Cancellation; Flat, Pro Rata, or Short Rate
In a flat cancellation the full premium is returned to the insured. A pro rata cancellation means the insurer has charged for the time the coverage was in force. Short rate cancellation entails a penalty in excess of pro rata for early termination.
Care, Custody or Control
An expression common to liability insurance contracts. It refers to exclusion in the policy eliminating coverage for damage to property of others that is in the insured’s "care, custody, or control." The insured has a bailee relationship to the property, in other words, making the insured liable for the care of the property beyond damage caused by negligence.
Certificate of Insurance
A written description of insurance in effect as of the date and time of the certificate. The certificate does not ordinarily confer any rights on the holder, i.e., the issuing insurer does not promise to inform the holder of change in or cancellation of coverage.
The expense of adjusting a claim, such as investigation and attorneys’ fees. It does not include the cost of the claim itself.
A type of liability insurance that responds only to claims for injury or damage that are brought (to the insurer) during the policy period (or during a designated extended reporting period beyond expiration). This development was in response to "long tail" claims, such as those related to asbestosis injury, carrying over many years and multiple layers of coverage limits. However, most public liability policies are written on an "occurrence" basis, covering injury or damage occurring during the policy period even if a claim is brought months or even years later. California statute of limitations is ten years.
Co-Insurance Clause Explaination of Co-Insurance
Co-insurance is an arrangement by which the insured, in consideration of a reduced rate, agrees to carry an amount of insurance equal to a percentage of the total value of the property insured.
An example is if you have guaranteed to carry insurance up to 80% or 90% of the value of your building and/or contents, whatever the case may be. If you don't, the company pays claims only in
proportion to the amount of coverage you do carry. The following equation is used to determine what amount may be collected for partial loss:
Amount of Insurance Carried x Loss = Payment
Amount of Insurance that Should be Carried
Mr. Right has an 80% co-insurance clause and the following situation:
- $100,000 building value
- $ 80,000 insurance carried
- $ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be
$80,000 x $10,000 = $10,000
Mr. Right recovers the full amount of his loss because he carried the coverage specified in his co- insurance clause.
Mr. Wrong has an 80% co-insurance clause and the following situation:
- $100,000 building value
- $ 70,000 insurance carried
- $ 10,000 building loss
By applying the equation for determining payment for partial loss, the following amount may be collected:
$70,000 x $10,000 = $8,750
Mr. Wrong's loss of $10,000 is greater than the company's limit of liability under his co-insurance clause. Therefore, Mr. Wrong becomes a self-insurer for the balance of the loss-- $1,250.
Completed Operations Liability Coverage
This form of liability insurance provides coverage for bodily injury and property damage rising from completed or abandoned operations, provided the incident occurs away from premises owned or rented by the insured. Operations are deemed completed at the earliest of the following items:
- When all operations to be performed by or on behalf of the insured under contract have been completed.
- When all operations to be performed by or on behalf of the insured at the site of the operations have been completed.
- When the portion of work out of which injury or damage rises has been put to its intended use by a party other than the contractor or subcontractor.
Commercial General Liability Coverage
Under this form of insurance and regarding a covered occurrence, the company will pay all sums the insured becomes legally obligated to pay as damages due to:
- Bodily Injury (Coverage A)
- Property Damage (Coverage B)
The insurance company has the right to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of suit are groundless, false or fraudulent, and to make such investigation and settlement of any claim or suit as it deems expedient. However, the company is not obligated to pay any claim or judgment or to defend any suit
after applicable limit of the company's liability has been exhausted by payments of judgments or settlements.
Contractual Liability Coverage
It is common in construction and other agreements (written or oral) for one party to "assume" the liability of another. This is sometimes referred to as a "hold harmless" agreement. The extent to which one holds another harmless varies from contract to contract, job to job, etc. To assume the liability of another, regardless of extent, is a voluntary undertaking which increases your exposure to loss. A standard Commercial General Liability policy does cover this additional exposure subject to certain exclusions.
An indirect consequence of direct loss to property. Business income may be lost when a store burns down, or frozen goods may spoil when windstorm causes an interruption of power. Consequential or
indirect loss is not generally insured by policies covering direct damage (i.e., by fire or wind as in these examples), but insurance is readily obtainable separately for most such consequential exposures— business income coverage being among the most common.
A bond that guarantees the owner of a building under construction that it will be completed. If the contractor cannot finish the work, the insurer is obligated to see that the work is performed.
In liability insurance, the "trigger" is the event that brings coverage into play. It may be either an occurrence of bodily injury or property damage; or, in a form with a claims-made trigger, the formal making of a claim.
Cross Liability Coverage
In the event of claim by one insured for which another insured covered by the same policy may be held liable, this endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company's overall limit of liability.