Glossary

The Payment Card Industry Data Security Standard (PCIDSS) is a set of proprietary information security protocols that businesses are obligated to follow and merchants must agree to if they accept payment from the leading credit cards, including Visa, MasterCard, American Express, and Discover. When a data breach occurs involving a merchant that has agreed to comply with the PCIDSS, the merchant is subject to various fines and penalties. Coverage for these fines and penalties is available within some cyber and privacy insurance policies, more specifically under the insuring agreement known as PCI fines and assessments coverage. This insuring agreement also covers defense costs that an insured incurs if it seeks to contest the imposition of such fines and penalties.

The payment card industry fines and assessments insuring agreement is found within cyber and privacy insurance policy forms and covers (1) fines and penalties for failing to comply with the Payment Card Industry Data Security Standard and (2) defense costs incurred, if the insured challenges such penalties. The Payment Card Industry Data Security Standard is a set of proprietary information security standards that have been promulgated for businesses that accept payment from the leading credit card issuers, including Visa, MasterCard, American Express, and Discover. Coverage under this insuring agreement would apply under the following circumstances: A retailer reports that the personally identifiable information (PII) (including credit and debit card information) belonging to its customers was stolen by a hacker. An investigation reveals that the breach occurred because the retailer's computer system did not comply with the Payment Card Industry Data Security Standard. In the event the retailer was fined $100,000 for failure to comply with applicable standards, this insuring agreement would cover the fines. Furthermore, if the retailer incurred costs to dispute the imposition of the $100,000 fine (because it felt that it did, in fact, comply with standards), this insuring agreement would cover those required defense costs.

A payor benefit refers to a provision under which premiums are waived if the person paying the premiums becomes disabled or dies. This option is often used when the insured is the child or spouse of the policyholder.

A payout profile is a schedule illustrating the percentage of loss dollars actually paid in settlement of claims over time. For example, less than 25 percent of the total loss dollars for workers compensation claims are paid during the first year of coverage. The final claim costs are usually not completely settled until year 10. General liability losses have a payout that is even slower than workers compensation. As a result, many insureds choose insurance options that allow them to retain control of loss reserves and therefore the income accrued on the reserves while waiting for the claim to be paid.

Payroll is the premium basis used to calculate premium in workers compensation insurance and, for some classifications, in general liability insurance.

Payroll audit is a review of an insured's payroll records by a representative of the insurer to determine the earned premium on a policy such as workers compensation.

Payroll deduction is a method of paying insurance premiums, typically for personal lines policies, that is sometimes offered as an employee benefit. The policyholder (employee) authorizes the employer to deduct the premium from their paycheck.

Payroll limitation is a limitation on the amount of payroll for certain classifications used for the development of premium. In workers compensation insurance, payroll limitations typically apply only to sole proprietors, executive officers, partners, and certain noted classifications. In general liability, payroll limitations typically apply to executive officers, sole proprietors, and partners. The limitation varies by state.

Pay practices claims are one of the two types of wage and hour claims made by employees against their employers. Pay practices claims involve "all other" types of claims that do not fall within the category of "misclassification claims." The most common types of pay practices claims include (but are not limited to) miscalculating the amount of wages owed to an employee; requiring employees to work "off the clock" and not paying them for such work; not paying workers for their time spent in "donning" and "doffing" specialized equipment required for their work; not allowing employees to take rest or meal breaks; and not paying workers on a timely basis. (The other type of wage and hour claim is known as a "misclassification claim" in which an employer misclassifies and thus fails to pay overtime wages to an employee.) Insurers universally exclude indemnity coverage for both types of wage-and-hour claims (i.e., misclassification and pay practices) under employment practices liability insurance (EPLI) policies. However, a handful of insurers offer coverage for the costs of defending such claims, albeit subject to sublimits, typically $100,000 or $250,000.

Peer review refers to a process in a professional firm whereby one or more professionals reviews and critiques the work of another professional within the organization on a given project. Underwriters consider peer reviews a key element in preventing claims against professional firms. Accordingly, peer reviews should be conducted on every major engagement, with the work reviewed by at least one professional who did not personally perform it. Peer review is especially important on large-scale service projects in which less experienced members of a firm performed the bulk of the work.