Glossary of Insurance Terms and Conditions
ABSOLUTE POLLUTION EXCLUSION
Coverage is excluded under the liability policy for any sudden or gradual loss arising out of the actual or threatened discharge release or escape of pollutants.
A mandatory automobile insurance cover, providing immediate financial assistance for out-of-pocket medical expenses incurred by you or any occupant of your vehicle. Provides coverage while you are an occupant of another vehicle, including limited long term medical, death and disability payments.
ACCOUNTS RECEIVABLE COVERAGE
Provides coverage if accounts receivable records are damaged by an insured peril making them uncollectible, including cost to reconstruct such records.
ACTUAL CASH VALUE
A basis of loss settlement for property insurance. Depreciation is deducted based on the age and condition of the property.
A person other than the Named Insured who is protected under the terms of the policy. However, they do not have the same rights as the “Named Insured”.
Provides coverage for legal liability arising from an advertising program that results in claims due to libel, slander, invasion of privacy, defamation or infringements of copyright. Must be endorsed onto the policy as it is not covered by a General Liability policy.
This is the maximum amount payable by an Insurer during the policy period.
AGREED AMOUNT OR STATED AMOUNT CO-INSURANCE
An agreement whereby the coinsurance clause is waived if the insured agrees to carry a specific amount of insurance which represents at least 90% or 100% of the total values at risk.
ALL RISK INSURANCE
Coverage is provided for all perils, subject to the exclusions in the policy. This is different from a Named Perils Policy which specifically lists the perils insured.
BINDER OF INSURANCE
Legal agreements by the Broker to provide evidence of coverage until a full policy (ies) are issued.
Provides coverage for various locations or objects. One limit is shown which applies to all locations. A specific limit is not allocated by location.
BLANKET FLEET (21B)
This is the alternative to adding/deleting coverage for every vehicle change. This endorsement eliminates notification by providing automatic cover for additions with premium adjustment at the end of the policy based upon your list of changes. Premiums are calculated pro-rata of the specific change dates or 50/50 of annual for additions/deletions.
BODILY INJURY & PROPERTY DAMAGE INSURANCE
This provides coverage for damages, due to bodily injury or property damage to a Third Party, caused by your negligence.
BOILER & MACHINERY
Provides coverage for losses specifically excluded under the property policy such as explosion of pressured vessels, electrical arcing and mechanical breakdown. Coverage is provided for property damage and should include business income consistent with the property policy.
Bonds are issued to provide a guarantee that the performance of obligations that are assumed. Bonds are not insurance, and any monies paid out by the Surety Company issuing the bond can be recovered from you if the funds are available.
BROAD FORM PROPERTY DAMAGE
An extension under the General Liability Policy, this endorsement expands the definition of property damage to include property in the care, custody or control of the Insured for property which is not normally insured if damage is done as a result of the insured’s negligence.
An insurance professional who represents an Insured, rather than an Insurer as does an Agent. A broker deals with many insurers and can shop the market for the most competitive price.
Terms used in Crime Insurance. For a burglary to occur there must be visible signs of forced entry or exit. For Robbery to occur there must be violence of threat of violence towards insured. Theft provides broader coverage, but does not include mysterious disappearance.
BURGLARY DAMAGE TO BUILDING
Provides coverage for damage to the building caused by burglary or robbery or attempt thereat, subject to exclusions in the policy.
A coverage which applies to lost earnings and/or increased expenses when operations are suspended or curtailed because of a property loss caused by an insured peril.
The standard Replacement Cost Endorsement in a property insurance policy usually excludes increased building costs due to the imposition of any bylaw or ordinance. This restriction may be removed by inclusion of a Bylaws Endorsement.
This clause explains the cancellation procedures for an insurance policy if cancelled prior to expiry:
- Pro-Rata: Policy is usually cancelled by the Insurer. A premium charged based on the exact time a policy has been in force.
- Short Rate: Policy is usually cancelled by the Insured. A process of calculating premium charges which is not in direct proportion to the unexpired term of the policy, but rather charging a penalty for the cancellation of the policy prior to expiry.
CARE, CUSTODY AND CONTROL
Coverage for property damage to other people’s property under your care, custody and control is usually excluded under the General Liability Policy. Special arrangements to include this type of coverage can be made.
CERTIFICATE OF INSURANCE
A form issued to provide evidence of policy coverage and limits, and is generally used as proof of insurance for Lenders, Lawyers or customers. These forms have no legal status in the sense that they cannot be interpreted as replacing coverage as described in actual policies.
CLAIMS MADE LIABILITY POLICY
Policies written on a “claims made” basis will only cover claims presented during the particular year the policy is in force for incidents which occurred during the same policy year or for any
previous year noted in the “claims made” policy (retroactive date). This form of coverage contrasts with an “occurrence” policy which responds to incidents regardless of when the claim is reported. It will cover an incident occurring today several years from now when a claim for injuries from that incident may first be presented.
A clause which obligates the insured to carry an amount of insurance to a specified minimal level, usually prescribed to be a fixed percentage of the value of the insured property, and failure of the insured to insure to that level results in the insured becoming a co-insurer in the event of a loss.
In automobile insurance, this provides coverage for damage to your vehicle as a result of colliding with another vehicle, object or upset.
COMMERCIAL PROPERTY FLOATER
Insures stock, equipment and tenants improvements incidental and usual to the insured’s business against All Risks of direct physical loss or damage subject to the exclusions in the policy. Covers property at the location specified.
COMPOSITE /PACKAGE POLICY
Provides comprehensive Property and General Liability Insurance, Crime, and various other coverage tailored to the needs of the insured. In some ways, this is cost effective and the paper flow is minimal as you have several coverage under one policy instead of three or four separate policies.
In automobile insurance, this is coverage for loss of or damage to your vehicle by perils other than Collision or upset such as fire, theft, flood, windstorm, hail, etc. Other coverage like liability, Boiler, Builders Risk, use this phrase to describe broad available policy forms in their coverage area.
COMPREHENSIVE GENERAL LIABILITY
A policy which provides liability insurance for your business operations. Protects business from liability imposed by law for bodily injury and property damage arising from the operation.
CONTINGENT BUSINESS INTERRUPTION
Coverage for loss of earnings of an insured because of a casualty at another business which is one of the insured’s major suppliers or customers. The loss must be caused by a peril insured in the policy for a claim to be made.
Insures equipment and property of the insured while on land. Including while in transit against All Risks of direct physical loss or damage subject to the exclusions in the policy.
In the event of a claim by one insured under a policy against another insured under the same policy, this endorsement covers the insured against whom the claim is made to the same extent as if a separate policy had been issued to each without however increasing the total limits of the policy available to all insured’s.
Provides coverage for liability assumed under contract or agreement over and above that which may be imposed by law. Note that the extent of contractual liability coverage varies greatly in liability policies. It may be given on a blanket basis for all written contracts or may be restricted to specific types of “incidental” contracts.
DATA PROCESSING EQUIPMENT (EDP)
Coverage is tailored to provide coverage for specialized perils due to the nature of the equipment.
A property policy extension of coverage which grants coverage for the expense of removing debris caused by damage to property by an insured peril.
That portion of a claim which must be borne by the insured before the insurer is obligated to contribute.
Coverage providing indemnification to the insured (and his bank) for loss caused by forgery or alteration of cheques, notes or other written promises to pay.
DIRECTORS’ AND OFFICERS’ LIABILITY
Provides coverage for legal liability of Director’s & Officer’s at a corporation arising out of their fiduciary responsibility. They may be held personally liable if the corporation suffers a loss due to their negligence.
This is the period of time allowed an insured to identify and report losses occurring during the policy period.
EMPLOYEE BENEFIT LIABILITY
Coverage to protect employers who may be held liable for errors and omissions in the administration of employee benefit programs.
EMPLOYEES AS ADDITIONAL NAMED INSUREDS
An endorsement in which the person insured is amended to include any employee of the Named Insured while acting within the scope of his duties.
EMPLOYEE DISHONESTY/FIDELITY INSURANCE
Provides coverage for loss of property or money resulting from Employee Dishonesty. Bonds may be written on an Individual Basis, Named Schedule, Position Schedule or a Commercial Blanket Bond.
EMPLOYERS LIABILITY/CONTINGENT EMPLOYERS LIABILITY
Provides coverage against the legal liability of an Employer for injuries to employees, as opposed to liability imposed by a Workers Compensation Law. Employer’s liability coverage applies in situations where a worker does not come under any Workers Compensation Law.
Contingent cover extends coverage for claims by employees who are covered under Workers Compensation, but may bring suit against their employer.
A wording issued as an attachment to a specific policy to record a change in the insurance policy.
ENVIRONMENTAL IMPAIRMENT LIABILITY
A special form of insurance designed to protect an insured against claims for liability and clean up costs related to pollution. Coverage may be granted for gradual and sudden and accidental pollution and is always written on a claims made form.
ERRORS AND OMISSIONS
– See Professional Liability
A coverage designed to be in excess over one or more primary liability policies, and which will not pay out until the primary limits of liability are exhausted.
Perils or Property not covered by an Insurance Policy.
A form of business interruption insurance which insures against payment of additional expenses while operating in temporary quarters due to damage to buildings or contents by an insured peril.
FAMILY PROTECTION ENDORSEMENT (OEF 44)
In automobile Insurance, this endorsement protects you, your spouse and your dependents in cases (if injured with an outstanding judgment) where the motorist at fault is underinsured, up to your policy limit.
Provides coverage against all damages to glass, lettering, ornamentation caused by accidental breakage of such glass which occurs during the policy period subject to the exclusions in the policy.
GROSS EARNINGS FORM
A form of business interruption insurance which covers the reduction of gross earnings (total net sales less the cost of goods sold) during the period that a business is shut down following damage by an insured peril. Coverage however, only applies until the doors open again for business.
HOLD HARMLESS AGREEMENTS
This is usually found in contracts where the legal liability of one party is assumed by another party. The extent of the hold harmless agreement may vary but normally takes one of three formats. Special arrangements must be made with insurance company if policy is to be extended to include hold harmless agreements:
- Limited Form: Where Party A only acknowledges responsibility for his own negligent acts.
- Intermediate Form: Where party A reaffirms responsibility for his own negligent acts and agrees to share responsibility for joint and concurrent negligence of both parties.
- Broad Form: Where Party accepts responsibility for all liability, including that involving the sole negligence of Party B. This format may be held not to be in the public interest, and thus invalid when one party imposes this degree of responsibility on another.
Insurance is provided so that in the event of a loss or damage, your policy will respond by compensating you to the exact position you were in prior to the loss.
A person who investigates, on behalf of the insurer, and determines the extent of liability for loss when a claim is reported. Is not an employee of the insurance company.
Insures any and all materials, equipment and machinery to be used in the fabrication erection or completion of projects of a nature usual to the business of the insured. Coverage is provided while in transit, after delivery and while awaiting erection, away from the insured premises.
INTERIOR, MESSENGER AND PAYMASTER
Provides robbery coverage both on and off premises for money and securities. Also included is theft from a custodian’s home for not more than $500.
LEGAL LIABILITY FOR DAMAGE TO NON-OWNED OR HIRED AUTOMOBILES
Provides legal liability coverage for vehicles leased or rented under 30 days.
The total amount for which the Insurer is legally obligated to pay in the event of a loss. This may apply to all losses, or specific losses.
LOSS OF USE
Provides coverage for a rental vehicle when your car has been damaged or stolen and cannot be driven.
Provides insurance coverage for shipments being sent on ocean going vessels
MERCANTILE STOCK BURGLARY
Provides coverage against loss of merchandise by burglary of the premises.
MONEY & SECURITIES
All risk coverage for money. Provides coverage for destruction, disappearance or wrongful abstraction of money from a premise.
A disappearance of property that cannot be explained. Broad form crime policies grant this form of coverage in comparison to narrower forms which may only insure against the perils of burglary or robbery.
This policy specifically lists the perils insured against, as opposed to an “All Risk” policy which covers all perils other than those specifically excluded.
Provides protection to the employer against claims arising from employees who use their own vehicles in the course of their employment. In the event of an accident, the employee may have inadequate insurance to respond and may be sued by the third party. The third party can in turn sue the employer if the employee was using his car in the course of his employment.
Insures office contents of every description kept and used by the insured while situated at the premises of the insured against All Risk of direct physical loss or damage subject to the exclusions in the policy.
An occurrence is an accident, including continuous or repeated exposure, which results in bodily injury or property damage neither expected nor intended by the insured. Occurrence policies cover claims which occur during the policy period regardless of when the claim is made against the policy.
An extension to business interruption insurance which can be purchased to provide coverage for payroll cost on non-key employees. Usually purchased for shorter periods like 90 or 180 days.
OWNERS, LANDLORDS AND TENANTS LIABILITY
Protects owners and occupiers of premises arising from ownership, maintenance or use of the premises.
OWNERS OR CONTRACTORS PROTECTIVE LIABILITY
Protects the insured who is responsible for activities or a sub contractor who performs operations on behalf of the insured.
The cause of loss insured against in the policy i.e. fire and extended coverage, named perils or all risk.
Injury other than those arising out of bodily injury such as false arrest, malicious prosecution, wrongful entry or eviction, libel or slander, violation of privacy. The extent of such coverage may vary from policy to policy.
Provides coverage for mechanical breakdown for any completed production machine or apparatus which forms, cuts, shapes, grinds or conveys raw material in process or finished products and any equipment forming a part of the driving or controlling mechanism for such production machine or apparatus.
PRODUCTS AND COMPLETED OPERATIONS
A principal element of general liability insurance which applies to claims arising out of products sold, manufactured, handled, distributed, or liability incurred after a job has been completed as a result of improperly performed work.
Coverage is provided for third party claims alleging bodily injury or property damage arising from the rendering of professional services from certain classes of individuals. Several forms of professional liability insurance include Errors and Omissions Insurance or Malpractice Insurance. Coverage is not provided from a Commercial General Liability policy and special arrangements must be made to purchase this type of policy.
A form of Business Interruption coverage which continues until the organizations profits have returned to the same position as they were prior to the loss occurring subject to an indemnity period which is usually 12 months.
PROPERTY DAMAGE LIABILITY
Provides coverage for legal liability for damage or loss of use of property of others not in your care, custody and control.
PROPERTY OF EVERY DESCRIPTION (POED)
Instead of having separate limits for each type of property, these can be categorized into a blanket description.
This is also known as Exemplary Damages. Damages awarded by the Court to compensate the plaintiff for the wrong done and to punish the defendant for wanton, reckless or malicious acts or omissions. Punitive damages are not insurable.
A form of business interruption insurance designed for landlords to cover the loss of rents when leased property is made un-tenantable due to damage by an insured peril.
Endorsement which provides loss settlements without deduction for depreciation.
This form is usually used if there is a large fluctuation in values of insured property. Limits are set up to the maximum exposure and premium is charged based on a deposit premium basis. Monthly reports are provided by the insured based on the actual inventory values. At the end of the policy term an adjustment is made based on values reported.
A provision of a “claims made” policy whereby claims for injury or damage which occurred prior to the retroactive date will not be covered by the claims made policy even if a formal claims is first presented during the term of the claims made policy.
Risk Management is the process of planning, organizing, directing, controlling, and then implementing certain requirements in order to minimize accidental losses occurring to that organization.
The assignment to an insurer by policy term or by law, after payment of a loss, of the rights of the insured to recover the amount of the loss from the party responsible for such loss. A waiver of subrogation is often a part of the policy wording which gives the insured permission to waive such rights of subrogation against specific parties as long as such waivers are given prior to a loss.
TAIL COVERAGE (EXTENDED REPORTING PERIOD)
A designated period of time after a claims made policy has expired, during which period claims may be reported as if they were made during the original term of the claims made policy.
Insures building improvements, alterations and betterments made at the expense of the insured to a building occupied by the insured providing the insured does not own the building.
TENANTS LEGAL LIABILITY INSURANCE
Coverage is provided for damage to the premises which you lease or rent, but do not own.
THIRD PARTY INSURANCE
Coverage for your legal liability to other parties.
Insures tools and equipment used in the business of the insured anywhere in Canada and the continental U.S.A. against All Risk of direct physical loss or damage subject to the exclusion in the policy.
Provides protection for materials, and/or equipment while in transit and away from the listed premises.
UMBRELLA LIABILITY INSURANCE
Provides excess protection over the underlying liability insurance policies. An umbrella policy increases overall limits of liability carried to protect against large or catastrophic losses and, also provides additional coverage – i.e. non-owned aircraft and watercraft, advertising liability that may not be included in underlying policies.
Covers loss or destruction of valuable papers, notes, records, customer lists. This is all risks insurance that provides coverage at the premises, in transit and temporarily at the premises of others.
Used in Business Interruption insurance. Instead of applying a dollar deductible against losses, the policy will not start to pay for losses until the interruption has equaled a specified time period.
A promise which must be stated in the policy, that a certain stipulation will exist throughout the policy period.
Most policies have a territorial limit which can easily be amended if necessary. The territorial limit for most policies is Continental North America.