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BI - In relation to liability claims, BI refers to Bodily Injury liability which is a legal liability that may arise as a result of the injury or death of another person. In relation to property, BI refers to business interruption insurance, which is a time element coverage that pays for loss of earnings when operations are curtailed or suspended because of property loss due to an insured peril.
Bail Bond - (Surety) A form of bond given to guarantee that a person released from legal confinement will appear as required in court, or the penalty of the bond will be forfeited to the court. In insurance policies, bail bond fees are covered under an Automobile policy.
Bailee -A person or concern having possession of personal property entrusted to him by the owner. An example would be a laundry which has custody of customers' clothing for washing or dry cleaning. Bailees are required to exercise the same care with the property of others as they would with their own property.
Bailees Customer Insurance -(Inland Marine) Insurance purchased by a bailee to protect the personal property of his customers against loss caused by specific perils. An example would be a carpet cleaner who buys coverage to protect his customers against loss or damage to their carpets while in his care.
Bailees Liability Coverage -(Inland Marine) Coverage that meets the needs of a bailee's liability. His legal responsibility is to exercise care appropriate to the circumstances of the bailment. In addition, most bailees want to carry enough insurance to make good any loss to property in their custody whether or not they are legally liable.
Ballast Value- In computing workers compensation experience modification, a specific value taken from actuarial tables used to limit the effect of a single severe accident on the modification factor.
Basic Extended Reporting Period - An automatic "tail" for reporting claims after expiration of a "claims-made" liability policy. It is provided without charge and consists of two parts: a mini-tail covers claims made within 60 days after the end of the policy; a midi-tail covers claims made within five years after the end of the policy period arising out of occurrences reported not later than 60 days after the end of the policy.
Basic Premium- Usually a percentage of the standard premium. It is often determined by multiplying the standard premium by a basic premium factor. It provides for insurance carrier expenses including loss control and commission, profit, contingencies, and an adjustment for limiting the retro premium between the minimum and the maximum retrospective premiums.
Basic Premium Factor- In worker's compensation, based on the Table of Expense Ratios, the Table of Insurance Charges, and the individual loss limitation if selected.
Basic Rate- The manual rate that is adjusted to compensate for varying exposure to risk.
Bench Error - A term used in Products Insurance which describes a loss that occurs in the production process. For instance, if production workers mistakenly use the wrong ingredients in a chemical formula, a bench error has occurred. Bench errors are covered.
Benefit Level Adjustment Factor- Factors calculated for each state by the NCCI representing the impact of regulatory changes on workers' compensation costs. They are used to bring historical losses up to current benefit levels.
Bid Bond - (Surety) A bond filed with a bid for a construction or other project which guarantees that if the contractor has the low bid and is awarded the job, he will furnish the required Performance Bond.
Binder - An agreement executed by an agent or insurer (usually the latter) putting insurance into force before the contract has been written or the premium paid.
Blanket Bond - (Crime) A type of fidelity bond which covers losses caused by the dishonesty of all employees as opposed to bonds which specifically identify only certain employees to be covered.
Blanket Coverage - 1) In property insurance, a single limit of insurance that covers a number of items, such as one amount of insurance to cover two buildings and its contents. A blanket policy usually contains certain restrictions, which may be absent in "specific" or "itemized" policies, such as the use of a 90% coinsurance clause. 2) In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).
Boiler and Machinery Insurance - Insurance against the sudden and accidental breakdown of boilers, machinery, and electrical equipment. Coverage is provided an (1) damage to the equipment, (2) expediting expenses, (3) property damage to the property of others, and (4) supplementary payments; and (5) automatic coverage is provided on additional objects. Coverage can be extended to cover consequential losses and loss from interruption of business.
Bond - (Surety) A three-party contract guaranteeing that if one person, the principal, fails to perform as specified or proves to be dishonest, the person to whom the duty is owed, the oblige, will be financially protected by the issuer of the bond, the surety.
Breach- Failure to live up to the conditions or warranties contained in a contract.
Brick Construction - Refers to a building where at least 75% of the exterior walls are of some type of masonry construction, i.e., brick, stone or hollow masonry tile, poured concrete or reinforced concrete, or hollow masonry block.
Brick Veneer Construction - refers to a building where the outside walls are constructed of wood with a facing of a single layer of brick.
Broad Form - A term generally used to designate policies that provide insurance for multiple types of perils over and above the usual basic perils, or additional coverages beyond standard coverage(s).
Broker- A solicitor of insurance who does not represent insurance companies as does an agent, instead representing the insured.
Broker of Record - a broker who has been designated to handle certain insurance contracts for the policyholder
Builder's Risk Coverage Form - A commercial property coverage form specifically designed for buildings in the course of construction.
Building and Personal Property Coverage Form - A commercial property coverage form designed to insure most types of commercial property (buildings, or contents, or both). It is the most frequently used commercial property form, and has replaced the General Property Form, Special Building Form, Special Personal Property Form, and others.
Building Code - This refers to municipal or other governmental ordinances regulating the type of construction of buildings within its jurisdiction.
Bumbershoot Policy -A Liability policy similar to the Umbrella policy which includes coverage related to Ocean Marine risks. In addition to General Liability coverage, Protection and Indemnity can be provided, as can Liability under the Longshoremen's and Harbor Workers' Act. Collision coverage can be provided and general average and salvage charges can be included. A shipyard would be interested in a Bumbershoot policy.
Burglary - (Crime) Breaking and entering into the premises of another with felonious intent, leaving visible signs of forcible entry or exit.
Business Automobile Policy - A policy which provides Liability and Physical Damage coverages on commercial vehicles. It replaces the Basic Auto policy and features the new "simplified wording" concept.
Business Income Coverage Form - A commercial property form providing coverage for "indirect losses" resulting from property damage, such as loss of business income and extra expenses incurred. It has replaced earlier Business Interruption and Extra Expense forms.
Business Interruption Insurance - A time element coverage that pays for loss of earnings when operations are curtailed or suspended because of property loss due to an insured peril.
Business Personal Property - Traditionally known as "contents", this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured's business.
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Capacity - The largest amount of insurance or reinsurance available from a company. In a broader sense, it can refer to the largest amount of insurance or reinsurance available in the marketplace.
Capital Sum - The maximum lump sum payable in the event of accidental death or dismemberment.
Captive- 1) Insurance company formed by a non-insurance entity and established for the primary purpose of insuring all or part of the risk of its owners. 2) Legal entity created for the purpose of insuring the loss exposures of their owner(s), reduce or stabilize costs, provide and arrange specific risk management services, and take advantage of certain tax situations. 3) A closely held insurance company whose insurance business is primarily supplied by and controlled by its owners, and in which the original insureds are the principal beneficiaries.
Captive Agent - One who sells insurance for only one company as opposed to an agent who represents several companies.
Captive Insurer - A legally recognized insurance company organized and owned by a corporation or firm whose purpose is to use the captive to write its own insurance at rates lower than those of other insurers. Usually it is a non-admitted insurer that has the right, under special circumstances, to reinsure with an admitted insurer.
Captive Pool- Groups of individually owned captives that combine to reinsure one another; risk swapping
Care, Custody and Control - Most Liability Insurance policies exclude coverage for damage to property in the care, custody, or control of the insured. In some cases this type of coverage is not available; in other cases it can be purchased through certain forms of Inland Marine Insurance, like Installation Floaters, and in some cases this exclusion can be made less restrictive by adding a Broad Form Property Damage Endorsement.
Cargo Insurance - A policy covering the cargo being transported by carrier.
Case Reserve- Amount the claims adjuster puts on an individual claim that has not yet been paid; there is no provision for development and IBNR (incurred but not reported); also know as claim reserve
Cash Flow- The cash account of a business; money available, even if not required, for current expenses; income and expenditures traceable (through a "cash flow statement" from their first appearance in an organization's bank accounts through their final disposition.
Cash Flow Plans - Premium payment schemes which allow the insured to retain a large part of the premium and pay it out over a time period such as a year.
Cash Flow Program- Any insurance rating program that allows the insured to hold and benefit from loss reserves until paid as claims, e.g., deferred premiums, self-insurance, and paid loss retros.
Casualty Actuarial Society (CAS)- a professional society for actuaries in areas of insurance work other than Life Insurance. This society grants the designation of Associate and Fellow of the Casualty Actuarial Society (ACAS and FCAS)
Casualty Insurance - That type of insurance that is primarily concerned with the legal liability for losses caused by injury to persons or damage to the property of others.
Caveat Emptor - Let the buyer beware.
Cede- When a company reinsures its liability with another. The original or primary insurer, insurance company that purchases reinsurance, is the "ceding company" that "cedes" business to the reinsurer; to transfer to a reinsurer all or part of the risk.
Ceding Company- The direct or primary insurer that contracts with a reinsurer to share all or a certain portion of its losses under insurance contracts it has issued in return for a stated premium.
Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits provided by the contract.
Claim Expense - The expense of adjusting a claim, such as investigation and attorney's fees. It does not include the cost of the settlement or judgment of the claim itself.
Claimant - The person making a demand for payment benefits.
Claims-Made Coverage - A policy which provides liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered.
Claims Reserve - Amounts set aside by the insurer to meet costs of claims incurred but not yet finally settled. The reserve is the funds kept based on the estimate of what the claim will cost when finally settled.
Class Action Suit - A legal device allowing a group of individuals with a claim against a company or an individual to join together as plaintiffs in a single suit.
Clause - A section of a policy contract or endorsement dealing with a particular subject. For instance, a Subrogation Clause deals with the rights of the insurer in the event of payment of a loss under the contract.
Cleanup Fund - A commonly used term to designate policies whose express purpose is to pay final expenses of death.
Coinsurance Clause -A clause under which the insured shares in losses to the extent that he is underinsured at the time of loss. The insurer grants a reduced rate to the insured providing he carries insurance 80, 90, or 100% to value. If, at the time of loss, he carries less than required, he must share in his loss. For example, if an insured has a building worth $100,000 and carries an 80% coinsurance clause, it means that he agrees to carry at least $80,000 of insurance. If the insurance carried equaled $60,000, then any loss under the policy would be paid for on the basis of the comparison of $60,000 (amount carried) divided by $80,000 (amount agreed upon in advance) times the amount of the loss. Thus, the insured above would only receive 75% of a loss or $7,500 for a $10,000 loss.
Combined Ratio- A formulas used by insurance companies to relate premium income to claims, administration and dividend expenses.
Combined Single Limit - A single limit of protection for both Bodily Injury and/or Property Damage, contrasted with split limits, where specific limits apply to Bodily Injury and Property Damage separately.
Commercial Package Policy (CPP) - A commercial lines policy that contains more than one of the following coverage parts: Commercial Property, Commercial General Liability, Commercial Inland Marine, Commercial Crime, Boiler and Machinery Insurance, or Commercial Automobile Insurance.
Commission- A certain percentage of premium produced that is retained as compensation by insurance agents and brokers.
Common Law - The unwritten law developed primarily from judicial case decisions based on custom and precedent. It developed in England and constitutes the basis for the legal systems of most of the states in the United States.
Common Law Defenses - Pleas that can defeat an injured worker's suit for injuries against his employer in the absence of a Workers' Compensation law or Employers Liability legislation. The three defenses are contributory negligence, assumption of risk, and fellow servant rule.
Comparative Negligence - In some states the negligence of both parties to an accident is established in proportion to the degree of their contribution to the accident. Several states have comparative negligence laws, and each one varies somewhat from the others.
Compensatory Damages - Damages recoverable or awarded for injury or loss sustained. In addition to actual loss or injury, this term may include amounts for expenses, loss of time, bodily suffering and mental suffering, but does not include punitive damages.
Competitive State Fund - A fund established by a state to write Workers' Compensation Insurance in competition with private insurers.
Completed Operations Insurance - A form of insurance issued particularly to various types of contractors. It covers a contractor's liability for accidents arising out of jobs or operations that he has completed. (also referred to as Products- Completed Operations Insurance).
Completion Bond - This is a bond issued to a mortgagee. It guarantees that the construction for which the mortgagor ha borrowed money will be completed and will be able to serve as collateral for the mortgage upon completion.
Compromise and Release Agreement - A settlement practice under which an injured worker agrees to a compromised liability amount (usually a lump sum) in exchange for releasing the employer from further liability.
Compulsory Insurance - Any form of insurance required by law.
Computer Fraud - Fraudulent theft or transfer of money, securities or other property resulting from the use of any computerized equipment or systems.
Concealment - The failure to disclose a material fact.
Concurrent Causation - A term referring to tow or more perils acting concurrently (at the same time or in sequence) to cause a loss.
Conditions - These are provisions of an insurance policy which state either the rights and duties of the insured or the rights and duties of the insurer. Typical conditions have to do with such things as the insured's duties in the event of loss, cancellation provisions, and the right of the insurer to inspect the property.
Consequential Loss (or Damage) - (1) An indirect loss arising out of the policyholder's inability to use the property over a period of time, as opposed to a direct loss that happens almost instantaneously. Business Interruption, Extra Expense, Rents Insurance, and Leasehold Interest are the most common coverages included under the category of Consequential Loss coverages. (2) A loss not directly caused by a peril insured against, such as spoilage of frozen foods caused by fire damage to the refrigeration equipment.
Consignee - This is a person to whom materials or goods are delivered for resale. The consignee pays the owner after the goods have been sold.
Consortium - The companionship of a spouse. If a spouse is injured through the fault of another, part of the damages could include the value of the spouse's services or companionship which was lost due to the accident. This can also apply to children if a parent is injured.
Construction Bond - This bond protects the owner of a building or other structure under construction in case the contractor cannot complete the job. If he defaults, the insurer is obligated to see that the work is completed.
Construction Types - Buildings are broken out into classifications based on the construction materials used to build them. Wood frame, joisted masonry, masonry, and masonry non-combustible are examples of construction types
Consumer Protection Act - A law passed by many states which protects a policyholder from the misconduct, misrepresentation, or "sharp" trade practices of insurers, brokers, and agents.
Contents Rate - The Fire Insurance rate on the contents of a building rather than on the building itself.
Contestable Clause - A provision in an insurance policy setting forth the conditions under which or the period of time during which the insurer may contest or void the policy. After that time has lapsed, normally 2 years, the policy cannot be contested.
Contract - (1) An agreement entered into by two or more persons under whom one or more of them agree, for a consideration, to do or refrain from doing acts in accordance with the wishes of the other party. (2) In insurance, the agreement, by which an insurer agrees, for a consideration, to provide benefits, reimburse losses or provide services for an insured. A "policy" is the written statements of the terms of the contract. (3) An agreement under which an agency or agent does business with an insurer.
Contract Bond - A guarantee of the faithful performance of a construction contract and the payment of all material and labor bills incidental thereto.
Contract Carrier - A transportation company that carries, for payment, the goods of certain customers only, as contrasted with a common carrier who carries goods for the public in general.
Contractual Liability- Liability of another party assumed under a contract or agreement, either expressed or implied, as opposed to liability incurred directly, as in tort.
Contractual Transfers- SEE ATTACHED
Contributory Negligence - If an injured party fail to exercise property care and in some way contributes to his injury, the doctrine of contributory negligence will probably negate or defeat his claim, even though the other party is also negligent.
Cost-of-Living Rider- Designed to adjuster policy benefits in relation to the change in the economic climate. The majority of such riders are tied to changes in the consumer Price Index (CPI). The amount of insurance may be automatically increased, without evidence of insurability, at predetermined periods for a maximum amount.
Cost Allocation- Contribution of risk management costs from all sections of an organization or company. These sections include departments, locations, divisions, profit centers, etc.
Cost Allocation System- Process that identifies and attributes the cost of risk among the various sections of an organization or company.
Cost of Goods Sold- 1) Labor, material, and overhead expenses including inventory shrinkage; 2) the purchasing or production costs and expenses, both direct and indirect, of the merchandise sold during a certain period. These expenses include raw materials, direct and indirect labor costs, plant costs (such as depreciation), electricity, water, and shipping costs.
Cost of Risk- All components that are allocated to cover losses and expenses. Usually includes insurance premiums, retained losses, risk management department costs, and outside services (such as consultants). Can also include loss of productivity, cost of overtime, and opportunity costs.
Credibility- The relative confidence (statistical reliability) associated with a given body of data (e.g., loss experience for an individual division). Expressed as a number between zero and one (100%) with once representing "full credibility."
Crime - A public wrong, a violation of criminal law. The state is the entity that brings charges against one who commits a crime, and the matter is adjudicated in a criminal court.
Cumulative Liability - The liability of a surety bonding company for the accumulation of loss under its own bond and under a bond which it replaced before a loss under the replaced bond was discovered.
Current Asset- Cash or other assets that are expected to be (or could be) converted into cash or consumed within twelve months or within an organization's normal operating cycle. Current assets include marketable securities, notes receivable, accounts receivable, inventory and prepaid items.
Current Liability- Liabilities that must be satisfied within the next twelve months. Current liabilities include trade accounts payable, taxes, wage accruals, current installments on long-term debt, and notes payable.