE)

1.) Refers to damage done to the insured automobile (not to be confused with "Property Damage" which is damage done by the insured automobile) such as fire, theft, collision or upset, windstorm, vandalism, malicious mischief, flood, falling objects, etc.

2.) That portion of automobile insurance other than liability (Bodily Injury, Medical Payments, etc.).

PHYSICAL DAMAGE (TO PROPERTY OF OTHERS)

Unlike Property Damage found in general liability policies, this coverage provides the insured protection for damage to property of others while in the care, custody or control of the insured, including intentional damage by a child of 12 or under. Covers for damage to property borrowed by the insured, but not to property owned or rented by the insured, any member of his family residing with him, nor to property owned by a tenant of the insured. This coverage is included in the standard Comprehensive Personal Liability Policy, and is incorporated in the Homeowners forms under Section II, Liability.

PHYSICAL HAZARD

The physical properties of characteristics of real or personal property, together with the physical conditions adjacent to such property, which might contribute to creating or increasing the possibility of loss. (See also Moral Hazard.)

PICK-UP ENDORSEMENT

An endorsement used when a package policy written to "pick up" certain lines already covered by policies which are still in force, allowing them to continue to expiration. This form is also know as the "Credit for Existing Insurance" endorsement, and allows the insured premium credit on a pro rata basis for the existing policies, and automatically picks up such coverages upon their expiration, contingent upon their remaining in force until that time. This presents the insured from being penalized for short rate cancellation, and also eliminates any suspicion that the agent may be guilty of "Twisting."

PILFERAGE

Petty theft of personal property.

PLAIN LANGUAGE LEGISLATION

The move toward plainer language and away from the "fine print" has given rise to Federal and State legislation mandating that legal contracts be made more readable to lay persons (consumers) who are made parties to these contracts. The legislation affects the Insurance Industry which had made attempts in this direction long before the government decided to do something about the problem. Much of the legislation has required that rewritten contracts use as a yardstick for readability, the "Flesch Reading Ease Test" and obtain a minimum grade on a scale of 1 to 100 (1 being the most difficult; 100 being the easiest). The problem of writing contracts which must necessarily cover almost every conceivable contingency without resorting to litigation and with an absolute minimum of possibility of more than one interpretation for any of the conditions, is enormous. The aim is to use a minimum of simple words to spell out an agreement between two or more parties, each of which has, certain obligation and privileges. An uncountable number of situations could arise requiring this simple contract to be called upon to give an unequivical interpretation as to the proper application of its terms. That there is room for improvement, no one can doubt; archaic language must go. (See Flesch Reading Ease Test.)

PLANT

See Agency Plant.

POLICY

The written contract between the insurance company and the insured containing the details of an insurance agreement, including any modifying endorsements attached at the time of issue or thereafter.

POLICY PERIOD

A record of all policies (by number) kept by an insurance company to account for all policies issued and not yet issued. (i.e. those not yet used either by the company, or those in the possession of its agents not yet reported as having been issued.) Policies missing because of loss, damage, voided or flat-cancelled must be accounted for. If voided or flat-cancelled by agent, the policies must be returned to the company to be entered in the policy register as such. If lost or destroyed by fire or other cause, the agent must sign a statement releasing the company from all liability for policies which may have been issued but yet remain unaccounted for. The release must also be recorded in the policy register.

POLICY REGISTER

A record of all policies (by number) kept by an insurance company to account for all policies issued and not yet issued. (i.e. those not yet used either by the company, or those in the possession of its agents not yet reported as having been issued.) Policies missing because of loss, damage, voided or flat-cancelled must be accounted for. If voided or flat-cancelled by agent, the policies must be returned to the company to be entered in the policy register as such. If lost or destroyed by fire or other cause, the agent must sign a statement releasing the company from all liability for policies which may have been issued but yet remain unaccounted

POOL

Companies joined together to write on a fixed share basis a certain (usually undesirable) class of business. (See Assigned Risk)

POWER OF ATTORNEY

A legal document authorizing another person or corporation to act on behalf of and obligate the giver of such Power Of Attorney within certain specified limitations. (See also Attorney-in-Fact.)

PREFERRED RISK

A risk that from the standpoint of exposure to loss is less likely than the average to result in a claim.

PREMISES

The location of the property insured, including the buildings(s) insured and/or containing the property insured, plus the insured property immediately adjacent thereto.

PREMISES MEDICAL PAYMENTS

See Medical Payments.

PREMIUM

The amount of money charged for a specific amount or limit of insurance for a specified length of time.

Additional Premium: An additional amount charged above and beyond the original premium by reason of a corrected rate, a "published" -rate replacing a "subject" rate (see below), or an additional policy amount, limit or coverage requested by the insured.

Earned Premium: The amount of total premium which has been used up at any given point during the policy period. (See also Unearned Premium below.)

Estimated (Advanced, Initial or Deposit) Premium: a premium agreed upon when the exact actual premium cannot be determined until the end of the policy period. Used on policies the premiums of which are based on payroll, sales, receipts or other units, the exact amount or number of which cannot be known in advance. (See also Audit.)

Gross Premium: The total premium paid by insured before any deduction for agent’s commission, reserve or reinsurance premium. Minimum Premium: The least amount for which an insurance company will insure a risk for a given period of time. Aside from the risk involved, an insurance company must take in at least enough money to cover the expenses of handling the necessary paperwork.

Minimum Retained Premium: See Minimum Retention. Return Premium: That portion of the total premium due the insured by reason of cancellation of the policy; reduction in the coverage, rate, limit or amount; or upon determination on audit that the Advance or Deposit Premium is greater than the actual premium developed.

"Subject "Premium: See Subject Rate.

Unearned Premium: The portion of the total premium applicable to the unexpired (unused) portion of the policy period at any given point during its term. (See also Earned Premium above.)

PREMIUM NOTICE

A statement sent to a policyholder giving advance notice of a premium due.

PRIMA FACIE

Refers to the indiscriminate mixing of clients and companies’ funds by an agent or broker with his own funds. This is illegal under state law and can result in revocation of license and fines.

PRIMARY CARRIER

An insurance company which is first obligated to pay its limit of coverage before any other applicable insurance ("excess") is required to pay.

PRIMARY INSURANCE

The applicable insurance which is called upon first to satisfy a covered loss. (See Excess Insurance and Reinsurance.)

PRINCIPAL

See Bond.

PRINCIPAL AMOUNT

See Face Amount.

PRINTER

One of many types of data processing output devices which can produce data from a computer that can be read by the human eye.

PRIVATE CARRIER

See Common Carrier.

PRIVATE PASSENGER AUTOMOBILE

The generally accepted insurance definition of this term is a four-wheeled motor vehicle of the private passenger, station wagon or jeep type, not used as a public or livery conveyance nor rented to others without a driver, owned or hired under long-term lease by an individual or by husband and wife residing in the same household, or by a corporation or co-partnership. Automobiles used in connection with business pursuits (sales calls, etc.) are included in this definition, providing they are not used for wholesale or retail delivery. Also included in the "private passenger" definition is a motor vehicle with a pick-up body, a delivery sedan or a panel truck (none of which has a load capacity in excess of 1,500 pounds), owned by an individual or by a husband and wife residing in the same household, and not used in the occupation, profession or business of the insured, other than driving to and from work or pleasure use. (See definition of Commercial Vehicle.)

PRO RATA

Literally "in proportion." For example, if a one-year policy calls for a premium of $120, at the end of 3 months, the Pro Rata Earned Premium is $30, and the Pro Rata Unearned Premium (for the remaining nine months) is $90. See Premium, Apportionment, Short Rate and other Pro Rata headings.

PRO RATA CANCELLATION

See Cancellation

PRO RATA DISTRIBUTION CLAUSE

(Sometimes called "Average Clause.") A clause attached to blanket forms of policies covering various items or locations to enable the insurance to be distributed proportionately as to the value of each item or location and its relationship to the total value of the property insured at the time of the loss. An example of the benefit to the insured of this clause would be a man who had two or more warehouses in which the goods he manufactured would vary from time to time. If he carried enough total insurance, particularly with regard to any Reduced Rate Contribution Clause requirement (80% Coinsurance, for example), he would have no concern relative to variations of inventory between the warehouses.

PROBABILITY, THEORY OF

1.) Statement of the observation that, in a large ("Significant") number of situations, a predictable number of events of various types will occur as a result of pure chance. The degree of accuracy of prediction of the occurrences will be in direct proportion to the number of such situations. The concept of probability is the basis of insurance. See also Actual’,’, Insurance and Law of Large Numbers.

PRODUCER

An agent, sub-agent, broker or salaried solicitor who sells insurance. (See also Agent and General Agent.)

PRODUCT LIABILITY INSURANCE

This coverage protects manufacturers and retailers (and all the people in between) of goods against claims for damages or injuries arising out of possession, use or consumption of such goods. Food poisoning is a good example of a claim under this type of insurance. (See also Completed Operations.)

PROFESSIONAL LIABILITY

The liability of those engaged in offering professional services is practically unlimited. The law has forced increasing responsibility for errors and omissions on Attorneys, Physicians and Surgeons, Dentist, Druggists, Nurses, Hospitals, Laboratories and many others who supply professional services and may be held liable for errors -and omissions, malpractice or malfeasance. The area of responsibility was even further expanded by legislation in the early 1970’s to hold Corporate Directors and Officers individually liable for civil claims made against them and caused by a negligent act or error or omission while acting in their official capacities.

It is important to remember that this coverage is limited to protection against liability arising out of professional services, and is not designed to protect against exposure of claims arising from premises or other hazards which can properly be covered by other forms of liability insurance.

PROFITS INSURANCE

When a fire or other covered peril destroys merchandise which is covered under the policy, only the value of the damaged goods or destroyed merchandise is paid. Profit Insurance reimburses the insured for loss of profit that could have been realized had the goods been sold. Coverage can be provided for this exposure by adding (see) "Selling Price Clause" endorsement.

PROGRAM

A detailed set of instructions given to the computer telling it what kinds of input data it will receive, what operations it will perform on it and what form of output to produce.

PROHIBITED LIST

A list provided by the company to the agent outlining the classes of risks which it will not insure under any conditions. A Prohibited Risk is the same, except that it refers to a particular risk.

PROMULGATE

Determine and publish (make known) a rate.

PROOF OF FINANCIAL RESPONSIBILITY

See Financial Responsibility.

PROOF OF LOSS

A formal written affidavit accompanied by pertinent supporting data filed by the insured requesting payment from the insurance company of a "First Party" claim. (See Claim.)

PROPERTY

See Real Property and Personal Property.

PROPERTY DAMAGE

Damage to property of others as opposed to (see) Physical Damage for which the insured may be held legally liable.

PROPERTY INSURANCE

This type of insurance indemnifies the insured for the loss of property (real or personal) resulting from the direct physical damage or loss by a peril insured against (Fire, Explosion, Windstorm, etc.).

PROSTHETIC DEVICE

An artificial substitute for a missing part of the human body, such as a denture, an artificial eye, appendage (leg, arm, hand, etc.). Canes, walkers, wheelchairs and the like are not considered prosthetic devices, but supportive braces worn on and attached to the body are so considered.

PROTECTION AND INDEMNITY INSURANCE (P. & I.)

The ocean marine equivalent of Bodily Injury and Property Damage Liability Insurance. Since there are some differences inasmuch as P. & I. has its origins in maritime law, this definition is general in nature, and further study is recommended depending on interest and need.

PROTECTION STATEMENT

A description of the degree of fire protection in terms of proximity of available fire hydrants and fire stations. Term is used to define the exposure for minimum (as opposed to specific) rated risks. Protection Statements are numbered. For example, Protection Statement No.1 indicates that the risk is located within 500 feet of the nearest (acceptable) fire hydrant, and within 3 (road) miles of an available fire station. Notice the words "acceptable” and "available" (ours). If the hydrant is located on private property and cannot be used, it is obviously not "acceptable"; similarly, if a fire station is located within 3 miles of the risk, but is located in another municipality, and will not respond to a call for help, it cannot be considered available. Statements usually range from 1 to 4. When the distance requirements are met, but the hydrant and/or fire station are located in a different municipality, and there is a reciprocal agreement between the municipalities to respond without prior approval of an authority of either town, then the facilities are considered as "available."

PROTECTIVE LIABILITY INSURANCE

See Contractors’ Protective Liability.

PROXIMATE CAUSE

Property: The hazard to which a loss can be directly attribute, such as wind, fire, lightning, flood, etc. Liability: The direct causal connection between a negligent act and an injury.

PUBLIC ADJUSTER

See Adjuster.

PUBLIC AUTHORITY

See Civil Authority.

PUBLISHED RATE

See Promulgate.

PUNITIVE DAMAGES

See Damages.