insured "a person, a business, or an organization whose property, life, or legal liabilit y is covered by an insurance policy" insurer an insurance

company covered loss the events for which insurance pays loss exposure (exposure) any condition or situation that presents the possibility of a loss law of large numbers "a mathematical principle stating that as the number of similar but independent e xposure units increases, the relative accuracy of predictions about future outco mes (losses) based on these exposure units also increases" exposure unit "a measure of loss potential and used in pricing insurance, i.e., in homeowners i nsurance, each home insured is an exposure unit" property loss exposure any condition or situation that presents the possibility that a property loss wil l happen real property consists of land as well as buildings and other structures attached to the land o r embedded in it personal property consists of all tangible or intangible property that is not real property net income income (or revenue) minus expenses during a given period liability loss exposure any condition or situation that presents the possibility that a liability loss wi ll happen liability loss a claim for monetary damages because of injury to another party of damage to anot her party's property human loss exposure (personal loss exposure) "any condition or situation that presents the possibility of a financial loss to an individual or a family by such causes as death, sickness, injury, or unemploy ment" personnel loss exposure "the possibility of a financial loss to a business because of the death, disabili ty, retirement, or resignation of key employees" indemnify to restore a party who has had a covered loss to the same financial position that party held before the loss occurred fire and allied lines insurance covers direct damage to or loss of insured property

business income insurance covers the loss of net income or additional expenses incurred by a business as th e result of a covered loss to its property crime insurance "protects the insured against loss to covered property from various causes of los s such as burglary, robbery, theft, and employee dishonesty" ocean marine insurance includes hull insurance (which covers ships) and cargo insurance (which covers th e goods transported by ships) inland marine insurance "covers miscellaneous types of property, such as movable property, goods in domes tic transit, and property used in transportation and communication" auto physical damage insurance covers loss of or damage to specified vehicles owned by the insured and sometimes covers vehicles borrowed or rented by the insured auto liability insurance covers an insured's liability for bodily injury to others and damage to the prope rty of others resulting from automobile accidents commercial general liability insurance "covers businesses for their liability for bodily injury and property damage; it can also include liability coverage for various other offenses that might give r ise to claims, such as libel, slander, false arrest, and advertising injury" personal liability insurance provides liability coverage to individuals and families for bodily injury and pro perty damage arising from the insured's personal premises or activities professional liability insurance "protects physicians, accountants, architects, engineers, attorneys, insurance ag ents and brokers, and other professionals against liability arising out of their professional acts or omissions" whole life insurance provides life-time protection (to age 100); policies accrue cash value and have p remiums that remain unchanged during the insured's lifetime cash value (of life insurance) "a savings fund that accumulates in a whole life insurance policy and that the po licyholder can access in several ways, including borrowing, purchasing paid-up l ife insurance, and surrendering the policy in exchange for the cash value" term insurance a type of life insurance that provides temporary protection (for a certain period ) with no cash value universal life insurance "combines life insurance protection with savings; the policy is a flexible-premiu m policy that separates the protection, savings, and expense components" medical insurance "covers the cost of medical care, including doctors' bills, hospital charges (inc luding room and board), laboratory charges, and related expenses" disability income insurance

a type of health insurance that provides periodic income payments to an insured w ho is unable to work because of sickness or injury stock insurance company an insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for these stockholders mutual insurance company an insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to its policyholder-owners demutualization "the process by which a mutual insurer, which is owned by its policyholders, beco mes a stock company, which is then owned by its stockholders" reciprocal insurance exchange (interinsurance exchange) an unincorporated association formed to provide insurance coverage to its members ; one of the distinguishing features of a reciprocal is that the subscribers emp ower an attorney-in-fact to manage it subscriber "also known as members, these are the policyholders of a reciprocal insurance exc hange who agree to insure each other" attorney-in-fact the contractually authorized manager of a reciprocal insurance exchange who admin isters its affairs and carries out its insurance transactions captive (insurance company) "an insurer that is formed as a subsidiary of its parent company, organization, o r group, for the purpose of writing all or part of the insurance on the parent c ompany or companies" reinsurance a type of insurance in which one insurer transfers some of all of the loss exposu res from policies written for its insureds to another insurer primary insurer the insurance company that transfers its loss exposures to another insurer in a c ontractual reinsurance arrangement reinsurer the insurance company that accepts the loss exposures of the primary insurer monopolistic state fund a state workers compensation insurance plan that is the only source of workers co mpensation insurance allowed in that state competitive state fund a state workers compensation insurance plan that competes with private insurers t o provide workers compensation insurance residual market plan (shared market plan) a program that makes insurance available to those who cannot obtain coverage beca use private insurers will not voluntarily provide such coverage for various reas ons guaranty fund a state fund that provides a system to pay the claims of insolvent insurers; the

money comes from assessments collected from all insurers licensed in the state National Association of Insurance Commissioners (NAIC) "an association consisting of the commissioners of the insurance departments of e ach state, the District of Columbia, and US territories and possessions; it coor dinates insurance regulation activities among the various insurance departments" model law "a document drafted by the NAIC, in a style similar to a state statute, that refl ects the NAIC's proposed solution to a given problem and provides a common basis to the states for drafting laws that affect the insurance industry" ratemaking the process insurers used to calculate the rates that determine the premium for i nsurance coverage rate the price of insurance for each unit of exposure; it's multiplied by the number o f exposure units to arrive at a premium premium a periodic payment by an insured to an insurance company in exchange to insurance coverage actuary a person who uses complex mathematical methods and technology to analyze loss dat a and other statistics and to develop systems for determining insurance rates actuarial equity a ratemaking concept through which actuaries base rates on actuarially calculated loss experience and place insureds with similar characteristics in the same rat ing class social equity a rating concept that considers rates to be unfairly discriminatory if they penal ize an insured for characteristics (such as age or gender) that are beyond the i nsured's control unfair discrimination involves applying different standards or methods of treatment to insureds who hav e the same basic characteristics and loss potential prior-approval law rates must be approved by the state insurance department before they can be used flex rating law prior approval is required only if the new rates are a specified percentage above or below previously filed rates file-and-use law rates must be filed by do not have to be approved before use use-and-file law rates must be filed within a specified period after they are first used in the st ate open competition (also called no-file) rates do not have to be filed with the state state-mandated rate

state-specified rates must be used by all insurers of a particular type of insura nce in the state solvency "the ability of an insurance company to meet its financial obligations as they be come due, even those resulting from insured losses that might be claimed several years in the future" solvency surveillance "the process, conducted by state insurance regulators, of verifying the solvency of insurance companies and determining whether the financial condition of insure rs enables them to meet their obligations and to remain in business in the long term" Insurance Regulatory Information System (IRIS) begun in the early 1970s as the Early Warning System; it is an analytical system designed by the NAIC to monitor an insurer's overall financial condition licensed (admitted) insurer is authorized by the state insurance department to transact business within that state domestic insurer is incorporated in the same state in which it is transacting business foreign insurer licensed to operated in a state but is incorporated in another state alien insurer is licensed in a US state but incorporated in another country market conduct regulation "consists of state laws that regulate the practices of insurers in regard to four areas of operation: sales and advertising, underwriting, ratemaking, and claim handling" standard market refers collectively to insurers who voluntarily offer insurance coverages at rate s designed for customers with average or better-than-average loss exposures excess and surplus lines (E&S insurance) "consists of insurance coverages, usually unavailable in the standard market, tha t are written by unlicensed insurers" nonadmitted (unlicensed) insurer insurers that are not licensed in many of the states in which they operate and th at write E&S insurance coverages written premium premiums on policies put into effect during a given period earned premium the portion of the written premium that applies to the part of the policy period that has already occurred unearned premium the portion of the written premium that applies to the part of the policy period that has not yet occurred paid loss

claim payment that an insurer has made incurred loss the sum of paid losses and changes in loss reserves loss reserve amounts designated by insurance companies to pay claims for losses that have alre ady occurred but are not yet settled; it is the insurer's best estimate of the t otal amount that it will pay in the future for a loss that has already occurred net underwriting gain or loss earned premiums minus losses and underwriting expenses for a specific period overall gain or loss from operations net underwriting gain or loss plus net investment gain results (or minus investme nt loss results) asset (in financial statements) property (both tangible and intangible) owned by an entity (the insurance company ) admitted asset "types of property, such as cash and stocks, that regulators allow insurers to sh ow as assets on their financial statements; such assets are easily convertible t o cash at or near the property's market value" nonadmitted asset "types of property, such as office furniture and equipment, that insurance regula tors do not allow insurers to show as assets on financial statements because the se assets cannot readily be converted to cash at or near their market value" liabilities (in financial statements) "financial obligations, or debts, owed by a company to another entity, usually th e policyholder in the case of an insurance company" unearned premium reserve the total of an insurer's unearned premiums on all policies at a particular time policyholders' surplus equal to total admitted assets minus total liabilities balance sheet "a type of financial statement that shows a company's financial position at a par ticular point in time and includes the company's admitted assets, liabilities an d policyholders' surplus" income statement "a type of financial statement that shows a company's revenues, expenses, and net income for a particular period, usually one year" loss ratio calculated by dividing an insurer's incurred losses (including loss expenses) for a given period by its earned premiums for the same period expense ratio calculated by dividing an insurer's incurred underwriting expenses for a given pe riod by its written premiums for the same period combined ratio the sum of the loss ratio and the expense ratio

investment income ratio calculated by dividing net investment income by earning premiums for a particular period overall operating ratio calculated by subtracting the investment income ratio from the combined ratio capacity ratio or premium-to-surplus ratio calculated by dividing written premiums by policyholders' surplus marketing "the process of identifying customers and their needs and then creating, pricing, promoting, selling, and distributing products or services to meet those needs" producer any person who sells insurance products for an insurance company or companies agency "a legal relationship that is formed when one party, the principal, authorizes an other party, the agent, to act as a legal representative of the principal" principal the party that authorizes the agent to act on its behalf in an agency relationshi p agent the party that is authorized by the principal to act on the principal's behalf in an agency relationship insurance agent legal representatives of the insurance company for which they have contractual ag reements to sell insurance agency contract (agency agreement) "a written agreement between an insurance company and an agent that specifies, am ong other things, the scope of the agent's authority to conduct business for the insurer" errors and omissions (E&O) negligent acts committed by a person in the conduct of the insurance business tha t give rise to legal liability for damages; these claims can also arise from a f ailure to act that creates legal liability express authority authority that the principal specifically grants to the agent binding authority "usually granted in the agency contract, this is the authority of an insurance ag ent to effect coverage on behalf of an particular insurer" binder a temporary contract of insurance that can be either written or oral implied authority "authority that arises from actions of the agent that are in accord with accepted custom and are considered to be within the scope of authority granted by the pr incipal, even though such authority is not expressly granted orally or in an age ncy contract" apparent authority

authority based on a third party's reasonable belief that an agent has authority to act on behalf of the principal independent agency "an independent firm that sells insurance, usually as a representative of several unrelated insurance companies" independent agent a producer who works for an independent agency agency expiration list the record of an insurance agency's present policyholders and the dates their pol icies expire (insurance) broker an independent business owner or firm that sells insurance by representing custom ers rather than insurers managing general agency (MGA) an independent business organization that appoints and supervises independent age nts for insurance companies that use the independent agency system; it functions almost as a branch office for one or more insurance companies exclusive agent an agent that has a contract to sell insurance exclusively for one insurance comp any (or a group of related companies) direct writing system uses sales representatives who are employees of an insurance company direct writer uses the direct writing system to market insurance direct response system "includes any insurance marketing system that does not depend primarily on indivi dual producers to locate customers and sell insurance but relies primarily on ma il, phone, and/or internet sales" mixed marketing system refers to the use by an insurer of more than one marketing system (sales) commission a percentage of the premium that the insurer pays to the agency or producer for n ew policies sold or existing policies renewed contingent commission "a commission that an insurer pays, usually annually, to an independent agency an d that is based on the premium volume and profitability level of the agency's bu siness with that insurer" marketing representative "insurance company employees whose role is to visit agents representing the insur er, to develop and maintain sound working relationships with those agents, and t o motivate the agents to produce a satisfactory volume of profitable business fo r the insurer" production underwriter insurance company employees who work in an insurer's office in an underwriting po sition but who also travel to visit and maintain rapport with agents and sometim

es clients unfair trade practices laws state laws that specify certain prohibited business practices rebating "offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance" underwriting "the process of selecting insureds, pricing coverage, determining insurance polic y terms and conditions, and then monitoring the underwriting decisions made" underwriter "an insurance company employee who evaluates applicants for insurance, selects th ose that are acceptable to the insurer, prices coverage, and determines policy t erms an conditions" adverse selection a situation that occurs because people with the greatest probability of loss are the ones most likely to purchase insurance; it normally occurs if the premium is low relative to the loss exposure capacity "refers to the amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to the size of its policyholders' surplus; an insurer must have adequate policyholders' surplus to be able to incr ease the volume of insurance it writes" commensurate with the exposure a relationship between the premium and the exposure where the size of the premium is appropriate for the exposure assumed by the insurer class rate or manual rate "rates that apply to all insureds in the same rating category, or rating class; i nsureds with similar loss exposures are grouped into rating classes" merit rating plan rating plans that modify class rates to reflect loss characteristics of a particu lar insured individual rate or specific rate used to assign a specific insurance rate that reflects the unique characteristics of an insured or the insured's property judgment rate a type of individual rate used to develop a premium for a unique exposure for whi ch there is no established rate; the underwriter relies heavily on his experienc e standard form "insurance forms that contain standardized policy wording; they are developed by insurance advisory organizations, although some insurers develop their own" book of business (portfolio) "a group of policies with a common characteristic, such as territory or type of c overage; it can also refer to all policies written by a particular insurer or ag ency" treaty reinsurance

an arrangement whereby a reinsurer agrees to reinsure automatically a portion of all eligible insurance of the primary insurer facultative reinsurance involves a separate transaction for each reinsured policy; each policy is evaluat ed individually underwriting authority the limit on decisions that an underwriter can make without receiving approval fr om someone at a higher level decentralized "activities are moved away from a central location; processes and decision-making authority are moved geographically closer to the insured, usually to a field of fice" centralized activities are in a central location; many decisions are made in the home office underwriting audit a process in which members of the home office underwriting department examine fil es to see whether underwriters are following underwriting guidelines expert system (knowledge based system) "computer software programs that supplement the underwriting decision-making proc ess; it asks for information necessary to make an underwriting decision, ensurin g that no necessary information is overlooked" hazard conditions that increase the chance of a loss occurring physical hazard "tangible characteristics of property, persons, or operations that tend to increa se the probably frequency or severity of loss" moral hazard dishonest tendencies in the character of the insured (or applicant) that increase the probability of a loss occurring morale hazard (attitudinal hazard) "involve carelessness about, or indifference to, potential loss on the part of an insured or applicant" legal hazard characteristic of the legal/regulatory environment that affect an insurer's abili ty to collect a premium commensurate with the exposure to loss claim a demand by a person or business seeking to recover from an insurance company for a loss that might be covered by an insurance policy claim representative (adjuster) "a person responsible for investigating, evaluating and settling claims" claimant anyone who submits a claim to an insurance company; can be a first party or a thi rd party reservation of rights letter a notice sent by the insurer to an insured advising that the insurer is proceedin

g with investigation of a claim but that the insurer retains the right to deny c overage later staff claim representative an insurance company employee who performs some or all of the insurer's claim han dling activities inside claim representative "an insurance company employee who handles claims that can be settled, usually by telephone or letter, from inside the insurer's office" outside claim representative (field claim representative) an insurance company employee who handles claims that cannot be handled easily by phone or mail independent adjuster independent claim representatives who offer claim handling services to insurance companies for a fee draft authority authority expressly given to an agent by an insurer to settle and pay certain typ es of claims by writing a claim draft up to a specified limit public adjuster a person hired by an insured to represent the insured in handling a claim self-insurance plan "an arrangement in which an organization pays for its losses with its own resourc es rather than purchasing insurance, however, the organization may choose to buy insurance for losses exceeding a certain limit" third-party administrator (TPA) business firms that contract to provide administrative services to other business es (often contracted by business with self-insurance plans) insurable interest exists if a person or other entity has any right to or interest in the property s uch that a loss to that property would cause a direct monetary loss to that pers on or entity actual cash value (ACV) the replacement cost of property minus depreciation replacement cost the cost to repair or replace property using new materials of like kind and quali ty with no deduction for depreciation depreciation an allowance for physical wear and tear or technological or economic obsolescence agreed value "a method of valuing property in which the insurer and the insured agree on the v alue of the property at the time the policy is written, and that amount is state d in the policy declarations and is the amount the insurer will pay in the event of a total loss to the property" subrogation the insurer's right to recover payment from a negligent third party salvage rights

the rights of the insurer to recover and sell or otherwise dispose of insured pro perty on which the insurer has paid a total loss or a constructive total loss constructive total loss exists when a vehicle (or other property) cannot be repaired for less than its ac tual cash value minus the anticipated salvage value damages refer to a monetary award that one party is required to pay to another who has su ffered loss or injury for which the first party is legally responsible compensatory damages "damages, which include both special and general damages, that are intended to co mpensate a victim for harm actually suffered" special damages "compensatory damages allowed for specific, out-of-pocket expenses, such as docto r and hospital bills" general damages "compensatory damages awarded for losses, such as pain and suffering, that do not have a specific economic value" punitive damages "damages awarded by a court to punish wrong-doers who, through malicious or outra geous actions, cause injury or damage to others" unfair claim practices laws state laws that specify claim practices that are illegal contract a complete written contract of insurance policy a legally enforceable agreement between two or more parties agreement offer and acceptance consideration an exchange of something of value that is required in any valid contract conditional contract a contract in which one or more parties must perform only under certain condition s utmost good faith an obligation to act in complete honesty concealment an intentional failure to disclose a material fact material fact any information that would affect the insurer's underwriting decision to provide or maintain insurance or that would affect a claim settlement misrepresentation a false statement of a material fact contract of adhesion

a contract in which one party (the insured) must adhere to the agreement as writt en by the other party (the insurer) contract of indemnity "the insurer agrees, in the event of a covered loss, to pay an amount directly re lated to the amount of the loss" principle of indemnity states that the insured should not be better off financially after a loss than be fore valued policy "a policy in which the insurer pays a stated amount in the event of a specified l oss, regardless of the actual value of the loss" "declarations page (declarations, dec)" an information page that provides specific details about the insured and the subj ect of the insurance insuring agreement "a statement that the insurer will, under certain circumstances, make a payment o r provide a service" exclusion policy provisions that eliminate coverage for specified exposures manuscript policy an insurance policy that is specifically drafted according to terms negotiated be tween a specific insured (or group of insureds) and an insurer self-contained policy a single document that contains all the agreements between the insurer and the in sured and that forms a complete policy by itself endorsement a document that amends an insurance policy in some way modular policy "consists of several different documents, non of which by itself forms a complete contract" cancellation "refers to the termination of a policy, by either the insurer or the insured, dur ing the policy period" pro rata refund the unused premium (based on the portion of the premium for the number of days re maining in the policy) returned to the insured when a policy is canceled short rate refund "sometimes used when the insured cancels midterm, this is a return of premium les s than the pro rata refund would be" liberalization clause "a policy condition that provides that if a policy form is broadened at not addit ional premium, the broadened coverage automatically applies to all existing poli cies of the same type" assignment the transfer of rights or interest in a policy to another party by the insured

money "currency, coins and bank notes; can also include traveler's checks, credit card slips and money orders held for sale in some cases" securities "written instruments representing either money or other property (i.e., stocks an d bonds)" auto (automobile) "a broad term that includes cars, trucks, buses and other motorized vehicles desi gned for use on public roads" mobile equipment includes many types of land vehicles -- usually designed for use principally off public roads -- including equipment attached to them (this is specifically defin ed in most commercial insurance policies) recreational vehicles vehicles used for sports and recreational activities cause of loss (peril) the actual means by which property is damaged or destroyed named perils listed and described in the policy; represent the only covered causes of loss open perils (special form coverage) (all-risks) provides coverage for 'risk of direct loss' to property; any direct loss to prope rty is covered unless the cause of loss is specifically excluded in the policy mortgagee (mortgage holder) "a lender that loans money on a home, building or other real property" mortgagor the person or organization that borrows money from a mortgagee to finance the pur chase of real property bailee a person or business that holds the property of others for some specific purpose property insurance "any type of insurance that indemnifies an insured who suffers a financial loss b ecause property has been lost, stolen, damaged or destroyed" floater policies that are designed to cover property that moves from location to location friendly fire "a fire that stays in its intended place (i.e., a fireplace)" hostile fire a fire that leaves its intended place proximate cause the event that sets in motion an uninterrupted chain of events contributing to th e loss vehicle damage (peril) damage done by a motor vehicle to some other kind of property

vandalism willful and malicious damage to or destruction of property sprinkler leakage the accidental leakage or discharge of water or other substance from an automatic sprinkler system sinkhole collapse a cause of loss involving damage by the sudden sinking or collapse of land into u nderground empty spaces created by the action of water on limestone or dolomite mine subsidence "a cause of loss involving the sinking of ground surface when underground open sp aces, resulting from the extraction of coal or other minerals, are gradually fil led in by rock and earth from above" volcanic action "a cause of loss by lava flow, ash, dust, particulate matter, airborne volcanic b last, or airborne shock waves resulting from a volcanic eruption" burglary the taking of property from inside a building by someone who unlawfully enters or exits the building robbery the taking of property from a person by someone who has caused or threatened to c ause the person harm theft a broad term that means any act of stealing; theft includes burglary and robbery collision covers damage to an insured motor vehicle caused by its impact with another vehic le or object or by its upset or overturn other than collision (comprehensive) "covers losses to a covered auto by fire, theft, vandalism, falling objects, floo d and various other perils" specified causes of loss "a less expensive alternative to comprehensive coverage in commercial auto polici es; it is a named perils coverage that covers loss to a covered vehicle caused b y fire, lightning, theft, windstorm, hail, earthquake, flood, vandalism and othe r specifically listed perils" direct loss a reduction in the value of property that results directly and often immediately from damage to that property time element loss (indirect loss) includes loss of income or extra expenses resulting from direct loss to property extra expenses expenses that reduce the length of a business interruption or enable a business t o continue some operations when the property has been damaged by a covered cause of loss additional living expense a coverage in homeowners policies that indemnifies the insured for the additional

expenses that are incurred following a covered property loss so that the househ old can maintain its normal standard of living while the dwelling is uninhabitab le named insured the policyholder whose name(s) appear on the declarations page of an insurance po licy first named insured "the person or organization whose name appears mmercial insurance policy and who, depending on the one responsible for paying premiums and the any return premiums, to cancel the policy, and ation or nonrenewal" mortgage clause (mortgage holders clause) first as the named insured on a co the policy conditions, might be one who has the right to receive to receive the notice of cancell

"protects the insurable interest of the mortgagee by giving it certain rights, su ch as the right to be named on claim drafts for losses to insured property and t he right to be notified of policy cancellation" loss payee "a lender, named on an insurance policy, who has loaned money on personal propert y, such as a car" loss payable clause "provides that a loss will be paid to both the insured and the loss payee as thei r interests appear and gives the loss payee certain rights; however, not as many rights are extended to the lender as the mortgage clause extends" deductible a portion of a covered loss that is not paid by the insurer; it is subtracted fro m the amount the insurer would otherwise be obligated to pay the insured insurance-to-value provisions "provisions in property insurance policies that encourage insureds to purchase an amount of insurance that is equal to, or close to, the value of the covered pro perty" coinsurance "an insurance-to-value provision in many property insurance policies; if the prop erty is underinsured, this provision reduces the amount than an insurer will pay for a covered loss" legal liability means that a person or organization is legally responsible for injury or damage s uffered by another person or organization constitutional law consists of the Constitution itself and all the decisions of the Supreme Court th at involve the Constitution statutory law "consists of the formal laws, or statutes, enacted by federal, state, or local le gislative bodies" common law (case law) consists of a body of principles and rules established over time by courts on a c ase-by-case basis criminal law

the category of law that applies to wrongful acts that society deems so harmful t o the public welfare that government takes the responsibility for prosecuting an d punishing the wrongdoers civil law the category of law that deals with the rights and responsibilities of citizens w ith respect to one another; applies to legal matters not governed by criminal la w contract law the branch of civil law that deals with contracts and settles contract disputes tort "a wrongful act, other than a crime or breach of contract, committed by one party against another" tort law the branch of civil law that deals with civil wrongs other than breaches of contr act negligence failure to act in a manner that is reasonably prudent; occurs when a person or or ganization fails to exercise the appropriate degree of care under given circumst ances tortfeasor "a person, a business, or another party who has committed a tort" vicarious liability legal responsibility that occurs when one party is held liable for the actions of another party intentional tort a deliberate act (other than a breach of contract) that causes harm to another pe rson assault the intentional threat of bodily harm battery the unlawful physical contact with another person libel a written or printed untrue statement that damages a person's reputation slander an oral untrue statement that damages a person's reputation false arrest an unlawful physical restraint of another's freedom invasion of privacy an encroachment on another person's right to be left alone absolute liability (strict liability) "a legal liability that arises from inherently dangerous activities or dangerousl y defective products that result in injury or harm to another, regardless of how much care was used in the activity; does not require proof of negligence" hold harmless agreement

a contractual provision that obligates one party to assume the legal liability of another party warranty "a promise, either written or implied, such as a promise by a seller to a buyer t hat a product is fit for a particular purpose" statutory liability legal liability imposed by a specific statute or law compensatory damages damages intended to compensate a victim for harm actually suffered; include speci al (specific out-of-pocket) and general (losses w/o specific economic value) dam ages liability insurance covers losses resulting from bodily injury to others or damage to the property of others for which the insured is legally liable and to which the coverage applie s bodily injury "any physical injury to a person, including sickness, disease and death" property damage "physical injury to, destruction of, or loss of use of tangible property" personal injury (as used in insurance policies) "injury, other than bodily injury, arising from intentional torts such as libel, slander, or invasion of privacy" litigation expenses "the expenses incurred for legal defense, such as attorneys' fees, expert witness fees, and the cost of legal research" supplementary payments "amounts the insurer agrees to pay (in addition to the liability limits) for item s such as premiums on bail bonds and appeal bonds, loss of the insured's earning s because of attendance at trials, and other reasonable expenses incurred by the insured at the insurer's request" prejudgment interest interest that might accrue on damages before a judgment has been rendered postjudgment interest interest that might accrue on damages after a judgment has been entered in a cour t and before the money is paid medical payments coverage "pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of wh ether the insured was at fault" occurrence basis coverage "covers liability claims that occur during the policy period, regardless of when the claim is submitted to the insurer" claims-made coverage covers liability claims that are made (submitted) during the policy period for co vered events that occur on or after the retroactive date and before the end of t he policy period

retroactive date the date on or after which injury or damage must occur in order to be covered und er a claims-made policy each person limit the maximum amount an insurer will pay for injury to any one person for a covered loss each occurrence limit "the maximum amount an insurer will pay for all covered losses from a single occu rrence, regardless of the number of persons injured or the number of parties cla iming property damage" aggregate limit the maximum amount an insurer will pay for all covered losses during the covered policy period split limits separate limits that an insurer will pay for bodily injury and for property damag e single limit the maximum amount and insurer will pay fro the insured's liability for both bodi ly injury and property damage that arise from a single occurrence risk management "the process of making and implementing decisions to deal with loss exposures; in volves identifying loss exposures and then applying various techniques to elimin ate, control, finance or transfer those exposures" loss exposure survey a risk management tool in the form of a checklist of questionnaire listing potent ial loss exposures that a household or an organization might face flowchart a diagram that depicts the flow of a particular operation or set of related opera tions within an organization loss frequency a term used to indicate how often losses occur or are expected to occur; it is us ed to predict the likelihood of similar losses in the future loss severity refers to the dollar amount of damage that results or might result from loss expo sures; used to predict how costly future losses are likely to be avoidance a risk management technique that eliminates a loss exposure and reduces the chanc e of loss to zero loss control a risk management technique that attempts to decrease the frequency or severity o f losses; includes loss prevention and loss reduction loss prevention seeks to lower the frequency of losses; to decrease the number of losses loss reduction seeks to lower the severity of losses that do occur; to decrease the dollar amoun

t of losses retention a risk management technique that involves retaining all or part of a particular l oss exposure noninsurance transfer a risk management technique in which one party transfers the potential financial consequences of a particular loss exposure to another party that is not an insur ance company