administrative costs: Costs for University Risk Management and University Claims and Legal Management services provided to administer insurance programs.

claims made policy: A policy that covers claims only if they are “made” during the policy period.  This coverage trigger is what causes a “tail” liability exposure for claims that have occurred but have not been reported.

contractors: Read Classifications of Contractors (PDF).

discounted liabilities: Reserves on a discounted (present value) basis.

excess insurance: A policy covering the insured against certain hazards and applying only to loss or damage in excess of a stated amount.

excess insurer's: Insurance companies that provide insurance protection over sizable retentions, or deductibles.  They price their insurance product under the assumption most claims will fall below their point of attachment.

exposure: Estimate of the probability of loss from some hazard, contingency, or circumstance.

hazard: The conditions that may create or increase the probability of a loss from a given peril.

hold harmless agreement: A contract under which one party to the contract assumes the legal liability of the other party.

incurred losses: The total of all losses occurring within a fixed period.

incurred but not reported (IBNR): The technique of assigning claim values for claims which are assumed to have occurred, based on past claim history, but which have not yet been reported.

indemnify: To hold harmless against loss or damage.

indemnity: In this document, indemnity is used interchangeably with settlement, and is used to reference a claim payment the UI makes a claimant, or plaintiff.

insurance: A contractual relationship that exists when one party, called the insurer, agrees to reimburse another, called the insured, for loss on a specified type of coverage for a consideration, called a premium.  Commercial insurance is purchased by an insured to transfer financial risk to the insurer.

legal expenses: Fees paid to outside law firms for claims brought against the University, and/or employees or agents, as defined in the University’s self-insurance plan document.  A legal expense also includes other expenses related to the defense of a claim, such as court reporting costs or the subpoena fees. 

legal liability: A liability imposed by law.

liability: Any legally enforceable obligation.

limits of liability: The maximum sum of money that an insurance company or self-insurer agrees to pay under the policy in the event of a covered loss. 

loss ratio: The percentage of losses to premiums earned.

malpractice: Alleged professional misconduct or lack of skill in the performance of a professional act.

negligence: The failure to use the degree of care an ordinary person would use under given circumstances.  Negligence may be constituted by acts of omission, commission, or both.

occurrence policy: A policy that covers claims that occur during the policy period.

policy: An insurance policy or contract. 

reinsurance: The process by which an insurance company protects itself against excessive loss by reinsuring a part of its risks with other companies and paying such sharing companies a portion of the premium it receives.  In this document, it is used interchangeably with “excess insurance”. 

replacement cost: The replacement value of damaged property is paid without deduction for depreciation.

retention: The net amount of risk retained on a given risk.  “Retention” applies on high excess programs, whereas “deductible” is used on programs where little financial risk is assumed.

risk: The subject matter of insurance, the object of an underwriter’s attention.  A home, a building, or a driver of a car may be referred to as a risk.  In addition, the term “risk”, in the academic sense, may be used to refer to the uncertainty of financial loss.  In this sense, risk is the uncertainty or chance of loss. 

subrogation: The assignment to an insurer by terms of the policy or by law, after payment of a loss, of the rights of the insured to recover the amount of the loss from one legally liable for it.

tail: On claims-made policies, the “tail” refers to the exposure for claims that have occurred, but are not known.  When moving from one claims-made policy to another one of two things needs to occur: Either the effective date of the new claims-made policy must have a retroactive date that coincides with the effective date of the first claims-made policy issued, or the insured needs to purchase a “tail” endorsement.  Either is designed to prevent gaps in coverage based on when claims are reported. A tail is also known as an “Extended Reporting Policy endorsement”.

tort: A wrong; a private or civil wrong or injury resulting from a breach of a legal duty that exists by virtue of society’s expectations regarding interpersonal conduct, rather than by contract or other private relationship. There are many kinds of torts, each with different elements, but they can be generally classified into three groups:  those involving intent, negligence, or strict liability.  The essential elements of a tort are the existence of a legal duty owed by a defendant to a plaintiff; a breach of that duty; and a causal relationship between the defendant’s conduct and the resulting damage to the plaintiff.

underwriting: Securing and evaluating information and making decisions to accept or reject risks.  Underwriting also involves determining the terms under which insurance will be written if the risk is deemed acceptable. 

working layer: An underwriting term referring to the insured’s retention, and where excess insurance sits above.  It is also known as the “burning layer”.  In excess liability policies, particularly malpractice, the excess insurer wants to have their coverage attach well in excess of where claims frequently settle.