Glossary

Sexual harassment is conduct involving unwelcome sexual advances, requests for sexual favors, and verbal, visual, or physical conduct of a sexual nature. There are two types of sexual harassment: quid pro quo sexual harassment, in which sexual contact is made a condition of employment, and hostile environment sexual harassment, in which such conduct creates an intimidating, hostile, or offensive working environment. Lawsuits against businesses that allege sexual harassment have increased significantly during the past decade. Accordingly, around 1990 the insurance market began offering employment practices liability policies, a specialized form of insurance covering claims of sexual harassment as well as other employment-related torts.

Sexual orientation discrimination refers to workplace discrimination committed against people who identify as lesbian, gay, bisexual, or transgender. President Barack Obama administration's Equal Opportunity Employment Commission (EEOC) filed two lawsuits on behalf of former employees who claimed they had been discriminated against on the basis of their sexual orientation. In contrast, the Donald J. Trump administration's Department of Justice (DOJ) filed an amicus brief in one of these two cases. Here, the DOJ argued that the definition of "sex" within Title VII of the Civil Rights Act of 1964 does not also encompass sexual orientation discrimination. This is because "sex" (the term used in Title VII) and "sexual orientation" (a term not appearing in Title VII), are fundamentally different. The brief asserted that expanding the scope of Title VII to include "sexual orientation" would require legislative action, a position that opposes the prior Obama administration. The federal circuit courts of appeal are split on the question of whether Title VII's gender discrimination prohibition also encompasses sexual orientation. While nearly half of the states (along with a number of cities and counties) have laws prohibiting sexual orientation discrimination, other states and municipalities have no laws addressing this matter. Therefore, in jurisdictions where a federal court has not yet ruled on this issue, employers could still face liability under state or local laws. Going forward, the matter will likely require a ruling by the US Supreme Court in order to ultimately resolve the question of whether Title VII's protections extend to sexual orientation discrimination.

The share purchase of a corporation's own stock in the open market (i.e., from an organized exchange, such as the New York Stock Exchange). Share repurchases are sometimes criticized because they could indicate that the company no longer has any profitable new business ideas in which to deploy its excess cash and therefore is repurchasing its stock. Worse yet are assertions that a company is repurchasing its stock to boost earnings per share (e.g., if a company buys back 5 percent of its outstanding stock, its earnings per share will rise, simply because its gross earnings will now be divided by a smaller number of outstanding shares). Despite these criticisms of share repurchases, they can also indicate that because the company has been successful in generating profits, the firm now has excess cash.

The sharing economy is an economic model where personally owned goods, property, vehicles, space, or services are offered to others, typically for a fee. Digital platforms, e.g., apps, are generally used to accomplish this transaction. For example, ridesharing, home sharing, peer-to-peer vehicle rentals, equipment rentals, delivery services, and task-based services are common sharing economy services. These activities can create coverage issues because they may blur the line between personal and commercial use, involve multiple parties, and fall outside the scope of standard homeowners, renters, personal auto, or other commercial insurance policies. Specialized insurance is often necessary to address liability, property damage, bodily injury, and other exposures arising from the sharing activity.

The Sharpe ratio is a measurement often used to synthesize risk into an easy-to-understand metric. It is a risk-adjusted measure calculated using standard deviation and excess return (the return of an investment in excess of a risk-free return, such as the 90-day Treasury bill) to determine reward per unit of risk. The higher the Sharpe ratio, the better the historical risk-adjusted performance is.

Short-rate cancellation refers to a type of insurance policy cancellation that serves as a disincentive for the named insured to cancel the policy before its normal expiration date. The only time short-rate cancellation would occur would be when the insured initiates the cancellation prior to the expiration date. With short-rate cancellation, the insurer is entitled to retain a greater percentage of unearned premium than would otherwise apply with pro rata cancellation. The method in which the short-rate cancellation penalty may apply varies with the insurance policy in question. For example, a short-rate table may be included as a part of the policy; or the short-rate penalty may be calculated by multiplying the pro rata cancellation factor by a certain percentage increase—for example, 10 percent.

Shortfall risk is the probability that a random variable falls below some specified threshold level. Probability of ruin is a special case of shortfall risk in which the threshold level is the point at which capital is exhausted.

A shrink-wrap agreement is a non-negotiable, preprinted agreement that is wrapped in cellophane and included in a box that contains a software program. The user agrees to the license when they tear open the plastic wrap or install the software. Most courts have found these agreements to be enforceable unless their terms are unconscionable or violate a generally accepted principle of contract law.

The shrinking limits defense provision provides that the expenditure of defense costs associated with a claim reduces policy limits. This approach contrasts with that used in commercial general liability (CGL) policies, in which defense costs are paid in addition to policy limits. Accordingly, limits under professional liability policies must be selected so that they will be adequate to cover not only projected settlement/indemnity costs but expected defense expenses as well. This approach contrasts with that used in commercial general liability policies, in which defense costs are paid in addition to policy limits.

Side A-only coverage refers to a directors and officers (D&O) liability policy that provides only "direct" coverage of the directors and officers but does not cover the corporation's legal obligation to indemnify the directors and officers (known as Side B or corporate reimbursement coverage). Side A-only forms are written either on an excess or umbrella basis over a primary D&O policy. When written on an excess basis, they provide additional limits if a claim exhausts the coverage available under the primary form. When written on an umbrella basis, Side A-only policies afford broader coverage than the underlying, primary D&O policy as well as additional limits.