Glossary

The A201 construction contract, developed and published by the American Institute of Architects (AIA), is a widely used standard contract document that outlines the general conditions of the contract for construction between the owner and the general contractor, including hold harmless provisions and insurance requirements. While modifications are common, the A201 contract is probably the most widely used of all standard construction contracts; therefore, its provisions have risk and insurance implications for many construction projects.

Abandonment is a clause in property insurance policies prohibiting the insured from abandoning damaged property to the insurer for repair or disposal. Arranging for repair or disposal is the insured's responsibility, unless the insurer elects otherwise.

Abatement is the act or process of diminishing the presence of a pollutant (e.g., asbestos or lead) in either degree or intensity.

The ABC test is utilized in several jurisdictions (e.g., California, Massachusetts, New Jersey) to distinguish employees from independent contractors. The ABC test has three prongs. A worker is properly considered an independent contractor, to whom a wage order does not apply, only if the hiring entity establishes each of the following. (1) That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work. (2) That the worker performs work that is outside the usual course of the hiring entity's business. (3) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. The ABC test makes it relatively challenging for companies to properly classify workers as independent contractors, as they must meet all three of the criteria. As such, jurisdictions utilizing the ABC test are seen as favorable for plaintiff lawyers suing on behalf of workers.

"Absolute" exclusions are found within certain insurance policy forms and preclude coverage for claims that are remotely related to the actual nature of the exclusion. The effect of an absolute exclusion's language is to defeat coverage in situations where it could be reasonably expected that coverage would apply. For example, an absolute exclusion in a policy written to cover insurance agents' errors and omissions (E&O) exposures might read as follows: "This Policy does not apply to any 'Claim' against the 'Insured' ... based on or directly or indirectly arising out of or relating to any actual or alleged 'bodily injury.'" Assume, for example, that an insurance agent failed to secure bodily injury (BI) liability coverage for a client and the client is later held liable for BI. The client then sues the agent for failing to obtain an appropriate insurance policy. Given the wording of the "absolute" exclusion noted above, the agent's policy may not respond to the claim. This is because the client's allegation indirectly arose from and was "related to" BI. In recent years, these "absolute" exclusions have become more common, and insurers have, with increasing frequency, been using them to deny coverage of claims that would otherwise appear to be covered.

The standard pollution exclusion in post-1986 Insurance Services Office, Inc. (ISO), commercial general liability (CGL) policies is called the absolute pollution exclusion. This exclusion earned its name due to its removal of the "sudden and accidental" exception to the 1973 CGL's standard pollution exclusion. While it does remove coverage for most pollution events that would occur in the course of an insured's business operations, coverage is preserved for some significant exposures, primarily for certain incidental pollution (including hostile fire) damages, products and completed operations liability, and certain off-premises work by contractors. Since the exclusion is not truly "absolute," a more appropriate moniker for it is "broad form pollution exclusion," and this is used in some IRMI publications.

An absorbed dose is the amount of a chemical that enters the body of an exposed organism.

To accept is to agree to insure. An insurer accepts a risk when an underwriter or agent agrees to insure it, and the essential elements of the insurance contract are known and agreed to by the parties to it. Even though a policy has not been issued, once the risk is "accepted," the insurer is obligated to pay a loss that occurs subject to the terms and conditions of the coverage agreed upon.

The access to records clause, also referred to generically as an "inspection" or "audit" clause, is one of the most significant contract rights that a reinsurer has under a reinsurance agreement. The purpose of this clause is to grant the reinsurer the right to inspect the cedent's books and records applicable to the reinsured business. This is one of the few methods reinsurers have to evaluate the business being ceded to them under their reinsurance agreement and to ascertain whether the cedent is following the terms and conditions of the agreement, in particular the accuracy of policy and claim cessions and premium calculations. A typical access to records clause provides as follows. The reinsurer or its designated representatives shall have free access to the books and records of the company on matters relating to this reinsurance at all reasonable times for the purpose of obtaining information concerning this contract or the subject matter hereof. More recent access to records clauses are more limited and specific as to the scope, timing, and method of inspection afforded a reinsurer. Access to records clauses are found in most reinsurance agreements. The right of inspection is so ingrained in the reinsurance industry custom and practice that there is support for the proposition that the reinsurer has this right even in the absence of an express clause.

Accident, in insurance parlance, is a term that is included within the insuring agreement of many types of liability insurance. In a few cases, the word "accident" is a defined term within the policy. In most cases, however, common law becomes the determinant of what is or is not an accident for purposes of triggering coverage. In boiler and machinery (BM) insurance, "accident" is defined within the policy to mean a sudden and accidental equipment breakdown that causes damage to the equipment that necessitates repair or replacement. BM coverage applies to loss or damage resulting from an accident to a covered object. In liability insurance, particularly older forms, the insuring agreements typically covered injuries or damages caused by an accident that was not the result of a deliberated intended act (even if the intended act caused an unexpected result). The term accident was undefined in such policies. The coverage trigger in the insuring agreement of modern liability policies, such as the commercial general liability (CGL) policy, applies to an "occurrence," which is defined to mean an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Unlike most other modern liability policies, the commercial auto liability insuring agreement continues to apply to injuries or damages caused by an "accident." In this case, the policy includes a definition, of sorts, of the term "accident"—that is, "[a]ccident" includes continuous or repeated exposure to the same conditions resulting in "bodily injury" or "property damage." The personal auto policy's (PAP's) liability insuring agreement states that the insurer will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident. In this type of policy, the term accident is used in its ordinary sense, without including it as a defined term.