Insurance Glossary for A&E Firms
Common insurance and contract terms, explained in plain words. These are general definitions, not an interpretation of any policy or contract. The wording of your own policy and contract always controls.
Access Agreement (RPAPL 881)
In New York, an agreement or court-granted license that lets an owner enter a neighbor's property to make improvements or repairs. Insurance requirements are often part of it.
Action-Over Claim
When an injured worker sues a third party, such as a property owner, and that party then seeks payment from the worker's employer.
Additional Insured (AI)
A person or company, like a client or owner, added to your policy so they can also be protected for claims arising from your work.
Additional Services
Work outside the base scope of a design contract, usually priced separately and authorized in writing.
Admitted Carrier
An insurance company licensed by your state's insurance department. Its rates and forms are generally filed with the state.
AM Best Rating
A grade of an insurer's financial strength, like A or A++, plus a size class shown in Roman numerals, like VIII or XV.
Architect of Record
The licensed architect, or engineer of record for engineering work, who takes professional responsibility for the drawings submitted for permits.
Basis of Design
A record of the criteria, standards and assumptions a design is based on, such as design conditions and the owner's stated requirements.
Betterment
The idea that an owner should not end up with more than they would have paid for had the design been right the first time. The base cost of an upgrade the project always needed is usually the owner's.
Business Income (Actual Loss Sustained)
Coverage for lost income and continuing expenses when covered damage forces a firm to slow down or close for a time.
Certificate Holder
The person or company that asked for a certificate of insurance and is named in the certificate holder box, usually an owner, GC, landlord or client.
Certificate of Insurance (COI)
A one-page summary, usually on an ACORD 25 form, showing which policies a firm carries, the limits and key endorsements.
Chapter 558 Notice (Florida)
A written notice of claim Florida requires before most construction defect lawsuits. It can be served on contractors, subcontractors, suppliers and design professionals.
Choice of Counsel
Whether you or the insurer picks the defense lawyer on a claim. Many policies let the insurer choose, and some let you choose with the insurer's approval.
Claims-Made Policy
A policy that responds to claims first made while the policy is active, for work done after the retro date. Most professional liability policies for A&E firms work this way.
Continuous Coverage
Keeping a claims-made policy in force without a gap from renewal to renewal, and from one insurer to the next. It is what keeps your retro date and protection for past work.
Cyber Liability
Insurance for costs from data breaches, ransomware and other cyber incidents, such as notification, recovery and claims.
Declarations Page
The summary page of a policy that lists the named insured, policy period, limits, deductible, premium and, for claims-made policies, the retro date.
Deductible
The amount your firm pays on a claim before the insurer pays. On professional liability it may include defense costs, damages or both.
Defense Outside the Limits
When legal defense costs are paid in addition to the policy limit instead of using it up.
Demand Letter
A letter from a client or their lawyer asking you to pay for a loss they blame on your work. It is often the first sign of a claim.
Description of Operations
The free text box on a certificate of insurance used to name a project or location and note special terms such as additional insured status.
Disciplinary Proceeding Coverage
Coverage some professional liability policies include for defending a complaint to a state licensing board, often with a separate, smaller limit.
Duty to Defend
An insurer's obligation to provide a defense against a covered claim or suit. In contracts, a separate promise you make to defend someone else, which insurance may not fully cover.
Employee Benefits Liability
Coverage for mistakes in running employee benefit plans, such as failing to enroll an employee in a health plan.
Employers Liability
The part of a workers compensation policy that covers lawsuits over employee injuries that fall outside workers comp benefits, such as a suit by an employee's family member.
Employment Practices Liability (EPLI)
Coverage for claims from employees or applicants, such as wrongful termination, discrimination or harassment.
Endorsement
A written change to an insurance policy that adds, removes or changes coverage. Additional insured and waiver of subrogation are common examples.
Excess Liability
Extra limits above one specific underlying policy, following its terms.
Expert Witness Coverage
Whether your professional liability policy responds to claims about work as an expert or testifying witness. It depends on the policy's definition of professional services.
First Dollar Defense
A deductible that applies only to settlements or judgments, not to legal defense costs. The insurer pays defense from the first dollar.
Flow-Down Provision
A contract term requiring you to pass your client's requirements, often including insurance requirements, down to your own consultants or subcontractors.
General Liability
Insurance for bodily injury and property damage claims from your operations, like a visitor hurt at your office or damage during a site visit.
Grave Injury (NY)
A defined list of serious injuries in New York Workers' Compensation Law Section 11 that can allow a third party to seek contribution or indemnity from an injured worker's employer.
Hammer Clause
A policy clause about what happens if the insurer wants to settle a claim and you do not. It can shift part of the extra cost to your firm.
Height Limitation Exclusion
An exclusion found on some contractor general liability policies for work above a set height or number of stories.
Hired and Non-Owned Auto
Liability coverage when employees drive rented cars or their own vehicles for work.
Late Notice
Reporting a claim or potential claim to your insurer after the time the policy requires. Late notice can create coverage problems, especially on claims-made policies.
Limitation of Liability Clause
A contract clause that caps how much a design firm can owe the client if something goes wrong.
Limits of Liability
The most the policy will pay: per claim, and in total for the policy period (the aggregate).
Loss Run
A report from an insurer listing the claims, if any, on a policy over a period of time. New insurers often ask for several years of loss runs to quote.
Named Insured
The person or business listed on the declarations page as the policyholder.
No Known Loss Letter
A signed statement that you know of no claims or circumstances that could lead to a claim. Insurers sometimes require it before binding or when loss runs are not available.
Notice of Cancellation
A requirement that a certificate holder be told before a policy is cancelled, often 30 days in advance.
Notice of Circumstance
Telling your insurer about a situation that could lead to a claim before anyone has made a demand. On many claims-made policies, a proper notice can tie a later claim to the policy in force when you reported it.
Pay on Behalf (Ransomware)
A cyber policy provision where the insurer pays covered ransomware costs directly, instead of the firm paying first and asking to be paid back.
Per Project Aggregate
An endorsement that applies the general liability aggregate limit separately to each project, so claims on one job do not use up the limit for the others.
Pollution Liability
Coverage for claims that your work caused or contributed to a pollution incident, such as a release of fuel, sewage or contaminated soil.
Premium Audit
A review after the policy year to compare estimated payroll or revenue with the actual figures. Premium may go up or down.
Premium Financing
Paying an insurance premium over time through a finance company, usually with a down payment and monthly installments plus a finance charge.
Primary and Non-Contributory (PNC)
Wording that makes your policy pay first for the additional insured, without asking their own insurance to share the loss.
Prime Consultant
The firm that contracts directly with the client and hires other consultants to deliver part of the work.
Prior Acts Coverage
Coverage for work you did before the current policy started, back to the retro date.
Products Liability
Liability for injury or damage caused by a product you make, sell or distribute. Professional liability is generally built for services, not products.
Products-Completed Operations
The part of general liability for injury or damage that happens after your work is finished, away from your premises. It usually has its own aggregate limit.
Professional Liability (E&O)
Insurance for claims that your design, advice or reports caused a client a financial loss. Also called errors and omissions.
Professional Services
The policy's definition of the work it covers. If a service is outside this definition, a claim about it may not be covered.
Project-Specific Policy
A professional liability policy for one project only, with its own limit separate from the firm's annual policy.
Reinstatement
When an insurer restores a policy that was set to cancel, usually after an overdue payment is received.
Rescission Notice
A notice withdrawing an earlier notice of cancellation, confirming the policy continues.
Reservation of Rights
A letter from your insurer saying it will handle or defend a claim while keeping the right to raise coverage issues later. It is common and is not the same as a denial.
Retroactive Date
The earliest date of work a claims-made policy looks back to. Work done before this date is usually not covered.
Scaffold Law (NY Labor Law 240)
New York Labor Law Section 240, which requires contractors and owners to provide proper protection for workers doing elevation-related work and can make them liable when they do not.
Social Engineering
Theft of money by tricking someone at the firm, such as a fake email from a vendor asking you to change where payments go.
Split Retroactive Date
Different retro dates for different layers of limits on one policy. Often the old retro date applies up to your old limits and a new date applies to newly added limits.
Statute of Repose
A state law that sets an outside time limit for bringing certain claims, usually measured from completion of a project, regardless of when a problem is discovered.
Subcontractor Exception
Part of the your work exclusion in many general liability forms that can restore coverage when the damaged work was performed on your behalf by a subcontractor.
Subjectivity
A condition in a quote that must be met before or after binding, such as a signed application or a driver list.
Sublimit
A smaller limit for one type of loss inside a policy's main limit.
Vicarious Liability
Being held responsible for someone else's work, such as a sub-consultant you hired, because of your relationship with them.
Voluntary Payments
A policy condition saying you should not make payments, admit liability or take on obligations about a claim without the insurer's consent. Payments made without consent may not be reimbursed.
Waiting Period
How long a business interruption has to last before a cyber or property policy starts paying lost income.
Waiver of Subrogation (WOS)
An agreement that your insurer will not try to recover what it paid from the other party named in the contract.
Weighted Revenue
How carriers adjust your revenue by the type of work behind it when pricing professional liability. Riskier work counts for more.
Workers Compensation
Insurance for employee injuries on the job, required by law in most states. It includes employers liability coverage.
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