Confusing Insurance Terms
By Kari Dybdahl
Have you ever been speaking with your insurance agent or insurance company and found yourself completely confused? Don’t worry; you are not alone. Insurance industry jargon can seem like a whole different language, but I’m here to help with an explanation of seven terms you’re likely to hear when planning and handling your company’s insurance policy needs.
1 | Additional insured versus additional named insured
An additional insured applies to a third party for whom you are performing work. This party does not have an insurable interest in your company; however, they do hold liability for the work you perform and may require that they are listed on your insurance policy as an additional insured. For example, if you perform work on a commercial property, the property owner or manager will likely want to be protected against claims resulting from “your work.” (See sidebar for more on this.)
An additional named insured relates to your common ownership in another company and, when used, means you would like the current policy to extend coverage to this other company as well.
The main difference between an additional insured and an additional named insured is made clear by how each can receive coverage under the policy when a claim or lawsuit comes in. For the policy to respond for an additional insured, it and the first named insured on the policy must be named in the suit.
An additional named insured may receive policy coverage if they are named in a suit even without the first named insured being included. Therefore, an additional named insured has slightly broader privileges under the policy when it comes to triggering coverage.
2 | Aggregate limit
A policy’s aggregate limit is the maximum amount an insurance company will pay out during the designated policy period. This is different from a per-occurrence limit. The aggregate limit is the most the carrier is responsible to pay over the course of one full policy term. Once this limit is reached, they will not pay a cent more even if you have additional claims or expenses during that policy term. The per-occurrence limit listed on the policy is the maximum the carrier will pay for each individual occurrence, loss, or claim until the aggregate limit has been exhausted.
3 | Blanket
This term generally applies to specific wording in the insurance policy or added endorsements related to standard contractual obligations or requirements. Blanket wording essentially grants specific coverage to another party if it is requested or required in a written contract or agreement.
For example, I mentioned that commercial clients may require that you list them as an additional insured. Often, you can add an endorsement on your insurance policy that provides additional insured status on a blanket basis.
In cases like this, when a third party requests to be an additional insured on your policy, they are provided that status “automatically” as long as it is written into your contract with the third party. This simplifies the contractual agreement phase for both yourself and your insurance team.
4 | Declarations page
A declarations page (or dec page) is part of the insurance policy issued to you and is usually found in the beginning of the policy. The declarations page is a snapshot of your insurance policy, usually about two pages long, that will list your entity name (first named insured), address, policy limits, coverage provided, effective and expiration dates of the policy, insurance carrier, all forms and endorsements on the policy, and any retroactive dates. It is a very important tool to efficiently see the insurance coverage offered by your carrier.
About ‘Your Work’
This refers to the Damage to Your Work exclusion in a General Liability (GL) policy. The gist is, due to this exclusion, your GL insurance will not apply on property damage to “your work” arising out of your operations. “Your work” basically means the work or operations you perform or the thing you were called to work on.
For example, you are called to clean carpet. A product you used damaged the carpet, and the only remedy is carpet re-placement. After filing the claim with your GL insurance company to replace the carpet, we would expect the claims adjuster to trigger the Damage to Your Work exclusion and deny the replacement claim. This is because the carpet is considered “your work” because it is the thing you were called to work on.
If in addition to ruining the carpet, the walls were damaged as well because your sprayer went crazy, the policy should trigger for repairing the wall because it is not considered “your work,” but, in theory, insurance coverage still would not cover the damaged carpet.
5 | Loss run
The loss run is the history of your claims activity with the insurance carrier for the time you held insurance coverage with it.
This report tracks any claim you file with the insurance carrier during that policy term. For each claim, it will show the claimant, date of the loss, a description of the claim, whether the claim is open or closed, the amount of defense or legal fees paid, the amount of indemnity paid to the claimant, and any money set aside by the carrier for anticipated indemnity or defense ( aka “reserves”).
Insurance agents and brokers, as well as underwriters and insurance companies, use loss run reports to judge your risk as a contractor and analyze the risk management processes in your company.
6 | Submission
For insurance professionals, submission refers to the information about your company that is needed to underwrite and quote your insurance.
In general, a submission includes an application, financial statements, resumes of key personnel, a description of your company, a list of vehicles, a list of property and equipment you own or rent, a list of employees with their associated payroll, and loss run reports for the insurance coverage you are looking to purchase.
Submission items needed to quote your insurance vary depending on the insurance carrier and the lines of coverage you are requesting.
7 | Combined form
A combined form is an insurance policy that combines multiple lines of coverage into one policy with one policy number. These lines of coverage often share limits of insurance including the occurrence and aggregate limit.
The liability insurance package available to restoration and remediation contractors that combines your GL insurance with Contractor’s Environmental Liability (aka Contractor’s Pollution Liability) coverage and Professional Liability (aka Errors & Omissions Coverage) is an example of a combined form. Often, these combined form policies also include bailee’s coverage and lost key coverage. In many cases, a combined form is more cost effective and broadens your liability insurance. These policies can be accessed by insurance wholesale brokers specializing in the cleaning and restoration industry.
Kari Dybdahl has more than a decade of experience in the environmental insurance industry assisting clients from carpet cleaners to municipalities. She has received multiple awards and recognition for her work placing compliant insurance for Crawford Contractor Connection members and many others. Dybdahl designs custom insurance programs alongside Dave Dybdahl. Reach out to her with any questions at 608-824-3341 or [email protected].
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February 21, 2023