Casualty

Workers Compensation and Employers Liability Policy

A business insurance policy that employers may purchase to meet their state's workers compensation requirement. Sold by commercial insurers in the voluntary private market, the workers comp policy provides coverage for an employer's two key exposures: (1) the employer's statutory liabilities under workers compensation laws, and (2) liability arising out of employees' work-related injuries that do not fall under the workers compensation statute.

Aviation Insurance

A category of insurance that covers property and liability exposures faced by owners of private aircraft. Aviation insurance applies to all types of privately owned and operated aircraft, including light passenger or recreational aircraft (which may also be used for commercial purposes), helicopters, experimental aircraft, ultralights, gliders, hot air balloons, and hang gliders.

Business Auto Policy (BAP)

A commercial auto policy that includes auto liability and auto physical damage coverages. While the BAP can be written as part of a commercial package policy that includes other property and liability coverages, it can also be written as a stand-alone policy that includes auto-only coverages. The basic coverages of the BAP can also be modified with various endorsements.

Limited Pollution Liability Extension Endorsement

A commercial general liability (CGL) endorsement that replaces the standard CGL pollution liability exclusion with coverage for certain pollution claims. The limited pollution liability endorsement contains its own limit of insurance.

Claims-Made Policy

A commercial general liability policy that covers losses only if the policy is in force when the claim is made. Under the claims-made form, filing a claim during the policy period triggers coverage. This form requires the insured to maintain the CGL policy in effect for as long as claims are anticipated. Contrast with occurrence policy.

Occurrence Policy

A commercial general liability policy that covers losses that occur during the policy period even if the claim is made after the policy period. Most CGL insurance is written on an occurrence form. Contrast with claims-made policy.

Commercial General Liability (CGL) Policy

A commercial insurance policy that covers general liability exposures facing businesses and other organizations. A CGL policy protects against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations, as well as from advertising and personal injury (PI) liability. It does not cover auto liability or professional liability.

Commercial Umbrella Liability Policy

A commercial liability policy that provides high limits of liability coverage on top of the coverage provided by the insured's basic commercial coverage. The commercial umbrella policy provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims. It may also provide protection against some claims not covered by the underlying policies.

Theft

A common crime insurance peril that includes robbery, burglary, and embezzlement. Theft is a very broad term that includes any type of stealing or attempted stealing. Some policies cover only certain types of theft, such as burglary or robbery.

Surety Bond

A contract under which one party (the surety) guarantees the performance of certain obligations of a second party (the principal) to a third party (the obligee). For example, most construction contractors must provide a bond to the party for which they are performing operations guaranteeing that they will complete the project by the date specified in the construction contract in accordance with all plans and specifications. Insurance companies often serve as sureties.

Bond

A contractual agreement between three parties guaranteeing the performance of an obligation or repayment of a debt by one of the parties. Insurance companies sell bonds wherein the insurer (the surety) guarantees the performance or repayment by a second party (the principal or obligor) to the third party (obligee) to whom the performance or debt is owed.

Lessees of Safe Deposit Boxes

A crime insurance policy endorsement covering an insured's property that is kept in a safe deposit box in a bank. The Lessees of Safe Deposit Boxes (CR 04 09) endorsement can insure two categories of property, each against a different cause of loss. Note that neither type insures the loss of cash. securities (but not money) property other than money or securities

Commercial Crime Policy

A crime insurance policy that is designed to meet the needs of organizations other than financial institutions (such as banks). A commercial crime policy can provide several different types of crime coverage, including: theft robbery employee dishonesty forgery computer fraud coverage kidnap, ransom, or extortion coverage and money orders and counterfeit money coverage.

Workers Compensation Premium Basis

A factor in calculating an employer's workers comp premium, the premium basis is equal to covered payroll divided by $100. Calculating an employer's workers comp premium begins by multiplying the rate for the employer's job classification by its premium basis. If the rate is $1.50 and the covered payroll is $100,000, the unmodified premium would be $1,500 ($1.50 x $100,000 ÷ $100 = $1,500).

Insurance Agents Errors and Omissions Insurance

A form of E&O coverage designed specifically for insurance agents and brokers. The two major classes of claimants are clients and insurers. Common allegations made by clients include: failing to place coverage promptly or to place the type of coverage requested failing to increase the coverage limit or to recommend needed coverage failing to explain limitations of coverage inadvertently cancelling or failing to renew Common allegations made by insurers against insurance agents and brokers include: failing to follow underwriting guidelines failing to act in the best interests of the insurer failing to revise or cancel coverage on request failing to disclose material information about an insured or applicant exceeding underwriting authority

Lawyers Professional Liability Insurance

A form of E&O coverage designed specifically for lawyers. This coverage provides attorneys with liability coverage for financial loss arising from acts, errors, and omissions in providing professional legal services. These policies provide coverage for personal injury perils (such as defamation and invasion of privacy) because allegations of such acts often arise in the legal arena.

Burglary

A form of theft committed by a person who enters the premises with the intent to commit a crime. Not all burglaries involve forcible entry. A burglar can also enter a building during business hours, hide until all employees have left for the night, then force their way out to escape with stolen property.

Robbery

A form of theft committed by a person who uses or threatens to use force against another person. A burglar sneaks in and out of a building. A robber directly assaults another person.

Consequential Bodily Injury Suit

A lawsuit brought by an employee's spouse or other family member against the employer, alleging an injury that is the direct result of a work-related injury to the employee. In this type of legal action, a member of the injured worker's family purports to have an injury that directly results from the injury to the employee. Often, mental injuries are alleged.

Auto Coverage Symbols

A numeric code used to indicate, in a commercial auto policy's declarations, the type of vehicle and coverage. Examples of auto coverage symbols: 1 - 9 and 19 for business auto 41 - 50 and 59 for truckers 61 - 71 and 79 for motor carrier Symbols 10 (business auto), 32 (garage), 51 and 52 (truckers), and 72 and 73 (motor carrier) are custom symbols, available through the use of the covered autos designation symbol endorsement (CA 99 54).

Bailee

A person or company in whom another person's property has been entrusted. As a general rule, a bailee is liable for damage to a customer property left in the care of the bailee. Dry cleaners and auto repair shops are two common examples of a bailee.

Personal Injury Protection (PIP) Endorsement

A personal auto policy (PAP) endorsement used in no-fault states that provides protection for the insured in an accident regardless of fault. PIP coverages, limits, and each party's responsibilities vary from state to state.

Named Driver Exclusion

A personal auto policy (PAP) provision that excludes policy coverage for specifically named individuals The availability of the named driver exclusion varies by state. Some states do not allow insurers to use a named driver exclusion, and the courts sometimes refuse to enforce a named driver exclusion on the basis that it is against public policy.

Personal Umbrella Liability Policy

A personal liability policy that provides high limits of liability coverage on top of the coverage provided by the insured's basic home or auto policy. A personal umbrella liability policy protects an insured against a catastrophic liability loss. It covers bodily injury, property damage, and personal injury. Its coverage stacks on top of the primary liability coverage provided by the insured's homeowners, personal auto, watercraft, and any other scheduled underlying liability policy.

Commercial Crime Coverage Form

A standard ISO form that businesses use to cover their crime risk needs. The ISO crime coverage form includes eight insuring agreements, any combination of which may or may not be activated by the policyowner. The eight basic crime coverages include: employee theft forgery or alteration inside the premises—theft of money and securities inside the premises—robbery or safe burglary of other property outside the premises computer fraud funds transfer fraud money orders and counterfeit money

Government Crime Coverage Form

A standard ISO form that government agencies use to cover their crime risk needs. The ISO government crime coverage form includes the same eight insuring agreements as the commercial crime form. The primary difference between the two is that the government form includes two employee theft insuring agreements (per loss and per employee), whereas the commercial form includes only one employee theft insuring agreement (per loss).

Exclusive Remedy

A standard component of workers compensation laws that makes workers comp the exclusive source of financial benefits available from the employer to an injured employee. In effect, states reward employers for providing workers comp by restricting an injured employee's ability to sue for anything more than what the coverage provides, thus limiting an employer's exposure.

Basic Extended Reporting Period (BERP)

A standard provision in a claims-made CGL policy that extends the claims reporting period beyond the policy period in most situations of policy termination. The BERP applies automatically for no additional premium and lasts for up to five years.

"Your Covered Auto"

A term used throughout the Personal Auto Policy that refers to the four types of covered automobiles. "Your covered auto" is a critical term used throughout the PAP. There are four types of covered autos: vehicles shown in the declarations newly acquired autos owned trailers temporary substitute autos

Aircraft Hull Insurance

A type of aviation insurance coverage designed to pay the cost of repair or replacement of the insured aircraft's body due to physical damage. Hull coverage also applies to the aircraft's tools and equipment. Coverage is normally written on an open perils basis, with three types of hull coverage available: (1) ground and flight (the broadest option), (2) not in motion, and (3) not in flight.

Aircraft Liability Insurance

A type of aviation insurance coverage designed to pay, on behalf of the insured, all sums for which the insured may become legally liable because of bodily injury to persons or because of damage to property of others. Aircraft liability insurance policies include separate insuring agreements for bodily injury and property damage.

Fidelity Bond

A type of bond that deals with the employer-employee relationship. Fidelity bonds usually indemnify the employer for loss resulting from an employee's dishonest acts.

Cargo and Freight Insurance

A type of insurance, purchased by individuals and businesses who ship goods by air, to cover those goods while in air transit. Aviation cargo insurance shares some characteristics with ocean marine cargo insurance. These include total versus partial losses and the assessment of salvage charges.

Experience Modification Factor

A workers comp premium factor that reflects the employer's prior loss experience as it compares to similar businesses in he same industry. The experience modification factor adjusts the preliminary unmodified premium to better reflect the employer's past loss history when compared to that of other employers in the same industry.

Retrospective Rating

A workers compensation premium calculation method that factors the insured's current loss experience into the final premium. If its actual loss experience during the rating period is favorable, the insured can earn a premium credit at the first retro premium adjustment. On the other hand, if the insured's loss experience is worse than expected during the rating period, the retro premium adjustment can result in an additional charge.

Jones Act

Also called the Merchant Marine Act of 1920, this federal law protects seamen against negligence by ship owners. The Jones Act establishes liability based on negligence and gives seamen three rights: (1) the right to sue, (2) the right to trial by jury, and (3) elimination of the fellow servant rule.

Personal Auto Policy (PAP)

An ISO form that combines property and liability insurance in a single policy covering private-passenger autos owned by individuals. The PAP may be structured to provide a combination of liability, personal injury protection (PIP), medical payments, uninsured and underinsured motorists (UM/UIM), and physical damage coverages.

No-Fault Auto Insurance

An auto insurance claims system, mandated by some states, that places no blame on any party in an accident but instead requires each insurer to cover its insureds' losses without regard to fault. Under a no-fault system, an injured insured recovers damages resulting from auto accidents from his or her own insurer rather than from another party's insurer. Injured parties are not compensated for general damages, such as pain and suffering and disfigurement.

MCS-90 Endorsement

An endorsement to a motor carrier policy attesting that the policy provides the minimum coverages required under the Motor Carrier Act of 1980. The MCA of 1980 requires that certain motor vehicles carry minimum limits of insurance coverage to satisfy public liability and environmental restoration claims. MCS-90 amends the auto liability policy covering an insured vehicle so that it complies with requirements of the act.

Sole Proprietors, Partners, Officers, and Others Coverage Endorsement (WC 00 03 10)

An endorsement to a workers comp liability policy that includes an owner or officer of the company in the coverage. Normally, owners and officers of a company are not covered under the company's workers comp plan. This endorsement is used when a sole proprietor, partner, executive officer, or other person has elected to become subject to the workers compensation law of a state.

Duty to Defend

An insurer's obligation to provide an insured with legal support in defense of claims made under a liability insurance policy. The insurer is obligated to pay all defense costs associated with a covered loss even if the costs exceed the policy's limit of liability. The insurer's duty to defend ends when the claim is settled and the limit of liability has been exhausted by the payment of a judgment or settlement.

Compulsory Workers Compensation

Any state's workers compensation laws that require employers to purchase and maintain workers compensation for their employees. Workers compensation is compulsory in the vast majority of states. The specific benefits provided can vary by state.

Uninsured Motorist/Underinsured Motorist (UM/UIM) Coverage

Coverage for bodily injury (BI) and, in some states, property damage (PD) incurred by an insured when an accident is caused by a motorist who is not insured or is underinsured. UM/UIM coverage protects insureds when an at-fault driver has no (or too little) auto liability insurance. It allows an insured to collect from his or her insurer as if it provided liability coverage for the negligent third party.

Motor Carrier Act of 1980

Federal act that requires certain motor vehicles to carry minimum limits of liability insurance coverage. Motor carriers subject to MCA regulation are required to furnish evidence of financial responsibility at a minimum limit (between $750,000 and $5 million) to cover claims that may arise from accidents while those vehicles are transporting property.

Covered Auto

In a business auto policy, a motor vehicle that is covered under the policy. Ten numeric "symbols," eight of which may be used to signify liability coverage under the policy, allow for a wide range of choices to signify the autos or types of autos for which liability coverage applies. Symbol 1, any auto, affords the broadest possible liability coverage.

Personal and Advertising Injury Liability

In a commercial general liability (CGL) policy, coverage that protects the insured in lawsuits claiming damage to a person or company's reputation. CGL policies combine elements of "personal injury" (PI) and "advertising injury" coverage. PI includes: false arrest, detention, or imprisonment; malicious prosecution; wrongful eviction; slander; libel; and invasion of privacy. Advertising injury includes: libel, slander, copyright infringement, and misappropriation of advertising ideas.

Supplementary Payments

In a commercial general liability policy, the amount the insurer will pay to cover legal expenses defending and settling a covered claim. Supplementary payments are made in addition to the policy's applicable limits of insurance. Covered defense costs do not reduce the amounts available for payment of covered damages under the policy.

Other-than-Collision Coverage

In a personal auto policy (PAP), a form of open perils protection for damage to a covered auto from perils other than collision. "Other-than-collision" covered perils include: missiles or falling objects fire theft or larceny explosion or earthquake windstorm hail, water, or flood malicious mischief or vandalism riot or civil commotion contact with a bird or animal glass breakage

Coverage for Damage to Your Auto

In a personal auto policy (PAP), the part that insures for damage or theft to the insured's auto caused by collision or other perils, regardless of fault. Part D of the PAP offers two forms of coverage: "collision" and "other than collision." Unlike liability coverage, "collision" and "other than collision" coverages apply regardless of negligence. This coverage is usually purchased by insureds with newer and more valuable vehicles.

Garagekeepers Coverage

Liability coverage for owners of parking lots, garages, and auto repair shops for accidental damage to customers' vehicles left in their care. As a bailee, the owner of a garage or parking lot may be liable for damage to a customer's auto that is stored on the bailee's property. Garagekeepers coverage may be sold alone or as part of a commercial auto policy package designed especially for auto dealers.

Liquor Liability Insurance

Liability insurance designed specifically for businesses that manufacture, sell, distribute, and serve alcohol. Although host liquor liability—for those not in the alcohol business—is covered, liquor liability exposures of businesses that manufacture, sell, distribute, and serve alcohol are not insured under a standard commercial general liability (CGL) policy.

Protection and Indemnity (P&I) Insurance

Liability insurance for practically all maritime liability associated with operating a vessel, other than that covered under a workers compensation policy and under the collision clause in a hull policy. A shipowner may be held liable for injury or damage to passengers and other vessels, but by far the most common and costly exposure is to crew members and longshoremen, who are the source of most P&I claims.

Employee Benefits Liability (EBL) Insurance

Liability insurance that deals with claims involving errors or omissions in administering employee benefit plans. EBL coverage is usually provided through an endorsement to the employer's commercial general liability policy by using Employee Benefits Liability Coverage (CG 04 35) endorsement.

Directors and Officers (D&O) Liability Insurance

Liability insurance that protects a corporation's directors and officers—and sometimes the corporation—against liability arising out of wrongful acts. D&O liability insurance also reimburses the corporation in situations where the corporation indemnifies its directors and officers for their wrongful acts.

Errors and Omissions (E&O) Insurance

Liability insurance that protects the insured against liability for committing an error or omission when performing professional duties. Generally, E&O policies are designed to cover financial losses rather than liability for bodily injury (BI) and property damage (PD).

Vicarious Liability

Liability that arises from the conduct of another person for whom one has legal responsibility. Parents generally have vicarious liability over their minor children. Employers can have vicarious liability over their employees, such as when an employee is operating a covered auto the employer owns.

Physicians Professional Liability Insurance

Medical professional liability insurance coverage designed specifically for doctors. Also known as medical malpractice insurance, this coverage can cover these exposures: misdiagnosis or failure to diagnose inappropriate treatment or delay in treatment failure to treat injuries from therapeutic treatments injuries from equipment and premises intentional torts (such as assault, invasion of privacy, sexual misconduct)

Residual Market Plan

One of the four "markets" from which workers compensation coverage may be purchased, this one is for employers who cannot purchase coverage in the voluntary private market. Employers that are unable to purchase workers compensation insurance from insurers in the voluntary private market can buy it from their state's residual market facility. This plan is also called a state assigned risk plan.

Competitive State Fund

One of the four "markets" from which workers compensation coverage may be purchased, this one lets employers buy coverage from a state fund designed to compete with insurance companies. About 20 states have set up competitive state fund organizations in hopes of reducing the employer premiums for workers comp insurance. Employers may buy from either a commercial insurer or the state fund.

Voluntary Private Market

One of the four "markets" from which workers compensation coverage may be purchased, this one lets employers buy coverage from insurance companies licensed to write workers comp. Most insurers that write other types of insurance for businesses (e.g., commercial property, commercial general liability, and commercial auto insurance) also write workers compensation insurance.

Monopolistic State Fund

One of the four "markets" from which workers compensation coverage may be purchased, this one requires employers to buy it through a state workers compensation insurance fund. Employers must buy workers compensation coverage through a state workers compensation insurance fund in four states: North Dakota Ohio Washington Wyoming

Workers Compensation Death (Survivor) Benefits

One of the four categories of workers compensation benefits, this one pays burial costs and a weekly income benefit to the surviving dependents of a deceased employee. Weekly income benefit amounts vary from state to state and are usually expressed as a percentage of the weekly wages of the deceased worker, subject to a maximum and minimum weekly benefit. Children's benefits usually end at age 18, and a spouse's benefits typically end at remarriage.

Workers Compensation Disability Benefits

One of the four categories of workers compensation benefits, this one pays for lost wages resulting from an employee's compensable injury. The four classes of disability are: temporary total permanent total permanent partial temporary partial

Workers Compensation Medical Benefits

One of the four categories of workers compensation benefits, this one pays for most if not all the medical care needed to treat an employee's compensable injury. Unlike personal medical insurance, there are rarely deductibles or co-payments required with a workers comp claim.

Workers Compensation Rehabilitation Benefits

One of the four categories of workers compensation benefits, this one pays for rehabilitation and rehab-related expenses associated with employee's compensable injury. Rehab-related expenses may include board, lodging, and travel. While most states specify that rehabilitation must be funded directly by the employer or its insurer, a number of states have set up special state funds to pay for rehabilitation costs.

Supplemental Extended Reporting Period (SERP)

Optional protection available with a claims-made CGL policy that extends the claims reporting period beyond the end of the basic extended reporting period (BERP). Provided by endorsement to a claims-made CGL policy for an additional premium, a SERP begins when the automatic BERP expires, and it runs indefinitely.

Constructive Total Loss

Property damage (PD) loss that is treated as a total loss because the cost of repairing the damaged property exceeds the value of the property. An example of constructive total loss is a minor auto accident with an old car. If the cost of repairing the damage exceeds to market value of the car, the insurer will treat the claim as a total loss.

Workers Compensation

State-law-mandated insurance coverage that provides financial benefits to employees who suffer job-related accidents or illnesses. Required by law in most states, workers comp is a state-based system of no-fault statutory health and life insurance benefits that employers provide to their employees (or to an employee's family) because of a job-related injury (including death) resulting from an accident or occupational disease.

Financial Responsibility

The legal requirement for an auto owner to be able to demonstrate the ability to pay for an at-fault loss, either through insurance or by some other financial means. Most states today require automobile owners to have auto insurance, but before insurance was mandatory, owners were required to demonstrate the financial means to cover their liability as a condition of registering the vehicle.

Personal Auto Policy (PAP) Liability Coverage

The part of a PAP that pays for "bodily injury" or "property damage" incurred by another party for which the insured is legally responsible because of an auto accident. Because an insured's legal liability arising from a car accident can result in a high severity loss, the liability coverage of the PAP is generally considered to be the policy's most important coverage.

Personal Auto Policy (PAP) Medical Payments Coverage

The part of a PAP that pays for relatively small amounts of medical expenses for all individuals involved in an accident regardless of any fault on the part of the insured. Medical payments coverage lessens the likelihood that passengers or other eligible persons will sue to recover their minor injury medical expenses.

Auto Liability Insuring Agreement

The part of a business auto policy that states the insurer's obligation to cover bodily injury, property damage, or pollution clean-up costs resulting from an accident involving a covered auto. The insuring agreement also states the insurer's duty to defend an insured against a suit asking for such damages or clean-up costs.

Policy Year

The period between anniversary dates in an insurance policy. Insurance policy cancellations and renewals are based on the policy's anniversary date. On the insurer's part, only non-payment of a premium results in policy cancellation during the policy year. Policyowners may terminate their coverage at any time.

Compensable Injury

With workers compensation, any type of injury that qualifies for workers comp benefits. Most types of on-the-job injuries are compensable. Examples of noncompensable injuries include those that are intentionally self-inflicted, incurred while committing a crime, and incurred while intoxicated through alcohol or drugs.

Elective Workers Compensation

Workers compensation that is not mandated by state law, meaning employers can choose whether to provide it. Only two states have elective workers compensation laws. Most employers in these states nonetheless do provide workers comp coverage because an employee liability claim without it could be very expensive.