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Obligee - Broadly, anyone in whose favor an obligation runs. This term is used most frequently in surety bonds where it refers to the person, firm, or corporation protected by the bond. The obligee under a bond is similar to the insured under an insurance policy. In the case of a construction bond, the person for whom the building is being built is the obligee.
Obligor - Commonly called the principal. One bound by an obligation. In the case of a construction bond, the contractor is the principal.
Occupational Accident - An accident arising out of or occurring in the course of one's employment and caused by hazards inherent in or related to it.
Occupational Disease - Sickness or disease arising out of or in the course of employment. State compensation laws provide coverage for this type of loss.
Occupational Hazard - A condition in an occupation that increases the peril of accident, sickness, or death.
Occurrence - An event that results in an insured loss. In some lines of insurance, such as Liability, it is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected nor intended by the insured.
Odds- The probable frequency of incidence of a given occurrence in a statistical sample. It is expressed as a ration to the probably number of non-occurrences or as a decimal fraction of the total occurrences. For example, a probability of .25 equals odds of three to one against. A probability of .75 equals odds of three to one for.
OH- Overhead fixed charges
Ordinance or Law Coverage - Ordinance or Law Coverage provides three coverages for losses resulting from building ordinances or laws:
- Coverage A: Covers loss to the undamaged portion of the building that an ordinance or law does not permit to remain in use.
- Coverage B: Covers cost to demolish the undamaged portion of the structure and remove the debris.
- Coverage C: Covers the additional cost of reconstructing a damaged or destroyed building to be in conformity of local ordinances or laws.
Other Insurance Clause - A provision found in almost every insurance policy except Life and sometimes Health stating what is to be done in case any other contract of insurance embraces the same property and/or hazards.
Outstanding Losses- Calculated by subtracting paid losses form incurred losses. Represents the remaining liability to be paid on a group of losses.
Owners and Contractors Protective Liability Policy - A policy which protects an insured against losses caused by the negligence of a contractor or subcontractor that he hires. Also sometimes referred to as Independent Contractors Insurance.-
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Package Policy - Any insurance policy including two or more lines or types of coverages in the same contract. Personal and commercial package policies are very common today.
Paid Loss Retrospective Rating Plan - An insurance cash flow plan that allows the insured to hold loss reserves until they are paid out in claims.
Paid Losses - The amount actually paid in losses during a specified period of time, not including estimates of amounts (i.e., reserves) that will be paid in the future for losses occurring in the specified period.
Pair and Set Clause - A clause which states that if a part of a pair or set is lost or damaged the measure of the loss shall be a reasonable and fair proportion of the total value of the set, giving consideration to the importance of the article. The insurer is under no obligation to pay for the total loss of a set when one part is lost, damaged, or destroyed.
Partial Loss - A loss covered by an insurance policy which does not completely destroy or render worthless the insured property.
Party Wall - A common wall between two buildings.
Passive Retention - Unplanned acceptance of losses because of failure to identify risk, failure to act, or forgetting to act.
Peak Season Endorsement - An endorsement which provides increased amounts of coverage on inventories during peak seasons, beginning and ending on dates specified in the endorsement.
Penalty - The limit of an insurance company's liability under a Fidelity Bond.
Per Diem Business Interruption - A type of Business Interruption policy which provides a stated amount to be paid for each day that the business is interrupted due to an insured peril.
Performance Bond - A bond which guarantees the faithful performance of a contract.
Peril - The cause of a possible loss.
Permanent Partial Disability - A condition where the injured party's earning capacity is impaired for life, but he is able to work at reduced efficiency.
Permanent Total Disability - A condition where the injured party is not able to work at any gainful employment for the remaining lifetime.
Permit Bond - A bond which guarantees that a person who has been issued a permit will comply with the laws and ordinances regulating the privilege for which the permit was issued.
Personal Property - Any property of an insured other than real property. Homeowner policies protect the personal property of family members, and commercial forms are used to protect many types of business personal property.
Personal Property of Others - Property, other than real property, which is not owned by an insured. Liability forms have traditionally excluded coverage for property of others in an insured's care, custody, or control. Modern homeowner forms and commercial property forms provide some coverage for property of others.
Physical Damage (PD) - A term indicating damage from such perils as collision, comprehensive, fire, and theft or any damage to the vehicle.
Physical Hazard - Any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it.
Pilferage - Petty theft. This term is associated with the insuring of cargo under an Inland Marine Insurance form.
Piracy - Unlawful seizure of a ship and/or its cargo on the high seas. Commonly covered by Ocean Marine contracts.
Plaintiff - The party who brings a legal action against another, (called the defendant).
Policy - The written statement of a contract effecting insurance, or certificates thereof, by whatever name called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.
Policy Period - The period during which the policy contract affords protection.
Pollution Liability Extension Endorsement - An endorsement to general liability insurance which removes part of the pollution exclusion, creating liability coverage for pollution injury or damage.
Pool- 1) An organization of insurers or reinsurers through which particular types of risk are underwritten with premiums, losses, and expenses shared in agreed ratios. 2) A group of organizations (generally not large enough to self-insure individually) that form a shared risk pool.
Power Interruption Insurance - This coverage indemnifies the insured in the event of loss due to the interruption of power supplied by a public utility and caused by any of the perils insured against.
Power of Attorney - (1) The authority given to one person or corporation to act for and obligate another to the extent set forth in the agreement creating the power. (2) The authority given to the chief administrator of a reciprocal insurance exchange, who is called an attorney in fact, by each subscriber.
Preexisting Condition - A physical condition that existed prior to the effective date of a policy.
Premises and Operations Liability Insurance- Liability coverage for exposures arising out of an insured's premises and business operations. One of the two major sublines of general liability.
Premium - the price of insurance protection for a specified risk for a specified period of time.
Premium Discount - 1) A discount allowed on premiums paid in advance of one year, which is based on projected interest to be earned. 2) A discount allowed on certain workers compensation and comprehensive liability policies to allows for the fact that larger premium policies do not require the same percentage of the premium for basic insurer expenses such as policy writing. The discount percentage increases with the size of the premium. This is not available in all states.
Present Value - The amount of money that future amounts receivable are currently worth. For example, a Life Insurance policy may provide for payments to be made monthly for ten years. The present value of that money would be less than the total amount of the monthly payments for ten years because of the amount of interest that a present lump sum could earn during the term that the payments otherwise would have been made.
Primary Actual Losses - For computing workers compensation experience modification, for each loss equal to or less than $5,000, use the actual loss amount as primary loss value. Each loss over $5,000 is limited to a primary loss value of $5,000.
Principal- The entity whose performance is being guaranteed in suretyship.
Probable Maximum Loss - A maximum loss estimate developed for property insurance underwriters, which assume an impairment to one sprinkler system exists at the time of loss. A PML estimate may include other adverse conditions, such as a delayed fire alarm, insufficient water supply, or delayed firefighting response if such conditions seem reasonable.
Probate Bond - A bond required by a probate court to protect the administration of an estate or the assets of one person being cared for by another, such as assets in the hands of an executor or guardian. Probate bonds fall within the classification of fiduciary bonds.
Products and Completed Operations Insurance- A major general liability subline which provides coverage for an insured against claims arising out of products sold, manufactured, handled, or distributed, or operations which are complete. Claims are covered only after a product has been sold and possession relinquished, or operations have been completed or abandoned by the named insured. Manufacturers and contractors have a need for this coverage.
Proof of Loss - A formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of its liability.
Pro Rata - Proportionately
Proximate Cause - The effective cause of loss or damage. It is an unbroken chain of cause and effect between the occurrence of an insured peril and damage to property. For instance, fire is the proximate cause to damage done by the water used to extinguish it.
Public Adjuster - Similar to an independent adjuster, except that a public adjuster represents an insured on a fee basis in settlement claims.
Punitive Damages - Also known as Exemplary Damages. Damages awarded over and above compensatory damages to punish a negligent party because of wanton, reckless, or malicious acts or omissions. This serves to make an example of the wrongdoer. It is agreed that General Liability policies cover punitive damages when included with compensatory in a lump sum, but it is up to the courts to decide whether or not they are to be awarded. This is difficult for the courts, due to the fact that if the wrongdoer's insurance covers punitive damages, the punishment effect is lost.
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Quota Share Reinsurance- A form of reinsurance whereby the reinsurer accepts a stated percentage of each exposure written by the ceding company on a defined class of business
Quid Pro Quo - Latin for "this for that," or "one thing for another." In insurance it could refer to the consideration in an insurance contract which calls for the exchange of values by both parties to the contract in order for it to be a valid contract.