ABANDONMENT: Giving up the proprietary rights in insured
property to the Underwriter in exchange for payment of a
constructive total loss.
ACCIDENT: A fortuitous event, unforeseen and unintended.
ACCIDENT INSURANCE: A form of health insurance against loss by
ACCOUNTS RECEIVABLE POLICY: An inland marine (also burglary)
policy written to protect the insured from financial loss due to
his inability to collect amounts owed him because of the
destruction of his records.
ACT OF GOD: A flood, an earthquake or other accident or event
that is without any human intervention and that could not have
been prevented by reasonable care or foresight but is the result
of natural causes.
ACTUAL CASH VALUE: The sum of money required to pay for damages
or lost property, computed on the basis of replacement value
less its depreciation by obsolescence or general wear.
ACTUAL TOTAL LOSS: Occurs when:
(1) the insured property is completely destroyed or
(2) the Assured is irretrievably deprived of the insured
(3) cargo changes in character so that it is no longer the thing
that was insured or
(4) a ship is posted "missing" at Lloyd's, in which case both
the ship and its cargo are deemed to be an actual total loss.
ADDITIONAL INSURED: A person or firm or corporation other than
the named insured on a policy or mortgage company named in a
mortgagee clause, who is protected against loss by the terms of
the policy or mortgage company named in the mortgage clause.
ADJUSTER: An individual representing the insurance company and
acting for the company in working on agreements as to the amount
of a loss and the liability of the company in same.
ADVERSE SELECTION: Selection against the insurance company; the
tendency of more poor risks to buy and maintain insurance than
ALL RISK: Insurance against loss or damage to property arising
from any fortuitous cause, except such as may be specifically
APPRAISAL: A survey of property made for determining its
insurable value or the amount of loss sustained.
ASSIGNMENT: The passing of beneficial rights from one party to
ASSIGNED RISK: A risk which underwriters do not care to insure,
but because of state law or otherwise, the insured must be
protected and the insurance is therefore handled through the
state and assigned to companies.
ASSUMED LIABILITY: Liability which would not rest upon a person
except that he has accepted responsibility by contract expressed
or implied. This is also known as contractual liability.
AUTOMOBILE FLEET POLICY: A commercial automobile policy covering
five or more automobiles.
AVERAGE: A marine partial loss. This can be particular average
or general average (see below).
AVERAGE CLAUSE: A clause in a marine insurance policy, whereby
partial losses are subject to special conditions (e.g. a
franchise or deductible is to be applied to claims).
BAILEE: A person or concern having possession of property
committed in trust from the owner.
BAILEE'S CUSTOMERS POLICY: A policy providing for loss or or
damages to property of bailee's customers, payable either to
bailees for their account or direct to customers.
BASIC COVERAGE FORM: Any of the commercial or personal insurance
property forms which provide basic coverages. These forms
generally provide the most limited coverage, which is surpassed
by "Broad Forms" and "Special Forms."
BASIC RATE: The manual rate, from which are taken discounts or
to which are added charges to compensate for the individual
circumstances of the risk.
BENEFIT OF INSURANCE CLAUSE: A clause by which the bailee of
goods claims the benefit of any insurance policy effected by the
cargo owner on the goods in care of the bailee. Such a clause in
a contract of carriage, issued in accordance with the Carriage
of Goods by Sea Act, is void at law.
BILL OF LADING: Contract of carriage and receipt for goods,
issued by carrier.
BINDER: (Or Binding Receipt): In lines other than life and
health, a binder is an acknowledgement (usually from the agent)
that insurance applied for is in force whether or not premium
settlement has yet been made or the policy issued. In life and
health insurance, binders are not issued, but if premium
settlement is made with the application, what is often
erroneously referred to as a "binder" is issued. Actually this
is a conditional binding receipt.
BLANKET INSURANCE: (1) Property-liability insurance that covers
more than one type of property in one location in one policy or
form instead of under separate items, or one or more types of
property at more than one location; (2) A contract of health
insurance that covers all of a class of persons not individually
BODILY INJURY LIABILITY: The liability which may arise from
injury or death of another person.
BOILER AND MACHINERY POLICY: Insurance against loss due to
accidents to boilers, pressure vessels or other machinery
including the equipment itself, as well as liability arising out
of the accident.
BOND: An obligation of the insurance company to protect one
against financial loss caused by acts of another.
BUILDER'S RISK COVERAGE FORM: A commercial property coverage
form specifically designed for buildings in the course of
BUILDER'S RISK INSURANCE: Insurance against loss to buildings or
structures in the course of construction.
BUILDINGS AND PERSONAL PROPERTY COVERAGE FORM: A commercial
property coverage form designed to insure most types of
commercial property (buildings or contents or both). It is the
most frequently used commercial property form, and has replaced
the General Property Form, Special Building Form, Special
Personal Property Form, and others.
BUSINESS AUTO COVERAGE FORM: The latest commercial Automobile
Insurance coverage form, which may be written as a monoline
policy or as part of a commercial package. This form has largely
replaced the Business Auto Policy.
BUSINESS INCOME COVERAGE FORM: A commercial property form
providing coverage for "indirect losses" resulting from property
damage, such as loss of business income and extra expenses
incurred. It has replaced earlier Business Interruption and
Extra Expense forms.
BUSINESS INTERRUPTION INSURANCE: A type of policy that pays for
loss of earnings when operations are curtailed or suspended
because of property loss.
BUSINESS LIABILITY: The term used to describe the liability
coverages provided by the Businessowners Liability Coverage
Form. It includes liability for bodily injury, property damage,
personal injury, advertising injury, and fire damage.
BUSINESS PERSONAL PROPERTY: Traditionally known as "contents,"
this term actually refers to furniture, fixtures, equipment,
machinery, merchandise, materials, and all other personal
property owned by the insured and used in the insured's
& F: A sale term relating to goods. Cost and Freight. The
consignee makes his own insurance arrangements for the goods
throughout the period of transit.
CARRIER: (1) An insurance company which "carries" the insurance.
(The terms "insurance company" or "insurer" are preferred
because of the possible confusion of "carrier" with
transportation terminology). (2) In transportation, the trucker,
air carrier, ocean steamship company or other entity which moves
the goods. (See "Contract Carrier)
CASUALTY INSURANCE: That type of insurance that is primarily
concerned with losses caused by injuries to persons and legal
liability imposed 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 or forgery,
Boiler and Machinery insurance, and Aviation insurance. Many
casualty companies also write surety business.
CAUSES OF LOSS: Under the latest commercial property forms, this
term replaces the earlier term "perils" insured against.
Liability – Insures the liability
obligations a charterer has to the vessel owner and others.
CLAIMS-MADE COVERAGE: A policy providing liability coverage only
if a written claim is made during the policy period or any
applicable extended reporting period. For example, a claim made
in the current reporting year could be charged against the
current policy even if the injury or loss occurred many years in
the past. If the policy has a retroactive date, an occurrence
prior to that date is not covered. (Contrast this with
CLASSIFICATION CLAUSE (CARGO): A clause in a cargo insurance
open cover which details the minimum classification for an
overseas carrying vessel that is acceptable to the insurers for
carriage of the insured goods at the premium rate/s agreed in
the contract. Goods carried by lower class vessels are accepted
under the open cover, subject to payment of an additional
COINSURANCE: (1) In property insurance, a clause under which the
insured shares in losses to the extent that he is underinsured
at the time of loss. (2) In health insurance, a provision that
the insured and insurance company will shared covered losses in
agreed proportion. In health insurance, the preferred term is
COLLISION COVERAGE: Physical damage protection for the insured's
own automobile(s) for damage resulting from a collision with
another object or upset.
COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE PART: General
liability coverage which may be written as a monoline policy or
part of a commercial package. "CGL" now means commercial general
liability forms which have replaced the earlier "comprehensive"
general liability forms. The latest forms include all sublines,
provide very broad coverage, and two variations are available,
"Occurrence," and "Claims Made," coverage.
COMPREHENSIVE COVERAGE: Traditional name for physical damage
coverage for losses by fire, theft, vandalism, falling objects
and various other perils. On Personal Auto Policies this is now
called "other than collision" coverage. On commercial forms, it
continues to be called "comprehensive coverage."
COMPREHENSIVE GENERAL LIABILITY POLICY: A policy covering a
variety of general liability exposures, including Premises and
Operations (OL&T or M&C), Completed Operations, Products
Liability, and Owners and Contractors Protective. Contractual
Liability and Broad Form coverage could be added. In most
jurisdictions the "Comprehensive General Liability Policy" has
been replaced by the newer "Commercial General Liability (CGL)
forms which include all the standard and optional coverage of
the earlier forms.
COMPREHENSIVE PERSONAL LIABILITY POLICY (CPL): A personal
liability contract. It provides personal liability coverage for
the individual and family needs arising out of numerous personal
activities and situations, such as the ownership of residential
property, ownership of pets, sports activities, and many other
CONDITIONALLY RENEWABLE: A contract of health insurance that
provides that the insured may renew the contract to a stated
date or an advanced age, subject to the right of the insurance
company to decline renewal only under conditions defined in the
CONSEQUENTIAL LOSS: A loss arising indirectly from an insured
CONSTRUCTIVE TOTAL LOSS: A partial loss of sufficient degree to
make the cost of repairing more than the property is worth.
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.
CONTRACTUAL LIABILITY: Liability assumed under any contract or
agreement. Coverage is generally limited in liability policies,
but in most cases may be provided for an additional premium.
CONTRIBUTION: The term relates to circumstances where more than
one party covers the risk. Each party is deemed to be liable for
his proportion of the loss. If the Assured recovers in full from
one insurer, that insurer is entitled to recover from the other
insurer for that part of the loss which should have been paid by
the latter. The term is used in marine insurance, also, in
relation to contributions paid by the Assured in connection with
salvage and/or general average.
CONTRIBUTORY VALUE: The value on which a contribution to a
general average loss or salvage award is calculated.
COUNTRY DAMAGE: Marine term referring to damage to baled or
bagged goods (e.g. cotton) caused by excessive moisture from
damp ground or exposure to weather, or by grit, dust or sand
forced into the insured property by windstorm or inclement
COVER: (1) A contract of insurance; (2) To effect insurance; (3)
To include within the coverage of a contract of insurance.
COVERAGE PART: Any one of the individual commercial coverage
parts that may be attached to a commercial policy.
COVERAGE TRIGGER: A mechanism that determines whether a policy
covers a particular claim for loss. For example, the difference
between the coverage triggers of liability "occurrence" forms
and "claims made" forms is that the loss must occur during the
policy period in the first case and the claim must be made
during the policy period in the second case.
DEPRECIATION: Decrease in the value of property over a period of
time due to use, wear, tear, and obsolescence.
DIRECT OR HELD COVERED: A condition requiring that the insured
voyage be direct from one place to another. If the voyage is
delayed en route or there is a deviation from the direct route
the insurance cover continues subject to payment of an
additional premium, but only if the Assured gives prompt notice
of such delay or deviation immediately on receipt of advices,
unless the policy provides otherwise.
DISCLOSURE: The duty of the Assured and his broker to tell the
Underwriter every material circumstance before acceptance of the
DISCOVERY PERIOD: The time allowed the insured after termination
of certain bond and policy provisions to discover that he has
sustained a loss which occurred during the period covered by the
DUTY OF ASSURED CLAUSE: This appears in the Institute Cargo
Clauses published for use with the MAR form of policy. It
directs the attention of the Assured, his agents, etc. to the
duty (as required by the MIA, 1906) to take reasonable measures
to avert or minimize any loss which is recoverable under the
policy; also to ensure that all rights against carriers and
others are properly preserved and exercised. Underwriters agree
to reimburse the Assured for any reasonable expenditure incurred
by his compliance with the clause; in practice, these expenses
are termed "sue and labor" charges (see Sue & Labor).
EARNED PREMIUM: That portion of a premium for which the policy
protection has already been given during the now-expired portion
of the policy term.
EFFECTIVE DATE: The date on which an insurance policy or bond
goes into effect, and from which protection is furnished.
ELECTRONIC DATA PROCESSING COVERAGE (EDP): Specialized type of
insurance designed to cover computer equipment, data systems,
information storage media, and expense or income losses related
to EDP losses.
ELIMINATION PERIOD: A loosely-used term sometimes designating
the waiting period and sometimes the probationary period.
EMPLOYERS LIABILITY INSURANCE: Coverage against common law
liability of an employer for accidents to employees, as
distinguished from liability imposed by workers compensation
EMPLOYERS NON-OWNERSHIP AUTOMOBILE LIABILITY: (1) Liability
arising out of the operation of an automobile not owned by the
insured. This frequently results when an employee uses his own
personal car in the business activities of the insured; (2)
Insurance coverage for the liability exposure mentioned above.
ENDORSEMENT: A form attached to the policy bearing the language
necessary to change the terms of the policy to fit special
ENGLISH JURISDICTION CLAUSE: A condition, printed in the MAR
form of policy, whereby Underwriters agree to recognize
judgments only from courts convened within English jurisdiction.
Subscribing Underwriters may agree to replace this clause with a
foreign jurisdiction clause. Please note this is not applicable
to business emanating from the United States of America which is
subject to the Service of Suit Clause (USA) appearing in the
ENGLISH LAW AND PRACTICE: This clause appears in Institute
clauses published for use with the MAR form or policy. It
applies where a foreign jurisdiction clause attaches to the
policy and requires that the foreign court shall base its
decisions on English law and practice.
EXPERIENCE: The loss record of an insured, class of coverage, or
of an insurance company.
EXPOSURE: (1) State of being subject to the possibility of loss;
(2) extent of risk as measured by payroll, gate receipts, area,
or otherwise; (3) possibility of loss to a risk being caused by
EXTENDED COVERAGE ENDORSEMENT: A specific endorsement attached
to a Standard Fire policy, usually providing coverage of
windstorm, hail, explosion, riot, riot attending civil strike,
aircraft, vehicular damage, smoke and civil commotion.
EXTENDED REPORTING PERIOD (ERP): A period allowed for making
claims after expiration of a "claims made" liability policy.
Also known as a "tail."
FAS: Incoterm meaning Free Alongside Ship"
FAC: Incoterm meaning "Free Carrier"
FOB: Incoterm meaning "Free On Board"
FPA: Free of Particular Average (see Average or Particular
FIDELITY BOND: A bond which will reimburse an employer for loss
up to the amount of the bond, sustained by an employer (the
insured) by reason of any dishonest act of an employee (or
employees) covered by the bond.
FIRE: Combustion sufficient to product a spark, flame or glow
and which is hostile (as opposed to friendly - i.e. not in the
place where it is intended to be as in a furnace or fireplace.)
FIRE INSURANCE: (1) Insurance contracts that indemnify an
insured for loss caused by the destruction of the insured's
property resulting from a fire; (2) The field of insurance that
provides insurance policies on the insured's property for a
variety of perils, including fire.
FIRST NAMES INSURED: The first named insured appearing on a
commercial policy. The latest forms permit the insurer to
satisfy contractual duties by giving notice to the "first" named
insured rather than requiring notice to all named insureds.
FLOATER POLICY: A policy under the terms of which protection
follows moveable property, covering it wherever it may be.
FRANCHISE: A provision in freight insurance conditions which
exempts the insurer from particular average losses, in any one
accident, under 3%. The provision is waived if the loss is
caused by fire, or by the ship stranding, sinking or being in
FREIGHT: (1) Goods moved for another or, (2) The remuneration
earned by a shipowner or manager for the carriage of goods;
including the profit derived from carrying his own goods.
GARAGEKEEPERS LEGAL LIABILITY POLICY: Coverage for losses for
which the insured is legally liable, caused by fire or
explosion, theft of an entire vehicle, riot and vandalism,
collision, and upset to automobiles in his care, custody and
GARAGE LIABILITY POLICY: A liability contract designed to
provide the owner of a garage operation with the liability
protection needed for the special hazards that exist there.
GENERAL AGGREGATE LIMIT: A Commercial General Liability limit
that applies to all damages paid for bodily injury, property
damage, personal injury, advertising injury, and medical
expenses, except damages included in the products-completed
GENERAL AVERAGE: An Ocean Marine coverage meaning a partial loss
which has resulted from the voluntary and deliberate sacrifice
of some cargo for the benefit of all concerned, and which must
be shared by all parties (owners of ship, cargo and freight) in
proportion to their interest. For example, if 100 containers
were jettisoned from a 1000 container load in order to protect
the ship, the owners of the remaining 900 containers, the owners
of the ship, and the owners of the freight would all contribute
to offset the losses of those whose cargo was jettisoned for the
benefit of the whole.
GENERAL AVERAGE CONTRIBUTION: The proportion paid or payable by
a saved interest involved in a general average act.
GENERAL AVERAGE DEPOSIT: Paid by a consignee to obtain release
of the cargo from the carrier following a general average act.
This may be replaced by an Underwriter's guarantee.
GENERAL AVERAGE GUARANTEE: Paid by a consignee to obtain release
of the cargo from the carrier following a general average act.
This may be replaced by an Underwriter's guarantee.
GENERAL AVERAGE IN FULL -aka- G-A IN FULL: An agreement in a
cargo insurance whereby Underwriters do not reduce a claim for
general average contribution in event of underinsurance.
GENERAL EXCLUSION CLAUSE: A clause in the Institute Cargo
Clauses 1982, which specifies risks that are excluded,
irrespective of the risks covered elsewhere in the wording.
GLASS COVERAGE FORM: A commercial property form used to insure
plate glass, lettering, frames and ornamentation. It has
replaced earlier commercial glass insurance forms.
GOOD FAITH: A basic principle of insurance. The Assured and his
broker must disclose and truly represent every material
circumstance to the Underwriter before acceptance of the risk. A
breach of good faith entitles the Underwriter to avoid the
contract. (Proposed changes in law may affect this definition -
also see "Utmost Good Faith".)
HAZARD: A specific situation that increases the probability of
the occurrence of loss arising from a peril, or that may
influence the extent of the loss. For example, accident,
sickness, fire, flood, liability, explosion are perils. Slippery
floors, unsanitary conditions, shingled roofs, congested
traffic, unguarded premises, and uninspected boilers are
HELD COVERED: A provisional acceptance of risk, subject to
confirmation at a later date that the agreed cover is needed.
Where applicable to an existing insurance, cover is conditional,
in practice, on prompt advice to the Underwriter as soon as the
Assured is aware of the circumstances to be held covered coming
into effect, and a reasonable additional premium is payable if
the risk held covered comes into effect.
HIRED AUTOMOBILE: Autos the insured leases, hires, rents or
borrows but not autos owned by employees or members of their
HOLD-HARMLESS AGREEMENT: A contractual arrangement whereby one
party assumes the liability inherent in a situation, thereby
relieving the other party of responsibility. Such agreements are
typically found in contracts like leases. A typical lease may
provide that the lessee must "hold harmless' the lessor for any
liability from accidents arising out of the premises.
ICC CLAUSES: (see Institute Cargo Clauses)
INDEMNIFY: To restore the victim of a loss, in whole or in part,
by payment, repair or replacement.
INDEMNITY BOND: A bond which indemnifies the obligee against
loss which arises as a result of failure on the part of a
principal to perform.
INDEPENDENT CONTRACTOR: One who agrees to perform according to a
contract and who is not an employee.
INHERENT VICE: A defect or cause of loss arising out of the
nature of the goods in question.
INLAND MARINE INSURANCE: A branch of the insurance business
which developed from the insuring of shipments which did not
involve ocean voyages. Exposures eligible for this form of
protection are described in the nationwide definition of Marine
Insurance. Such diverse properties as bridges, tunnels, jewelry,
and furs can now be written under Inland Marine forms.
INLAND WATERS - Lakes and
rivers away from the coast with no direct access to the ocean.
INSTITUTE CARGO CLAUSES: Treaty wordings developed by the
International Chamber of Commerce. There are three basic sets of
these clauses (A, B and C). The A clauses cover "all risks",
subject to specified exclusions. The B and C clauses cover
specified "risks", subject to specified exclusions. (See actual
ICC Clauses wordings via link at right)
INSURABLE RISK: A risk which meets most of the following
requisites: (1) The loss insured against must be defined; (2) It
must be accidental; (3) It must be large enough to cause
hardship to the insured; (4) It must belong to a homogenous
group of risks large enough to make losses predictable; (5) It
must not be subject to the same loss at the same time as a large
number of other risks; (6) The insurance company must be able to
determine a reasonable cost for the insurance; (7) The insurance
company must be able to calculate the chance of loss.
JONES ACT Definition – The Jones Act is the federal maritime law
that allows a seaperson injured during the course of employment
to recover damages for the injuries or death in a negligence
action against the employer.
JOINT LIFE POLICY: Pays the insurance amount when the first of
two or more covered persons dies.
KEY MAN (KEY EMPLOYEE) INSURANCE POLICY: An insurance policy on
the life of a key employee whose death would cause the employer
financial loss, owned by and payable to the employer.
KNOWN LOSS: A loss known to one or both parties when a broker
and Underwriter are negotiating a placing.
LEASE: Contract whereby the owner or user of property (the
lessor) agrees to let another party, (the leasee) use the
property for a consideration (money or rent).
LEASEHOLD INSURANCE: Insurance for the tenant of a property
leased against the loss of value of the lease or of profit fom a
sub-lease through termination of the lease by fire or other
peril insured against.
LIABILITY: Broadly, any legally enforceable obligation.
LIABILITY INSURANCE: That insurance that pays and renders
service on behalf of an insured for loss arising out of his
responsibility, due to negligence, to others imposed by law or
assumed by contract.
LIABILITY LIMITS: The sum or sums beyond which a liability
insurance company does not protect the insured on a liability
LOCATION CLAUSE: Used in cargo open covers this limits
Underwriters' liability in any one location.
and Harbor Workers Compensation Act -
A federal act pertaining to
a vessel owner's liability for workers hired to perform
"seaman-like duties" on the watercraft such as repairs, upgrades
MALICIOUS DAMAGE CLAUSE: A clause published by the Institute of
London Underwriters for use in a cargo policy that is subject to
the Institute Cargo Clauses (1982) B or C. It adds the risks of
malicious acts, vandalism and sabotage to the cargo policy.
MANUAL RATES: Usually the published rate for some unit of
insurance. An example is the Workers Compensation Manual where
the rates shown apply to each $100 of the payroll of the
insured, $100 being the unit.
MAR POLICY: A market term for the form of marine policy used by
Lloyd's and the London company market. It is a basic contract
form to which the conditions agreed by the insurers subscribing
a marine insurance contract are attached.
MARKET VALUE CLAUSE: A provision that may be used in property
damage insurance form covering some risks which obligates the
insurance company, in the event of loss, to pay the established
cash selling price of the destroyed or damaged stock, rather
than the actual case value as provided in the Standard Fire
MINIMUM PREMIUM: The smallest premium which an insurance company
will accept for writing a particular policy or bond for a
MOTOR TRUCK CARGO - OWNER'S FORM: This form insures the owner of
a truck against loss to his own property while being
transported. It pays for the loss or damage of cargo for the
perils insured against, regardless of the legal liability.
MOTOR TRUCK CARGO - TRUCKER'S FORM: This form indemnifies the
policyholder, a trucker, for loss or damage resulting from his
legal liability as a carrier while transporting the property of
others. I does not insure against any loss for which he is not
NAMED INSURED: Any person, firm, or corporation, or any member
thereof, specifically designated by name as insured(s) in a
policy as distinguished from the others who, though unnamed, are
protected under some circumstances.
NAMED PERIL POLICIES: Named Peril Policies specify what perils
are insured against, as opposed to so-called all-risk policies.
OBLIGEE: Broadly, anyone in whose favor an obligation runs. This
term is most frequently used in surety bonds, where it refers to
the person, firm or corporation protected by the bond.
OBLIGOR: Commonly called principal; one bound by an obligation.
Under a bond, strictly speaking, both the principal and the
surety are obligors.
OCCUPANCY: In insurance, this term refers to the type and
character of the use of property in question.
OCCURRENCE COVERAGE: A policy providing liability coverage only
for injury or loss that occurs during the policy period,
regardless of when the claim is actually made.
OPEN COVER: An agreement whereby the Assured undertakes to
declare every item (e.g. shipment, vessel, etc. as appropriate)
that comes within the scope of the cover in the order in which
the risk attaches. The insurer agrees, at the time of concluding
the contract, to accept all valid declarations up to the agreed
limit for each declaration. An open cover may be for a fixed
period or always open; subject to a cancellation clause.
OVERAGE: An additional premium charged on a cargo open cover
declaration because the carrying vessel is outside the scope of
the classification clause.
PACKAGE POLICY: An insurance policy including two or more lines
or types of coverages in the same contract.
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.
PARTICULAR AVERAGE: Accidental partial loss of the subject
matter insured proximately caused by an insured peril. In a
freight at risk policy the term may be applied to a claim for
loss of freight following particular average loss of goods.
PAYROLL AUDIT: An examination of the insured's payroll records
by a representative of the insurance company to determine the
premium due on a policy.
PERIL: A term used in the Marine Insurance Act (1906) to denote
a hazard. The principle of proximate cause is applied to an
insured peril to determine whether or not a loss is recoverable.
In modern practice the term "risk" often replaces "peril".
PERSONAL ARTICLES FLOATER: Provides all risk coverage for
valuable items such as furs, jewelry, etc. formerly insured
under separate contracts.
PERSONAL EFFECTS FLOATER: An Inland Marine Policy covering
worldwide except in the insured's domicile, personal effects
usually carried by a tourist.
PERSONAL INJURY: Injury other than bodily injury arising out of
false arrest or detention, malicious prosecution, wrongful entry
or eviction, libel or slander, or violation of a person's right
to privacy committed other than in the course of advertising,
publishing, broadcasting, publishing, or telecasting.
PERSONAL INJURY COVERAGE: Liability insurance coverage for third
party claims for damages which are other than physical such as
libel, slander, false arrest, etc.
PERSONAL INJURY PROTECTION: The formal name usually given to
no-fault benefits in states that have enacted mandatory or
optional no-fault Automobile Insurance coverages. PIP usually
includes benefits for medical expenses, loss of work income,
essential services, accidental death and funeral expenses.
PERSONAL LINES: This term is used to refer to insurance for
individuals and families such as private passenger automobile or
PRE-CERTIFICATION AUTHORIZATION: A cost containment technique
which requires physicians to submit a treatment plan and an
estimated bill prior to providing treatment. This allows the
insurer to evaluate the appropriateness of the procedures, and
lets the insured and the physician know in advance which
procedures are covered and at what rates benefits will be paid.
PRODUCTS LIABILITY INSURANCE: Provides protection against claims
arising out of the use, handling or consumption of a product.
PROFESSIONAL LIABILITY INSURANCE: Liability insurance to
indemnify professionals, doctors, lawyers, architects, etc. for
the loss or expense resulting from claim on account of bodily
injuries because of any malpractice, error or mistake committed
or alleged to have been committed by the insured in his
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.
PROPERTY INSURANCE: Insurance which indemnifies a person with an
interest in physical property for its loss or the loss of its
PROXIMATE CAUSE: The effective cause of loss or damage. It is an
unbroken chain of cause and effect between the occurrence of an
insured peril or a negligent act and resulting injury or damage.
QUALIFIED PLAN: A plan under which contributions by the employer
are allowed as a deduction from taxable income, and which
provides that the deposits for his employees, future benefits
are not to be considered as taxable income to them in the year
in which they are made.
RATING BUREAU: An organization that classifies and promulgates
and in some cases compiles data and measures hazards of
individual risks in terms of rates in a given territory.
RECOVERY: Amount recovered from a third party responsible for a
loss on which a claim has been paid.
REIMBURSEMENT: Payment of an amount of money related to the
amount of loss to or on behalf of the insured upon the
occurrence of a defined loss.
REINSTATEMENT: (1) Putting a lapsed policy back in force; (2)
The payment of a claim under some 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.
REINSURANCE: (1) A contract of indemnity against liability by
which the insurance company procures another insurance to insure
against loss or liability by reason of the original insurance;
(2) Insurance by one insurance company of all or part of a risk
accepted by it with another insurance company which agrees to
reimburse the insurance company for the portion of the claim
REPLACEMENT CLAUSE: A clause limiting Underwriters' liability
for damage to machinery cargo.
REPLACEMENT COST: The cost of replacing property without
deduction for depreciation.
REPORTING FORM: Fire or other direct damage insurance written
under a form of policy that covers fluctuating values of stocks
of merchandise, furniture and fixtures and improvements by means
of periodic reports submitted to the insurance company by the
insured, with an annual adjustment of premium on the average
RETROACTIVE DATE: Date on a "claims made" liability policy which
triggers the beginning of insurance coverage. A retroactive date
is not required. If one is shown on a policy, any claim made
during the policy period will not be covered if the loss
occurred before the retroactive date.
RISK: A fortuity. It does not embrace inevitable loss. The term
is used to define causes of loss covered by a policy.
SALVAGE: (1) Property taken over by an insurance company to
reduce its loss; (2) Award recoverable by salvors under maritime
SALVAGE CHARGES: The award due to a salvor for services rendered
in saving the insured property.
SALVAGE LOSS: Occurs when the Underwriter agrees to settle a
cargo claim by paying the difference between the insured value
and the proceeds realised by selling the damaged goods.
SCHEDULE: (1) A list of specified amounts payable for, usually,
surgical procedures, dismemberments, ancillary expenses or the
like in Health Insurance policies; (2) The list of individual
items covered under one policy as the various buildings or
animals and other property in property insurance; (3) In Marine
policies, a list attached to a slip, open cover, policy or other
document, usually detailing the rates of premium for various
voyages, interests and risks.
SEAWORTHINESS WARRANTY: There is an implied warranty in every
voyage policy that the ship must be seaworthy at the
commencement of the insured voyage or, if the voyage is carried
out in stages, at the commencement of each stage of the voyage.
To be seaworthy, the ship must be reasonably fit in all respects
to encounter the ordinary perils of the contemplated voyage,
property crewed, fuelled and provisioned, and with all her
equipment in proper working order. Cargo policies waive breach
of the warranty, except where the Assured or their servants are
privy to the unseaworthiness. Breach of the warranty is not
excused in a hull voyage policy, literal compliance therewith
being required. Although there is no warranty of seaworthiness
in a hull time policy, claims arising from unseaworthiness may
be prejudiced if the ship sails in an unseaworthy condition with
the knowledge of the Assured.
SECURITY: The Underwriters subscribing a risk. The Insurers.
STOP LOSS: (1) Any provision in a policy designed to cut off the
insurance company's loss at a given point. Aggregate benefits
and maximum benefits are an example; (2) A type of reinsurance
designed to transfer the loss from the ceding company to the
reinsurer at a given point.
SUBROGATION: The legal process by which an insurance company
seeks from a third party who may have caused the loss, recovery
of the amount paid to the insured.
SUBROGATION WAIVER: A waiver by the named insured giving up any
right of recovery against another party. Normally an insurance
policy requires that subrogation (recovery) rights be preserved.
SUE AND LABOR: Expenses incurred by the Assured or their
representatives with the intention of preventing or minimizing a
loss for which the Underwriter would have been liable. They do
not include expenses incurred in general average or salvage
acts; these being recoverable under the policy only as part of
the Underwriters' liability for contribution to general average
or salvage, if any. Sue and labor charges are recoverable under
a policy that incorporates a sue and labou clause (SG policy),
or in accordance with the wording of the policy (e.g. under the
"duty of the Assured" clause attached to a MAR policy).
SURETY: (1) A term loosely used to describe the business or
suretyship or bonds. Suretyship is an arrangement whereby one
party becomes answerable to a third party for the acts of
neglect of a second party; (2) The party in a surety arrangement
who holds himself responsible to one person for the acts of
SURETY BOND: A bond in which the surety agrees to answer to the
obligee for the non-performance of the principal (known as the
TAIL: This term has been used to describe both the exposure that
exists after expiration of a policy and the coverage that may be
purchased to cover that exposure. One "occurrence" forms a
claims tail may extend for years after policy expiration, and
the losses may be covered. On "claims made" forms tail coverage
may be purchased to extend the period for reporting covered
claims beyond the normal policy period.
Third Party Property Damage:
Covers damages to property of others while it is in the care,
custody and control of the insured (i.e. damage to a house that
you are shooting in).
TO PAY AS CARGO: Used in an ancillary insurances relating to the
cargo (e.g. increased value) when the Assured is not required to
show evidence of loss or interest and can claim on the policy if
he can show that a corresponding loss has been settled on the
main cargo policy.
TOTAL LOSS: This can be actual total loss or constructive total
TRANSIT CLAUSE: A clause in the Institute Cargo Clauses,
specifying the attachment and termination of cover.
TRUCKMENS LIABILITY FORM: See Motor Truck Cargo Policy
UMBRELLA LIABILITY POLICY: A liability policy designed to
provide liability protection above and beyond that provided by
standard liability contracts.
UNDER-INSURANCE: A condition in which not enough insurance is
carried to cover the insurable value, and, especially, to
satisfy a coinsurance clause.
UNDERWRITER: (1) A person trained in evaluating risks and
determining the rates and coverage that will be used for them;
(2) An agent, especially a life insurance agent, who might
qualify as a "field underwriter."
VALUABLE PAPERS AND RECORDS INSURANCE: An Inland Marine or
burglary insurance coverage providing for the replacement of
valuable papers, records and forms.
VOID POLICY: One which is inadmissible as evidence in a court of
law (e.g. P.P.I. policy).
WAITING PERIOD: A period of time between the beginning of a
disability and the date benefits begin.
WAIVER CLAUSE: A clause which entitles both Underwriter and
Assured to take measures to prevent or reduce loss without
prejudice to the rights of either party.
Wharfinger protection extends
to: loss or damage to the property of others in the care,
custody, and control of the Wharfinger; including tugs and tows,
barges, their cargo and equipment; wreck removal.
WARRANTY: A statement made on an application for insurance that
is warranted to be true in all respects. If untrue in any
respect, even though the untruth may not have been known to the
person giving the warranty, the contract may be voided whether
or not the untruth or inexactness is material to the risk.
WATERBORNE AGREEMENT: A market understanding whereby
Underwriters cover goods against war risks only whilst they are
on the overseas vessel. This rule is relaxed only in the case of
goods in a transhipping port for a short period awaiting onward
WITHOUT BENEFIT OF SALVAGE: A term in a marine insurance policy,
whereby the Underwriters forgo their subrogation rights. A
policy incorporating such a term is deemed to be a gambling
policy in law, and is therefore invalid in a court of law.
WITHOUT PREJUDICE: The claim is paid on this occasion, although
the Underwriter feels it does not attach to the policy, but this
action must not be treated as a precedent for future similar
WORKERS COMPENSATION: (1) A schedule of benefits payable to an
employee for injury, disability, dismemberment, or death as a
result of occupational hazard. The payments are a liability of
an employer. (2) Insurance agreeing to pay the Workers
Compensation benefits required by law on behalf of the employer.