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CPCU 530
Applying Legal Concepts to Insurance
| Term | Definition |
|---|---|
| Contract | A legally enforceable agreement between two or more parties. |
| Offeror | The party to a contract who promises to give something in return for a promise or an act by another party. |
| Offeree | The party to a contract who makes a promise or acts in return for something offered by another party. |
| Consideration | Something of value or bargained for and exchanged by the parties to a contract. |
| Bilateral contract | A contract in which each party promises a performance |
| Unilateral contract | A contract in which only one party makes a promise or undertakes the requested performance. |
| Executed contract | A contract that has been completely performed by both parties |
| Executory contract | A contract that has not been completely performed by one or both of the parties. |
| Express contract | A contract whose terms and intentions are explicitly stated. |
| Implied contract | A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances. |
| Uniform Commercial Code (UCC) | A model code that has been adopted in whole or in part by each state and whose purpose is to provide a consistent legal basis for business transactions throughout the United States and its territories. |
| Warranty | A written or an oral statement in a contract that certain facts are true. |
| Express warranty | An explicit statement about a product by the seller that the buyer or other user may rely on and that provides a remedy in the event the product does not perform as claimed. |
| Implied warranty | An obligation that the courts impose on a seller to warrant certain facts about a product even though not expressly stated by the seller |
| Bailment | The temporary possession by one party (the bailee) of personal property owned by another party (the bailor) for a specific purpose, such as cleaning or repair. |
| Employment at will | A legal doctrine under which an employer may terminate any employee at any time for any reason or for no reason. |
| Wrongful discharge | A cause of action an employee may have against an employer for illegal termination of employment. |
| Bona fide occupational qualification (BFOQ) | The minimum qualification, under federal antidiscrimination laws, that an employee needs in order to be able to perform the duties of a particular job. |
| Nonexempt employee | An employee who is paid by the hour and who receives hourly overtime pay. |
| Exempt employee | An employee who is paid a salary and who does not receive overtime pay |
| Conditional contract | A contract that one or more parties must perform only under certain conditions. |
| Utmost good faith | An obligation to act in complete honesty and to disclose all relevant facts |
| Material fact | A fact that is significant to a decision or matter at hand. |
| Misrepresentation | A false statement of a material fact on which a party relies. |
| Incontestable clause | A clause that states that the insurer cannot contest the policy after it has been in force for a specified period, such as two years, during the insured’s lifetime. |
| Contestable period | A period during which an insurer can challenge the validity of a life insurance policy. |
| Contract of adhesion | Any contract in which one party is put in a “take-it-or-leave-it” position and must either accept the contract as written by the other party or reject the contract entirely. |
| Contract of indemnity | A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss. |
| Principle of indemnity | The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured |
| Valued policy | A policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss), regardless of the actual value of the loss. |
| Binder | A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued. |
| Direct-action statute | A law that permits a negligence victim to sue an insurer directly or to sue both the insurer and wrongdoer jointly. |
| Waiver | The intentional relinquishment of a known right. |
| Election | The voluntary act of choosing between two alternative rights or privileges. |
| Personal property | All tangible or intangible property that is not real property. |
| Real property (realty) | Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land |
| Title | The legal ownership of property; the highest right to property that a person can acquire |
| Intellectual property | The product of human intelligence that has economic value. |
| Intellectual property rights | The legal entitlement attached to the expressed form of an idea or of other intangible subject matter |
| Copyright | The legal right granted by a government entity to a person or an organization for a period of years to exclusively own and control an original written document, piece of music, computer code, or other form of expression. |
| Patent | The right granted by a government entity to an inventor or applicant for a limited time period to exclusively own and control a new, useful, and nonobvious invention. |
| Accession | An increase or addition to property. |
| Confusion | In property law, the intermingling of goods belonging to different owners. |
| Gift | The voluntary and gratuitous transfer of property without consideration. |
| Bailor | The owner of the personal property in a bailment. |
| Bailee | The party temporarily possessing the personal property in a bailment. |
| Insurable interest | An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred. |
| Lien | A creditor’s legal right or interest in another’s property, usually lasting until satisfaction of the specific debt or duty that the lien secures. |
| Possessory lien | A bailee’s right to retain possession of a bailor’s property as security for the payment of a debt or performance of some other act |
| Estate | The sum total of all types of property owned by a person at the time of death, including businesses, profits, savings accounts, stocks, and other financial assets. |
| Fee Simple Estate | A full ownership interest in property with the unconditional right to sell, lease, use, or dispose of it, limited by certain governmental powers, such as zoning law |
| Life estate | n interest in which a life tenant, is entitled to possession of real prop and to all income the land produces for the duration of that person’s or someone else’s life; interest terminates on the death of the life tenant (or of the other person) and does n |
| Tenancy | A right to possession or ownership, or both, of property. |
| Joint tenancy | A concurrently owned and undivided interest in an estate that transfers to a surviving joint tenant upon the death of the other. |
| Tenancy by the entirety | A joint tenancy between spouses. |
| Tenancy in common | A concurrent ownership of property, in equal or unequal shares, by two or more joint tenants who lack survivorship rights. |
| Community property | Property owned or acquired by both spouses during a marriage by their communal efforts. Each spouse has an undivided one-half interest in the community property. Also a Steel Panther song. |
| Cooperative ownership | Ownership of real property by a corporation. Stockholders receive long-term proprietary lease to portion of property, and proportional vote in its affaris based on # of shares owned |
| Condominium | A real estate development consisting of a group of units, in which the air space within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners. |
| Deed | A written instrument that transfers interest in real property. |
| Vendor | The seller of real property. |
| Vendee | The purchaser of real property. |
| Grantor | One who conveys property to another. |
| Grantee | The buyer of real property after execution of the deed. |
| Statute of frauds | A law to prevent fraud and perjury by requiring that certain contracts be in writing and contain the signature of the party responsible for performing that contract. |
| Mortgage | An interest in land created by a written document that provides security for the payment of a debt. |
| Mortgagor | The person or organization that borrows money from a mortgagee to finance the purchase of real property. |
| Mortgagee | A lender in a mortgage arrangement, such as a bank or another financing institution. |
| Foreclosure | A legal proceeding to terminate a mortgagor’s interest in property; the mortgagee’s remedy when the mortgagor defaults on payments. |
| Assignment | The transfer of rights or property. |
| Assignee | The individual or entity to whom property, rights, or interests have been transferred. |
| Trust deed (deed of trust or trust indenture) | A secured interest in real property that is held by a trustee to protect the lender (beneficiary) until the loan is repaid by the borrower (trustor). |
| Mechanic’s lien | A lien, granted by law to anyone who repairs a specific piece of property, that secures payment for the repairs. |
| Negligence | The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others. |
| Tort | A wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right. |
| Tortfeasor | A person or an organization that has committed a tort. |
| Plaintiff | The person or entity who files a lawsuit and is named as a party |
| Defendant | The party in a lawsuit against whom a complaint is filed. |
| Legal duty | An element of negligence that exists when parties are in such a relationship that the law imposes on one party the responsibility for the exercise of care toward the other party |
| Statute | A written law passed by a legislative body at either the federal or state level |
| Common law (case law) | Laws that develop out of court decisions in particular cases and establish precedents for future cases. |
| Reasonable person test | A standard for the degree of care exercised in a situation that is measured by what a reasonably cautious person would or would not do under similar circumstances. |
| Common carriers | Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services. |
| Proximate cause | A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened |
| “But for” rule | A rule used to determine whether a defendant’s act was the proximate cause of a plaintiff ’s harm based on the determination that the plaintiff ’s harm could not have occurred but for the defendant’s ac |
| Substantial factor rule | A rule used to determine proximate cause of a loss by determining which of the acts are significant factors in causing the harm. |
| Foreseeability rule | A rule used to determine proximate cause when a plaintiff ’s harm is the natural and probable consequence of the defendant’s wrongful act and when an ordinarily reasonable person would have foreseen the harm. |
| Intervening act | An act, independent of an original act and not readily foreseeable, that breaks the chain of causation and sets a new chain of events in motion that causes harm. |
| Concurrent causation (concurrent causation doctrine) | A legal doctrine stating that if a loss can be attributed to two or more independent concurrent causes—one or more excluded by the policy and one covered—then the policy covers the loss |
| Negligence per se | An act that is considered inherently negligent because of a violation of a law or an ordinance |
| Res ipsa loquitur | A legal doctrine that provides that, in some circumstances, negligence is inferred simply by an accident occurring. |
| Exclusive control | The control of only one person or entity; in tort law the control by the defendant alone of an instrument that caused harm. |
| Trespasser | A person who intentionally enters onto the property of another without permission or any legal right to do so. |
| Nuisance | Anything interfering with another person's use or enjoyment of property. |
| Attractive nuisance doctrine | A doctrine treating a child as a licensee, or guest, rather than a trespasser on land containing an artificial and harmful condition that is certain to attract children. |
| Licensee | A person who has permission to enter onto another's property for his or her own purposes. |
| Invitee | A person who enters a premises for the financial benefit of the owner or occupant. |
| Express license | The oral or written permission to enter onto another’s land to do a certain act, but not the granting of any interest in the land itself. |
| Implied license | The permission to enter onto another’s land arising out of a relationship between the party who enters the land and the owner. |
| Public invitee | A person invited to enter onto premises as a member of the general public for a purpose for which the land is open to the public. |
| Business invitee | An individual who has express or implied permission to be on the premises of another for the purpose of doing business |
| Intentional tort | A tort committed by a person who foresees (or should be able to foresee) that his or her act will harm another person |
| Assault | The threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact. |
| Battery | Intentional harmful or offensive physical contact with another person without legal justification. |
| False imprisonment | The restraint or confinement of a person without consent or legal authority |
| False arrest | The seizure or forcible restraint of a person without legal authority. |
| Defamation | A false written or oral statement that harms another's reputation. |
| Slander | A defamatory statement expressed by speech. |
| Libel | A defamatory statement expressed in writing. |
| Malice | The intent to do a wrongful act without justification or excuse. |
| Product disparagement, or trade libel | An intentional false and misleading statement about a characteristic of a plaintiff ’s product, resulting in financial damage to the plaintiff. |
| Invasion of privacy | An encroachment on another person's right to be left alone |
| Intentional infliction of emotional distress | An intentional act causing mental anguish that results in physical injury. |
| Bad faith (outrage) | A breach of the duty of good faith and fair dealing |
| Malicious interference with prospective economic advantage | A tort involving intentional interference with another’s business, or with another’s expected economic advantage. |
| Unfair competition | Use of wrongful or fraudulent practices by a business to gain an unfair advantage over competitors. |
| Interference with employment | An unjustified intentional act that interferes with another’s valid or expected business relationship. |
| Malicious prosecution | The improper institution of legal proceedings against another. |
| Malicious abuse of process | The use of civil or criminal procedures for a purpose for which they were not designed. |
| Trespass | Unauthorized entry to another person's real property or forcible interference with another person's personal property |
| Conversion | The unlawful exercise of control over another person's personal property to the detriment of the owner. |
| Chattel | Tangible, movable personal property |
| Strict liability (absolute liability) | Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, or inappropriate. |
| Ultrahazardous activity (abnormally dangerous activity) | An activity that is inherently dangerous; if harm results, the performer may be held strictly liable. |
| Toxic tort | A civil wrong arising from exposure to a toxic substance |
| Environmental law | The body of law that deals with the environment’s maintenance and protection. |
| Products liability | A manufacturer’s or seller’s liability for harm suffered by a buyer, user, or bystander as a result of a product that has a dangerous manufacturing defect or design defect or that is not accompanied by a warning of an inherent hidden danger |
| Comparative negligence | A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault. |
| Active negligence | A plaintiff ’s voluntary use of a defective product with knowledge of the potential danger resulting from the defect. |
| Assumption of risk | A defense to negligence that bars a plaintiff 's recovery for harm caused by the defendant's negligence if the plaintiff voluntarily incurred the risk of harm. |
| Passive negligence | A plaintiff ’s failure to discover a product defect or to guard against a possible defect. |
| Agency | A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal. |
| Agent | In the agency relationship, the party that is authorized by the principal to act on the principal's behalf. |
| Principal | The party in an agency relationship that authorizes the agent to act on that party’s behalf. |
| Fiduciary Duty | The duty to act in the best interests of another. |
| Power of attorney | A written document that authorizes one person to act as another person’s agent or attorney-in-fact. |
| Agency by estoppel | An agency relationship created by a principal's words or conduct that cause a third party to reasonably believe that an agency exists. |
| Ratification | Creation of an agency relationship resulting when a principal adopts the act of another who has purported to act for the principal and has neither power nor authority to perform the act for the principal |
| Actual authority | Authority (express or implied) conferred by the principal on an agent under an agency contract. |
| Express authority | The authority that the principal specifically grants to the agent. |
| Implied authority | The authority implicitly conferred on an agent by custom, usage, or a principal's conduct indicating intention to confer such authority |
| Apparent authority | A third party’s reasonable belief that an agent has authority to act on the principal’s behalf. |
| Ministerial duties | The routine or mechanical tasks performed by agents. |
| Cause of action | A plaintiff ’s legal grounds to sue a defendant. |
| Employee | A person hired to perform services for another under the direction and control of the other party, called the employer. |
| Independent contractor | A person (or organization) hired to perform services without being subject to the hirer’s direction and control regarding work details |
| Vicarious liability | A legal responsibility that occurs when one party is held liable for the actions of a subordinate or an associate because of the relationship between the two parties |
| Exculpatory clause (exculpatory agreement) | A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act. |
| Insurance producer | Any of several kinds of insurance personnel who place insurance business with insurers and who represent either insurers or insureds, or both. |
| Insurance agent | A legal representative of one or more insurers for which the representative has a contractual agreement to sell insurance. |
| Broke | An independent producer who represents insurance customers. |
| General agent | An insurance producer with broad powers to represent one or more insurers in a given area and for a specific line or lines of insurance. |
| Allegation | A claim made in the complaint by the plaintiff, specifying what the plaintiff expects to prove to obtain a judgment against the defendant. |
| Complaint | The allegations made by a plaintiff in a lawsuit. |
| Pleading | A formal written statement of the facts and claims of each party to a lawsuit. |
| Motion | A formal request for the court to take a particular action. |
| Discovery | A pretrial exchange of all relevant information between the plaintiff and defendant. |
| Relevance | A quality of evidence that is likely to prove or disprove an element of the case. |
| General verdict | A kind of verdict that entails a complete finding and a single conclusion by a jury on all issues presented. |
| Special verdict | A kind of verdict reached by a jury that makes findings of fact by answering specific questions posed by the judge. The judge then applies the law to the facts as the jury has found them. |
| Res judicata | A doctrine that bars parties to a lawsuit on which final judgment has been rendered from bringing a second lawsuit on the same claim or on related transactions. |
| Alternative dispute resolution (ADR) | Procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation. |
| Mediation | An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement. |
| Legislative rule | A type of substantive administrative agency rule that comes from a statutory delegation of authority and that has the same force as a law enacted by Congress or a legislature |
| Interpretative rule | A type of administrative agency rule that interprets statutes, providing guidance for agency staff or regulated parties, but that lacks the force and effect of law and therefore is not binding on individuals. |
| Procedural rule | A type of administrative agency rule that prescribes procedures for agency operations, legislative rulemaking, and adjudication proceedings. |
| Standing to sue | A party’s right to sue, as one who has suffered or will suffer a legal wrong or an adverse effect from an action. |
| Final order | An administrative agency’s final conclusion or disposition of any material private right of a party, terminating an agency proceeding |
| Exhaustion of administrative remedies | The completion of all possible administrative procedures and appeals in a case; required before a party can appeal an agency action to a court. |
| Compensatory damages | A payment awarded by a court to reimburse a victim for actual harm |
| Punitive damages (exemplary damages) | A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party’s actual damages. |
| Special damages | A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages. |
| General damages | A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific, measurable expenses. |
| Wrongful death action | A legal cause of action that exists for the survivor of the deceased. |
| Survival statute | A statute that preserves the right of a person’s estate to recover damages that person sustained between the time of injury and death. |
| Joint tortfeasors | Two or more parties who act together to commit a tort or who commit separate torts that combine to cause an injury or loss. |
| Enterprise liability (industry-wide liability) | An expanded liability concept requiring each member of an industry responsible for manufacturing a harmful or defective product to share liability when a manufacturer at fault cannot be identified. |
| Alternative liability | An expanded liability concept that shifts the burden of proof to each of several defendants in a tort case when there is uncertainty regarding which defendant’s action was the proximate cause of the harm. |
| Market share liability | When harm to a consumer comes from a product that cannot be traced back to a single manufacturer. All manufacturers responsible for a substantial share of the market are named in a lawsuit and are liable for their proportional share of the judgement |
| Concert of action | An expanded liability concept that applies when all defendants acted together or cooperatively. |
| Conspiracy | An expanded liability concept that applies when two or more parties worked together to commit an unlawful act. |
| Negligent entrustment | The act of leaving a dangerous article with a person who the lender knows, or should know, is likely to use it in an unreasonably risky manner. |
| Negligent supervision | A parent’s failure to exercise reasonable control and supervision over his or her child to prevent harm to others. |
| Family purpose doctrine | A liability concept that holds the owner of an automobile kept for the family’s use vicariously liable for damages incurred by a family member while using the automobile |
| Good Samaritan law | A statute providing that a person will not be liable for damages as a result of rendering aid to an injured person, without compensation, at the scene of an accident |
| Gross negligence | An act or omission that completely disregards the safety or rights of others and is exaggerated or aggravated in nature |
| Class action (class action lawsuit) | A lawsuit in which one person or a small group of people represent the interests of an entire class of people in litigation. |
| Mass tort litigation | A class-action suit based on tort law rather than on contract law. |
Created by:
CampH
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