Accident – when used in conjunction with liability insurance, an event or condition occurring by chance or an unexpected happening.

Adjudication – the rendering of a court decree.

Agency – a contractual relationship whereby one party acts on behalf of another.

Agent – when used in conjunction with insurance, a businessman who represents one or more insurance companies and not the insured, insofar as insurance transactions.

Aggregate Limit of Liability – common to liability policies, this refers to the policy’s limit of liability that may not be exceeded by payment of the sum of all losses and claims expense during the policy period.

Allegation – the assertion, declaration or statement of a plaintiff party contained in his pleading and setting forth that which he hopes to prove.

Allocated Claims Expense – claims expense to which the deductible of a policy applies and that may serve to reduce the available limit of liability.

All Risk Insurance – property or marine insurance that provides coverage for all perils except those specifically excluded instead of providing coverage for certain named perils only.

Arbitration – the process of submitting a disputed matter to a panel of arbitrators selected in a manner provided by law or statute in order that they make a decision.

Award – a decision rendered by a panel of arbitrators.

Binder – evidence of insurance that has been affected. A binder is usually issued pending delivery of a policy.

Blanket – when used in conjunction with insurance, coverage that applies on a general rather than a specific basis.  To exemplify, blanket joint venture coverage would cover an insured’s participation in all joint ventures.

Bodily Injury – when used in conjunction with liability insurance, injury, sickness or disease sustained by any person including death resulting there from.

Broker – when used in conjunction with insurance, a businessman who represents the insured rather than any company, insofar as insurance transactions.

Builders Risk Insurance – covers a project during the course of construction.  This coverage can be purchased on an all-risk basis or a named peril basis and is generally obtained by the owner.

Case Law – a body of law resulting from previous court decisions.

Cause of Action – constitutes a plaintiff’s basis for commencing suit against a defendant through the establishment of substantive legal reasons for liability.

Claim – a demand, generally for money or services.  Such demand may be either in oral or written form.

Claims Expense – the expense incurred in investigating, defending or appealing a claim.

Combined Single Limit of Liability –peculiar to a claims-made policy, the limit of liability may not be exceeded by payment of any one claim nor all claims reported during the policy period.

Common Law- the body of unwritten law that was originated, developed and formulated in England.

Complaint – the initial pleading by a plaintiff in a court of law.

Comprehensive General Liability Insurance – covers several public liability exposures of an insured arising out of the activities of his business.

Counterclaim – a claim advanced by a defendant in opposition to the original claim.  Counterclaims are frequently advanced by clients against design professionals in response to collection fees.

Damages – loss, injury or diminution in value suffered by a party and generally attributable to a negligent act, error or omission.

Decennial liability – the exposure associated with the potential collapse of a building subsequent to completion. The named derives from the fact that it covers the 10 year period after completion of the project. It is required in the United Arab Emerites, France, Egypt and other countries subject to civil code. Decennial liability is strict liability which doesn’t require the finding of negligence.

Declaratory Relief Action – an action commenced in a court of law seeking determination as to which insurer owes coverage.

Deductible – the amount that an insured must pay as a prerequisite to an insurer paying any amounts relative to allocated claims expense or damages.  Deductibles are generally mandatory with respect to professional liability policies issued to design professionals.

Defamation – a statement that is damaging to a party’s reputation.

Defendant – the party against who recover is sought in litigation.

Defense – the procedure by which the allegations in a complaint are repelled.

Deposition – a statement given under oath that is admissible in a court of law as evidence.

Derivative Liability – liability attaching to a party that was not the result of such party’s negligence.  The liability arising out of joint ventures is derivative if resulting from your co-venture’s negligence.

Dismissal – a court order dismissing a complaint if it has been concluded that no cause of action lies against the defendant.

Duty – the designation of those obligations of performance or due care that one party owes to another party as imposed by law or contract.

Employers’ Liability Insurance – covers the liability of an employer as would result from bodily injury sustained by any of his employees during the course of their employment.  This insurance applies to an employer’s common law liability and is distinguished from his statutory liability, which is covered by workers’ Compensation insurance.

Endorsement – when used in conjunction with insurance, an amendment to a policy modifying one or more of the provisions contained therein.

Error – a mistake.

Errors and Omissions Insurance – synonymous with Professional Liability Insurance.

Excess Insurance – provides coverage in excess of the limit of liability provided by primary insurance.  This insurance is called upon when the primary limit of liability becomes exhausted.

Exclusion – a provision contained in a policy expressly eliminating certain exposures from coverage there under.

Exculpation – to remove a party from being in a position of liability.

Expert Witnesses – qualified persons utilized by both plaintiffs and the defense.  Such persons testify and in doing so, provide both their opinions and elate certain facts.

Express Warranty – an explicit representation usually made in writing, regarding suitability or fitness. 

Expiration Date - the date upon which a policy expires.  Professional liability policies generally expire at 12:01 A.M.

Frivolous Suit - a suit that is commenced without any factual basis.

Guarantee – the promise that a certain level of performance will be maintained.

Hazard – a condition that creates or potentiates the possibility or probability of a loss.

Hold Harmless Agreement – an agreement wherein one party agrees to save harmless and indemnify another party from loss or damage.  These agreements are often referred to as indemnification agreements.

Implied Warranty – an implied representation regarding suitability or fitness.

Inception Date – the date upon which a policy incepts.  Professional liability policies generally incept at 12:01 A.M.

Indemnitee – the party that is saved harmless under a hold harmless or indemnification agreement.

Indemnitor – the party that saves another party harmless under a hold harmless or indemnification agreement.

Indemnity – when used in conjunction with insurance, the reimbursing of an insured after he has disposed of a claim by paying damages and/or claims expense.

Insurance – the assumption by the insurer of an insured’s financial risk of loss in consideration of a payment of premium.

Insured – the party to whom benefits are payable under a policy.

Insurer – the party, generally a company, which assumes the financial risk of loss of the insured in consideration of a premium.

Joint Venture- a mutual undertaking assuming the form of a corporation or more commonly a limited partnership, formed between two or more design professional firms or organizations and generally for the duration of one project.  The liability of the co-ventures is both joint and several.

Joint and Several Liability- liability is said to be joint and several when a plaintiff has the option of suing one or more of the parties alleged to be negligent, separately, or the option of suing all of them in one action.

Liability – a responsibility that is imposed upon a party by law or by statute.

Liability Insurance – covers the insured’s legal liability to third parties as would result from the insured’s negligence.

Libel – a false or malicious expression made either in writing or graphically.

Limit of Liability – the amount of coverage afforded by a policy.

Liquidated Damages- damages that are previously agreed upon and that are assessed in the event a party breaches a contract.  Such damages must generally contemplate actual damages rather than a penalty in order to be considered enforceable.

Litigation – the contesting of a dispute or the enforcement of a right conducted in a court of law.

Loss ratio- an insurer’s underwriting results calculated by dividing his net losses incurred by the earned premium be generated.

Malpractice – professional negligence.  This term is generally used in connection with the medical profession, although it has been used in conjunction with design professionals.

Material Representation – when used in conjunction with insurance, a statement of fact so significantly important that it becomes the bias of a decision as to whether or not to affect coverage.  The new business application used by most insurers offering coverage for design professionals is generally attached to the issued policy and becomes a part thereof in substantiation of the material representations contained in the former.

Mediation – an informal procedure whereby the opposing parties appear before an impartial mediator in an attempt to reconcile their differences.  Mediation is not binding; however, the parties, in most instances, will usually abide by the decision of the mediator if they are in substantial agreement and further legal action and expense can be avoided.

Misfeasance – the failure to properly perform a duty.

Misrepresentation – When used in conjunction with insurance, a false or misleading statement that induces an insurer to offer insurance.  If an application for insurance contains a misrepresentation deemed material to the coverage afforded, the insurer generally is able to deny coverage for a resulting claim on the basis of material misrepresentation or perhaps go the extreme of commencing an action for revision of the policy.

Named Insured – the firm or organization shown on the declarations page of a policy.

Named Peril – the specific enumeration of those perils for which coverage is afforded under a property or marine policy.

Negligence – the failure to exercise the degree of care that a reasonable and prudent man in the same community would exercise under similar conditions.

Negligence Per Se – conduct in violation of a code, ordinance, statute or other regulation.  Proof of such violation generally precludes the need for the plaintiff to establish the elements of negligence.

Nonfeasance – the failure to act when a party has a duty to act.

Occurrence – when used in conjunction with liability insurance, an accident including continuous or repeated exposure to conditions that result in either bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Omission – synonymous with nonfeasance

Peril – the event or condition being insured against.

Plaintiff – the party who seeks recovery in a civil action.

Pleading – the process performed by both parties to a suit in alternately presenting written statements of their contentions, each responsive to that which precedes and each serving to narrow the field of controversy until an issue evolves.  Such issue is then affirmed by one side and denied by the other.

Policy – a written contract of insurance.

Premium – the amount paid to an insurer in consideration of the coverage afforded.

Prior Acts – coverage for a claim resulting from a negligent act, error or omission of the insured occurring precedent to the policy period.

Privity of Contract – the condition of relationship that exists by virtue of being one of the contracting parties.

Producer- when used in conjunction with insurance, the insurance agent or broker.

Property Damage – when used in conjunction with insurance, physical injury to or destruction of tangible property including loss of use thereof.

Pro Rata Cancellation – the cancellation of a policy without penalty to the insured.

Provisions – the terms and conditions of a policy.

Punitive Damages – those damages awarded to a plaintiff over and above what is required to compensate him.  Such damages are generally awarded only if the defendant was willfully or wantonly negligent.

Rate – when used in conjunction with insurance, the cost factor applied to the rating base in calculating the premium.

Reinsurance – process whereby the initial insurer protects himself by transferring a portion of coverage to other insurers.

Release – when used in conjunction with insurance, a document signed by a claimant generally after a settlement has been paid to him, wherein he releases the insured from all liability.

Reserve – when used in conjunction with insurance, the amount set aside by an insurer contemplating his liability resulting from a loss incurred but not paid.

Rider – when used in conjunction with insurance, synonymous term for an endorsement.

Risk – when used in conjunction with insurance, synonymous with a single insured.

Settlement – when used in conjunction with insurance, the voluntary resolution of a claim.

Short Rate Cancellation – the cancellation of a policy with the insured incurring a penalty.

Slander – an oral, false or malicious statement.

Statute of Limitation / Repose – a statue limiting the time period in which suit must be commenced.

Subpoena – the summoning of a party compelling that he attend a legal proceeding in order to testify.

Subrogation- when used in conjunction with insurance, an insurer assuming the insured’s right to seek indemnification from a third party and paid by the insurer.

Suit – when used in conjunction with law, an action to secure justice in a court of law.

Summons – a writ advising a defendant that a legal action has been commenced against him and requiring that he answer the allegations contained in the complaint.

Surety – the guarantor of an obligation owed by one party to a third party.

Surety Bond – the means by which the surety guarantees the obligations of one party to a third party.

Term of Coverage – the period that commences upon the inception date of a policy and terminates upon the expiration date.

Testify – to provide evidence as a witness.

Underwrite – when used in conjunction with insurance, the process of effecting insurance.

Vicarious Liability – contingent liability arising out of the acts or omissions of those parties not employees or agents.

Waiver – when used in conjunction with insurance, the insurer’s voluntary relinquishment of a right known to him.

Workers’ Compensation Insurance- covers the liability of an employer as would result from bodily injury sustained by any of his employees during the course of their employment.  This insurance applies to an employer’s statutory liability and is distinguished from his common law liability, which is covered by Employers’ Liability Insurance.