Insurance Terms

Professional Liability (Errors & Omissions or malpractice) – coverage designed to protects professionals incurred as a result of errors and omissions in performing professional services. Most policies will pay the cost of legal defense against claims and payment of judgments against you, up to the limit of the policy. 

Claims-made coverage – a policy providing coverage that is triggered when a claim is made against an insured during the policy period, regardless of when the error of omission that gives rise to the claim took place. (If there is a retroactive date on the policy, the error or omission had to take place after the retroactive date).

Claims-Made and Reported Policy –  a type of claims made policy in which a claim must be both made against the insured and reported to the insurer during the policy period for coverage to apply. Claims-made and reported policies are unfavorable from the insured’s standpoint because it is sometimes difficult to report a claim to an insurer during a policy period if the claim is made late in that policy period.

Defense in addition or “outside” the Limits (CEOL) – a policy provision where amounts paid by the insurer to defend the insured against a claim or suit do not reduce the policy’s applicable limit of insurance. 

Defense within Limits (CEIL) – a policy provision where amounts paid by the insurer to defend the insured against a claim or suit reduce the policy’s applicable limit of insurance. 

50% Offset Defense Provision –   In NJ, some policies have defense costs in addition to the limit of liability up to 50% of the limit, after which defense costs erode the limit of liability. Defense costs are paid by the carrier.

Loss only Deductible – The deductible applies only to indemnity (judgments and settlements) and not to defense costs. Defense costs are paid by the carrier from the first dollar.

Loss and Defense Deductible – The deductible applies to both defense costs and indemnity payments (only once per claim).

Per Claim Deductible – the deductible applies to each claim reported

Aggregate Deductible – The deductible has a maximum limit that applies during the policy period.

Retroactive Date – a provision found in many claims-made policies that eliminates coverage for claims emanating from wrongful acts that took place prior to a specified date, even if the claim is first made during the policy period.

Tail coverage or Extended Reporting Period (ERP) – a provision in a claims-made policy that extends the time for reporting claims that are made against the firm or individual attorneys after the policy has expired for covered acts or omissions which occurred after the retroactive date and prior to the cancellation or expiration date of the policy. Most options have a set time period and are available for an additional premium. Some policies have free retirement tails for attorneys who have retired from the practice of law.

NJ PLIGA surcharge (NJ Property-Liability Insurance Guaranty Fund) – a fund to pay claims to claimants and policyholders who have no coverage due to insolvent admitted insurance companies. Companies are permitted by statute to recoup the assessment by placing a surcharge on policies issued to their policyholders.

Admitted Insurance Carriers – Licensed by the state department of insurance to transact business in the state(s) they are admitted. The insurer complies with all state regulations and must file their rates and forms with the state.

Surplus Lines (Non-admitted) Insurance – Insurance carriers are allowed to do business in states where they are not licensed and do not have to follow the same regulations and do not have to file their forms and/or rates with the state which makes their coverage more flexible. This coverage is usually for insureds who have claims and/or have areas of practice that do not fit in admitted carriers underwriting guidelines. Non-admitted carrier do not participate in state guarantee funds.

A.M. Best Ratings – All insurance companies (admitted or non-admitted are rating for financial stability by A.M. Best., who give the insurance companies ratings ranging from A++ (Superior) to F. This is an industry guide used to determine reliable insurance carriers.

Cyber Liability Insurance – An insurance policy that protects businesses with a combination of coverage options to help protect from data breaches and other security issues. Coverages typically include costs associated with data breaches and cyber attacks on a business or firm. Those costs can include such things as lost income due to a cyber event, costs associated with notifying customers affected by a breach, costs for recovering compromised data, costs for repairing damaged computer systems and more.

Directors & Officers Insurance – Insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization. It can also cover legal fees and other costs the business can incur as a result of such a suit.

Employment Practices Liability Insurance (EPLI) – a type of policy covering wrongful acts arising from the employment practice. The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation.

Fidelity and/or Crime Coverage – a policy that covers employee theft, ERISA fidelity, employee theft of client property, or direct loss from damage to money, securities or other property. It can also cover direct loss of money and securities from computer fraud.

Surety Bonds – A surety bond is defined as a three-party agreement that legally binds together a principal who needs the bond, an obligee who requires the bond and a surety company that sells the bond. The bond guarantees the principal will act in accordance with certain laws. If the principal fails to perform in this manner, the bond will cover resulting damages or losses.