Glossary

A buyout settlement clause is a provision found in media liability insurance policies allowing an insured the option to refuse settlement of a claim for an amount offered by an insurer and agreed upon by a claimant. The clause allows the insurer to tender that amount to the insured, thereby "buying out" of the claim. At that point, the insured takes complete control of the case, bearing the risk that ultimate settlement and defense costs will exceed the buyout figure. If the case is resolved for less than that amount, the insured may keep the difference.

A buy/sell agreement refers to a contract among members of a firm that provides for the continuation of the business through an agreement by which each principal agrees that, in the event of their death, their estate will sell its interest back to the business entity for a predetermined amount. The amount may be calculated as a fixed amount or as a variable amount, depending on business factors. The agreement is usually funded by life insurance.

A bystander claim is a type of liability claim in which a witness to an accident suffers some form of mental anguish due to witnessing this event. Whether a witness's emotional distress and trauma falls under the definition of "bodily injury" may arise in a court case. Some auto accidents involve situations in which one person suffers severe bodily injury, and another occupant may walk away with minor scratches. In that case, the uninjured occupants may make a claim for emotional distress or trauma from witnessing the injuries to the other passengers. Another example would be a mother who witnesses her small child being mauled by a neighborhood dog. Some courts recognize these types of claims if (1) the witness was located at or near the scene of the accident, (2) the mental anguish resulted from a direct emotional impact upon the witness from the sensory observance of the event, and (3) the witness and the victim were closely related (e.g., mother and child), as contrasted with a more distant relationship.

Following the purchase of one corporation by another, shareholders of the acquired organization frequently bring lawsuits alleging that the purchase price paid by the acquirer—and thus the price received by the acquiree's shareholders—was too low. In some situations, insureds intentionally negotiate a below-market acquisition price, and then allow insurance proceeds paid in response to the inevitable shareholder objection to supplement that price to achieve a fair-market value in the end. Bump-up exclusions in directors and officers (D&O) liability policies preclude coverage for such losses. These exclusions were developed by insurers who perceive that such claims are essentially business risks and are beyond the scope of intended coverage under a D&O policy.