Admin panel
Insurance Planning

INSURED - A person or a corporation who contracts for an insurance policy that indemnifies (protects) him against loss or damage to property or, in the case of a liability policy, defend him against a claim from a third party.

NAMED INSURED - Any person, firm or corporation specifically designated by name as an insured(s) in a policy as distinguished from others who, though unnamed, are protected under some circumstances. For example, a common application of this latter principle is in auto liability policies wherein by a definition of "insured", coverage is extended to other drivers using the car with the permission of the named insured. Other parties can also be afforded protection of an insurance policy by being named an "additional insured" in the policy or endorsement.

ADDITIONAL INSURED - An individual or entity that is not automatically included as an insured under the policy of another, but for whom the named insureds policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insureds impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).

CO-INSURANCE - The sharing of one insurance policy or risk between two or more insurance companies. This usually entails each insurer paying directly to the insured their respective share of the loss. Co-insurance can also be the 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 dont, 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

Amount of Insurance that = Payment

Should be Carried

Example A 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 collected:

$80,000 x $10,000 = $10,000

$80,000

Mr. Right recovers the full amount of his loss because he carried the coverage specified in his co-insurance clause.

Example B 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

$80,000

Mr. Wrongs loss of $10,000 is greater than the companys limit of liability under his co-insurance clause. Therefore, Mr. Wrong becomes a self-insurer for the balance of the loss-- $1,250.

PREMIUM - The amount of money paid by an insured to an insurer for insurance coverage.

DEDUCTIBLE - The first dollar amount of a loss for which the insured is responsible before benefits are paid by the insurer; similar to a self-insured retention (SIR). The insurers liability begins when the deductible is exhausted.

SELF INSURED RETENTION - Acts the same way as a deductible but the insured is responsible for all legal fees incurred in relation to the amount of the SIR.

POLICY LIMIT - The maximum monetary amount an insurance company is responsible for to the insured under its policy of insurance.

FIRST PARTY INSURANCE - Insurance that applies to coverage for an insureds own property or a person. Traditionally it covers damage to insureds property from whatever causes are covered in the policy. It is property insurance coverage. An example of first party insurance is BUILDERS RISK INSURANCE which is insurance against loss to the rigs or vessels in the course of their construction. It only involves the insurance company and the owner of the rig and/or the contractor who has a financial interest in the rig.

THIRD PARTY INSURANCE - Liability insurance covering the negligent acts of the insured against claims from a third party (i.e., not the insured or the insurance company - a third party to the insurance policy). An example of this insurance would be SHIP REPAIRERS LEGAL LIABILITY (SRLL) - provides protection for contractors repairing or altering a customers vessel at their shipyard, other locations or at sea; also covers the insured while the customers property is under the "Care, Custody and Control" of the insured. A Commercial General Liability policy is needed for other coverages, such as slip-and-fall situations.

INSURABLE INTEREST - Any interest in something that is the subject of an insurance policy or any legal relationship to that subject that will trigger a certain event causing monetary loss to the insured. Example of insurable interest - ownership of a piece of property or an interest in that piece of property, e.g., a shipyard constructing a rig or vessel. (See BUILDERS RISK above)

LIABILITY INSURANCE - Insurance coverage that protects an insured against claims made by third parties for damage to their property or person. These losses usually come about as a result of negligence of the insured. In marine construction this policy is referred to an MGL, marine general liability policy. In non marine circumstances the policy is referred to as a CGL, commercial general liability policy. Insurance policies can be divided into two broad categories:

  • First party insurance covers the property of the person who purchases the insurance policy. For example, a home owners policy promising to pay for fire damage to the home owners home is a first party policy. Liability insurance, sometimes called third party insurance, covers the policy holders liability to other people. For example, a homeowners policy might cover liability if someone trips and falls on the home owners property. Sometimes one policy, such as in these examples, may have both first and third party coverage.
  • Liability insurance provides two separate benefits. First, the policy will cover the damage incurred by the third party. Sometimes this is called providing "indemnity" for the loss. Second, most liability policies provide a duty to defend. The duty to defend requires the insurance company to pay for lawyers, expert witnesses, and court costs to defend the third partys claim. These costs can sometimes be substantial and should not be ignored when facing a liability claim.


UMBRELLA LIABILITY COVERAGE - This type of liability insurance provides excess liability protection. Your business needs this coverage for the following three reasons:

  • It provides excess coverage over the "underlying" liability insurance you carry.
  • It provides coverage for all other liability exposures, excepting a few specifically excluded exposures. This subject to a large deductible of about $10,000 to $25,000.
  • It provides automatic replacement coverage for underlying policies that have been reduced or exhausted by loss.


NEGLIGENCE- The failure to use reasonable care. The doing of something which a reasonably prudent person would not do, or the failure to do something which a reasonably prudent person would do under like circumstances. Negligence is a legal cause of damage if it directly and in natural and continuous sequence produces or contributes substantially to producing such damage, so it can reasonably be said that if not for the negligence, the loss, injury or damage would not have occurred.

GROSS NEGLIGENCE - A carelessness and reckless disregard for the safety or lives of others, which is so great it appears to be almost a conscious violation of other peoples rights to safety. It is more than simple negligence, but it is just short of being willful misconduct. If gross negligence is found by the trier of fact (judge or jury), it can result in the award of punitive damages on top of general and special damages, in certain jurisdictions.

WILLFUL MISCONDUCT - An intentional action with knowledge of its potential to cause serious injury or with a reckless disregard for the consequences of such act.

PRODUCT LIABILITY - Liability which results when a product is negligently manufactured and sent into the stream of commence. A liability that arises from the failure of a manufacturer to properly manufacture, test or warn about a manufactured object.

MANUFACTURING DEFECTS - When the product departs from its intended design, even if all possible care was exercised.

DESIGN DEFECTS - When the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design, and failure to use the alternative design renders the product not reasonably safe.

INADEQUATE INSTRUCTIONS OR WARNINGS DEFECTS - When the foreseeable risks of harm posed by the product could have been reduced or avoided by reasonable instructions or warnings, and their omission renders the product not reasonably safe.

PROFESSIONAL LIABILITY INSURANCE - Liability insurance to indemnify professionals, (doctors, lawyers, architects, engineers, etc.,) for loss or expense which the insured professional shall become legally obliged to pay as damages arising out of any professional negligent act, error or omission in rendering or failing to render professional services by the insured. Same as malpractice insurance.

Professional Liability has expanded over the years to include those occupations in which special knowledge, skills and close client relationships are paramount. More and more occupations are considered professional occupations, as the trend in business continues to grow from a manufacturing-based economy to a service-oriented economy. Coupled with the litigious nature of our society, the companies and staff in the service economy are subject to greater exposure to malpractice claims than ever before.