Glossary

A business continuity plan (BCP) is a written document summarizing steps to take in the event of a disaster—man-made or natural—assessing the business's ability to recover from the loss event and subsequent business interruption. It is a hedging tool against the impact of a disruption on an organization. It typically includes estimated recoveries for loss of business income due to damage to the business's own locations, key suppliers/customers, adjacent buildings, key objects (such as bridges, highways), and utility interruptions. The BCP outlines the decision-making framework and advanced arrangements and procedures that enable an organization to maintain an acceptable level of operations in the event of a disruption.

Business income coverage (BIC) is commercial property insurance covering loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs for a specified number of days. There are two Insurance Services Office, Inc. (ISO), BIC forms: the Business Income (and Extra Expense) Coverage Form (CP 00 30) and the Business Income (without Extra Expense) Coverage Form (CP 00 32).

A business income worksheet is a form used to estimate an organization's annual business income for the upcoming 12-month period for purposes of selecting a business income limit of insurance. The selected percentage, or multiple, of the organization's estimated annual business income for the upcoming 12-month period should be based on how long it would take to replace all damaged property and resume operations in the event of a worst-case loss. For some organizations, this period could exceed 12 months. Most insurers require a completed business income worksheet as a condition of activating the business income agreed value coverage option.

The business judgment rule is a legal defense used to absolve corporate directors and officers from liability, provided it can be shown that a loss resulted from a seemingly prudent, good faith business decision that simply turned out to be incorrect, rather than a grossly negligent or fraudulent act.

Business legal expense insurance (LEI) is a form of coverage for the expenses associated with defending liability claims against the insured. It does not cover expenses to defend claims that would be insured in a general liability policy or that would not be a tax-deductible expense.

Business risk is a risk of loss so closely tied to an insured's way of doing business that it is considered not to be an appropriate subject of insurance coverage; such risks are typically addressed as overhead (i.e., the cost of the loss is included in the price of the business's products or services) or as a subject for loss control. The cost of replacing a defective product or redoing defective work is a classic "business risk" and therefore is excluded from most liability policies.

Business use class is a classification determined by commercial vehicle usage and serves as a part of the rating process in classifying commercial vehicles. There are three business use classifications: service, which does not include transportation of any property except for tools, equipment, and supplies to and from jobs; retail, which includes transportation of property to and from individual households; and commercial, which applies for any other type of transportation except service and retail.

The "but-for" evidentiary standard applies in certain employment discrimination cases. Employees must prove that the employer's discriminatory act was the primary motivation for action taken against the employee. Whether or not the "but-for" evidentiary standard applies depends upon (1) the particular jurisdiction in which a case is filed and (2) the exact type of discrimination alleged. Under this standard, employee-plaintiffs must prove that the employer's discriminatory act for which a claim is being brought (e.g., termination, reassignment, demotion) was the primary factor that motivated the employer-defendant's particular action. For example, assume an employee is terminated for low productivity that had been documented during the previous 6 months. At the exit interview, the employee is referred to as "one of our older workers" by the company's human resources manager. Under the "but-for" evidentiary standard, the worker must prove that he was terminated primarily because of his age and not as a result of low productivity. Although the remark about being an "older worker" may have been discriminatory, by itself, it would still not be sufficient to prove a discrimination case if the worker's lack of productivity was the employer's primary motivation for terminating the employee. Employers favor the "but-for" standard because it sets up a relatively high level of proof to support a discrimination case.

In first-party property cases involving multiple perils, courts use the "but-for" test to determine whether a given peril is a cause-in-fact of the loss. To do that, courts conduct a "thought experiment" and imagine what would happen if one of the perils did not occur. If the loss would have happened anyway with or without the occurrence of the removed peril, then the removed peril fails the "but-for" test. What that means is that the removed peril is not really a cause-in-fact of the loss, so it cannot be selected as the proximate cause.

A buyback deductible is a deductible contained in the basic policy that may be removed by paying additional premium when full coverage is required.