C

CAFE

(See Corporate Average Fuel Economy.)

[C209]

Cafeteria plan

Often called a Section 125 plan after the IRS code, a cafeteria plan provides an employee with options under an employee benefits plan. The employee may be enrolled in a basic health plan with a certain amount of unallocated dollars. These dollars may be used to purchase additional benefits such as orthodontia, additional life insurance or to pay health deductibles.

[C003]

Camera and musical instruments dealers coverage

An inland marine coverage designed for the property exposures of camera or musical instruments dealers to protect against loss to furniture, fixtures, and stock both on premises and while in transit, on an "all-risk" basis.

[C004]

Cancel

To terminate a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

[C005]

Cancelable policy

This type of insurance policy may be canceled by the insured or the insurer at any time, as long as the other party is notified according to the terms and conditions set forth in the policy, and the appropriate time is allowed during the notification process.

[C006]

Cancellation

The termination of a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

[C006a]

Cancellation clause

The provision in a policy that explains the conditions and terms to be complied with for the termination of a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

[C007]

Cancellation notice

The notice issued by one party of the policy to the other, informing of the intent and request to cancel. The policy provisions must be followed during the notification process with respect to how the notice must be given (normally in writing), the number of days that must be allowed, and how the notice must be delivered (registered mail, delivery, etc.).

[C210]

Cancer policy

Also known as a dread disease policy because it covers one or more major maladies such as cancer, heart disease, etc.

(See also dread disease policy.)

[C008]

Capacity

The amount of insurance (measured either by face value of policies or by premium) which an insurer is able or willing to issue as a maximum, as limited by legal restrictions, corporate restrictions, or indirect restrictions. Legal restrictions (e.g., "no policy may be issued for an amount in excess of 10% of policyholder surplus") or corporate restrictions (e.g., a board of directors resolution that "the company shall not knowingly commit itself to a policy amount in excess of $10 million") establish the maximum capacity an insurer is able to write. Indirect restrictions on the capacity an insurer is willing to write include:

1) the financial strength (policyholder surplus) of the insurer, or

2) the willingness of the insurer to venture a portion of its current anticipated underwriting (or overall) profit on a single policy (this willingness could also be expressed as a percent of annual premium) and the confidence felt in that anticipated result.

Capital Asset Pricing Model

An actuarial method for determining how to pay back investors for taking two actions. One is to compensate investors for the value of supplying funds over a given period of time and the second is to compensate those same investors for facing a given level of loss of investment value.

[C272]

Capital assets policy

"All-risk" property coverage for personal property of industrial firms away from the insured's own manufacturing premises.

[C009]

Capital gain

That part of a company's income which is realized when its invested assets are sold at a price above book value (or below book value, for a capital loss). Unrealized capital gains or losses do not affect a company's income; however, increases or decreases in the market values of equity securities produce a corresponding effect on policyholder surplus, although market value changes in other invested assets do not affect policyholder surplus.

(See investment income.)

[C010]

Capital loss

That part of a company's income which is realized when its invested assets are sold at a price below book value.

[C011]

Capital stock insurance

Insurance business transacted by an insurer whose ownership element is divided into shares of stock represented by certificates, as opposed to a mutual insurer which does not have capital stock and whose ownership element is divided among its policyholders. While a stock insurer has both stockholders (its owners) and policyholders (its customers), a mutual insurer has only policyholders (its owners and customers).

(See mutual insurance and mutual insurance companies.)

[C012]

Capital sum

The total policy amount, the entirety of which is made in a one-time payout to the beneficiary of an accident policy in the event of accidental death or dismemberment of the insured.

Capital transaction

The sale of a major (capital) asset such as stock or structures. Typically, when such sales involve securities, they must be taxed as ordinary rather than dividend income.

Capitalization

(See leverage.)

[C211]

Capitation benefits

An HMO program which, instead of paying a fee for service, pays a physician a flat amount for each subscriber/patient. A physician with a relatively sick population of subscribers will earn less than the physician who has a healthy group of patients.

CAPM

(See Capital Asset Pricing Model.)

[C013]

Captive agent

An agent who, by contract, represents only one company and its affiliates. Sometimes called an exclusive agent.

(See agency and insurance agency.)

[C014]

Captive insurance company

A company which is wholly owned by another organization (generally non-insurance), the main purpose of which is to insure the risks of the parent organization. A pure captive is owned by a single parent, while an association captive is owned by a group of companies usually in the same line of business.

[C257]

Captive Insurance Company Association (CICA)

An association formed to educate persons working for or interested in captive insurance companies. It provides information, education and support services for both domestic and foreign captives. Headquarters: Minneapolis, MN.

[C015]

Care, custody or control

Most liability policies have provisions that exclude coverage for physical damage or loss to property while it is in the care, custody or control of the insured. Two methods are available to buy back some or all of the care, custody or control coverage: either endorsements to the liability policy, such as the broad form property damage endorsement or its company-specific equivalent which will provide limited coverage, or the purchase of inland marine coverages such as bailees' forms.

(See broad form property damage endorsement.)

[C212]

Career agent

An agent who is licensed to write life insurance (usually) exclusively for one company.

[C213]

Career average benefit formula

Defined benefit pension plans do not accumulate cash but calculate an accrued benefit. A career average formula averages the compensation of the employee over the entire career (years of participation in the plan) of the employee and pays benefits related to that average (perhaps 55% of the average less Social Security benefits). Contrast this with the backloaded plan that gives greater weight to the latter years of employment.

(See also accrued benefit and backloaded.)

[C273]

CARFRA--Coordinated Advertising Rate and Form Review Authority

An initiative created by the NAIC, it involves a special panel of insurance regulators who review various insurance product rates and forms on an expedited basis for use nationally. Primarily used for life and health insurance products and rates.

[C016]

Cargo

Goods being transported by rail, plane, truck, ship, or other conveyance, excluding the equipment needed to operate the conveyor.

[C017]

Cargo insurance

A generic term used in both inland marine and ocean marine insurance to designate the types of insurance available to provide coverage for cargo that is being transported by truck, rail, air, ship or boat.

[C018]

Carpenter Plan

A form of excess of loss reinsurance in which a ceding company spreads its losses over a three- to five-year period, first introduced in the U.S. by a broker by that name.

(See spread loss reinsurance.)

[C019]

Carriage of Goods by Sea Act (COGSA)

An international agreement subscribed to by most maritime nations and ratified by the U.S. in 1936, prescribing the format and content of uniform ocean bills of lading on goods shipped internationally.

(See bill of lading.)

[C020]

Carrier

1) The insurance company which provides the protection for a particular risk.

2) A transporter of goods, a form of bailee for which insurance is provided. A common carrier is one which is available to the public for the transport of any goods. A private carrier transports only the goods of its owner.

[C021]

Carriers legal liability

An insurance policy designed to provide coverage for the bailee exposure of cargo carriers that would result from damage to property of others that has been entrusted to the carrier for transport.

[C214]

Carry-over provision

A provision found in many health plans which permits expenses arising out of claims that occur in the last three months of the year to carry over into the next year, without incurring new deductibles or coinsurance.

Carve-out insurance

A method of eliminating high-risk exposure from a general liability policy by excluding it (carving it out) and then providing coverage specifically designed for that exposure under a separate policy.

Case management

With regard to workers compensation, this refers to an approach for coordinating the medical care and communication necessary to handle persons who have suffered serious, work-related illness or disability and who are recuperating at their residence (rather than at a medical facility).

[C022]

Cash flow plan

A method of paying casualty insurance premiums in which the insured (usually a large commercial concern) pays the fixed portion (administrative expenses) of the premium in installments and the variable portion (loss payments and loss reserves) as incurred.

[C023]

Cash-flow underwriting

Emphasis by an insurer on quick premium growth in its underwriting activities, at the expense of sound underwriting at adequate rates, with the hope that investment income from the increased premium writings will more than offset any unreasonable underwriting losses. The practice becomes more tempting as short-term interest rates rise.

[C215]

Cash payment option

An option found in many participating life insurance policies in which a cash dividend is paid to the policy owner.

[C024]

Cash refund annuity

In this type of annuity, if the annuitant dies before the balance of the annuity has been paid out in periodic disbursement, any amount remaining will be paid to a designated beneficiary in one lump sum.

[C025]

Cash surrender value

In a life insurance policy, if the insured wishes to surrender the policy in order to collect the cash value of the policy, the cash surrender value is the amount the insured is entitled to, as stated in the policy, based upon time in the policy, limits and payments. The amount of cash the insured will receive may be reduced by a surrender fee, any outstanding loans, and applicable interest.

[C026]

Cash value

The amount that a life insurance policy will pay the insured if the policy is terminated or canceled prior to maturity. The cash value is the amount the insured is entitled to, as stated in the policy, based upon time in the policy, limits and payments. The amount of cash the insured will receive may be reduced by a surrender fee, any outstanding loans, and applicable interest.

[C027]

Casualty Actuarial Society

An organization formed to promote actuarial and statistical knowledge applicable to casualty insurance. Following multiple line development in the insurance industry, the scope of the society has been enlarged to include all lines of insurance other than life. Headquarters: New York, NY. Its life and health counterpart is Society of Actuaries.

[C028]

Casualty insurance

Insurance concerned with legal liability for personal injuries or damage to property of others, including many other types of insurance, such as workers compensation, plate glass, burglary, boiler and machinery, aviation, etc. "Casualty" is generally accepted to cover all classes outside the definition of "property insurance," so that a property and casualty company would tend to handle all forms of insurance other than life.

Cat bond

Refers to catastrophe bonds. These instruments are typically issued by an entity that deals with insurance (private or public). The securities may consist of any single or multiple source of investment grade securities and, generally, pay a higher yield. However, the investor faces the risk of a lower return or even a total loss of investment should a catastrophe occur within the parameters set by the bond issue.

Cat modeling

Refers to programs used to predict the likelihood that severe circumstances will occur.

[C029]

Catastrophe

A severe loss, usually involving many risks, or having substantial financial impact.

[C030]

Catastrophe (excess) cover

1) In reinsurance, a form of excess of loss reinsurance which, subject to a specified limit, indemnifies the ceding company for the amount of loss in excess of a specified retention, with respect to an accumulation of losses resulting from a catastrophic event or series of events. The actual reinsurance document is referred to as "a catastrophe cover."

2) In primary insurance, an amount of insurance on a single risk or group of risks in excess of self-insured retention or other primary insurance.

(See catastrophe reinsurance.)

[C031]

Catastrophe number

Whenever a catastrophe occurs which produces losses within a prescribed period of time in excess of a certain amount (now $5 million), the amount of such losses is recorded separately from noncatastrophe losses, and is numbered by the American Insurance Association. Such losses may be treated differently in the state's statistical experience records used in setting rate levels.

[C032]

Catastrophe policy

1) A type of policy, primary or reinsurance, in the property or casualty industry, to provide protection against catastrophic events.

2) A major medical insurance policy purchased by an insured to provide adequate coverage in case of major illness such as cancer.

Catastrophe provision

Provision which gives consideration to the impact catastrophes have on loss experience; procedures are developed to include an allowance for the catastrophe exposure in the insurance rate.

[C033]

Catastrophe reinsurance

1) In reinsurance, a form of excess of loss reinsurance which, subject to specified limits, indemnifies the ceding company for the amount of loss in excess of a specified retention, with respect to an accumulation of losses resulting from a catastrophic event or series of events.

2) In primary insurance, an amount of coverage on a single risk or group of risks in excess of self-retention or other primary insurance.

(See catastrophe (excess) cover.)

[C034]

Catastrophic loss funds

Reserves that have been specifically formed to provide funds to an insurer in case of catastrophic and cataclysmic losses.

[C035]

Cause of loss

Previously called "peril," this is the actual type of event that causes the loss. Examples are: theft, collision, earthquake, flood, fire or mischief.

[C258]

Causes of loss forms

Forms that may be added to the Commercial Property Coverage Part. They describe the perils (basic, broad or special) and exclusions that apply to the covered property.

[C034a]

Caveat emptor

Latin term meaning "let the buyer beware." It is an admonishment or reminder of the buyer's responsibility for checking the quality of the product prior to purchase. It may also describe a purchase where the buyer has no recourse to the seller if the product or service is defective or of poor quality.

CBNR

(See chemical, biological, nuclear and radiological attacks.)

[C299]

CCIP

(See Contractor Controlled Insurance Program; also see wrap.)

[C217]

CCLA

Casualty Claim Law Associate designation sponsored by the American Educational Institute. Headquarters, Basking Ridge, NJ.

CCRA

(See Certified Catastrophe Risk Analyst.)

CDW

See collision damage waiver.

[C035a]

CE--continuing education

An on-going process in the insurance industry to keep its member professionals current, updated and responsive to the many legislative, coverage and marketing changes, through the offering of courses, workshops and seminars.

[C218]

CEBS

Certified Employee Benefits Specialist designation sponsored by the International Foundation of Employee Benefit Plans CEBS Program, 18700 West Bluemound Road, Brookfield, WI 53008-1270.

[C036]

Cede

To pass on to another insurer (the reinsurer) all or part of the insurance written by an insurer (the ceding insurer) with the object of reducing the possible liability of the latter.

[C037]

Ceding commission

The commission paid by the reinsurer to the ceding company (primary insurer) on reinsurance agreements as compensation to place the business with the reinsurer and to cover the ceding company's acquisition expenses.

[C038]

Ceding company

An insurer that has bought reinsurance protection as distinguished from the reinsurer that has issued the reinsurance protection.

[C039]

Cemetery professional liability insurance

Liability coverage specifically designed to meet the needs and exposures of owners or operators of a cemetery to protect for damages suffered by third parties, as a result of the rendering or failing to render professional services as the owner, operator, management or staff of a cemetery.

[C040]

Central processing unit (CPU)

The part of an insurer's computing system containing the circuits that calculate and perform logic decisions based on a manual program of operating instructions.

CERA

(See Chartered Enterprise Risk Analyst.)

[C219]

Cert holder

(See certificate holder.)

[C220]

Certificate holder

The individual or business that requests and receives written verification of insurance coverage on an individual or business. The insurance company issues the certificate of insurance.

[C041]

Certificate of authority

A written certificate issued by one party showing the authority that party has granted to another to perform on the first party's behalf. The two most common examples in insurance are state insurance department grants to insurers issuing authority to write insurance kinds of policies and contracts within that state, and the certificate which grants authority to agents to write policies on behalf of an insurer.

[C042]

Certificate of convenience

An interim or temporary certificate that has been issued by a state insurance department allowing an agent to write business in that state during the licensing procedure, until a final license is issued or denied.

[C043]

Certificate of insurance

A short-form documentation of an insurance policy.

[C044]

Certificate of reinsurance

The certificate issued by reinsurers to confirm the reinsurance transaction. It is a form of an insurance contract as it contains the terms and conditions of the reinsurance transaction, as well as details as to who, what, where, and when coverage applies to that cession.

[C274]

Certified act of terrorism

Any terrorist act that is described as an action that qualifies for coverage under the Terrorism Risk Insurance Act (TRIA) of 2002. Specifically, terrorist acts are certified when the U.S. secretary of the treasury, secretary of state and attorney general makes the determination. Any such act must involve an attempt to coerce the behavior of the targeted populace (civil or governmental), must exceed a certain dollar amount (five million dollars) in total damages, and must occur at the direction of a foreign party.

Certified Catastrophe Risk Analyst

A designation conferred after completing a special course created and offered by independent risk management and risk control services provider, Risk Management Solutions. Headquarters: Newark, CA.

[C292]

Certified Fraud Examiner

A professional designation awarded by the Association of Certified Fraud Examiners (ACFE). The designation recognizes a person's successful completion of courses and training in identifying and addressing instances of corporate fraud.

[C224]

CIC--Certified Insurance Counselor

Certified Insurance Counselor designation sponsored by the Society of Certified Insurance Counselors. Headquarters: Austin, TX.

[C293]

Certified Insurance Data Manager

A professional designation awarded by the Insurance Data Management Association (IDMA). The designation recognizes a person's successful completion of courses and training in properly managing the information (particularly reporting system) needs of a modern insurance operation.

[C045]

Cession

1) The unit of insurance passed to a reinsurer by a primary company which issued a policy to the original insured. A cession may accordingly be the whole or a portion of single risks, defined policies, or defined divisions of business, all as agreed in the reinsurance contract.

2) The act of ceding where such an act is necessary to invoke the reinsurance protection.

[C046]

Cession number

The identification numbering process applied to a reinsurance transaction to assist in the payment tracking of premiums. Similar to policy numbers on insurance contracts.

[C221]

CFA

Chartered Financial Analyst designation sponsored by the Association for Investment Management and Research. Headquarters: Charlottesville, VA.

[C259]

CFE

(See Certified Fraud Examiner.)

[C222]

CFP

Certified Financial Planner designation sponsored by the National Endowment of Financial Education.

[C047]

CGL--commercial general liability policy

The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.

[C223]

ChFC

Chartered Financial Consultant designation sponsored by The American College. Headquarters: Bryn Mawr, PA.

[C048]

Chain store multiple location policy

A commercial policy designed for a series of related stores under the same ownership with central management and selling the same type of merchandise at various locations. Examples include clothing chains, appliance stores, sporting goods stores, and card shops.

[C049]

Change in occupancy or use

A provision contained in some property or casualty policies which requires the insured to inform the insurer of any change in occupancy or use of the premises. This allows the insurer to re-rate or add the necessary conditions or exclusions when the change adversely changes the exposures covered. Should the insured not comply and the change increases the hazard to the insurer, some states allow the insurer the option to cancel or void the policy.

Change in ownership clause

(See change of control clause.)

Change of control clause

A condition that allows one party to terminate an agreement when there has been a change in ownership or control of the other party involved in that agreement. The provision acknowledges the possibility that such changes would subject one party to unacceptable conditions.

[C050]

Charter

1) To rent or lease a boat, ship, vessel or aircraft.

2) The instrument issued by a governmental body (state) recognizing the organization of an insurance company and giving authority to operate within the stated jurisdiction. The charter also contains the condition under which the insurer must operate.

[C051]

Charter fare protection insurance

A specially designed insurance coverage for persons who have paid for the cost of a trip or tour. This policy provides coverage for individual insureds who are unable to participate in the specified trip or tour should an accident, injury, sickness, death or other covered incident occur. Coverage is also provided for expenses should the insured become ill or suffer a covered event while on the trip or tour and need to return home prior to the end of the trip or tour. Also known as trip cancellation insurance.

[C052]

Charter party

The document which outlines the agreements between a ship owner and the person or organization that chartered (or leased) a ship.

Chartered Enterprise Risk Analyst

A designation conferred by the Society of Actuaries after completing a series of five exams and electronic course modules, and after passing a separate validation process (regarding a required level of actual risk analyst experience).

[C052a]

Chartered Life Underwriter (CLU)

Chartered Life Underwriter designations sponsored by The American College. Headquarters: Bryn Mawr, PA.

[C275]

Charterer's liability

A form of liability coverage that protects against the loss exposures faced by entities that charter (rent out) vessels.

[C053]

Charters liability insurance

Liability coverage for parties or individuals who lease a vessel from another party.

[C054]

Chattel mortgage

A mortgage, the collateral for which is personal or movable property, as distinguished from a mortgage on land or buildings.

Chemical, biological, nuclear and radiological attacks

A shorthand (CBNR) reference to the sources of cataclysmic exposures inherent to major acts of terrorism. Such exposures are seen as suited to be addressed by publicly subsidized (government) insurance.

[C260]

Chief risk officer (CRO)

An executive charged with the task of creating, managing and implementing an organization’s risk strategy that, increasingly, encompasses financial, market, credit and operational risks.

[C055a]

ChoicePoint, Inc.

Formerly the insurance division of Equifax and now known as ChoicePoint, Inc., it is an organization widely used by insurance professionals to obtain information on applicants for underwriting purposes such as motor vehicle reports, prior loss or claims history (C.L.U.E.) reports, retail credit reports and even inspection reports. Headquarters: Atlanta, GA.

[C056]

Chop shop

Slang term for illegitimate enterprises that sell parts from dismantled stolen vehicles.

[C294]

CIAB

(See Council of Insurance Agents and Brokers.)

[C224]

CIC--Certified Insurance Counselor

Certified Insurance Counselor designation sponsored by the Society of Certified Insurance Counselors. Headquarters: Austin, TX.

[C266]

CICA--Captive Insurance Company Association

An association formed to educate persons working for or interested in captive insurance companies. It provides information, education and support services for both domestic and foreign captives. Headquarters: Minneapolis, MN.

[C225]

CIDM

(See Certified Insurance Data Manager.)

[C057]

CIF (cost, insurance and freight)

This refers to a common term in a sales contract that may be encountered in international trading when ocean marine travel is used. In this type of contract, the selling price includes the cost of the goods, all shipping charges and the cost of marine insurance. Although the seller is obligated to purchase marine insurance, the seller's responsibility for the goods ends when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract.

CIP

Controlled Insurance Program, please see wrap.

[C058]

Civil authority clause

A provision in a policy requiring the payment of the loss suffered by the policyholder if the insured property is destroyed by the city or other civil authority in an effort to prevent the spread of fire.

(See By Order of Civil Authority.)

[C059]

Civil commotion

A disturbance among, or a popular uprising of, a large number of people.

(See riot and civil commotion insurance.)

[C060]

Civil commotion exclusion

A property policy exclusion that specifies that there is no coverage for property damage suffered as a result of any type of civil commotion or riot.

[C061]

Civil commotion policy

A special property policy to provide coverage for loss occurring as a result of civil commotion or riot.

[C268]

CIWA (Califorina Insurance Wholesalers Association)

An insurance trade association organized to promote education and good business practices, and to represent the interest of their members with insurance companies and vendors. Headquarters: Montrose, California.

[C062]

Claim

1) The formal request by a policyholder or a claimant for payment of loss under an insurance policy.

2) The final amount made in payment of a covered loss.

[C063]

Claim agent

In marine insurance, a person authorized by a marine underwriter to survey and certify losses. Underwriters maintain claim agents in various important ports and cities throughout the world. Claim agents do not have the authority to pay losses as do settling agents.

[C064]

Claim department

The personnel of an insurance company dealing with losses or claims. In casualty operations it is a "claim" department, in fire operations, a "loss" department. As the property and liability business develops more on a multiline basis, these distinctions are rapidly disappearing.

(See loss department.)

[C065]

Claimant

One who presents a claim or one who has suffered a collectible loss.

[C066]

Claims adjustment

The process of handling and settling claims or the amount requested by a policyholder or claimant because of a loss or damages suffered.

[C067]

Claims reserve

An estimate of the amount an insurance company expects to pay for reported and estimated claims. This may include amounts for loss adjustment expenses. In an insurance company's financial statement, it includes losses incurred but not reported, losses due but not yet paid, and amount not yet due.

Claims series clause

Typically regarding product claims, refers to a provision that takes all product losses related to a given party's product and classifies them as a single loss.

[C068]

Claims-made

A liability insurance method covering losses from claims asserted against the insured during the policy period, regardless of whether the liability-imposing causes occurred during or prior to the policy period. (However, many underwriters may not cover liability-imposing causes occurring prior to the policy period.) The coverage trigger is based on the retroactive date stated in the Declarations.

(See longtail and retroactive date.)

[C069]

Claims-made trigger

In order to trigger coverage in a claims-made liability policy, a claim must be made against the insured during the policy period and the injury or damage alleged in the claim must not have occurred prior to the retroactive date specified in the policy Declarations.

Clarified and expanded condominium coverage

Refers to optional coverage that is attached to a condominium association's Master policy. The coverage typically deals with several coverages such as protection caused by selecting an insurance policy that does not match what was required by the association's rules, insuring against deliberate acts by individual board members, officers or unit owners, coverage of incidental construction activity that has not been completed and coverage of certain types of common property.

[C070]

Clash cover

A reinsurance agreement applying to casualty insurance. This is an excess of loss agreement where the underlying amount to be retained by the ceding insurer is at an amount which is higher than the limit on any one reinsured policy. This agreement provides payment of loss when the unusual circumstances occur where two or more casualty policies experience the same occurrence of loss and the total amount of the payment of losses for the multiple policies exceeds the clash cover retention amount. This is sometimes known as contingency cover.

(See contingency cover.)

Class action lawsuit

Legal action filed in court by one or more people on behalf of themselves and others having an identical interest in the alleged wrong.

[C226]

Class beneficiary designation

Instead of naming each child as a beneficiary in a life insurance policy one can say "all children of the insured," "all children of the marriage between Mike and Ethel" (if there are stepchildren and different plans have been provided for them). This class beneficiary designation may prevent disinheriting children who arrive after the policy has been issued.

[C227]

Class of business

A term used by underwriters to describe a particular industry group or exposure, e.g., "We do not wish to write insurance for long-haul truckers." "We do want to insure the class of business that includes homes valued at $25,000 and below."

[C071]

Class rate

Rates developed for a line of property/casualty business based on the concept of what is average for that particular class. For example: the class rate for fire on a frame grocery store would be based on the average statistics for all frame grocery stores and would be applied to all frame grocery stores unless otherwise specifically rated. Rates are then deviated for other factors such as the public protection class and, when applicable, individual risk characteristics.

[C072]

Classification

The systematic arranging of properties, persons or business operations into groups or categories according to certain criteria. The purposes of such classification in insurance are to create bases for establishing statistical experience and determining rates, and to avoid unfair discrimination. The essential concept of establishing classifications is that each risk should bear its fair share of the overall cost of expenses and losses in relation to its own relevant expenses and hazards. It is unfair discrimination to charge different rates for similar risks, and it is equally wrong to treat in the same manner risks which have different costs and expenses.

(See unfair discrimination, discrimination and selection.)

[C073]

Classification society

An organization that institutes standards for construction of large vessels, with follow-up surveys periodically or after accidents. The objective of such a society is to maintain minimum standards for cargo carrying vessels to reduce hull and cargo insurance costs. The society is supported by fees charged to shipowners for services rendered and publishes an annual register of approved vessels.

[C074]

Clause

Language in a policy that describes, limits or modifies coverage granted.

(See provisions.)

[C075]

Cleanup costs

Costs that a party incurs to clean pollutants from the ground, water or air after the occurrence of a pollution incident. These costs are usually mandated or assessed in response to a confirmed incident by the Environmental Protection Agency (EPA).

(See corrective action costs.)

[C076]

Clear-space clause

Language which requires that the property insured be separated from some other property, e.g., from stacks of lumber or from the forest.

[C077]

Clergy professional liability

Professional liability for clergy members for claims that might arise out of rendering or failing to render services related to their professional duties, including counseling.

[C078]

Client

The customer (person or entity) who buys insurance through an agent or other intermediary.

[C079]

Close out

To complete a binder through issuance of the corresponding policy.

[C079a]

Closed corporation

A type of corporate entity that is controlled and operated by a small, closed group of individuals (often family members). The stock of this kind of corporation is not publicly traded.

[C080]

Closed panel

A requirement of a health maintenance organization (HMO) mandating that the insured or subscriber must use only the medical treatment, services, physicians, and facilities approved by the HMO.

[C081]

Closure and post-closure insurance

Insurance coverage that is purchased to protect owners and operators of hazardous waste treatment, storage and disposal facilities, in response to the Resource Conservation and Recovery Act of 1976 (RCRA).

[C082]

CLU--Chartered Life Underwriter

Chartered Life Underwriter designations sponsored by The American College. Headquarters: Bryn Mawr, PA.

[C296]

CLUE® Report

Stands for Comprehensive Loss Underwriting Exchange. CLUE reports provide information on a given person's loss history, generally under an auto or homeowners policy. Insurers typically use these reports to assist in determining whether an applicant's request for coverage is accepted.

[C300]

Coastal Barrier Resources Act

Federal law introduced in 1982. A major objective of the law is to discourage building/development of coastal property (particularly barrier islands). While it does not prohibit building and development, the act does exclude such areas from eligibility for disaster area assistance and National Flood Insurance Program coverage.

[C083]

Coastal waters

For the insurance of yachts and outboard motor boats, the waters of bays and inlets, as well as of the sea along the coast. Also referred to as contiguous waters.

[C084]

COB--coordination of benefits

In health insurance, policy provisions used by insurers to avoid duplicate payment for losses insured under more than one insurance policy (e.g., automobile or health) by making one of the insurers the primary payer, assuring that no more than 100% of the costs are covered and preventing the claimant from making a profit.

[C084a]

COBRA--Consolidated Omnibus Budget Reconciliation Act of 1985

A federal act making provision for the continuation of an employee's health insurance coverage, as well as the coverage for dependents, should the employee terminate his or her employment. This act is in effect whether or not the termination was voluntary. Further, it applies to employer-sponsored group health plans with 20 or more employees.

[C085]

Code

A number assigned to represent some characteristic of a risk, e.g., its state of location, its occupancy class, or the type of policy involved.

[C085a]

Coding

The act of translating data and information into numerical format to be used for statistical purposes in rate setting, actuarial and other reporting or report writing mechanisms.

[C085b]

Coercion

An unfair trade practice that is prohibited by most state insurance departments. It is when an agent, broker or other insurance professional applies physical, financial or mental pressure to persuade a second party to participate in an insurance transaction.

[C086]

COGSA--Carriage of Goods by Sea Act

An international agreement subscribed to by most maritime nations and ratified by the U.S. in 1936, prescribing the format and content of uniform ocean bills of lading on goods shipped internationally.

(See bill of lading.)

[C087]

COIL--Conference of Insurance Legislators

An organization of state legislators that specialize in insurance legislation.

[C088]

Coinsurance

See coinsurance clause

[C089]

Coinsurance clause

1. In property insurance, a condition of the policy requiring the insured to maintain insurance at least equal to a stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, a penalty is applied to the amount of loss based on a proportionate formula of the amount of insurance carried divided by the amount of loss required to be carried.

2. In major medical insurance, the clause that specifies the percentage of a loss which the company will pay and the percentage which the insured will bear (e.g., 80/20, 75/25).

[C090]

Coinsurer

1) An insured which has not carried the required amount of insurance and must bear a portion of the loss proportionate to the inadequacy.

2) In countries other than the United States, an insurer that shares a risk with one or more other insurers.

3) An insured or an insurance company that participates with an insurer in bearing losses covered by a particular policy.

[C229]

COLA

Cost of Living Adjustment clauses can be found in many health, pension and disability plans, including Social Security. In order to match or keep up with inflation, benefits are increased (or decreased) in relation to particular indices such as the Consumer Products Index.

[C090a]

Collateral

With respect to a surety bond, collateral is anything of value that is pledged with the surety to protect that surety from a default loss by the principal.

[C091]

Collateral assignment

When benefits in an insurance policy are transferred to a creditor or lienholder as part of the collateral for a loan. The creditor receives only that portion of the policy benefits or payments that compare to the amount of the creditor's interest or value of the loan. Most common in property, life and inland marine coverages.

[C092]

Collateral protection insurance

Insurance policies designed specifically to meet the exposure needs of financial institutions, by covering physical damage losses to collateral held by the lenders of loans.

[C093]

College of Insurance, The

An accredited collegiate institution offering an associate degree with majors in various aspects of the insurance business, a Bachelor of Business Administration degree with an insurance major, a Bachelor of Science degree in actuarial science, and a Master of Business Administration degree with an insurance major. Offices are in New York City.

[C094]

Collision damage waiver

When renting an automobile or other vehicle from a rental agency, the rental agreement between renter and rental agency may contain an option allowing the renter to pay an additional fee in exchange for the agreement by the rental agency to waive its rights to collect any collision losses to the vehicle from the renter.

[C095]

Collision insurance

Coverage for the loss resulting from the striking of another object by a moving vehicle.

[C096]

Collision of the load

The striking of another object by the cargo of a moving vehicle, as opposed to the vehicle itself striking the object. In insuring merchandise in transit by motor truck, many policies insure against collision damage only if the vehicle itself collides with something. This excludes collision damage if, for example, a part of the load extends beyond the limits of the truck and hits a bridge or some other object.

[C096a]

Collusion

When two or more entities secretly agree to conspire together in the act of defrauding or depriving another entity or other entities of their property or rights.

[C097]

Combination automobile policy

A policy combining the coverages afforded under automobile physical damage and automobile liability policies.

(See automobile physical damage insurance.)

[C098]

Combined ratio

The addition of the ratio of losses incurred to earned premiums, and the ratio of underwriting expenses to written premiums.

[C297]

Combined single limit

Insurance policy limits under a liability policy that indicate a single dollar amount that applies to either/or bodily injury and property damage that may occur during an eligible occurrence.

[C276]

Coming and going rule

An informal term that typically refers to commuting to and from work and that time being excluded as part of a workday. This distinction is important in determining whether an employer may be held partially or totally responsible for a loss that occurs during a commute.

[C099]

Commercial articles coverage

An inland marine policy providing coverage on an "all-risk" basis for loss or damage to cameras, fine arts, and musical instruments of a business insured.

[C230]

Commercial auto

Coverage designed to provide a "standard" form for insuring commercial vehicles (other than private passenger cars).

[C100]

Commercial blanket bond

A fidelity bond which insures an employer against loss from dishonest acts committed by employees, covering all employees in the regular service of the employer during the term of the bond. The bond is issued for a fixed amount which is the maximum sum payable for any one embezzlement, whether one or more employees are involved.

(See blanket position bond.)

Commercial crime policy

This ISO crime policy incorporates most commercial crime coverages into one policy. It is an ala carte policy that starts with eight insuring agreements but can be expanded to include up to eleven additional insuring agreements. The insured can choose one or more insuring agreements.

[C101]

Commercial general liability policy (CGL)

The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.

[C102]

Commercial lines

Types of insurance written for businesses instead of individuals (for which the term personal lines applies)

[C103]

Commercial multiple peril

A general term, sometimes shortened to commercial multiperil, relating to that class of package policies which provides coverage for more than one peril or cause of loss in one contract. Not the same as a commercial package policy, that contains more than one line of business.

[C104]

Commercial package policy (CPP)

A package policy designed for commercial insureds that can provide in one policy several lines of insurance business as needed by that commercial venture. Lines of business which may be included in the CPP are property/glass, general liability, inland marine, crime, boiler and machinery insurance, and commercial automobile.

[C277]

Commercial property policy

Commercial property policy provides coverage for real and personal property that is used in a business.

[C231]

Commercial umbrella

A form of liability insurance protecting policyholders for claims in excess of the limits of their primary automobile, general liability and workers compensation policies, and for some (few) claims excluded by their primary policies which are subject to a deductible, which may range from $250 for a personal umbrella to a minimum of $10,000 for a commercial umbrella.

[C106]

Commission

The portion of the premium paid the agent or broker for having produced the business.

(See agent's commission.)

[C107]

Commissioner of insurance

The official of a state charged with the duty of enforcing its insurance laws. Also called the superintendent of insurance (in three states) and director of insurance (in eight states). The official is elected in 11 states, appointed by a governor or state agency in 38 states, and is a civil service appointee in Colorado.

Commissioners' Values

A list that is revised and published annually by the National Association of Insurance Commissioners. The list consists of values that insurance companies must use in order to post security values in their financial statements.

[C108]

Commitments

Amounts of insurance on risks which a company has written or agreed to write.

[C232]

Common accident provision

Found in some health insurance plans. If two or more persons are injured in the same accident, the deductible applies only once. Some travel accident plans will also have a common accident provision that will pay out no more than a certain multiple if a certain number of employees are killed in a common accident, e.g., a plane crash.

[C109]

Common area

Most often used in reference to the property and liability coverages for apartments, condominiums, townhouses, cooperatives, and other related risks. Common areas are those areas not specifically owned by a tenant or individual property owner, but are owned either by the landlord or all the occupant-owners, or are under the control of the landlord or association. Common areas are open to all. The most common examples are hallways, parking areas, and recreational facilities.

[C261]

Common carrier

1) The insurance company which provides the protection for a particular risk.

2) A transporter of goods, a form of bailee for which insurance is provided. A common carrier is one which is available to the public for the transport of any goods. A private carrier transports only the goods of its owner.

[C233]

Common disaster clause

Found in life insurance policies. If the insured (husband) and the primary beneficiary (wife) die in the same car accident, the secondary beneficiary (Junior) will become the beneficiary. If wife survives for a while and then dies without a common disaster clause, her estate would receive the benefits of the policy. In addition to problems with survivors, there can be tax implications with the payment of benefits to the wife that could be mitigated by payment to Junior. The common disaster clause states that the primary beneficiary must survive the insured by (usually 30-90 days) or the benefit is automatically paid to the secondary beneficiary.

[C110]

Common law

Law based on precedents that have been made by courts throughout the years in Great Britain and the United States. This is, therefore, law that has not been enacted into statutes by lawmaking bodies (which make "statute" law).

Common law liability

The legal responsibility that one party owes another (for injury or damage caused by negligent actions) which is based on common law principles.

[C234]

Community rating

In health insurance, particularly with Blue Cross-Blue Shield plans, rather than develop rates and experience based upon the individual or the group of employees within one business, the plan will accumulate the experience of all employees within a specific geographic territory or some other large population.

[C289]

Communications liability

(See Media Professional Liability.)

[C111]

Commutation clause

A clause in a reinsurance agreement which provides for discharge of all obligations (past, present and future) between the parties for reinsurance losses incurred. This clause is usually optional but may be mandatory.

[C112]

Comparative negligence

A more modern system of allocating damages between two or more persons than the method of contributory negligence, which remains effective in many states (under which one cannot collect damages for bodily injury or property damage caused by another party's negligence if one were oneself in any way negligent). Under comparative negligence, the damages collectible in relation to another person are diminished in proportion to one's degree of negligence. In most instances, damages cannot be collected at all if the claimant's negligence was greater than that of the other party. Currently, in a few instances, the courts have awarded both parties damages as a percent of the total damages, depending on respective degrees of fault.

(See contributory negligence.)

[C113]

Compensation insurance

Protection which provides various benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits that are provided. Originally, workers ceded their rights to sue in exchange for worker's compensation benefits, but in recent years lawsuits have successfully eroded this concept.

[C114]

Compensatory damages

Not to be confused with punitive damages, which are additional damages requested by an injured party to punish the party responsible for the loss. Compensatory damages are normally monetary damages alleged by the claimant to compensate for actual injuries or expenses sustained. These may include all types of medical expenses, as well as other expenses such as lost wages, legal fees, pain and suffering, mental anguish, loss of consortium, etc.

[C115]

Completed operations coverage

Protection for a business which sells service instead of products against liability claims arising out of work completed away from the business premises. Differs from products liability coverage, which protects against products liability claims.

[C116]

Composition roof

A roof made of asphalt shingles, asbestos shingles or tar paper roofing, or the usual forms of roofing materials. It does not refer to slate roofs, tile roofs, or metal roofs, which are not combustible, nor does it refer to wood shingle roofs, which are usually so designated.

[C117]

Comprehensive automobile coverage

An "all-risk" type of physical damage protection for automobiles including theft but excluding loss by collision or upset (which may be added).

[C118]

Comprehensive automobile liability policy

The broadest form of business coverage for claims alleging bodily injury or property damage resulting from the insured's ownership, maintenance or use of an automobile. The premium, which is adjusted (audited) at the expiration of the policy term, is based on the insured's actual exposure during the policy term.

[C119]

Comprehensive crime coverage endorsement

Endorsement (now obsolete) that at one time could be attached to a special multiperil policy providing optional employee dishonesty, money and securities, money orders, counterfeit paper currency, and depositors' forgery coverages.

[C120]

Comprehensive dishonesty, disappearance and destruction policy

Commonly known as the 3-D policy, this is an obsolete package policy providing crime protection principally covering dishonesty, forgery, loss of money and securities, and safe deposit losses.

[C121]

Comprehensive general liability policy

(See commercial general liability policy.)

[C121a]

Comprehensive major medical insurance

Coverage designed to provide protection including that which is otherwise contained in both the basic and the major medical insurance policies. A relatively small dollar amount deductible is found in this type policy, as well as coinsurance. Dollar amounts of the benefits provided are normally higher than those found in either a basic or a major medical policy by themselves.

[C122]

Comprehensive medical expense policy

One form of health insurance that provides coverage for hospital expenses, surgical expense, physicians' costs, drugs, and other medical coverages. Normally, the coverage is subject to a deductible and coinsurance provisions. This type of coverage is often offered as group insurance.

[C123]

Comprehensive personal liability

A form of liability insurance which reimburses the policyholder, if liable, to pay money for damage or injury caused to others. This form does not include automobile liability but does include almost every activity of the policyholder except such as may arise from the operations of a business, hence "personal" liability. The coverage is a part of either homeowners or tenants policies and is almost obsolete as a separate policy.

[C124]

Compulsory insurance

Coverage required by certain states of certain people in certain circumstances, e.g., workers compensation and automobile liability.

[C125]

Computer fraud coverage form

A crime coverage form designed to protect against loss of money, securities and property when conversion occurs via computer fraud.

Computer insurance

Protects computers and related equipment in amounts that supplement the modest limit available under a standard HO policy. Generally, the coverage is written as an optional endorsement to homeowner coverage. Besides providing a higher, separate limit, the coverage tends to be broader, allowing for more off-premises protection as well as being applicable to certain business use.

[C126]

Concealment

In insurance, failure to disclose a material fact which may void an insurance policy.

(See material fact.)

[C127]

Concurrent causation

A legal concept of applying insurance coverage when two or more hazards or perils (with at least one being a covered hazard/peril) contribute to creating a loss, essentially at the same time.

[C128]

Concurrent insurance

Coverage in one policy on the same property under the same conditions as another policy.

[C129]

Condition

Something established or agreed upon to be necessary to make a policy of insurance effective.

(See warranty.)

[C130]

Conditional delivery

Insurance policies containing provision preventing the policy from becoming effective until all terms and conditions stated have been fully met.

[C235]

Conditional premium receipt

In life insurance there is usually no insurance granted until the first mode of premium is received by the company. However, the applicant may pay the first mode of premium at application or before the policy is issued. A conditional receipt is used to provide insurance should the insured die before the policy is issued. If the insured would have been otherwise insurable (but for the premature death), then the company, by the conditional receipt, would have to pay either the entire policy limit or some lesser limit as indicated on the receipt.

Conditional reserves

Insurer and reinsurer balance sheet items such as unauthorized reinsurance and unsecured and/or overdue reinsurance recoverables that, due to accounting regulations or restrictions, are treated as liabilities.

[C131]

Conditional sales floater

An inland marine policy covering property which has been sold on the installment plan. Also known as installment sales floater.

[C236]

Conditionally renewable policy

Found in health policies. Gives the company the right not to renew the policy for specific reasons enumerated in the contract. Conditions vary by contract and the conditional renewal is often at the next premium payment period, i.e., quarterly, annually, third year, etc.

(See also guaranteed renewable and noncancelable or noncancelable/guaranteed renewable policy.)

[C132]

Condominium

A form of real estate ownership becoming increasingly popular. It is the individual ownership of a single unit in a multiple-unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.

[C133]

Condominium association coverage

Insurance policies designed to meet the specific liability exposures of condominium associations and to provide protection for the property held in common, such as the building, hallways, recreational facilities, and maintenance equipment.

Condominium declarations map

A survey map or plat of the surface of the ground included within a condominium project.

[C134]

Condominium unit owners form

Insurance policies designed to meet the liability and property needs of the condominium unit owner. Both personal and commercial versions of this type of policy are available.

[C135]

Conference of Insurance Legislators (COIL)

An organization of state legislators who specialize in insurance legislation.

[C136]

Conflagration

A sweeping fire which destroys many properties and usually involves large values.

[C137]

Conflagration area

An area in which property may be consumed by a sweeping fire or conflagration.

[C278]

Consent-to-rate

This rating rule is no longer widely used since it is prohibited by many state regulations. It refers to a company writing a risk that falls outside of underwriting guidelines by getting the insured's written permission to use rates that are higher than those that have been filed for use with the applicable line of business.

[C298]

Consent-to-settle clause

A provision that typically appears in professional liability policies. It requires the insurance company to secure the insured's permission to settle a claim or lawsuit. It allows the insured to have control over an action that could affect his or her reputation.

(Also see hammer clause.)

[C138]

Consequential loss

In property insurance contracts, consequential losses are indirect losses, a reduction in the value of property that is a result of a direct damage loss. Usually associated with time element or other remote or indemnification type losses. Consequential losses are different than ensuing losses since consequential losses are indirect losses not direct damage losses, whereas ensuing losses are further or additional direct damage losses that have been initiated by the original direct damage cause of loss.

[C237]

Conservation

The acts or efforts of a company or agent to attempt to prevent a life insurance policy from lapsing.

[C138a]

Consideration

In legal terms, it is the inducement to a contract or the promises made. It may be either express or implied. The insurance policy is a common example. The consideration provided by the insured is the premium dollar, and the consideration of the insurer is a promise to pay should loss, accident or injury occur. If a loss does not occur, nothing is paid by the insurer. Should there be a loss, however, the amount of coverage provided by the insurer may exceed the lifetime accumulation of premiums paid by the insured.

[C139]

Consignee

The party listed on a bill of lading to whom the cargo is to be delivered.

[C140]

Consignor

The party shipping the cargo as listed on a bill of lading.

[C140a]

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

A federal act making provision for the continuation of an employee's health insurance coverage, as well as the coverage for dependents, should the employee terminate his or her employment. This act is in effect whether or not the termination was voluntary. Further, it applies to employer-sponsored group health plans with 20 or more employees.

[C262]

Consortium

Refers to the right shared in spousal (and sometimes parent-child) relationships to enjoy companionship, affection, intimacy and similar feelings for which, if lost because of injury or death, a suffering party may seek damages.

[C141]

Construction bond

A surety bond designed to protect the owner of property on which a building or structure is being built should the contractor not complete the job. If the contractor fails to fulfill the construction contract, the insurer must then make sure the work is finished.

[C142]

Constructive total loss

Damage to property which is so great that the cost of recovering and repairing the property would exceed the insured value.

(See abandonment.)

[C238]

Consumer reporting agency

An entity that provides various types of insurers with lifestyle, credit history, and other information about their potential and existing customers.

[C263]

Contact center

In its simplest form, a physical site used by an organization (insurer) to handle large volumes of incoming and outgoing phone calls involving customer service, marketing, and other business transactions. Such centers are highly dependent upon sophisticated data management and technology. Also called call centers.

[C143]

Contact lens insurance

Reimburses for replacement of lost or damaged contact lenses.

[C144]

Container

A portable, box-like metal structure (resembling the non-wheel portion of a railroad boxcar) used for transporting goods on ships, planes or trucks.

[C145]

Contents rate

The fire insurance rate on the contents of a building as distinguished from the rate for insurance on the building itself.

[C239]

Contestable period

Typically a two-year contestability period during which an insurer has the right to void the contract if fraud or material misrepresentation by the insured is discovered in the application.

(See also incontestable period.)

[C146]

Contingency cover

A reinsurance agreement applying to casualty insurance. This is an excess of loss agreement where the underlying amount to be retained by the ceding insurer is at an amount which is higher than the limit on any one reinsured policy. This agreement provides payment of loss when the unusual circumstances occur where two or more casualty policies experience the same occurrence of loss and the total amount of the payment of losses for the multiple policies exceeds the clash cover retention amount. This is sometimes known as clash cover.

[C147]

Contingency reserve

1) Assets maintained by an insurance company to absorb some unexpected outgo or loss, such as the sudden fall in the value of securities owned. Companies may carry as a contingency reserve the excess between the market value of securities on the last day of the year over their NAIC required valuation.

2) A voluntary reserve not specifically assigned.

[C148]

Contingent beneficiary

The party designated to receive the benefits or proceeds of a life insurance policy or retirement plan, should the primary beneficiary die.

[C149]

Contingent business income

The insurance against loss due to interruption of business by fire or other insured cause of loss occurring at the premises of another on whom the continuation of the business is dependent, such as the premises of a supplier or a large customer.

[C150]

Contingent commission

A profit-sharing commission paid to an agent, which depends upon the profit the company has realized from the agency's operations. Also known as profit-sharing commission.

[C151]

Contingent liability

1) A liability which may be incurred by an insured as a result of negligence on the part of independent persons engaged to perform work. The most common example is the contingent liability of a principal contractor, which may result from construction operations undertaken by subcontractors. Also applies to the liability of a principal for the acts of an agent or servant.

(See protective liability insurance.)

2) In property damage insurance, the possibility of financial loss to a policyholder, resulting from damage or loss to the property of another, such as a supplier or a customer.

[C240]

Contingent payee

In life insurance, the primary payee normally will receive all proceeds. However, proceeds may be paid out over a specific period and if the primary payee dies before all proceeds are paid, the designated contingent payee will receive the balance of payments.

[C151a]

Continuing education (CE)

An ongoing process in the insurance industry to keep its member professionals current, updated and responsive to the many legislative, coverage and marketing changes, through the offering of courses, workshops and seminars.

[C151b]

Continuing education requirement

Requirements imposed by state departments on insurance agents and in some cases adjusters and other professionals to periodically complete a minimum number of hours of insurance-related education in order to be eligible for a professional license or license renewal.

[C152]

Continuing expenses

A term used in commercial time element coverage to indicate those expenses that will continue during the restoration period after a business is closed because of a loss. These expenses may include such items as taxes, certain executive and key person payroll, loan payments, utilities, and other expenses the insured may be contractually obligated to continue.

Continuous coverage or continuous liability insurance

Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

[C241]

Continuous premium whole life insurance

Life insurance that is payable for the life of the insured. Most whole life insurance policies are continuous premium whole life insurance because premiums are payable for life or until age 100, whichever comes first.

[C264]

Continuous trigger theory

An event is recognized as an insurable loss (or occurrence) along a timeline from when damage first appears until it terminates. The continuous damage is eligible for coverage under every policy in existence during the period that damage occurred. Under this theory, each policy would cover its share of damage that occurred during the time the policy was in effect.

(See exposure theory, injury-in-fact theory and manifestation theory.)

[C152a]

Contra proferentium

A Latin term used when any ambiguity in contract is construed against the drafting party.

[C153]

Contract bond

In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond.

[C154]

Contract carrier

A cargo transport operation that contracts with only one or a limited few shippers. This type of operation often has consistent delivery routes and rarely contracts with other operations.

[C279]

Contract of indemnity

A contract agreeing to restore an injured party to the condition that was present prior to the occurrence of injury or loss.

[C154a]

Contract price

The entire cost of the contract between the owner of property and the contractor providing service to fulfill the obligations of the contract. It is used as the basis for the premium charge on many varieties of construction and supply bonds.

[C301]

Contractor-controlled insurance program

An insurance program for larger construction projects that is purchased and administered by, typically, the project's general contractor. Also see wrap.

[C155]

Contractors' equipment

Equipment used by contractors in their business operations. Examples may be anything from concrete forms, asphalt plants, bulldozers, cherrypickers, and scaffolding, to small hand tools. This equipment is most often protected by inland marine insurance coverages due to its mobile nature.

(See mobile equipment.)

[C156]

Contractors' equipment floater

An inland marine form which insures the equipment, tools and materials of a contractor.

(See equipment floater insurance.)

[C157]

Contractors protective liability

A policy which provides liability coverage for the insured for the negligent acts of contractors and subcontractors hired by the insured. May also cover for their own negligent supervision of the work performed.

[C158]

Contractual liability

A legal obligation voluntarily assumed under the terms of a contract, as distinguished from liability imposed by the law (legal liability).

[C159]

Contractual liability insurance

Insurance coverage to provide protection for the additional liability exposure an insured has assumed in a contract. Only specified contractual liability exposures are covered in standard liability policies for items such as leases and related types of contracts because the assumption of such liability in a contract is not only voluntary, but may be extensive. When contractual liability insurance is purchased, the contracts covered must be individually evaluated for the type and amount of exposure posed.

[C242]

Contributing excess

A reinsurance term for when more than one reinsurer shares coverage on a particular line of insurance, i.e., general liability, and all are in excess of a particular retained limit. Example: There are three reinsurers. Each agrees to one-third of the loss above the $500,000 retained limit up to a limit of $1,000,000. In a million dollar claim, the insured will pay the first $500,000 and each of the three reinsurers will pay $166,000.

[C160]

Contribution

The amount payable by each of several policies when covering a loss.

[C161]

Contribution clause

The clause in a policy which describes how much its issuer must pay if there is insurance in more than one company on a given loss.

(See overlapping insurance.)

[C243]

Contribution to surplus

A company that makes more in money than it spends in claims or underwriting expenses can contribute the excess to its surplus account.

(See also surplus.)

[C162]

Contributory group insurance

Group insurance in which all or part of the premium is paid by the employee or group member, with any remainder being paid by the employer or union. In noncontributory insurance, the employer pays all the premium without any contributions from employees.

[C163]

Contributory negligence

A common law defense in which the plaintiff must be entirely free from fault in order to recover from a negligent defendant. If the plaintiff has in any way been guilty of neglect, the plaintiff cannot recover from the defendant. This principle has been modified in some states by legislation and interpretation by the courts.

(See comparative negligence.)

[C244]

Contributory plan

In a contributory pension plan, a participant has the option to or is required to make payments or contributions into the plan in addition to those contributions made by the employer.

(See also noncontributory plan.)

[C164]

Contributory value clause

Used in ocean marine hull, cargo and freight policies, setting forth the insured's responsibilities and the underwriter's obligations, with respect to the insured's interest, when involved in a general average and/or an act of salvage. The insured can be a coinsurer if the insured's interest is underinsured.

(See general average.)

[C164a]

Controlled business

Business over which an agent is able to exercise his or her personal influence. Generally, such business includes the agent's company, employees and immediate family. Most states limit the amount of controlled business which may be written by an agent. The limitation prevents persons from securing a license for the sole purpose of writing business more cheaply (such as by saving commission costs) for relatives, employers and employees.

Controlled Insurance Program

(See wrap.)

[C165]

Convention blank

Another name for annual statement, a form of financial report prescribed by the NAIC.

Convention of Salvage

Via its 1989 revision, an international maritime provision that allows some level of compensation for unsuccessful salvage operations that were performed with a given level of expertise and which involved reduced environmental harm.

Convergence

The term refers to any instance of "coming together." With regard to insurance, it refers to the trend of that service, as well as other, previously separate financial services, being offered by the same source, or risk managers arranging both traditional and nontraditional programs to address loss exposures.

[C166]

Conversion

The wrongful exercise of ownership rights over another's personal property, whether by taking, withholding or misusing.

[C167]

Conversion privilege

A life and health insurance provision. It permits an insured to change from one type of policy to another or to increase coverage limits, without having to take additional physical examinations or prove insurability.

[C168]

Converted losses

The factor indicative of the insured's specific loss experience, used in some retrospective rating and retention plans, computed by multiplying incurred losses by a loss conversion factor.

[C169]

Convertible collision

A form of full coverage collision insurance for automobiles in which 50% of the full coverage premium is charged as an initial premium, the remaining 50% being payable only if the policyholder makes a claim during the policy period. Thus, the effect is that the policyholder is not likely to make a claim unless the amount of the loss exceeds the initial premium, in which case the premium payable is changed (or converted) from 50% of the full cover rate to 100%, becoming obsolete.

[C245]

Convertible term insurance

Term insurance that is convertible to a higher premium paying plan (usually whole life) without evidence of insurability. Convertible term insurance can be convertible without medical examination for only a limited part of its term, e.g., a ten-year convertible term policy may be convertible only during the first seven years of the term.

[C170]

Cooperative

One type of ownership arrangement for an apartment building. It is owned by the cooperative or cooperative association, a group of individuals, each of whom owns shares in the building, rather than the person's individual units or apartments as with a condominium.

[C281]

Coordinated Advertising Rate and Form Review Authority

An initiative created by the NAIC, it involves a special panel of insurance regulators who review various insurance product rates and forms on an expedited basis for use nationally. Primarily used for life and health insurance products and rates.

[C171]

Coordination of benefits (COB)

In health insurance, policy provisions used by insurers to avoid duplicate payment for losses insured under more than one insurance policy (e.g., automobile or health) by making one of the insurers the primary payer, assuring that no more than 100% of the costs are covered and preventing the claimant from making a profit.

[C291]

COP--Commercial Output Policy

Essentially an updated version of a manufacturers output policy. The coverage is designed for medium and larger firms that make and/or distribute goods. The policy offers liability and property coverage. Covered property includes building and building personal property (particularly computers and equipment). Broad coverage is offered for both on-premises and off-premises exposures.

[C172]

Copayment

A flat, preset fee paid by an insured for office visits, drugs, and other medical services as member of an HMO or preferred provider service. These copayments are normally a small fraction of the overall cost and act much like a service charge or handling fee.

Corporate Average Fuel Economy

Refers to the provision of the Energy Policy and Conservation Act of 1975. It initially established vehicle fuel efficiency standards (miles per gallon) for manufactured vehicles and is periodically updated to take advantage of technological advancements and other policy considerations.

[C172a]

Corporate surety

A corporation which has obtained the necessary and proper licenses under applicable state insurance law, to legally act as the surety for others

[C173]

Corrective action costs

Expenses that a party incurs to clean or correct the damage done by pollutants to the ground, water or air after the occurrence of a pollution incident. These costs are usually mandated or assessed in response to a confirmed incident by the Environmental Protection Agency (EPA).

(See cleanup costs.)

[C282]

Correlation

A relationship or connection between (at least two) items. In credit scoring, it refers to the relationship between an individual's score (that is derived from their credit history, existing accounts and debt service) and their likelihood of experiencing an insurable loss.

[C246]

Corridor

In universal life insurance the corridor is the difference between the policy death benefit and the cash value. This corridor is important because the IRS will consider the size of the corridor (too narrow = too much cash value) to determine whether the contract meets the definition of life insurance and retains the tax-free inside buildup of cash value or is considered an investment vehicle and subject to more immediate taxation.

[C174]

Corridor deductible

A corridor deductible is exclusive to the health insurance industry. Once a major medical policy has paid the full stated amount of limits or benefits to an insured, if additional expenses still exist, the corridor deductible is the amount that must be borne by the insured before additional coverage is available.

Cost Based Pricing

Cost Based Pricing-Method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.

[C175]

Cost, insurance and freight (CIF)

This refers to a common term in a sales contract that may be encountered in international trading when ocean marine travel is used. In this type of contract, the selling price includes the cost of the goods, all shipping charges and the cost of marine insurance. Although the seller is obligated to purchase marine insurance, the seller's responsibility for the goods ends when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract.

[C247]

Cost of living adjustment

(See COLA.)

[C176]

Cosurety

One of several who participate in underwriting a surety bond.

[C295]

Council of Insurance Agents and Brokers

Established in 1913 as the NAIB, this organization is a trade association that is composed of the largest United States agents and brokers who handle property and casualty insurance and employment benefits. Headquarters: Washington D.C.

[C177]

Countersignature

1) An additional signature placed on a policy by an authorized person at the time it is issued, supplementing any other signature appearing on the printed form used for the policy.

2) When used to describe a countersignature law, the signature which must be obtained from an authorized person (usually a licensed agent or broker in a state having such a law) on a policy covering property in that state, but written by a party outside the state.

[C283]

Counterclaim

A party that is confronted by a legal action responds by filing a separate action, alleging a different set of circumstances.

[C178]

Countersignature law

State insurance laws, in some states, requiring that policies issued to insureds within that state, but written by agents or insurers outside the state, be countersigned by agents licensed within that state.

[C179]

Country damage

In marine cargo insurance, damage to baled cotton caused from poor methods of baling, handling or storing which discolor and strain the cotton.

Countrywide rates

Refers to any vendor’s published, advisory rates (typically minimum) that apply on a national (rather than state) basis.

Countrywide Rules

Refers to any vendor’s published rating rules that apply on a national (rather than state) basis.

[C180]

County clerks and recorders errors and omissions insurance

Insurance protection designed to protect against the liability exposures of county clerks and recorders for losses as a result of the rendering or failing to render official services and duties, including negligent acts, errors, and omissions of the insured and employees.

[C180a]

Court bonds

A generic term encompassing a variety of bonds that may be required of, or used by, the participants in a lawsuit. These bonds permit those participants to pursue certain legal remedies in court

[C181]

Cover

1) To protect with insurance.

2) The insurance itself. Same as coverage.

[C182]

Cover note

1) A document issued by an agent or broker which tells the insured that the agent or broker has effected the insurance described therein. Since there are often delays in issuing formal policies, a cover note gives the insured a description of what insurance the agent or broker has put into effect. A cover note is similar to a binder although a binder usually refers to a document given by a company to an agent instead of one given by the agent to a customer.

2) Used by surplus lines brokers to evidence coverage placed with nonadmitted companies.

(See binder.)

[C183]

Coverage

The extent of insurance protection afforded by a policy of insurance.

[C184]

Coverage trigger

The event which determines when coverage of a liability policy applies. In an "occurrence" policy, the event is the occurrence of the injury or damage. In a "claims-made" policy, the event is the notification to the insurer or the insured, whichever comes first, of the happening of the injury or damage.

[C248]

CPC

Certified Pension Consultant designation sponsored by the American Society of Pension Actuaries. Headquarters: Fairfax, VA.

[C249]

CPCLA

Casualty Property Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

[C185]

CPCU--Chartered Property Casualty Underwriter

The professional designation conferred by the American Institute for Property and Liability Underwriters.

[C250]

CPIW/M

Certified Professional Insurance Woman/Man designation sponsored by the National Association of Insurance Women (International). Headquarters: Tulsa, OK.

[C186]

CPP (commercial package policy)

A package policy designed for commercial insureds that can provide in one policy several lines of insurance business as needed by that commercial venture. Lines of business which may be included in the CPP are property/glass, general liability, inland marine, crime, boiler and machinery insurance, and commercial automobile.

[C251]

CPSR

Certified Professional Service Representative designation sponsored by the National Association of Professional Insurance Agents. Headquarters: Alexandria, VA.

[C187]

CPU--central processing unit

The part of an insurer's computing system containing the circuits that calculate and perform logic decisions based on a manual program of operating instructions.

[C188]

Credibility

The measure of credence or belief which is attached to a particular body of statistical experience for rate making purposes. Generally, as the body of experience increases in volume, the corresponding credibility also increases. This term would frequently be defined in terms of specific mathematical formulas.

Credit arbitrage

Now considered a method of alternative risk management, it refers to the buying and selling of corporate credit and, based on price discrepancies between different credit markets, realizing a profit from the transaction.

[C284]

Credit-based scoring

Refers to assigning a numerical score to a number of attributes in an individual's financial history in order to evaluate his or her desirability as a customer or loan prospect. Due to a discovery of a correlation between credit scores and loss probability, credit scores have been modified for use as an underwriting tool by insurers.

[C189]

Credit card insurance

Covers against losses stemming from the misuse of lost or misappropriated credit cards. Usually written for individuals as an endorsement to the homeowners policy, but is also offered to business corporations as a separate contract or as part of forgery of comprehensive crime policies.

[C190]

Credit health insurance

A form of health insurance to provide payments in case of disablement of debtors with respect to the amount owed on installment loans. If the debtor becomes disabled, the insurance will provide continued monthly payments, either to the end of the loan or for a specified number of months.

[C191]

Credit insurance

1) A form of life and health insurance protecting the lender against loss from death or disability of the borrower, often written as group insurance. The coverage can be written to protect the interest of the creditor only (single interest), or the interests of both creditor and debtor (dual interest).

(See single interest cover (or insurance) and margin account insurance.)

2) Protection against loss caused by the insolvency of a firm's customers in excess of its normal credit losses; written by a few specialty casualty insurers.

(See floor plan insurance.)

[C192]

Credit life insurance

A form of life insurance to provide payments in case of death of debtors with respect to the amount owed on installment loans. In case of death of the debtor, the insurance pays the balance of the loan.

[C193]

Credit report

A report on an individual's personal characteristics, credit standing, habits, and including other facts which might influence the decision to insure that individual.

(See inspection.)

[C285]

Credit scoring

Refers to assigning a numerical score to a number of attributes in an individual's financial history in order to evaluate his or her desirability as a customer or loan prospect. Due to a discovery of a correlation between credit scores and loss probability, credit scores have been modified for use as an underwriting tool by insurers.

[C194]

Crime coverages

A generic term used to encompass the variety of crime coverage forms available to protect against losses of money, securities and property by such causes of loss as employee dishonesty, forgery, theft, burglary, robbery, kidnap, extortion and fraud.

Criticism

In reference to an audit, it refers to a suggestion that an outside party makes to an insurer regarding needed, corrective action

[C267]

CRO

An executive charged with the task of creating, managing and implementing an organization’s risk strategy that, increasingly, encompasses financial, market, credit and operational risks.

[C195]

Crop dusting and spraying liability insurance

Protection against claims alleging bodily injury or property damage arising from the normal business operations of crop dusters.

[C196]

Crop-hail insurance

Insurance against hail damage to growing crops. Although hail is the basic peril in these policies, cover is often granted for crop damage resulting from additional perils such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.

[C197]

Crop-Hail Insurance Actuarial Association

Rating organization, statistical and research association for crop-hail insurance and rain insurance on public events, business ventures and private proceedings. Headquarters: Chicago, IL.

[C198]

Crop insurance

Insurance against hail damage to growing crops. Although hail is the basic peril in these policies, cover is often granted for crop damage resulting from additional perils such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.

[C287]

Crop revenue coverage

Refers to a policy that pays for loss of farm income due to a low yield, low market prices or both.

[C302]

Cross liability coverage

A provision that responds to a liability claim that is made against an insured by a person who is also an insured under the same policy. However, the total insurance limit available under the policy is unchanged.

[C198a]

Cross liability coverage endorsement

Most liability policies will not respond to claims between two or more insureds covered by the same insurance policy whether they be named insureds or additional insureds. This endorsement adds coverage for insureds who make a claim against another insured under specific circumstances. It is important to note that this endorsement does not increase the insurance company's overall limit of liability.

[C288]

Cross sell

In insurance, refers to the technique of reviewing one's current clients for one type of business and selling them coverage in different lines (such as selling auto insurance to homeowner clients or selling life and health products to current property and casualty clients).

CSA

Customer Service Agent.

[C252]

CSP

Certified Safety Professional designation sponsored by the Board of Certified Safety Professionals. Headquarters: Savoy, IL.

CSR

Customer Service Representative.

[C199]

Cumulative liability

Relates to fidelity bonds where a substantial claim could be made under a canceled bond containing a discovery period and also under another bond replacing it, since defalcations of dishonest employees often are spread over lengthy periods. To avoid this cumulative liability which could expose a surety company to a loss totaling the sum of two bonds, a clause--the superseded suretyship rider--is used, which picks up any liability under the prior bond and bars possibility of an accumulation of liability between the two bonds if issued by the same company.

[C200]

Cure

An ocean marine term used to express the medical expenses made by the owner or operator of a vessel to a sailor who has become ill, injured or disabled while on a voyage or while performing the duties of a sailor for the owner/operator.

[C201]

Current assets

Current assets consist of cash and other assets that can be quickly liquidated and converted to cash within one year.

[C253]

Current assumption whole life insurance

This type of policy deviates from the whole life concept where premiums remain level. With current assumption whole life insurance, the premium payments are flexible and are linked to current interest rates. Premium adjustments are usually made on specific policy anniversary dates. Premium adjustments come from higher or lower mortality, expenses or investment returns of the insurer.

[C202]

Current liabilities

Liabilities that must be paid within a one-year period, including the current (one year's worth) portion of long-term debt.

[C203]

Current ratio

The ratio of current assets to current liabilities. Normally, the greater or higher the ratio, the more liquid a firm is determined to be and thus is considered better able to pay debt. As a rule of thumb, a ratio of 2-to-1 is normally considered an acceptable minimum.

[C204]

Curtain wall

Many buildings built of steel frames or concrete have walls which support no load, but serve merely to protect from the weather. Such walls are "curtain walls." Modern fire-resistive construction usually calls for wall structure of this kind.

[C269]

Custodian

A term typically used in crime insurance. It refers to any insured person (partner, officer, employee) who has custody of insured property while inside the covered premises.

[C205]

Custom brokers and freight forwarders errors and omission insurance

Special insurance policies designed for custom brokers which provide coverage for liability as a result of errors, omissions, or negligence in arranging for the clearance and forwarding of imports of behalf of the importer.

Cut rate

A generic reference to below market insurance rates or premiums.

[C206]

Cut-off cancellation

The cancellation provision in a reinsurance agreement which clarifies that the reinsurer is not obligated to cover any loss that may occur after the specified cancellation date.

[C207]

Cut-through clause

The cut-through clause is a provision in a reinsurance agreement which clarifies that, should the primary insurer becomes insolvent, the reinsurer is still liable for its stated share of the loss but that payment will be made directly to the insured and not to the insurer as is normally done.

(See cut-through endorsement.)

[C208]

Cut-through endorsement

An addition to an insurance policy between an insurance company and a policyholder which requires that, in the event of the company's insolvency, any part of a loss covered by reinsurance be paid directly to the policyholder by the reinsurer. The cut-through endorsement is so named because it provides that the reinsurance claim payment "cuts-through" the usual route of payment from reinsured company-to-policyholder and then reinsurer-to-reinsured company, substituting instead the payment route of reinsurer-to-policyholder. The effect is to revise the route of payment only, and there is no intended increased risk to the reinsurer. Similar to the guarantee endorsement, the cut-through endorsement is also known as an assumption endorsement.

(See cut-through clause.)

[C254]

CWCLA

Casualty-Workers Compensation Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

[C270]

Cyber insurance

A special form of commercial insurance created to protect businesses against cyber (Internet) risks, such as hackers and other breaches of computer system security.

[C271]

Cyber risks

Exposures to loss faced by organizations that conduct business online, particularly loss caused by unauthorized entry into their systems by hackers.