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29 GLOSSARY Airport Operator: An airport operator is an organization lower costs, and reduced litigation. Can be owner con- responsible for the direction and management of one or trolled (OCIP) or contractor controlled (CCIP). See also more airports. Partner controlled insurance program at http://www. irmi.com/online/insurance-glossary/terms/p/partner- Benchmarking: The act of comparing a measurement with controlled-insurance-program-pcip.aspx. a standard. It shows you where you are and helps you decide where you want to go. Crime Coverage: A crime insurance policy that is designed to meet the needs of organizations other than financial Builders' Risk: A property insurance policy that is designed institutions (such as banks). A commercial crime policy to cover property in the course of construction. There is typically provides several different types of crime cover- no single standard builders' risk form; most builders' risk age, such as employee dishonesty coverage; forgery or policies are written on inland marine (rather than com- alteration coverage; computer fraud coverage; funds mercial property) forms. Coverage is usually written on transfer fraud coverage; kidnap, ransom, or extortion an all-risk basis, and typically applies not only to prop- coverage; money and securities coverage; and money erty at the construction site, but also to property at off- orders and counterfeit money coverage. site storage locations and in transit. Builders' risk insurance can be written on either a completed value or a Cyber (Cyberspace Liability) Coverage: A term used to reporting form basis; in either case, the estimated com- describe the liability exposures encountered when com- pleted value of the project is used as the limit of municating or conducting business online. Potential liabil- insurance. ities include the Internet and e-mail. Online communication tools could result in claims alleging breaches of privacy Business Interruption: Insurance covering loss of income rights, infringement, or misappropriation of intellectual suffered by a business when damage to its premises by a property; employment discrimination; violations of covered cause of loss causes a slowdown or suspension of obscenity laws; the spreading of computer viruses; and its operations during the time required to repair or replace defamation. Media liability policies are available to cover the damaged property. There are two Insurance Services these exposures. Office, Inc., business income coverage forms: the busi- ness income and extra expense coverage form (CP 00 30) Deductible: A portion of covered loss that is not paid by the or the business income coverage form without extra insurer. expense (CP 00 32). Previously referred to as "business Employment Liability: A form of liability insurance cover- interruption coverage." ing wrongful acts arising from the employment process. Carrier: An insurance or reinsurance company that insures The most frequent types of claims alleged under such or "carries" the insurance or reinsurance. policies include wrongful termination, discrimination, and sexual harassment. The forms are written on a Claim: Used in reference to insurance, a claim may be a claims-made basis and generally exclude coverage for demand by an individual or corporation to recover, under large-scale, companywide layoffs. In addition to being a policy of insurance, for loss that may come within that written as a stand-alone coverage, employment liability policy. insurance is frequently available as an endorsement to Consolidated Insurance Program: See Controlled Insur- directors' and officers' liability policies. ance Program. Errors and Omissions: An insurance form that protects the Controlled Insurance Program (CIP): A centralized insured against liability for committing an error or omis- insurance program under which one party procures sion in performance of professional duties. Generally, insurance on behalf of all (or most) parties performing such policies are designed to cover financial losses rather work on a project or a site. Typically, the coverages pro- than liability for bodily injury and property damage. vided under a CIP include builders' risk, commercial Exposure: The state of being subject to loss because of some general liability, workers' compensation, and umbrella hazard or contingency. liability. CIPs are most commonly used on single con- struction projects, but other uses include contract mainte- Fiduciary Liability: The responsibility on trustees, employ- nance on a large plant or facility (maintenance wrap-up) ers, fiduciaries, professional administrators, and the plan or on an ongoing basis for multiple construction projects itself with respect to errors and omissions in the adminis- (rolling wrap-up). CIPs offer a number of benefits, tration of employee benefit programs as imposed by the including greater control of the coverage, potentially Employee Retirement Income Security Act.
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30 General Liability Insurance: A standard insurance policy Primary Coverage: The policy that responds first to an issued to business organizations to protect them against insured loss, either on a first-dollar basis or after allowing liability claims for bodily injury and property damage for a deductible. When the primary coverage limits are arising out of premises, operations, products, and com- paid, any remaining loss is covered by whatever excess pleted operations; and advertising and personal injury layer of insurance may be in place. liability. The policy was introduced in 1986 and replaced Professional Liability: Coverage designed to protect tradi- the "comprehensive" general liability policy. tional professionals (e.g., physicians) and quasi-profes- Insurance Broker: An insurance intermediary who/that sionals (e.g., real estate brokers) against liability incurred represents the insured rather than the insurer. Because as a result of errors and omissions in performing profes- they are not the legal representatives of insurers, brokers, sional services. Although there are a few exceptions, unlike independent agents, often do not have the right to most professional liability policies cover economic losses act on behalf of insurers, such as to bind coverage. suffered by third parties, as opposed to bodily injury and Although some brokers do have agency contracts with property damage (which is typically covered under com- some insurers, they usually remain obligated to represent mercial general liability policies). The vast majority of the interests of insureds rather than insurers. For exam- professional liability policies are written with claims- ple, some state insurance codes impose a fiduciary made coverage triggers. responsibility to act on behalf of their customers or pro- Property Insurance: First-party insurance that indemni- vide full disclosure of all their compensation from all fies the owner or user of property for its loss, or the loss sources. See also Agent at http://www.irmi.com/online/ of its income-producing ability, when the loss or damage insurance-glossary/terms/a/agent.aspx. is caused by a covered peril, such as fire or explosion. In Large Airport: Airports reporting operating revenue in the this sense, property insurance encompasses inland last fiscal year of more than $600 million. marine, boiler and machinery, and crime insurance, as well as what was once known as fire insurance, now sim- Law Enforcement Errors and Omissions: Provides errors ply called property insurance: insurance on buildings and omissions coverage for police departments. Unlike and their contents. most professional liability coverage, such policies are often written on an occurrence (rather than on a claims- Public Officials' Errors and Omission: Provides liability made) basis. Some of the more important covered acts coverage for the errors and omissions of public officials. include false arrest, excessive force, and invasion of pri- In effect, such policies serve the same function for vacy. This coverage can sometimes be provided on a lim- elected/appointed officials of state and local government ited basis in the general liability policy but must usually as directors' and officers' (D&O) insurance serves for the be purchased separately. Common exclusions are crimi- directors and officers of corporations. However, one nal/intentional acts, claims for injunctive relief, and major difference is that under public officials' liability motor vehicle operations. forms, employees and the public entity itself are insureds, whereas this is not the case with D&O policies. Exclu- Liability Limits: The stipulated sum or sums beyond which sions under this policy include losses owing to fraud or an insurance company is not liable for payments due to a dishonesty, bodily injury or property damage, false arrest, third party. The insured remains legally liable above the assault and battery, defamation, and fiduciary liability. limits. Renewal Policy: An insurance policy issued to replace an Loss: The basis of a claim for damages under the terms of a expiring policy. policy. Request for Proposals: A document used to secure propos- Medium Airport: An airport reporting operating revenue als for insurance or risk management services. between $251 million and $600 million. Retention: Assumption of risk of loss by means of noninsur- Owner-Controlled Insurance Program (OCIP): See ance, self-insurance, or deductibles. Retention can be Controlled Insurance Program. intentional or, when exposures are not identified, Pollution: The contamination of an environment by sub- unintentional. stances regarded as pollutants. Liability from pollution is Risk Identification: The qualitative determination of risks normally excluded to some degree by the general, auto, that are material, i.e., that potentially can impact the orga- and umbrella liability policies. In recent years, insurers nization's achievement of its financial and/or strategic have attempted to introduce strict exclusionary language objectives. This is often done through structured inter- into these policies, making it necessary for insureds to views of key personnel by internal (e.g., internal audit) or seek coverage under separate "environmental impair- external experts. In some cases, the organization's busi- ment liability" policies. ness process maps are used to guide the risk assessment.
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31 Self-Insurance: A system whereby a firm sets aside an War Exclusion: A provision found in nearly all insurance amount of its monies to provide for any losses that policies that excludes loss arising out of war or warlike occur--losses that could ordinarily be covered under an actions. The loss can result from either declared or unde- insurance program. The monies that would normally be clared war, but must be related to actions of a military used for premium payments are added to this special force directed by a sovereign power. Before the Septem- fund for payment of losses incurred. Self-insurance is a ber 11, 2001, terrorist attacks, the war exclusions in most means of capturing the cash flow benefits of unpaid loss liability insurance policies applied only with respect to reserves and also offers the possibility of reducing contractually assumed liability, on the theory that private expenses typically incorporated within a traditional persons and organizations could not otherwise incur lia- insurance program. It involves a formal decision to retain bility in connection with war. Following the September risk rather than insure it and is distinguished from nonin- 11, 2001, terrorist attacks, "war and terrorism" exclusions surance or retention of risks through deductibles, by a that broadened the war portion of the exclusion beyond formalized plan or system to pay losses as they occur. contractually assumed liability were quickly added to liability policies. That broadened war exclusion is now Small Airport: An airport reporting operating revenue standard, regardless of whether terrorism is insured or between zero and $250 million. excluded in the policy. Terrorism: The use of violence to produce terror for politi- War Risk Insurance: Insurance against loss or damage to cal or ideological purposes. Terrorism is distinct from property resulting from the acts of war. It is freely written war in that it need not be the act of a military force or be on marine exposures but is virtually unobtainable on directed by a sovereign power. Foreign acts of terrorism property exposures. may be certified as an insurable loss exposure under the Terrorism Risk Insurance Act (TRIA). See also Terror- Workers' Compensation: The system by which no-fault ism Risk Insurance Act (TRIA) at http://www.irmi.com/ statutory benefits prescribed in state law are provided by online/insurance-glossary/terms/t/terrorism-risk-insur- an employer to an employee (or the employee's family) ance-act-tria.aspx/ owing to a job-related injury (including death) resulting from an accident or occupational disease.