ACCORD Insurance Certificate: A certificate of insurance commonly issued by insurance agents on behalf of their clients to indicate to other interested parties the nature and amounts of insurance purchased by the client. The ACORD certificate form was developed by the insurance industry in an attempt to standardize and simplify this type of insurance documentation. A sample form appears in Appendix B (Insurance Requirements in Contract Manual from Alliant).  This form does not provide insurance coverage. An endorsement or insurance policy is needed for that purpose.

Agent: One who has authority to act for another. An insurance agent acts for an insurer by soliciting buyers of insurance and providing them service on behalf of the insurer. See Broker.

Aggregate Limit: A cumulative limit that applies to all claims within a given period of time, such as within one year, or within the policy term. For example, if a policy has an occurrence limit of $1 million and an aggregate limit of $1 million, the policy could be exhausted by a sequence of losses totaling $1 million, or by one big loss of that amount.Avoidance: A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occurring from that activity is eliminated.

Bodily Injury: Bodily injury, sickness or disease, including death.

Broker: One who, for a commission from the insurance company, solicits, negotiates and services insurance policies on behalf of the insurance buyer. From a practical standpoint, there is little or no difference between a broker and an agent in terms of providing insurance in to a California insured.

Claims-Made Coverage: A type of liability coverage which imposes strict deadlines regarding timing of claims by plaintiffs and reporting of accidents and claims to the insurer. Although not widely used for General Liability coverage, it is common enough that you can expect to encounter some of your Entity’s contractors’ and vendors’ insurance written on these forms.

In its most fundamental form, Claims-Made coverage responds to claims made during the policy term, regardless of when the triggering accident or event happened. In the case of an injured child, for example, the policy that would respond would be the policy in effect at the time that the child made a formal claim, even if years after the event (minors may present claims after reaching their majority). However, most Claims-Made policies have a retroactive date. Claims arising from events that occurred before the retroactive date are not covered. Usually the retroactive date is the first date that the insurer began providing Liability insurance for that insured. Renewal policies often keep the same retroactive date as the expiring policy.

While the restrictions may vary somewhat from insurer to insurer, and the forms allow some exceptions, one common version of Claims-Made coverage applies only to claims that are submitted to the insurer during the policy term or within sixty (60) days thereafter. Therefore, if your Entity’s protection is to be preserved under this policy form, claims made against your Entity, either orally or in writing, must be reported immediately to the insurer at the address on the endorsement form. If the coverage has expired, or is about to do so, send notice by the fastest possible means, to reduce the possibility of missing a deadline.

A common Claims-Made version also makes an exception for claims arising out of incidents that have been reported to the insurer during the policy term or within sixty (60) days thereafter provided that the claim is made within five (5) years after the policy term. In other words, if an incident is reported to the insurer that may generate a future claim, coverage is locked in for five years. If the incident is not reported (e.g., if you don’t know about it), then if the claim is submitted after the policy term, the policy does not cover it. Therefore, you should also report incidents that might result in claims to the insurer immediately.

Clearly, when your Entity arranges to be protected under a Contractor’s Liability insurance for claims arising out of a particular project, occurrence coverage is preferred, as the needed coverage can be arranged and the full cost known in advance of the project.

Professional Liability risks are almost always written on a Claims-Made basis, especially Professional Liability of architects, engineers, medical professionals and consultants. Also, hazardous products or activities, such as asbestos removal contracting, may be written on a claims-made form. However, most types of commercial business insurance are usually written on an Occurrence form.

Comprehensive General Liability and Commercial General Liability: policies usually automatically insure liability for these risks, as defined in the policy. However, certain contractors must pay additional premiums to obtain these coverages or the underwriter will issue the policy excluding certian perils.

Cross Liability Clause/Separation of Insureds Clause/Severability of Interest Clause are various names for language found in Liability policies which states that the terms of the policy apply separately to each insured, as though a separate policy had been issued to each. An exception is made for policy limits: the policy limits apply collectively to all insureds.

Deductible (clause): A provision in an insurance policy whereby the insured is required to pay a specific amount or percentage of a loss, with the insurance company paying over the deductible amount.

Loss prevention: A risk control technique that lowers the frequency of a particular loss.

Loss reduction: A risk control technique that lowers the severity of a particular loss.

Separation: A risk control technique that disperses a particular asset or activity over several locations and regularly relies on that asset or activity as part of the organization’s working resources.

Duplication: A risk control technique that uses backups, spares, or copies of critical property, information, or capabilities and keeps them in reserve.

Diversification: A risk control technique that spreads loss exposures over numerous projects, products, markets, or regions.

Insurance: A risk financing technique that transfers the potential financial consequences of certain specified loss exposures from the insured to the insurer.

Noninsurance risk transfer: A risk financing technique that transfers all or part of the financial consequences of loss to another party, other than an insurer.

Retention: A risk financing technique by which losses are retained by generating funds within the organization to pay for the losses.

Forecasting: the effects that the available risk management techniques are likely to have on the organization’s ability to fulfill its goals and the costs of those techniques

Assigned Risk: A risk not ordinarily acceptable to insurers which is, according to state law, assigned to insurers participating in a plan in which the insurers agree to accept their share of these risks.

Basic Limits of Liability: The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law. In determining rates, a carrier will use the basic limits to develop the base rates. If an insured person wants higher limits, the carrier applies an increased limits factor to the base rate in calculating the new premium for the increased coverage.

Bodily Injury Liability: Legal liability for causing physical injury or death to another.

Collision Insurance: This covers loss to the insured person’s own auto caused by its collision with another vehicle or object.

Combined Single Limit: Bodily Injury and Property Damage coverage expressed as one single amount of coverage.

Comprehensive Coverage: Covers damage to a vehicle caused by an event other than a collision or overturn. Examples include fire, theft, vandalism, and falling objects.

Continuous Coverage or Continuous Liability Insurance: Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

Covered Person: This refers to the individuals (named insured, spouse, resident relatives, etc.) insured under a policy contract.

Deductible: The amount an insured person must pay before the insurance company pays the remainder of each covered loss, up to the policy limits.

Driver Training: State accredited training course that consists of at least six hours of behind-the-wheel professional instruction.

Effective Date/Inception Date: The date that coverage begins on an insurance policy.

Equitable Indemnity: An after the fact determination that one party has to pay for someone’s loss; based on fairness/equity.

Expiration Date: The date your coverage ends. There is a time of day associated with this date, for example, an expiration date of 5/1/2002 at 12:01am. This means your coverage ends one minute after midnight on the date listed.

Express Contractual Indemnity: Two persons agree in writing before any loss occurs that indemnity may be owed.

Extended Non-Owner Liability:. An endorsement that provides broader liability coverage for specifically named people operating any non-owned automobile or trailer. It covers non-owned autos, use of autos to carry people or property for a fee, and individuals driving employer-furnished cars who do not own vehicles themselves.

Financial Ratings: Financial ratings reflect a rating organization’s opinion on the financial strength and ability to meet ongoing obligations to policyholders. The ratings organizations most commonly identified with the insurance industry are AM Best, Standard & Poor’s and Moody’s.

Financial Responsibility Laws: Financial responsibility laws require owners and operators of autos to maintain enough money to compensate those they injure. Liability insurance is the most common way to satisfy these requirements.

First Party Benefits: This pays policyholders and others covered by the policy in the event of injury, no matter who caused the accident. The benefits can include medical expenses, loss of income, funeral and death benefits. This may also be called Personal Injury Protection.

Hit and Run: An accident caused by someone who does not stop to assist or provide information.

Indemnitee: Person receiving indemnity; Payee.

Indemnitor: Person providing indemnity; Payor

Indemnity: Compensation for damage, loss, or injury suffered.

Insurance: A contract in which an insurer agrees to compensate the insured for certain types of damages that result from specific risks.

Lapse in Coverage/Policy Lapse: A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Lender/Lessor: Your lender is the institution to which you make your car payments. Your lessor is the institution to which you make your lease payments.

Loss Payee/Lien holder: A person or entity with a legally secured insurable interest in another’s property, usually a financial institution that loaned money to buy a car. The car is the loan collateral. If the auto is damaged in an accident, loss payments will be made to you and to the loss payee on your policy.

MVR: Motor Vehicle Record: A motor vehicle record, also referred to as DL printout, or MVR, contains information obtained from an individual’s driver license application, abstracts of convictions and accidents.

Named Insured: Any person, firm or corporation designated by name as the insured person(s) in a policy. Others may be protected by policy definition even though their names aren’t on the policy, such as other drivers operating (with consent) the named insured’s covered auto.

Named Non-Owner Policy: A policy endorsement for one who operates any non-owned automobile on a regular basis, such as driving a car provided by one’s employer.

No-Fault Insurance: Many states have enacted auto accident compensation laws permitting auto accident victims to collect directly from their own insurance companies for medical and hospital expenses regardless of who was at fault in the accident. Although there are many legal variations of no-fault insurance, most states still allow people to sue the negligent party if the amount of damages exceeds a certain state-determined threshold. (see “Threshold Level.”)

Occurrence-Based Coverage: A way of writing liability insurance that covers accidents or events that happen during the policy term, even if the plaintiff does not make a formal claim until months or years later. For example, a child injured in an accident may, under certain circumstances, be allowed to make a formal claim for damages years later, after reaching age eighteen. The insured (e.g., the Contractor or your Entity) would be protected against this claim by the policy in effect at the time of the accident.

Per Occurrence Limit: This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence).

Per Person Limit: This refers to the cap amount an insurance company will pay for any one person’s injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100.000(per person)/$300,000(per occurrence).

Personal Auto Policy: The most common auto insurance policy sold today. Often referred to as “PAP,” this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Personal Injury: As used in insurance policies, this term usually applies to injuries of a nonphysical nature, such as:

• False arrest, detention or imprisonment,
• Libel, slander or defamation, and
• Wrongful entry or eviction.

Personal Injury Liability insurance should always be required of anyone who may deal with the public, such as contract security guards. It is typically included in the Commercial General Liability coverage and in the older Broad Form Comprehensive General Liability Endorsement, or it can be written as a separate coverage.

Physical Damage: Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft.

Policy: The written documents of contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policy Period: The period of time in which a policy is in effect.(For example, six months or one year).

Policy holder: One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy. See also Named Insured.

Preferred Risk: Any risk considered to be better than the standard risk on which the premium rate was calculated.

Premium: The price of insurance an insured person pays for a specified risk for a specified period of time.

Products and Completed Operations: As used in insurance policies, applies to coverage that insures against liability for bodily injury or property damage resulting from:

• A product which is sold, handled or distributed by a supplier, or
• Faulty work completed by a contractor.

Your Entity should require Products and Completed-Operations Liability coverage from all contractors and from suppliers of hazardous products, such as guns and ammunition. Typically, this coverage is included in Comprehensive General Liability coverage and in Commercial General Liability coverage.

Pro Rata Cancellation: Termination of an insurance contract before the policy expiration date on which the premium returned to the insured person is adjusted in proportion to the amount of time the policy was in effect.

Professional Services Contracts: Professional liability insurance protects against losses that occur when a professional fails to practice his or her art to the standards usual and customary to that profession. The types of losses that can occur under such circumstances are often excluded in general liability policies. Thus, professional liability insurance is needed. The entity will not be made an additional insured under a professional liability policy.

Property Damage Liability Insurance: Protection against liability for damage to another’s tangible property, including loss of use. Although this coverage is different than liability for bodily injury to another person, Bodily Injury and Property Damage Liability protection are generally written together.

Renewal: The process of keeping an active policy in force through the issuance of a renewal policy.

Self-Insured Retention: The amount of loss for which the insured agrees to be responsible before the insurer begins to participate in a loss. Unlike a deductible, the insured is usually responsible for handling claims within the self-insured retention.

Split Limit: Any insurance coverage with separately stated limits for different types of coverage. Example: an automobile liability policy of 100/000/50 provides a maximum of $100.000 bodily injury coverage per person, $300.000 bodily injury coverage per accident, and a property damage limit of $50,000 per accident.

Term. The length of time for which a policy or bond is in force.

Threshold Level: Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

Tort: A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Waiver of Subrogation: An agreement between two parties to a contract whereby one or both agrees not to (or obligates their insurer not to) pursue legal rights to recovery of a loss. When an insurer pays a loss to its insured, and another party’s negligence caused the loss, the insurer usually reserves the right to collect from the negligent party the amount it has paid on the loss. This right is called the right of subrogation. When your insurer pays you for damage to your car, then collects from the other party that caused the accident, your insurer is exercising its right of subrogation.

When two parties enter into a contractual agreement, they usually attempt to agree between them as to which party’s insurance will cover each type of loss. This agreement may be defeated if the insurer can pay the loss, then collect from the party that intended to transfer the loss through the contract. To prevent this unintended result, contracts will sometimes contain a Waiver of Subrogation provision through which the insurer’s right to subrogate will be waived. This requirement must be implemented by a policy endorsement. Liability and Workers’ Compensation sample endorsements appear in Appendix B (Insurance Requirements in Contract Manual from Alliant).

An example of such a waiver is sometimes found in lease agreements. The landlord and tenant may agree that the landlord’s insurance should cover property losses. To make sure that the landlord’s insurer does not attempt to charge the tenant for losses the insurer has paid, the contract may require that the landlord obtain a Waiver of Subrogation from the insurer, and provide evidence of the waiver to the tenant.

Waivers should be used with caution: Some insurance policies void the coverage if the insured agrees to waive the insurer’s subrogation rights without prior approval. Other policies permit waivers. You should carefully review the policies and/or call your risk management advisor for assistance when dealing with waivers of subrogation.