Insurance Glossary

We know that insurance speak can sometimes sound like a foreign language. Use the following glossary to help you understand some of the jargon we use.

A | B | C | D | E | F | G | H | I | J | L
M | N | O | P | R | S | T | U | V | W

Abandonment Clause - A clause often contained in property insurance policies stating that the insured cannot abandon damaged property to the insurer and later demand to be reimbursed for its full value.

Accident - A sudden and unexpected event, which occurs at a specific time and place. In easy-to-read policies, an accident is also defined as a loss, which occurs over a period of time.

Act of God - An event of nature over which humans have little or no control, such as earthquake, lightning, flood, landslide, tornado, etc. Liability policies usually exclude Acts of God.

Actual Cash Value (ACV) - The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (Replacement Cost-Depreciation).

Actuary - An individual trained in mathematics, statistics and accounting specialties. In an insurance company, an Actuary is responsible for rate determinations and reserve & dividend calculations.

Additional Living Expense - A property coverage included in Dwelling and Older Homeowner contracts, designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This indirect loss must be the result of direct loss by a covered peril.

Aftermarket Part - A vehicle replacement part manufactured by a company other than the vehicle maker. These parts are less expensive than the original equipment manufacture (OEM) part. There is ongoing controversy as to whether aftermarket parts are equal to or inferior to OEM parts. Individual states have various rules and regulations regarding the use of aftermarket parts.

Agent - The state-licensed professional who represents the insurance company in the sale and servicing of insurance. The direct link between the insurance company and the policyholder.

Aggregate Limit - A type of policy limit found in liability policies; limits coverage to a specified total amount for all losses occurring within the policy period.

Agreed Value Coverage - An optional coverage written with property insurance policies. It waives the Coinsurance clause and requires the insured to carry insurance equal to at least 80% of a signed statement of values filed with the company.

Aleatory - A characteristic of insurance contracts, meaning a contract in which equal value is not given by both parties to the contract.

Allied Lines - Property coverages which are closely associated with and frequently sold with fire insurance such as Dwelling insurance or Earthquake insurance.

All Risk Insurance - Insurance protecting the insured from losses arising from perils other than those perils specifically excluded by name. This contrasts with Named Peril insurance, which names the peril or perils insured against.

Application - A questionnaire which is filled out by both an agent and the prospect seeking insurance. The form contains rating and underwriting information.

Apportionment - A method for determining how much will be contributed by each company toward a loss covered under more than one policy. A typical apportionment clause provides that the company will pay no more than the same proportion of the loss that its policy limit bears to the total amount of insurance.

Appraisal Clause - Clause which provides an appraisal procedure when the insured and the insurer are in disagreement regarding the amount of a loss. Insured and insurer each choose an appraiser. If they fail to agree, then they agree to select an umpire. Agreement of any two of the three will be decisive.

Arbitration Clause - Clause which provides a means for settling disputes between the insured and the insurer.

Assumption of Risk - A defense against liability based on the common law principle that a person who has been made aware of dangers beforehand assumes the risk and can not attribute the loss to another.

Attractive Nuisance - A dangerous place or instrumentality attractive to children like a swimming pool without a fence. The owner of an attractive nuisance has the legal duty of taking unusual care to guard children from it.

Bail Bond - Surety bonds that guarantee that the principal person will appear in a criminal proceeding. See Court bond.

Bailee - One who has temporary custody of property belonging to another. (Example: dry cleaners.)

Barratry - Illegal acts committed willfully by a ship's master or crew for the purpose of damaging the ship or cargo. This Ocean Marine peril includes hijacking, abandonment and embezzlement.

Betterment - A reduction in an insurance claim payment arising out of the replacement of a partial worn part with a new part. An insurer applies betterment when a damaged vehicle part that has finite life span, such as a tire, is replaced by a new part. For example, if a new tire replaces a tire with 50% wear, the insurer will reduce the amount paid for the new tire by 50%.

Binder - An oral or written statement providing immediate insurance protection, valid for a specified period. Designed to provide temporary coverage until a policy can be issu
ed or denied.

Blanket Insurance - Insurance where a single amount of insurance applies to two or more coverage items. Contrast Specific insurance. Also, a type of Employee Dishonesty coverage that covers loss caused by an employee. Contrast Name Schedule coverage and Position Schedule coverage.

Bodily Injury - Usually defined to include physical harm, sickness, disease, or death resulting from any of these.

Boiler and Machinery Coverage Form - Insurance which covers the insured against losses, liability and physical damage, arising out of the use of a monoline policy or as part of the Commercial Package policy.

Broker - An individual who represents the prospect, instead of the insurance company, in the insurance transaction. Frequently involved in the placement of very large or unusual risks.

Burden of Proof - Generally, the party who affirmatively alleges a fact must prove evidence to support it. In tort cases, the burden of proving liability and damages rests with the plaintiff.

Cargo Liability Insurance - Protects against legal liability for loss or damage to cargo or baggage. May be part of an Ocean Marine or Aviation policy.

Casualty Insurance - A line of insurance, which historically has included a wide variety of unrelated coverages. One important coverage in the casualty line is liability. Casualty also includes Aviation, Auto, Boiler and Machinery, Crime, Workers Comp and Surety bonds.

Causes Of Loss Form - A form which is a part of the Commercial Property Coverage Part of the Commercial Package policy. It specifies what perils are insured against and lists exclusions. Several different versions provide increasingly broad coverage from basic to broad to special. An earthquake form is also available. Causes of Loss forms take the place of "perils insured against" provisions.

Civil Liability - Liability involving actions brought by persons against others for money damages or other relief such as injunctions, accounts and specific performance.

Claimant - One who makes a liability claim against another person's insurance policy.

Coinsurance Clause - A clause that requires an insured to pay part of a loss if the coverage provide under the policy limits is less than a specified percentage of the value of the property at the time of loss.

Collateral Source Rule - The rule of tort law which provides that the plaintiff's award for damages will not be reduced because the plaintiff received indemnification of loss from other sources. Based on the concept that the wrongdoer should not benefit from payments form such collateral sources.

Collision - A type of physical damage insurance which covers loss due to the insured object striking another object. Collision may also include upset of the insured object.

Commercial Lines - Insurance designed for businesses, institutions or organizations.

Commercial Package Policy (CPP) - A simplified, easy-to-read commercial package policy introduced by ISO. Includes Commercial General Liability, Commercial Property, Commercial Inland Marine, Commercial Crime, Boiler and Machinery and Commercial Auto. Forms may be used in the package policy or may be used to issue monoline policies.

Common Law - A body of principles and rules of action arising from usage's and customs or from judgments of courts that recognize, affirm and enforce custom. Common law is unwritten in that it has never been enacted into statute law.

Comparative Negligence - A rule whereby a plaintiff's damages are reduced to the extent of the plaintiff's degree of negligence. Plaintiff's negligence does not altogether bar a suit.

Compensatory Damages - Monetary awards which compensate an injured party only for losses that were actually sustained. Compensatory damages include special damages and general damages.

Comprehensive Coverage - In automobile insurance, a broad physical damage coverage which covers all property losses except collision and those perils or property which are specifically excluded. Comprehensive Coverage covers such items as theft, vandalism, and storm damage.

Comprehensive General Liability Form (CGL) - An early liability coverage form which, when attached to the General Liability policy jacket, provides coverage for the premises and operations, independent contractors, and products and completed operations exposures in a single contract.

Concealment - The withholding of a material fact from the insurance company. May void the policy.

Concurrent Causation - Occurs when two or more perils cause a loss. When one of these perils was covered by an insurance contract, but the other peril was not, courts generally ruled that the entire loss would be covered, even the part of the loss attributable to the peril not covered. Many insurance policies have been reworded to clarify that only loss attributable to a covered peril will be covered.

Conditions - The portion of an insurance contract which sets forth the rights and duties of the insured and the insurance company.

Consequential Loss - Indirect loss which occur as a "Consequence" of a direct loss. Includes Time Element coverages.

Consideration - A characteristic of a legal contract: The thing of value exchanged for the performance promised in the contract. In insurance, the policy premium is the consideration.

Constructive Total Loss - In Ocean Marine insurance, a loss which occurs when property is not completely destroyed but the cost to salvage or repair the property would exceed its value.

Contingent Liability - Liability which an insured or business incurs because of the actions of others (i.e., family or employees). Also called vicarious liability.

Contributory Negligence - A common law defense against negligence which states that if an individual contributes to his or her own loss, then someone else cannot be held liable for the loss. Contributory negligence encompasses the lack of ordinary care on the part of the person's injured, which combined with the defendant's negligence, contributed to the injury as a proximate cause.

Court Bonds - A category of Surety bonds required for most types of court litigation: civil suits, criminal actions, appeals, bail bonds, and etc. Also, called Judiciary Bonds. Includes Fiduciary Bonds, Bail Bonds, and Litigation Bonds.

Criminal Liability - Liability that is purely a product of statutory law. The action is generally brought by society and the punishment may include denial of freedom to the defendant.

Custodian - In Crime insurance, a custodian is the insured or is a regular employee or partner of the insured who has care or control of property within the premises. Does not include watchman, porter or janitor.

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Debris Removal - A coverage provided in many property contracts which reimburses the insured for expenses involved in removing debris produced by a loss form a peril insured against.

Declarations - The section of an insurance contract which clarifies who is insured, what property or risk is covered, when and where coverage is effective and how much coverage applies.

Deductible - Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.

Degree of Care - Extent of duty owed by one person to another.

Depreciation - A decrease or loss in value because of wear, age, or other cause. In accounting, an allowance made for this loss.

Direct Loss - Loss which is a direct result of a peril. Also includes loss due to efforts to end the peril or to unavoidable exposure following a peril.

Disability Insurance - Line of insurance which includes coverages that are designed to protect the insured against a loss of income resulting form injury or sickness.

Due Care - The degree of care that is required to protect others from unreasonable chance of harm; the standard of conduct a "reasonably prudent" person would observe in a given situation.

Dwelling Policy - Policy designed to provide property coverage to individuals and families. Covers dwellings, other structures, personal property and fair rental value. Does not require owner-occupancy for eligibility.

Endorsement - A document which is attached to the policy and modifies or changes the original policy in some way.

Errors and Omissions - A Professional Liability coverage which protects the insured against liability for committing an error or omission in performance of professional duties. An insurance agent would carry such coverage.

Estoppel - An equitable principal to the effect that if one intentionally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is damaged as a result, the guilty party may be legally prohibited from asserting that fact does not exist. For example, if an insurance company accepts coverage and makes an offer to settle and later decides that it was unwise, the insurance company may be stopped from denying the claim at that point.

Excess Insurance - Coverage which applies only after the limits of the primary insurance have been exhausted. See Primary Insurance.

Exclusions - The section of the insurance policy which lists property, perils, persons, or situations which are not covered under the policy

Face Value - The total amount or principal amount of insurance provided by an insurance policy. The term derives from the fact that the amount of insurance is usually indicated on the first page or "face" of the policy.

Family Purpose Doctrine - A doctrine under which the owner of an auto is held liable for damages resulting from its negligent operation by members of his or her family. ( An extension of respondeat superior )

Fidelity Bond - A class of bonds which guarantees an employee's honest discharge of duty.

Fiduciary - A person or institution which occupies a position of special trust and has responsibility for the money, property or financial affairs of another. A claim representative is a fiduciary agent of the insurance company.

Fiduciary Bond - A surety bond commonly used to bond fiduciaries: guardians, administrators, trustees and executors, or persons appointed by a court to manage the properties of others. See Court Bonds.

Financial Responsibility Laws - Each state has it's own laws which require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state. Each state it's own minimum requirements.

Flat Cancellation - Cancellation of an insurance policy before it becomes effective. This might occur if one's down payment check bounced.

Floater - An insurance contract that applies to property wherever it is moved, rather than applying only at a fixed location.

Flood Insurance - Insurance designed to reimburse property owners for loss due to flood or to flood related erosion. Administered through the Federal Insurance Administration, but marketed though independent agents.

Friendly Fire - Fire which is contained in the place intended for it, such as a fireplace. (Excluded by fire polices)

Garage Coverage Form or Garage Keepers Insurance - Part of the Commercial Auto Coverage Part of the Commercial Package Policy (CPP). It is designed for garage businesses, (dealers, service stations, garages, parking lots, and etc.). Includes coverage for liability (both auto and garage operations), physical damage and garage keepers losses arising out of owned, non-owned and hired autos.

General Damages - Damages which are awarded in an attempt to compensate for such things as pain, suffering, humiliation, embarrassment and disfigurement.

Gross Negligence- Conduct which fails to meet even the minimum standard of care that persons with common sense would take for their own safety and that of their property. Conduct showing total disregard for the safety of others - reckless, wanton and willful misconduct.

Hazard - Something that increases the chance of loss. For instance, faulty wiring is a hazard because it increases the chance of a fire loss.

Hearsay - Evidence of a statement made outside of court, which is offered to show the truth of what is contained in the statement.

Hearsay Rule - Hearsay evidence is generally inadmissible since the court and jury cannot judge the demeanor of the person making the statement, the statement is not made under oath, and the person making the statement is not subject to cross examination.

Homeowners Policy - A personal multiple line contract incorporating both property and liability coverages. Six different policies provide varying degrees of protection.

Hostile Fire - A fire which has spread beyond its intended place or is in a place not intended for it.

Hull Insurance - In Ocean Marine and Aviation insurance, insurance against physical
damage to a plane or ship.

Implied Warranties - Warranties that are not written into the policy, but have become part of policy by custom.

Imputed Negligence - Negligence of one person for which another person is made legally responsible due to the legal relationship of the two persons. The person to whom the negligence is "imputed" is said to be vicariously negligent. This concept applies in agency relationships, such as employer-employee.

Incurred Losses - Losses or claims which the insurance company has paid or for which it has become liable; or paid losses plus reserves for a certain period, minus unpaid reserves at the end of the previous period.

Indemnification - A principal of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse. An insurance company can indemnify an individual through the replacement, or repair or payment of value of a loss. Not to be confused with legal damages, which frequently go beyond indemnity.

Independent Adjuster - One who adjusts losses on behalf of insurance companies but is not on their payroll. The independent adjuster is paid by fee for each loss adjusted, as distinguished from a company claims representative who is paid a regular salary by one company.

Inherent Vice - A condition or defect which exists within property from the beginning. A tendency of the property itself. An example of inherent vice is the tendency of milk to sour. Insurance policies usually exclude inherent vice.

Inland Marine Insurance - A form of insurance originally designed as an extension of marine coverage to insure transportation of goods over land. Today, it covers, in addition to goods in transit, a variety of portable property.

Insurable Interest - Any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance from loss, destruction or pecuniary damage or impairment. Relationship or condition such that loss or destruction of life or property would cause a financial loss. A claim may be paid only when an insurable interest exists.

Insurance - A contract or device for transferring risk from a person, business or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums.

Insuring Agreement - The section of an insurance policy that states which losses will be indemnified, what property is covered, and which perils are insured against.

ISO (Insurance Services Office) - A nonprofit organization established for the benefit of its member insurance companies and other subscriber companies. ISO gathers statistics, provides loss costs, drafts policy forms and coverage provisions, and conducts inspections for rate-making purposes.

Invitee - A person who comes onto one's property with express or implied permission in order to further the purposes of the landholder. Property-holders are liable to injured invitees if they know or should know of danger and fail to warn of it or correct it.

Jettison - A voluntary action to rid the ship of cargo in order to prevent further damage or peril.

Judicial Notice - The power of the court to recognize certain facts without proof actually being offered.

Judiciary Bonds - See Court Bonds.

Last Clear Chance - A valid counter-defense to contributory negligence when the defendant had the "last clear chance" to avoid injury or the defendant could have prevented the injury, but failed to do so.

Law of Large Numbers - A principal which states that the more examples used to develop any statistic, the more reliable the statistic will be.

Leasehold Interest Coverage Form - A form which belongs to the Commercial Property Coverage Part of the Commercial Package Policy (CPP). It covers a tenant for certain losses following damage to the premises from a covered peril, such as tenant's loss of a favorable lease or loss of remaining value of improvements or betterments made by a tenant.

Lex Loci Delicti - The traditional low principal that the law of the place of damage determines a plaintiff's right of action. This is in opposition to a newer approach which provides that the choice of tort law is determined by the state's having "dominant contracts," or the closest relationship to the transaction. Lex loci delicti provides that the law of the place of the wrong determines all questions of substantive law in tort suits unless that law is contrary to a strong public policy.

Liberalization Clause - A policy condition found in many standard policies which states that if the insurer adopts a revision that would broaden coverage without additional premium within some period of time prior to the policy period or during the policy period, the insured receives the benefit of such broadened coverage.

Licensee - A person on one's property with stated or implied permission, but not to further the business interest or purposes of the landholder. The degree of care owed to licensees is less than that owed to invitees.

Limits of Liability - The maximum amount of insurance the insurance company will pay for a particular loss, or for a loss during a period of time. 15/30/10 would mean $15,000 maximum limit per person for bodily injury for any one occurrence, $30,000 maximum total paid for bodily injuries per occurrence, and $10,000 maximum per occurrence for property damages.

Litigation Bond - A type of surety bond used to provide a variety of guarantees that a person will be able to pay damages, court costs and the consequences of attachments or seizures of property. See Court Bonds.

Lloyd's Association - A voluntary association of individuals or groups of individuals who agree to share in insurance contracts. Each individual or "syndicate" is individually responsible for the amounts of insurance they write.

Loss - In insurance, the term means the amount the insurer is required to pay because of a happening against which it has insured. Also, a happening that causes the company to pay. Also refers to the overall financial result of some operation, as opposed to "profit." The basis for a claim for indemnity or damage under the terms of an insurance policy. Any diminution of quality, quantity or value of property.

Loss of Consortium - Involves actions to recover for injury to familial relationships, especially when negligently inflicted. A husband may have a monetary claim for Loss of Consortium after an accident involving his wife for the period of time when the wife is disabled and/or unable to provide him
with physical comforts including sexual relations.

Loss of Use Coverage - Under the Homeowners contract, covers the insured_s increase cost of living after loss and rental value of any portion of the dwelling which is rented out.

Loss Instrument Bonds - A category of Surety Bonds issued in situations where a person loses valuable securities or other papers and requests issuance of duplicates. Should the lost instruments turn up and be redeemed by the holder, the issuer of the instrument would be reimbursed. Also called Securities Bond.

Malpractice Insurance - A form of Professional Liability Insurance used to insure professionals including physicians, dentists and druggists against their liability for professional misconduct or lack of ordinary skill.

Market Value - The amount that a seller may expect to obtain for merchandise, services or securities in the open market. An insurance company may pay you the Market Value of your automobile if it was declared a total loss from a covered peril.

Material Misrepresentation - To make written or verbal statements that are untrue or misleading, either intentionally or unintentionally. For instance, if you exclude a resident driver of your household on the application of insurance, this may be grounds for invalidating the insurance contract since the insurance company did not have the opportunity to rate this driver when determining the amount of premiums to charge.

Mitigation of Damages - A plaintiff is responsible for any loss which occurs as a result of his or her own lack of care following an accident. An individual must do his or her best to mitigate (lessen) the damages resulting from an accident.

Moral Hazard - The hazard present in an insuring situation if the insured purposely creates a loss to later collect from the insurance company.

Morale Hazard - The hazard present in an insuring situation if the insured, through carelessness or as a result of his or her own irresponsible action, creates a loss.

Mutual Benefit Theory - A method of determining whether or not a passenger qualifies as a guest. If the passenger_s presence furthers the business interest of the driver or owner or is for the mutual benefit of the passenger and driver, then the passenger is not a guest.

Mutual Company - Insurance company owned by its policyholders. Policyholders share in profits made by the company through dividends or reductions in future premiums.

Mysterious Disappearance - Disappearance of property from a known place or location during a known period of time under unknown or baffling circumstances for which there is not reasonable or logical explanation.

Named Non-owner Coverage - An endorsement that can be added to the Personal Auto policy to provide coverage for a named individual who does not own an auto while the insured is operating autos owned by others.

Named Peril Policy - Insurance contract which insures only against perils named in the policy.

Negligence - Failure to do what a reasonably prudent individual would ordinarily do under the circumstances of a particular case, or doing what a prudent person would not have done. The failure to exercise that degree of care that the law requires to protect others from an unreasonable risk of harm. Negligence may involve acts of omission, commission, or both. Lack of due care. Breach of duty owed.

Negligence Per Se - Negligence which is self-evident. Negligence per se is sometimes established by statute: e.g., violation of a motor law may in itself indicate negligence.

Negligent Entrustment - A rule of common law whereby the owner of a vehicle may be held liable for direct and primary negligence if he or she knowingly permits someone who is intoxicated, reckless, or otherwise incapable of operating a vehicle safely, to use the vehicle, and damage results.

No Fault Insurance - A form of automobile insurance mandated by law in many states whereby an insurance company reimburses its insured for auto losses, regardless of fault, and without resort to subrogation. This is usually related to the medical bills of the insured paid under their Personal Injury Protection (PIP) coverage.

Obligee - In bonds, the party to whom the principal makes the promise, and for whose protection the bond is being written.

Occurrence - Coverage on an "occurrence" basis is generally considered to differ from coverage on an "accident" basis in that "occurrence" connotes gradual or accumulative damages without regard to exact time or place, whereas "accident" refers to instantaneous damage, identifiable as to time and place. In other words, "occurrence" may be defined as an event, or repeated exposure to conditions, which unexpectedly causes injury during the policy period.

Occurrence Form - A Commercial General Liability coverage form with a coverage trigger that states that coverage applies only to bodily injury or property damage which occur during the policy period, regardless of when claim is made.

Open Perils - See All Risk.

Pair or Set Clause - A clause found in various property insurance contracts which states that when part of a set is damaged or destroyed, the insured is not entitled to reimbursement for the entire set. Policies provide various methods for determining the amount of reimbursement.

Parole Evidence Rule - States that evidence is not admissible to change or modify the terms of a written contract insofar as that contract clearly reflects the intention of the parties involved. The purpose of the parol evidence rule is to avoid attacks on agreements which are clearly and precisely stated.

Peril - Refers to the causes of possible loss, such as fire, windstorm, explosion, etc.

Personal Articles Floater - Personal Inland Marine insurance which provides all risk coverage on nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.

Power of Attorney - The written instrument by which the authority of one person to act in the place and stead of another as his or her attorney in fact is set forth. Authority given a person or corporation, called an attorney in fact, to act for the obligate another to a specific extent.

Prime Facea ( Prime Facie ) Evidence - Evidence good and sufficient on its face; such evidence as, in the judgment of the law, is sufficient to establish a given fact.

P
rimary Insurance - When two or more coverages or polices apply to the same loss, the one which pays first, up to its limits of liability or the amount of the loss, whichever is less. See Excess Insurance.

Principal - In bonds, the party who promises to do (or not to do) a specific thing. In agency law, the person or company being represented.

Proof of Loss - A statement signed by the policyholder making formal claim against the company for damage to or loss of the property insured.

Pro-Rata - A method of handling insurance when more than one policy applies to a loss. Each policy covers a portion of the loss in proportion to the relationship its limit of liability bears to the total limit of liability under all applicable policies.

Proximate Cause - In tort, the direct causal relationship between the breach of duty owed to another party and damages sustained by that party. In relation to an auto accident, the specific action or lack of action of a party that led to the accident. Example: If the first party involved in the accident was speeding but the second party pulled out in front of the first party, then it would be determined that the act of pulling out on front of the second party was the proximate cause of the accident.

Prudent Person Rule - Principle of law which expects each person to behave like a prudent person by following those ordinary considerations that guide human affairs.

Punitive Damages - Damages awarded to punish the wrongdoer for anti-social actions, rather than simply reimbursing the plaintiff for the loss. Punitive damages are awarded when the injury is intended, or involves a wrong more flagrant than negligence.

"Reasonable Person" - A pattern of behavior used as a basis for defining negligent conduct. One is required to act as though he or she has the physical attributes of the person actually involved in the case, as well as to exercise a certain degree of mental capacity - that of the average person of similar age and experience. Persons holding themselves out as having superior skills, knowledge or intelligence also have a special standard of conduct imposed on them, which is higher than the one imposed the average person.

Release - Written acknowledgment stating that all obligations - past, present or future - arising out of a particular accident or occurrence have been fulfilled. Signing by the claimant generally relieves the company and the insured of any further obligations.

Rental Value - An indirect property coverage available under Dwelling and Homeowners policies and also available with certain commercial contracts which reimburses the insured for rents lost when rented property is damaged by a peril insured against.

Replacement Cost Endorsement - An endorsement that can provide replacement cost coverage for personal property when added to the Homeowners Special Form (HO-3).

Reporting Form - A method of collecting premiums for exposures which are difficult to evaluate "before the fact." Instead of paying a flat premium, the insured pays a deposit, then submits periodic reports to the insurer, showing the status of the factors on which the premium is based. From these status reports, premiums are calculated and charged against the deposit.

Res Gestae - A Latin phrase meaning "things accomplished." Applied to the rules of evidence, evidence of statements made about things done spontaneously or immediately following an event, which serve to establish the facts of the event, is admitted in evidence as an exception to the "hearsay rule." Also known as an "excited utterance."

Res Ipsa Loquiteur (or Logutur) - "The event speaks for itself." Res ipsa loquiteur is a presumption that the defendant was negligent, and which arises upon proof that the cause of injury was in the defendant's exclusive control and that the accident was one which ordinarily does not happen in the absence of negligence. Occurs when the facts proved are more consistent with negligence on the part of the defendant than with other causes. The plaintiff proves the happening of the accident speaks for itself in determining negligence. Res ipsa loguitur does not apply when the cause of the accident is known, for that is prima facie evidence.

Respondeat Superior - "Let the master answer" - provides that a principal is responsible for the wrong-doings of his or her agent.

Salvage - The property in which an insurance company secures an ownership interest as a result of paying a claim for total loss or damage based on the true value of the property in its undamaged state or before the loss occurred.

Special Damages - Damages which compensate for direct and specific expenses that are involved in a loss including property damage, medical bills, loss of use, rental expenses, and lost wages. Special Damages do not include compensation for inconvenience or pain and suffering.

Statute of Limitations - A statute prescribing limitations to the right of action on certain described causes of action, declaring that no suit shall be maintained on such causes of action unless brought within a specific period of time after the right accrued. Example: California has a 1 year statute of limitations for bodily injury claims and a 3 year statute of limitations for property damage claims. i.e.: you have one year from the date of the accident to assert a bodily injury claim in the state of California. You have one year to file suit in order to protect the statute from running.

Strict Liability - Refers to the direct responsibility for damages resulting from a deliberate action which is potentially hazardous.

Subrogation - The substitution of one person in the place of another person with reference to a lawful claim, demand or right. In case of insurance, this principal of law has been incorporated in all policies. The insurance company, upon payment of loss to the insured, is entitled to the insured_s legal and equitable rights against the negligent third parties. These rights are only those related to the loss and the company is only entitled to the extent of the loss payment to the insured.

Surety - The party ( often the insurance company ) which agrees to be responsible for loss which may result if the principal does not keep his or her promise.

Surety Bonds - Bonds which guarantee that someone will perform faithfully whatever he or she agrees to do or that someone will make an agreed-upon payment to another party.

Time Element Coverage - Provides protection for indirect loss which occurs when, following a direct property loss, there is a time lapse before the property can be used again. Includes Business Income, Business Income-Dependent Properties and Extra Expense Coverage forms.

Tort - A term applied to a miscellaneous and to a more or less uncon
nected group of civil wrongs, not arising from a contract, for which a court will provide for money damages.

Tortfeasor - Person committing a tort; wrongdoer. The person who was at fault for the accident.

Total Loss - Loss to the insured of the entire value of goods or other property by destruction, damage or deprivation. Also, loss entailing the payment of the face amount of an insurance contract. Also, property damages to the extent that the cost of repairs exceeds the market value less the salvage value.

Umbrella Liability Policy - Provides broad coverage for an insured_s liability over and above liability covered by underlying contracts or retention limits. Can be personal or commercial.

Underinsured Motorist Coverage - A coverage that reimburses the insured for the difference between the actual damages sustained by the insured for bodily injury and the amount of liability insurance which meets the state_s minimum financial requirements carried by the driver who was at fault, up to the limits of the insured_s Underinsured Motorist coverage.

Underwriting - The insurance function which researches and evaluates insurance applications to decide which are acceptable to the company as insureds.

Uninsured Motorist Coverage - Automobile coverage designed to provide protection for the insured should he or she be included in an accident in which the driver at fault has no insurance to cover the loss.

Utmost Good Faith - A principal of insurance which states that the insurance company must be able to rely on the honesty and cooperation of the insured, and the insured must rely on the company to fulfill its obligations in good faith.

Value Reporting Endorsement - An endorsement that can be added to Commercial Property policies which sets the limit of insurance somewhat higher than expected peak values and then requires the insured to make periodic reports of actual values. These reports are averaged and the premium is then adjusted to reflect the average exposure.

Vicarious Liability - Negligence which is not directly attributable to the person claimed against, but which is the negligence of another for whom the person claimed against is in some way responsible. Also known as imputed liability.

Waiver - The relinquishment of a right, either expressly or by implication. Express waiver is made voluntarily. In insurance matters, the policy may be reformed by endorsement or otherwise amended. Implied waiver may result from misleading actions or neglect on the part of the claim representative. A claim representative is not privileged in this area and must avoid all acts of waiver except those which the insurer has instructed the claim representative to perform.

Workers Compensation Insurance - Insurance which covers an employer_s obligations under Workers Compensation laws, and which makes the employer responsible for stated damages in the event of a work-related injury or illness. Workers Compensation coverage also includes separate coverage for Employers Liability.

Wrongful Death - Action on account of injuries which result in death before a claim for them was compromised or reduced to judgment. The death is judged to be needless, unjust, reckless and unfair.