Glossary of Insurance Terms

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Best Ratings - Ratings issued by A.M. Best Company, Inc., a company which, in addition to publishing reports on the financial condition and history of individual insurers, provides rating (ranging from F to A++) covering most insurers doing business in the United States.

Claim - A demand for payment under an insurance policy for a loss covered by that policy.

Claims Examiner - A person involved with the technical services of adjusting a claim such as investigation, settlement of liability matters and work-up for trial.

Claims-Made Policy - An insurance policy covering only those claims which both occur and are reported during that policy period. In certain instances, a claims-made policy may cover claims arising prior to the policy’s inception date. See PRIOR ACTS COVERAGE.

Deposition - The taking and recording of the testimony of a witness under oath before trial and in a place away from the courtroom. Part of routine pretrial discovery (investigation). Deposition testimony may be used to contradict (impeach) or refresh the memory of the witness at trial. It may also be used if the witness cannot appear at trial.

Errors and Omissions - A form of insurance which covers an insured’s liability for actual or alleged breach or neglect of duty committed in the conduct of the insured's business activities

Exclusions - A provision of an insurance policy referring to risks or circumstances not covered by the policy

Indemnity - A principle of insurance that an injured party should be fully reimbursed for the loss they suffered, making them whole again.

Insurance - An arrangement in which an insured passes risk to an insurer in exchange for the payment of a premium to that insurer.

Insured - A purchaser of insurance; one who enjoys protection under an insurance policy; also known as a policyholder.

Insurer - A person or an entity which provides insurance.

Intermediary - A broker, agent or other entity through which insurance arrangements are established.

Interrogatories - A written list of questions put to a plaintiff or defendant to a lawsuit. Answers provided are used to prepare questions for depositions or for trial.

Limits - The maximum available protection an insured is provided by a given policy.

Occurrence - An accident or loss.

Occurrence Policy - A policy which covers incidents which occur during the policy coverage period regardless of when they were reported.

Premises Liability - A form of insurance that provides liability coverage for claims resulting from accidents at your professional office premises that you own, maintain, or lease.

Premium - The payments to an insurer in consideration for the insurance coverage being provided.

Prior Acts Coverage - A provision in certain claims-made insurance policies that specify that acts as of a certain retroactive date will be covered if reported during the policy period.

Reinsurer - An insurer that assumes reinsurance risk.

Reinsurance - A transaction in which one party (insurance company-reinsurer) indemnifies another party (insurance company-primary insurer) for a portion of the primary limits and/or limits in excess of the primary insurance policy.

Reported Claims - Those claims arising in a specific period and reported to the insurer.

Risk Management - The dynamic process of systematically identifying and anticipating risk and acting to minimize and/or prevent actual or potential loss. The emphasis is on being proactive; it involves balancing the chance of an unfavorable outcome with the costs involved in reducing that risk.

Risk Purchasing Group - A large group of individuals, companies, or trade associations combining to request insurance rates based on their perceived loss experience. Requests for reduced rates may be justified by some special characteristic of the group (e.g. specialized training) which will result in fewer and/or less severe claims.

Summons and Complaint - A set of served documents that outline a plaintiff’s allegations against a defendant and may name other defendants. It may also be called a "Notice" or "Petition."

Subpoena - An order (writ) of the court for a witness to appear at a deposition or at a trial. A subpoena duces tecum is an order to deliver documents or other evidence to the court or to the attorney for one of the parties. Failure to appear as required by the subpoena can result in sanctions or being held in contempt of court.

Tail - The period of time which elapses between the writing of an insurance policy and the resolution of the claim or between the loss occurrence (or the insurer’s knowledge of the loss) and the resolution of the claim.

Tail Coverage - When an insured moves from a claims-made coverage to occurrence coverage or otherwise terminates, there is exposure for claims occurring in past years not reported during the claims-made coverage period of the policy. This exposure can be covered by purchasing retroactive coverage for the past period (tail).

Third-Party Administrator (TPA) - A service provider engaged in the performance of administration, clerical, and managerial functions related to insurance policies or employee benefit plan.

Underwriter - A synonym for insurer, or an employee of an insurance company whose responsibilities include reviewing applications submitted for insurance coverage, deciding whether to accept or reject all or part of the coverage requested, and fixing the price and terms of coverage. The term originated in the early days of marine insurance as merchants joined together to share risks as part of their commercial activities.

Vicarious Liability - One party may become legally liable for the negligent behavior of another party premised solely on their relationship. This type of liability is based upon the common law principle of respondent superior, which is interpreted as "let the master answer." A common example is when an employer becomes legally responsible for the actions of an employee.

Written Premium - The amounts payable by an insured to an insurer in consideration for the insurance coverage provided by the insurer.