Education :: Glossary

We' ve tried to avoid legalese in this glossary, so the wording of some of the following definitions is rather informal, but it is hoped that they will convey the meanings of terms as used in the insurance industry today. For additional Life & Health Insurance terms and concepts see Get Acquainted with Life & Health Insurance.

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ABANDONMENT—the owner of damaged property may seek to "abandon" his property to the company for the purpose of claiming a total loss. Most property insurance policies contain provisions forbidding abandonment of property to the company altogether or without the company's consent.

ABSOLUTE LIABILITY—responsibility without fault or negligence—e.g., liability arising from use of dangerous equipment or ownership of dangerous animals. (See NEGLIGENCE and STRICT LIABILITY)

ACCIDENT—an event that takes place without one's foresight or expectations; a sudden and unintended event. In insurance, accidents can sometimes be gradual—e.g., exposure to asbestos or another harmful substance over a period of time can be treated as one OCCURRENCE by a general liability policy.

ACCOUNT CURRENT—the report of premium transactions, usually on a monthly basis, either provided by the agency to the company, or by the company to the agency.

ACQUISITION COST—the cost to the insurance company of securing business; commissions to agents and brokers and, in some companies, field supervision.

ACT OF GOD—an accident or event that is the result of natural causes, without any human intervention or agency, that could not have been prevented by reasonable foresight or care—e.g., floods, lightning, earthquake, and storms. (See FORCE MAEJURE CLAUSE)

ACTUAL CASH VALUE—the present-day value of property measured in cash, arrived at by taking REPLACEMENT COST and deducting for DEPRECIATION brought about by physical wear and tear and obsolescence.

ACTUARY—a person trained in mathematics whose job is to apply the theory of probability to the business of insurance in order to develop insurance rates, and to advise in situations involving questions of probability. (See LAW OF LARGE NUMBERS)

ADDITIONAL INSURED—a person other than the named insured who is protected under an insurance contract. 


ADJUSTER—an individual representing the insurance company in discussions leading to agreement about the amount of loss and the company's liability. Adjusters may be salaried employees of adjusting organizations operated by insurance companies, individuals operating independently and engaged by the companies to adjust a particular loss, and special agents or staff adjusters employed by the company. (See Florida Statute 626.015(1))

ADMITTED INSURER—an insurance company that is licensed to transact insurance business in the state, as opposed to NON-ADMITTED INSURERS. Also known as AUTHORIZED insurers.

ADVERSE SELECTION—the risk that someone who expects to need the insurance is more likely to buy it than others, thus negatively skewing the company's claims experience—e.g., in an open enrollment for group health insurance, all unhealthy people might enroll, while many healthy ones might not.


AGENCY—a relationship between two parties where one (the AGENT) is empowered to act on behalf of the other (the PRINCIPAL). (See AUTHORITY)

AGENCY AGREEMENT—the contract which establishes the legal relationship between the agent and the insurer. (See AGENCY)

AGENT—a person authorized by another to act on his account and under his control. (See AGENCY and Florida Statute 626.015(3))

ALEATORY CONTRACT—a CONTRACT in which unequal values are exchanged, because there is an element of chance involved. An insurance policy is an aleatory contract due to the uncertainty of claims.

ALIEN INSURER—an insurer formed under laws of a country other than the U.S. (See F.S. 624.06)

ALL-RISK POLICY—a policy which covers against loss of or damage to property arising from any fortuitous cause not specifically excluded, making the coverage broader than that of a NAMED PERILS form. Also known, more accurately, as an "Open Perils" or in some cases "Special" form. 

AMERICAN ASSOCIATION OF INSURANCE SERVICES (AAIS)—an insurance service organization that develops policies and rates for the insurance industry. (See INSURANCE SERVICES OFFICE) 

ANNUITY—a periodic payment to be made from a stated or contingent date and continued for a fixed period or for as long as the annuitant or annuitants live. Using an annuity, a fixed sum of money can be disbursed over a period of time. In a life annuity, for example, mortality statistics enable insurance companies to determine the amount of monthly payments that can be made, based on the amount of money funding the annuity and the age and other personal factors of the annuitant.

APPARENT AUTHORITY—the AUTHORITY derived from the perception of third parties (i.e., clients) as to the powers an AGENT would be expected to have based on circumstances. Apparent authority may protect the client by allowing unauthorized acts by the agent to bind the PRINCIPAL (i.e., the insurance company), but the agent will ultimately be held liable to the principal. An agent' s actual authority is equal to his EXPRESS AUTHORITY plus his IMPLIED AUTHORITY.

APPLICATION—a document prepared by the agent which serves as a request for coverage for the person seeking insurance. It gives the company information about the proposed subject of insurance and the person to be insured.

APPOINTMENT—AUTHORITY granted by an insurer to a licensed agent to transact insurance or process claims on the insurer's behalf. In Florida individuals can become licensed as insurance agents on their own (i.e., they do not need to be sponsored by an insurance company), but the licensed agent cannot write insurance coverage without an appointment from at least one company. An individual can maintain an insurance license for a maximum of two years without holding any company appointments. (See F.S. 626.015(4), 626.104 and 626.112)

APPRAISAL—a survey of property made for determining its insurable value or the amount of loss sustained. Insurance policies commonly contain an Appraisal Clause to address disputes between the company and the insured over the value of damaged property. (See VALUATION)

ARBITRATION—an "alternative dispute resolution" method (i.e., an alternative to a lawsuit) in which a third party attempts to negotiate a fair settlement between two parties involved in a dispute. (See Chapter 44, Florida Statutes)

ARBITRATION CLAUSE—a provision in some insurance policies specifying the procedure through which the company and the insured will settle coverage disputes. This type of provision is broader in scope than an APPRAISAL clause, which only deals with VALUATION disputes.

ARSON—the willful and malicious burning of property, sometimes with intent of defrauding insurance companies.

ASSIGNMENT—the transfer of the legal right or interest in a policy to another party, generally in connection with the sale of property.

ASSIGNED RISK PLAN—a type of RESIDUAL MARKET in which the state assigns policies to insurance companies based on their share of the private market for the line of insurance that is the subject of the assigned risk plan. 

ASSUMPTION OF RISK—used where one places himself in a situation which he knows may be dangerous to him. It can serve as a liability defense in some cases.

ASSURANCE—sometimes used in place of "insurance" with the same meaning.

ATTRACTIVE NUISANCE—a dangerous place or instrumentality attractive to children (e.g., a swimming pool, idle construction equipment, a discarded refrigerator), the owner of which has the legal duty to exercise a higher than ordinary degree of care to protect them from it, regardless of whether the child may be an INVITEE, a LICENSEE, or a TRESPASSER. (See NEGLIGENCE)

AUDIT—the adjustment of a policy based upon a survey of the insured's books and records in order to determine the proper premium to be charged for the actual operations during the policy period. Audit occurs most often when the premium is subject to payroll, sales, or other fluctuating premium bases.

AUTHORITY—the power an AGENT has to legally bind his PRINCIPAL, which is seldom absolute. An agent's acting outside the limits of his authority generally does not bind the principal and/or makes the agent liable to the principal. (See AGENCY, APPARENT AUTHORITY, EXPRESS AUTHORITY, and IMPLIED AUTHORITY)

AUTHORIZED INSURER—an insurer authorized to transact insurance in the state. Also known as an ADMITTED INSURER. (See F.S. 624.09)

AUTHORIZATION—the amount of insurance an underwriter says he will accept on a risk of a given class or on specific property, given for the guidance of agents and in response to requests from producers.

—the average rate of remuneration per week, computed as prescribed by the law. Used in WORKERS COMPENSATION as a basis for injured workers' lost wages.
BAIL BOND—a bond guaranteeing that the PRINCIPAL (the defendant in a criminal trial) will appear in court at the appointed time. (See SURETYSHIP)

BAILEE—one who has temporary possession of property belonging to another. (See BAILMENT)

BAILEES' CUSTOMERS FORM—an INLAND MARINE form that covers damage to a BAILEE's customers' property in the bailee's possession (damage to property of others in the insured' s care, custody and control being excluded in most liability policies).

BAILMENT—a delivery of personal property by one party (the BAILOR) to another (the BAILEE), usually for some specific purpose and with the expectation that it will be returned—e.g., an individual leaving his television at a shop to be repaired. There are several different types of bailment, and the bailee' s degree of LIABILITY for the property transferred (i.e., the “duty owed” aspect of NEGLIGENCE) varies with the type of bailment. For example, the bailee owes the BAILOR a higher degree of care in the case of a bailment for hire (e.g., dry cleaning, auto repair) than in that of a gratuitous bailment (e.g., lending tools to a neighbor).

BAILOR—one who delivers personal property to another in trust.

BID BOND—guarantees that a contractor who bids on a project will enter into a contract and provide the required CONTRACT BONDS if awarded the job. (See SURETYSHIP)

BINDER—a preliminary agreement to provide immediate insurance until a policy can be written, either by an agent or company. It should contain a definite time limit, should be in writing, and clearly designate the company in which the risk is bound, the amount, and the perils insured against, as well as the type of insurance.

BLANKET POLICY—an insurance policy which covers several different properties or exposures under one form or coverage limit, instead of under separate policies.

BLOCK POLICY—a policy covering all the property of the insured (usually a merchant) against most perils, including transportation. It may also cover property of others held by the insured on consignment, sold but not delivered, for repairs, or otherwise held. It usually covers both on and off the insured's premises. Examples: Jeweler's Block, Camera and Musical Instrument Dealers, Equipment Dealers.

BODILY INJURY LIABILITY INSURANCE—protection against loss arising out of the liability imposed upon the insured by law for damages because of bodily injury, sickness, or disease sustained by any person or persons (other than employees). (See LIABILITY and NEGLIGENCE)

BOILER & MACHINERY INSURANCE—a type of insurance coverage designed to address certain equipment-related PERILS that are excluded in other property insurance policies. The equipment that is the subject of the boiler and machinery policy is covered for ordinary perils (fire, lightening, smoke, vandalism, sinkhole collapse, etc.) in commercial property forms, but the boiler policy addresses MECHANICAL BREAKDOWN, electrical arcing, rupture of steam boilers, and other perils that commercial property policies exclude. The term “boiler and machinery” is gradually being replaced by “mechanical breakdown” or “equipment breakdown,” which are more descriptive of the coverage being provided.



BROKER—sometimes used interchangeably with "agent" in insurance, but an insurance agent is generally considered to primarily represent the insurance company, while a broker represents the applicant/insured. An insurance agent may act as a broker in some cases—most commonly, when he or she is trying to place (or "broker") coverage with a company with whom he is not appointed.

BUILDERS RISK POLICY—property insurance designed for a building under construction.

BUREAU, RATING—an organization that classifies and promulgates rates and in some cases compiles data and measures hazards of individual risks in terms of rates in a given territory. (See INSURANCE SERVICES OFFICE)

BURGLARY—ordinarily, at common law, the act of breaking into and entering the dwelling of another by night with intent to commit larceny therein. Today, burglary by daytime is also recognized. Under an insurance policy covering loss from burglary, there must be visible marks made upon the premises at the place of entering. (See THEFT, ROBBERY, and LARCENY)

BUSINESS INTERRUPTION INSURANCE—a form of coverage that reimburses the insured for loss of earnings during an interruption of business operations caused by a covered PERIL. It functions the way disability insurance does for an individual and enables a business to pay its ongoing bills while its operations are suspended due to property damage at the described premises. (See BUSINESS INCOME and TIME ELEMENT COVERAGES)

BUSINESS INCOME—defined in the ISO Business Income forms as the net earnings (or loss) that would have been earned (or incurred), if the loss had not occurred, plus continuing normal operating expenses, including payroll. The intent of Business Income coverage is to put the insured in the position it would have been in had the business not suffered the interruption. For example, if it would have been netting $100 per month (or losing $100 per month), the policy intends to pay an amount adequate to put the business at that level during the PERIOD OF RESTORATION.
CALENDAR YEAR EXPERIENCE—underwriting experience based on earned premiums and booked incurred losses for the same calendar year reporting period, regardless of the dates of the loss events.

CANCELLATION—the termination of an insurance policy or bond before its expiration by either the insured or the company. The notice necessary before such cancellation becomes effective is almost invariably stated in the contract, and minimum notice requirements in cases of cancellation by the company are often established by statute—e.g. Florida Statutes 627.4133 and 627.728.

CAPITAL STOCK INSURANCE COMPANY—a company having, in addition to surplus and reserve funds, a capital fund paid in by stockholders. (See MUTUAL INSURANCE COMPANY)

CAPTIVE AGENT—an agent under exclusive contract to one company. (See DIRECT WRITER)


CARRIER—(1) an insurance company which "carried" the insurance; another term for an insurance company or "insurer"; (2) pertaining to transportation insurance, see COMMON CARRIER and CONTRACT CARRIER.

CASUAL LABOR—defined in the Florida WORKERS COMPENSATION law as employments anticipated to be completed in ten working days or less with a total labor cost of less than $500. Employers are not required to provide workers compensation for casual laborers whose work is not in the ordinary course of the trade, business, or profession of the employer. (See F.S. 440.02(5) and 440.02(15)(d)5.)

CASUALTY INSURANCE—that type of insurance which is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass; insurance against crime, such as robbery, burglary, and forgery; power plant insurance, and aviation insurance. Many casualty companies also write surety business.

CEDE—to transfer a risk or a portion thereof from an insurance company to a reinsurer. (See REINSURANCE)

CERTIFICATE OF INSURANCE—a form issued by the company to the insured or other interested parties attesting to the fact that coverage is in force. Certificates cannot be used to alter coverage and generally contain disclaimers stating that certificate holders are not granted any rights under the policy, and the company has no duty to notify them of cancellation.

CGL—Commercial General Liability

CHURNING—the practice of using values in an existing life insurance or annuity contract to purchase additional policies with the same insurer for the purpose of generating additional premiums, fees, or commissions. (See Florida Statute 626.9541(1)(aa))

CLAIM—as used in reference to insurance, a claim may be a demand by an individual or corporation to recover under a policy of insurance for loss which may come within the scope of that policy, or it may be a demand by an individual against an insured for damages covered by a policy held by him. In the latter case (i.e., third-party claims), such claims are referred to the insurance company for handling on behalf of the insured in accordance with the contract terms.


CLAIMS-MADE COVERAGE—a type of liability policy that responds only to claims made during the policy period without regard to when the occurrence leading to the claim took place, subject to certain limitations and extensions. The idea behind claims-made coverage is to avoid the "long-tail" exposure (i.e., the tendency for liability claims to come in beyond the policy period) that is inherent in OCCURRENCE COVERAGE. (See EXTENDED REPORTING PERIOD and RETROACTIVE DATE)

CLASSIFICATION—the underwriting or rating group into which a particular risk must be placed. It pertains to type of business, location, and other factors.

CLAUSE—a section of a CONTRACT, or of riders attached to it, dealing with a particular subject in the contract, such as the "insuring clause," or the "coinsurance clause."

COINSURANCE—(a) a provision in property insurance policies requiring insureds to contribute a fair share of the total premiums out of which losses are to be paid by carrying an adequate amount of insurance on their property. Typically, it involves carrying an amount of insurance equal to 80 percent of the value of the building (based on either its ACTUAL CASH VALUE or REPLACEMENT COST, whichever VALUATION method applies to that building). The inclusion of this provision, whether mandatory or optional, usually gives the insured lower rates than would otherwise apply, and electing a higher coinsurance percentage can provide an even lower rate. The coinsurance provision provides for the full payment of losses, up to the amount of the policy, if the insured has insurance at least equal to the required percentage of the value of the property covered. If the amount of insurance falls short of the stated percentage, the loss payment for most partial losses is reduced proportionately (i.e., the amount of insurance purchased, divided by the required amount, times the amount of the loss). (b) In health insurance, it refers to a provision requiring the insured to pay a percentage of each claim, until he reaches a stated out-of-pocket limit.

COINSURER—one who shares the loss sustained under an insurance policy or policies. Usually applies to an owner of property who fails to carry enough insurance to comply with the COINSURANCE provision and who therefore suffers part of the loss himself.

COLLAPSE—a peril that is treated as an “additional coverage” with its own specific agreement in property insurance policies. By separating collapse from the other covered perils and listing perils that can cause a covered collapse, the insurer avoids paying for a collapse loss caused by a peril that is otherwise excluded, such as earthquake.

COLLATERAL SOURCE RULE—a defendant in a civil action may not benefit from the fact that the plaintiff has received money from other sources.

COLLISION DAMAGE WAIVER—an addendum to an auto rental agreement the renter may purchase that waives the renter's responsibility for physical damage to the vehicle, subject to some limitations and exclusions. This exposure may be covered by the renter's own auto insurance, depending on the terms of the policy, the type of vehicle, purpose of the rental, etc. 

COMMISSION—insurance agents and brokers are usually compensated by being allowed to retain a certain percentage of the premiums they produce. Such an allowance is known as "commission."

COMMISSIONER OF INSURANCE—the state official charged with the enforcement of the laws pertaining to insurance in the respective states. Sometimes called the Superintendent or Director.

COMMON CARRIER—an individual or corporation that offers its services, for a fee, to the public for carrying persons or property from one place to another. (See CONTRACT CARRIER and MOTOR TRUCK CARGO POLICY)

COMPARATIVE NEGLIGENCE—legal doctrine permitting recovery in a negligence action despite the plaintiff having contributed to their own injury, with both parties able to recover according to their respective degrees of negligence. (See CONTRIBUTORY NEGLIGENCE and Florida Statute 768.81)

COMPENSATORY DAMAGES—type of DAMAGES designed to restore injured parties to the same economic position they enjoyed prior to the loss. Includes both ECONOMIC and NON-ECONOMIC damages, but not PUNITIVE DAMAGES. 

COMPLETED OPERATIONS—a form of liability insurance which covers accidents arising out of operations which have been completed or abandoned, provided the accident occurs away from the premises owned, rented, or controlled by the insured.

COMPULSORY INSURANCE—any form of insurance which is required by law.

CONCURRENT CAUSATION—when two or more perils occurring at the same time or in sequence contribute to a loss. Property insurance policies typically contain wording to address the situation in which a covered peril and an excluded peril are both involved in causing a loss.

CONCURRENT INSURANCE—two or more insurance policies which provide the same coverage for the same property and for the same interests are concurrent. (See NON-CONCURRENCY)

CONSEQUENTIAL LOSS—a loss arising indirectly from an insured peril.

CONSIDERATION—something of value given as the inducement to a CONTRACT (or release). 

CONSORTIUM—a fellowship, partnership, or union; especially, marital association. Used chiefly in the phrase "loss of consortium" in an action for damages for injury to a spouse. (See PAIN & SUFFERING)

CONSTRUCTIVE TOTAL LOSS—a loss of sufficient amount to make the cost of salvaging or repairing the property equal to or greater than the value of the property when repaired.


CONTRACT, LEGAL—an agreement between parties that includes all of the following elements: (1) offer and acceptance, (2) legally competent parties, (3) it serves a legal purpose, and (4) consideration (an exchange of something of value by each party).

CONTRACT BOND—a BOND that guarantees the performance of a contract. (See SURETYSHIP)

CONTRACT CARRIER—a transportation company which carries the goods of only certain customers and not the public in general, as in the case of a COMMON CARRIER.

CONTRACT OF ADHESION—a CONTRACT in which one party has little or no say in the wording of the contract—e.g., in an insurance policy the insured is generally accepting a pre-printed contract without negotiating the terms and conditions. (See CONTRA PROFERENTEM)

CONTRACTUAL LIABILITY—liability assumed under any contract or agreement. Contractual liability is generally excluded from or limited in liability policies, but may be insurable for an additional premium.

CONTRA PROFERENTEM—legal principle which holds that ambiguous language in a CONTRACT is interpreted against the drafter of the contract—therefore, in an insurance policy ambiguous language generally goes against the insurance company. (See CONTRACT OF ADHESION)

CONTRIBUTION—payment by each of several jointly liable parties of their individual shares in a loss suffered; the amount so paid by one of them.

CONTRIBUTORY NEGLIGENCE—a legal doctrine/liability defense that bars a person from recovering damages, if they contributed in any way to their own injury. (Also see COMPARATIVE NEGLIGENCE)

CONTROLLED LINES—the various types of insurance considered to fall within the category of INLAND MARINE are generally divided into two major categories: “controlled lines” and “uncontrolled lines.” For controlled lines, there are forms filed by a bureau such as ISO, which leads to more standardization of coverages among different companies; for uncontrolled lines there are no standardized filings, so policy provisions vary more among the insurers writing these types of coverage.

COURT BOND—all BONDS required of litigants to enable them to pursue court actions, including DEFENDANTS' BONDS and PLAINTIFFS' BONDS. (See JUDICIAL BONDS and SURETYSHIP)

—in insurance practice, the word "coverage" is used synonymously with the word "insurance" or "protection."

COVERAGE TRIGGER—refers to the difference between OCCURRENCE and CLAIMS MADE liability coverages. The issue is what "triggers" the coverage under a particular policy—an occurrence having taken place during that policy period or a claim having been made during that policy period.

DAMAGES—a sum of money awarded to someone to compensate for a loss. (See NEGLIGENCE, ECOMONIC DAMAGES, PAIN & SUFFERING, and PUNITIVE DAMAGES)


DANGEROUS INSTRUMENTALITY DOCTRINE—anyone who possesses a dangerous instrument (e.g., dynamite) has ABSOLUTE LIABILITY for injury or damage arising out of that instrument, regardless of their degree of care or the lack of NEGLIGENCE on their part.

DECLARATION—a statement by the applicant for insurance usually relative to underwriting information. 

DECLARATIONS PAGE—the section of an insurance policy that lists the name and address of the insured, the property covered, policy limits, premiums, policy period, forms attached, etc.

DEDUCTIBLE—the amount (usually stated as a dollar amount, but sometimes as a percentage) that the insured must assume on all losses with the insurance company paying the amount of the loss in excess of the deductible. The deductible essentially has the effect of reserving insurance coverage for larger, less frequent losses, thus avoiding "nuisance" claims and keeping premiums down. Associated primarily with property, rather than liability, insurance.

DEFENDANT—the party against whom relief or recovery is sought in a legal action.

DEFENDANT'S BOND—bonds given by defendants in litigation enabling them to retain or regain possession of property, pending the outcome of a suit, or to suspend the execution of a judgment while the defendant appeals it. (See COURT BOND and SURETYSHIP)

DEPRECIATION—decrease in the value of property over a period of time due to wear and tear, and obsolescence.

DIRECT DAMAGE—loss of or injury to property, which is caused proximately by the hazard insured against.

DIRECTORS & OFFICERS LIABILITY (D&O)—covers directors and officers of a corporation for liability arising from negligent acts or omissions in the management of the corporation on behalf of the shareholders. The D&O policy normally has two coverages—one for direct coverage of directors and officers and the other for indemnification of the corporation when it has advanced payments on behalf of its directors and officers. (See F.S. 617.0834 and 768.1355)

DIRECT WRITER—an insurance company which sells its policies through salaried employees or agents who represent it exclusively, rather than through independent local agents or insurance brokers. (See CAPTIVE AGENT)

DISABILITY INSURANCE—coverage which generally provides non-occupational weekly benefits payable to employees for accident or sickness not within the scope of Workers Compensation Laws.

DISCOVERY PERIOD—under certain bonds and policies, a provision is made to give the insured a period of time after the cancellation of a contract in which to discover whether he has sustained a loss that comes within the terms of the contract, and would have been recoverable had the contract continued in force. This period varies from six months to three years where the company can fix the period of time to be allowed. It may also be governed by statute, and in certain bonds the period is indefinite because of such statutory requirement.

DOMESTIC INSURER—an insurance company formed under the laws of the state in which the insurance is written. (See Florida Statute 624.06)

DRAM SHOP LAWS—statutes dealing with the selling and serving of alcoholic beverages and the liability exposures entailed in these activities. (See LIQUOR LIABILITY)

DRIVE OTHER CAR—a business auto policy endorsement designed to provide coverage to persons who are furnished with company cars but have no personal auto policy (i.e., they don' t own a car).

DROP DOWN PROVISON—the provision found in umbrella liability policies whereby the umbrella policy will provide primary coverage, subject to the insured's SELF-INSURED RETENTION. This feature comes into play when the umbrella policy's scope of coverage encompasses a loss not covered by any of the underlying liability policies. (See UMBRELLA COVERAGE)


DUAL CAPACITY—a type of claim that arises when an employer is sued by an employee in some capacity other than as an employer for an employment-related injury—e.g., the employer' s product injures the employee while he is on the job, and the employee files a product liability claim. EMPLOYERS LIABILITY coverage will address this type of claim (which exclusion “e” of the CGL excludes). If an employee were injured by his employer' s product while not on the job, it would be an ordinary products liability claim covered by the CGL with no WORKERS COMPENSATION or Employers Liability implications.
E&O—short for “errors and omissions.” (See PROFESSIONAL LIABILITY)

EARNED PREMIUM—that portion of the advance premium and audits which the company is entitled to at any period before the date the policy expires or is cancelled.

ECONOMIC DAMAGES—measurable dollar amounts or out-of-pocket costs in a LIABILITY claim, including such expenses as medical costs; lost wages; and repair, replacement, or loss of use of damaged property. Also known as “special” damages. (See DAMAGES, PAIN & SUFFERING, and PUNITIVE DAMAGES)

EFFECTIVE DATE—the date on which an insurance policy or bond goes into effect and from which protection is furnished.

ELECTRONIC DATA PROCESSING (EDP) COVERAGE—a type of INLAND MARINE insurance coverage designed to address exposures associated with computers, including both hardware and software.

EMPLOYEE DISHONESTY—the risk to an employer of theft by an employee, which can be insured by a Fidelity Bond or Employee Dishonesty Coverage Form and is excluded in property insurance forms and all other crime coverage forms.

EMPLOYERS LIABILITY INSURANCE—coverage against common law liability of an employer for injuries to employees (as opposed to statutory WORKERS COMPENSATION coverage). It is included in the Workers Comp policy as Part Two and complements the statutory WC coverage. How much this part of the WC policy comes into play can vary state-to-state, depending on how the state's workers comp law is written—specifically, how effective the EXCLUSIVE REMEDY aspect of the law is. A very effective WC law should minimize the number of Employers' Liability claims.

EMPLOYMENT PRACTICES LIABILITY INSURANCE (EPLI)—liability of an employer for nonphysical injuries to employees or potential employees, such as unfair discrimination, defamation, retaliation, wrongful termination, invasion of privacy, or sexual harassment.

ENDORSEMENT—special circumstances frequently require that a policy be altered. Such alterations are effective by attaching to the policy a form bearing the language necessary to record the change.


EXCESS INSURANCE—(a) coverage that applies on top of underlying insurance. Excess insurance does not pay until the PRIMARY insurance exhausts its limit. (b) That portion of a LINE that exceeds the company's NET LINE or RETENTION.

—a liability coverage form that provides additional insurance above underlying policy limits, but does not necessarily provide broader coverage (compare to UMBRELLA coverage). The excess policy's provisions may match the underlying policies' (often called a "following form"), or it may be narrower, or it may be broader in some ways and narrower in others.

EXCLUSION—a provision in an insurance policy or bond referring to PERILS or property for which no insurance is afforded. The most common reasons for exclusions are exposures not common to most insureds (which can often be added by endorsement); uninsurable exposures (e.g., WEAR & TEAR or illegal activities), catastrophic exposures (e.g., war or nuclear), and exposures that are typically covered by other policies (e.g., homeowners policies exclude liability arising from use of an auto, which is covered by an auto policy).

EXCLUSIVE REMEDY—in WORKERS COMPENSATION it is intended that the statutory workers comp benefits will be the sole source of recovery for injured workers in keeping with the intent of workers comp laws to substitute statutory benefits for lawsuits by injured workers against their employers; therefore, the statutes provide employers with immunity as long as the employer complies with workers comp requirements. (See F.S. 440.10 and EMPLOYERS LIABILITY INSURANCE)

EXCULPATORY CLAUSE—a contract clause that releases one of the parties from liability for his or her actions. (See HOLD HARMLESS)


EXPERIENCE—the loss record of an insured or of a class of insureds. (See POLICY YEAR EXPERIENCE and CALENDAR YEAR EXPERIENCE)

EXPERIENCE RATING—a plan, available in certain lines of casualty insurance, which is applicable to risks that meet qualifying tests. This plan provides that manual rates (average rates that reflect the experience of large groups of similar risks) shall be increased or decreased in accordance with the actual past experience of such risks.

EXPIRATION DATE—the date upon which a policy will cease to cover, unless previously cancelled.

EXPOSURE—a circumstance or factor leading to the possibility of a loss—e.g., being close to another building from which fire can spread to the insured' s building. (See HAZARD and PERIL)

EXPRESS AUTHORITY—the AUTHORITY expressly given to the AGENT by the PRINCIPAL through oral or written directions. (See AGENCY)

EXTENDED COVERAGE—a common extension of property insurance beyond coverage for fire and lightning, such as windstorm, hail, explosion (except for steam boilers), riot, civil commotion, aircraft damage, vehicle damage, smoke, and volcanic eruption. It was an endorsement to the Standard Fire Policy, but is included in current ISO homeowners and commercial property policies.

EXTENDED REPORTING PERIOD (ERP)—in claims-made liability coverage, the ERP provides a limited time after the policy period during which claims can be made and covered by that policy for occurrences that took place prior to the end of the policy period. Some policies contain a limited ERP and offer the option of purchasing a longer ERP. (See CLAIMS-MADE COVERAGE)

EXTRA EXPENSE—extra funds needed to continue a business uninterrupted after a loss. Applied to dwellings, it is called "additional living expense." Coverage is available through Extra Expense insurance and Additional Living Expense coverage in homeowners policies. (See TIME ELEMENT COVERAGES)

—commonly used to mean the amount of insurance provided.

FACULTATIVE REINSURANCE—the placement of REINSURANCE on a risk-by-risk basis. 

—common law doctrine that in an action brought against an employer by an injured employee, the employer may allege that the negligence of a fellow employee was wholly or partly responsible for the injury, thus reducing the employer' s LIABILITY. This is one of the common law defenses given up by employers under WORKERS COMPENSATION insurance.

FIDELITY BOND—a bond which reimburses an employer for loss due to theft by an employee. This type of exposure is now commonly addressed by the Employee Dishonesty Coverage Form under the Commercial Crime Coverage part of a commercial package policy. (See EMPLOYEE DISHONESTY and SURETYSHIP)

FIDUCIARY—a person who occupies a position of special trust and confidence (for example, in handling or supervising the affairs or funds of another). There are many types of fiduciaries, including an executor of an estate or a court-appointed guardian of a minor.

FIDUCIARY BOND—a type of JUDICIAL BOND that guarantees the performance of a FIDUCIARY. 

FINANCIAL RESPONSIBILITY LAW—statutes requiring motorists to furnish evidence of ability to pay damages, either before or after an accident. (See Florida Statutes, Chapter 324.)

FIRE—the courts have held that fire must be combustion sufficient to produce a spark, flame, or glow, but not an explosion, and must be hostile, as opposed to friendly—i.e., not in the place where it is intended to be, as in a furnace, stove or fireplace, but must be accidental and must be the proximate cause of the damage.

FIRST NAMED INSURED—because they often cover multiple insureds (e.g., a partnership), many commercial insurance policies reserve certain rights for the First Named Insured, making it relevant how insureds are listed in the declarations. This practice simplifies the process of making changes to the policy or providing the insured with notice of additional premium, cancellation, etc. for the insurance company.

FLAT CANCELLATION—cancellation of a policy as of the policy effective date, so that there is no earned premium, the effect being as though the policy was never written.

FLAT RATE—this term is used in several ways: (1) the rate used when no coinsurance clause is attached to the policy, or the rate from which the credits for coinsurance are deducted. In some states this is called the gross rate. (2) Sometimes used for judgment rates.

FLEET POLICY—an insurance contract covering a number of automobiles. The automobiles may be specifically designated or provision may be made for automatic coverage of all automobiles owned by the insured, on a reporting basis. To be eligible for such coverage, all automobiles must be owned by a single insured.

FLOATER POLICY—a policy designed to insure moveable property wherever it may be. (See INLAND MARINE)

FLOOR PLAN POLICY—covers merchandise held for sale that has been financed (e.g., large appliances); can be written on the interest of the lender, the dealer, or both.

FORCE MAEJURE CLAUSE—a clause found in many contracts that addresses the effect of ACTS OF GOD on either party's obligations under the contract. (See CONTRACT)

FOREIGN INSURANCE COMPANY—an insurance company is so designated with respect to any state or country other than the one in which it is chartered. (See Florida Statute 624.06)

FORGERY—in general, any false writing with intent to defraud. Defined by statute in the various states.

FULL COVERAGE—any form of insurance which provides for payment without deduction of all losses occasioned by hazards covered.

FUNCTIONAL REPLACEMENT COST—the cost to replace property with a less costly alternative that is functionally equivalent. Most commonly used where a unique building has been converted for some commercial use and, if it were destroyed, could be rebuilt more cheaply by using a more conventional (i.e., less ornate, less heavily constructed, etc.) building design. The insured saves money by choosing in advance not to replace the building exactly as it is, thus being able to carry less insurance. ISO has Functional Building Valuation and Functional Personal Property Valuation endorsements among their commercial property forms for this purpose, one of the key provisions of these forms being waiver of the COINSURANCE requirement. (See ACTUAL CASH VALUE, REPLACEMENT COST, and VALUATION)

GENERAL AVERAGE—in maritime law and OCEAN MARINE insurance, "a sacrifice to avert a common peril." It means losses suffered through expenses voluntarily incurred and sacrifices intentionally made by a master of a ship of a part of the ship' s cargo to preserve the rest from destruction. Since they were for the benefit of all, these losses and expenses must be shared proportionately by each of the interests involved.


GOVERNMENTAL IMMUNITY—a right peculiar to governmental bodies exempting them from responding in damages for alleged tortuous acts.

GRACE PERIOD—a period following the premium due date during which payment of the premium may be made without penalty or suspension of coverage.

GROUP INSURANCE—broadly, any insurance plan by which a number of employees (and their dependents) are insured under a single policy, issued to their employer with individual certificates given to each insured employee. The most commonly written lines are Life, Accidental Death and Dismemberment, Weekly Benefits, Hospital, Surgical, Medical Expense, Major Medical, and Comprehensive Medical Expense plans.

GROSS NEGLIGENCE—far and above the omission of care of an ordinary reasonable person; almost criminal; willful and wanton negligence; reckless indifference to the consequences of one's act or omission. (See NEGLIGENCE and PUNITIVE DAMAGES) 

GUIDING PRINCIPLES—it sometimes happens that the coverage afforded by one type of policy overlaps that afforded by another, producing disputes as to which policy covers a given loss. Various underwriting organizations, such as the National Board of Underwriters, the Inland Marine Underwriters Association, and the National Bureau of Casualty Underwriters, have drawn up recommended "guiding principles" covering such situations to minimize disputes so that the insuring public will get the best adjustment possible. For example, according to the Guiding Principles, specific insurance should be PRIMARY to blanket coverage. Insurance companies' compliance with these principles is voluntary.

HAZARD—refers to physical conditions which may create or increase the probability or potential severity of a loss due to a given PERIL. For example, faulty wiring is a hazard, because it increases the chances of a fire loss. (See MORAL HAZARD and MORALE HAZARD)

HIRED CAR—an automobile whose exclusive use and control has been temporarily given to another for a fee. This is different from contract hauling, since in the latter case the owner retains control of the movements of the vehicle and simply agrees to furnish transportation.

HOLD HARMLESS AGREEMENT—a contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of liability—typically found in leases, easements, and construction agreements.


HOST LIQUOR LIABILITY—liability exposure of one who incidentally provides liquor to another, but is not in the business of manufacturing or selling alcoholic beverages—e.g., the liability exposure of a company holding an office party where liquor is being served when one of the guests injures himself or another. The ISO CGL policy excludes the LIQUOR LIABILITY exposure, but makes an exception for the host liquor liability exposure.

HULL POLICY—a marine or aviation insurance contract covering damage to the ship or plane itself.
IMPLIED AUTHORITY—the AUTHORITY that derives from and is necessary to the carrying out of the agent's EXPRESS AUTHORITY. (See AGENCY)

IMPROVEMENTS & BETTERMENTS—additions or changes made by a lessee at his own cost which enhance the value of a building he is occupying. These become part of the realty and require special insurance consideration. The lessee does not own them but has an INSURABLE INTEREST in them as long as he occupies the building.

IMPUTED NEGLIGENCE—the negligence of one person may be transferred to another, depending upon the relationship of the parties—e.g., the negligence of an AGENT acting within the scope of his AUTHORITY may be chargeable to his PRINCIPAL.

INCONTESTABLE CLAUSE—a clause in a life insurance contract providing that the insurer may not, after a specified time from the inception of the contract, contest the validity of the contract—e.g., the company is generally prevented from denying benefits in the case of a suicide if the policy has been in force at least two years.

INDEMNIFY—to compensate for actual loss sustained; to restore the victim of a loss by payment, repair, or replacement. The promise to indemnify implies that the insured will be reimbursed for actual payments made. Since insurance normally covers both first-party losses and LIABILITY losses without the insured being significantly out-of-pocket, most policies today no longer use the term “indemnify,” instead promising “to insure,” “to cover,” to “pay on behalf of” or similar wording. (See INDEMNITY)

INDEMNITY—a fundamental insurance principle which holds that after a loss the insured should be restored to the approximate financial condition that existed prior to the loss. The principle of indemnity holds that an insured should not profit from an insurance claim.

INDEPENDENT CONTRACTOR—one who agrees to perform services or supply commodities under a contract. In carrying out his contract he is not under the control of, nor an employee of, the party with whom he contracts. The "independent contractor v. employee" issue is relevant to certain insurance questions, particularly in relation to workers compensation coverage, and Florida Statute 440.02(14) attempts to clarify the issue by defining the terms for WORKERS COMPENSATION purposes.

INDEPENDENT AGENT—an insurance agent who contracts with multiple insurance companies. (See AGENCY AGREEMENT)

INDIRECT DAMAGE—loss resulting from a peril, but not caused directly and immediately thereby. Indirect damage may be covered by insurance, as for example, Business Interruption, Leasehold Interest, Profits and Commissions, Rent or Rental Value, and Consequential Coverage.

INHERENT VICE—a defect or cause of loss arising out of the nature of the goods in question.

INLAND MARINE INSURANCE—various types of insurance developed originally by MARINE underwriters to cover goods while in transit by other than ocean vessels. It now includes any goods in transit, except trans-ocean, and numerous floaters—such as personal effects, personal property, jewelry, furs, fine arts, contractors' equipment, etc. — the essential condition being that the insured property be moveable. Bridges, tunnels, radio towers, and other instrumentalities of transportation and communication are also considered Inland Marine, as well as BAILEE coverages, valuable papers, accounts receivable, and others. There is sometimes an overlap between inland marine and other lines of insurance—e.g., BUILDERS RISK coverage is available both as a commercial property policy and an inland marine policy. Much of the property insured under inland marine forms is also covered under other property insurance forms (Homeowners or Commercial Property), but the inland marine forms can provide more flexibility and often broader coverage, particularly when it comes to property in transit or otherwise away from the premises. There is less standardization among inland marine forms than there is in most other lines, so policy provisions can vary widely among companies. (See CONTROLLED LINES, MOTOR TRUCK CARGO COVERAGE, NATIONWIDE MARINE DEFINITION, and OCEAN MARINE) 

INSTALLATION FLOATER—an INLAND MARINE form designed to protect artisan contractors (e.g., electricians, plumbers) for property risks involved in the installation of equipment, including while in transit to the job site; similar to a BUILDERS RISK form but narrower and usually of shorter duration.

—policy that protects the seller' s interest (i.e., the unpaid balance) in goods being sold on installments; can also be written to cover both parties' interests, in which case it is written on the full value of the merchandise being sold. Banks will sometimes buy this type of policy to protect their interest (i.e., a single-interest policy) on autos being purchased with a loan from them, if they have reason to believe the purchaser has not maintained insurance on the vehicle (they then add the cost of the installment policy to the balance of the loan).

INSURABLE INTEREST—any interest in a subject of insurance or any legal relation to it of such a nature that a certain happening could cause monetary loss to the insured—e.g., the owner of a building has an insurable interest in it, and a person has an insurable interest in the life of his or her spouse.

INSURANCE—the contractual relationship which exists when one party, for a consideration, agrees to reimburse another for loss caused by designated contingencies. The first party is called the insurer; the second, the insured; the contract, the insurance policy; the consideration, the premium; the property in question, the risk; and the contingency in question, the hazard or peril.

INSURANCE AGENT—an individual licensed under the insurance laws of a state and appointed by insurance companies to transact insurance on their behalf. The two major types are INDEPENDENT AGENTS, who contract with multiple insurance companies and CAPTIVE AGENTS who (primarily) represent one company. (See AGENCY, APPOINTMENT, DIRECT WRITER, and F.S. 626.015 (3))

INSURANCE-BY-THE-MILE—an auto insurance option introduced in Texas in 2001 that would allow insurers to sell and rate auto insurance based on miles driven by the insured. For example, the insured could purchase 3000 miles worth of insurance, rather than buying a policy with a term of six or 12 months. Policies would still have an expiration date in order to preserve certain rights established by statute, such as the company' s right to give 30 days notice of nonrenewal. 

INSURANCE COMPANY—an organization chartered under state or provincial laws to act as an insurer. In the United States, insurance companies are usually classified as fire and marine, life, casualty, and surety companies, and may write only those kinds of insurance which are specifically authorized in their charters. Many company charters have now come to include several of these types.

INSURANCE POLICY—broadly, the entire written contract of insurance. More narrowly, the basic written or printed document, as distinguished from the forms and endorsements added thereto.

INSURANCE SERVICES OFFICE (ISO)—Formed in 1971, a consolidation of several insurance industry service organizations including the Insurance Rating Board, the Fire Insurance Research and Actuarial Association, the Inland Marine Insurance Bureau, and the Multi-Line Insurance Rating Bureau. The ISO performs a wide range of advisory, actuarial, rating, statistical, research, and other types of services, including the development of standardized policies and endorsements for major lines of coverage. 

INSURED—in property-casualty insurance, the person, partnership, association, trust, or corporation whose insurable interest is protected by the policy. (See NAMED INSURED)

—the part of an insurance policy or bond which recites the agreement of the insurer to protect the insured against some form of loss or damage. This is the heart of the contract of insurance.

INTERSTATE CARRIER—a COMMON CARRIER doing business across state lines.

INTRASTATE CARRIER—a COMMON CARRIER whose business is confined entirely within the boundaries of a particular state.

INVITEE—one on another' s premises at their invitation (express or implied)—e.g., a customer. The property owner has a duty to exercise reasonable care to maintain safe premises for the protection of invitees. (See LICENSEE and TRESPASSER)


JOINT & SEVERAL LIABILITY—legal concept under which each party among a group who are jointly liable can be held liable for the full amount of damages without regard to his individual degree of responsibility—e.g., the manufacturer, wholesaler, and retailer of a product are all sued by a person injured by the product; the wholesaler and retailer are both insolvent and uninsured, and the manufacturer ends up being held responsible for all damages. Sometimes referred to as the "deep pockets" theory. (See NEGLIGENCE)

JOINT UNDERWRITING ASSOCIATION (JUA)—a type of RESIDUAL MARKET involving an administrative body (the JUA) using a few “servicing carriers” to carry out the ordinary insurance company functions such as receiving funds, issuing policies, and processing claims, but in which the losses are underwritten by private market insurers based on their respective market shares. 

JOINT VENTURE—an enterprise undertaken by several persons jointly, essentially a temporary partnership.

JUDGEMENT—the court's decision on the rights of the parties in action. (See Chapter 55, Florida Statutes.)

JUDICIAL BOND—applies to all BONDS filed in court, including FIDUCIARY and COURT BONDS. (See SURETYSHIP)
LAPSE—technically, discontinuance of a contract by the insured by non-payment of premium before the policy has a cash or other non-forfeiture value; popularly, loss or reduction of rights by non-payment of premium at any time.

LARCENY—generally, the unlawful taking of the personal property of another without his consent and with intent to deprive him of the ownership or use thereof. This offense is defined by statute in practically all states and provinces and these statutory definitions differ somewhat. Generally, the theft is accomplished by stealth, and degree of turpitude is measured by the value of the personal property stolen—e.g., theft of less than $300 equals petit larceny, and $300 or more equals grand larceny in Florida. 

LAST CLEAR CHANCE DOCTRINE—usually applied where the defendant, by the exercise of reasonable vigilance, could have observed the danger created by the plaintiff's negligence in time to have avoided harm.

LAW OF LARGE NUMBERS—in statistics, the larger a sample size, the more closely it will coincide with the statistics of the population as a whole—e.g., the more times you flip a fair coin, the more closely the results will approach 50-50 heads-tails. In insurance, the larger the number of exposures, the more closely the amount of losses will match those expected based on population statistics (assuming an adequate spread of risks), thus the more predictable the company's underwriting results, which is a fundamental basis of insurance. (See ACTUARY)

LESSEE—a person to whom a lease is granted, commonly called the tenant.

LESSOR—a person granting a lease, also known as the landlord.

—the economic interest a tenant has in a favorable lease—i.e., loss of that lease could cause the tenant a financial loss, such as having to pay more rent for replacement premises or losing the value of IMPROVEMENTS & BETTERMENTS made by the tenant. This exposure can be insured against through a Leasehold Interest policy, which covers the tenant's losses from various leasehold interest exposures when property damage caused by an insured peril leads to their loss of the lease on that property. (See TIME ELEMENT COVERAGES)

LIABILITY—broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense. (See ABSOLUTE LIABILITY, LIABILITY INSURANCE, NEGLIGENCE, STRICT LIABILITY, TORT, and VICARIOUS LIABILITY)

LIABILITY INSURANCE—any form of coverage whereby insureds are protected for claims for DAMAGES filed against them by third parties. Most liability insurance is written by casualty companies, but some forms, especially those referring to property in the care of the insured, are underwritten in connection with fire and marine business. The insured's liability for damages under such claims may arise from his NEGLIGENCE or through the operation of a law or a contract.

LIABILITY LIMITS—the sum or sums beyond which a liability insurance company does not protect the insured on a particular policy. The majority of policies covering liability for bodily injury have two limits, a limit of liability to any one person and, subject to this personal limit, another (and usually higher) limit for any single accident, where more than one person is involved. Coverage for property damage is usually written with a limit per accident, and may also include an aggregate limit of liability for the total amount of all claims during the policy period. Basic limits of liability are the lowest limits which are ordinarily written and are the limits contemplated by manual rates and minimum premiums.

LIBEL—written defamation of another (includes pictures and film). (See SLANDER)

LICENSE AND PERMIT BONDS—bonds required by various municipalities or public authorities to indemnify them against loss in the event of violation of regulations or ordinances under which the permit is required. (See SURETYSHIP)

LICENSEE—one allowed to go on another's premises for his own interests—e.g., a meter reader. In TORT law, a property owner owes a licensee a lower degree of care than that owed an INVITEE. The licensee accepts the premises as they are, and the owner' s duty is only to warn the licensee of hidden dangers; however, the distinction between licensees and invitees has blurred to some degree. (See TRESPASSER)

LIMIT OF LIABILITY—the maximum amount that an insurance company agrees to pay in case of loss.

LINE—colloquial term with several meanings. It may be used in connection with a particular type of insurance. It may also be used to describe all the various types of insurance written for a property owner. The term is sometimes used to describe the amount of insurance on a given property. In casualty insurance, "line" may also refer to specific categories such as automobile liability, general liability, burglary, and workers compensation coverages.

LIQUOR LIABILITY—liability arising out of the manufacture or sale of alcoholic beverages. (See HOST LIQUOR LIABILITY)

LIQUIDATED DAMAGES—an amount stipulated in a CONTRACT, which the parties agree to as a reasonable estimate of the DAMAGES owed to one in the event of a breach by the other. This provides an upper limit on the defaulting party' s LIABILITY. If the liquidated damages amount is unreasonably high, it may represent a penalty, rather than a good faith effort to estimate probable damages, which can make it unenforceable.

LITIGATION—a suit at law; a judicial contest; hence, any controversy that must be decided upon evidence.

LLOYD'S—a broad term used to designate a group or groups of individuals, not insurance corporations or companies, assuming liability through an underwriter. Each individual independently assumes a proportionate part of the insurance accepted by the underwriter.

LOADING—an amount added to the basic rate or premium to cover the expense to the insurance company of securing and maintaining the business. This term is also used in connection with Inland Marine insurance, as the amount added to the fire rate to cover additional perils.


LOSS—any diminution of quantity, quality, or value of property. With reference to policies of indemnity, this term means a valid claim for recovery thereunder. In its application to LIABILITY INSURANCE, the term refers to payments made on behalf of the insured.

LOSS CONSTANT—flat amount added to the premium of a risk; designated to offset worse than average loss experience of the smaller risk. This term is found in Workers Compensation insurance.

LOSS CONTROL SERVICE—engineering and inspection work done by insurance companies or independent organizations for the purpose of changing or removing conditions which would be likely to cause loss.

LOSS OF USE COVERAGE—compensates the insured for expenses associated with the loss of use of property caused by a covered peril.

LOSS PAYABLE CLAUSE—a clause in an insurance contract providing for payment to someone other than the insured to the extent that they have an interest in the property, its purpose being to protect the interests of a lender or lien holder. It' s similar to the MORTGAGE CLAUSE but generally for personal property, rather than real property. 

LOSS RATIO—the percentage of losses to premiums.

LOST POLICY RELEASE—a statement signed by the insured releasing the insurance company from all liability under a lost or mislaid contract of insurance.

MAINTENANCE BOND—guarantees against loss due to defective workmanship or materials used in the performance of a construction or supply contract. (See SURETYSHIP)

MALPRACTICE—alleged professional misconduct or lack of ordinary skill in the performance of a professional act. A practitioner is liable for damage or injuries caused by malpractice. Such liability, for some professions, can be covered by insurance. (See PROFESSIONAL LIABILITY)

MANAGING GENERAL AGENT (MGA)—an agent or agency that performs some or all of the functions that a regional office would for an insurance company; the MGA has more AUTHORITY to act on behalf of the company than an ordinary agent would, and retail agents place business with the company through the MGA. (See F.S. 626.015(16)(a) and 626.7451—626.7454)

MANUAL—a book published by an insurance or bonding company, a conference or a rating association or bureau, giving rates, classifications, and underwriting rules for some phase of insurance or bonds in a particular territory.

MANUAL RATES—usually the cost of a unit of insurance or bond protection of the various kinds of insurance and bonds as published in the pertinent manuals, but may also refer to rates developed by the application of a recognized rating plan.

MARINE INSURANCE—that form of coverage which is primarily concerned with the protection of goods in transit and the means of transportation. (See INLAND MARINE, MOTOR TRUCK CARGO COVERAGE, and OCEAN MARINE)

MARKET VALUE CLAUSE—a provision that may be used in a property damage insurance form covering some risks which obligates the insurance company, in the event of loss, to recognize the established market value of the destroyed or damaged stock as of the date of loss as the actual cash value and to adjust the loss accordingly.

McCARRAN-FERGUSON ACT—federal legislation enacted in 1945 giving the insurance industry limited antitrust immunity by establishing that federal antitrust laws will not apply to insurance to the extent that it is regulated by state law. The law was a response to the Supreme Court' s decision in United States v. South-Eastern Underwriters, which established that insurance is commerce and therefore subject to federal antitrust laws. Prior to that case, insurance had traditionally been regulated by the states, which was supported by a prior Supreme Court decision in Paul v. Virginia, which had established that insurance was not commerce. The effect of McCarran-Ferguson has been to maintain the states as the primary regulators of the insurance industry, even though it is clearly subject to federal regulation, with the federal government only stepping in where state regulation proves inadequate. 

MECHANICAL BREAKDOWN—the sudden and accidental breakdown of a piece of equipment arising from within the equipment—i.e., not caused by some external force, such as fire or being struck by another object. This PERIL is excluded in most property policies and covered by BOILER & MACHINERY insurance.

MEDICAL EXPENSE INSURANCE—coverage available in various forms against expenses incurred for medical treatment and care as a result of bodily injury or illness.

MEDICAL PAYMENTS INSURANCE—protection available under various liability insurance policies under which the company reimburses, without regard to the insured's liability, the insured and others as specifically provided in the policy for medical or funeral expenses incurred by such persons as the result of bodily injury or death sustained by accident under the conditions specified in the policy. Medical payments coverage associated with premises (e.g., in a CGL or HO policy) is generally for the expenses of third parties, while auto med pay coverage is generally for expenses incurred by insureds.

MID-TERM CANCELLATION—cancellation of a policy after its effective date, normally necessitating a proportional refund of premiums. (See FLAT CANCELLATION and UNEARNED PREMIUM)

MINIMUM PREMIUM—the smallest premium which an insurance company may charge under the rules for writing a particular policy or bond for a designated period. It is intended to cover the expense incurred in writing the policy or bond, for which the manual premium on a small policy may be insufficient.

MINIMUM RATE—a general class rate for risks of low hazard, with many units in the class, as opposed to "schedule rate" and "specific rate."

MONOPOLISTIC STATE FUND—a state or provincial WORKERS COMPENSATION insurance plan which prohibits the writing of this coverage by private carriers. Currently applies to the following states: North Dakota, Ohio, Washington, West Virginia, and Wyoming.

MORAL HAZARD—the possibility of loss being caused or aggravated by the dishonesty of the insured, his agents, or employees. It arises from the character and circumstances of the insured, rather than the nature of the property covered or its location, which is known as the PHYSICAL HAZARD. (See MORALE HAZARD)

MORALE HAZARD—an attitude that increases the probability of loss—e.g., a carelessness in maintaining property that creates a fire hazard. (See MORAL HAZARD)

MORTGAGE (or MORTGAGEE) CLAUSE—a provision attached to a fire or other direct damage insurance policy covering mortgaged property reciting that the loss should be payable to the mortgagee as his interests may appear and that his right of recovery shall not be defeated by any act or neglect of the insured and giving the mortgagee other rights and privileges.

MOTOR TRUCK CARGO COVERAGE—an INLAND MARINE insurance policy that protects a cargo carrier for loss caused by damage to goods of others it is hauling for a fee; can also be written for one transporting his own goods. (See COMMON CARRIER, CONTRACT CARRIER, and TRANSIT POLICY)

MUTUAL INSURANCE COMPANY—an insurance organization incorporated without capital funds contributed by stockholders, owned by its policyholders, and operating solely through premiums paid in by them. (See CAPITAL STOCK INSURANCE COMPANY)

—any person or organization, or any member thereof, specifically designated by name as insured in a policy as distinguished from others who, though unnamed, are protected under some circumstances. A common application of this latter principle is in liability policies wherein by a definition of "insured" protection is extended to interests (not designated by name) according to their status or in particular situations or circumstances—e.g., employees are automatically insureds under a CGL. (See FIRST NAMED INSURED)

NAMED PERILS—an insurance policy that specifies what PERILS are insured against, contrary to so-called ALL-RISK policies.

NATIONWIDE MARINE DEFINITION—a statement of the types of insurance that may be properly written under MARINE or INLAND MARINE policies. This statement, on recommendation by the National Association of Insurance Commissioners, has been adopted in most states. There is a committee of interpretation composed of representatives of fire, casualty, and marine and inland marine departments of the industry. 

NEGLIGENCE—an act or omission contrary to the conduct of a "reasonable person" in the same circumstances. This constitutes ordinary negligence. Most courts hold that four elements must be present: (1) a duty owed, (2) breach of duty, (3) actual loss suffered by a third party, (4) negligent act was the PROXIMATE CAUSE of the loss. (See ABSOLUTE LIABILITY, DAMAGES, GROSS NEGLIGENCE, STRICT LIABILITY, and Chapter 768, Florida Statutes) 

NEGLIGENT ENTRUSTMENT—the entrustment of a dangerous object or instrument to another whom the lender knows or should know is likely to endanger others—e.g., lending a car to someone who is underage or intoxicated.

NEGLIGENCE PER SE—in violation of statutory law.

NET LINE—the amount of liability the company is prepared to expose to loss for its own account. (See REINSURANCE)

NO BENEFIT TO BAILEE—a clause in property insurance policies providing that the coverage provided is for the benefit of the insured property owner and not that of someone else in possession of the insured' s property—i.e., the insurance company will SUBROGATE against a BAILEE who causes damage to the insured' s property.

NONADMITTED INSURER—an insurance company that is not licensed to transact business in the state. Also known as "unauthorized" or "surplus lines" carriers. Insurance coverage can only be placed with such companies under circumstances specified in state statutes, including in most cases lack of availability of insurance through ADMITTED carriers. (See Florida Statutes 624.09 and 626.901 - 626.939)

NON-CONCURRENCY—the situation which exists where a number of insurance policies, intended to cover the same property, for the same interests, and against the same hazards, are not identical, as to the extent of coverage. 


NOTICE—knowledge or information of a fact. Actual notice involves being expressly informed of the fact. Constructive notice is that notice imputed by law to a person not having actual notice.

OBLIGEE—broadly, anyone in whose favor an obligation runs. This term is used most frequently in surety bonds, where it refers to the person, firm, or corporation protected by the bond. The obligee under a bond is similar to the insured under an insurance policy. (See SURETYSHIP)

OCEAN MARINE INSURANCE—insurance for goods being transported by ship. (See INLAND MARINE)

OCCUPANCY—in insurance, this term refers to the type and character of the use of property in question. It plays a very important part in computing rates and in determining the acceptance or rejection of risks.

OCCURRENCE—an ACCIDENT (e.g., a customer slipping and falling in a grocery store would constitute an occurrence, and it may or may not lead to a subsequent liability CLAIM being filed for injuries).

OCCURRENCE COVERAGE—a type of liability coverage that pays claims arising from OCCURRENCES that take place during the policy period, regardless of when the resultant claims are filed. (See CLAIMS-MADE COVERAGE)

OFF PREMISES—a clause used to provide insurance protection on personal property covered while it is away from the premises named in the policy.

OMNIBUS CLAUSE—that agreement of the automobile liability policy which, by its definition of "insured," extends the protection of the policy to interests embraced by the definition without the necessity of naming or otherwise designating them.


ORDINANCE OR LAW COVERAGE—usually an endorsement to a property insurance policy that covers additional repair costs arising from the necessity of complying with current building codes (a cost that is normally excluded in an unendorsed policy).

OTHER INSURANCE CLAUSE—a provision found in practically every insurance policy stating what is to be done in case any other contract of protection embraces the same property and hazards. How the policies coordinate will vary depending on the types of policies and what their respective Other Insurance clauses say, but the most common methods are sharing on a PRO RATA basis, or one being PRIMARY and the other EXCESS, or equal shares (until one policy uses up its limit). (See GUIDING PRINCIPLES)

OVER-INSURANCE—the situation which exists where a risk is insured for more than its fair or reasonable value. Such a state of affairs is undesirable for all parties concerned.

PACKAGE POLICIES—combination policies wherein several coverages are included in one contract. Examples: Homeowners policy, BOPs, etc.

PAIN & SUFFERING—intangible or subjective DAMAGES often claimed in LIABILITY suits where an attempt is made to place a value on emotional injury, such as “loss of consortium” (or companionship), which can become an issue when a spouse has been killed or disabled, for example. Pain and suffering is a type of “general” or “non-economic” damages, which can also include mental anguish, inconvenience, and other types of injuries that don' t coincide with a specific monetary loss. Like ECONOMIC DAMAGES, general damages are considered COMPENSATORY, as opposed to PUNITIVE DAMAGES, which are considered “exemplary.”

PAIR OR SET CLAUSE—policy provision applying to personal property that stipulates that in case of partial loss to a pair or set of items the company will have the option to repair, replace, or pay the value of the lost part or item, or pay the difference in value of the pair or set before and after the loss. This prevents the insured from claiming a total loss when only part of a pair or set is lost or damaged.

PARENT COMPANY—broadly, any corporation controlling another. In insurance usage, this term is frequently applied to the oldest or controlling company in a group of companies.

PARTIAL LOSS—a loss under an insurance policy which does not either (1) completely destroy or render worthless the insured property, or (2) exhaust the insurance applying thereto.

—insurance or reinsurance which contributes proportionately with other insurance on the same risk.

—this means, primarily, a loss suffered by the insured without benefit to, or right of remuneration from, others. It is also used synonymously with "partial loss" in MARINE insurance.

PAYMENT BOND—guarantees that a contractor will pay for labor and materials used in the completion of the work undertaken in a contract. (See SURETYSHIP)

PERFORMANCE BOND—guarantees the performance of the terms of a contract for construction or the furnishing of supplies. (See SURETYSHIP)

PERIL—refers to the potential causes of loss, such as fire, windstorm, explosion, theft, etc. (sometimes mistakenly used interchangeably with HAZARD).

—perils particular to maritime operations, such as storm, collision, sinking, and stranding.

PERIOD OF RESTORATION—in BUSINESS INCOME coverage the period of time following a direct physical loss due to a covered peril that is necessary to restore an organization to its pre-loss condition. (See TIME ELEMENT COVERAGES)

—periodic payments for a disability which impairs earning capacity but which does not involve total inability to work. (See WORKERS COMPENSATION)

PERMANENT TOTAL DISABILITY BENEFITS—periodic payments, generally weekly, for a disability of a kind that renders any employment impossible. Such compensation may be limited by a maximum time or a maximum amount, but if unlimited, may run for life. (See WORKERS COMPENSATION)

PERSONAL & ADVERTISING INJURY—defined in the CGL policy as liability arising from nonphysical injuries, such as libel, slander, false arrest, invasion of privacy, wrongful eviction, malicious prosecution, copyright infringement, and misappropriation of advertising ideas. Coverage is provided for these exposures under Coverage B of the CGL (bodily injury liability and property damage liability are covered under Coverage A). Within the legal system “personal injury” has a broader definition, encompassing both the nonphysical injuries described above and bodily injury. It may also be used differently is some non-ISO insurance policies.

PERSONAL INJURY PROTECTION (PIP)—the no-fault portion of an auto policy that pays for insureds' medical costs, lost wages, loss of services, or death due to physical injury arising from use of or contact with an automobile. (See F.S. 627.730 - 627.7405)


PHYSICAL DAMAGE—damage to property. Usually refers to damage to the property described in the policy. (See PROPERTY DAMAGE LIABILITY INSURANCE)

PLAINTIFF—one who complains at law, by bringing an action against a DEFENDANT.

PLAINTIFF'S BOND—bonds given by plaintiffs in litigation, enabling them to exercise certain privileges with permission of the court, such as attachment, injunction, or replevin. (See COURT BOND and SURETYSHIP)

POLICY—a written contract of insurance.

POLICYHOLDER—one who possesses an insurance contract. In most states this term is used synonymously with "Insured."

POLICY YEAR—a year during the life of an insurance contract beginning at a designated date, usually the policy anniversary.

POLICY YEAR EXPERIENCE—experience on business during the 12-month period from the effective date of the policy which became effective during a given year regardless of when the transactions (payment of premium or loss payment) may actually have taken place.

POWER-OF-ATTORNEY—authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power. (a) In reciprocal insurance each subscriber gives the individual or incorporated manager (attorney-in-fact) authority to exchange insurance for him with other subscribers. A reciprocal contract of insurance cannot be completed without a power-of-attorney. (b) In the Fidelity and Surety business, it gives the attorney-in-fact the power to execute bonds within the authority granted in the power of attorney itself, subject to instructions, if any, defining the manner of its use.

PREMISES—the property conveyed in a deed; hence, a piece of land or real estate. In insurance policies it is generally a building or buildings on land, or in some cases it may only be a part of a building, such as a suite or unit occupied by the insured, depending on how it is described in the DECLARATIONS.
PREMISES LIABILITY —the LIABILITY exposure arising from the ownership or use of premises, such as that for injuries to guests, customers or passersby. One' s personal premises liability exposure is generally addressed in their Homeowners policy, and their business premises liability exposure is normally covered by a Commercial General Liability policy. (See INVITEE, LICENSEE and TRESPASSER) 

PREMIUM—in insurance and bonding, the consideration to be paid for a policy or bond. "Premium" refers to the price a particular insured pays for a particular policy, while RATE refers to the base cost of a unit of insurance before applying other factors to produce the premium. This term has a variety of meanings in other business practices. 

PREMIUM AUDIT—a survey of the insured's books made to determine the premium which should be paid when premium is based on the insured's payroll, gross receipts, values on hand or units handled or sold.

PREMIUM AUDITOR—an employee of an insurance company trained in the technicalities of his field has the responsibility to establish the correct earned premium through an audit of the insured's records.

PRIMARY INSURANCE—applicable to a loss first, and when exhausted, other insurance, if any, then applies. (See EXCESS INSURANCE)

PRINCIPAL—in SURETYSHIP the party whose actions, honesty or responsibility are to be guaranteed. In a Fidelity Bond, for example, the bonded employee is the principal. In the context of AGENCY, the party on whose behalf an AGENT is empowered to act.

PRODUCER—term commonly applied to an agent, solicitor, broker, or other person who sells insurance, producing business for the company and for a commission (if so paid) for himself. He also creates the insurance product, namely, security and relief from risk for the insured.

PRODUCT LIABILITY—liability imposed for DAMAGES caused by accident and arising out goods or products manufactured, sold, handled, or distributed by the insured or others trading under his name, if the accident occurs (a) after possession has been relinquished to others and (b) away from premises owned, rented, or controlled by the insured. If a company' s product injures someone on the company' s premises, it is treated like any other injury arising out of the insured' s premises (with the exception of food at a restaurant, which is considered a product exposure once it is served, even if the injury occurs on the premises). If the product injures someone while the insured is using or demonstrating it off the insured' s premises, it is considered to have arisen out of the insured' s operations. This distinction can be relevant if, like the ISO CGL, the insured' s policy has a Premises-Operations Liability limit and a separate Products-Completed Operations Liability limit.

PROFESSIONAL LIABILITY—LIABILITY arising out of the rendering of or failure to render professional services, such as a medical error by a doctor, dentist, or nurse causing injury to a patient; bad advice by a lawyer, accountant, or insurance agent causing financial damage to a client; a design error by an architect or engineer leading to the construction of a defective building. The professional liability exposure is generally in addition to the ordinary business liability exposures—e.g., a law firm would need professional liability coverage for this exposure, and they would still need general liability coverage in case someone were injured on their premises. Different terminology is used for different professions—e.g., doctors' professional liability coverage is referred to as “malpractice” insurance, and insurance agents' professional liability coverage is referred to as “errors and omissions” or “E&O” coverage.

PROOF OF LOSS—a formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.

PROPERTY DAMAGE LIABILITY INSURANCE—protection against liability for damage to the property of another not in the care, custody, and control of the insured, as distinguished from liability for bodily injury.

PRO RATA—(a) Distribution of the amount of insurance in one policy among the several objects or places covered in proportion to their value or to the amounts shown. (b) The proportional distribution of liability among the several insurers having policies on the risk.

PRO RATA CANCELLATION—the termination of an insurance contract or bond, the premium charge being adjusted in proportion to the exact time the protection has been in force. (See SHORT RATE)

PRO RATA DISTRIBUTION—this provision, also known as the pro rata distribution clause, is used in the writing of certain blanket policies. Its purpose is to divide the amount of insurance carried under a single item in the policy form among the several subjects of insurance in that proportion which the value of each subject of insurance bears to the total value of all property covered under that single item in the policy form.

PROTECTED—in Fire Insurance, a risk located in an area protected by a fire department. In Burglary Insurance, a risk equipped with a burglar alarm, etc.

PROTECTION—(1) a term used interchangeably with the word "coverage" to denote the insurance provided under the terms of a policy; (2) a term used to indicate the existence of fire fighting facilities in an area known as a "protected" area.

PROXIMATE CAUSE—the dominating cause of loss or damage; an unbroken chain of cause and effect between the occurrence of an insured peril and damage to property or persons; e.g., fire is the proximate cause of damage done by water used in extinguishing it.

PUBLIC OFFICIAL BOND—bond guaranteeing the faithful performance of duties by a public official. (See SURETYSHIP)

PUNITIVE DAMAGES—monetary DAMAGES in excess of the amount required to compensate for loss, allowed in cases of GROSS NEGLIGENCE or for torts committed with fraud, malice, or other aggravating factors, as a punishment to the defendant and as a warning to other wrongdoers. Also known as "exemplary" damages. Whether punitive damages are covered by an insurance policy depends on state law and the terms of the policy. (See COMPENSATORY DAMAGES, ECOMONIC DAMAGES, PAIN & SUFFERING, and Florida Statutes 768.71-768.737)

PURE PREMIUM—premium arrived at by dividing losses by exposure and in which no loading has been added for commission, taxes, and expenses.
RAILROAD SIDETRACK AGREEMENT—a contract entered into between a railroad and another entity, such as a manufacturer, under the terms of which the railroad agrees to build and maintain a switch track on the other party' s premises to facilitate shipments, and the other party agrees to release the railroad from liability to a certain extent.

RATE—the cost of a unit of insurance, usually expressed in Fire Insurance per $100 per year. Most states have statutes requiring that insurance companies submit their rates for approval by the Department of Insurance, a general standard being that rates be adequate, equitable, and not unfairly discriminatory. (See PREMIUM and F.S. 627.062)

REBATING—when a portion of the agent's commission is returned to the insured as an inducement to purchase insurance through that agent. It is forbidden in most states, including Florida, with certain exceptions. (See F.S. 626.572 and 626.9541(1)(h))

REDLINING—unfair discrimination in underwriting, based on a risk's location.

REINSTATEMENT—(1) restoration of a policy that has lapsed or been cancelled for non-payment of premium; (2) the payment of a claim under many forms of insurance reduces the principal amount of the policy by the amount of the claim. Provision is usually made for a method of reinstating the policy to its original amount. This may be done automatically either with or without premium consideration or at the request of the insured. 

REINSURANCE—the means by which an insurance company transfers (or "cedes") part of the risk to another company; basically, insurance for insurance companies. Reinsurance is generally used to further spread the risk when the limits or exposure are beyond the amount which the company wants to handle alone. Reinsurance may be placed on a FACULTATIVE or TREATY basis.

RELEASE—to give up, abandon, and discharge a claim or an enforceable right against another; name of the instrument evidencing such an act.

RENEWAL—the reinstatement in form, force, and effect of something that is about to expire. With an insurance policy it is made either by the issuance of a new policy or renewal receipt or certificate under the same conditions, to take effect upon the expiration of the old policy.

—VALUATION method providing that the insured will be paid the cost of replacing the damaged property without deduction for DEPRECIATION. It is essentially an exception to the principle of INDEMNITY, because the insured is receiving new property to replace used property that was lost. The usual replacement cost wording provides that the property must actually be replaced before the insured may collect a claim under it—i.e., if the insured chooses a cash payment, rather than making repairs, the coverage reverts to ACTUAL CASH VALUE.

REPORTING FORM—a policy designed for use when values fluctuate during the policy term. Usually an adequate limit of liability is set, and the insured reports the values actually on hand on a given day of each month. At the end of the year, these reported values are averaged, and the premium adjusted accordingly.

REPRESENTATION—oral or written statement made by the insured to the insurer of certain facts or conditions. A material misrepresentation made by the insured may be grounds for the company to cancel, void or alter the policy. A representation does not carry the same force as a WARRANTY.

RESERVE—a name common to certain funds that are earmarked for specific purposes. Insurance examples are reserves for unearned premiums and reserves for losses in process of adjustment.

RES IPSA LOQUITUR—"The thing speaks for itself"; a legal doctrine eliminating the need for the plaintiff to prove NEGLIGENCE.

RESPONDEAT SUPERIOR—"Let the master answer" for the negligence of his agent or employee. (See VICARIOUS LIABILITY)

RESIDUAL MARKETS—insurance markets established by the government to cover hard to place risks (e.g., the Florida Auto and Workers Comp JUAs) or to provide a market where the private market is unable to address some need (e.g., Citizens Property Insurance Corporation in Florida and the National Flood Insurance Program). Residual markets are sometimes referred to as "markets of last resort" and include JOINT UNDERWRITING ASSOCIATIONS (JUAs) and ASSIGNED RISK PLANS.


RETENTION—the amount of liability retained on a given risk; the gross line less REINSURANCE. (See NET LINE)

RETROACTIVE DATE—in claims-made liability policies, the earliest date that an occurrence could have taken place for the resulting claim to be covered by the policy. The more recent the retroactive date, the less the insurance company's exposure. A claims-made policy with no retro date is said to have "full prior acts" coverage--i.e., the policy will accept claims no matter how long ago the occurrence took place. (See CLAIMS-MADE COVERAGE)

RETROSPECTIVE RATING—a plan or method which permits adjustment of the final premium for risks on the basis of its own loss experience subject to maximum and minimum limits.

RETURN PREMIUM—the amount due the insured if a policy is cancelled, reduced in amount or reduced in rate.

RIDERS—another name for clauses or endorsements; but more specifically, printed forms of special provisions that are not contained in the policy contract. In bonding, life insurance, and the Personal Accident department, such clauses are called riders instead of endorsements.

RISK—any chance of loss to the insured or the property to which the insurance policy relates.

ROBBERY—the felonious taking, either by violence or threat of violence, of the personal property of another. Robbery is commonly known as "hold-up," but also includes obvious acts of stealing, such as snatch-and-run type thefts. (See THEFT, LARCENY and BURGLARY)

—the value of property after it has been partially damaged by fire or other perils. Also used as a verb meaning to save endangered property and to enhance the value of damaged property. In Marine Insurance it means the cost of saving property exposed to a peril. Salvage, in SURETYSHIP, is that which is recovered from the principal or an indemnitor to offset in whole or in part the loss and expense paid by a SURETY in satisfying its obligation under a bond.

SCHEDULE OF INSURANCE—the list of individual items covered under one policy, such as the various buildings, animals, and other property in farm insurance or the list of the rings, bracelets, etc., insured under a jewelry floater.

SELF-INSURANCE—setting aside of funds by an individual or organization to meet his or its losses, an accumulation of a fund to absorb fluctuations in the amount of loss, the losses to be charged against the funds so satisfied or accumulated.

SELF-INSURED RETENTION—in umbrella liability insurance, the amount (stated in the policy declarations) of a loss the insured assumes in losses where the umbrella policy provides primary coverage—i.e., those losses that are covered under the terms of the umbrella policy but not under those of any underlying policy. Unlike a DEDUCTIBLE, it does not apply to all losses. An alternative term is RETAINED LIMIT. (See DROP DOWN PROVISION)

SELLING PRICE CLAUSE—this clause defines the insurable value of merchandise that has been sold but not delivered as the amount at which it was sold, less any charges not incurred. Selling price clause may also apply only to goods made by an insured manufacturer. This clause sets the value of such goods at the net price at which they could have been sold at the factory (instead of insured's costs to reproduce).

SEPARATION OF INSUREDS—a condition found in some insurance policies that enables the insurer to treat various INSUREDS under the policy separately. For example, if a department store employee were to beat up a customer and the customer sued the employee and the store, a CGL policy insuring the business could deny coverage to the employee due to the intentional injury (CGL exclusion "a") but still provide coverage for the business.

SHORT RATE CANCELLATION—the insured receives less return premium than he would on a straight PRO RATA CANCELLATION, because the insurance company charges a penalty on top of earned premium, usually because the insured cancelled the policy mid-term.

—provides for payment of a substantial part of earned income lost through disability caused by illness and for payment of medical expenses incurred as a result of illness.


SINGLE INTEREST POLICY—insurance protecting the interest of only one of the parties having an insurable interest in certain property, such as that protecting a mortgagee but not the mortgagor, or protecting the seller but not the buyer of merchandise. 

SISTERSHIP EXCLUSION—an exclusion in PRODUCT LIABILITY insurance that excludes coverage for the cost of product recalls (e.g., exclusion "n" in the Commercial General Liability policy). The term derives from the fact that if a product is found to be defective its "sister ships" may have to be recalled to help avoid future claims of the same type arising from that product. Although it excludes the costs associated with the recall, it does not affect any subsequent LIABILITY claims that may arise from damage caused by the product that is being recalled.

SLANDER—spoken defamation of another. (See LIBEL)

SLIDING—adding an ancillary product to an auto insurance policy without the insured's informed consent. (See Florida Statute 626.9541(1)(z))


SPECIFIC INSURANCE—(a) applying separately to specifically named objects or locations; (b) inaccurately used in referring to primary insurance which must be exhausted before excess insurance applies. (See BLANKET POLICY)

STATUTES OF LIMITATIONS—laws establishing time limits within which one must take legal action to bring criminal charges, enforce rights, or seek damages following the act, event, or injury which brought about the right of action. (See Chapter 95, Florida Statutes.) 

—laws limiting the time during which a product can be the subject of a liability suit, the intent being to protect the manufacturer or seller of a product from liability for damages arising from the product when it is being used beyond its “expected useful life” (as defined in the statutes). (See PRODUCT LIABILITY and F.S. 95.031(2))

STATUTORY IMMUNITY—statutes may provide protection from liability under certain circumstances. (See Chapter 768, Florida Statutes.)


STRICT LIABILITY—a concept applied by the courts in product liability cases in which a product manufacturer or seller is liable for any and all defective or hazardous products which unduly threaten a consumer's personal safety. Rather than proving NEGLIGENCE, it is only necessary to prove that the product was the PROXIMATE CAUSE of the injury.

SUBROGATE—usually used in the sense of the insurance company “subrogating” against a third party in order to partially or fully recover the amount the company paid for the insured' s loss. 

SUBROGATION—the right of one who has taken over another's loss to also take over his or her right to pursue remedies against third parties. In insurance it's the transference of the insured's right to recover DAMAGES from a third party to the insurer, when the insurer has paid the insured's loss. Subrogation is consistent with the principle of INDEMNITY in that it prevents the insured from profiting from his or her loss, and it helps the insurer to recoup its pay-outs.

—a risk which does not meet the underwriting standards set up by the company for the coverages involved. 


SUSPENSE FILE—a file maintained in which any items requiring follow-up are filed prior to the issuance of a policy. The file may include binders, quotations, and outside report requests.

SURETY—a person or corporation collaterally bound for the payment of money or the performance of an act or duty by another.

SURETY BOND—a contract in which one party (the SURETY) agrees to be responsible to another party (the OBLIGEE) for the obligation or performance of a third party (the PRINCIPAL).

SURETYSHIP—the function of being a surety. Suretyship embraces all forms of obligations to pay the debt or answer for the default of another. (See OBLIGEE, PRINCIPAL, and SURETY)

SURVEY—(1) a careful examination of the insurance requirements of an insurance buyer and the report of such examination; (2) an insurance engineer's study of a risk for underwriting and/or accident and occupational disease prevention purposes.

—the term generally used when speaking of a weekly benefit payable to employees for non-occupational accidents and sickness. 

TEMPORARY TOTAL DISABILITY BENEFITS—the weekly benefit payable to an employee as prescribed by a WORKERS COMPENSATION law because he is temporarily unable to perform any duties for his employer due to an accident or sickness arising out of his employment.


TERM—a period of time for which a policy or bond is issued.

TERM INSURANCE—a common expression used mainly in life insurance for a policy that has no cash value and the benefit is payable only for a loss that arises during a specific time period. (Example: five-year term, 10-year term)

THEFT—an act of stealing. It includes LARCENY, BURGLARY, and ROBBERY. (See Chapter 812, Florida Statutes)

THIRD PARTY INSURANCE—generally, this insurance protects the insured against his liability arising out of bodily injury to others or damage to their property. (See LIABILITY INSURANCE)

THIRD PARTY OVER—type of claim that arises when an injured employee sues a third party (such as an equipment manufacturer) for his injuries, then the third party takes legal action against the employer (for using the equipment incorrectly, for example). The employer' s WORKERS COMPENSATION insurance covers the employee' s injuries, and his EMPLOYERS LIABILITY coverage will address the third-party-over claim (which is excluded under his CGL policy by exclusion “e”).

TIME ELEMENT COVERAGES—insurance coverages in which the amount of the loss can vary with the length of time that a loss situation continues (includes BUSINESS INCOME, EXTRA EXPENSE, and LEASEHOLD INTEREST coverages). (Also see PERIOD OF RESTORATION)

TORT—a civil wrong. Torts may be intentional or unintentional. Some intentional torts are also crimes (e.g., assault is both a tort and a crime). Unintentional torts are the primary subject of LIABILITY INSURANCE, although some intentional torts are also insurable (e.g., libel and slander are intentional torts that can be covered by Coverage B of the Commercial General Liability policy). (See NEGLIGENCE)

TORTFEASOR—one who commits a TORT.

TRANSIT POLICY—an INLAND MARINE form that provides property coverage for the owner of goods being shipped, usually written on an annual basis to cover multiple shipments. This is an alternative to relying on the liability coverage of the company transporting the property. (See MOTOR TRUCK CARGO COVERAGE)

TRIP TRANSIT POLICY—same as a TRANSIT POLICY, but for a single shipment.

TREATY REINSURANCE—a reinsurance contract between companies in which the ceding company agrees to cede certain types of risks or classes of insurance or a percentage thereof to the reinsurer, and the reinsurer agrees to accept them. (See REINSURANCE)

TRESPASSER—one who goes on another's premises without permission. A property owner owes a trespasser a lower degree of care (i.e. the “duty owed” element of NEGLIGENCE) than he does an INVITEE or LICENSEE. His duty to a trespasser is to not willfully cause injury to him. The concept of ATTRACTIVE NUISANCE is an exception to this.

TWISTING—the practice of inducing any policyholder to lapse or cancel a policy for the purpose of replacing such a policy with another to the detriment of the policyholder. This is always unethical and is illegal in most states. (See Florida Statute 626.9541(1)(l))

ULTIMATE NET LOSS—a term used in UMBRELLA liability policies to describe the amount of the loss the umbrella carrier will pay (the definition can vary in different umbrella policies).

UMBRELLA COVERAGE—a form of liability insurance that provides additional coverage limits above underlying liability policies. A Personal Umbrella policy serves as excess to one's Homeowners, Personal Auto, etc., and a Commercial Umbrella is excess above a CGL, Business Auto Policy, etc. True umbrella coverage is also generally broader in scope than the underlying policies and will drop down and pay certain types of losses not covered by the underlying policies above a SELF-INSURED RETENTION incurred by the insured. (Also see EXCESS LIABILITY INSURANCE.)


UNCONTROLLED LINES—the various types of insurance considered to fall within the category of INLAND MARINE are generally divided into two major categories: “controlled lines” and “uncontrolled lines.” For controlled lines, there are forms filed by a bureau such as ISO, which leads to more standardization of coverages among different companies; for uncontrolled lines there are no standardized filings, so policy provisions vary more among the insurers writing these types of coverage.

UNDER-INSURANCE—a condition in which not enough insurance is carried to cover the insurable value and especially to satisfy a COINSURANCE clause.

UNDERWRITE—to underwrite refers to the evaluation and classification of an insurance risk by an insurance company underwriter or agent; also refers to the taking on of the financial risk by the insurer.

UNDERWRITER—the most common meaning is an employee of an insurance company who has the responsibility for accepting or rejecting risks and determining in what amounts their insurance should be written, and at what price. Also refers to the insurance carrier that assumes (or “underwrites”) the risk. Many independent insurance agencies also have an underwriter position, and this employee is generally involved in pre-qualifying agency clients based on the underwriting criteria of the various insurers the agency represents.

UNDERWRITING PROFIT—the remainder found by deducting incurred losses and expenses from earned premiums.

UNEARNED PREMIUM—that portion of the original premium that has not yet been "earned" by the company as the policy still has some time to run. A fire or casualty insurance company must carry all unearned premiums as a liability in its financial statement, because if the policy should be cancelled, the company would have to pay back the unearned portion of the premium.

UNFAIR TRADE PRACTICES—unfair methods of competition and discriminatory practices in the insurance business, spelled out in statutes, including statutory penalties. (See Florida Statutes 626.9521 and 626.9541)

UNOCCUPIED—containing personal property but no people. (See VACANT)

—generally, containing neither people nor personal property, but some insurance policies may contain their own, more specific definitions. Vacancy can affect insurance coverage—e.g., the ISO Commercial Property Coverage Form excludes coverage for certain perils when the damaged building has been vacant for at least 60 consecutive days and reduces recoveries for losses from all other perils by 15%. (See UNOCCUPIED) 

VALUATION—the determination of the value of a piece of property for insurance purposes. (See ACTUAL CASH VALUE, REPLACEMENT COST, and FUNCTIONAL REPLACEMENT COST)

VALUED POLICY—a policy which provides that a specific amount shall be paid in the event of a total loss of property. Most fine arts and some other Inland Marine policies have this provision. In Fire insurance, any such provisions are illegal in most states. (Contrast with INDEMNIFY and INDEMNITY)

VALUED POLICY LAW—a law that requires the insurer to pay the full amount of the policy in the case of total loss of a building (including mobile homes and manufactured buildings) due to an insured peril. It does not prevent the insurer from making repairs rather than paying cash. (See Florida Statute 627.702)

VICARIOUS LIABILITY—liability that is imputed to one party for the tortious act or omission of another—e.g., a parent being held liable for the actions of their child or an employer for the actions of an employee. Also known as CONTINGENT LIABILITY.

—a time period for which benefits (e.g., disability payments) are not payable immediately following the inception of a loss. This is similar to a DEDUCTIBLE, but based on a certain amount of time, rather than a certain dollar amount.

WAIVER OF SUBROGATION—an insurer may grant an insured the right to waive SUBROGATION under certain circumstances. When this is done, it protects designated parties (e.g., a person or entity with a business relationship with the insured) from the insurance company recovering against them for the insured' s loss.

WARRANTY—a statement or stipulation in the policy as to the existence of a fact or a condition of the subject of the insurance which has the force of a guarantee and, if untrue, will void the policy without regard to materiality. (Florida Statute 627.409 in effect changes warranties into REPRESENTATIONS in Florida.)

WEAR & TEAR EXCLUSION—a general term for an exclusion relating to types of damage that are not insurable because they are gradual, expected or non-accidental losses, including rust, marring, scratching, settling, rotting, etc.

WORKERS COMPENSATION—insurance that covers an employer's obligations to injured employees (spelled out in each state's Workers Compensation Law). Essentially, employees give up the right to sue their employers for work-related injuries, and employers give up the right to defend against claims for medical benefits and lost wages by injured workers, subject to certain exceptions and limitations. There is no overlap with the employer' s general liability policy, because it excludes workers comp related liabilities—exclusion “d” in the CGL. (See EMPLOYERS LIABILITY and Chapter 440, Florida Statutes)