CAS Online Course 2 4th Edition

Factual expectancy

A situation in which a party experiences an economic advantage if an insured event does not occur or, conversely, economic harm if the event does occur.

Reasonable person test

A standard for the degree of care exercised in a situation that is measured by what a reasonably cautious person would or would not do under similar circumstances.

Insuring agreement

A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service.

Proof of loss

A statement of facts about a loss for which the insured is making a claim.

Good Samaritan law

A statute providing that a person will not be liable for damages as a result of rendering aid to an injured person, without compensation, at the scene of an accident

Survival statute

A statute that preserves the right of a person's estate to recover damages that person sustained between the time of injury and death

Statute of repose

A statute that requires a plaintiff to file a lawsuit within a specific time period after a wrongful act by a defendant, such as improper construction of a building, regardless of when the injury occurred or was discovered.

Statute of limitations

A statute that requires a plaintiff to file a lawsuit within a specific time period after the cause of action has accrued, which is often when the injury occurred or was discovered.

Contract bond

A surety bond guaranteeing the fulfillment of obligations under construction contracts or other types of contracts

Classification system

A system developed for rating purposes to group similar loss exposures into homogeneous classes to avoid adverse selection

Apparent authority

A third party's reasonable belief that an agent has authority to act on the principal's behalf.

Intentional tort

A tort committed by a person who foresees (or should be able to foresee) that his or her act will harm another person

Malicious interference with prospective economic advantage

A tort involving intentional interference with another's business, or with another's expected economic advantage

Indemnity plan

A type of healthcare plan that allows patients to choose their own healthcare provider and reimburses the patient or provider at a certain percentage (usually after a deductible is paid) for services provided.

Managed care plan

A type of healthcare plan that provides members with comprehensive services and encourages them to use providers belonging to the plan.

Prior approval

A type of insurance rate regulation in which rates and supporting rules must be filed with and approved by the insurance regulator before they can be used

File-and-use

A type of insurance rate regulation in which the insurer must file rates and supporting rules with the insurance regulator within a specific number of days prior to their use, and if not disapproved by the regulator during that review period, the rates can then be used immediately without specific approval.

Use-and-file

A type of insurance rate regulation in which the rates and supporting rules must be filed with the insurance regulator within a specified period after they are put into use

Open competition (no-file law)

A type of insurance rate regulation that allows insurers to develop and use rates and supporting rules without having to file with or receive approval from the insurance regulator

Flex rating

A type of insurance rate regulation that requires insurers to obtain prior regulatory approval only if new rates exceed a certain percentage above or below previously filed rates

Annuity

A type of life insurance policy or contract that makes periodic payments to the recipient for a fixed period or for life in exchange for a specified premium.

Loss portfolio transfer

A type of retroactive plan that applies to an entire portfolio of losses

Vehicle identification number (VIN)

A unique number that is assigned to each vehicle and that identifies certain vehicle characteristics.

Functional valuation method

A valuation method in which the insurer is required to pay no more than the cost to repair or replace the damaged or destroyed property with property that is its functional equivalent.

Tort

A wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right.

Transportation expenses

Additional coverage in the Personal Auto Policy for substitute transportation costs incurred as the result of a covered physical damage loss.

Common carriers

Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services.

Personal property

All tangible or intangible property that is not real property.

Reinsurance recoverables

Amounts for losses and loss adjustment expenses owed to an insurer under reinsurance agreements covering paid losses

Occurrence

An accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Deferral-matching

An accounting approach in which the focus is to coordinate the timing of income and expense recognition so that both occur when the triggering event that is the focus of the contract occurs.

Asset-liability

An accounting approach that focuses on the value of assets or liabilities that exist as of the balance sheet date.

Gross negligence

An act or omission that completely disregards the safety or rights of others and is exaggerated or aggravated in nature.

Governmental function

An act that can be performed only by government.

Negligence per se

An act that is considered inherently negligent because of a violation of a law or an ordinance.

Ministerial act

An act that is directed by law or other authority and that requires no individual judgment or discretion about whether or how to perform it.

Administrative act (discretionary act)

An act, a decision, a recommendation, or an omission made by a government official or agency within the authority of that office or agency.

Intervening act

An act, independent of an original act and not readily foreseeable, that breaks the chain of causation and sets a new chain of events in motion that causes harm.

Public nuisance

An act, occupation, or structure that affects the public at large or a substantial segment of the public, interfering with public enjoyment or rights regarding property.

Ultrahazardous activity (abnormally dangerous activity)

An activity that is inherently dangerous; if harm results, the performer may be held strictly liable.

Extended reporting period (ERP)

An additional period (also called a "tail") following the expiration of a claims-made policy, during which the expired policy will cover claims first made for injury or damage that occurred on or after the policy's retroactive date (if any) and before policy expiration.

Preferred provider organization (PPO)

An administrative organization that meets the common needs of healthcare providers and clients and that identifies networks of providers and contracts for their medical services at discounted rates.

Arbitration

An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement, which can be final and binding.

Self-insured retention (SIR)

An amount that is deducted from claims that are payable under an umbrella liability policy and that are not covered at all by any primary policy.

Trend analysis

An analysis that identifies patterns in past data and then projects these patterns into the future

Immediate annuity

An annuity contract bought with a single payment and with a specified payout plan that starts right away.

Deferred annuity

An annuity with an accumulation period that usually lasts a number of years.

Denial-of-service attack

An attempt to overwhelm a computer system or network with excessive communications in order to deny users access

Invasion of privacy

An encroachment on another person's right to be left alone.

Corporation

An entity organized under law and entitled to the same rights as a person, distinct from its owners

Enterprise liability (industry-wide liability)

An expanded liability concept requiring each member of an industry responsible for manufacturing a harmful or defective product to share liability, when a manufacturer at fault cannot be identified

Market share liability

An expanded liability concept that applies when a product that has harmed a consumer cannot be traced to a single manufacturer; all manufacturers responsible for a substantial share of the market are named in the lawsuit and are liable for their proportional share of the judgment

Concert of action

An expanded liability concept that applies when all defendants acted together or cooperatively

Conspiracy

An expanded liability concept that applies when two or more parties worked together commit an unlawful act

Alternative liability

An expanded liability concept that shifts the burden of proof to each of several defendants in a tort case when there is uncertainty regarding which defendant's action was the proximate cause of the harm.

Express warranty

An explicit statement about a product by the seller that the buyer or other user may rely on and that provides a remedy in the event the product does not perform as claimed.

Twisting

An illegal misrepresentation that convinces a customer to cancel one policy and purchase another policy that is detrimental to the customer

Implied warranty of merchantability

An implied warranty that a product is fit for the ordinary purpose for which it is used

Broker

An independent producer who represents insurance customers.

Business invitee

An individual who has express or implied permission to be on the premises of another for the purpose of doing business.

Binding authority

An insurance agent's authority to effect coverage on behalf of the insurer.

Manuscript form

An insurance form that is drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer.

Named perils coverage

An insurance policy in which the covered causes of loss are listed or "named" in the policy

Declarations page (declarations, or dec.)

An insurance policy information page or pages providing specific details about the insured and the subject of the insurance.

Consent-to-settle clause

An insurance policy provision, usually found only in professional liability policies, that requires the insurer to obtain consent from the insured before settling a claim.

Modular policy

An insurance policy that consists of several different documents, none of which by itself forms a complete policy.

Contractors pollution liability (CPL) policy

An insurance policy that covers the pollution-related loss exposures of a contractor

Site-specific environmental impairment liability (EIL) policy

An insurance policy that covers third-party claims arising from either sudden or gradual releases of pollutants from specified locations.

Underground storage tank (UST) compliance policy

An insurance policy that provides proof of financial responsibility under governmental regulations that apply to the owners and operators of underground storage tanks containing fuels or other hazardous materials

Dollar trading

An insurance premium and loss exchange in which the insured pays the insurer premiums for low value losses, and the insurer pays the same dollars back to the insured, after subtracting expenses.

Domestic insurer

An insurer doing business in the jurisdiction in which it is incorporated.

Alien insurer

An insurer domiciled in a country other than the one in which it seeks to conduct, or is conducting, business

Foreign insurer

An insurer licensed to operate in a jurisdiction but incorporated in another jurisdiction

Intentional infliction of emotional distress

An intentional act causing mental anguish that results in physical injury.

Fraud

An intentional misrepresentation resulting in harm to a person or an organization

Insurable interest

An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.

Legal duty

An obligation imposed by law for the preservation of the legally protected rights of others.

Implied warranty

An obligation that the courts impose on a seller to warrant certain facts about a product even though not expressly stated by the seller

Administrative agency

An official governmental body empowered with the authority to implement and administer particular legislative acts.

Health maintenance organization (HMO)

An organization that provides all the care needed by its members in exchange for a fixed fee.

Negligent infliction of emotional distress

An unintentional act causing mental anguish that results in physical injury.

Interference with employment

An unjustified intentional act that interferes with another's valid or expected business relationship.

Private nuisance

An unreasonable and unlawful interference with another's use or enjoyment of his or her real property.

Loss exposure

Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs

Contract of adhesion

Any contract in which one party must either accept the agreement as written by the other party or reject it.

Producer

Any of several kinds of insurance personnel who place insurance and surety business with insurers and who represent either insurers or insureds, or both

Policy condition

Any provision that qualifies an otherwise enforceable promise made in the policy.

Nuisance

Anything interfering with another person's use or enjoyment of property.

Basic medical expense coverage

Coverage for medical expenses, such as hospital and surgical expenses, physicians' visits, and miscellaneous medical services.

Other than collision (OTC) coverage

Coverage for physical damage to a covered auto resulting from any cause of loss except collision or a cause of loss specifically excluded.

Inflation Guard optional coverage

Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.

Underinsured motorists (UIM) coverage

Coverage that applies when a negligent driver has liability insurance at the time of the accident but has limits lower than those of the injured person's coverage.

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.

Liability coverage

Coverage that protects the insured form damages owed because of legal liability to another party. For auto policies, it protects insureds against liability arising out of the ownership or operation of automobiles.

Directors and officers (D&O) liability insurance

Insurance that covers a corporation's directors and officers against liability for their wrongful acts covered by the policy and also covers the sums that the insured corporation is required or permitted by law to pay to the directors and officers as indemnification.

Employee benefits liability insurance

Insurance that covers an employer against liability claims alleging improper advice or other errors or omissions committed while administering the employer's employee benefit plans

Employment practices liability (EPL) insurance

Insurance that covers an organization, its directors and officers, and its employees against claims alleging damages because of wrongful employment practices such as sexual harassment, wrongful termination, and unlawful discrimination.

Aircraft insurance

Insurance that covers liability due to the insured's ownership, maintenance, or use of aircraft; physical damage to aircraft owned or used by the insured; and other aircraft loss exposures.

Major medical insurance

Insurance that covers medical expenses resulting from illness or injury that are not covered by a basic medical expense plan.

Management liability insurance

Insurance that covers organizations and in some cases their directors, officers, and other employees against liability claims for damages resulting from various wrongful acts that are not covered under other commercial liability policies; common examples are directors and officers liability insurance, employment practices liability insurance, employee benefits liability insurance, and fiduciary liability insurance.

Professional liability insurance

Insurance that covers persons engaged in various occupations against liability resulting from their rendering or failing to render professional services.

Fiduciary liability insurance

Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duties involving discretionary judgment.

Insurance to value

Insurance written for an amount approximating the full value of the asset(s) insured.

Battery

Intentional harmful or offensive physical contact with another person without legal justification

Postjudgment interest

Interest that may accrue on damages after a judgment has been entered in a court and before the money is paid.

Prejudgment interest

Interest that may accrue on damages before a judgment has been rendered.

Maintenance bond

A contract bond guaranteeing that the work will be free from defects in materials and workmanship for a specified period after the project is completed.

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.

Conditional contract

A contract that one or more parties must perform only under certain conditions.

Exculpatory clause (exculpatory agreement)

A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.

Precedent

A court decision that serves as an example, or rule, for later, similar cases

Broad evidence rule

A court ruling explicitly requiring that all relevant factors be considered in determining actual cash value.

Injunction

A court-ordered equitable remedy requiring a party to act or refrain from acting

Specific performance

A court-ordered equitable remedy requiring a party to perform a certain act, often - but not always - as a result of breach of a contract.

Accounts receivable

A current asset representing monies owed to a business by customers for goods or services rendered.

Underwriting cycle

A cyclical pattern of insurance pricing in which a soft market (low rates, relaxed underwriting, and underwriting losses) is eventually followed by a hard market (high rates, restrictive underwriting, and underwriting gains) before the pattern again repeats itself.

Slander

A defamatory statement expressed by speech

Libel

A defamatory statement expressed in writing

Immunity

A defense that, in certain instances, shields organizations or persons from liability

Assumption of risk

A defense to negligence that bars a plaintiff's recovery for harm caused by the defendant's negligence if the plaintiff voluntarily incurred the risk of harm.

Interspousal immunity

A defense to negligence that grants immunity to one spouse from the other spouse's lawsuit for torts committed before, during, and after the marriage.

Parent-child immunity

A defense to negligence that grants immunity to parents from their children's lawsuits for torts

Sovereign immunity (governmental immunity)

A defense to negligence that protects the government against lawsuits for tort without its consent.

Attractive nuisance doctrine

A doctrine treating a child as a licensee, or guest, rather than a trespasser on land containing an artificial and harmful condition that is certain to attract children.

Self-insured retention (SIR)

A dollar amount specified in an insurance policy that the insured must pay before the insurer will make any payment for a claim.

Mitigation of damages

A duty owed by an injured party to a claim to take reasonable measures to minimize or avoid additional injury or loss.

Misrepresentation

A false statement of a material fact on which a party relies

Defamation

A false written or oral statement that harms another's reputation.

Partnership

A for-profit business entity jointly owned by two or more persons who share ownership and profits (or losses), although not necessarily on an equal basis

Special damages

A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages

Variable life insurance

A form of life insurance providing a death benefit that may change with time due to its variable cash value

Cooperative corporation

A form of real property ownership in which the real property is owned by a corporation whose shareholders are the tenants of the property.

Variable universal life insurance

A form of universal life insurance that allows the policyholder to make fund choices for the investment component but that has no guaranteed cash value and no guaranteed interest rate

Injurious falsehood

A group of torts involving disparagement that causes harm to any kind of legally protected intangible property right.

Emotional distress

A highly unpleasant mental reaction resulting from another person's conduct, for which a court can award damages.

Uninsured motor vehicle

A land motor vehicle or trailer that is not insured for bodily injury liability, is insured for less than the financial responsibility limits, is a hit-and-run vehicle, or whose insurer denies coverage or becomes insolvent.

Wrongful-pregnancy action (wrongful-conception action)

A lawsuit by a parent for damages resulting from a pregnancy following a failed sterilization

"But for" rule

A rule used to determine whether a defendant's act was the proximate cause of a plaintiff's harm based on the determination that the plaintiff's harm could not have occurred but for the defendant's act

Negligent supervision

A parent's failure to exercise reasonable control and supervision over his or her child to prevent harm to others.

Jurisdiction

A particular court's power or authority to decide a lawsuit of a certain type or within a certain territory

Standing to sue

A party's right to sue, as one who has suffered or will suffer a legal wrong or an adverse effect from an action.

Consequential damages

A payment awarded by a court to indemnify an injured party for losses that result indirectly from a wrong such as a breach of contract or a tort.

Punitive damages (exemplary damages)

A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages.

Compensatory damages

A payment awarded by a court to reimburse a victim for actual harm.

Public invitee

A person invited to enter onto premises as a member of the general public for a purpose for which the land is open to the public.

Tortfeasor

A person or an organization that has committed a tort

Third party

A person or business who is not a party to the insurance contract but who asserts a claim against the insured.

Licensee

A person who has permission to enter onto another's property for his or her own purposes.

Trespasser

A person who intentionally enters onto the property of another without permission or any legal right to do so

Named insured

A person, corporation, partnership, or other entity identified as an insured party in an insurance policy's declarations page.

Passive negligence

A plaintiff's failure to discover a product defect or to guard against a possible defect.

Active negligence

A plaintiff's voluntary use of a defective product with knowledge of the potential danger resulting from the defect.

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.

Exclusion

A policy provision that eliminates coverage for specified exposures.

Excess liability policy

A policy that covers liability claims in excess of the limits of an underlying policy or a stated retention amount.

Reinstatement premium

A premium that applies to reinsurance contracts or primary policies to reinstate the original policy limit after it has been exhausted by the covered event in order to cover another possible event under the reinsurance or primary policy.

Predictive modeling

A process in which historical data based on behaviors and events are blended with multiple variables and used to construct models of anticipated future outcomes.

Return on equity (ROE)

A profitability ratio expressed as a percentage by dividing a company's net income by its net worth (book value). Depending on the context, net worth is sometimes called shareholders' equity, owners' equity, or policyholders' surplus.

External exposure

A property outside the area owned or controlled by the insured that increases the probability of loss to the insured's building and its contents.

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.

Grace period

A provision that continues a life insurance policy in force for a certain number of days (usually thirty or thirty-one) after the premium due date, during which time the policyowner can pay the overdue premium without penalty.

Retrospective rating

A ratemaking technique that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period; paid losses or incurred losses may be used to determine loss experience.

Experience rating

A rating plan that adjusts the premium for the current policy period to recognize the loss experience of the insured organization during past policy periods.

Condominium

A real estate development consisting of a group of units, in which the air space within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners.

Liquidating damages

A reasonable estimation of actual damages, agreed to by contracting parties and included in the contract, to be paid in the event of a breach or for negligence

Retrocession

A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).

Commercial property declarations page

A required commercial property coverage part component that provides basic information about the policyholder and the insurance provided

Commercial Property Conditions

A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms

Slight versus gross rule

A rule of comparative negligence that permits the plaintiff to recover only when the plaintiff's negligence is slight in comparison with the gross negligence of the other party

Substantial factor rule

A rule used to determine proximate cause of a loss by determining which of the acts are significant factors in causing the harm.

Foreseeability rule

A rule used to determine proximate cause when a plaintiff's harm is the natural and probable consequence of the defendant's wrongful act and when an ordinarily reasonable person would have foreseen the harm.

Self-contained policy

A single document that contains all the agreements between the insured and the insurer and that forms a complete insurance policy.

Surety

The party (usually an insurer) to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or law.

Defendant

The party in a lawsuit against whom a complaint is filed

Bailee

The party temporarily possessing the personal property in a bailment

Obligee

The party to a surety bond that receives the surety's guarantee that the principal will fulfill an obligation or perform as promised

Principal

The party to a surety bond whose obligation or performance the surety guarantees.

Relativity

A numerical estimate of losses in one classification relative to losses in a base classification

Civil law system

A basic legal system that relies on scholarly interpretations of codes and constitutions rather than court interpretations of prior court decisions, as in common-law systems

Bad faith (outrage)

A breach of the duty of good faith and fair dealing

Joint venture

A business association formed by an express or implied agreement of two or more persons (including corporations) to accomplish a particular project, such as the construction of a building.

Proximate cause

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened.

Loss assessment

A charge by the condominium association against the unit owners for the cost of uninsured losses.

Toxic tort

A civil wrong arising from exposure to a toxic substance.

Mass tort litigation

A class-action suit based on tort law rather than on contract law.

Court bonds

A classification of surety bonds guaranteeing that a person or an organization will faithfully perform certain duties prescribed by law or by a court or will demonstrate financial responsibility for the benefit of another until the final outcome of a court's decision

Coinsurance clause

A clause that requires the insured to carry insurance equal to at least a specified percentage of the insured property's value.

Incontestable clause

A clause that states that the insurer cannot contest the policy after it has been in force for a specified period, such as two years, during the insured's lifetime.

Commercial property coverage form

A commercial property coverage part component that can be any of several commercial property forms containing an insuring agreement and related provisions.

Public official bond

A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully and honestly.

Generally Accepted Accounting Principles (GAAP)

A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results

Contributory negligence

A common-law principle that prevents a person has been harmed from recovering damages if that person's own negligence contributed in any way to the harm.

Comparative negligence

A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault.

Transportation network company

A company that uses a mobile application or website to connect riders with drivers and arrange transportation in a personal auto for a fee.

Pure comparative negligence rule

A comparative negligence rule that permits a plaintiff to recover damages discounted by his or her own percentage of negligence, as long as the plaintiff is not 100 percent at fault

49 percent comparative negligence rule

A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff's negligence is less than the other party's negligence.

50 percent comparative negligence rule

A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff's negligence is not greater than 50 percent of the total negligence leading to harm.

Bid bond

A contract bond guaranteeing that a contractor bidding on a construction or supply contract will enter into the contract and will provide a performance bond if the bid is accepted.

Performance bond

A contract bond guaranteeing that a contractor's work will be completed according to plans and specifications.

Payment bond

A contract bond guaranteeing that the project will be free of liens.

Wrongful-life action

A lawsuit by or on behalf of a child with birth defects, alleging that, but for the doctor-defendant's negligent advice, the parents would not have conceived the child or would have terminated the pregnancy so as to avoid the pain and suffering resulting from the child's defects.

Class action (class action lawsuit)

A lawsuit in which one person or a small group of people represent the interests of an entire class of people in litigation.

Wrongful death action

A legal cause of action that exists for the survivor of the deceased

Concurrent causation (concurrent causation doctrine)

A legal doctrine stating that if a loss can be attributed to two or more independent concurrent causes - one or more excluded by the policy and one covered - then the policy covers the loss

Reasonable expectations doctrine

A legal doctrine that provides for an ambiguous insurance policy clause to be interpreted in the way that an insured would reasonably expect.

Collateral source rule

A legal doctrine that provides that the damages owed to a victim should not be reduced because the victim is entitled to recover money from other sources, such as an insurance policy.

Res ipsa loquitur

A legal doctrine that provides that, in some circumstances, negligence is inferred simply by an accident occurring.

Insurance agent

A legal representative of one or more insurers for which the representative has a contractual agreement to sell insurance

Vicarious liability

A legal responsibility that occurs when one party is held liable for the actions of a subordinate or associate because of the relationship between the two parties.

Common-law system

A legal system in which the body of law is derived more from court decisions as opposed to statutes or constitutions.

Release

A legally binding contract between the parties to a dispute that embodies their agreement, obligates each to fulfill the agreement, and releases both parties from further obligation to one another that relates to the dispute.

Family purpose doctrine

A liability concept that holds the owner of an automobile kept for the family's use vicariously liable for damages incurred by a family member while using the automobile

Umbrella liability policy

A liability policy that provides excess coverage above underlying policies and may also provide coverage not available in the underlying policies, subject to a self-insured retention.

Proprietary function

A local government's act that is not considered part of the business of government and that could be performed by a private enterprise.

Products liability

A manufacturer's or seller's liability for harm suffered by a buyer, user, or bystander as a result of a product that has a dangerous manufacturing defect or design defect or that is not accompanied by a warning of an inherent hidden danger.

Inflation guard protection

A method of protecting against inflation by increasing the applicable limit for covered property by a specified percentage over the policy period.

Appraisal

A method of resolving disputes between insurers and insureds over the amount owed on a covered loss.

Agreed value method

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.

Uniform Commercial Code (UCC)

A model code that has been adopted in whole or in part by each state and whose purpose is to provide a consistent legal basis for business transactions throughout the United States and its territories.

General damages

A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses.

Class code

A numeric code representing the description in the rating classification table that best fits a particular organization's operations.

Convertible

Characteristic of a term insurance policy that allows the policy to be exchanged for some type of permanent life insurance policy with no evidence of insurability.

Suicide clause

Clause that states the insurer will not pay the death benefit if the insured commits suicide within a certain period (usually two years) after policy inception.

Commercial property coverage part

Commercial package policy (CPP) coverage component that provides a broad range of coverages to "middle-market" or larger firms to insure buildings and business personal property.

Actual cash value (ACV)

Cost to replace property with new property of like kind and quality less depreciation.

Replacement Cost optional coverage

Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis.

Entity coverage

Coverage extension of D&O liability policies for claims made directly against a corporation (the "entity") for wrongful acts covered by the policy.

Collision coverage

Coverage for direct and accidental loss or damage to a covered auto caused by collision with another object or by overturn.

Peak Season Endorsement

Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.

Package modification factors

Factors that are applied to the regular policy premiums for certain coverage parts of a CPP that includes both property and liability coverages, resulting in premium discounts for those coverage parts.

Universal life insurance

Flexible premium permanent life insurance that separates the protection, savings, and expense components.

Suretyship

The obligation of one entity to answer for the debt, default, or miscarriage of performance of duties by another entity

Public or livery conveyance

In case law, a method of transportation that is indiscriminately offered to the general public, such as a taxi or public bus.

Adverse selection

In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.

Agent

In the agency relationship, the party that is authorized by the principal to act on the principal's behalf.

Publication

In tort law, the communication of a defamatory statement to another person.

Scheduled coverage

Insurance for property specifically listed (scheduled) on a policy, with a limit of liability for each item.

Common law (case law)

Laws that develop out of court decisions in particular cases and establish precedents for future cases.

Strict liability (absolute liability)

Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, or inappropriate.

Term life insurance

Life insurance that provides coverage for a specified period, such as ten or twenty years, with no cash value

Whole life insurance

Life insurance that provides lifetime protection, accrues cash value, and has premiums that remain unchanged during the insured's lifetime.

Malware

Malicious software, such as a virus, that is transmitted from one computer to another to exploit system vulnerabilities in the targeted computer

Point-of-service (POS) plan

Managed care plan that combines the characteristics of an HMO and a PPO; has a network of preferred providers who, if used by the member, charge little or nothing for services; healthcare received out of the network is covered, but members must pay substantially higher coinsurance charges and a deductible.

Hard market

Market conditions in which insurer competition diminishes, buyers have difficulty finding coverage, premiums increase, and insurer profitability rises.

Soft market

Market conditions in which insurer competition is intense and is indicated by widely available coverage, lower premiums, and decreased insurer profitability.

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.

Single-limits basis

One coverage limit that applies to all damages arising from bodily injury or property damage or both, resulting from a single accident.

Agreed Value optional coverage

Optional coverage that suspends the coinsurance clause if the insured carries the amount of insurance agreed to by the insurer and the insured.

Noneconomic damages

Pain and suffering or mental anguish

Invitee

Person who enters a premises for the financial benefit of the owner or occupant.

Beneficiary

Person(s) designated in a life insurance policy to receive the death benefit

Bodily injury

Physical injury to a person, including sickness, disease, and death.

Property damage

Physical injury to, destruction of, or loss of use of tangible property.

Severability of Insurance condition

Policy condition that applies insurance separately to each insured; does not increase the insurer's limit of liability for any one occurrence.

Monoline policy

Policy that covers only one line of business.

Package policy

Policy that covers two or more lines of business

Commercial package policy (CPP)

Policy that covers two or more lines of business by combining ISO's commercial lines coverage parts.

Special form coverage

Property insurance coverage covering all causes of loss not specifically excluded.

Intangible property

Property that has no physical form

Accidental death benefit

Provision in a life insurance policy that doubles (or triples) the face amount of insurance payable if the insured dies as a result of an accident.

Nonforfeiture options

Provisions in a life insurance policy that give the policyowner a choice of ways to use the cash value if the policy is terminated and that protect the policyowner from forfeiting the cash value.

Intentional nuisance

Purposeful interference with another party's enjoyment of his or her property.

Prospective reinsurance

Reinsurance purchased to cede future losses

Guaranteed insurability rider ( guaranteed purchase option)

Rider that permits the policyowner to buy additional amounts of life insurance at standard rates without evidence of insurability.

Split-limits basis

Separate coverage limits that allow one limit for bodily injury to each person; a second usually higher limit for bodily injury to all persons in each accident; and a third limit for all property damage in each accident.

Rider

Similar to an endorsement; modifies a life insurance policy

Trustee

Someone who has the legal title to a property but is responsible that it be used, handled, transferred solely for the benefit of the beneficiary.

Consideration

Something of value or bargained for and exchanged by the parties to a contract.

Significant contacts rule

Specifies that the substantive law of a state having more significant contacts to the parties could apply, even when the tort occurred elsewhere

Real property (realty)

Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.

Chattel

Tangible, movable personal property

Cancellation

Termination of a policy, by either the insurer or the insured, during the policy term.

Statutory accounting principles (SAP)

The accounting principles and practices that are prescribed or permitted by an insurer's domiciliary state and that insurers must follow.

Negligent entrustment

The act of leaving a dangerous article with a person who the lender knows, or should know, is likely to use it in an unreasonably risky manner.

Attachment

The act of seizing property to secure a judgement.

Deposit premium

The amount a policyholder pays at the beginning of a policy period, pending the determination of the actual premium owed.

Loss severity

The amount of loss, typically measured in dollars, for a loss that has occurred.

Reserve

The amount the insurer estimates and sets aside to pay on an existing claim that has not been settled.

Environmental law

The body of law that deals with the environment's maintenance and protection

Loss of wages and earnings

The compensatory damages to compensate a plaintiff for any loss of income directly related to a tort

Exclusive control

The control of only one person or entity; in tort law the control by the defendant alone of an instrument that caused harm.

Functional replacement cost

The cost of replacing damaged property with similar property that performs the same function but might not be identical to the damaged property;.

Replacement cost

The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.

Retroactive date

The date on or after which the injury, damage, or other insured event must occur in order to be covered in the claims-made liability policy.

Policy termination

The ending of the contractual relationship between the insured and insurer by cancellation, expiration, or nonrenewal.

Express license

The oral or written permission to enter onto another's land to do a certain act, but not the granting of any interest in the land itself.

Bailor

The owner of the personal property in a bailment.

Claims-made coverage trigger

The event that triggers coverage under a claims-made coverage form; the first making of a claim against any insured during either the policy period or an extended reporting period.

Occurrence coverage trigger

The event that triggers coverage under an occurrence coverage form: injury or damage that occurs during the policy period.

Negligence

The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.

Jurisdiction

The geographic area over which authority extends

Probable cause

The grounds that would lead a reasonable person to believe that the plaintiff committed the act for which the defendant is suing.

Malicious prosecution

The improper institution of legal proceedings against another.

Malice

The intent to do a wrongful act without justification or excuse

Waiver

The intentional relinquishment of a known right.

Respondeat superior

The legal principle under which an employer is vicariously liable for the torts of an employee acting within the course and scope of employment.

Joint and several liability

The liability of multiple defendants either collectively or individually for the entire amount of damages sought by the plaintiff regardless of their relative degree of responsibility.

Incurred losses

The losses that have occurred during a specific period, no matter when claims resulting from the losses are paid.

Aggregate limit

The maximum amount an insurer will pay for all covered losses during the covered policy period.

Loss frequency

The number of losses that occur withing a specified period.

Implied license

The permission to enter onto another's land arising out of a relationship between the party who enters the land and the owner

Plaintiff

The person or entity who files a lawsuit and is named as a party

Unearned premium

The portion of policy premium for the unexpired portion of the policy.

Loss costs

The portion of the rate that covers projected claim payments and loss adjusting expenses.

Earned premiums

The portion of written premiums that corresponds to coverage that has already been provided.

Rebating

The practice of giving a portion of the producer's commission or some other financial advantage to an individual as an inducement to purchase the policy

Market value

The price at which a particular piece of property could be sold on the open market by an unrelated buyer and seller.

Rate

The price per exposure unit for insurance coverage

Principle of indemnity

The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured.

Star decisis

The principle that lower courts must follow precedents set by higher courts

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Actuarial rate indication

The proposed rate change derived by actuarial analysis prior to company strategic influences

Deferred acquisition costs

The recognition of the cost of acquiring a new customer over the duration of an insurance contract.

Retrocessionaire

The reinsurer that assumes all or part of the reinsurance risk accepted by another reinsurer.

False imprisonment

The restraint or confinement of a person without consent or legal authority.

Contribution

The right of a tortfeasor who has paid more than his or her proportionate share of the damages to collect from other tortfeasors responsible for the same tort

False arrest

The seizure or forcible restraint of a person without legal authority.

Administrative law

The statutory laws that grant power to administrative agencies to act and the body law that is created by administrative agencies themselves

Regulation

The supervision and control of an activity for a specific purpose by an entity that is not directly involved in, or party to, the activity

Assault

The threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact.

Policy period

The time frame, beginning with the inception date, during which insurance coverage applies.

Written premiums

The total premium on all policies written (put into effect) during a particular period.

Infringement

The unauthorized use of an individual's intellectual property.

Conversion

The unlawful exercise of control over another person's personal property to the detriment of the owner

Malicious abuse of process

The use of civil or criminal procedures for a purpose for which they were not designed.

Mark-to-model

The valuation of an asset based on financial models instead of market price.

Mark-to-market

The value of an asset or liability based on its current market price.

Physical damage coverages

There are four kinds: comprehensive - pays for loss to covered auto or its equipment from any cause not excluded, except collision or overturn; specified causes of loss - provides named peril coverage; collision - covers loss to a covered auto or its equipment by collision with another object or by overturn; and towing - provides coverage for towing and labor performed at the place of disablement.

Joint tortfeasors

Two or more parties who act together to commit a tort or who commit separate torts that combine to cause an injury or loss.

Trespass

Unauthorized entry to another person's real property or forcible interference with another person's personal property.

Unfair competition

Use of wrongful or fraudulent practices by a business to gain an unfair advantage over competitors

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.

Settlement options

Various ways of paying life insurance policy proceeds to the beneficiary.

Statistical plan

a formal set of directions for recording and reporting insurance premiums, exposures, losses, and sometimes loss expenses, to a statistical agent

Deemer provision

a law stating that if an insurance regulator does not approve of an insurers filing within a specified time, the filing is deemed approved

Case reserve

a loss reserve assigned to an individual claim

Deductible

a portion of a covered loss that is not paid by the insurer

Individual risk premium modification plan (IRPM)

a rating plan that allows underwriters to modify property premiums based upon specific risk characteristics not reflected in the class rate

Causes of loss form

a required component of the commercial property coverage part that specifies perils covered

Loss development factor

an actuarial means for adjusting losses to reflect future growth in claims due to both increases in the incurred amount for reported losses and incurred but not reported (IBNR) losses

Structured settlement

an agreement in settlement of a claim involving specific payments made over a period of time

Remediation stop-loss policy (cost cap policy)

an insurance policy purchased to insure remediation costs that exceed the projected or anticipated costs of performing an environmental cleanup of a specific location that is being sold

Product disparagement, or trade libel

an intentional false and misleading statement about a characteristic of a plaintiff's product, resulting in financial damage to the plaintiff

Pain and suffering

compensable injuries that are difficult to measure, such as physical and mental distress and inconvenience associated with a physical injury

Legislation

law enacted by a legislative body

Premium base

the unit in which the exposure is measured, such as gross sales or payroll