Glossary

Representation is a statement made in an application for insurance that the prospective insured represents as being correct to the best of their knowledge. If the insurer relies on a representation in entering into the insurance contract and if it proves to be false at the time it was made, the insurer may have legal grounds to void the contract.

Representations and warranties insurance refers to a form of coverage designed to guarantee the contractual representations made by sellers associated with corporate mergers and acquisitions. For example, the seller of a company may represent that the company's underground storage tanks are in good repair. If a serious leak is discovered following the purchase, the buyer can seek recovery for repair and cleanup costs from the seller's representations and warranties insurance policy. The key benefit of the policies is that they provide a viable alternative to escrow funds, which have traditionally been used to satisfy claims associated with representations and warranties contained in merger and acquisition documents.

Reproduction cost refers to the cost to duplicate an item exactly by using materials, artistry, and other expertise comparable to those used in the original.

The reptile theory is a strategy, typically used by the plaintiffs' bar, to influence a jury outcome by focusing the jury's reaction to instinctively favor safety and survival of their families and community (versus plaintiff's actual injuries) by demonstrating the defendant's conduct endangers their families and community as a whole. The theory was popularized and coined in Reptile: The 2009 Manual of Plaintiff's Revolution, by David Ball and Don Keenan (New York: Balloon Press, 2009).

Reputational risk is the risk that negative publicity regarding an institution's business practices will lead to a loss of revenue or increased litigation. An institution's reputation, particularly the trust placed in the organization by its customers, may be irrevocably blemished due to perceived or actual breaches in its ability to conduct business ethically, securely, and responsibly. For example, companies that are publicly condemned for their poor environmental policies or high greenhouse gas emissions might eventually suffer a blow to their reputation. A tarnished brand can negatively influence voters who sit in judgment in court cases, community decision-makers on corporate expansion and new construction, reporters who cover a corporation's business activities, consumers who are potential customers, environmental activists who may protest a company's operations, and investors.

A request for proposal (RFP) is a document used to secure proposals for insurance, risk management or other services.

Rescission, with respect to a directors and officers (D&O) liability insurance policy, is a declaration by an insurer that the policy was never in effect, the result being that coverage for a claim, when tendered by a corporate organization to an insurer, is not covered. Rescission most often occurs under two circumstances: (1) when the signer of an application for D&O liability coverage had knowledge of a potential claim and intentionally concealed such knowledge, and (2) when the application for coverage or an important attachment to it (e.g., a financial statement) contains information that is materially false, such that if correct information were provided to the insurer, it would not have entered into the contract of insurance. In recent years, D&O insurers have increasingly rescinded coverage on these two bases.

A reservation of rights is an insurer's notification to an insured that coverage for a claim may not apply. Such notification allows an insurer to investigate (or even defend) a claim to determine whether coverage applies (in whole or in part) without waiving its right to later deny coverage based on information revealed by the investigation. Insurers use a reservation of rights letter because in many claim situations, all the insurer has at the inception of the claim are various unsubstantiated allegations and, at best, a few confirmed facts. In reserving its rights to later deny coverage, the insurer is merely telling the insured of its concerns that the claim, in whole or in part, may not be covered under the policy, pending further investigation. Although a reservation of rights protects an insurer's interests, it also alerts an insured to the fact that some elements of a claim may not be covered, thereby allowing the insured to take necessary steps to protect its potentially uninsured interests.

A reserve in an insurance context is an amount of money earmarked for a specific purpose. Insurers establish unearned premium reserves and loss reserves indicated on their balance sheets. Unearned premium reserves show the aggregate amount of premiums that would be returned to policyholders if all policies were canceled on the date the balance sheet was prepared. Loss reserves are estimates of outstanding losses, loss adjustment expenses (LAEs), and other related items. Self-insured organizations also maintain loss reserves.

Reserved but not enough refers to amounts that are increases in outstanding loss reserves that cannot yet be formally justified but which are known, usually from experience, and are going to be required.