Glossary

Legal action against insurer is a provision in most standard insurance coverage forms that imposes certain limitations on an insured's right to sue the insurer for enforcement of the policy. Sometimes titled "legal action against us," such provisions typically require that the insured meet all its own obligations under the policy before bringing suit in contract. Some legal action against insurer clauses in liability policies also attempt to limit the prerogatives of third-party beneficiaries by stipulating that nothing in the policy gives any third party a right to sue the insurer for damages being sought against an insured.

Legal funding, sometimes called litigation finance, third-party litigation finance (TPLF), or alternative litigation financing (ALF), refers to transactions in which a third party provides capital to one of the parties to a legal claim (e.g., a plaintiff, defendant, or law firm). This is done on a nonrecourse basis in exchange for a financial interest in the outcome of the claim or a lien on the law firm. Repayment of the financing is generally contingent on a successful outcome of the underlying claim, whether by way of a judgment or, as is more frequently the case, an out-of-court settlement between the parties. If the litigation is unsuccessful, the lender is owed nothing.

A legal liability coverage form is the Insurance Services Office, Inc. (ISO), Commercial Property Legal Liability Coverage Form (CP 00 40) that provides coverage for sums the insured is obligated to pay as a result of accidental damage from a covered cause of loss to property of others in the insured's care, custody, or control (CCC). Not a suitable means of insuring leased premises because of a contractual liability exclusion that eliminates coverage for contractually assumed liability unless the insured would have been liable in tort regardless of the contract.

A legal principles claim specialist (LPCS) is a claims law specialist designation offered by the American Educational Institute (AEI). It requires successful completion of the AEI legal principles self-study program.

A legal reserve life insurance company is a life insurer that maintains reserves at least equal to the minimum prescribed by law or regulation in the state in which it does business. These reserves are based on actuarial formulas and are designed to allow the company to meet all its financial obligations. Conversely, an assessment life insurer is permitted to access its policyholders in the event of financial problems.

Legal risk is the possibility of reputational or financial loss as a result of legal issues. Legal risk emanates from contracts, litigation, and regulations. Basel II classifies legal risk as a subset of operational risk.

The Lemon test is a three-part test commonly used to determine whether a government's treatment of a religious institution constitutes "establishment of a religion" (which is prohibited under the establishment clause of the First Amendment). Under the " Lemon test," named after the case Lemon v. Kurtzman, 403 U.S. 602, 91 S.Ct. 2105 (1971), a government can only assist a religion if (1) the primary purpose of the assistance is secular; (2) the assistance does not promote or inhibit religion; and (3) there is no "excessive entanglement" between church and state.

Lenders liability coverage provides coverage for errors and omissions (E&O) arising out of the extension of credit by financial institutions.

A lenders loss payable endorsement is a commercial property policy endorsement that gives a creditor of the insured that has loaned money in connection with the insured's personal property the same rights and duties that a mortgage clause gives a mortgagee. The standard Loss Payable Provisions (CP 12 18) endorsement includes this as one of its three options.

Lender liability is caused by the wrongful acts of a lending institution. Lender liability claims most frequently arise when a debtor challenges the validity of a loan agreement in a counterclaim against a financial institution after the institution has filed a collection action. Such claims typically allege misrepresentation of repayment terms, fraud, economic duress, and withholding of promised credit by the lender.