Common Public Adjusting Insurance Terminology Terms for A to L defined by a SWAT Public Adjusting Firm. Like any other field of insurance, public adjusters have a very large variety and/or a vast amount of their own unique terms. It’s important when going to any insurance company about a claim or dealing with an insurance claim – you should know the basic terminology to more effectively communicate in an insurance office.

What are some Public Adjusting Insurance Terms You Should Know? A to L defined by a SWAT Public Adjusting Firm.

Don’t worry, at SWAT Public Adjusting Firm will take time to explain and re-explain things about your insurance claim to you. Also, thank you for reading this blog article “What are some Public Adjusting Insurance Terms You Should Know?” the team at the SWAT Public Adjusting Firm, which is a Great 5 Star Rated Team of Public Adjusters was happy to write it for you.

But like many other medical terminologies, some insurance terms are best learned by breaking them down into their component parts. Here is a large number of terms you might hear when visiting our insurance office, on the phone with an insurance agent, speaking with an attorney, and/or talking with an insurance adjuster. So let’s get started on the terms for A to L.

A – What are some Public Adjusting Insurance Terms You Should Know?

ABANDONMENT From Standard Fire Policy: “There can be no abandonment to this company of any property.” From Insurance Service Office Homeowners Policy: “We need not accept any property abandoned by any insured.” These provisions mean that the insured cannot force the company to accept possessions of property damaged under a covered loss. The option is solely that of the company.
ABOVE-NORMAL LOSS A loss which is made more costly than would normally be expected because of extenuating circumstances such as sub-zero weather, heavy rain, faulty or delayed alarm, traffic congestion, etc.
ACCIDENT An event which occurs by chance: Unforeseen, unexpected and unplanned, resulting in injury and/or property damage. (See also Occurrence.)
ACCIDENT CONTROL OR PREVENTION’ See Loss Prevention Service.
ACCIDENTAL MEANS The cause of an occurrence which is unexpected and unintentional; a fortuitous cause. (See Occurrence.)
ACCOMODATION LINE A Line of insurance accepted by a company (which otherwise would be rejected) strictly as an accommodation to a good agent. (See Line.)
ACCORD An acronym for Agency-Company Organization for Research and Development, a coalition of agents, companies and rating organizations with the purpose of standardizing forms and procedures. Its functions are now performed by a corporation of the same name with headquarters in New Jersey.
ACCOUNT CURRENT A detailed statement, usually prepared by the agent, of business written by him for a particular company as of the end of each month.
ACQUISITION COST An insurance company’s cost of obtaining business: services to insureds, agent’s commissions, advertising, etc.
ACT OF GOD An event which is the result of action of natural forces over which man has little or no control: earthquake, tornado, lightning, flood, etc.
ACTUAL CASH VALUE (A.C.V.) The cost measured in terms of money to replace or restore any item of property at the time of the loss, less depreciation (except where “Replacement Value” is covered). See also Depreciation, Replacement Value and Stated Amount.
ACTUARY A mathematician trained in statistics employed by an insurance company or rating bureau who applies the theories of probability to insurance practice; the person who supplies the “educated guess” by predicting the anticipated experience projections upon which the rates and/or premiums for various classes of risks are based.
ADDITIONAL INTEREST An individual, partnership or corporation, other than the actual named insured, who has an insurable interest. (See “Insurable Interest.”) For example, an employer or a salesman who owns his own car which is used in the employer’s business. Should the employee become involved in an accident while on company business, the employer would most likely be named in any action for recovery by an injured party. In this event he (the employer) has a possible loss which can be measured in terms of money, and he therefore has an insurable interest which can be protected by naming him in the employee’s policy as “Additional Interest.” (See also Insurable Interest and Non-Ownership Liability, Automobile.)
ADDITIONAL LIVING EXPENSE (Coverage D in the Homeowners Policy.) The money, above and beyond normal living expenses, which becomes necessary in the event of a loss covered by the policy. For example: A fire loss covered by a Homeowners Policy so damages the home that it is uninhabitable for three weeks. Normal activities of the family (eating, sleeping, laundry, etc.) cannot be carried on as usual during this period. As a result, they must eat out, live in a motel, send out laundry and so on. Additional Living Expenses coverage supplies the extra money (up to the policy limits, and only the additional amount required) to live under these conditions, as opposed to living under normal conditions.
ADDITIONAL PREMIUM See Premium.
ADJACENT Term used to describe structures which are near each other, but not physically connected.
ADJOINING Structures are “Adjoining” when they are physically separated, but are connected or touching.
ADJUSTER An individual who negotiates on behalf of an insurance company with all parties concerned following a loss to determine the proper settlement of any claim(s). An Independent Adjuster is an individual who adjusts losses for insurance companies, but is paid on a fee basis, and is not an employee of any insurance company. An adjuster who is employed full time by an insurance company is known as a Staff Adjuster. A Public Adjuster is one who, for a fee, negotiates with an insurance company or companies on behalf of the insured(s) in the event of a loss. (See also Arbitration.)
ADMIRALTY COURTS Courts of law having jurisdiction over ocean marine matters. Legal differences are settled by Courts of Admiralty under rules, procedures and precedents which differ considerably from those of other courts. Their area concerns matters of happenings at sea, marine insurance contracts and settlements of disputes arising from interpretations of provisions of maritime contracts, insurance or otherwise.
ADMITTED COMPANY (OR CARRIER OR INSURER) A company licensed by a state under the laws of the state, but whose home office is located in another state or country. (See also Alien, Foreign or Domestic Company.)
ADVANCE PREMIUM See Premium.
ADVERSE SELECTION The practice by insureds of purchasing insurance protection against only those exposures or perils which they believe will most likely cause a loss. When large number of insureds bought only selective types of certain coverages (although some of these certainly got burned), the result was that a disproportionate number of poorer risks were more heavily insured for certain exposures than the better risks which insured “across the board.” This had the effect of defeating the purpose of the “Spread of Risk” doctrine. (This is not to mention the additional cost of issuing and servicing the many individual policies.) With the coming of the “Package” policies in the 1950’s, the problem of adverse selection was largely eliminated.
ADVISORY RATES OR PREMIUMS Rate or premium schedule promulgated by a rating bureau which may or may not be adopted by a subscribing company, at its option.
AFTER CHARGE An additional charge or increase in rates used in some insurance group contracts to cover exposures due to correctible hazardous conditions as an incentive to remove such conditions to eliminate the surcharge.
AGE GROUP A grouping of motor vehicles based on model year for the purpose of automobile physical damage insurance rating.
AGENCY AGREEMENT A contract between an insurance company and an agent spelling out all the conditions upon which the agreement is based, covering the rights and the obligations of both the company and the agent.
AGENCY PLAN Term used to describe all of a company’s agents as a group.
AGENT An individual, partnership or corporation licensed by the state to act for a particular company or companies in soliciting, negotiation, effecting and servicing insurance contracts. By the terms of his contract and bylaw, he is, in many cases, the company. (See also Captive Agent under Direct Writer, Broker, General Agent, Special Agent, State Agent, and Local Agent.)
AGENT OF RECORD See Broker of Record.
AGGREGATE EXCESS OF LOSS REINSURANCE See Excess of Loss Reinsurance, Aggregate.
AGGREGATE LIMIT See Limit(s) of Liability.
AGREED AMOUNT CLAUSE A provision in fire policies under which the insured agrees to carry an amount of insurance specified by the company (usually 80 to 90% or more of value) and the company in return agrees to waive the requirements of the coinsurance clause. (See Coinsurance.)
ALIEN COMPANY (OR CARRIER OR INSURER) An insurance company whose home office is located in a foreign country.
ALIENATED PREMISES Premises transferred to another owner.
ALLIED LINES Lines of insurance which are allied to Property Insurance, such as Water Damage, Rain Insurance, Business Interruption or Sprinkler Leakage, etc.
ALL-RISK Term generally found in Inland Marine insurance indicating coverage for losses caused by perils not specifically excluded in the policy. Automobile Comprehensive coverage could be considered “All Risk.” (See also Inland Marine, Floater, and Named Perils.)
ALTERATION See Forgery.
AMENDMENT(S) See Endorsement.
AMERICAN AGENCY SYSTEM The system of selling and servicing insurance by means of independent agents who may represent more than one company, and who derive their income from commissions on insurance sold. (For contrast, see Direct Writer.)
AMERICAN INSTITUTE FOR PROPERTY AND LIABILITY UNDERWRITERS An organization which supports and promotes insurance education and encourages professionalism establishing standards to that end. Those qualified who successfully pass the examinations prepared and conducted by the institute are awarded the designation “Chartered Property and Casualty Underwriter” (CPCU). It is equal to the “CLU” and “CPA” designations awarded in life insurance and public accounting, respectively.
AMERICAN LLOYDS See Lloyd’s of London.
ANALYTIC SYSTEM See Dean Schedule.
ANNUAL STATEMENT An insurance company’s annual report to the -State Insurance Department(s) in the state(s) in which it is licensed. The report, containing information regarding the company’s financial condition, is required bylaw. The form containing the data may vary from state to state, by must include the particulars spelled out by the supervising authority of the state in which the company is licensed.
ANNUALIZATION See Deferred Premium Payment.
ANTIQUE AUTOMOBILE A motor vehicle of the private passenger type which is 25 or more years old, maintained solely for use in exhibitions, parades, club activities and occasionally used for other purposes.
APPLICATION A written statement based on information supplied by a prospective insured, giving full details concerning the risk as may be required by the company and upon which the company relies in rating and underwriting. In some forms of insurance, the application becomes an integral part of the policy.
APPORTIONMENT The determination of the extent to which each applicable policy must share in a loss when two or more policies cover the same loss. The portion of the loss paid by the sharing policy is called its “Contribution.” For example, in a loss of $16,000, where two concurrent policies contribute “Pro Rata,” one policy (A) is written for $35,000, and the other (B) is for $45,000, the total amount of the insurance applicable to the loss is $80,000. The “A” policy pays 35/80ths (7/1 6ths) of the $16,000 loss, or $7,000. Policy “B” ($45,000) pays 45/80ths (9/1 6ths) of the loss, or $9,000. In this example, the process is known as “Apportionment,” and the amount of the loss paid by each policy is called its ‘Contribution.’
APPRAISAL Determination of the insurable value of any given property. Also, determination of the extent of financial loss or damage. A clause in some policies (Fire, for example) provides for an appraisal by impartial experts to determine the amount of damage or loss. The terms of the policy provide that such appraisal must be made on demand of either the insured or the insurance company. Appraisals of property to be insured may be required by the insurance company prior to the issuance of the policy, and may constitute a part of the policy, when issued.
APPRAISAL CLAUSE A condition in a property policy which provides for (see) arbitration in the event of a disagreement between the company and the insured as to the amount of a loss. Either party has the right to request an appraisal; each appraiser is paid by the party selecting him, and other expenses for the (see) umpire, if one is necessary, are shared equally by the company and the insured.
APPRECIATION The increase in value (in terms of money) of property as the result of market pressure, inflation and/or rarity.
APPROVED Term indicates meeting or exceeding a set standard, such as “Approved Roof,” “Approved Fire Hydrant,” etc.
ARBITRATION (AND ARBITRATION CLAUSE) Most policies provide the mechanics for resolving disputes between the insured and the company when the amount of a loss cannot be agreed upon. The usual procedure is for each party to choose a qualified disinterested person, both of whom in turn select a third party as “umpire.” Both the company and the insured agree beforehand that the decision of the arbitrators will be binding. (See Disinterested Party.)
ARSON The willful, malicious or fraudulent burning of real and/or personal property.
ASSAILING THIEVES Term used in ocean marine referring to persons who steal or rob by violence or force. Included as a “Specified Peril” in marine policies. Excludes loss as a result of petty thievery or pilferage.
ASSESSABLE POLICY See Mutual Company.
ASSETS Owned property, real and personal, including money, accounts receivable and other evidences of debt. Liquid assets are those which are readily available (cash, negotiable instruments) to pay obligations.
ASSIGNED RISK A “pool” arrangement among subscribing insurance companies, whereby the companies agree to write automobile liability and/or physical damage insurance for risks unable to obtain coverage in the open (“voluntary”) market. The assignment of risks is based on the proportionate share of premiums written in the voluntary market by the participating companies. Those undesirable risks are politely referred to as the “Residual Market.” The plans and their administration are known variously as “The Blank(State) Automobile Insurance (Assigned Risk) Plan,” “Joint Underwriting Association,” or ‘Reinsurance Facility.”
ASSIGNMENT 1.) The written transfer of interest (legal rights) in an insurance policy from one Party to another, in most cases only with the consent of the insuring company. 2.) The legal transfer of rights or obligations from one party to another. 3.) The designation of a participating company in a “pool” agreement. (See Assigned Risk)
ASSUMED LIABILITY Liability (other than Legal Liability–see “Liability Insurance”) which is assumed by contract or other agreement. Liability assumed by the insured results in exposures which are excluded under most liability policies. (See Contractual Liability Insurance.)
ASSUMING CARRIER See Reinsurance.
ASSUMPTION BY CONTRACT Basic liability policies do not contemplate exposures beyond the policy provisions created by liability assumed by contract between the insured and another party. Liability protection of this nature may be obtained by (see) Contractual Liability insurance for an additional premium.
ASSUMPTION OF RISK One of the defenses which may be used by the party being sued for negligence is that the claimant assumed the risk of suffering injury when he was (or should have been) aware that he was exposing himself to injury when he took action or failed to take action.
ASSURED See Insured.
ATTACH A policy or endorsement is said to ‘attach’ when such policy or endorsement becomes effective.
ATTORNEY-IN-FACT An individual who has been given authority by another to act in his behalf in certain specifically defined transactions. (See also Power of Attorney.)
ATTRACTIVE NUISANCES An object or situation which normally would not be considered dangerous (such as an abandoned refrigerator) but could cause injury or death to one (such as a child) who is “attracted” to it as a plaything.
AUDIT An examination of the insured’s records (payroll, inventory, receipts, sales, etc.) in order to determine the actual premium developed when the basis of premium is on factors which cannot be pre-determined. Worker’s Compensation (payroll) and Product Liability (sales, receipts or other units) are examples of policies requiring audit. Such policies are called “Audit Policies,” and sometimes “Automatic Policies.”
AUDIT BUREAU See Stamping Office.
AUTHORIZED INSURER See Admitted Company.
AUTOMATIC COVER CLAUSE Provides increase in amount of insurance to cover added or transferred property automatically (within limits). Insured is required to report such property additions within 60 days and pay a pro rata additional premium from date of acquisition. Coverage is usually available only to Government, Hospital or Educational Institutions.
AUTOMATIC REINSTATEMENT Most policies provide automatic reinstatement of the original amount of insurance without payment or additional premium after payment of a loss and effective upon the restoration of the property involved in the loss.
AUTOMATIC REMOVAL This provision affords coverage for removal of property from one location to another, pro rata at each location. Property in transit is limited to amount provided by the policy for property away from the original premises. Coverage is limited to 30 days from date of removal. Not to be confused with (see) Pro Rata Distribution Clause.
AUTOMOBILE INSURANCE See Physical Damage, Automobile; Medical Payments, Automobile; Comprehensive Coverage, Automobile; Family Automobile Policy, Basic Automobile Policy.
AUTOMOBILE INSURANCE PLANS See Assigned Risk.
AUTOMOBILE MEDICAL PAYMENTS See Medical Payments, Automobile.
AVERAGE CLAUSE (Also called “Average Distribution Clause.”) See Pro Rata Distribution Clause.
AVERAGE RATE (OR PREMIUM) An average rate or premium is a rate applying to several (2 or more) items under a blanket policy which is generally determined from the average of values and the published rates applicable to each item of property covered.
AVERAGE WEEKLY BENEFIT The weekly indemnity as prescribed under worker’s compensation law for disability or death. Based on a percentage of the average weekly wage of the worker, the amount of compensation is subject to a minimum and maximum. Determination is made by formula according to the law of the state in which the claim is made. Under “No-Fault” reparations, weekly benefits for work loss are also based on a percentage of income prior to the date of the claim.
AVERAGE, GENERAL; AVERAGE PARTICULAR See General Average, Particular Average.

B – What are some Public Adjusting Insurance Terms You Should Know?

BAIL BOND A bond which guarantees the court appearance of a person to answer a legal summons. If the person fails to appear, the bondsman or bonding company (the “surety”) must pay the amount of the bond to the court. See definition of “Bond.”
BAILEE One who assumes possession, but not ownership, of goods in accordance with an expressed or implied contract, usually for the purpose of servicing, storage or transportation of such goods. In assuming custody the bailee becomes legally liable for the property. For example: Furniture Movers, Laundries, Dry Cleaners Upholsterers, T.V. Repairers, etc.
BAILEE’S CUSTOMERS POLICY This policy covers loss or damage to customer’s property while in the custody of the bailee whether or not the bailee is legally liable for the loss, with certain limitations and exclusions.
BAILOR The owner of goods in the custody of a bailee.
BARRATRY(MARINE) Pertaining to any willful and unlawful act committed by the master or mariners of a ship as a result of which the owners suffer damage to the ship and/or cargo.
BASIC AUTOMOBILE POLICY (BAP) When ownership of an automobile is by other than an individual or by husband and wife, or is classified as a “Commercial” vehicle, the Basic Automobile Policy (BAP) must be used. This policy is in many ways not as broad as the Family Automobile Policy (FAP) or the Personal Automobile Policy (PAP). The latter makes no mention of other family members resident in the same household. There is limited coverage also on non-owned automobiles, and the addition of the Broad Form Drive Other Car Coverage is recommended.
BASIC LIMITS An amount of liability insurance for which the minimum premium is charged. If the insured wishes a larger amount, this is called “Increased Limits,” and a percentage (“Factor”) of the minimum rate or premium is charged in addition to the minimum premium.
BASIC REPARATIONS As used in No-Fault Automobile Plans, these are benefits reimbursing persons suffering economic loss through injury arising out of the ownership, maintenance, or use of a private passenger motor vehicle.
BATCH PROCESSING When large quantities of data (items of original entry such as invoices, credit memos, payments, etc.) do not require processing as soon as they are generated, all similar transactions affecting a master file can be processed at one time (say once a day), the files updated and outputs produced. This procedure is know as “batch processing.” (Compare to On-Line and Real Time Processing.)
BEACH PLAN A “Pool” plan similar to the fair plans and the auto assigned risk plans, underwritten by all companies writing fire insurance, to provide fire and extended coverage for risks with high exposure in the so-called “Hurricane Belt.” (The “Gulf” states plus the south Atlantic states north to include North Carolina.) Eligibility requires that the property to be certified complies with wind resistance standards according to the Southern Standard Building Code.
BEAUFORT SCALE A system of classifying the intensity of wind based on “Gale Force” in miles per hour: ‘Moderate,’ 32 to 38; ‘Fresh,’ 39to 46; ‘Strong,’ 47 to 54; ‘Whole,’ 55 to 63 miles per hour. A ‘Storm’ is defined as having winds from 64 to 75 miles per hour, and a ‘Hurricane’ in excess of 75 miles per hour. (see Windstorm.)
BENCH MARK Term sometimes used to mean “Threshold.” See No-Fault.
BENEFIT The usual dictionary definition of this word is at odds with its meaning in insurance. Most dictionaries describe “benefit” as profit, advantage, or privilege. In insurance, a “benefit,” such as those under Reparations Benefits or Personal Insurance Protection (No-Fault Plans) or Worker’s Compensation, does not contemplate profit, but rather a partial compensation for lost wages or disability. A basic principle of insurance is that an individual should not end up in a better financial or physical (including property) condition as a result of a loss than before.
BETTERMENTS See Improvements and Betterments.
BID BOND A bond required of a contractor who bids for work which is to be awarded to the lowest bidder. The bond is forfeited in the event the contract is awarded to him and he fails to enter into such contract. See definition of Bond; Performance Bond.
BILL OF LADING A receipt from a carrier which describes in detail the merchandise or other property which is to be transported by him, and stipulates the carrier’s duties with regard to the property. (See also Bailee and Common Carrier.)
BINDER A legal written or oral agreement issued by either an agent or a company, limited in term to a specific number of days, to effect immediate insurance in cases where sufficient information or time prevents a policy from being issued. A binder should include all pertinent information available, state the type of insurance, the limits, the perils insured against and (when issued by agent) designate the insurance carrier. Oral binders, although legally binding within the limits of the agency agreement, are dangerous, and should be executed without delay, with-copy to company in which the risk is bound.
BLANKET CATASTROPHE EXCESS LIABILITY See Umbrella Liability.
BLANKET INSURANCE A policy which covers two or more items under a single amount (e.g. Buildings and/or Contents), or two or more locations, or a combination of items and/or locations. (See also Specific Insurance and Pro Rata Distribution Clauses.)
BLANKET RATE OR PREMIUM See Average Rate or Premium.
BLOCK POLICY An inland marine policy covering the property of a merchant, wholesaler or manufacturer, including property of others while in his custody, property on consignment, property sold but not delivered. The policy covers against loss by most hazards including transportation. Most common forms are jeweler’s block and furrier’s block policies, and these contain many restrictions and limitations.
BOBTAIL (DEAD HEADING) LIABILITY Auto Liability Insurance for the independent truckman who leases his equipment to trucking firms. This insurance protects him against third party claims when his vehicles operate beyond the bounds of the leasing agreement as for example when they are in for repairs or maintenance, and the lessee’s insurance does not operate. Operation of a tractor without a trailer is know as “bobtailing;” operation of a tractor with an empty trailer is called “dead heading.”
BODILY INJURY The term “Bodily Injury” includes sickness or disease including death at any time resulting there from, sustained by any person or persons, caused by accident and arising out of one or more of the hazards insured against in the policy.
BODILY INJURY LIABILITY INSURANCE Protection against liability imposed bylaw on the insured for bodily injury as described above, to any person except employees. (See Worker’s Compensation.)
BOILER AND MACHINERY INSURANCE A combination of liability and physical damage insurance covering loss arising from the operation of boilers, pressure vessels, mechanical and electrical equipment and machinery. Coverage may be written on a “Named Perils” or an “All-Risk” basis, and may be extended to include business interruption and consequential damage.
BOND An agreement by one party (the Surety) to a second party (the Obligee) guaranteeing the honesty, integrity, ability, financial responsibility and compliance with the law and/or a specific contract of a third party (the Principal). Simply stated, the Surety guarantees to the Obligee the satisfactory performance of the Principal.
BOOK OF BUSINESS An expression of long standing meaning all insurance accounts of a particular agent, producer, marketing representative, general agent division office or other similar category. Sometimes referred to simply as “book,” the term is usually preceded by an adjective. For example: “He (the agent, marketing rep, division manager, etc.) has a good ‘book of business.”–meaning profitable; or “…a balanced ‘book of business”–the desired ratio of personal to commercial lines or a “large book”–high volume.
BORDEREAU A list itemizing in detail a (usually large) number of transactions, documents or policies. When a large number of such items is sent to another company or department, a Bordereau usually accompanies it for transmittal and checking purposes.
BROAD FORM Term indicating a more comprehensive form of coverage (as opposed to a “Limited” form). Examples are “Broad Form Personal Theft” and “Broad Form Storekeepers” policies. See also Dwelling Forms.
BROAD FORM, DWELLING AND CONTENTS See Dwelling Forms.
BROKER (OR AGENT) OF RECORD An agent or broker designated in writing by the insured to examine or copy the make-up of a rate, to apply for a specific rating or re-rating because of changes in occupancy or to inquire as to the effect on a rate of proposed changes in the physical condition or use of the property. Rating Bureaus will generally not cooperate with a broker or agent who is not designated in writing by the insured as his broker or agent “of record.” The statement signed by the insured is known as the “Agent (or Broker) of Record Letter.”
BUDGET PAYMENT See Installment Premium.
BUFFER LAYER LIABILITY See Gap, or Buffer Layer Liability.
BUILDER’S RISK INSURANCE Insurance against loss to builders, including machinery and equipment, in the course of construction, and to materials incidental to construction.
BULLION Gold and/or silver considered for its value as metal. Includes -coins, but does not take into consideration their value as coins. (See Numismatic Property.)
BUMBERSHOOT LIABILITY A form of umbrella liability where the principal exposure is “wet” marine involving the operation of vessels and the use of docking facilities. Covers the insured for Protection and Indemnity, General Average, salvage charges, collision, fire, Sue and Labor and all other legal or contractual liability including Longshoremens and Harborworkers Compensation Act, Employer’s Liability, liability under Admiralty Law, automobile liability and other hazards usually related to liability insurance.
BURDEN OF PROOF 1.) Insurance: The obligation on the part of the insured to prove he sustained a covered loss and to provide evidence supporting the amount of his claim. 2.) Legal (Civil): The obligation on the part of the alleged injured party (the plaintiff) that a third party (the defendant) is the proximate cause of his injury or loss; (Criminal): The obligation on the part of the state (through the prosecutor) to justify the action against the accused by providing the charge.
BUREAU, RATING See Rating Bureau.
BURGLARY Unlawful entry into premises by actual force and violence, evidence of which must be in the form of visible marks made by tools, explosives, chemicals or electricity. (See also Premises and Theft.)
BUSINESS INTERRUPTION INSURANCE Indemnifies the insured for loss of income caused by interruption of business operations as a result of fire or other insured perils. Also called “Use and Occupancy” insurance. (See also Extra Expense Insurance, Time Element, and Gross Earnings Form.)
BUYBACK Term commonly used to refer to an exclusion of certain coverage in a policy which the company may be willing to eliminate upon payment of an additional premium.

C – What are some Public Adjusting Insurance Terms You Should Know?

CANCELLATION Termination of an insurance policy before the end of the stated period. There are only three ways in which cancellation can be effected: 1.) Surrender of the original policy by the insured, or 2.) Written Notice to the insured (and mortgagee, if any) by the company or agent, or 3.) the signing of a Lost Policy Release by the insured (and mortgagee, if any). Types of Cancellation: Flat: Cancellation of a policy as of its inception date with no premium charge. (Note: In some cases the company is entitled to a fee called a “Minimum Rentention” to cover the cost of processing the policy. Short-Rate: Cancellation at the request of the insured, with the return premium credit less than proportional to the unexpired term. Pro Rata: Cancellation by or at the request of the company or the agent, with the return premium credit proportional to the unexpired term.
CAPACITY The maximum amount or limit of insurance a company will write on any one risk.
CAPITAL STOCK COMPANY See Stock Company.
CAPTIVE AGENT See Direct Writer.
CAPTIVE INSURANCE COMPANY An insurance company owned by a single interest or a combination of similar interests who control the stock with the purpose of obtaining insurance coverage for its business operations at a lower cost than the market offers. It may be a Non-Admitted Company, Non-Resident or Foreign, and under special circumstances may supply reinsurance to a self-insurer or a Domestic Company. (See Non-Admitted Company.)
CARGO POLICY A type of insurance covering “Goods and Merchandise in Transit” (by ship, motor carrier, rail or air). Forms vary greatly with regard to exclusions and limitations, and are generally tailored to the individual risk. Common exclusions are what might be expected: loss of market, strikes, locked-out workers, for example. Cargo insurance may be written on either a specified (named) perils or an all-risk basis.
CARRIER See Insurance Company or Common Carrier.
CASH VALUE See Actual Cash Value.
CASHIER’S CHECK A bank’s own check, drawn on its own account and signed by the cashier or other authorized official. It is used to pay direct obligations of the bank, to disburse the proceeds of a loan to the borrower or to credit his account. It is also sold to customers for domestic remittances where a personal check may not be acceptable to the payee. (Compare Certified Check)
CASUALTY INSURANCE A broad, loose term denoting generally those classes of insurance concerned with losses due to legal liability to third -persons, and also such lines as Accident and Health, Bonds, etc. which would not properly be classified as “Property Insurance.” The line between “Property” and “Casualty” insurance cannot be finely drawn. Burglary and Robbery, for example, have always been, and still are, considered “Casualty” lines, and yet, because they involve loss to property and are considered “First Party” situations (between company and insured), such losses could be classified under the “Property Insurance” category without much argument. For purposes of ready understanding and assignment and apportionment under the (see) “Guiding Principles” for losses involving overlapping coverages, however, the traditional terms and definitions of “Property” and “Casualty” are retained. In line with this, a burglary loss is still considered a “Casualty” loss.
CATASTROPHE A severe loss usually covering a relatively wide area, such as one resulting from a hurricane, tornado, conflagration, flood, etc. (See also Shock Loss and Umbrella Policy.)
CATHODE RAY TUBE (CRT) A display screen much like a television screen which shows data “called up” by a terminal keyboard, Sometimes called a “Display Screen” or simply “Screen,” but mostly referred to as a “CAT.”
CEDING CARRIER See Reinsurance.
CENTRAL PROCESSING UNIT (CPU) This unit is the heart of the computer, without which no processing could be done. There are three basic parts in the Central Processing Unit: the Control Unit which interprets instructions from an Input Device and orders the other two parts to perform their functions; the Storage Unit which holds both instructions and data for the desired use of the system; and the Arithmetic and/or Logic Units which perform the required operations on the data entered into the system.
CERTIFICATE OF INSURANCE Evidence of insurance, usually in the form of a certified copy of the policy. Also, a description of specific details of the property covered under a “Master” or “Open” policy. The certificate usually carries with it the obligation on the part of the insurance company to notify the holder of the certificate in the event of a change in the terms or the cancellation of the policy. A description of insurance in force does not bear this obligation is often referred to as a “Memorandum of Insurance.”
CERTIFIED CHECK A bank’s customer’s check upon which an officer of the bank or other authorized person has stamped the word “Certified,” inserted the name of the bank and signed his name. By its certification, the bank immediately transfers the amount of the certified check into its own funds to guarantee payment of the check when it is presented for payment. (Compare Cashier’s check.)
CERTIFIED MAIL A special service provided by the United States Postal Service. For insurance purposes, Certified Mail is considered legal proof of mailing, as to the date and the addressee. When this class of mail is brought to the sending post office, it is numbered and recorded, with a receipt given to the mailer. The mail is then treated just as other First Class Mail until it reaches the delivering post office, which then records it before giving it to the carrier for delivery. The mail, on delivery, must be signed for by the addressee or someone acting for the addressee. This receipt is then kept on file at the delivering post office so that evidence of delivery may be available at a later date if necessary. For an additional charge, the Postal Service will obtain and return to the sender a “Return Receipt” which shows the date of delivery and the person signing. If the certified mail is to be signed for only by the addressee, with return receipt, the mail is marked “Restricted Delivery,” and an additional charge is made for this service. (See also Registered Mail.)
CHANGE IN OCCUPANCY When the use or occupancy of a building is changed (e.g. a dwelling is converted from a two-to a three-family, or to a partial or complete business or commercial use, or vice versa) involving alteration or not, the change may result in a use or classification either increasing or decreasing the exposure (risk of loss), the insurance company must be notified. Failure to notify could result in voiding of policy coverage. If the company is notified and the change results in an increase in exposure, the company has the option of cancelling or adjusting the premium to reflect the increase. The insured may also request an adjustment of premium if he feels that the change results in a decrease in exposure. (See Broker (or Agent} of Record.)
CHARTERED LIFE UNDERWRITER (CLU) A professional designation awarded to those who have completed the prescribed examinations and have satisfied the experience requirements of the American College of Life Underwriters. Comparable to the professional level of (see) Chartered Property and Casualty Underwriter (CPCU) and Certified Public Accountant (CPA).
CHARTERED PROPERTY AND CASUALTY UNDERWRITER (CPCU) A professional designation awarded to those who have the required experience and have passed the prescribed examinations. Program is under the auspices of the American Institute for Property and Liability -Underwriters.
CHATTEL MORTGAGE A mortgage on movable or personal property as opposed to real property (land and buildings). (See also Encumbrance, Lien and Mortgage.)
CHATTEL MORTGAGE NON-FILING INSURANCE Insurance designed to protect a lending institution (bank, savings and loan association, credit union, etc.) against financial loss in the event it is unable to repossess property on which it has a chattel mortgage, or to enforce its rights to the property as a result of intentional non-filing of the chattel mortgage with the proper authorities.
CHECKING SLIP A sheet accompanying manual pages which are replacements or additions to existing pages. Lists page number(s) of the manual page(s), edition or effective date(s) and frequently includes a brief explanation of the important changes. These “checking slips” should be filed together in the front of the manual (or section) after changes have been made for later reference and “checking.” Replaced pages may remain in the manual plainly marked “Replaced” (we recommend this procedure), or they may be discarded.
CIVIL (OR PUBLIC) AUTHORITY CLAUSE Under Fire Insurance, any order by a civil (public) authority to destroy insured property to prevent or retard the spread of fire (provided such fire, even though not on the premises, originated from a peril not excluded under the policy) is covered. Under Business Interruption, Homeowners Additional Living Expenses and Rent and Rental Value, denial of access to insured property by Civil Authorities (for inspection purposes, etc.), coverage is extended for a period not to exceed two seeks when denial is direct result of damage to adjacent premises by a peril insured under the policy. Under Transportation Insurance, Common Carrier is not responsible for delay occasioned by order of Civil Authority.
CIVIL ACTION A legal action to recover money, property, rights or privileges by one party from another, claiming injury or damages. (See Tort; Criminal Action.)
CIVIL COMMOTION A serious and prolonged disorder of and by a number of people. When coverage for this hazard is provided, it includes coverage of riot, riot attending a strike, and in most forms coverage includes direct loss from pilferage and looting occurring during and at the immediate location of the riot or civil commotion. (See also Riot.)
CIVIL DISORDER LOADING See Loading.
CLAIM A request for indemnification. (See Indemnity.) First Party Claim: A request for indemnification for a loss involving only the insured and his insurance company. Third Party Claim: A request for indemnification of a loss by other than the insured (a “Third Party”) for damages alleged to have been caused by the insured. The term “Claim” also is used to refer to the estimated amount of the loss.
CLAIMANT The one who makes the claim.
CLAIMS EXAMINER (SUPERVISOR) An individual who is charged with the examination, investigation and evaluation of claims in process. Working closely with the adjuster in procedures, they agree on the amount of reserves to be set aside for pending claims.
CLAIMS REVIEW (AUDIT) A periodic review of the claims of an agency (particularly whose which have draft authority.) Bonding companies require these audits, and they may even be conducted by the state insurance department when such action is indicated.
CLASS RATES See Minimum Rates.
CLASS, CLASSIFICATION A term used to indicate an established category into which a person, risk, degree of protection, operation or other division is placed for the purposes of determining premium or underwriting decision.
CLASSIC AUTOMOBILE Term usually applied to an automobile which is not old enough to qualify as an “Antique Automobile” but by reason of its make, model, year and condition, has appreciably increased in market value. (See Antique Automobile; Appreciation.)
CLAUSE Section of a policy or endorsement dealing with a specific phase of coverage, exclusion of coverage, restriction or other condition, such as “Coinsurance Clause,” ‘Mortgage Clause,” etc., usually modifying, limiting or otherwise spelling out certain conditions.
CLOSING A meeting of the buyer and the seller for the purpose of transfer of title of real property from one to the other. As a general rule, each party is represented by his own attorney, although, “closings” are frequently held in the offices of attorneys who specialize in this type of transaction, in which case the interests of all parties concerned are protected. At this time all mortgage arrangements, title search, insurance, etc., are checked to see that all are in order before legal transfer is made and recorded.
COBAL A computer language most widely used in business data processing. It is an acronym for Common Business Oriented Language.
CODE (“STATISTICAL CODE”) A number (digit) or series of numbers representing the various characteristics of a risk, such as type of policy, class of occupancy, degree of protection, driver class, etc. Enables information to be computerized for statistical analysis, billing and retrieval for actuarial and other purposes.
COINS, COIN COLLECTIONS See Numismatic Property.
COINSURANCE (REDUCED RATE CONTRIBUTION) An arrangement by which the insured, in consideration of a reduced rate, agrees to carry an amount of insurance equal to a percentage of the total value of the property insured. For example: A building is valued at $10,000, and the 80% coinsurance rate is agreed upon. In accepting this rate, the insured implies agreement to carry at least $8,000 in insurance. Suppose he carries only $6,000 in insurance and suffers a $4,000 loss. Since he is carrying only 75% of the amount of insurance he agreed to carry, he then becomes a “coinsurer” to the extent of 25% of the loss, the company paying only 75% ($3,000) of the $4,000 loss. Read this again. You should be able to understand it on the fourth or fifth reading.
COINSURER An insured or an insurance company required to share in a loss under a conisurance agreement. (See Coinsurance.)
COLLISION (AUTOMOBILE) The colliding of the automobile, stationary or moving, with any other object, stationary or moving. Term also includes overturning (“upset”) of the insured automobile whether or not any other object is involved. (See Physical Damage-Automobile.)
COLLUSION Joint action by two or more individuals to commit a fraud. (See Fraud.)
COMBINATION POLICY A policy which provides protection against two or more hazards of both property and liability. Dates back to the days when companies were chartered to write only property or liability (Casualty) lines but not both. Homeowners form is an example of a present day “combination policy.” (See Package Policy.)
COMBINED ADDITIONAL COVERAGE(C.A.C.) An automobile physical damage coverage which may be written only in connection with Fire or Fire Theft coverage, and then only for a like amount. Vandalism and Malicious Mischief (subject to a $25 Deductible) may be written only as an addition to, and in connection with Combined Additional Coverage. As compared to (see) Comprehensive Coverage, which is an all-risk type of insurance, Combined Additional Coverage protects only from specified perils of Windstorm, Hail, Earthquake, Explosion, Riot or Civil Commotion, or the forced landing of any aircraft or of its parts or equipment, Flood or Rising Waters, External Discharge or Leakage of Water except loss resulting from rain, snow or sleet whether driven by a wind or not.
COMBINED PHYSICAL DAMAGE COVERAGE A new automobile physical damage coverage designed to include all perils currently under comprehensive and collision for commercial automobiles. It is aimed at eliminating any confusion which might exist as to whether a loss is covered under comprehensive or collision. The new coverage is available for most commercial auto risks. It is not available for garage dealers because of the special theft, mischief and vandalism deductibles which apply in dealer risks. Obviously, a common deductible must apply equally to both exposures when writing this combined coverage.
COMBUSTION A chemical change producing heat and light caused spontaneously or from an external source. Fire is always the result of combustion. But combustion does not always cause fire.
COMMERCIAL LINES A general reference to all of the various forms of insurance designed for the protection of business operations and property exposures, as opposed to those of individuals. (See Persona/Lines.)
COMMERCIAL VEHICLE A vehicle, generally of the truck type, which does not qualify under the definition of (see) ‘Private Passenger Automobile,’ used for commercial purposes. This classification includes all types of buses, liveries, taxicabs, ambulances, law enforcement vehicles and special or mobile land vehicles (e.g. bulldozers, power shovels, road rollers and graders, farm equipment, etc.).
COMMISSION The percentage of the total premium which is retained by the agent or broker in payment for his services. Return Commission: That portion of the Return Premium (see Premium) based on the original rate of Commission which the agent must contrib ute in the event of cancellation of reduction in the rate or amount of insurance. Earned Commission: An agent’s commission is a percentage of the premium earned under a given policy. If a policy runs its full term, then his commission is a percentage of the full premium for the period. If the policy is cancelled during its term, then his commission is a percentage of the premium which is earned while the policy is in force. In short, Earned Commission is the difference between Full Commission and Return Commission. (See Commission.) Contingent Commission: See Contingent Commission.
COMMISSIONER OF INSURANCE The state official who is charged with the responsibility of enforcing state insurance laws. Known in some states as Director or Superintendent of Insurance.
COMMON CARRIER A trucking concern which carries merchandise for a fee, and which cannot, under the law, refuse to accept shipments from anyone who wishes to use its services. The common carrier may limit the type of merchandise he carries to that which he is especially equipped or accustomed to carry, may refuse to carry certain items such as dangerous materials or perishables, and he may operate within a specifically limited area, but other than these limitations, he must offer his services to the general public. In contrast with a Contract Carrier, whose obligations are limited to those of a bailee (see below), the Common Carrier is responsible for the safety of goods in custody, except when delay or loss is occasioned by Act of God, an enemy nation at war with the carrier’s country, and act of any Civil or Public Authority, negligence on the part of the shipper or inherent vice of the goods themselves. If any delay or loss is not caused by any of the above, the Common Carrier is liable. The detailed description of the merchandise to be carried and contract between the shipper and the carrier is known as the “Bill of Lading,” although this, or a receipt or copy of any other agreement is not necessary to make the Common Carrier liable for a loss. A Private or Contract Carrier transports merchandise only for those with whom it has made prior agreements.
COMMON LAW That part of general law which has gained general acceptance in the United States and Great Britain by reason of custom and usage, and by decisions handed down by courts over the years. Common Law differs from Statutory Law in that the latter has come into existence through enactment into statutes by state and federal legislative bodies.
COMPARATIVE NEGLIGENCE See Negligence.
COMPENSATION AWARD An agreed amount to be paid to an injured party, usually periodically over a definite or an indefinite period of time, depending on the nature and extent of the injuries. Payment is usually made in installments, but may sometimes be made in a lump sum. Common in Worker’s Compensation cases. (See also Structured Settlement.)
COMPENSATORY DAMAGES See Damages.
COMPLETED OPERATIONS COVERAGE Liability coverage for contractors to cover losses occurring after operations (installations, servicing, etc.) have been completed at the place of occurrence and away form the premises owned or controlled by such contractors. Coverage must be written under a Product Liability form, as it is specifically excluded under the Manufacturer’s and Contractor’s Liability Policy. (See also Product Liability Insurance.)
COMPLETION BOND A bond required by the bank(or other lender) who supplied a construction mortgage. The bond guarantees that the mortgagor will use money (along with some of his own) for the purpose intended, i.e., the construction of the building or other facility for which the mortgage was given. Differs from “Performance Bond” in that the “Principal” is not necessarily the party doing the construction.
COMPOSITE RATE A common rate used for a particular insured’s operational exposures, reflecting the variations of insurance hazard. A single rate arrived at based on units of payroll, sales, receipts, inventory, admissions, etc. (See also Average Rate.)
COMPREHENSIVE The word “Comprehensive” in insurance is used to mean coverage is afforded for all risks of loss within the general scope of the policy except those specifically excluded. To put it another way, a “Comprehensive” policy covers any loss under the Insuring Agreement, except those specifically excluded in the policy.
COMPREHENSIVE COVERAGE (AUTOMOBILE) Covers any and all physical damage to the insured automobile with the exception of loss caused by collision or upset, mechanical or electrical breakdown, or wear and tear. Any damage or loss (e.g. theft) to the insured automobile except as a result of the hazards specifically named above is covered. Coverage may be written either on a Full or a Deductible basis. See also Combined Additional Coverage; Collision and Physical Damage-Automobile.)
COMPREHENSIVE GENERAL LIABILITY POLICY A general liability policy which is comprehensive in nature, i.e. covers for loss where no exclusions are specified. Also automatically covers new hazards or locations.
COMPREHENSIVE GLASS POLICY Although the Standard Glass Policy is generally used to cover plate glass, the Comprehensive Glass Policy may be extended to cover almost every type of glass manufactured. It is also used to cover Residence Glass. Except for Residence Glass and certain large risks, each piece (commonly called “light”) must be scheduled. That is each “light” must be described in the policy as to its type, dimensions and position in the building. Even glass signs, lamps and such items as glass bricks may be covered under the Comprehensive Glass Policy. $75 is provided for necessary repairs or replacement of frames, if necessary, at any one location. The policy will also pay for the temporary installation of glass or the boarding up of openings up to $75 for each separate location, with the same amount available for removal of obstructions necessary to replace damaged glass. The usual exclusions are: malicious scratching (malicious damage by acid or chemicals is covered), fire, war, invasion or nuclear energy. (See also Residence Glass Policy, Retention Fifty Percent and Two-Plate (Rider) Agreement.)
COMPREHENSIVE PERSONAL LIABILITY POLICY This coverage is now rarely written as a separate policy as it is now largely incorporated in the Homeowners forms, and was designed for risks now eligible for the latter form. Comprehensive Personal Liability protects the insured or spouse, resident relatives of either, and any other person under 21 in the care of the insured both on the insured premises and elsewhere for liability for bodily injury and property damage. With respect to those coverages, it is a “single limit” policy. Premises Medical Payments is also afforded without regard to liability of the insured, but does not extend to those persons listed with the insured above, and is restricted to those injuries of an accidental nature. (See Single Limit Policy.) Coverage extends beyond the insured premises to personal acts anywhere, and to premises in which the insured is temporarily residing. As with all liability policies, there are restrictions as well as optional extensions of coverage. Only a study of the contract will afford all of the “ifs,” “ands” and “buts.”
COMPREHENSIVE POLICY Policy providing broad coverage. So broad, in fact, that it means, in effect: “This policy covers all losses except those specifically excluded.” Standard policies, in contrast, name the specific hazards insured against, and exclude all others not mentioned.
COMPULSORY INSURANCE Any type of insurance which is required by law, and for which penalties are levied for non-compliance. (Compare Mandatory.)
CONCEALMENT Deliberate failure to disclose a material fact or facts (whether asked or not) when obtaining insurance or in the filing of a claim. A material fact is one which would have a bearing on a company’s decision to accept or decline the writing of an insurance policy or paying a claim.
CONCOMITANT Existing or occurring together; refers to coincidence in time and events so clearly related that one seems attendant on the other(s).
CONCURRENT INSURANCE Insurance under two or more policies which are identical in terms, but may vary in amounts or date. Non-Concurrent Insurance is also insurance under two or more policies which may (or may not) differ in amounts or dates, but also differ in other features as well, principally in forms or coverages. Non-Concurrency can create serious difficulties in the settlement of losses, and should be avoided.
CONDITION That part of an insurance policy which sets forth the terms of agreement under which insurance is undertaken. Usually spells out the duties and responsibilities of the insured and/or the insurance company with regard to the insurance policy. Limits of liability; insured’s duties after loss, suit against company, bankruptcy or any insured liberalization clause, waiver of policy conditions. These are examples of “Conditions” found in an insurance policy. A Representation is a statement of fact or condition made by or for an insured which is made a part of the policy and which, even though in error or untrue, will not jeopardize coverage unless it is material. (See also Warranty.)
CONDOMINIUM A multiple unit building or group of buildings featuring individual ownership of single units, wherein each owner has, in addition, a proportional interest in the balance of the total property owned jointly by all the unit owners.
CONFLAGRATION Widespread destructive burning characterized by great intensity.
CONSEQUENTIAL LOSS OR DAMAGE Indirect loss or damage resulting from fire or other peril covered by the policy. Example: Windstorm blows tree down damaging electrical wires running to a food freezer, causing food spoilage. Business Interruption Insurance covers “consequential” losses such as “Extra Expenses,” “Rental Value,” “Profits and Commissions” and “Tuition Fees,” among others. This type of insurance contrasts with the “Direct Loss or Damage” forms.
CONSIDERATION 1.) Term sometimes used in place of ‘Premium.” 2.) Payment of money, giving of service(s) or property or anything else of value or a combination of these by one party to another, in return for something else of value agreed to by the other party or parties. (See also Contract, Party.)
CONSIGNMENT The physical transfer of one’s personal property to another primarily for the purpose of selling the property, but sometimes for storage or shipping.
CONSORTIUM, INSURANCE See Insurance Consortium.
CONSORTIUM, LOSS OF Loss of companionship and support of a spouse provided by marriage.
CONSTRUCTIVE TOTAL LOSS When the cost to repair or salvage damaged property equals or exceeds the total value of the property at the time of the loss (even though the loss is not “total” as we usually understand it) it is, in effect “total,” and is called a “Constructive Total Loss.”
CONTAMINATION, RADIOACTIVE See Radioactive Contamination.
CONTINGENT COMMISSION A commission, in addition to the commission, which an agent receives as a result of an agreement with the company as a reward for a lower than average loss ration.
CONTINGENT LIABILITY Liability resulting from negligence of persons (not employees) engaged by the insured to perform certain jobs. (See Contractor’s Protective Liability.)
CONTRACT Term often used to mean an insurance policy. In general, a Contract is a written agreement between one who offers something (a service, indemnification, property, etc.) and one who accepts, giving Consideration (payment of money, giving of service or property, something else of value, or a combination of any of these) to the first party (the Offerer). In order to meet the necessary requirements of a legal contract the agreement must meet five conditions – It must be: 1.) in legal form; 2.) entered into by legally competent parties; 3.) based on a consideration (see above); 4.) not against the public good or against the law; and 5.) mutually acceptable, each party being fully aware of all relevant facts known to the other party.
CONTRACT BOND A bond guaranteeing satisfactory performance of a contractor of a construction contract, and payment of all labor and materials in connection with the specified project. (See discussion under Bond.)
CONTRACT CARRIER See Common Carrier.
CONTRACTOR’S PROTECTIVE LIABILITY Covers Contractor’s liability for damages or injuries sustained by any person (other than his employees) resulting from construction or alteration work done by any subcontractors. (See Contingent Liability.)
CONTRACTUAL LIABILITY INSURANCE Protects manufacturers and! or contractors who are required to assume liability under contract, such as a contractor who assumes liability for injury or damages resulting from materials or equipment on streets or sidewalks during the course of construction. (See also Hold-Harmless Agreement.)
CONTRIBUTION See Apportionment.
CONTRIBUTION, REDUCED RATE See Coinsurance.
CONTRIBUTORY NEGLIGENCE See Negligence.
CONVERSION Essentially the same as (see) Embezzlement except that Conversion generally refers to property rather than money. Term is also used in Life Insurance to denote a change in one form of life protection to another.
CONVEYANCE In business transactions, a conveyance is a transfer of title to property of one to another.
CORPORATION A legal entity made up of individuals which is granted a charter by the state. Each member becomes a “shareholder” to the extent of his investment, and his personal liability for the debts and obligations of the corporation is limited to the degree of his investment. (See Entity, Partnership.)
CORRECTION NOTICE See Criticism.
COST, ACQUISITION See Acquisition Cost.
COST, INSURANCE AND FREIGHT (C.L.F.) A condition of a sales agreement of merchandise wherein the purchaser agrees to pay the cost, insurance and freight charges in connection with the shipping of the goods to their destination.
COUNTERSIGNANTURE Signature by an agent resident in and licensed by the state in which a risk is located.
COVER NOTE Similar to a Binder issued by a reinsurance company in favor of a Primary Carrier as evidence of reinsurance.
COVERAGE Insurance, an insurance policy, or the extent of protection in type, limit or amount afforded by an insurance policy. Sometimes called “Cover.”
COVERAGE, EXTENDED See Extended Coverage.
COVERED LOSS A loss for which an applicable policy provides indemnification. (See Indemnity.)
CREDIT FOR EXISTING INSURANCE ENDORSEMENT See “Pick-Up” Endorsement.
CREDIT REPORT A report containing information about an individual (his personal habits, credit rating, family and job situation, etc.) which enables an underwriter to evaluate him as an insurance risk. Inspection Report (a report on the physical condition, “housekeeping,” neighborhood, protection and construction of the property) and Mercantile Report (on the moral and financial status, usually of a business organization) are terms which in recent years have come to be used interchangeably with Credit Report.
CRIMINAL ACTION A crime is (broadly speaking) an act or an omission in violation of the law. A criminal action is brought against the person accused of a crime which does not only damage or injure another person (See “Civil Action”) but is of such a nature that it is a crime against society as a whole, the public in general or, as we refer to it, “The State.” In the event, it is the state which brings action against the accused, who, if found guilty, may be punished by death, imprisonment or any other penalty the court see fit. (See also Civil Action, Felony, and Misdemeanor.) Also, see a lawyer.
CRITICISM A notice of correction in rules, rates, classification and /or forms given by a rating office. (See Stamping Office.)
CURRENT, ACCOUNT See Account Current.
CURTAIN WALL A non load-bearing wall in a building of concrete and/or steel, whose purpose is to divide areas within the building or to afford protection against the weather.

D – What are some Public Adjusting Insurance Terms You Should Know?

DAILY REPORTS Copies of an insurance policy which are kept as the agent’s record and sent to the company or branch office either directly or through a stamping office.
DAMAGES The sum claimed for damages allegedly sustained as a result of the act (or failure to act) of another party. The word “damages” as used in insurance is very broad, and may include loss as a result of injury, malfeasance , malpractice, errors and omissions, acts of God, etc. Compensatory Damages are damages which demand indemnification for measured loss. (See Indemnity.) Punitive Damages are those which are awarded by the court as punishment for the negligent act which caused the loss. (See discussion under Injury.)
DATA INPUT-OUTPUT DEVICES See Input Device, Output Device.
DATA PROCESSING The compilation and/or computation of data (facts) for the purposes of supplying information for decision making and/or storage and selective retrieval of such data. In the sense in which the term is used today, Data Processing (often referred to as “EDP”–for Electronic Data Processing) is a system of high speed manipulation of facts, made possible by a Computer System which consists of a (see) Central Processing Unit (CPU), the “brain,” to which are connected various devices for entering information (input) into the CPU, and extracting processed information from it (output). A computer system has two main functions:1.) compilation and computation of the facts (data) entered, and 2.) storage of the processed data bring out the data in any form or sequence requested by the user through the use of any of the (see) Output Devices.
DEAD HEADING Operation of a tractor hauling an empty trailer (see also Bobtaillng.)
DEAN SCHEDULE (Also known as the “Analytic System.”) A system of measurement of exposure to fire loss, devised by Alfred E. Dean, Chief Engineer of the New England Insurance Rating Association, based on debits and credits applied to the basic rate. Adjustments are made in consideration of grade of fire protection, construction and height, housekeeping, nature of occupancy, density or neighborhood, etc.
DEBRIS REMOVAL This clause, included as an “Additional Coverage” in policies covering property, provides for expense, up to a specified amount, of removal of debris resulting from damage caused by a covered loss.
DECK PAGE A “Buzz” term meaning the Declarations section of an insurance policy.
DECLARATIONS Information given by the insured on the basis of which a policy is issued: Name, address, nature, location and description of risk, coverage, amounts or limits, etc. Also included are the numbers and edition dates of the endorsements which are attached and become a part of the policy. The effective and expiration dates, the name of the insurance company and agent and the policy number are also shown.
DEDUCTIBLE An agreed amount which, in the event of a covered loss, the insured must pay before the company pays the balance of the loss up to the limits of the policy. (See also Disappearing Deductible.)
DEED A written agreement under seal by which real property is conveyed (title is transferred) from one party to another.
DEFAMATION To damage, or to attempt to damage, the reputation of a person or group of persons by evil or false reports. (See also Libel and Slander.)
DEFENSE The method(s) adopted by a person or other legal entity against legal proceedings have been taken, for the purpose of disputing charges of wrong-doing.
DEFENSE OF SUITS, SUPPLEMENTARY BENEFITS All liability policies provide for the defense of the insured against any suit charging injury or damages, even if such charges are false and groundless. The company also agrees to pay, in addition to the limit(s) afforded, all costs of such defense. It is important to note, however, that the injuries or damages alleged in the claim must be of the type that would be covered by the policy if the charge could be proven. If not, the company has no obligation for defense.
DEFERRED PREMIUM PAYMENT PLAN (D.P.P.) Method of annual payment of a three-year policy. Annual payments (not including Homeowners and Minimum Fire and some other Iines) are calculated by multiplying the three-year rate (usually 2.7 times the annual) by 35%, and multiplying the resulting figure by the amount (per $100) of insurance. The premium thus obtained is the annual premium payment (subject to the Minimum Premium rule.) Most policies are now “annualized.” That is, annual rates or premiums are now shown, and three-year pre-paid premiums are determined by multiplying the annual rate or premium by three. If the insured elects to pay three years in advance, he may protect himself against any interim rate or premium increase during the three-year period. He may, however, prefer to have the policy issued for a three-year period, paying annually (DPP). In electing this method, he is charged for the second and third annual premiums which are in effect at the time they become due. This method of premium payment is called Annualization. Today most policies are for a one-year period only.
DEMOLITION CLAUSE Fire and Homeowners policies exclude indemnification for demolition of undamaged portions of a building by reason of “any local of state ordinance or law regulation construction, repair or demolition.” Coverage can be added for an additional premium.
DEPOSIT PREMIUM 1.) The initial premium paid under an installment payment plan or (see) Deferred Premium Payment Plan (D.P.P.); 2.)The estimated premium paid under an audit policy when the actual premium, cannot be determined until after the policy has expired. (See Audit Policy.)
DEPRECIATION The allowance taken for age, wear and tear and obsolescence of any item, consideration being made of the probable useful life the item may have had. It is important to remember that the depreciation factor is applied to the replacement value at the time of the loss and not to the original cost new of the item.
DEPRECIATION INSURANCE See Replacement Cost Insurance.
DEVIATION A rate or premium, usually lower, which differs from the standard rate or premium filed with the state insurance department having jurisdiction. In many states “File and Use” laws have been passed, under which a company may simply file a schedule of rates, and proceed to use them. They will remain in use unless the Commissioner of Insurance contests them. In these states, the bureaus issue rate schedules on an “advisory” basis.
DIARY FILE See Suspense File.
DIFFERENCE IN CONDITIONS INSURANCE (D.I.C.) A form of insurance protection usually written for large industrial or commercial property risk in order to cover gaps in the standard coverage. Usually tailored to meet the particular needs of the insured. Normally the responsibility of Inland Marine Departments, the contract may be written separately or may be included in the basic policy by proper endorsement. Can include -Water Damage, Flood, Collapse, Earthquake, Landslide and other accidental occurrences not contemplated in the original contract.
DIRECT BILLING A System whereby the company bills the insured direct for renewal premiums, and the insured remits directly to the company, or pays the agent, who in turn sends the full premium payment on to the company. The agent receives a monthly statement listing all transactions (including additional and return premiums paid), accompanied by his commission check for the month’s business. In most cases under Direct Billing, the agent performs his usual functions, such as claim reporting and other services.
DIRECT DAMAGE (OR LOSS) Damage caused directly by a peril insured against under the policy. Under “Consequential Damage or Loss” (above), the damage done by the tree to the electrical wiring is “Direct Damage,” while the damage done to the food in the freezer is Consequential or Indirect damage.
DIRECT LOSS See Direct Damage.
DIRECT WRITER An insurance company which sells insurance directly to the insured without benefit (either to the company or to the insured) of the services of an independent agent. Captive Agent: A term in general use describing an employee of a Direct Writer who is engaged in a sales capacity. Also applies to a person who sells insurance for a Direct Writer on a commission basis, and who, by terms of his contract, cannot effect or service insurance for any other company.
DIRECTOR OF INSURANCE See Commissioner of Insurance.
DIRECTORS AND OFFICERS LIABILITY INSURANCE Directors and officers of corporations may be held personally liable for damages resulting from negligent or wrongful acts even though acting in the name of the corporation. This insurance protects these individuals and reimburses the corporation (and sometimes even the individual directors and officers) for necessary legal expenses incurred for defense. Usually written with a high deductible.
DISABILITY Physical and/or mental inability to function in a normal manner as a result of physical injury, illness or disease. There are varying degrees of disability: Partial or total; temporary or permanent.
DISAPPEARING DEDUCTIBLE A deductible which is reduced as the loss increases until, at a given point, the deductible ceases or “Disappears” entirely. For example, in a Homeowners policy, if a $50 “Disappearing Deductible” applies, the company pays 111% of any loss in excess of $50. Thus, if the loss is $250, the company will pay $222 (111% of $200), leaving the insured with only $28 to pay. When the loss reaches $500, the insured pays nothing (111% of $450 equals $499.50) In the case of $100 “Disappearing Deductible,” the factor used to apply to the amount of the loss in excess of $100 is $1 25% of $300 (the excess over the $100 deductible) would amount to $375, which is the amount the company would pay, leaving the insured’s contribution only $25. As in the case with the $50 “Disappearing Deductible,” in a $500 loss, the insured pays nothing. (125% of $400 equals $500.)
DISCOVERY BOND A fidelity bond covering the insured’s bonded employees retroactively to the date of their original employment, even if they had not been bonded previously. See Superseded Suretyship Rider and Bond.
DISCOVERY PERIOD When a bond expires, there may have been a loss during its term which has not yet come to light. A period of time can be allowed under the terms of the bond followed expiration or cancellation to allow the insured to “discover” his loss. The time allowed is called the “discovery period.” See also above and Bond.
DISINTERESTED PARTY See Party.
DISPLAY TERMINAL A device connected to a computer system by cable or microwaves with a screen (“CAT”) and keyboard used for input and output of data.
DISTRIBUTION CLAUSE See Coinsurance and Pro Rata Distribution Clause.
DIVIDEND A share in the profits (if any) usually arrived at as a percentage of the premium earned by a given policy at its termination, which is returned to the policyholder of a Mutual or a Stock Participating company. Dividends are paid in accordance with the dividend rate in effect as of the termination of the policy, and can never be guaranteed in advance. In the event of cancellation of a policy during its term, the dividend is figured on the earned premium (see “Premium”), and is known as the earned dividend. Dividends may also be declared from time to time to stockholders in a Capital Stock Company out of earnings. See Mutual, Stock Participating and Capital Stock companies.
DIVISION WALL A wall, usually of brick, masonry or stone, which separates two sections of a building, runs from the basement floor through the roof and above and has no openings. Sometimes called a “Fire Wall,” this construction makes possible lower fire rates for the two -sections.
DOMESTIC CARRIER (OR COMPANY) An insurance company doing business in a state in which its home office is located.
DRAFT Similar to a check, except that the bank upon which it is drawn is authorized to transfer funds to cover the draft only after the maker (e.g. the insurance company) has approved payment.
DRAFT AUTHORITY The authority given to an agent or adjuster to issue drafts in payment of losses. This authority is limited as to types of claims and amounts paid.
DRAM SHOP LAWS Laws which impose special liability for damages or injuries arising out of the sale of liquor. Coverage for this exposure is excluded under the usual liability.
DRIVE OTHER CAR COVERAGE The private passenger automobile policy provides protection for the insured when driving automobiles other than the one(s) described in the policy. This extension in coverage is limited in that it excludes operation of owned vehicles and those which are furnished for the regular use of the insured. The insurance on the borrowed automobile is (see) “Primary” for liability and physical damage, and the insurance on the insured’s (owned) automobile is (see) “Excess” in the event of an accident or other covered loss. In “No-Fault,” the reparations benefits or “Personal Injury Protection” (PIP) afforded under the insured’s (borrower’s) automobile is primary, and any such benefits which may cover the borrowed automobile are not available to the borrower, since they are not considered “excess,” and do not operate in the above situation.
DRIVER TRAINING CREDIT A credit allowed by insurance companies in consideration of a young driver having successfully completed a driver training course approved by the state board of education and/or the state motor vehicle department.
DWELLING FORMS (FIRE) In addition to the regular forms for Dwelling Building(s) and Contents, Office Furniture, Fixtures, Instruments and Supplies in buildings otherwise designed and occupied solely for dwelling purposes, there are two forms commonly used for dwellings: Broad Form: ($100 Deductible applicable to all perils.) Covers dwelling building(s) and/or contents for broad named perils. Special Building Form: ($200 Deductible applicable to all perils.) An All-Risk coverage for dwellings (not contents) and excludes only specified exposures. Under the above forms, Dwellings designed for occupancy by more than 4 families or subject to farm rates are not eligible. Also, these forms are not recommended if property otherwise qualifies for Homeowners policy.

E – What are some Public Adjusting Insurance Terms You Should Know?

EARNED COMMISSION See Commission.
EARNED DIVIDEND See Dividend.
EARNED PREMIUM See Premium.
EARNINGS INSURANCE A type of business interruption insurance for small mercantile and non-manufacturing businesses which is a relatively simple form, and requires no coinsurance. It provides payments for loss of business during a shut-down period while the damaged property is being repaired, and is a simplified version of the Gross Earnings form. While no coinsurance is required, the policy does include a limitation of 1/6, 1/4 or 1/3 of the amount of insurance during any 30 day period of delay. The face amount of the policy therefore, should be at least six, four or three times the monthly needs, depending on the limitation selected. See also Business Interruption, Gross Earnings Form and Time Element.
EASEMENT The right to pass over or through the property of another.
EFECTIVE DATE The date and hour at which an insurance policy or endorsement goes into force. The Standard Fire Policy provides that insurance takes effect “at Noon, Standard Time at the Location of the property involved.” “Standard Time” is generally regarded by the courts as “Daylight Savings Time” if that is legally in effect at the location of the insured property. Most policies covering real or personal property become effective at 12:00 Noon, while most casualty policies become effective at 12:01 A.M. This arrangement was suitable a few years ago when by charter, companies were permitted to write either Property or Casualty Insurance, but not both types. When statutes permitting companies to write both property and casualty lines in a single policy, the definition of “Effective Time” became a problem. Since that time, multi-line (multiple-peril) policies with a common effective time have been approved in practically all states.
ELECTRONIC DATA PROCESSING (EDP) See Data processing.
EMBEZZLEMENT The fraudulent appropriation of property (usually money) to which the individual has been entrusted. Although this usually means an employee, it also could be an attorney, an attorney-in-fact, one -who has power of attorney, or any other fiduciary. Conversion has the same meaning, but is restricted to property rather than money.
EMINENT DOMAIN The right of government to appropriate private real property for public use; to confiscate or condemn any property for the common good. When the property taken results in a necessary public benefit, the owner is entitled to fair compensation.
EMPLOYEE, RESIDENCE See Residence Employee.
EMPLOYERS’ LIABILITY The common law doctrine placing legal liability on the employer for injuries to his employees. Modified through the years by statute, Employers’ Liability has now been largely replaced by Worker’s Compensation Insurance, which provides protection for employees whether or not negligence can be shown. Since Worker’s Compensation Insurance covers only the obligations of the employer under the various Worker’s Compensation Laws, no such law covers every situation in which an employee may seek to recover damages from his employer. In such cases the employee is free to take legal action against his employer for recovery. Inasmuch as all other Liability Policies specifically exclude coverage for employees, there has been included in the Worker’s Compensation Policy a second Insuring Agreement, Coverage B, Employers’ Liability, to cover the gap. While there is no dollar limit of coverage under the Worker’s Compensation contract itself (any and all sums must be paid in accordance with the state regulations, regardless of amount). Employers’ Liability (Section B) does have a limit. The limit applies per occurrence, with no separate limit per person.
EMPLOYERS’ NON-OWNERSHIP LIABILITY See Non-Ownership Liability.
ENCUMBRANCE Property (real and for personal) to which the owner does not have complete and clear legal title is said to be “encumbered.” “Encumbrance” may be in the form of a mortgage, lien for unpaid taxes, “Mechanic’s Lien” for materials and/or labor, attachment (to secure claims by others for alleged obligations of the owner not necessarily related to the property), survivor’s rights or other legal restrictions.
ENDORSEMENT A printed or otherwise written or typed statement attached to and made a part of an insurance policy, amending, clarifying, restricting or expanding the declarations or conditions of the policy. Changing circumstances often require that alterations be made to an existing insurance contract. Addition or elimination of a mortgagee or loss payee, change in coverage or limits, change of classification or basis of rating are just a few of the many changes which are made possible by the use of an endorsement. Were it not for endorsements, the alternative would be cancellation of the existing policy and issuance of a replacement to accomplish changes. This would be going from bad to worse, or much more worse. A “Rider” accomplishes the same purpose, but applies to bonding, health and accident and life insurance. The two terms have, unfortunately, been often used interchangeably.
ENGINEER See Safety Engineer.
ENTITY A unit recognized as being responsible under the law for its (his, her, their) acts or omissions which may affect the physical, mental or financial condition of another entity. An individual, a partnership, a corporation or association is considered an “Entity” under the law.
EQUIPMENT Term used in insurance describing personal (movable) property owned by a business, not including items of inventory or supplies.
EQUITY Literally, “Justice.” Financially, the owner’s portion of the value (as measured in terms of money) of his property after the amount of (see) encumbrance (mortgage, lien, etc.) is deducted from the value of the property.
EQUITY RATING A form of rating based on the insured’s experience. Similar to Experience, Merit and Retrospective Rating, but usually used on the very large risks for those insureds with better than average experience.
ERRORS AND OMISSIONS INSURANCE (E & 0) Coverage for liability resulting from errors or omissions in the performance of professional duties (other than medical (see) Malpractice). Applicable as a general rule to professional business activities such as banking, accounting, law, insurance and real estate. With regard to insurance, covers loss occasioned by failure, whether by error or omission, to have adequate or valid insurance in force, including failure to renew without prior notice to the insured.
ESCROW A deed or any instrument of property or an amount of money as part of an agreement which is entrusted to a third party (the “Escrowee” or “Escrow Agent”) to be held by him until certain obligations of one of the parties to the agreement are fulfilled, at which time the deed, instrument or money is given to that party.
ESTIMATED PREMIUM See Premium.
ESTOPPEL A legal term referring to the prevention of a party from making. a claim which he might ordinarily have a right to make, except for a previous action taken by him (e.g., waiver or release) or by a court of law.
EVIDENCE OF FINANCIAL RESPONSIBILITY See Financial Responsibility.
EX DOCK, NAMED PORT OF IMPORTATION An ocean marine agreement under which the seller is responsible for all charges involving delivery of goods (including duty) to the designated port of entry. Under this agreement seller must also provide and pay for marine insurance (including War Risk) and is and remains responsible for the goods after delivery to the named port until the buyer or his authorized agent (not his insurance agent) takes physical control of the goods or until the time stipulated in the agreement expires, whichever comes first.
EX GRATIA PAYMENT Payment by an insurance company of a loss for which it is not obligated to pay under the policy. This is sometimes done because of an error, oversight or misunderstanding on the part of the company, the agent or the insured. Payment is made entirely at the discretion of the company for various reasons, among which may be: to save a favorite agent’s face; to preserve the company’s image; to avoid litigation or simply to keep a prized account.
EX POINT OF ORIGIN’ An ocean marine contract under which the seller agrees to deliver goods to a designated location (warehouse, etc.) on or before a particular date (or within a stated period of time). On the agreed date or upon the expiration of the period of time specified, the goods become the responsibility of the buyer, whether or not he or his authorized agent takes physical possession.
EX WORKS An agreement in ocean marine under which the buyer is responsible under a purchase agreement for transportation, insurance, duties and all other expenses involved, from the premises of the seller to the final destination of the goods.
EXAMINER, CLAIMS See Claims Examiner.
EXAMINER, INSURANCE DEPARTMENT An employee or other authorized representative of a state insurance department whose duties include the examination of the books and the reviewing of the procedures required of insurance companies licensed in that state to verify that the department’s regulations are being followed.
EXCEPTED PROPERTY Term generally used to refer to property not covered by a policy but which may be added by endorsement. “Uninsurable Property,” by contrast, cannot be covered.
EXCEPTIONS, STATE See State Exceptions.
EXCESS AND SURPLUS LINES When a risk cannot be placed in either the (see) Voluntary or Residual market, the agent or broker has the option of placing it with a “Non-Admitted” company through an “Excess” or “Surplus Lines” broker who must be licensed under the laws of your state to represent the non-licensed underwriter, such as Lloyd’s of London or other non-licensed facility. Any domestically licensed agent or broker may legally accept a commission for the placement of such a risk. (See Non-Admitted Company, Voluntary Market, Residual Market.)
EXCESS COVER See Reinsurance.
EXCESS INSURANCE Insurance which pays only after the amount of a loss exceeds a previously agreed amount which may or may not be insured under another primary policy or policies. An excess policy does not contribute in the event of a loss and until applicable primary insurance is exhausted, and where other excess insurance exists, it contributes only its proportionate share of such excess loss. (See also Primary Insurance, Reinsurance and Retrocession.)
EXCESS OF LOSS REINSURANCE, AGGREGATE A reinsurance contract under which an insurance company may make certain that it does not exceed a predetermined net loss ratio. Should the company (the “ceding carrier’) exceed the net loss percentage, the reinsurance company (the “assuming carrier”) is bound by the agreement to reimburse the primary company the amount necessary to bring its net loss ratio back to the agreed percentage. See Reinsurance.
EXCLUSION(S) Specific reference to exposure(s), condition(s), situation(s). or item(s) not covered in a policy.
EXEMPLARY DAMAGES See Punitive Damages.
EXPENSE CONSTANT An amount added to the premium charged on small policies to help cover the cost of handling such policies. This charge is applied to Worker’s Compensation policies, and is usually $15 or less. The charge depends on the total policy premium developed, rather than the classification of the risk. Generally speaking, on a risk with premiums in excess of $500, no charge for Expense Constant is made. (See also Loss Constant.)
EXPENSE RATIO The relationship between a company’s (or a line’s) expenses and its premium, expressed in percentage.
EXPENSE, ADDITIONAL LIVING See Additional Living Expense.
EXPERIENCE The record of the ratio of premiums to losses of a given insured, agent, area, class of coverage, company, or the industry as a whole.
EXPERIENCE RATING A system of estimating rating based on loss experience of an industry. Also known as “Merit Rating” or “Judgment Rating.”
EXPIRATION DATE The date (and time) on which insurance protection under a given policy is scheduled to cease. See discussion under Effective Date.
EXPLOSION This term is generally not specifically defined in insurance policies except for exclusions (see below). A definition widely accepted by the courts is that an explosion is evidenced by a sudden and violent bursting and breaking or expansion of a container caused by an internal force or pressure, with material going outward from the center and usually accompanied by a noise. The following are not considered “explosions” for insurance purposes: 1.) electrical arcing, 2.) water hammer, 3.) rupture or bursting of pipes, 4.) “Sonic Boom” and 5.) rupture or bursting of rotating or moving parts of machinery caused by mechanical breakdown or centrifugal force.
EXPOSURE (OR HAZARD) A condition, material, activity or situation, or the proximity to any of these, which creates or increases the possibility of a loss. Also, the measure of such possibility. Two risks may be insured against the same exposures (or hazards), but the possibility of loss may be far greater in one (type of construction, operation, materials handled, etc.) than in the other. The greater exposure to loss should determine the rate or premium charged and certainly should be a factor in deciding the acceptability of the risk. Exposure is also defined as the source of possible loss–wind, fire, explosion, earthquake, etc. The terms Exposure and Hazard are often used interchangeably with the word “Peril.”
EXTENDED COVERAGE Extends the coverage of a fire policy (which covers for fire and lightning only) to include loss due to Windstorm, Hail, Explosion, Riot, Riot attending a strike, Civil Commotion, Damage by Aircraft, Motor Vehicles or Smoke Damage. The endorsement excludes Vandalism and Malicious Mischief which may be added by endorsement for an additional premium. The Extended Coverage Endorsement does not apply to a standard fire policy unless a specific additional premium is charged; it must be written for the same amount as the fire policy; it must apply to all items covered by the policy and it does not act to increase the amount of insurance afforded by the policy to which the endorsement is attached.
EXTRA EXPENSE INSURANCE A “Time Element” form of insurance which helps to pay for loss due to suspension of operations caused by a covered hazard. It is designed to pay for the “extra expenses” involved in continuing operations with a minimum of interruption until such time as the damaged premises can be repaired or a different usable premises can be obtained. Unlike “Business Interruption” coverage, which pays for loss due to suspension of operations, Extra Expense Insurance enables a business to continue necessary operations (health care facilities, laundries, newspaper publishing, etc.) which, if interrupted for any length of time, could seriously, if not fatally, damage a business operation. “Time Element” insurance may be tailored to the particular business, and may be added to the regular property insurance policy or may be written as a separate contract.

F – What are some Public Adjusting Insurance Terms You Should Know?

F.A.S. See Free Along Side.
FACE AMOUNT The amount shown in dollars of the limit(s) of the company’s liability in the event of a covered loss.
FACE SHEET A transcript of the information shown on the (see) Daily Report, plus claim and loss history information.
FACSIMILE TRANSMISSION An electronic, electromechanical system for high-speed transmission and reproduction of exact copies of documents of any kind (letters, contracts, engineering drawings, etc.) over telephone lines, microwave or a combination of both. Sometimes referred to as “electronic mail,” or ‘fax,” the procedure, as indicated in early court decisions appears to be legally acceptable.
FACTOR A number (multiplicand) used to multiply base premiums or rates to arrive at the proper premium for a higher (or lower) exposure than the base or norm. Examples are factors to increase limits from basic limits from basic limits shown in the manual, and the “Territorial Factors” (or “Multipliers”) used in rating Plate Glass. A Factor is also used in the Revised Classification and Rating Plans (e.g. “217” Plan). In the latter, it is arrived at by the combination of the “Primary” factor and the “Secondary” factor (which adds, subtracts or is 0.00 and therefore has no effect) resulting in the “Final” factor which is used to multiply each Base Premium for the coverages desired. Not to be confused with (see) Increment. In general business use, “Factor” refers to one who acts for another in certain transactions, such as discounting accounts receivable. (See also Increment, and Surcharge.)
FACULTATIVE (BASIS) A type of reinsurance agreement under which -each risk is specifically reinsured under a separate agreement. Since each item for reinsurance is treated as a separate proposal, subject to acceptance or rejection by the assuming carrier, the method has been largely replaced by “Treaty Basis.” (See Reinsurance and Treaty Basis.)
FAIR PLAN (Fair Access To Insurance Requirements”). A federally funded reinsurance plan designed to increase the availability of property insurance in areas prone to riot damage. Property insurance (not including automobile, farm or manufacturing risks) for home and business owners is made available in eligible urban areas when such coverage is not available through normal channels.
FAMILY AUTOMOBILE POLICY (FAP) OR PERSONAL AUTOMOBILE POLICY (PAP) Designation of the broad private passenger automobile policy developed from the National Standard Liability Policy which, for example, did not cover the operation of non-owned automobiles except by endorsement or a separate policy. The new policy not only included such operation automatically (with certain exceptions) but is broader in other respects. In order to qualify for the Family (or Personal) Auto Policy, the risk must meet certain eligibility requirements. Excluded are commercial vehicles (except pickup, panel delivery and jeep-type vehicles not customarily used for commercial purposes other than ranching or farming), public or livery conveyances, motorcycles, three-wheeled vehicles, scooters or others not designated for use on public highways. (See also Basic Automobile Policy.)
FAMILY PROTECTION See Uninsured Motorist Endorsement.
FEDERAL TORT CLAIMS ACT An act allowing persons to bring legal action against the federal government for injuries or damages in cases where the government could be held liable were it an individual or other legal entity.
FELONY A crime regarded under the law as especially vicious, punishable by death or imprisonment. (See also Misdemeanor.)
FIDELITY BOND A bond guaranteeing an employer the honesty of his employee(s). (See Bond.)
FIDUCIARY A person or corporation appointed in trust to act for another, particularly with regard to monetary or legal matters. A conservator for an incompetent person or an executor or an administrator of an estate are examples of a “Fiduciary.” (See also Power of Attorney and Attorney-in-Fact.)
FIELDMAN See Special Agency.
FILE AND USE See Deviation.
FINANCED PREMIUM An agreement by which a lending institution will advance the full premium to the insurance company and accept prearranged periodic payments from the insured. The payment plan is arranged with a down payment and subsequent payments so that premiums paid are always ahead of the cancellation table, and the lender, by contract, has the right to require cancellation.
FINANCIAL RESPONSIBILITY LAWS All states except Massachusetts and Puerto Rico (which have compulsory automobile insurance) have some form of automobile financial responsibility laws which require that owners and operators of motor vehicles give some proof that they are able to pay for injuries to others or damage done by reason of the operation of the motor vehicle. These laws generally operate after one or more of the following: 1.) an automobile accident involving bodily injury or property damage over a certain minimum; 2.) a conviction for certain offenses (intoxication, etc.) or a series of convictions whether or not they involve an accident; 3.) failure to pay final judgments arising from an automobile accident. Failure to provide Proof of Financial Responsibility will result in license suspension. Proof is usually required for a period of 3 years but can be as long as 5 years. By far the easiest and best evidence of Financial Responsibility is to have an automobile liability insurance policy with adequate limits in force at the time of the accident, or at the time Proof is required. Most states have reciprocal agreements regarding suspension of license for failure to provide Proof of Financial Responsibility in the event of involvement in an out-of-state accident. Proof of Financial Responsibility is often called Evidence of Financial Responsibility.
FINISHED STOCK Merchandise of a manufacturer which has been completely processed and is ready for sale (as opposed to “goods in process.”)
FIRE From an insurance standpoint a fire must be: 1.) the result of actual ignition of the property covered as evidenced by a flame, glow or some kind of light (smoke alone is not sufficient), and 2.) accidental as far as the insured is concerned. Friendly Fire: A fire located in and confined to a place where it is supposed to be, such as in a burner, stove, fireplace or furnace. Hostile Fire: A fire which escapes its intended original container, or which originates elsewhere, and does damage to property.
FIRE INSURANCE POLICY The Standard Fire Insurance Policy reimburses the insured up to the specified amount for all direct loss by fire, lightening, and by removal from premises property endangered by the perils insured against in the policy. This is of course a simple statement of what the fire insurance policy does. There are standard restrictions and limitations. Briefly, these are as follows: The policy will not pay for: 1.) More than the extent of the actual cash value (ACV) of the property at the time of the loss; 2.) more than the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable length of time after the loss; 3.) any increased cost of repair or construction required by any ordinance or law (e.g. local building code, etc.) regulation construction or repair; 4.) compensation for loss resulting from interruption of business or manufacture; 5.) more than the insurable interest of the insured. The above is only a brief summary of the provisions and limitations of the Standard Fire Policy. The limitations described here may be covered by endorsements or other insurance by payment of an additional premium.
FIRE WALL See Division Wall.
FIRE-RESISTIVE Refers to noncombustible materials used in construction of buildings and parts of buildings to prevent the spread of fire and to minimize its effect. Also refers to items other than buildings, e.g. clothing, drapery material, furniture, etc.
FIRST AID EXPENSE See Immediate Medical/Surgical Payments.
FIRST PARTY CLAIM See Claim.
FIXTURES See Furniture and Fixtures.
FLAT CANCELLATION. See Cancellation.
FLAT RATE Term used in fire insurance before any credits for coinsurance are applied. Rate used by insured if he does not want to carry insurance to value or near value, and still avoid becoming a coinsurer in the event of a loss. Most all insurance companies are averse to writing flat rate policies. See also Coinsurance.
FLEET POLICY A risk having five or more self-propelled vehicles of any type is eligible for the Automobile Fleet Plan. A Fleet Reduction Factor (discount) begins with the sixth vehicle, but does not apply to any vehicles rated under the Long Haul Trucking Rule, nor to any vehicles which are not owned by the insured. Most fleets are written on a “Reporting Form” basis, which automatically covers newly purchased or licensed vehicles, and allows credit for unlicensed or sold vehicles. A premium is estimated (the “Advance” or “Deposit” premium) based on the equipment owned and operated by the insured at the inception of the policy, and at the end of the policy term, the policy is “audited” to determine the actual premium earned for the exposure. Credits for suspension (See “Suspension–Automobile”) are allowed except on vehicles for which a certificate of Financial Responsibility has been filed. (See Reporting Policy.)
FLESCH READING EASE TEST This test, developed in the early 1950’s by Rudolph Flesch, attempts to measure the relative ease with which material can be read (and presumably understood) as compared to other material. The approach is to convert into mathematical formula, by means of average number of syllables per word, average number of words per sentence and with credits given for so-called “personal” words such as “you”, “we,” “they,” etc. Random samples of 100 word segments are taken from the text to be rated and scored, and the results are entered into the formula. The test “score” is determined from this equation, and ranges in scale from 100 (the simplest–probably “Da-da” and “ma-ma”) down to 0– the lower the score being the more difficult to understand (an example of which might be Bill Buckley having a conversation with himself). Following are typical score ranges: Comics: 90-100; Time Magazine: 60-70; scholarly works: 30-50; scientific and professional: 0-30, and many in between. Most legislation has required insurance and other consumer contracts to score a 45 or higher grade to be acceptable. The range (30-50) is described by Flesch as “difficult” or (see above) the academic or scholarly level. At this level, according to Flesch, 33% of the adult population of the U.S. who have completed high school and some college are able to understand–one out of three!
FLOATER A policy designed to cover personal (as opposed to real) property which is moving or can readily be moved, such as jewelry, musical instruments, coin and stamp collections, etc. These are generally written on an all-risk, world-wide basis, except that some are restricted to the United States and Canada. (See also All-Risk and Inland Marine.)
FLOOR PLAN Dealers in “high ticket” items such as automobiles or expensive appliances frequently borrow money, using as collateral the items “on the floor,” i.e. in stock. Insurance taken out by the bank or finance company for its interest alone or together with the dealer on these items is called “Floor Plan” insurance. This type of insurance is written on a “Reporting Form” basis. (See Reporting Policy.)
FOREIGN COMPANY (OR CARRIER OR INSURER) An insurance company doing business in a given state whose home office is located in another state or country. (See also Domestic, Admitted and Allen company.)
FORGERY The falsifying of any writing with fraudulent intent. Alteration–Changing the amount or the name of a payee or an endorse ment on a negotable instrument (check, etc.) with intent to defraud–is considered forgery.
FORM A printed endorsement attached to a policy which restricts, broadens, clarifies or otherwise modifies policy coverage. Term is also used to refer to the basic policy, its type and the “Declarations” made a part thereof.
FORTUITOUS Happening by chance as opposed to design; accidental; apparently without cause.
FRANCHISE CLAUSE A marine concept providing that no payment shall be made unless a loss exceeds an agreed amount (the “Franchise”), in which case the company pays the full amount of the loss from the first dollar on. This differs from “Deductible” where only the excess of the agreed amount is paid by the company in the event of a loss. It differs also from the “Disappearing Deductible” in that it makes no payment at all until the “Franchise” is reached, and then the company pays the full amount. (See Deductible and Disappearing Deductible.)
FRAUD Deception with the purpose of gain at another’s expense. Proof of fraud voids an insurance policy. In order to establish fraud, the following elements must be proven: 1) misrepresentation or concealment of material fact. (See Concealment.) 2) knowledge by the maker that the statement was not true; deliberate concealment or positive statement(s) by the maker when the truth or falsity of such statement(s) is known to him; 3) intention to deceive; 4) actions must result in inducement of the victim, and 5) there must have been reliance in good faith by the victim on the statement(s) made by the maker which resulted in loss (measurable in terms of money), such loss being traceable directly to such reliance.
FREE ALONG SIDE (F.A.S.) An Ocean Marine term referring to an agreement under which the seller is responsible for goods sold until goods are at (“along side”) the transporting vessel.
FREE OF PARTICULAR AVERAGE (F.P.A.) American Conditions. Under the terms of this Ocean Marine agreement, total destruction of a cargo would be covered no matter the cause, but partial losses would not be covered unless caused by one of the designated perils of the sea. American Conditions usually relate to on-deck cargo. English Conditions: Basically the same as American Conditions, but broader in that the policy will pay partial losses whether caused by designated perils of the sea or losses after such occurrence even if they are in no way directly traceable to whatever peril of the sea might have caused the loss. English Conditions generally have to do with below-deck cargo.
FREE ON BOARD (F.O.B.) Originally an ocean marine term, now meaning any condition of sale of goods where the seller is responsible until the merchandise is placed “on board” the truck, ship, freight car, aircraft or other conveyance, at which time the burden of risk shifts to the purchaser. Also means that the purchaser is responsible for the cost of transportation from that point. “F.O.B. Destination” holds the seller responsible until the goods are safely at the designated location specified by the purchaser, and the seller pays the cost of transportation to that place.
FRIENDLY FIRE See Fire.
FULL COVERAGE Term indicating policy pays in full for all losses caused by perils insured against from the first dollar. Also used to describe a policy which includes all coverages against all hazards possible to insure (even though it may include “deductible” or coinsurance features). An automobile policy, for example, with every available coverage (regardless of any deductible or limit) is referred to as having “Full Coverage,” since there is no other coverage which can be written on it. Despite the use of this term, there is no such animal as a “Full Coverage” policy. Some are broader in scope than others (see “Comprehensive” and “All-Risk”), but there is no insurance policy written which can be made to cover all possibilities of all losses, having no restrictions or conditions whatsoever.
FULL REPORTING CLAUSE A condition in most reporting form policies whereby the insured is penalized in the event of a loss if it is determined that the insured has reported lower values than actually existed. (See Reporting Policy.)
FUR FLOATER An inland marine form covering all-risks worldwide for scheduled personal furs, including garments trimmed with fur (representing their principal value). Other common “floaters” cover such things as jewelry, cameras, musical instruments, silverware and the like. (See also All Risk, Floater and Inland Marine.)
FURNITURE AND FIXTURES From an insurance standpoint, the contents of a building except machinery, goods in the process of manufacture, goods held as a bailee or merchandise for sale or held for sale. “Fixtures” refer to personal property of a tenant which can be removed without damage to the building.
FURRIERS’ BLOCK POLICY This insurance is designed to cover wholesale and retail dealers whose stock consists of furs and garments trimmed with fur. It does not cover those who deal exclusively in raw or dressed skins or those who manufacture for the wholesale or retail trade. Department stores with fur departments are eligible for this coverage, however. Exclusions are property of others accepted for storage, or property rented or leased or sold on the installment plan; after delivery, or generally in transit until they arrive at the insured’s premises, nor mysterious disappearance, unexplained loss or inventory shortage. Many of the above exclusions may be removed by endorsement for additional premium.
FURRIERS’ CUSTOMERS POLICY This insurance offers all-risk protection for the furrier who (as bailee) accepts furs and garments trimmed with fur for storage, alteration, repairing, cleaning or remodeling, including pickup and delivery, against loss or damage to customer’s goods caused by negligence of the furrier or his employees. It does not cover furs or fur items which are the property of the furrier. (See “Furriers’ Block Policy.”)

G – What are some Public Adjusting Insurance Terms You Should Know?

GAP OR BUFFER LAYER LIABILITY In some cases of (see) Umbrella Liability, the primary carrier is unwilling to write underlying limits adequate to meet the limits provided by the Umbrella coverage, thereby leaving a “gap” in coverage between the upper limits the primary carrier is willing to provide and the Umbrella minimum requirements. It is possible to procure in the specialty market “buffer layer” the gap created by this situation–sometimes akin to the procedure described under “Retrocession,” except that the third “Layer” of the cake is placed between the bottom and the top layers.
GARAGE KEEPERS’ LEGAL LIABILITY A commercial automobile form which covers the legal liability of a garage keeper as bailee for damage done to customers’ cars while in his custody. Since it is a legal liability policy, it is designed to protect the insured only for those losses for which the law would hold him responsible. In actual practice, however, the courts have tended to hold him responsible for almost all types of losses to customers’ cars. An application does not usually bring a smile to an underwriter’s otherwise happy countenance.
GARAGE LIABILITY A commercial automobile form designed to cover the legal liability of automobile dealers, repair shops, service stations, etc., for property damage and/or bodily injury losses arising out of business operations. Coverage excludes injury to employees, damage to owned or customer’s cars or other property while in the care, custody and control of the insured. In general, the policy covers premises liability, product liability, (including completed operations and liability for defective workmanship if resulting damage occurs after the property is no longer in charge of the insured.)
GARNISHMENT An order by the court to one who has possession of property and/or money (the “Garnishee”) of a debtor against whom a judgment has been obtained, directing the garnishee not to transfer the property or money to the debtor. An employer, for example, is the garnishee of an employee whose salary has been attached.
GENERAL AGENT An agent who has an exclusive contract with a company covering a specific territory, and who, to all intents and purposes, acts as a branch office for the company is called a “General Agent.” He supervises other agents (called Sub-Agents, Solicitors, Producers or Brokers) and may not solicit business directly from the public. Also, sometimes refers to an agent who has a liberal form of commission contract with the company and does solicit direct business. (See also Agent, Special Agent, Local Agent and State Agent.)
GENERAL AVERAGE The principal in maritime law that all interests (hull owners, cargo owners, charterees and shippers) share in any sacrifice for the good of all. A good example would be the jettisoning of a part of the cargo in order to save the ship and the balance of the cargo. Particular Average refers to loss which affects only a particular interest, as opposed to “General Average” in which all interests are involved.
GENERAL CASUALTY INSURANCE Term in general use referring to lines of insurance other than automobile and property insurance. A catch-all definition which includes many unrelated lines such as Burglary and Robbery, miscellaneous Liability, Glass, Boiler and Machinery Worker’s Compensation, Bonds, etc.
GENERAL LIABILITY See Comprehensive General Liability.
GLASS COVERAGE, COMPREHENSIVE See Comprehensive Glass Coverage.
GLASS COVERAGE, RESIDENCE See Residence Glass Coverage.
GOOD STUDENT DISCOUNT Many companies allow a discount on automobile insurance for students who maintain high scholastic grades, since there appears to be a high correlation between academic achievement and good driving experience.
GRACE PERIOD The period of time, after the date a premium is due, during which a policy will continue in force. Usually used in life insurance, meaning a period of time (varying from 28 to 31 days) following the premium due date during which the policy remains in force even though the premium has not been paid.
GRADING, TOWN See Town Grading.
GROSS EARNINGS FORM A Form of business interruption where the premium is based on the insured’s total sales less cost of merchandise or service (“Gross Earnings”). This very simple form is popular with small mercantile and non-manufacturing (service) businesses.
GROSS LINE The amount of insurance a company has on a single risk. The “Net Line” is the same thing, with the amount of reinsurance, if any, deducted.
GROSS PREMIUM See Premium.
GUARANTY FUND A state fund maintained through assessments (contributions) by insurance companies which are set aside to satisfy claimants and insureds of an insurance company which may become insolvent. The fund may be set up in advance to be prepared for any insolvency, or it may be created by assessment of the other companies after an insolvency has occurred.
GUEST LAWS Legislated in about half the states, “Guest Laws” restrict the right of recovery for injury sustained by guests (passengers in the vehicle other than the driver) in automobiles by placing upon the guest the burden of proof of “Gross Negligence” of the driver. Some statutes even require that proof of gross negligence include “willful and wanton misconduct” by the driver. The operation of “Guest Laws” can be affected by the relationship between the owner or driver and the passenger: was the joint ownership or right of control of the vehicle; was money or other benefit a consideration; did an employer-employee or principal-agent exist–these relationships have a bearing on the application of Guest Laws.
GUIDING PRINCIPLES A set of rules of recommended procedures to be used in the adjustment of claims involving overlapping casualty, fire and/or inland marine policies. Prior to the establishment of these “Guiding Principles.” the insured could find himself waiting for his claim to be paid while the insurance companies involved argued as to their participation in the loss and the apportionment, if any. With the advent of combination multi-peril policies (Homeowners, for example) where all coverages are written by one company in the same policy, there are fewer problems in this area, but they do occur, and they can be serious.

H – What are some Public Adjusting Insurance Terms You Should Know?

HARBORWORKER’S COMPENSATION See Longshoremen’s and Harborworker’s Compensation.
HARDWARE A computer term referring to the electric, electronic or mechanical components (or any combination of these) which are part of a computer system, such as (see) Central Processing Unit (CPU), tapes and disks, optical or magnetic character readers, card readers and punchers, interpreters and sorters, and any other part of the system which could be called “tangible.” (See Software.)
HAZARD See Exposure.
HAZARD, MORAL See Moral Hazard.
HAZARD, PHYSICAL See Physical Hazard.
HIRED CAR COVERAGE This insurance is designed to protect an insured against losses resulting from the operation of rented or hired automobiles. The individual who has a regular automobile policy is covered under the “Drive other Cars” coverage for hired cars only when they are not regularly or frequently used. In addition, there is no coverage under this provision when a hired car is used in the insured’s business, unless it is of the private passenger type, and driven by the insured, spouse, a chauffer or a servant. A Business which hires automobiles is covered as an additional insured under the automobile liability policy in the name of the owner of the hired car. The exposure here is that there may be no insurance or sufficient insurance on the hired car. In both the above cases, hired car coverage may be added by endorsement to the -regular automobile policy. But remember: Hired car coverage is excess over any other valid and collectible insurance under which the insured is entitled to collect, and does not cover automobiles owned by or registered in the name of the named insured, or an executive officer or partner of the insured. In addition, there is no coverage for the operation of any automobile owned by or registered in the name of an employer or agent of the insured who is given any allowance of any kind for the use of such automobile. (See Employer’s Non-ownership.)
HOLD-HARMLESS AGREEMENT A contract in which one party agrees to assume the legal liability (to “hold him harmless”) of another party for damages sustained by still another (third) party. Certain agreements (municipal ordinance requirements, except when involving work done for the municipality; elevator or escalator maintenance; easement agreements and lease of premises, etc.) are covered by Manufacturers; and Contractors’ and Owners’ Landlords’ and Tenants’ Liability policies. Any other type of “Hold-Harmless” agreement should be covered by a Contractual Liability policy. This is practically always required by a General Contractor in a sub-contract with a Sub-Contractor.
HOLDUP See Robbery.
HOLE-IN-ONE INSURANCE Reimburses the golfer who hits the once-in-a-lifetime hole-in-one, and then gets hit himself to pick up the tab for a round of booze for everyone who happens to be at the club at the time. This vital insurance protection enables the lucky one to enjoy himself on his day of glory.
HOMEOWNERS POLICY Although there are other “Package” Homeowners policies on the market, the Homeowners Policy Program developed and filed by the Insurance Service Office (ISO) is much more generally in use than the others. Since most other plans are very similar, the information that follows, based on the ISO Program, is a good general guide to the scope of coverages under this form. The Homeowners Policy is a property insurance contract which incorporates (see) Comprehensive Personal Liability coverage. With respect to direct physical damage to dwelling buildings and contents, there are five forms: HO-1 (Basic Form), HO-2 (Broad Form), HO-3 (Special Form), HO-5 (Comprehensive Form) and HO-8 (Modified Coverage Form). There are two additional forms: HO-4 (Contents Broad Form, commonly known as “Tenants Form”) and HO-6 (Condominium Unit-Owners Form), which are designed to cover contents only (plus Liability). These forms offer a measure of building coverage (limited to a certain amount) applicable only to those building additions and alterations made at the insured’s expense. All seven Homeowners forms cover property losses on either a “named” (smoke, theft, falling objects, etc.) or on an “all-risk” basis, or a combination of the two. The following is a brief guide to the coverages afforded under the Homeowners forms. The number in parentheses is the number of “named” perils covered in the form.
- Form Building(s) Contents
- HO-1 Named Perils (10) Named Perils (10)
- HO-2 Named Perils (17) Named Perils (17)
- HO-3 All-Risks Named Perils (17)
- HO-4 —-* Named Perils (17)
- HO-5 All Risks All Risks
- HO-6 —-* Named Perils (17)
- HO-8** Named Perils (10) Named Perils (10)

*Building coverage limited to insured’s interest.
**Building losses settled on an “actual cash value” basis.

All building losses are settled on a “replacement cost” basis (except HO8) provided the coinsurance requirement is met (no coinsurance requirement for HO-8). Contents losses in all forms are settled on the basis of “actual cash value,” although a number of states have approved optional “Replacement Cost” endorsements for contents. (See Replacement Cost Endorsement.)Many endorsements are available to fit the needs of the individual insured (e.g. scheduled personal articles such as furs, jewelry, etc.)

HOSTILE FIRE See Fire.
HOUSEHOLD CONTENTS Simplest definition: all property which an occupant of a premises would take with him if he moved. The term includes “Fixtures” (items attached to the building which are the property of the tenant) which can be removed without damage to the building. The wallpaper you put on yourself? Forget it!
HOUSEKEEPING The degree of care, maintenance and cleanliness of a premises or operation. An important consideration in underwriting a risk.
HULL POLICY A marine or aviation form covering damage to the body of the ship or plane.
HURRICANE See Windstorm.
HYGIENE, INDUSTRIAL See Industrial Hygiene.

I – What are some Public Adjusting Insurance Terms You Should Know?

IMMEDIATE MEDICAL/SURGICAL PAYMENTS Under most liability coverages, the insured has the right to incur expense for the immediate medical and/or surgical relief to others, and to be reimbursed by the company, regardless of fault.
IMPACT PRINTER See Printer.
IMPLIED WARRANTY Although warranties in law are generally thought of as those made by the seller (which they are), those made in an insurance transaction are also those representations made by the purchaser. In insurance, however, the emphasis is on statements (warranties) made by the purchaser upon which the contract of insurance relies. A warranty need not be spoken or written to be legally binding. An inference which is not specifically expressed in any way may result in an “implied warranty.” A material fact which is not revealed simply because no question was asked relative to that fact, is an example. Let us say you want to insure your 1989 Mercedes Benz for full coverage comprehensive and collision. The agent will not ask you if there is an engine in the car, so you do not tell him there is none. It is assumed (implied) that there is an engine in the vehicle. It is also implied that the boat you are insuring is not at the bottom of the lake, or that there are no firemen battling the blaze at your home while you are taking out a fire policy. (See Warranty.)
IMPROVEMENTS AND BETTERMENTS Fixtures, alterations, additions or installations made a part of the building by or at the expense of the tenant or lessee. Such “Improvements and Betterments” (painting, etc.) become the property of the owner of the premises, except that the tenant is responsible for restoring such betterments in the event of a loss under most leases. The tenant’s interest in improvements and betterments may be protected under a fire policy by the addition of the endorsement of the same title at the applicable regular contents rate, and is automatically covered under Homeowners Form HO-4 (“Tenant’s”) policy for 10% of the Coverage amount.
INCHMAREE CLAUSE In ocean marine, a clause which extends the policy to cover losses caused by bursting boilers, breakage of shafts, latent defects in machinery, hull or equipment, and faulty navigation or management. Named after a ship of the same name involved in a lawsuit in 1887.
INCREASE IN HAZARD Can void a policy. (See Change in Occupancy.)
INCREASED LIMITS See Basic Limits.
INCREMENT An increase; an additional amount added, sometimes expressed as a percentage of the premium or the rate. See also Surcharge, Factor.
INCURRED LOSSES Insurance company losses (claims) which have been paid or for which reserves have been set up. The statement of Incurred Losses usually covers a fixed period of time (one year, three years, etc.) and is computed by adding the losses paid during specified period to the reserves (unpaid losses) outstanding at the end of the period. The amount of the reserves shown at the beginning of the period is then subtracted. The resulting figure is the amount of “Incurred Losses.” (See Loss Reserve.)
INDEMNITY The restoration of individual, individuals or other entity to approximately the same economic condition as prior to any loss. Sometimes, because of applicable deductibles, coinsurance or other factors, such restoration may not be complete, but the principle of indemnification does not permit the person or persons suffering a loss to be better off after a loss than before.
INDEPENDENT ADJUSTER See Adjuster.
INDEPENDENT AGENT A licensed individual who represents two or more insurance companies for whom he sells and services policies, and whose income is derived solely on commissions. (Compare Captive Agent under Direct Writer and Broker.)
INDIRECT LOSS See Consequential Loss.
INDUSTRIAL HYGIENE Term referring to the technological approach to recognition, evaluation and control of environmental factors originating in or from the workplace, including conditions which may cause sickness, impaired health or well-being or discomfort and inefficiency among workers or others in the area of such factors. These may take many forms, among which are dust, fumes, irritating liquids, gases, vapors, mists or toxic waste. Radiation, noise, vibration or extremes of temperature or pressure are also among these factors. Industrial Hygiene also includes studies of stress resulting from boredom, monotony, worry, work pressures and fatigue. The Industrial Hygienist is charged with recognizing and minimizing or, ideally, eliminating the conditions which result in adverse effects.
INFLATION GUARD ENDORSEMENT An endorsement (optional for an additional premium) providing for automatic increases in amount of insurance periodically to prevent possibility of the danger of falling below the 80% of replacement cost coinsurance requirement.
INHERENT VICE “X-rated” where most insurance policies are concerned. Refers to an intrinsic or innate characteristic or condition of an article which, for no apparent reason, will cause fading, cracking or even disintegration, which cannot be traced to any outside influence. Pearls will lose their luster, opals will suddenly shatter, or furs will crack or split, all evidently due to some condition in the article itself.
INITIAL PREMIUM See Premium.
INJURY The word “injury’ in law and in insurance is often used broadly. It can include (in addition to Bodily Injury) damage to property, or, in a broader sense, the result of an action or occurrence resulting in a change for the worse of an individual’s financial, social or professional condition or standing.
INJURY, BODILY See Bodily Injury.
INLAND MARINE A form of insurance designed to cover moving or moveable property, so-called because it has its origins in ocean (“wet”) marine—probably the oldest form of property insurance. Since such property was known as “Floating Property,” inland marine policies are frequently referred to as “Floaters.” Ocean Marine contracts held the transporter liable for loss of goods before the beginning and after the completion of (in addition to) the actual ocean voyage, and the “non-ocean” part grew to large proportions during the 19th century. Most of the property reaching this country from Europe continued on its journey through the Erie and many other canals by barge, hence “Inland Marine” became a natural designation for such insurance. (See also All-Risk, Floater and Ocean Marine.)
INPUT DEVICE Any device (card reader, magnetic tape or disk units, console typewriter terminal, etc.) capable of entering data into the Central Processing Unit (CPU) of the computer both for instructing it on how to process data and the data to be processed. (See Output Device.)
INSOLVENT INSURANCE COMPANY See Guaranty Fund.
INSPECTION REPORT See Credit Report.
INSTALLMENT PREMIUM An installment payment of premium other than the initial (or “Deposit”) premium under an installment premium plan. (See Audit.)
INSTRUMENT (LEGAL) A written document detailing the terms of a legal agreement between two or more parties, spelling out the specific rights and obligations of each party. (See also Contract and Consideration.)
INSURABLE INTEREST In the definition of insurance, we see that any loss in order to be paid must be measurable in terms of money. If a loss occurs, therefore, which cannot be translated in such measurable terms suffered by an individual or individuals, it then follows that he has not had a financial loss which can be attributed to the accident or occurrence, and he therefore has no “insurable interest” in the event. You may have a particular sentimental fondness for the Leaning Tower of Pisa, but, should it fall on its face, you would have to show a loss measurable in terms of money in order to prove you had an “insurable interest” in it. You cannot purchase insurance on property or persons with yourself as beneficiary in whose condition or state of well being you have no “insurable interest.”
INSURANCE 1) An agreement by which the individual can, by payment (of “premium”) to an insurance company, be indemnified partially or fully in the event of a covered loss. Such loss must be measurable in terms of money. 2) A pooling of contributions by a number of individuals for the purpose of lessening or eliminating economic loss to any one of such individuals by indemnifying him from the pooled contributions if he should suffer a loss from any one of the previously agreed upon hazards common to all the contributors. Ed. Note: As you can see from the above, insurance is almost the exact opposite of gambling. A gambler places a bet (thereby voluntarily exposing himself to loss) with the hope of monetary gain. On the Other hand, an insured (who is faced with an involuntary exposure to loss) pays a fee–the “premium”–in order to reduce or eliminate such exposure.
INSURANCE COMMISSIONER See Commissioner Of Insurance.
INSURANCE CONSORTIUM A franchised arrangement for independent insurance agencies which provide for an independent contractor to work as an associate of the individual agency in servicing accounts, thereby freeing the principal(s) to pursue the larger and more lucrative accounts. The franchise agreement, in addition to providing increased visibility through group advertising, also enables the agency to participate in the benefits in training, etc. It is similar to franchises now operating nationwide in the real estate field.
INSURANCE INFORMATION INSTITUTE A clearing house for property and casualty insurance information supported by a great many stock and mutual insurance companies. Its main purpose is to provide information to both the public and the industry for better understanding of the operation and functions of this important sector of the economy.
INSURANCE POLICY The written contract of insurance, including all endorsements attached. Endorsements usually include the wording: “attached to an forming part of Policyd No—,” etc.
INSURANCE SERVICES OFFICE (ISO) A property/casualty rating and advisory organization which provides a variety of services to the P & C industry nationwide. Among these are statistical, actuarial and advisory support based on its broad access to the experience of its many supporting member and subscriber companies. A voluntary, non-profit association, it also designs policy and endorsement forms for all classes of insurance in this field and provides manuals for rates and rules. It is the result of the consolidation in the early 70’s of a number of separate and independent associations and rating bureaus which performed these same services for specific lines of insurance.
INSURANCE TO VALUE An amount in insurance substantially equal to the value of the property insured.
INSURED (ASSURED) The person(s) or other legal entity on behalf of whom an insurance company agrees to pay benefits or to indemnify for losses in the event of certain occurrences as described in the policy.
INSURED (CARRIER) An insurance company. There are a number of different types of insurers, definitions of which may be found elsewhere in the text: Admitted, Alien, Domestic, Foreign, Mutual, Stock, Stock-Participating, Reciprocal, Reinsurance, etc.
INSURING AGREEMENTS The portion of the insurance policy which sets forth the terms under which the insurance company agrees to indemnify the insured for loss suffered from specified perils or to pay benefits upon the occurrence of certain events as described. In brief, the agreements describe the conditions under which the company will identify the insured in event of a loss.
INSURING CLAUSE The part of the insurance policy which spells out the basic agreement between the company and the insured.
INSUROR A local insurance agent who is a member of Independent Insurance Agents of America (IIAA), formerly the National Association of Insurance Agents, the so-called “Stock” Association.
INTEREST, ADDITIONAL See Additional Interest.
INTEREST, INSURABLE See Insurable Interest.
INTERESTED PARTY See Party.
INTERFACE A connection (electronic, manual or electronic/manual) which makes it possible for a peripheral device to communicate with the main storage of a computer. Since insurance companies use various makes of computers, a problem of communication for producers, insurance department and rating organizations arises when it is necessary to intercommunicate. The producer, for example, in the near future would possibly have need for more than one terminal if he represented several companies which had systems which differed from on another. Adaptable interfacing devices are now available which bring about compatibility.
INVESTMENT INCOME The earnings of an insurance company from investments such as stocks, bonds, real estate and mortgages. The manner in which these funds may be invested is governed strictly by guidelines set by the state regulatory agencies (insurance departments) which require that a certain percentage of their premium income be held in liquid reserve for payment of claims. The investment of remaining available funds is also strictly regulated as to the percentages allowed to be used for investing in various categories.
INVITEE An individual on premises owned or in the care, custody or control of the owner or lessee, who is on or in the premises at the expresses or implied permission of such owner or lessee or agent, for business of mutual benefit to both parties. A high degree of care is imposed by law on the owner (or controller) to see that the condition of the premises is such as to minimize the possibility of injury to the “invitee.” (See also Licensee, Trespasser and Guest Laws.)
INVOICE A listing sent to a purchaser containing a description of the merchandise, and sometimes the method of shipment, the unit cost and the terms. Also, a notice of charges made for services rendered or a combination of both. (See also Statement.)
ITEMS OF ORIGINAL ENTRY See Source Document.

J – What are some Public Adjusting Insurance Terms You Should Know?

JETTISON An ocean marine term referring to the throwing overboard of part of the cargo or ship’s equipment in order to save the ship and the balance of the cargo. (See Genera/Average.)
JEWELERS BLOCK POLICY See Block Policy.
JEWELRY FLOATER An all-risk worldwide coverage contract for scheduled personal jewelry. May be issued as a separate policy or added as an endorsement to an existing policy. (See Floater.)
JUDGEMENT RATING See Experience Rating.

K – What are some Public Adjusting Insurance Terms You Should Know?

KEETON-O’CONNELL PLAN See No-Fault Automobile Insurance.
KEY-PUNCH A machine with a typewriter-like keyboard which punches rectangular holes in a card, enabling an operator to record data from (see) Source Documents resulting in a standard code pattern so that the data may be “read” into the computer for processing or storage. For the most part Key-Punch now means the direct recording of data into the computer memory, (key-punch) cards are used little if ever.
KINNE RULE A guide used by adjusters in apportioning losses under non-concurrent policies.

L – What are some Public Adjusting Insurance Terms You Should Know?

LANDLORDS PROTECTIVE LIABILITY When an owner leases, under a written lease, at least 90% of the area of a building to another who assumes full control (except repair or maintenance for the preservation of the premises), the landlord may protect his interest under a “Landlords Protective Policy” at 50% of the rates otherwise applicable under the regular OLT form.
LAPSE The voiding of an insurance policy because of non-payment of a renewal premium.
LARCENY The legal term referring to the wrongful appropriation of another’s property regardless of the method used. See also Burglary, Robbery, Theft, Embezzlement and Conversion.
LARGE NUMBERS See Law of Large Numbers.
LASER PRINTER See Printer.
LAST CLEAR CHANCE, LAW OF Under Contributory (see) Negligence, wherein the injured party must show himself completely free of any fault, there is a concept known as ‘Last Clear Chance” when the defendant is considered liable if it can be proven that he had a “last clear chance” to avoid the accident. Since the doctrine of contributory negligence is now for all practical purposes ignored, or at least modified, and the new No-Fault laws are substituting Comparative Negligence for Contributory Negligence, the question of ‘Last Clear Chance” has become largely academic.
LATENT DEFECT An intrinsic defect which is not apparent in a product, and which may later make itself known with perhaps dire results. A weakness, for example, which develops in the hardening process in the fabrication of a steel drive shaft may cause the entire shaft to break under heavy strain or prolonged use.
LAW OF LARGE NUMBERS The theory that the occurrence of events resulting in loss is the end product of pure chance, and not of the willful or deliberate action (or lack of action) by any individual or group of individuals. The larger the number of risks or exposures, the more accurate the estimate of the occurrence of such events. (See also Actuary, Insurance and Probability, Theory Of.)
LEASEHOLD INTEREST INSURANCE A “Time Element’ type of protection which indemnifies the lessee (tenant) in the event his lease is cancelled either by a clause in the lease which automatically terminates the lease when the property is damaged, making the premises untenable (a very common, if not universal provision in leases), or by an ordinance or statute of condemnation. Such termination would require the tenant to move to other quarters, most likely at an increased rental. The difference in the new rental and the old is made up for by this type of insurance.
LEDGER-LINE RECORD Agency copy of the original invoice, usually ontaining space for premium payments, commissions to sub-agents, etc.
LEGAL LABILITY See Liability.
LESSEE, LESSOR A Lessor (Landlord) grants a lease of occupancy (written permission to occupy) to a Lessee (Tenant).
LESSOR’S RISK ONLY An Owners’ Landlords’ and Tenants’ Liability classification covering buildings or premises–bank, mercantile, manufacturing or office–not occupied by the insured (owner). Form is based on the assumption that the insured is not responsible for the care and maintenance of such buildings, and carries a lower rate than would otherwise apply.
LETTER OF TRANSMITTAL A letter or other communication (form, etc.) which accompanies a document or other papers, describing such in detail, copy of which letter serves as evidence that such material was transferred to another party or parties. See also Bordereau.
LETTER, BROKER OR AGENT OF RECORD See Broker (or Agent) of Record.
LIABILITY Noun. The state or condition of being exposed, as above.
LIABILITY INSURANCE Insurance under the terms of which the company agrees to pay a third party for bodily injury or property damage on behalf of the insured who may be held legally liable because of negligence. Legal Liability is that which is imposed by law; Assumed or Contractual Liability is that which is assumed by agreement. (See Assumed Liability, Contractual Liability, Contractor’s Protective Liability and miscellaneous other types of liability insurance discussed throughout.)
LIABILITY LIMIT(S) See Limits of Liability.
LIABLE Adjective. Simply stated, being obliged or held responsible for penalty, expense or burden, either imposed by law or assumed by agreement or contract.
LIBEL The defaming of another by written or otherwise published word. Slander is also defamation, but by word of mouth (orally; spoken.) Both terms are subject to interpretation under law, but, generally speaking, in either case malicious intent must be shown. Relatively recent court decisions have in some instances denied the right of redress to well known public figures. Strangely enough, it has not always been necessary to prove that the charges themselves are false. In Ocean Marine, “Libel” means to bring suit against a ship and/or its cargo.
LIBERALIZATION CLAUSE A clause attached to some policies (Homeowners, for example) which provides that if, during the term of the policy, any endorsements are authorized, or filings or regulations are made which would broaden or extend the coverage afforded without additional charge, such broadenings or extensions automatically apply to the policy in force without the attachment of the pertinent endorsement(s). This eliminates the need to issue thousands of endorsements to existing policies when a broadening provision is adopted. Conversely, filings or regulations made after the policy is in force which would restrict or otherwise limit coverage originally offorded may not be applied to such policy during its term. There is an exception to this rule, however, where subsequent premium payments on a policy written on a (see) Deferred Premium Plan may be subject to increase in rate or premium in effect at the due date of such subsequent installment(s). By the same token, a decrease in rate or premium would also be reflected in the subsequent installment(s).
LICENSEE 1) One who is granted the right to do something by someone in authority. 2) Similar to a (see) In v/tee, but who is on or in premises for personal or social reasons (rather than business), where the obligation of the owner or lessee with regard to care is of a somewhat lesser degree than in the case of an “lnvitee.” (See also Invitee, Trespasser and Guest Laws.)
LIEN A legal claim against real or personal property which guarantees satisfaction of some obligation (usually monetary). A Mechanic’s Lien is a lien by a person who has done some kind of work (plumbing, electrical etc.) pertaining to the property and who has not yet been paid for the work. He files the lien to make sure the property cannot be sold or otherwise disposed of unless and until he has been paid for his labor and materials. (See also Encumbrance and Mortgage.)
LIGHT Glazier’s term for a pane or plate of glass.
LIGHTNING A charge of electricity generated by nature, as opposed to a short circuit which is caused by electrical current artificially generated.
LIMIT(S) OF LIABILITY This term refers to the maximum amount(s) an insurance company is obliged to pay in the event of a loss. In most policies covering for liability for Bodily Injury, two limits are provided: the first is the limit of liability for injury to any one person; the second (usually higher) is the limit of liability for bodily injury as a result of a single occurrence, regardless of the number of persons injured, and the first limit is contained in the second, and is not excess. (25/50 limits does not afford $75,000 protection, for example.) Property Damage is written with one limit per occurrence, subject sometimes to “Aggregate Limit–see below. When you hear the expression, “20-50 and 5,” or a similar expression, the first two figures given refer to the Bodily Injury limits (in thousands) as described above; the third refers to the Property Damage limit, also in thousands. In some types of policies (Malpractice, Product, Manufacturers’ & Contractors’ Liability, for example) there is also an Aggregate Limit of liability which is the maximum limit payable under the policy for losses paid during the policy period. Some policies (e.g. “Special Auto”) provide a Single Limit of liability for one occurrence for Bodily Injury and/or Property Damage. Single limits are becoming more common on Automobile Insurance Policies as of the printing of this publication.
LIMIT(S), INCREASED See Basic Limits.
LIMITED COLLISION COVERAGE A form of automobile physical damage insurance which covers only when the insured is free of fault.
LIMITED POLICY Type of policy which specifically limits the kind(s) of losses covered. (See Broad Form and All-Risk.)
LINE 1) Any particular category or type of insurance. 2) All the different types of insurance written for any particular insured. 3) The dollar limit written for an insured on a particular risk.
LINE GUIDE (OR LIMIT OR SHEET) A list issued as a guide for agents and underwriters specifying the maximum amounts of limits to which a company will commit itself on any one risk, risk classification and/or area.
LIQUID ASSETS See Assets.
LIVING EXPENSES See Additional Living Expenses.
LLOYD’S OF LONDON A corporation organized to supervise a group of underwriters who underwrite nearly every kind of insurance risk. It was originally a group of shipping merchants who met regularly at Lloyd’s Coffee House in London and pooled their resources so as to be able to contribute their share to marine losses resulting from perils of the sea, piracy, fire, mutiny and other hazards to ship and cargo. Lloyd’s, now made up of syndicates of underwriters, will assume almost any insurance risk, tailoring their contracts to fit the needs of their insureds. Lloyd’s of London has to this day never failed to honor a claim. A “non-admitted” market facility, Lloyd’s also does a considerable business in the reinsurance field. U.S. brokers and agents generally do not have direct access to Lloyd’s, but (depending on various state laws), may place business with their U.S. representatives for risks not acceptable in the domestic “voluntary” or “residual” market. American Lloyd’s (no connection) operate in a similar fashion, but are managed by attorneys-in-fact who act for members who participate in a given percentage of each risk. Individual participating underwriters usually have an agreement which limits their liability for losses, and must make deposits with the organization from time to time as evidence of their financial responsibility.
LOADING A flat charge or percentage added to the regular premium to provide for extra expenses or profits, or to compensate for special conditions or situations in a risk or class of risk. Most minimum fire premiums now contain a “loading” charge. A Civil Disorder Loading (usually ranging from 2%to 4% of the policy rate) is added to the Fire and Extended Coverage rate in many areas where chances of unusual damage may result from such disturbances. Often applies in Inland Marine insurance.
LOCAL AGENT An agent whose function is described generally under the definition of “Agent.” His operations are mostly local in nature, confined to his own towns, but he may write and service insurance anywhere in his state.
LONGSHOREMENS & HARBORWORKERS COMPENSATION ACT A special federal compensation law similar to Worker’s Compensation, but covering maritime workers other than masters and members of the crews of vessels.
LOSS A term loosely used. Generally speaking, it refers to 1) the amount for which an insurance company becomes liable if the event insured against occurs, or 2) the event itself. The word Loss is used in property insurance to refer to damage or injury sustained by the insured (the so-called “First Party” claim). In liability, the term refers to injury to others or damage to their property for which the insurance company is liable to pay on behalf of the insured (a “Third Party’ claim). (See also Consequential Loss and Constructive Total Loss.)
LOSS CONSTANT A surcharge applied to Worker’s Compensation Policies to off set the disproportionately higher loss ratio found in policies developing relatively smaller premiums. The Loss Constant charge varies with the classification, usually ranging from $5.00 to $20.00, and is waived when the premium exceeds $500. (See also Expense Constant.)
LOSS CONTROL See Safety Engineer.
LOSS INFORMATION SERVICE A service maintained by the National Board of Fire Underwriters which supplies insurance companies with the names of persons who have been suspected or convicted of arson, or who have in some way been connected with fires of suspicious origin.
LOSS OF CONSORTIUM See Consortium, Loss of.
LOSS PAYABLE CLAUSE A clause providing for payment of loss to someone other than the insured who has an insurable interest in the property involved. Generally used for property other than real estate. As a general rule, when a loss occurs, payment is made to the order of the insured and the Loss Payee.
LOSS PAYEE See Loss Payable Clause.
LOSS PREVENTION SERVICE As the term implies, this is work done by independent consulting organizations or by a department within an insurance company involving inspection of large risks with a view to eliminating conditions which might cause accidents or other types of losses.
LOSS RATIO The relationship of losses in dollars to premiums in dollars, expresses in terms of percentage. Other comparisons are also referred to as “Loss Ratios,” such as Earned Premiums to incurred Losses; Written Premiums to Paid Losses, etc. (See also Incurred Losses and Experience.)
LOSS REPORT A report to the company describing a loss involving an insured. Should be made promptly, even if all details may not be immediately available. A report of loss by an insured to the agent is considered a report to the company. Many policies also require a report to the police (or “proper authority”) within a time limit specified in terms of hours; others within a “reasonable time.”
LOSS RESERVE An estimate of the amount of money an insurance company expects it may have to pay for reported loss. This amount of money is set aside as a “reserve” as soon as possible after receipt of the loss report.
LOST INSTRUMENT BOND When stock certificates, bonds, insurance policies, government checks, certificates of indebtedness or of deposits, etc. are lost, the issuer will issue a duplicate when the owner can guarantee the issuer against loss in the event that the issuer may mistakenly honor the lost instrument and pay the bearer into whose hands the document may fall. A Lost Instrument Bond supplies this guarantee to the issuer. (See Bond, Instrument.)
LOST POLICY RELEASE (OR RECEIPT) A document which, when signed by the insured (and, when named in the policy, the mortgagee), legally effects the cancellation of a policy in the event it cannot be located. (See also Cancellation.)

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