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505 Cards in this Set

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Commercial insurance
Insurance that covers for-profit businesses or nonprofit organizations against the adverse financial effects of property and liability losses.
Risk management
The process of identifying and analyzing loss exposures, evaluating the feasibility of risk management techniques to address the loss exposures, selecting and implementing the best techniques, and monitoring results.
Loss exposure
Any condition or situation that presents a possibility of loss, whether or not loss actually occurs
Property loss exposure
The possibility that a person or an organization will sustain a financial loss as the result of the damaging, destruction, taking, or loss of use of property in which that person or organization has a financial interest.
Liability loss exposure
The possibility that a person or an organization will sustain a financial loss as the result of a claim being made against that person or organization by someone seeking monetary damages or some other legal remedy.
Avoidance
A risk management technique by which an organization avoids a loss exposure by choosing not to own a particular item or property or not to engage in a particular activity
Loss control
A risk management technique that prevents losses from occurring or reduces the size of losses that do occur.
Retention
A risk management technique by which an organization pays all or part of its own losses due to its loss exposures.
Noninsurance transfer
A risk management technique by which an organization obtains the promise of a second organization (other than an insurer) to pay for certain losses that would otherwise be the financial responsibility of the first organization.
Line of business
A general classification of insurance, such as commercial property, commercial general liability, commercial crime, or commercial auto
Six steps of the risk management process:
1. Identifying loss exposures
2. Analyzing loss exposures
3. Evaluating the various techniques for treating the loss exposures
4. Selecting the most effective technique or techniques
5. Implementing the selected techniques
6. Monitoring the program and making needed corrections or adjustments
Step one of the risk management process
Identifying loss exposures
Step two of the risk management process
Analyzing loss exposures
Step three of the risk management process
Evaluating the various techniques for treating the loss exposures
Step four of the risk management process
Selecting the most effective technique or techniques
Step five of the risk management process:
Implementing the selected techniques
Step six of the risk management process:
Monitoring the program and making needed corrections or adjustments
Monoline policy
Policy that covers only one line of business
Package policy
Policy that covers two or more lines of business
Commercial package policy (CPP)
Policy that covers two or more lines of business by combining ISO's commercial lines coverage parts.
CPP
Commercial Package Policy - a policy that covers two or more lines of business by combining ISO's commercial lines coverage parts
Common Policy Declarations
A required CPP component that provides basic information about the insurer, the policyholder, and the insurance provided (this is usually called just a "Dec")
Commercial policy decs include what elements?
Policy number; names of the insurance company and the producer; name, address, and business description of the named insured; effective date and expiration date of the policy; premium for each coverage part included int he policy; total premium
Components of the ISO CPP (Commercial Package Policy):
- Commercial Property (Dec, Coverage Form(s), Causes of Loss Form(s), Conditions Form)
- CGL (Dec, Coverage Form)
- Crime (Dec, Coverage Form)
- Equipment Breakdown Protection (Dec, Coverage Form)
- Inland Marine (Dec, Coverage Form(s), Conditions Form)
- Auto (Dec, Coverage Form)
- Farm (Dec, Coverage Form(s), Provisions Form)
Common Policy Conditions
A required CPP component that contains six conditions applicable to all coverage parts unless a coverage part states otherwise.

- Cancellation
- Changes
- Examination of your books and records
- Inspections and surveys
- Premiums
- Transfer of your rights and duties under this policy
What are the 6 common policy conditions?
1. Cancellation
2. Changes
3. Examination of your books and records
4. Inspections and surveys
5. Premiums
6. Transfer of your rights and duties under this policy
Coverage part
A CPP component in a line of insurance (such as commercial property or commercial general liability) that comprises the coverage part's declarations page, one or more coverage forms, applicable endorsements, and in some cases a general provisions form.
CPP coverage parts
(same as components)

- Commercial Property (including business income)
- Commercial Crime
- Equipment breakdown (boiler and machinery)
- Commercial Inland Marine
- Commercial General Liability
- Commercial Auto
- Farm
Package Modification Factor
A factor (such as 0.75) that is multiplied by the regular policy premium of any CPP that includes both property and liability coverages, resulting in a premium discount.
What justifies the discount offered by an insurer's package modification factor?
The greater efficiency of issuing a single package policy instead of several monoline policies for an insured.
Commercial Property Insurance
Insurance that covers loss to commercial property; more narrowly, a line of insurance that covers buildings and business personal property against loss caused by a wide range of perils.
Commercial property insurance can be provided under any of the following 4 types of policies:
- A businessowners policy (BOP)
- A commercial property coverage part
- A policy designed for "highly protected risks" (HPRs)
- Inland marine coverages, including output policies
True or false: BOP policies are intended for larger, complex businesses.
FALSE. Smaller, less-complex businesses.
What kinds of businesses/organizations are HPR policies designed for?
Those w/ superior loss protection characteristics (for example, fire-resistent, sprinklered buildings).
Real property
Land and whatever is growing or erected on or affixed to the land. Sometimes referred to as "immovable property." Few insurance policies use the term "real property" in describing covered property; most policies cover specified types of real property, such as buildings and structures.
Personal property
All property other than real property. Sometimes referred to as "movable property." Insurance policies often use the phrase "personal property" in describing covered property, for example 'business personal property." Insurance practitioners commonly refer to personal property usually situated in a building as "contents."
Tangible property
All property that can be touched and that has physical existence. It can be either real or personal property. Most property insurance policies cover only tangible property.
Intangible property
Property that cannot be touched because it has no physical existence. Examples of intangible property are patents, copyrights and trademarks. Most property insurance policies do not cover intangible property.
The five documents of the commercial property coverage part:
1. Commercial property declarations
2. One or more commercial property coverage forms
3. One or more causes-of-loss forms
4. Commercial Property Conditions
5. Any applicable endorsements
Commercial property coverage part
A CPP coverage component that provides a broad range of coverages to "middle-market" or larger firms to insure buildings and business personal property.
Commercial property declarations page
A required commercial property coverage part component that provides basic information about the policyholder and the insurance provided.
Commercial property coverage form
A commercial property coverage part component that can be any of several commercial property forms containing an insuring agreement and related provisions.
Causes-of-loss forms
A required component of the commercial property coverage part that specifies perils covered; choices include basic, broad, or special form.
Commercial Property Conditions
A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms unless a coverage form contains a contradictory condition.
Building and Personal Property Coverage Form (BPP)
A commercial property coverage form that can be used to cover buildings, "your business personal property," and personal property of others.
The most commonly used commercial property coverage form:
BPP
BPP
Building and Personal Property Coverage Form - a commercial property coverage form that can be used to coverage buildings, "your business personal property," and personal property of others.
What are the 9 sections of the BPP coverage form?
1. covered property
2. property not covered
3. additional coverages
4. coverage extensions
5. limits of insurance
6. deductible
7. loss conditions
8. additional conditions
9. optional coverages
Building (as defined in the BPP)
The building described in the policy; the building's completed additions; fixtures, including outdoor fixtures; permanently installed machinery and equipment; personal property owned by the insured and used to maintain or service the building or its premises.
Property that can be covered by the BPP:
1. Buildings
2. Business personal property of the insured
3. Personal property of others in the custody of the insured
Your business personal property (As defined in the BPP)
Personal property owned by the named insured and, in some cases, personal property owned by others (such as leased property and improvements and betterments).
Improvements and betterments
Alterations or additions made to the building at the expense of a tenant who does not own the building and who cannot legally remove them.
Personal property of others
A category of property that the BPP can cover and that includes personal property of others (such as the named insured's customers) while the property is in the named insured's custody.
Property not covered under BPP (answer part 1)
a. accounts, bills, currency, deeds, food stamps or other evidences of debt, money, notes or securities. Lottery tickets held for sale are not securities;
b. Animals, unless owned by others and boarded by youn, only as "stock' while inside of buildings;
c. automobiles held for sale;
d. bridges, roadways, walks, patios or other paved surfaces;
e. contraband, or property in the course of illegal transportation or trade;
f. the cost of excavations, grading, backfilling or filling;
g. foundations of buildings, structures, machinery or boilers if their foundations are below: 1) the lowest basement floor; or 2) the surface of the ground, if there is no basement
Property not covered under BPP (answer part 2)
h. Land (including land on which the property is located), water, growing crops or lawns;
i. personal property while airborne or waterborne;
j. bulkheads, pilings, piers, wharves or docks;
k. property that is covered under another coverage form of this or any other policy in which it is more specifically described, except for the excess of the amount due (whether you can collect on it or not) from that other insurance;
l. retaining walls that are not part of a building
m. underground pipes, flues or drains;
n. the cost to research, replace or resotres the information on valuable papers and records, including those which exist on electronic or magnetic media, except as provided in the Coverage Extensions;
Property not covered under BPP (answer part 3)
o. Vehicles or self-propelled machines (including aircraft or watercraft) that: (1) Are licensed for use on public roads; or (2) Are operated principally away from the described premises. This paragraph does not apply to (a) vehicles or self-propelled machines or autos you manufacture, process or warehouse; (b) vehicles or self-propelled machines, other than autos, you hold for sale; or (c) rowboats or canoes out of water at the described premises; (d) trailers, but only to the extent provided for in the Coverage Extension for Non-Owned Detached Trailers.
p. The following property while outside of buildings: (1) grain, hay, straw or other crops; (2) fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs or plants (other than 'stock' of trees, shrubs or plants), all except as provided in the Coverage Extensions.
The 5 additional BPP coverages:
1. Debris removal
2. Preservation of property
3. Fire department service charge
4. Pollutant cleanup and removal
5. Increased cost of construction
BPP debris removal expenses will be paid only if they are reported in writing within how many days?
180 days
Under the debris removal provision in the BPP, what is the most that will be paid for such debris removal?
25 percen tof hte sum of the direct loss payment (this in addition to the deductible amount).
An additional $10,000 limit per location is provided for the BPP debris removal coverage if:
(1) the direct loss plus debris removal expense exceeds the limits of insurance or (2) the debris removal expense exceeds the 25 percent limitation of direct losses.
T or F: You can increase the $10,000 additional limit for debris removal on the BPP by endorsement.
TRUE. You CAN increase the $10,000 additional limit for debris removal on the BPP by endorsement.
The fire department service charge (an additional coverage of the BPP) pays such charges up to how much if the charges are assumed by contract prior to loss or are required by local ordinance?
Up to $1,000
For examples of debris removal losses, see 2.14.
For examples of debris removal losses, see 2.14.
Pollutant cleanup and removal (a BPP additional coverage) requires that expenses be reported in writing within ______ days after the loss. An aggregate limit of ________ per location applies to all such expenses that occur during each separate twelve-month period.
180 days; $10,000 per location.
What is the amount of insurance for increased cost of construction (an additional coverage of the BPP)?
5 percent of the amount of insurance or $10,000, whichever is less. This amount is paid in addition to the policy limit. (And, it applies only if the Replacement Cost option has been selected.)
The protection provided by the coverage extensions section of the BPP coverage form applies only if _________ is shown in the declarations.
at least 80 percent coinsurance or a value reporting period symbol
T or F: BPP coverage extensions are paid in addition to policy limits.
TRUE. They ARE paid in addition to policy limits.
6 BPP coverage extensions
1. Newly acquired or constructed property
2. Personal effects and property of others
3. Valuable papers and records - cost of research
4. Property off-premises
5. Outdoor property
6. Non-owned detached trailers
Newly Acquired or Constructed Property coverage (a coverage extension of the BPP) terminates automatically at the earliest of the following three dates:
1. On the expiration date of the policy
2. Thirty days after the acquisition of the new location or the start of construction of the new building
3. On the date the insured notifies the insurer of the new location or new building.
Maximum limit for BPP's newly acquired or constructed property coverage extension: (separate limits for building and personal property)
Building: $250,000 at each building
Personal Property: $100,000 at each building
Maximum limit for BPP's personal effects and property of others coverage extension:
$2,500 at each location
Maximum limit for BPP's valuable papers and records - cost of research coverage extension
$2,500 at each location (can be increased)
Maximum limit for BPP's property off premises coverage extension
$10,000
Maximum limit for BPP's outdoor property coverage extension
$1,000 per occurence but only $250 per tree, shrub or plant
Maximum limit for BPP's non-owned detached trailers coverage extension
$5,000 (can be increased)
Abandonment condition
A condition that prohibits the insured from abandoning damaged property to the insurer
Appraisal condition
A process that the insurer and the insured must follow for resolving disputes about the insured property's value or amount of loss. (Involves appraisers, possibly umpire (who is possibly appointed by a judge)).
Proof of loss
A statement of facts about a loss for which the insured is making a claim
If the building where a loss occurs has been vacant for more than 60 consecutive days before the loss occurred, the insurer will not pay if the loss is caused by:
(1) vandalism, (2) sprinkler leakage unless the sprinkler was protected against freezing, (3) breakage of building glass, (4) water damage, (5) theft, (6) attempted theft. iF any other covered peril causes the loss, loss payment will be reduced by 15 percent.
If the BPP covers a building owner or general lessee, "building" means the entire building, and it is considered vacant unless at least ____ percent of its total square footage is (1) rented to a lessee or sub-lessee and used by that party to conduct its customary operations or (2) used by the building owner to conduct its customary operations. Buildings under construction or renovation are not considered to be vacant.
31 percent.
Actual cash value
ACV. Cost to replace property w/ new property of like kind and quality minus depreciation.
BPP valuation basis for property other than that specifically listed:
ACV
BPP valuation basis for building damage of $2,500 or less:
Replacement cost except for awnings, floor coverings, appliances, and outdoor equipment or furniture
BPP valuation basis for stock sold but not delivered
Selling price less discounts nad unincurred costs
BPP valuation basis for glass:
Replacement cost for safety glazing if required by law
BPP valuation basis for improvements and betterments replaced by the insured:
ACV
BPP valuation basis for improvements and betterments not replaced
Percentage of cost based on remaining life of lease
BPP valuation basis for valuable papers and records
Cost of blank media plus cost of transaction or copying ($2,500 research cost as coverage extension)
Coinsurance clause
Clause that requires the insured to carry insurance equal to at least a specified percentage of the insured property's value
Equation for coinsurance:
Loss payment = ((Amount of insurance carried/amount of insurance required) x Loss) - Deductible
In coinsurance, the amount of insurance required is:
...the actual cash value of the property immediately before the loss occurred multiplied by the coinsurance percentage.
BPP optional coverage: Agreed Value
Coverage that suspends the coinsurance clause if the insured carries the amount of insurance that the insurer and insured agree to be the property's full value.

Equation:

Loss payment = ((Limit of insurance/agreed value) x loss) - Deductible
BPP inflation guard optional coverage
Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations
BPP optional coverage: Replacement cost
Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value
The BPP Replacement Cost option does not apply to:
1) property of others, 2) contents of a residence, 3) manuscripts, or 4) works of art, antiques, or rare articles. (However, you can extend replacement cost to the personal property of others.)
Functional replacement cost
The cost of replacing damaged property w/ similar property that performs the same function but might not be identical to the damaged property
Value reporting form
Form that covers the fluctuating values of business personal property by providing insurance for the insured's maximum expected values and requiring the insured to periodically report property values to the insurer.
With the value reporting form (BPP), what is the amount of the advance premium based on?
It is based on 75% of the limit of insurance.
Peak Season Limit of Insurance Endorsement
Endorsement that covers the fluctuating value of business personal property by providing differing amounts of insurance for certain time periods during the policy period.
Specific insurance
Insurance that covers each building for a specific limit of insurance and perosnal property at each building for a specific limit of insurance. (as opposed to Blanket Insurance)
Blanket insurance
Insurance that covers either of the following with one limit of insurance: (1) two or more types of property (such as buildings and business personal property) or (2) one or more types of property at more than one location. (as opposed to Specific Insurance)
T or F: Blanket insurance may involve an additional cost.
TRUE. The minimum coinsurance clause for blanket insurance is 90%, but the rates are the same as for 80 percent coinsurance.
The first insurance policies covering buildings in colonial American covered loss by ______ only.
fire
Causes of Loss - Basic Form
Form that covers fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicles, riot, civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action
Causes of Loss - Basic Form consists of mainly two sections: A & B (describe)
A, a listing of several covered causes of loss (also known as perils), which are subject to some definitions and limitations expressed within that listing.

B, a set of exclusions that furhter limit the application of the covered perils
Causes of loss that both the Basic and Broad Form cover:
Fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action
Causes of loss that the Basic Form does not cover but the Broad Form does:
Falling objects; weight of snow, ice or sleet; water damage; collapse caused by certain perils (provided as an additional coverage)
Covered smoke damage must be what?
Sudden and accidental
Explosion does not include:
- The rupture of pressure relief valves
- The rupture of a building resulting from the expansion or swelling of its contents caused by water absorption
Hostile fire
Fire that is not in a place where fire is intended to be
How many persons are needed for a riot?
Three or more
Exclusions to Commercial Property insurance:
Ordinance or law; earth movement; governmental action; nuclear hazard; utility services; war and military action; water; other exclusions (artificially generated electric currents, rupture or bursting of water pipes unless caused by a covered cause of loss; leakage of water or steam from any part of an appliance or system containing water or steam; explosion of steam boilers, steam pipes, steam turbines, or steam engines owned by, leased to, or operated by the insured; mechanical breakdown; loss resulting from the neglect of the insured to use all reasonable means to save and preserve property at and after the time of loss.)
Causes of Loss - Broad Form
Form that covers basic form perils plus falling objects; weight of snow, ice, or sleet; water damage; and (as additional coverage) collapse caused by certain perils
The water damage covered loss in commercial property insurance specifically excludes:
1. The cost to repair anyd efect that caused the loss or damage.
2. Gradual damage that occurs over a period of fourteen days or more.
3. Discharge or leakage from an automatic sprinkler system. (The sprinkler leakage peril would cover such damage.)
4. Discharge or leakage from a sump, including overflow because of sump pump failure
5. Discharge or leakage from roof drains, gutters, downspouts, or similar fixtures or equipment
Collapse
An abrupt falling down or caving in of a building or part of a building that, as a result, can no longer be occupied for its intended purpose.
Causes of Loss - Special Form
Form that covers "risks of direct physical loss," suject to the form's exclusions and limitations. (Traditionally known as "all risks" coverage)
Exclusions and limitations to the Causes of Loss - Special Form
- Wear and tear
- Rust, corrosion, fungus, decay, or deterioration
- Smog
- Settling, cracking, shrinking, or expansion
- Infestations and waste products of insects, birds, rodents, or other animals
- Damage to personal property by dampness or dryness of atmosphere, changes or extremes in temperatures, or marring or scratching
- Weather conditions that contribute to other excluded causes of loss
- Acts or decisions, including the failure to act or decide, of any person, group, organization, or governmental body
- Faulty or inadequate planning, zoning, surveying, siting, design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction, materials or maintenance
Loss to the following kinds of property is covered only if it is caused by "specified causes of loss"
1. Valuable papers and records
2. Animals, and then only in the event of their death
3. Fragile articles if broken, such as glassware, statuary, marble, chinaware, and porcelain (but not including building glass, containers of property held for sale, and lenses)
4. Builders' machinery and equipment owned or held by the insured unless on or within 100 feet of the described premises
Theft limits for Commercial Property Special Form Causes of Loss
- $2,500 for furs and garments trimmed w/ fur
- $2,500 for jewelry, watches, and precious metals, but the limit does not apply to jewelry or watches valued at $100 or less per item
- $2,500 for patterns, dies, molds and forms
- $250 for stamps, tickets, and letters of credit
Additional coverages for the Commercial Property form:
- property in transit (up to $5,000)
- water damage, other liquids, powder or molten material damage coverage
Builders Risk Coverage Form
Form that covers buildings in the course of construction, including additions or alterations to existing buildings
Property covered under the Builders Risk Coverage Form:
- Foundations
- If not covered by other insurance, temporary structures built or assembled on site, such as scaffolding or concrete forms
- Property intended to become part of the building - such as lumber, uninstalled windows, doors, sinks, and furnaces - while located within 100 feet of the described premises
Important info on causes of loss as they pertain to the Builders Risk form:
Collapse During Construction (excluded by the Builders Risk form except by endorsement)

Theft of Building Materials (can be added by endorsement)
Need for Adequate Insurance condition
Essentially a 100 percent coinsurance clause for builders risk insurance; except that it requires 100 percent of ACV upon completion (as opposed to upon the date of loss)
Formula for "Need for Adequate Insurance" condition:
(builders risk policy)

Loss Payment = ((Limit of insurance / ACV of building on completion) x loss) - deductible
Condominium Association Coverage Form
Form that covers buildings and business personal property of condominium associations
The Condominium Association Coverage From provides coverage for property in three categories:
1. Building
2. Business personal property of the named insured (which is the association of unit owners)
3. Personal property of others
The condominium building coverage applies to certain items - i.e., fixtures, improvements, alterations, appliances, including (but not limited to) those used for refrigerating, ventilating, cooking, dishwashing, laundering, or housekeeping) only if ____
...only if the condo association agreement requires the association to insure them
T or F: Business personal property of a condo unit owner is covered if the owner is the sole owner.
FALSE. It is only covered if it is owned by the association or if it is indivisibly owned by all unit owners
Condominium Commercial Unit-Owners Coverage Form
Form that cover business personal property and building property exposures of commercial (nonresidential) condominium units.
Loss assessment coverage
Coverage for a commercial condominium unit-owner's share of any assessment made by the association against all unit-owners because of physical loss to condominium property caused by a covered cause of loss.
Miscellaneous real property coverage
Coverage for real property (such as a storage shed or garage building) that pertains only to the named insured's condominium unit or real property that the named insured has a duty to insure under the condominium association agreement
Insurance for highly protected risks (HPR)
Property insurance that covers large property risks with superior loss protection characteristics; has broader coverage than most commercial property policies and usually a lower premium rate.
Ordinance or Law Coverage Endorsement
Endorsement that covers three types of losses due to the enforcement of building ordinances or laws: (1) the value of undamaged property that must be demolished, (2) the cost to demolish the building's undamaged portion and remove its debris, and (3) the increased cost to rebuild the property
Spoilage Coverage Endorsement
Endorsement that covers damage to perishable stock due to power outages; on-premises breakdown; or contamination of the insured's refrigerating, cooling, or humidity control equipment (limit is $50,000)
Manufacturers' Consequential Loss Assumption Endorsement
Endorsement that covers reduction in value of undamaged property due to physical loss to other property
Brands and Labels Endorsement
Endorsement that permits the insured, when the insurer takes damaged merchandise as salvage, to stamp the word "salvage" on the merchandise or to remove its brands or labels before sale
Maximum NFIP limit per building and per contents of a building:
$500,000 each (per building; for contents of a building)
Typical deductible for commercial flood coverage:
$25,000 or more
Commercial Lines Manual (CLM)
An ISO publication that includes rules and rating procedures for nine major lines of commercial insurance.
Loss costs
The portion of the rate that covers projected claim payments and loss adjusting expenses.
Other factors affecting commercial property premiums: (catchy little acronym)
COPE:

Construction
Occupancy
Protection
Exposure

and,
Location
Specific rating
A rating approach that bases a building's property insurance rate on inspecting and evaluating that particular building
Class rating
A rating approach that uses rates reflecting the average probability of loss for businesses within large groups of similar risks; the predominant method used for rating commercial properties
Business income insurance
Insurance that covers the reduction in an organization's income when operations are interrupted by damage to property caused by a covered peril
Net income
Excess of revenues over expenses; revenues less expenses
Profit
Net income that results when revenues exceed expenses
Net loss
Net income that results when expenses exceed revenues
Continuing expenses
Expenses that continue to be incurred during a business interruption
Noncontinuing expenses
Expenses that cease during a business interruption
Extra expenses
Expenses that an organization only incurs if business is interrupted
Business Income (and Extra Expense) Coverage form
form that covers both business income and extra expense losses (even if the extra expenses do not reduce the business income loss).
Business Income (without Extra Expense) Coverage form
Form that covers business income loss but only covers extra expenses to the extent that they reduce the business income loss.
Business income
The sum of (1) net profit or loss that would have been earned or incurred if operations had not been suspended plus (2) normal operating expenses, including payroll, that continue during the suspension.
Period of restoration
The period during which business income loss is covered under the BIC forms; begins seventy-two hours after the physical loss occurs and ends when the property is (or should have been) restored to use with reasonable speed. (With regard to extra expense coverage, begins immediately after the physical loss occurs.)
Extra expense coverage
Coverage for extra expenses incurred by the named insured to avoid or minimize the suspension of operations; additional coverage of the business income and extra expenses coverage form.
Expenses to reduce loss
Coverage for necessary expenses incurred by the named insured to reduce business income loss; the expenses are covered only to the extent they actually reduce the business income loss
Civil authority additional coverage
Coverage for loss of business income that results when access to the insured's premises is prohibited by civil authority because of damage to property other than the insured's.
Extended business income (EBI) additional coverage
Coverage for business income losses that continue after the period of restoration ends; the coverage begins when the damaged property has been restored and ends when the insured's business returns to normal, subject to a maximum of thirty days
Business income coverage on newly acquired locations is limited to:
$100,000
BIC
Business Income insurance
BIC exclusions in causes-of-loss forms
Business income insurance does not apply if loss is caused by:

- Off-premises services interruption
- Finished stock
- Antennas
- Delay
- Loss of privilege
- Other consequential losses
Additional condition imposed by the BIC:
Resume operations, in whole or in part, as quickly as possible (if the insured intends to resume operations)
Limitation - Electronic Media and Records (for BIC)
Coverage for a BIC loss due solely to damage to or destruction of electronic media or records is limited to a maximum of sixty days from the initial date of loss. If other property is also damaged or destroyed, the covered loss is limited to a maximum of (1) sixty days or (2) the period required to restore the other property with reasonable speed and similar quality, whichever is longer.
T or F: the coinsurance provision for BIC may be 50,60,70,80,90,100 or 125 percent.
TRUE. However, the policy may also be written w/ no coinsurance.
For BIC coinsurance purposes, the time covered is:
the estimated net income and expense for one year starting with the policy inception or anniversary.
Probable maximum loss (PML)
The largest loss than an insurer is likely to sustain
BIC Optional coverages:
Maximum period of indemnity

Monthly limit of indemnity

Agreed value

Extended period of indemnity
Maximum period of indemnity coverage option (for BIC)
Option that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration or (2) the policy limit.
Monthly limit of indemnity coverage option (for BIC)
Option that deletes the coinsurance clause while limiting the amount recoverable during any month of business interruption to a stipulated fraction (1/6, 1/4, or 1/3)
Agreed value coverage option
Option that suspends the coinsurance clause as long as the insured carries an amount of business income insurance that is equal to the value agreed on by the policyholder and the insurer.
Extended period of indemnity coverage option (BIC)
Option that extends the duration of EBI coverage for up to two years
Extra expense coverage form
Form that covers the same extra expenses incurred as does the Business Income (and Extra Expense) Coverage form, with the exception that this form limits maximum recovery based on the period of restoration.
Dependent property exposures
The possibility of incurring business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales.
Contributing location
furnishes materials or services to the insured
Recipient location
Purchases materials or services from the insured
Manufacturing location
Manufactures products for delivery to the insured's customers
Leader location
Attracts customers to the insured's location (a major dept. store at a shopping center, for example)
Ordinary Payroll Limitation or Exclusion Endorsement
Endorsement that limits coverage for ordinary payroll expenses to a specified number of days or excludes such expenses altogether; allows the insured to satisfy the coinsurance requirement with a lower amount of insurance, thus reducing the policy premium.
Power, Heat, and Refrigeration Deduction Endorsement
Endorsement that eliminates power, heat, and refrigeration expenses from coverage and from the coinsurance calculation; allows insured to satisfy the coinsurance requirement with a lower limit of insurance.
Ordinance or Law - Increased Period of Restoration Endorsement
Endorsement that covers business income loss during the additional time required to comply with building ordinances or laws.
Business Income Premium Adjustment Endorsement
allows the insured to carry a limit of insurance set high enough to cover the highest anticipated fluctuation in business income values while paying premium based on the amount of insurance actually required
Business Income Changes - Educational Institutions Endorsement
Adapts the BIC policy to meet the needs of schools
Utility Services - Time Element Endorsement
Extends the BIC policy to cover loss of earnings resulting from off-premises interruptions of utilities and communications services
Commercial crime insurance
Insurance that covers (1) money and securities against numerous perils (not limited to crime perils) and (2) property other than money and securities against crime perils, such as employee theft, robbery, theft by outsiders, and extortion
Discovery form
Form that covers losses discovered during the policy period even though they may have occurred before the policy period
Loss sustained form
Form that covers losses actually sustained during the policy period and discovered no later than one year after policy expiration.
Basic crime insuring agreements:
1. Employee Theft
2. Forgery or Alteration
3. Inside the Premises - Theft of Money and Securities
4. Inside the Premises - Robbery or Safe Burglary of Other Property
5. Outside the Premises
6. Computer Fraud
7. Money Orders and Counterfeit Paper Currency
What is basic crime insuring agreement #1?
Employee theft
What is basic crime insuring agreement #2?
Forgery or alteration
What is basic crime insuring agreement #3?
Inside the premises - theft of money and securities
What is basic crime insuring agreement #4?
Inside the premises - robbery or safe burglary of other property
What is basic crime insuring agreement #5?
Outside the premises
What is basic crime insuring agreement #6?
Computer fraud
What is basic crime insuring agreement #7?
Money orders and counterfeit paper currency
Employee theft coverage
Coverage for theft of money, securities, or other property committed by an insured's employee
Theft
The unlawful taking of money, securities, or other property to the insured's deprivation
T or F: temps and leased employees are considered to be "employees"
FALSE.
Money
Currency, coins, bank notes in current use and having a face value; travelers checks, register checks, and money orders held for sale to the public
Securities
Negotiable and nonnegotiable instruments or contracts representing either "money" or other property. Examples of securities include stocks, bonds, tokens, tickets, stamps in current use (including unused value in a postage meter), and evidences of debt issued in connection w/ charge or credit cards other than cards issued by the insured
Other property
Defined as all tangible property, other than money and securities, that has intrinsic value and that the coverage form or policy does not otherwise exclude.
Cancellation as to Any Employee condition (commercial crime form)
- provides automatic cancellation of coverage with respect to any employee who has previously committed a dishonest act known to the insured
- gives the insurer the right to cancel coverage w/ respect to any employee by providing thirty days' advance notice to the insured.
Forgery
Signing the name of another person w/ intent to deceive
Alteration
Something done to a written instrument that changes its meaning or terms w/o the consent of all parties to the instrument.
T or F: Forgery or alteration coverage applies worldwide.
TRUE. it does apply worldwide.
Theft, disappearance and destruction
A combination of covered causes of loss in some crime insuring agreements that provides an extremely broad scope of coverage.
Robbery
The unlawful taking of property from the care and custody of a person by one who has caused or threatened to cause that person bodily harm; includes situations in which the thief commits an obviously unlawful act that is witnessed by the custodian of the stolen property (such as an observed 'smash and grab' theft from a shop window)
Custodian
The named insured, any of the named insured's partners or members, or the named insured's employee while having care and custody of the property inside the premises; excludes any person while acting as a watchperson or janitor.
Safe burglary
The unlawful taking of property from within a locked safe or vault by a person who unlawfully and forcibly enters the safe or vault; includes the unlawful taking of the entire safe or vault from inside the premises
Messenger
The named insured, a relative of the named insured, any of the named insured's partners or members, or any of the named insured's employees while having care and custody of property outside the insured premises.
Computer fraud coverage
Coverage for loss of covered property due to using a computer to fraudulently transfer covered property to the wrongdoer
A typical firm may choose to carry only which of the seven crime coverages?
1 (employee theft), 2 (forgery or alteration, 3 (inside the premises - theft of money and securities), 5 (outside the premises), 6 (computer fraud), fund transfer fraud endorsement
Why do many firms omit commercial crime insurance agreement 4?
Because they have comparable coverage in their special-form commercial property coverage.
Why do many firms omit commercial crime insurance agreement 7?
Many prefer to retain their exposure to money orders and counterfeit paper currency.
General exclusions to commercial crime insurance:
- Acts committed by you, your partners or your members
- Acts of employees, managers, directors, trustees or representatives
- Government action
- Indirect loss
- Legal expenses
- Nuclear
- War and similar actions
Exclusions applicable only to employee theft:
- Employee canceled under prior insurance
- Inventory shortages
- Trading
- Warehouse receipts
Exclusions applicable to Inside the Premises and Outside the premises (3,4,5)
Accounting or Arithmetical errors or omissions
Exchanges or purchases
Fire
Money operated devices
Motor vehicles or equipment and accessories
Transfer or surrender of property
Vandalism
Voluntary parting with title to or possession of property
Extended period to discover loss
A specified period following policy expiration providing coverage for loss first discovered during this period if the loss occurred before policy expiration
Retroactive date endorsement
Endorsement that modifies the discovery form by limiting coverage to losses the insured incurs because of acts committed or events occurring after the policy's retroactive date.
Employee Theft - Name or Position Schedule Endorsement
Covers employee theft by only those employees who are specifically identified by name or by position. This coverage is obviously more restricted than insuring agreement 1. It is sometimes used by smaller firms or those that feel that only a few employees pose an employee theft risk.
Inside the Premises - Theft of Other Property Endorsement
Covers theft of property other than money and securities inside the premises. This endorsement provides broader coverage than insuring agreement 4, which provides only robbery and safe burglary coverage.
Inside the Premises - Robbery or Safe Burglary of Money and Securities Endorsement
Covers loss of money and securities by robbery or safe burglary. This is more restrictive coverage than the "theft, disappearance or destruction" coverage provided by insuring agreement 3.
Inside the Premises - Robbery or Burglary of Other Property Endorsement
Covers loss of property other than money and securities by robbery of a watchperson or by burglary of the premises.
Burglary
The taking of property from inside a building by unlawful entry into or exit form the building; signs of forcible entry or exit must be visible
Clients' Property
Covers theft, committed by the insured's employees, of clients' property within clients' premises. A useful coverage for cleaning services and other firmst hat have employees who work within clients' premises.
Funds Transfer Fraud
Covers loss of money and securities by fraudulent electronic, telephonic, telefacsimile, telegraphic, cable, or teletype instructions from the insured's account at a financial institution
Extortion - Commercial Entitites
Covers loss due to surrender of money, securities, or other property as a result of (1) a threat of bodily harm to an employee, director, trustee, partner, member, manager, or proprietor; or (2) a threat to do damage to the insured's premises. (Similar coverage is also available for governmental organizations.)
Financial institution bond
A policy that covers the crime loss exposures of financial institutions such as banks, savings and loan institutions, and insurance companies.
Equipment breakdown insurance
Insurance that covers loss due to the accidental breakdown of almost any type of equipment that operates under pressure or that controls, transmits, or uses mechanical or electrical power.
Breakdown
A direct physical loss to covered equipment that necessitates its repair or replacement due to failure of pressure equipment, mechanical failure, or electrical failure
Covered equipment (as it pertains to equipment breakdown insurance)
Includes pressurized equipment, electrical or mechanical equipment, communication and computer equipment, and other specified equipment
Ten insuring agreements of the ISO Equipment Breakdown Form
- Property damage
- Expediting expenses
- Business income and extra expense
- Spoilage damage
- Utility interruption
- Newly acquired premises
- Ordinance or law
- Errors and omissions
- Brands and labels
- Contingent business income and extra expense
T or F: covered property is broader than covered equipment.
TRUE. Breakdown to covered equipment triggers coverage for damage to covered property.
Expediting expenses coverage
Coverage for the reasonable extra cost to make temporary repairs in order to speed up (expedite) permanent repairs or replacement of covered property.
Errors and omissions (E&O) coverage
Coverage for loss that would otherwise not be covered because of certain unintentional errors or omissions made in arranging the insurance, such as incorrectly describing an insured building's location
Contingent business income and extra expense coverage
Coverage for business income and extra expense loss due to equipment breakdown occurring at a location, shown in the declarations, that the insured does not own or operate
$25,000 is the most that insurer will pay for direct damage due to breakdown caused by what five categories?
1. Ammonia contamination
2. Hazardous substance
3. Consequential loss
4. Water damage
5. Data and Media
Suspension condition
Condition that allows the insurer to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be in a dangerous condition.
MDV
Multiple of daily value - a type of deductible sometimes used instead of a time deductible. It is expressed as a number (i.e., 3) times what the insured's average daily business income for the location where the loss occurred would have been during the period of restoration had no loss occurred. (Mentioned w/ equip. breakdown ins.)
Joint or disputed loss agreement
Condition that addresses claim situations in which the insured's equipment breakdown insurer and the insured's commercial property insurer disagree on which insurer covers a loss; each insurer pays half the loss to quickly indemnify the insured; insurers then resolve their differences.
Marine insurance
Insurance that, in the U.S., includes both ocean and inland marine coverage and in the rest of the world is limited to insurance for vessels and cargo.
Nationwide Marine Definition
A statement used mainly to determine whether a particular coverage is marine insurance (inland on ocean)
What qualifies as Marine?
That which is under the Nationwide Marine Definition:

A. Imports
B. Exports
C. Domestic shipments
D. Instrumentalities of transportation and communication (bridges, tunnels, piers, wharves, docks, pipelines, power and telephone lines, radio and television towers and communication equipment, and outdoor cranes and loading equipment)
E. Various types of property owned or used by individuals, such as jewelry, furs, musical instruments, silverware, coin collections and stamp collections
F. Various types of property pertaining to a business, a profession, or an occupation. Examples of such property include mobile equipment, builders risks, property in the custody of bailees, live animals, property at exhibitions, and electronic data processing equipment
Inland marine insurance
Insurance that covers many different classes of property that typically involve an element of transportation
Common carriers
Airlines, railroads, trucking companies, and other entities that furnish transportation services to the public.
Contract carriers
Carriers that furnish transportation services to shippers with whom they have contracts
Private carriers
Organizations that transport their own goods.
Bill of lading
The contract between the shipper and the carrier, which may limit the shipper's recovery for cargo loss
Common carriers are not liable for loss caused by:
- Acts of God (meaning natural phenomena such as floods, hurricanes, tornadoes, or earthquakes)
- Acts of public enemies (meaning war risks)
- Acts of public authority
- Neglect or fault on the part of the shipper
- Inherent vice in the cargo itself
Straight bill of lading
Fixes no limit on the amount of recovery
Released value bill of lading
Limits recovery to a specified amount
F.O.B.
"Free on Board" - indicates that the shipper (seller) is responsible for arranging to have the cargo delivered on board the vessel; used more loosely to indicate the point at which ownership and exposure to loss shift from the seller to the buyer
Bailment
The temporary possession by one party (the bailee) of personal property owned by another party (the bailor) for a specific purpose, such as cleaning or repair
Bailee
The part temporarily possessing the personal property in a bailment
Bailor
The owner of the personal property in a bailment
Examples of movable equipment and Unusual property (eligible for inland marine insurance)
Agricultural equipment, such as tractors and cultivators; mobile equipment used by contractors, such as cranes and backhoes; physicians' and surgeons' equipment; computer equipment; farm animals; fine arts; buildings under construction (builders risks); patterns, molds and dies; partially completed products while at another location for processing; property on exhibition; sales samples while in the custody of sales representatives; valuable papers and records; records of accounts receivable; theatrical property; signs; cameras; musical instruments
Filed class
The classes of inland marine business for which policy forms and/or rates must be filed w/ the state insurance dept.
Nonfiled class
The classes of inland marine business for which neither policy forms nor rates must be filed with the state insurance dept.
Some examples of nonfiled inland marine coverages:
Contractors equipment, builders risk, transit, motor truck cargo liability, difference in conditions, electronic data processing equipment, bailees, instrumentalities of transportation and communication
Contractors equipment floater
Policy that covers mobile equipment or tools while anywhere in the coverage territory. (Nonfiled)
Builders risk policy
Policy that covers a building in the course of construction, including building materials and supplies while on or away from the building site. (Nonfiled)
Soft costs coverage
Coverage for various incidental expenses that might result from a physical loss to a building project, such as additional interest, advertising expenses, or real estate taxes; can be added to a builders risk policy (Nonfiled)
Installation floater
Policy that covers a contractor's interest in building supplies or fixtures that the contractor has been hired to install. (Nonfiled)
Trip transit policy
Policy that covers a particular shipment of goods specified in the policy. (Nonfiled)
Annual transit policy
Policy that covers all shipments made or received by the insured throughout a one-year policy period. (Nonfiled)
Motor truck cargo liability policy
Policy that covers a trucker's liability for damage to cargo of others being transported by the trucker. (Nonfiled)
Difference in conditions (DIC) policy
Policy that covers on an "all-risks" basis to fill gaps in the insured's commercial property coverage, especially gaps in flood and earthquake coverage. (Nonfiled)
Electronic data processing (EDP) equipment floater
Policy that covers computer equipment, software, and electronic data
Warehouse operators legal liability policy
Policy that covers warehouse operators against liability for damage to the property of others being stored in operators' warehouses. (Nonfiled)
Bailees' customers policy
Policy that covers damage to customers' goods while in the possession of the insured, regardless of whether the insured is legally liable for the damage. (Nonfiled)
Commercial Articles Coverage Form
Form that covers photographic equipment and musical instruments used commercially by photographers, motion picture producers, professional musicians and others. (Filed)
Camera and Musical Instrument Dealers Coverage Form
Form that covers the stock in trade (inventory) of camera dealers or musical instrument dealers; also covers similar property of others in the insured's care, custody or control. (Filed)
Equipment Dealers Coverage Form
Form that covers the stock in trade of dealers that sell agricultural or construction equipment; also covers customers' equipment in the insured's care, custody, or control. (Filed)
Physicians and Surgeons Equipment Coverage Form
Form that covers the professional equipment, materials, supplies, and books of physicians, surgeons, and dentists; also covers the insured's office equipment and (if the insured is a tenant) improvements and betterments that the insured has made to the building. (Filed)
Signs Coverage Form
Form that covers neon, flourescent, automatic, or mechanical signs. (Filed)
Theatrical Property Coverage Form
Form that covers stage scenery, costumes, and similar property used in theatrical productions. (Filed)
Film coverage form
Form that covers exposed motion picture film and magnetic tapes or videotapes, including related soundtracks or sound records. (Filed)
Floor Plan Coverage Form
Form that covers merchandise being held for sale and that the dealer has financed under a floor plan. (Filed)
Jewelers Block Coverage Form
Form that covers the merchandise of retail jewelers, including similar property of others in the insured's care, custody, or control. (Filed)
Mail Coverage Form
Form that covers a financial institution against loss of securities and other negotiable instruments while in transit through specified types of mail. (Filed)
Accounts Receivable Coverage Form
Form that covers losses (including uncollectible accounts) due to destruction of the insured's records of accounts receivable. (Filed)
Nonfiled jewerlers block policies are used to insure:
1) Retailers w/ average inventories exceeding $250,000; 2) jewelery wholesalers; 3) jewelry manufacturers
Valuable papers and records coverage form
Form that covers valuable papers and records, such as an architect's blueprints and plans (Filed)
Judgment rating
Rating used by underwriters to rate one-of-a-kind risks
Freight
The compensation a carrier receives for transporting cargo
Ocean marine insurance
Insurance that covers vessels and their cargos, including various vessel-related liability exposures
Voyage policy (cargo)
Policy that covers cargo for a single trip specified in the policy; comparable to an inland marine trip transit policy.
Open cargo policy
Policy (ocean marine) that covers all goods shipped or received by the insured during the policy's term; comparable to an inland marine annual trip transit policy
Typical valuation of an ocean shipment:
Amount of invoice + Freight + 10%
Warehouse to warehouse clause
Clause in open cargo policies that covers the insured cargo during the ordinary course of transit (including land transit) from the time the cargo leaves the point of shipment until it is delivered to its final destination
Sue and labor clause
Clause that covers the cost of reasonable measures that the insured is required to take to protect property from damage at the time of loss.
General average
Partial loss that must, according to maritime law, be shared by all parties to a voyage (cargo owners and vessel owner).
Particular average
Partial loss that is borne by only one party to a voyage (such as a cargo owner)
Hull insurance
Insurance that covers physical damage to vessels, including their machinery and fuel but not their cargo
Salvage (ocean marine)
Refers to situations in which owners of cargo aboard a ship that falls in distress become liable to pay awards to those who put themselves at risk to rescue the ship
Covered causes of loss for hull insurance:
Perils of the seas, fire, lightning, earthquake, barratry, all other like perils.
Perils of the seas
Accidental causes of loss that are peculiar to the sea and other bodies of water
Barratry
Serious misconduct by the vessel's master or crew that is contrary to the owner's interest, such as fraudulent or criminal act that causes damage to the vessel.
Collision liability clause
Clause that covers the insured's liability for collision damage to other ships and their cargoes
Time policy (ocean marine)
Covers the insured vessel(s) for a specified period of time (usually a year)
Protection and indemnity (P&I) insurance
Insurance that covers shipowners against various liability claims due to operating the insured vessel.

i.e., - damage to bridges, piers, wharves, and other structures along waterways; injury to passengers, crew, and other persons on the ship; injury to persons on other ships; damage to cargo of others aboard the insured vessel
Commercial general liability insurance
Insurance that covers many of the common liability loss exposures faced by an organization, including its premises, operations, and products.
Liability loss
All costs to a person or an organization due to a legal claim or suit against that person or organization
Legal liability
A legally enforceable obligation of a person or an organization to pay a sum of money (called damages) to another person or organization.
Civil law
The branch of the law that provides a means to settle disputes between parties
Criminal law
The branch of the law that imposes penalties for wrongs against society
Tort
A civil wrong, other than a breach of contract, against another person
Negligence
A tort that occurs when a person exposes others to an unreasonable risk of harm because of failure to exercise the required degree of care.
Strict liability
Liability that is imposed even though the defendant acted neither negligently nor with intent to cause harm; for example, liability for injury caused by wild animals or dangerously defective products.
Contract
A legally enforceable agreement between two or more parties in which each party makes some promise to the other.
Breach of contract
Failure to fulfill one's contractual promise.
Hold harmless agreement
A contractual provision that obligates one of the parties to assume the legal liability of another party
Contractual liability
Liability assumed through a hold harmless agreement
Statute
A law passed by a state or federal legislative body
Premises liability exposure
Exposure to liability for injury or damage due to the ownership, occupancy, or use of premises.
Operations liability exposure
Exposure to liability for injury or damage due to activities in addition to the ownership, occupancy, or use of premises; for example, a building contractor's liability exposure while constructing a house
Products liability exposure
Exposure to liability for injury or damage due to products sold or distributed by the exposed party
Completed operations liability exposure
Exposure to liability for injury or damage due to work completed by the exposed party
CGL Coverage A
Bodily Injury and Property Damage Liability
CGL Coverage B
Personal and Advertising Injury Liability
CGL Coverage C
Medical Payments
Bodily injury (as defined in the CGL)
Bodily injury, sickness, or disease sustained by a person, including death resulting form any of these at any time
Property damage
Physical injury to tangible property, including resulting loss of use of that property and loss of use of tangible property that is not physical injured.
Occurrence
An accident, including continuous or repeated exposure to substantially the same general harmful conditions
Occurrence coverage trigger
Bodily injury or property damage that occurs during the policy period; what triggers coverage under the "occurrence" version of the CGL coverage form.
Insured contract
A contract under which liability assumed by the insured is covered int he CGL; includes a lease of premises, a sidetrack agreement, an easement or license agreement, an obligation (as required by ordinance) to indemnify a municipality, an elevator maintenance agreement, or that part of any other contract pertaining to the insured's business under which the insured assumes the tort liability of another party. (Is excluded for coverage by Coverage A)
CGL Coverage A (Bodily Injury & Property Damage Coverage) Exclusions
Contractual liability (i.e., insured contract)
Expected or intended injury
Liquor liability
Workers Compensation and Employers Liability
Pollution
Aircraft, Auto, and Watercraft
Mobile Equipment
War
Damage to Property
Insureds Products and Work (Damage to Your Product; Damage to Your Work; Damage to Impaired property or property not physically injured; recall of products, works, or impaired property)
Personal and Advertising Injury
Fire Legal Liability Coverage
Auto
A land motor vehicle, trailer, or semitrailer designed for travel on public roads, including attached machinery or equipment, but excluding mobile equipment
Loading or unloading
The handling of property (1) after it is moved from the place where it is accepted for movement onto an aircraft, watercraft or auto; (2) while on any such vehicle; or (3) while being moved from such vehicle to the place wher eit is finally delivered. Does not include movement by means of a mechanical device (other than a hand truck) that is not attached to the vehicle
Mobile equipment
Various types of vehicles designed for use principally off public roads, such as bulldozers and cranes
Fire legal liability coverage
Coverage for fire damage to premises rented to or temporarily occupied by the named insured
Personal and advertising injury (CGL Coverage B)
Injury that is covered by Coverage B of the CGL. Includes injury resulting from numerous offenses such as false detention, malicious prosecution, wrongful eviction, slander, libel, use of another's advertising idea, and copyright infringement
Trade dress
The overall appearance and image of a product
CGL Coverage C (Medical payments) does not apply to bodily injury to the following persons:
- Any insured (other than a volunteer worker of the named insured)
- Anyone hired to do work for an insured or for a tenant of an insured
- A person injured on that part of the named insured's premises which the person normally occupies
- A person entitled to workers compensation benefits for the injury
- A person injured while taking part in athletics
CGL: who is an insured?
1. Named insured
2. Employees of the named insured
3. Other persons and organizations
LLC
limited liability company
T or F: In a partnership, the spouses of members are also insureds (but only for liability claims arising out of the conduct of the business of the partnership or joint venture)
TRUE.
CGL: Who is an insured - other persons and organizations includes who?
1. Real estate managers
2. Legal representatives
3. Mobile equipment operators
4. Newly acquired organizations
CGL Limit flow chart:
General Aggregate limit --> Personal & Advertising Injury OR Each Occurrence -->Damage to Premises Rented to You OR Medical Expense

Products-Completed Operations Aggregate Limit --> Each Occurrence
General aggregate limit
The most the insurer will pay during the policy period for the sum of (1) damages under Coverage A, except damages because of injury or damage included in the products-completed hazard, (2) damages under Coverage B, and (3) medical expenses under Coverage C
Products-completed operations hazard
All bodily injury and property damage occurring away from the named insured's premises and arising out of the named insured's product or work. The hazard does not include (1) products still in the named insured's physical possession or (2) work that has not been completed or abandoned
Personal and advertising injury limit
The most the insurer will pay for all personal and advertising injury to one person or organization
Each occurrence limit
The most the insurer will pay for all of the following arising out of a single occurrence: (1) damages for bodily injury and property damage under Coverage A and (2) medical expenses under Coverage C
Damage to premises rented to you limit
The most the insurer will pay for either (1) damage by a cause other than fire to any one premises rented to the named insured or (2) damage by fire to any one premises rented to the named insured or temporarily occupied by the named insured with the owner's permission
Medical expense limit
The most the insurer will pay for Coverage C medical expenses due to bodily injury to one person
Contribution by equal shares
Method of sharing loss when two or more policies apply; each insurer pays an equal amount until the claim is fully paid or until one insurer exhausts its limit; if so, the other insurer pays the remainder of the claim (up to its limit).
Contribution by limits
Method of sharing loss when two or more policies apply; each insurer pays that proportion of the claim that the insurer's limit bears to the total of all applicable insurance.
T or F: The representations condition (CGL) places a heavy burden on the insurer to read the policy declarations and to be sure that the representations madein the negotiation of the policy are accurate
FALSE. It is the named insured's burden
Claims-made coverage trigger
The event that triggers coverage under the claims-made CGL coverage form: the first making of a claim against the insured during the policy period
Retroactive date
The date on or after which bodily injury or property damage must occur (or a personal and advertising injury offense must be committed) in order to be covered.
Extended reporting period (often referred to as a "tail")
An additional period (also called a "tail") following the expiration of a claims-made policy. During this period the expired policy covers claims first made against the insured, provided the injury occurred after the retroactive date (if any) and before policy expiration.
CGL Exclusion Endorsement:

Exclusion - Personal and Advertising Injury Endorsement
Excludes Coverage B - Personal and Advertising Injury Liability
CGL Exclusion Endorsement:

Exclusion - Employees and Volunteer Workers as Insureds
modifies the WHo Is an Insured section of the policy to eliminate insured status for the named insured's employees and volunteer workers
CGL Exclusion Endorsement:

Exclusion - Total Pollution Exclusion Endorsement
eliminates coverage for any injury, damage, or cleanup costs resulting from the actual, alleged, or threatened discharge of pollutants
CGL Exclusion Endorsement:

Exclusion - Designated Product Endorsement
excludes liability arising out of specified products of the insured
CGL - Boats Endorsement
extends CGL coverage to any watercraft described in the endorsement and owned or used by or rented to the insured
CGL - Deductible Liability Insurance Endorsement
Enables the insured to apply deductibles to the bodily injury and property damage liability coverages, either separately or combined. The deductibles may be on eithe ra per-claim or a per-occurrence basis.
CGL - Additional Insured-Vendors Endorsement
Includes as an insured any person or organization (the vendor) specified in the endorsement
Rate formula for CGL
Rate x rate exposure = premium
Premium base
The unit in which the rate exposure is measured, such as gross sales or payroll
Class code
A numeric code representing the description int he rating classification table that best fits a particular organization's operations
Certificate of insurance
A brief description of insurance coverage prepared by an insurer or its agent, commonly used by policyholders to provide evidence of insurance
Liquor liability coverage form
Form that covers liquor liability of insureds in the business of manufacturing, distributing, selling , serving or furnishing alcoholic beverages
Products/Completed Operations Liability Coverage Form
Form that covers products and completed operations liability separately from the CGL coverage form
Owners and Contractors Protective Liability COverage Form
Form purchased by a contractor to protect a property owner against liability for bodily injury or property damage arising out of (1) the contractor's operations at the specified location or (2) acts or omissions of the property owner in connection with the general supervision of such operations.
Railroad Protective Liability Coverage Form
Form that covers a railroad against claims arising out of a contractor's work on or adjacent to a railroad property and that is purchased by the contractor.
Doctrine of "respondeat superior"
"Let the employer answer"
Employers nonownership liability
An employer's liability for its employees' operation of their autos int he employer's business
Auto no-fault law
State statutes that require motorists to purchase (or require insurers to make available) insurance that provides minimum first-party benefits to injured persons regardless of fault
Uninsured motorists law
State statutes that require auto insurers to offer uninsured motorists coverage to all insured motorists who are their policyholders
Business Auto Coverage Form
Form that covers automobile loss exposures for all types of organizations other than auto dealers and motor carriers
Coverage symbol
Numeric symbols used in a commercial auto policy to indicate which autos are covered for particular coverages
Business Auto Coverage Form: Symbol 1
Any Auto
Business Auto Coverage Form: Symbol 2
Owned Autos Only
Business Auto Coverage Form: Symbol 3
Owned Private Passenger Autos Only
Business Auto Coverage Form: Symbol 4
Owned Autos Other Than Private Passenger Autos
Business Auto Coverage Form: Symbol 5
Owned Autos Subject to No-Fault
Business Auto Coverage Form: Symbol 6
Owned Autos SUbject to a Compulsory Uninsured Motorists Law
Business Auto Coverage Form: Symbol 7
Specifically Described Autos
Business Auto Coverage Form: Symbol 8
Hired Autos Only
Business Auto Coverage Form: Symbol 9
Nonowned Autos Only
Business Auto Coverage Form: Symbols 1 - 9 (all)
1. Any Auto
2. Owned Autos Only
3. Owned Private Passenger Autos Only
4. Owned Autos Other Than Private Passenger Autos Only
5. Owned Autos Subject to No-Fault
6. Owned Autos Subject to a Compulsory Uninsured Motorists Law
7. Specifically Described Autos
8. Hired Autos Only
9. Nonowned Autos Only
Commercial Auto Coverage Agreement - the insurer expresses three distinct duties:
1. A duty to pay damages
2. A duty to pay "covered pollution cost or expense"
3. A duty to defend the insured
Commercial Auto - who is an insured?
The named insured is an insured for any covered auto. Anyone other than the named insured is an insured whiel using w/ the named insured's permission a covered auto owned, hired or borrowed by the named insured. (some restrictions)
Business Auto Liability Coverage Exclusions
Expected or intended injury
Contractual liability
Workers compensation
Employee indemnification and employers liability
Fellow employee
Care, custody or control
Handling of property
Movement of property by mechanical device
Operations
Completed operations
Pollution
War
Racing
Severability of interests clause
w/ business auto, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or 'suit' is brought.
Business auto limit
The single limit is a maximum amount the insurer will pay for all claims arising form a single accident regardless of the number of vehicles, the number of drivers, or the number of claimants involved
Collision coverage
Coverage for direct and accidental loss or damage to a covered auto caused by collision w/ another object or by overturn
Comprehensive coverage
Coverage for direct and accidental loss or damage to a covered auto by any peril except collision or a peril specifically excluded
Specified causes of loss coverage (comm. auto)
coverage for several named perils instead of all perils except those specifically excluded. Includes fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, or vandalism. It also insures loss resulting from the sinking, burning, collision or derailment of a conveyance transporting the insured vehicle
Towing and labor coverage
Coverage for necessary towing and labor costs due to the disablement of a covered private passenger auto; coverage requires that the labor must be performed at the place of disablement.
Transportation expenses
Coverage extension for substitute transportation costs incurred when a private passenger type auto has been stolen; applies only if the auto is insured for comprehensive or specified causes of loss.
Loss of use expenses
Coverage extension that pays loss of use of a rental auto when an insured becomes contractually obligated to make such payments (up to $20 a day to a max of $600)
Comm. auto exclusions
The insurer will not pay for loss to the following:

1. Tapes, records, discs, or similar devices
2. Radar detectors and similar devices
3. Any equipment, whether permanently installed or not, that receives or transmits audio, visual, or data signals and that is not designed solely for the reproduction of sound
4. Any accessories used w/ the equipment described in item 3 above

or for the following causes:
wear and tear
freezing
mechanical or electrical failure
road damage to tires

unless they result from covered causes
Limit of insurance for comm. auto
Smaller of:

1. ACV of property at time of loss
2. The cost of repairing or replacing the property w/ other property of like kind or quality
T or F: Deductible for comm. auto applies to each covered auto involved in an incident
TRUE. If two covered autos collide, both deductibles apply.
Auto medical payments coverage
Coverage for medical expenses incurred by occupants of a covered auto, regardless of whether the auto's driver was at fault in the accident
Personal injury protection (PIP) coverage
Coverage for medical expense, income loss, and other benefits stipulated in an auto no-fault plan
Benefits provided by a typical PIP endorsement:
1. Medical and rehabilition expenses
2. Income loss benefit
3. Substitute services benefit
4. Death benefits to survivors
Garage Coverage Form
Form that covers the automobile and general liability loss exposures of auto dealers
Garage Coverage symbols
21-29 correspond to business auto 1-9

30 is used for providing garagekeepers coverage on customers' autos left w/ the named insured for service, repair, storage or safekeeping

31 covers dealers' autos and autos held for sale by nondealers or trailer dealers
T or F: Garage liability coverage is NOT restricted to liability arising out of "garage operations."
FALSE. It does carry this restriction.
Garage Coverage - Broad Form Products Coverage eliminates the exclusion of property damage to the named insured's products. What deductible is it subject to?
$250
Garage liability coverage provides completed operations insurance subject to a _____ deductible
$100
Garagekeepers insurance
Insurance that covers the insured's liability for damage by a covered cause of loss to autos left in the insured's care whiel the insured is attending, servicing, repairing, parking, or storing the autos
Garagekeepers direct excess option
Option that modifies garagekeepers coverage to include coverage in situations when the insured is not legally liable for loss to a customer's auto; this additional coverage applies in excess of what customers can collect under their own insurance.
Garagekeepers direct primary option
Option that modifies garagekeepers coverage so that it will pay all covered losses on a primary basis, regardless of whether the insured is legally liable and regardless of whether customers can recover under their own insurance.
Motor Carrier Coverage Form
Form that covers businesses that use autos to transport property of others or, in some cases, their own property.
Owner-operators
Individuals who lease themselves and their trucks to motor carriers to transport property for the motor carrier
Bobtail and deadhead coverage
Coverage for an owner-operator's use of his or her truck while not under lease to a motor carrier (and therefore not covered under the motor carrier's auto policy)
Trailer interchange agreement
A contract under which two motor carriers agree to swap trailers
Trailer interchange coverage
Coverage for a motor carrier's liability for damage to trailers in its possession under a written trailer interchange agreement.
Zone rated vehicles
Trucks in the medium and larger size class that are operated beyond a 200-mile radius of the principal garaging location and that are subject to zone rating, which considers the territories in which insured vehicles operate.
Businessowners policy (BOP)
A package policy that combines, in a simplified manner, most of the property and liability coverages needed by small and medium-sized businesses such as stores, offices, and apartment buildings
General eligibility for BOPs
Usually an eligible building must be occupied principally for retail, wholesale, service, or processing purposes and contain not more than a certain maximum total floor area, such as 15,000 or 25,000 square feet; sometimes, as with contractors, there is a payroll limit (i.e., not exceeding $300,000). General contractors are usually not eligible.

i.e., mainstreet businesses, apartment buildings, office buildings, contractors, restaurants
Ineligible for BOP programs:
-auto businesses
- bars, grills, and large restaurants
- manufacturing firms
- one or two-family dwellings other than multiple-unit garden apt. complexes
- places of amusement
- financial institutions
Business Pursuits Endorsement
Extends HO liability coverage to cover bodily injury and property damage liability arising out of the insured's business activities. However, coverage does not apply to a business owned or controlled by the insured
Home Business Insurance Coverage Endorsement
Includes Property & liability coverages normally found in a commercial insurance policy. In general, the home-based businesses insured w/ this endorsement are smaller than those usually insured under a BOP.
T or F: Most insurers only offer 2 versions of the BOP form: named-perils and special form
TRUE.
T or F: ACV is the standard valuation provision w/ BOPs
FALSE. Replacement cost is.
T or F: BOPs are characteristically written w/o coinsurance provisions
TRUE. in 1995, however, ISO introduced an insurance-to-value provision (use of which is becoming more widespread)
Seasonal increase provision
A provision commonly included in BOPs to address fluctuating personal property values (if insured carries insurance equal to 100% of its avg. monthly personal property value for 12 months preceding the loss, business personal property limit will automatically increase by 25 percent
T or F: Business Income and Extra Expense Coverage are automatically included in the BOP
TRUE.
Farmowners policy
A package policy designed to cover residential property (such as a farm family's house and belongings); property used in farming (such as mobile equipment, livestock, and barns); and personal and farm liability exposures.
ISO Farm form coverages
A - Dwellings
B - Other Private Structures Appurtenant to Dwellings
C - Household Personal Property
D - Loss of Use
E - Scheduled Farm Personal Property
F - Unscheduled Farm Personal Property
T or F: Unscheduled Farm Personal Property is not subject to 80 percent coinsurance
FALSE. It IS subject to 80% coinsurance
Basic farm causes of loss
Theft, collision, earhtquake, flood
Broad causes of loss
all basic causes plus death of livestock (from electrocution, drowning, accidental shooting, attacks by dogs or wild animals, and accidents in loading or unloading)
Crop hail insurance
Insurance offered by private insurers that covers crops against loss caused by hail and often other perils
Multiple Peril Crop Insurance (MPCI)
Insurance offered by the federal government that covers unexpected crop production losses due to natural causes such as drought, excessive moisture, hail, windstorm, and flood
Farm inland marine coverage forms:
- Mobile agricultural machinery and equipment coverage form
- livestock coverage form
Animal mortality insurance
Insurance that covers loss of valuable animals by (1) death resulting from accident, injury, sickness, or disease or (2) theft, subject to exclusions
Workers compensation and employers liability insurance
Insurance that provides (1) coverage for benefits an employer is obligated to pay under workers compensation laws and (2) coverage for employee injury claims made against the employer that are not covered by workers compensation laws
T or F: to be eligible for workers comp, an injury or disease must (in most states) arise out of and in the course of employment.
TRUE.
4 workers compensation benefits:
- Medical benefits
- Disability income benefits
- Rehabilitation benefits
- Death benefits
Temporary partial disability
A disability that prevents an injured worker from performing some job duties for a definite time period.
Temporary total disability
A disability that prevents an injured worker from performing any job duties for a specific period but that ultimately allows the worker to resume all job duties.
Permanent partial disability
A disability due to an irreversible injury that allows an injured worker to resume some job duties
Permanent total disability
A disability that prevents an injured worker from ever being able to perform any job duties
second-injury fund
should additional injury occur to an already impaired worker that results in a total or near total impairment, the applicable fund will pay a portion of the claim.
Employee
A person hired to perform services for another under the direction and control of the other party, called the employer
Independent contractor
A person (or organization) hired to perform services without being subject to the hirer's direction and control regarding work details
PEO
Professional employer organization (leases employees)
Determination of application of workers compensation laws depends on a few typical considerations:
1. Place and nature of employment
2. The place where the employee was hired
3. The employee's place of residence
4. The state in which the employer is domiciled
United States Longshore and Harbor Workers' Compensation Act (LHWCA)
A federal statue that eliminates the right of maritime workers (other than crew members of vessels) to sue their employers; requires such employers to provide injured or ill workers w/ benefits like those provided by state workers compensation statutes for work-related injury or illness
Jones Act
A federal statue that permits injured members of a vessel's crew (or survivors of a deceased crew member) to sue their employer for damages due to the employer's negligence
Competitive state fund
A facility, owned and operated by a state government, that provides workers compensation insurance and that also permits private insurers to sell workers compensation insurance (i.e., to compete w/ the state fund) in that state
Monopolistic state fund, or exclusive state fund
A facility, owned and operated by a state government, that provides workers compensation insurance and that does not permit any other insurers to sell workers compensation insurance in that state
Employers' mutual insurance company
A mutual insurer established by a state's legislature to write workers compensation insurance for any qualified employer in the state
Aggregate excess insurance
Insurance that covers losses only after the insured has retained a stated amount of aggregate loss during the policy period
Specific excess insurance
Insurance that covers loss due to a single occurrence only for the amount that exceeds the policy retention
Workers Compensation and Employers Liability Insurance Policy (WC & EL policy)
Policy used in most states to provide workers compensation and employers liability insurance
WC & EL policy: Item 3A
states where WC applies
WC & EL policy: Item 3B
Employers liability w/ split limits:

- bodily injury by accident (each accident)
- Bodily injury by disease (policy limit)
- bodily injury by disease (each employee)
WC & EL policy: Item 3C
all states part 3 applies to
trigger for EL bodily injury by accident:
policy in effect when the injury occurs is the policy that applies
trigger for bodily injury by disease in EL:
the policy that is in effect on the employee's last day of last exposure to the conditions causing or aggravating the injury is the policy that applies
Other states insurance
Insurance that automatically extends coverage to the insured's operations in any state listed in Item 3C of the WC & EL info page
Stopgap coverage
Coverage for employers liability that private insurers provide to employers operating in a monopolistic fund state that does not include such insurance in its workers compensation policies
Voluntary Compensation and Employers Liability Endorsement
Endorsement that amends the WC & EL policy to cover employees who are not subject to a workers compensation statute
United States Longshore and Harbor Workers' Compensation Act Endorsement
Endorsement that amends the WC & EL policy to cover the insured's obligations under the LHWCA.
WC premium base:
based on the manual rate for the applicable classification per $100 of payroll for the year
Experience rating plan
Rating plan that increases or reduces the premium for a future period based on the insured's own loss experience for a period in the recent past
Experience modification
A rate multiplier derived from the experience rating computation.
Retrospective rating
A rating plan that increases or reduces an insured's premium for a policy period based on the insured's own losses during the same period.
Expense constant
A flat charge to cover administrative expenses, such as policy issuance and record keeping, that are common to WC & EL
Large deductible plan
A plan that allows insureds to self-insure most of their workers compensation claims w/o establishing a qualifying self-insurance plan; WC & EL policy w/ deductibles in the $50,000 to $250,000 range
Maximum possible loss (MPL)
The largest loss that could be sustained in a particular occurrence or by a particular property
Excess liability policy
Policy that covers liability claims in excess of the limits of an underlying policy or a stated retention amount
Umbrella liability policy
Policy that provides excess coverage over several primary policies (typically CGL, auto, and employers liability) and that may also provide drop-down coverage
Drop-down coverage
Coverage provided by many umbrella liability policies for (1) claims not covered at all by the underlying policies and (2) claims that are not covered by an underlying policy only because the underlying policy's aggregate limits have been depleted.
Self-insured retention (SIR)
An amount that is deducted from claims that are payable under an umbrella liability policy and that are not covered at all by any primary policy
Maintenance of underlying insurance condition
A condition that obligate sthe insured of an umbrella liability policy to maintain all required underlying coverages in full force and effect during the policy period
Professional liability insurance
Insurance that covers persons engaged in various occupations against liability due to their rendering or failing to render professional services, exclusive of the exposures covered under their CGL policies; describes various other types of insurance such as directors and officers liability, employment practices liability, and fiduciary liability
Directors and officers (D&O) liability insurance
Insurance that covers a corporation's directors and officers against liability for their "wrongful acts" that would not be covered under a CGL or auto policy; also covers the sums that the insured corporation is required or permitted by law to pay to the directors and officers as indemnification.
D&O deductibles
often flat deductible amount & specified percentage of participation (i.e., $10,000 + 5% of remaining)
Entity coverage
Coverage extension of D&O liability policies for claims made directly against a corporation (the "entity") for wrongful acts
Employment practices liability (EPL) insurance
Insurance that covers an organization, its directors and officers, and its employees against claims alleging damages because of wrongful employment practices such as sexual harassment, wrongful termination, and unlawful discrimination
Employee benefits liability insurance
Insurance that covers an employer against liability claims alleging improper advice or other errors or omissions committed while administering the employer's employee benefit plans.
Fiduciary liability insurance
Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duties involving discretionary judgment.
Aircraft insurance
Insurance that covers liability due to the insured's ownership, maintenance, or use of aircraft; physical damage to aircraft owned or used by the insured; and other aircraft loss exposures
Airline
Int'l, national and regional air carriers
Business and pleasure aircraft
Individually owned aircraft used for owner's personal purposes w/ no charge made or direct profit derived from the aircraft's use
Industrial aid aircraft
corporate-owned aircraft that are (1) used for transporting employees, associates, and executives and (2) flown by full-time professional pilots
Commercial use aircraft
Charter operators, air taxi operators, and other profit-seeking operators
Special use aircraft
Crop dusting, banner towing, law enforcement, pipeline patrol, hunting, etc.
Aircraft liability limits
- Bodily injury excluding passengers
(each person)
(each occurrence)
- Passenger bodily injury
(each person)
(each occurrence)
- Property damage (each occurrence)
Resource Conservation and Recovery Act (RCRA, or Superfund) of 1976
required that owners and operators of hazardous and waste materials/businesses demonstrate financial responsibility to clean up environmental damage and compensate victims for bodily injury and property damage resulting from release of contaminants.
First party onsite cleanup coverage
Covers the expense to clean up pollution on the insured's own premises
Third-party environmental liability coverage
Covers claims for bodily injury and property damage occurring both onsite or offsite caused by pollution origination fromt he insured's premises, the release of contaminants during transportation, or pollution emanating from nonowned disposal sites.
Cleanup cost cap coverage (also called remediation stop-loss)
protects the insured against cost overruns in performing remediation of a contaminated site.
Contractors pollution liability coverage
Insures contractors against liability for bodily injury and property damage arising out of remediation operations, environmental cleanup, and transportation of hazardous materials
Environmental professional liability coverage
Provides professional liability insurance for engineers, lawyers, consultants, laboratories, and others providing advice or services involving pollution.
Surety bond
A written contract that expresses one party's promise to answer for another party's failure to do something as promised
Surety
The party (usually an insurer) to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as promised
Obligee
The party to a surety bond that receives the surety's guarantee that the principal will fulfill an obligation or perform as promised
Principal
The part to a surety bond whose obligation or performance the surety guarantees.
Contract bond
A surety bond guaranteeing the fulfillment of obligations under construction contracts or other types of contracts
Bid bond
A contract bond guaranteeing that a contractor bidding on a construction or supply contract will actually enter into the contract at the price bid
Performance bond
A contract bond guaranteeing that a contractor's work will be completed according to the contract
Payment bond
A contract bond guaranteeing that a contractor will pay when due all of the labor and material bills arising out of the work that the contractor is obligated to perform.
Maintenance bond
A contract bond guaranteeing a contractor will correct defects in workmanship or replace defective materials for a specified period after project completion.
License bond
A commercial surety bond guaranteeing that a licensee (such as a licensed plumber) will pay damages resulting form the licensee's violations of the udties and obligations imposed on the licensee
Permit bond
A commercial surety bond guaranteeing that a permit holder (such as a liquor store) will pay damages resulting form the permit holder's violations of the duties and obligations imposed onthe license holder
Public official bond
A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully and honestly.