Glossary

A principal in a surety bond is the entity whose performance is being guaranteed—the obligor—is also referred to as the principal.

The principal sum is the amount payable in one sum in the event of accidental death and, in some cases, accidental dismemberment.

Principle of indemnification is the basis of insurance, providing that a loss payment will replace what is lost, putting the insured back to where it was financially prior to the loss without rewarding or penalizing the insured for its loss.

The priority of payments provision refers to a provision found within most, but not all, directors and officers (D&O) liability insurance policies that sets forth the order in which policy proceeds will be paid out to the various insureds under the policy. The provision also states that policy proceeds are the property of the directors and officers, rather than a bankruptcy trustee. Priority of payments provisions were added to D&O policies because in the early 2000s, numerous controversies began to arise as to whether the proceeds of a D&O policy belong to a bankruptcy trustee or to the individual insured directors and officers.

Prior acts coverage is a feature of claims-made policies that have either no retroactive date or a retroactive date earlier than the inception date of the policy. Such a policy covers claims during the policy period arising out of events that precede the policy period. Without such a feature, the policy's retroactive date would preclude coverage with respect to these "prior acts."

The prior and pending litigation exclusion found in most directors and officers (D&O) liability policies precludes coverage for claims from litigation that was pending prior to the inception of the policy. For example, assume that litigation was pending against the corporation—rather than individual directors—prior to the inception of a D&O policy. If the suit was later amended (following inception of a new policy) so that it also named the firm's directors, the prior and pending litigation exclusion would eliminate coverage for the claim against the directors. The intent of the exclusion is to avoid exposure for the "burning building." However, insurers will sometimes agree to remove this exclusion when a policy is renewed.

A prior work exclusion is an endorsement sometimes attached to contractors' general liability policies. The exclusion eliminates coverage for injury or damage resulting from the insured's work that was completed before a stated date.

Privacy notification and crisis management expense coverage refers to an insuring agreement contained within policies written to cover claims caused by data breaches. Such policies are most often termed "cyber and privacy insurance," "information security and privacy insurance," or "cybersecurity insurance." Privacy notification and crisis management expense coverage includes the cost of (1) hiring a forensics expert to determine the cause of the breach and suggesting measures to secure the site and prevent future breaches, (2) hiring a public relations agency to assist the insured in dealing with the crisis, (3) setting up a post-breach call center, (4) notifying affected individuals whose personally identifiable information (PII) has been compromised, (5) monitoring these individuals' credit (usually for 1 year), and (6) paying the costs to "restore" stolen identities as a result of a data breach (e.g., expenses of notifying banks and credit card companies). Privacy notification and crisis management expense coverage addresses the so-called immediate response costs associated with a data breach. This insuring agreement makes payments on a "no fault" basis and without admission of liability (as is the case under "medical payments" coverage, included in a homeowners or personal auto policy (PAP)). The intent of such payments is to discourage affected customers from making claims associated with a data breach. In contrast, the information security and privacy liability insuring agreement is the true "liability" coverage element of a cyber and privacy policy since it responds to lawsuits and pays liability losses from claims made against the insured by various parties. Similar to other cyber and privacy insurance policies, privacy notification and crisis management expense coverage is subject to an annual aggregate limit and an annual aggregate deductible.

A privately held corporation is a type of corporation whose shares are not for sale to the public. Rather, the shares of privately held companies are usually owned by a small group of persons—often, although not always, family members and/or senior executives and managers of the company. Unlike publicly held corporations, the shares of stock in privately held corporations are not listed on the major stock exchanges.

Private carrier is a motor carrier that transports their own property by motor vehicle in interstate or foreign commerce to further their own business or commercial enterprise. Private carriers must comply with the various regulations of the states in which they operate.