Between writing contracts and printing out job costing reports, legalese and computer-ese are just two of the “languages” business owners must learn in order to operate their companies effectively – and that’s not even counting communicating with Hispanic workers.
Yet another business area with lots of confusing lingo is insurance, but wading through the lengthy forms and all their perplexing verbage is a necessary part of keeping a company safe. The list below, provided by United Agencies Insurance, Pasedena, Calif., notes some common small business insurance terms and their definitions. This mini dictionary – along with the help of an experienced and knowledgeable broker – can help contractors understand exactly what their policies cover so insurance dollars are spent on the right risks.
(Additional definitions are available at the United Agencies’ Web site. Click “Insurance Definitions” under the Resources section of the home page.)
ACTUAL CASH VALUE: The sum of money required to pay for damages or lost property, computed on the basis of replacement value, minus its depreciation by obsolescence or general wear.
BLANKET INSURANCE: (1) Property-liability insurance that covers more than one type of property, in one location, in one policy or form instead of under separate items, or one or more types of property at more than one location; (2) A contract of health insurance that covers all of a class of persons not individually identified.
BOND: An obligation of the insurance company to protect an insured party against financial loss caused by acts of another.
BUILDINGS AND PERSONAL PROPERTY COVERAGE FORM: A commercial property coverage form designed to insure most types of commercial property (buildings, contents or both). It is the most frequently used commercial property form and has replaced the General Property Form, Special Building Form, Special Personal Property Form and others.
BUSINESS AUTO COVERAGE FORM: The latest commercial Automobile Insurance coverage form, which may be written as a monoline policy or as part of a commercial package. This form has largely replaced the Business Auto Policy.
BUSINESS INCOME COVERAGE FORM: A commercial property form providing coverage for “indirect losses” resulting from property damage, such as loss of business income and extra expenses incurred. It has replaced earlier Business Interruption and Extra Expense forms.
BUSINESS LIABILITY: The term used to describe the liability coverage provided by the Business Owners Liability Coverage Form. It includes liability for bodily injury, property damage, personal injury, advertising injury and fire damage.
BUSINESS PERSONAL PROPERTY: Traditionally known as “contents,” this term actually refers to furniture, fixtures, equipment, machinery, merchandise, materials, and all other personal property owned by the insured and used in the insured’s business.
CARRIER: (1) An insurance company that “carries” the insurance. (The terms “insurance company” or “insurer” are preferred because of the possible confusion of “carrier” with transportation terminology). (2) In transportation, the trucker, air carrier, ocean steamship company or other entity which moves the goods.
CLAIMS-MADE COVERAGE: A policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current reporting year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered. (Contrast this with “Occurrence Coverage.”
COMMERCIAL GENERAL LIABILITY (CGL) COVERAGE PART: General liability coverage, which may be written as a monoline policy or part of a commercial package. “CGL” now means commercial general liability forms, which have replaced the earlier “comprehensive” general liability forms. The latest forms include all sublines, provide very broad coverage, and two variations are available, “Occurrence,” and “Claims-Made,” coverage.
CONTRACTUAL LIABILITY: Liability assumed under any contract or agreement. Coverage is generally limited in liability policies, but in most cases may be provided for an additional premium.
EMPLOYERS LIABILITY INSURANCE: Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by workers’ compensation law.
EMPLOYERS NON-OWNERSHIP AUTOMOBILE LIABILITY: (1) Liability arising out of the operation of an automobile not owned by the insured. This frequently results when an employee uses his own personal car in the business activities of the insured; (2) Insurance coverage for the liability exposure mentioned above.
FLOATER POLICY: A policy under the terms of which protection follows moveable property, covering it wherever it may be.
GENERAL AGGREGATE LIMIT: A Commercial General Liability limit that applies to all damages paid for bodily injury, property damage, personal injury, advertising injury and medical expenses, except damages included in the products-completed operations hazard.
GENERAL EXCLUSION CLAUSE: A clause in the Institute Cargo Clauses 1982, which specifies risks that are excluded, irrespective of the risks covered elsewhere in the wording.
GOOD FAITH: A basic principle of insurance. The insured and his broker must disclose and truly represent every material circumstance to the Underwriter before acceptance of the risk. A breach of good faith entitles the Underwriter to avoid the contract. (Proposed changes in law may affect this definition.)
HAZARD: A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises and uninspected boilers are hazards.
HIRED AUTOMOBILE: Autos the insured leases, hires, rents or borrows but not autos owned by employees or members of their households.
INSURABLE RISK: A risk which meets most of the following requisites: (1) The loss insured against must be defined; (2) It must be accidental; (3) It must be large enough to cause hardship to the insured; (4) It must belong to a homogenous group of risks large enough to make losses predictable; (5) It must not be subject to the same loss at the same time as a large number of other risks; (6) The insurance company must be able to determine a reasonable cost for the insurance; (7) The insurance company must be able to calculate the chance of loss.
LIABILITY: Broadly, any legally enforceable obligation.
LIABILITY INSURANCE: That insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
LIABILITY LIMITS: The sum or sums beyond which a liability insurance company does not protect the insured on a liability policy.
NAMED INSURED: Any person, firm, or corporation, or any member thereof, specifically designated by name as insured(s) in a policy as distinguished from the others who, though unnamed, are protected under some circumstances.
OCCURRENCE COVERAGE: A policy providing liability coverage only for injury or loss that occurs during the policy period, regardless of when the claim is actually made.
PARTIAL LOSS: A loss under an insurance policy, which does not either (1) completely destroy or render worthless the insured property; or (2) exhaust the insurance applying thereto.
PAYROLL AUDIT: An examination of the insured’s payroll records by a representative of the insurance company to determine the premium due on a policy.
PERIL: A term used in the Marine Insurance Act (1906) to denote a hazard. The principle of proximate cause is applied to an insured peril to determine whether or not a loss is recoverable. In modern practice the term “risk” often replaces “peril.”
PROPERTY DAMAGE (LIABILITY) INSURANCE: Protection against liability for damage to the property of another not in the care, custody and control of the insured, as distinguished from liability for bodily injury.
PROPERTY INSURANCE: Insurance which indemnifies a person with an interest in physical property for its loss or the loss of its income-producing ability.
REIMBURSEMENT: Payment of an amount of money related to the amount of loss to or on behalf of the insured upon the occurrence of a defined loss.
RISK: A fortuity. It does not embrace inevitable loss. The term is used to define causes of loss covered by a policy.
REPLACEMENT COST: The cost of replacing property without deduction for depreciation.
SCHEDULE: (1) A list of specified amounts payable for, usually, surgical procedures, dismemberments, ancillary expenses or the like in Health Insurance policies; (2) The list of individual items covered under one policy as the various buildings or animals and other property in property insurance; (3) In Marine policies, a list attached to a slip, open cover, policy or other document, usually detailing the rates of premium for various voyages, interests and risks.
UMBRELLA LIABILITY POLICY: A liability policy designed to provide liability protection above and beyond that provided by standard liability contracts.
UNDERWRITER: (1) A person trained in evaluating risks and determining the rates and coverages that will be used for them; (2) An agent, especially a life insurance agent, who might qualify as a “field underwriter.”
WORKERS’ COMPENSATION: (1) A schedule of benefits payable to an employee for injury, disability, dismemberment or death as a result of occupational hazard. The payments are a liability of an employer. (2) Insurance agreeing to pay the Workers’ Compensation benefits required by law on behalf of the employer.
The author is Assistant Editor of Lawn & Landscape magazine and can be reached at lspiers@lawnandlandscape.com.