Glossary

Nonconcurrency is the condition created by two or more policies covering the same loss exposure that do not have identical inception and expiration dates. Nonconcurrency of an insured's umbrella policies and the liability policies required by the umbrella as underlying insurance is a problem because the nonconcurrent policy terms make it possible for a loss under an underlying policy's annual aggregate limit to use up part of the limit required by the umbrella and thus violate its underlying limits requirement.

Discrimination in an insurance context is the act or process of evaluating insurable risks and determining premiums on the basis of likelihood of loss. Insurance laws prohibit "unfair discrimination"—that is, the formulation of rates on the basis of criteria that do not fairly measure the actual risk involved. Unfair or illegal treatment of or denial of rights to persons on the basis of certain arbitrarily chosen attributes or characteristics, including race, gender, religion, creed, age, medical condition, pregnancy, sexual orientation/preference, physical appearance, marital status, physical or mental disability, or national origin. Discrimination does not usually fall within the coverage terms of the commercial general liability policy (and may even be specifically excluded by endorsement) but may be covered as a form of personal injury under some umbrella policies. However, employment practices liability insurance covers a variety of employment-related claims, including discrimination.

Policy territory refers to insurance policy provisions that specify the geographic area in which coverage applies. With property and inland marine insurance the territory will usually specify where the property must be located when damage occurs for the policy to apply. Similarly, liability insurance will generally specify where the injury or damage must occur for coverage to apply. Some liability insurance policies may specify a broad territory for coverage but require that the suit must be made in a more restricted territory. For example, an umbrella liability policy might provide coverage worldwide but only if the claim or suit is brought in the United States.

Coordination of coverage is the process of reviewing and possibly modifying the scope or nature of coverage provided by an insured's various liability policies to eliminate gaps or overlaps. For example, if an insured has an occurrence-based commercial general liability (CGL) policy and an umbrella policy written with a claims-made trigger, coverage gaps could result. Coordinating coverage in this instance might involve replacing the umbrella policy with an occurrence form.

Personal injury coverage is found under the commercial general liability and homeowners policies. This coverage pertains to a category of insurable offenses that produce harm other than bodily injury (BI). As covered by the 1986 commercial general liability (CGL) policy, PI includes: false arrest, detention, or imprisonment; malicious prosecution; wrongful eviction; slander; libel; and invasion of privacy. Also addressed in the homeowners policy. Under umbrella liability insurance, a broad category of insurable offenses that includes both BI and the offenses defined as "personal injury" in CGL policies.

A residential wrap-up is a controlled insurance program implemented for a condominium or other residential development project primarily to provide commercial general liability (CGL) and umbrella/excess liability insurance for the contractors. Unlike most wrap-ups, residential wrap-ups usually do not include workers compensation insurance. Because they are implemented as a way to ensure adequate coverage rather than to reduce project costs, they can be implemented on much smaller projects than would qualify for a traditional wrap-up.

A series business unit (SBU) is a self-governing and protected company formed under the umbrella of a series limited liability company, currently permitted in Delaware. The SBU is an independent insurance company capable of issuing policies directly or policies fronted by a commercial insurer to the insured company and third parties. Each SBU has a unique business purpose and an independent tax identification number. The SBU's business purpose, taxpayer election, and coverage offerings are specified. Unlike the protected cells or segregated accounts of rent-a-captives, SBUs have greater flexibility offered by self-governance. An SBU is protected from the financial obligations of other SBUs by Delaware statute.

A follow form professional liability endorsement in an umbrella liability policy indicates that coverage applies under the same basis as in the underlying professional liability policy. In recent years, however, such endorsements are becoming increasingly difficult to obtain and are very unusual. This is because few umbrella insurers are also willing to assume the types of risks that professional liability policies cover.

An insolvency clause is a clause holding a reinsurer liable for its share of loss assumed under a treaty, even though the primary company has become insolvent. This term also refers to a clause in an umbrella liability policy, stipulating that the umbrella will not drop down in the event the primary liability insurer is unable to pay because of insolvency.

A liberalization clause is a provision that extends to persons already insured under a particular policy the broadened coverage features that may be introduced in subsequent editions of that policy form. In umbrella liability insurance, a clause specifying that coverage will be as broad as that provided by the primary liability policies.