Glossary

A commercial and personal auto coverage endorsement, the Suspension of Coverage Endorsement (CA 02 04, PP 02 01) suspends certain coverages for specified vehicles when the vehicles will not be used for a period of 30 days or more.

The Sutton rule is named for a 1975 Oklahoma case where a tenant's 10-year-old son, while using his chemistry set, damaged a rented home owned by the Suttons. The Suttons' insurer paid for the damage and then attempted to subrogate against the tenant. The court ruled that subrogation was not permitted because the tenant, absent an express agreement to the contrary, is an implied coinsured under the landlord's policy. Part of the rationale is that the tenant pays the premium indirectly through the payment of rent.

A swap is an agreement to exchange or to net payments at one or more times based on the actual or expected price, yield, level, performance, or value of one or more underlying interests.

Swaption is the option to purchase or sell a swap at a given price and time or at a series of prices and times. A swaption does not mean a swap with an embedded option.

Swing plans are provisions in a reinsurance contract that provide that, as losses covered by the insurance contract increase, so does the premium charged.

Syndicate is a group of companies or underwriters who join together to insure very high-valued property or high-hazard liability exposures. Insurance exchanges, such as Lloyd's of London, use syndicates to write insurance.

A systemically important financial institution (SIFI) is a bank, investment firm, insurance company, or other financial institution deemed by the Federal Reserve to pose a serious risk to the US economy should it fail. SIFIs are subject to increased scrutiny by regulators, including higher capitalization requirements and preparation of a contingency plan in the event of a future insolvency.

Systemic discrimination refers to a type of discrimination claim brought by the Equal Employment Opportunity Commission (EEOC) against an employer, in which the EEOC alleges that more than 20 individuals were victims of discrimination by that employer. Such claims are much more costly to defend and settle than those in which the EEOC alleges that an employer discriminated against a single employee (or against a group of fewer than 20 employees).

Systems performance insurance guarantees the owner's debt service if the insured project cannot perform at the anticipated capacity due to deficiencies in the system's design, materials, or construction. The policy provides the funds required to pay the debt service costs and may be modified to reimburse the insured for capital expended so that the project may be brought up to the expected performance level. The most common use of systems performance insurance is on energy-related construction projects, such as geothermal or hydroelectric plants.

A system safety approach is a theory of accident causation and control based on the premise that the universe is a single system and composed of many related subsystems. An accident occurs when a human or a mechanical segment of a system fails or malfunctions. The system safety approach reviews the accident to determine how and why it occurred and what steps could be taken to prevent such an incident. Preventive actions utilized under this approach include potential hazard recognition and identification, consistent use of safety-related design in all aspects of the system and subsystems, evaluation of all procedures for meeting safety requirements, and maintaining sustained awareness of all safety measures and techniques.