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A Guide to Pesky Insurance Acronyms,
Lingo and Confusing Terminology

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168 Hour Occurence (Place commonly used: Earthquake Insurance) -An “hours clause” that is part of most earthquake policies.  A finite chronologic limit which carefully restricts what constitutes an “occurrence” thus affecting how deductibles are applied.    Sample policy language: “Each loss by earthquake shall constitute a single claim hereunder; provided that if more than one earthquake shall occur within any period of one-hundred sixty-eight (168) hours (one week) during the term of this endorsement, such shocks shall be considered to constitute a single earthquake.”  Note: Some carriers offer seventy-two (72) hour occurrence.

ACV (Place commonly used: Property) - “Actual Cash Value” – Replacement cost minus depreciation.

Additional Insured (Place commonly used: All Lines except W/C) - A person or entity who qualifies as "Insured" under the terms of a policy even though not a first named insured.  For example, officers of a corporation may be included as Insureds under the terms of a policy written in the name of the corporation.  Similarly, the management agreement may require that the community manager (and firm) be added as an “Additional Insured.”

Adjuster (Place commonly used: All Lines) - A person may act either on behalf of the insurance company or the Insured in the settling a claim. Independent adjusters represent the insurance company on a fee basis; public adjusters represent the Insured on a fee basis.

“Admitted” Carrier vs. “Non-Admitted” Carrier (Place commonly used: All Lines) - Insurance carriers in California can choose to do business on either an “admitted” or “non-admitted” basis (the latter is also sometimes expressed as “excess” or “surplus lines” basis.)  The non-admitted carrier is domiciled in a state other than California (although some may be based in Bermuda or London).  Carriers who chose to do business in a given market without being domiciled in California are allowed to do so only after they are added to the California Insurance Commissioner’s LESLI list – the List of Eligible Surplus Lines Insurers. A “non-admitted” carrier is subject to less scrutiny, regulation and oversight.   A non-admitted carrier does not participate in the California Insurance Guarantee Fund.   As a result, if that carrier were to go insolvent, the policyholder does not have any protection through the Guarantee Fund.   That being said however, the California Guarantee Fund is limited to a maximum of $500,000 should your carrier go insolvent.  Regardless of how many unit owners are in a given condominium association, they consider the entity (the HOA) to be one Insured, and the limit will apply to the HOA as one entity.  Both admitted and non-admitted carriers are subject to the same rating review by A.M. Best, Standard and Poors, Weiss Reports, et al.

Agent (Place commonly used: All Lines) - The term used for one person appointed for the insurance company and acting on behalf of that carrier in the insurance transaction.

All Risk (Place commonly used: Property) - No longer in use (due to broad interpretations of the term “All Risk” by the Courts here in California and elsewhere). Typically referred to as “Special Form.”   The policy covers all property losses except for those items excluded.

A.M. Best Rating (Place commonly used: General) -The A.M. Best Company provides credit ratings and financial data products and services for the insurance industry.  A.M. Best assigns traditional letter grades, ranging from the very highest, A++ (Superior) to the lowest, F.  Additionally, A.M. Best assigns number grades to express a carrier’s financial size, or Financial Size Category (FSC), which is designed to provide a convenient indicator of the size of a company based on how much capital, surplus and conditional reserve funds the carrier has. Financial size categories range from one to 15; one being the poorest, and 15 the richest. Many insurance buyers consider buying insurance coverage from companies that they believe have sufficient capacity to insure their risk.

Annual Aggregate (Place commonly used: Liability) - The maximum a carrier will pay under a policy during the policy term.

Bare Walls (Place commonly used: Property) - This term is used by insurance practitioners to describe the “extent” or “scope” of a Master property policy covering a condominium association as it relates, in part, to the provision within many CC&Rs where the Board of Directors is only obligated to fix, repair or maintain up to and including the “unfinished floors, walls and ceilings” of the dwellings.  When used, the “bare walls” expression is a way of describing where the “Master Policy coverage ends” -- and the point where the individual unit owner policy (HO-6) to insure -- begins.  Sufficient care should be established to determine exactly what the Master Policy will or will not cover so an individual unit owner can procure the right coverage on his or her policy.

Binder (Place commonly used: All Lines) - A “Binder of Insurance” is a temporary insurance contract issued by a company as a substitute until the policy is issued.   An Insurance Binder may typically be issued for 30 or 60 days, but becomes null and void once the policy, itself, is issued. 

Bind Order (Place commonly used: All Lines) - A phrase used within the insurance industry when an signed order is given to bind coverage at the insured’s request based on a specified offer or proposal.   Typical usage:  “Thank for the “bind order.” We have bound coverage effective July 1st per on your request.”

Blanket Coverage (Place commonly used: Property) - A means of insuring various items of property under one limit of liability.

Broker (Place commonly used: All Lines) - One who acts as the Insured’s agent in arranging insurance. May not necessarily be an “agent” for that company but, in fact, can represent many companies. 

Building Ordinance (Place commonly used: Property) - “Code Upgrade” Coverage to protect against the enforcement of changes in building codes or ordinances of local cities, counties or municipalities. 

            Building Ordinance – Coverage A: Coverage for Loss to the Undamaged Portion of a Building
This coverage responds when a covered loss triggers the application of ordinance or law, but only a portion of the covered building is damaged. If the undamaged portion of the building is rendered as unusable or condemned by a building ordinance then it would have to be torn down, thus a total loss of the building would be incurred. This coverage would indemnify the insured for the undamaged portion even though there was not direct peril damage to the building.

            Building Ordinance – Coverage B: Coverage for the Cost of Demolition
This coverage pays the cost to demolish the undamaged portion of the partially damaged building (the property coverage responds to demolition and debris removal of the damaged portion of the building).

            Building Ordinance – Coverage C: Coverage for the Increased Costs of Construction
This coverage includes the recovery of costs related to making the building compliant with current building codes.

Certificate of Insurance (Place commonly used: All Lines) - A certificate issued by an insurance company or its agent. It verifies that a certain insurance policy is in effect for stated amounts and coverages and names those insured.

CGL (Place commonly used: Liability) - Formerly known as “Comprehensive” General Liability.  That phrase has been replaced by the words “Commercial General Liability” and refers to a broad liability policy form providing both bodily injury and property damage coverage.

Claims Made vs. Occurrence Form  (Place commonly used: Liability) - “Occurrence” policy forms cover losses that occur when the policy was in place at the time the incident occurred (regardless of when the incident actually gave rise to a claim - which might be years later.)    “Claims Made” policies, by comparison, only cover losses for which the claim arose during the policy term.   “Claims Made” policy form is the typical form written to cover both Board Of Directors (D&O Liability) and Management Companies (E&O).    Other than an event which may be excluded by a “retro date”, a “claims made” policy does cover events that occurred prior to the policy term and, as a result is often described as “prior acts“ coverage.

Dec Page (Place commonly used: All Lines) - Also known as the “Declarations Page” this document is, in a sense, the “cover page” for the policy.   The declarations page must include some key components, including the name of the insured, the issuing carrier, the policy #, the effective and expiration dates.  

Deductible “Per Unit Of Insurance (Place commonly used: Property) - Typically used on a Difference in Conditions policy, this provision, when applied, means that the percentage deductible is applied separately to each effected building, structure, maintenance fees, business income or other “unit of insurance.”

Defense Costs (Place commonly used: Liability) - Are the costs an insurance carrier incurs in defending the insured against a claim.

Defense Inside the Limits  (Place commonly used: Liability) - When such a provision exists, any costs incurred defending the Insured against a covered event is subtracted from the limit left to indemnity the policyholder. (Also described as “eroding” the limit.)

DIC (Place commonly used: Property) - “Difference in Conditions” is a type of insurance policy that provides a broader form than an underlying “special form” policy.  In California, a Difference in Conditions policy is typically used to add the peril of earthquake and flood to a subject property.    

D&O (Place commonly used: Liability) - A specialized professional liability policy which is designed to protect an entity’s Board of Directors against an “act, error or omission” which gives rise to a claim.  (Much like a doctor’s medical malpractice policy, this form protects against an “error in judgment” which results in a loss for which the Board is held liable.)

Dovetailing (Place commonly used: Property) - This term explains the coordination of the benefits between the Master Policy (purchased by the Association) and the Condominium Unit Owner Policy (HO6) purchased by the individual owner.

EPLI (Place commonly used: Liability) - Coverage against allegations of illegal or discriminatory hiring or firing practices, sexual harassment of employees, and so on.

Employee Dishonesty  (Place commonly used: Crime/Fidelity Bond) - This coverage is designed to protect an employer against dishonest acts on the part of the employee.   In the case of an HOA, the term “employee” is redefined to include non-compensated board members.   In the better forms, a management agent rider can be added to extend coverage for dishonest acts of  the management agent.  Can appear in several forms, including a “Fidelity Bond”, “Employee Dishonesty” Coverage or “Crime Insurance.”

EQSL (Place commonly used: Property) - “Earthquake Sprinkler Leakage” This is an endorsement to a Property Policy providing coverage for damage due to a malfunctioning sprinkler system as a direct result of an earthquake.  During an earthquake, pipes have been known to break and/or leak causing a great deal of water damage.  Because the proximate cause of loss is earthquake (an otherwise excluded peril) commercial property owners may have the option of purchasing EQSL coverage to cover the resulting water damage to the premises.

First Party Loss (Place commonly used: Property) - Another way to express a property loss to property owned by the first named insured.

Flood Coverage (Place commonly used: Flood Insurance) - As defined by the National Flood Insurance Program, a “flood” is a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder's property) from:  (a) Overflow of inland or tidal waters; or (b) Unusual and rapid accumulation or runoff of surface waters from any source; or (c) Mudflow.

Garagekeepers Legal Liability (Place commonly used: Liability) - A specialized type of liability coverage which may be placed to protect a community association that provides services where vehicles are temporality in the “care, custody and control” of the HOA – such as valet parking, car washing and car detailing.

“GRC” Coverage (Place commonly used: Liability) - This is a property provision whereby the adjuster would cover the resulting loss without regard to the stated property limit on the declarations page (even if it should be in excess of the stated limits).  In the aftermath of the Northridge Earthquake, the “Guaranteed” language has been eliminated and provisions (when written) have largely been placed by a modified version – often called “Extra Replacement Cost” or “Extended Replacement Cost” which provides a “cap” limit in excess of the amount shown in the declarations page (typically 20% or 25%).  Additionally, the newer versions of this endorsement often apply only to those buildings containing units (not to auxiliary structures or outbuildings). 

HO6 or HO-6 (Place commonly used: All Lines) - An industry term for the Condominium Unit Owner Policy – the policy that individual unit owners in a condominium association should purchase.

ITV (Place commonly used: Property) - “Insurance-to-value” Insurance written in an amount approximating the current-day replacement cost of the building or structure with like kind and quality of materials.  Commonly confused with market value.

Loss Control Suggestions (Place commonly used: Property and Liability) - A letter to the Association from the carrier which makes certain recommendations which, in the opinion of the carrier, may reduce the probability of loss.   (Note:  Typically are not suggestions, but indeed are often mandatory with a finite date for compliance.)

Maintenance Fees  (Place commonly used: Property and Liability) - Usually homeowners dues collected monthly by the Association to cover the cost of  Association insurance, repairs, landscaping, concierges, or amenities such as a gym or a pool.  Coverage can be purchased as part of the Master Policy for the circumstances where, following a loss from a covered peril, the Association is unable, after reasonable effort, to collect the dues because the unit is rendered uninhabitable.

Mechanical Breakdown  (Place commonly used: Property) - Formerly known as “Boiler & Machinery,” this coverage provides protection for breakdown and expediting expenses to repair specific boilers, pressure vessels and electrical apparatus on the premises.

Minimum Deductible (Place commonly used: Property) - The minimum deductible applicable.   Most often seen on an EQ or Flood (DIC) policy where a stated percentage deductible applies – subject to a $25,000, $50,000 or even $100,000 minimum.

Minimum Earned Premium (Place commonly used: All Lines) - A minimum premium amount a carrier could be entitled to retain in the event of a early cancellation.   Typically “25% premium is “minimum earned.”  This is in addition to “short rate” penalty which may also apply.

RC (Place commonly used: Property) - “Replacement Cost”  When settling a covered loss under a Replacement Cost policy, no deductible is taken for depreciation.

Scheduled Coverage (Place commonly used: Property) - List of items on a policy declaration, sometimes also showing descriptions and values.

Short Rate (Place commonly used: All Lines) - This is a penalty that an insurance carrier may apply to a policy that has been cancelled midterm.   The penalty is typical the equivalent of “10% of the unearned premium.”

SOV (Place commonly used: Property) - Statement of Values” is the building-by-building or item-by-item description of those items being covered under a property form.

Surplus Lines Taxes    (Place commonly used: Earthquake Insurance) - The amount of state tax is 3% of the California taxable non-admitted premium transacted by the broker for California home state insureds.  This amount is collected by the excess and surplus lines broker and immediately forwarded to the State of California.  In addition to the 3% taxes, there is also a stamping fee equal to 0.250% which is also charged on each transaction bound with a non-admitted carrier in California.

Third Party Loss (Place commonly used: Liability) - Another way to express a liability claim which resulted in bodily injury or property damage to others (other than the named insured).

TIBs (Place commonly used: Property) - Used to describe “tenant improvements and betterments” and is most commonly used in a landlord/tenant relationship.  Occasionally, it can be used in a condominium setting, although the use in that context is awkward since an owner in a condominium setting is not a “tenant” per se.

TIV (Place commonly used: Property) - “Total Insurable Value” is the approximate replacement cost of the property at risk.

Umbrella (Place commonly used: Liability) - In a condominium association, this is more correctly a “Commercial Umbrella” policy which is designed to be “excess” of underlying liability policies in the name of the Insured.  The best umbrellas have a “following form” endorsement which acts as “excess” to not only the General Liability – but also the Directors & Officers, and Employers Liability section of the Workers’ Compensation policy.

Underground Utilities (Place commonly used:Property) - Refers to underground property, such as telephone and cable wires, conduits or pipes, sewers, etc., beneath the surface of the ground.  Generally excluded on a master insurance policy therefore, when available, such coverage must be typically added by endorsement.  

UOBI (Place commonly used:Property) - Stands for Unit Owner Betterments & Improvements.

Waiver of Subrogation  (Place commonly used: Property) - An insurer has the right of subrogation; however, it may waive that right through this method.

Wholesale Policy Fees (Place commonly used: General) - If a retail insurance agent or broker cannot find coverage for a unique or higher risk account they may turn to the surplus lines market to purchase appropriate coverage. The insured's agent or broker typically negotiates through a wholesale insurance broker for placement with specialty insurers operating in the surplus lines market.  At their sole discretion, the wholesaler broker may charge a fee for their marketing effort.  That fee is passed-on through the retail agent and charged to the consumer in the form of a wholesale policy fee.

This list contains only a general description of coverage and is not a contract.   For a more detailed description of insurance policies limitations and exclusions, please consult the policy itself.

Compiled and edited by Timothy Cline, CIRMS, Timothy Cline Insurance Agency, Inc.
Copyright 2012 – Timothy Cline Insurance Agency, Inc. – ALL RIGHTS RESERVED

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