A Glossary of Common Insurance Terminology

An Arizona Insurance Bad Faith Lawyer Shares Definitions of Insurance Terms

Scottsdale Insurance Bad Faith Attorney Shane L. Harward has been practicing law since 1995 in Arizona. His primary focus has been on cases involving insurance companies that demonstrate bad faith to their claimants: unreasonably denied claims, improper evaluations, unfair delays, failure to defend, and a wide-variety of other questionable strategies that insurance companies practice. He has always represented individuals, families, and small businesses against big insurance companies and their teams of insurance adjusters, investigators, and staff lawyers. Far more often than not, Mr. Harward has been successful in proving that insurance companies have treated their insurance policy holders unfairly and in bad faith. The insurance companies often deny, delay and lie to avoid paying. He can prepare you for what to expect if you do file a lawsuit against a big insurance company.

Whether through trial or settlement, Mr. Harward has the skill and legal experience you need on your side. He knows that insurance law can be extremely complex and confusing for people who are not experts. As a result, the following common terms are defined in ways meant to ease some of the complexity. However, to have these terms explained in greater detail and in the context that is appropriate for your legal situation, call 480-874-2918 to speak with insurance bad faith attorney Shane L. Harward.

Arizona Bad Faith Insurance Glossary

Actual Damages

– The fair market value of losses sustained by a plaintiff.

Actuary

– A specialist who analyzes insurance claims, risks, sets reserves, and makes other judgments based on mathematical formulations.

Adjuster

– Typically, a representative of the insurance company responsible for investigating a policyholder’s claim and determining the insurance company’s monetary responsibility—or lack thereof—to a claimant.

Apportionment

– The division of loss and responsibility when two or more insurance companies cover the same loss.

Arbitration

– A hearing by an independent party to settle a dispute between two or more parties.

Assigned Risk

– A risk that insurance companies are obligated to cover according to state law even if they would prefer not to.

Association with Local Counsel/Admission Pro Hac Vice

– This allows an attorney from another state to appear in a specific legal action in a state in which the attorney is not otherwise approved to practice. It requires, among other things, an association with a local law firm.

Bad Faith Actions

– A bad faith action is a lawsuit that seeks to demonstrate that an insurer has not practiced fair, honest and reasonable dealing in the investigation or payment of a claim. It may also arise when an insurance company does not adequately defend the insured against a lawsuit.

Breach

– A violation of a duty or a responsibility. When an insurance company does not fulfill its obligation to the insured, it has “breached” its responsibility to act in good faith.

Breach of Contract

– Failing to perform or fulfill any duty in a contract.

Business Interruption Insurance

– Provides compensation for loss of business revenue when business is interrupted as the result of property damage.

Claim

– A formal demand for benefits included in an insurance policy.

Commercial General Liability

– Liability insurance sold to businesses and commercial entities that often covers a wide variety of risks under one broad policy. Included may be premises liability insurance, vehicle coverage and others. This allows a company to have fewer policies while still covering essential components of their business.

Consumer Fraud

– Manipulating or tricking the public. Insurance companies may market or sell a policy that does not deliver the promised coverage or sell a product that is unnecessary for a particular consumer.

Damron/Morris Agreements

– A relevant term when an insurance company fails to adequately defend a policy holder from legal action. This term arises from two importantArizona insurance cases. These agreements offer defendants options for shielding their own assets when lawsuits involving damages or injuries are pending.

Declaratory Actions

– A lawsuit which determines the rights and duties of parties involved. Where there is uncertainty about legal rights and obligations, a “declaration” of rights and obligations may be sought from a court.

Disability Insurance

– This replaces income after disability from illness, injury or other cause. While there are many variations, the two most common forms of disability insurance determine payment based upon prior work history or from any occupation for which the insured may be reasonably suited.

Excess Judgment

– A legal judgment (award) against an insured when their liability policy provides coverage limits less than the judgment’s amount.

Failure to Defend

– When an insured is sued for liability, their own insurance company typically has a responsibility to defend them if the liability is covered by the insurance policy coverage.

Gap Insurance

– Meant to cover the difference between the insurance company’s assessment of your property’s value and the amount still owed on the property if it has been a total loss. This insurance is most common in auto insurance and is meant to eliminate payments on a car that is no longer in the insured’s possession.

General Agent

– A representative for an insurance company in a given region. Usually an independent contractor who is paid commission.

General Damages

– A type of loss or injury that cannot be clearly quantified. Pain and suffering may be the most common type of general damages.

Grace Period

– Usually thirty days after a premium is due. During that time, even if the premium is not paid, the insurance coverage remains intact if a pattern of payment has been established.

Health Maintenance Organization (HMO)

– An entity, usually a large corporation, that provides health services to members. Payment to HMOs is provided through pre-determined periodic payments made by or on behalf of each member regardless of medical services that are provided.

Homeowners’ Insurance

– Provides broad protection against a number of negligence claims against a homeowner. The protection of this insurance is not restricted to claims occurring only on the homeowners’ premises.

Implied Duty of Good Faith and Fair Dealing

– The law requires insurers to behave reasonably and in a timely way in their investigations and in their payment or denial of claims. While this promise of good faith may not be explicit in each insurance policy, it is a legally binding obligation that is implied.

Indemnify

– Protect against future loss, injury or damages. Liability insurance policies are supposed to “indemnify” the insured when a claim is made against them by another for negligence.

Liability Insurance

– Provides protection to persons for claims made against them. Typically these are homeowners and auto insurance policies designed to protect a person from claims related to negligence, malfeasance or irresponsible behavior.

Life Insurance

– Provides a stated benefit when the insured becomes deceased except in cases of suicide depending upon the terms of the insurance policy, the length of time the insurance policy has been in effect, and the state law governing the insurance policy.

Mandated Benefits

– Coverage mandated by the state for any major medical policy. Certain preventative care related to cancer screening, automatic coverage for babies, hospice treatment and a variety of others may be mandated.

Medical Payments Insurance

– Guarantees the payment of necessary medical bills. This type of benefit should be paid regardless of fault or liability.

MIST (Minor Impact Soft Tissue Injuries)

– Serious injuries may occur even though property damage is minimal. Insurance companies often claim that the insured must not have been injured based upon the minimal damage to their automobile.  Insurance companies have derogatively termed such cases as “MIST” cases.

NAIC

– National Association of Insurance Commissioners State insurance commissioners who meet to discuss regulations, policies and problems in the insurance industry. They are heavily influential regarding political policy and legislation.

NALU

– National Association of Life Underwriters. An association of life insurance agents with state and local chapters across the entire nation.

Negligence

– Failure to use reasonable care during an action. Inaction can also result in charges of negligence.

Punitive Damages

– Monetary or other compensation in addition to actual or general damages. These damages are intended to punish defendants and deter future misconduct.

Rescission

– The cancellation of an insurance policy due to alleged nondisclosure or misrepresentation on an application for insurance coverage. Such cancellations often lead to bad faith insurance lawsuits.

Right of Subrogation

– In the event of a loss, an insurance company may try to recover the amount of a claim paid if the loss was caused by a third party. Any amount recovered, after expenses, must be divided with the insured in order to compensate for any deductible that the insured paid.

Third-Party Claims

– A liability claim made against an insured. The insured is not the person making the claim. Rather they are a third party seeking compensation from the insured’s insurance company.

Tort

– A civil wrong that may also include criminal wrongdoing but that specifically allows a person to sue for damages even if no criminal act occurred.

Underinsured Motorists Insurance

– Designed to compensate an insured for damages or injuries suffered during an automobile accident which cannot be adequately paid by the at-fault driver’s insurance. This extra protection provides added security against drivers who carry inadequate liability insurance.

Underwriter

– An individual or corporation specializing in evaluating insurance risks and calculating rates.

Uninsured Motorists Insurance

– A form of insurance designed to protect an insured, under an automobile policy, from injuries or damages not covered by automobile insurance on the part of the at-fault driver. Particularly important in states like Arizona where there are many uninsured motorists.

Voluntary Compensation Coverage

– Additional coverage for employees that an employer purchases to supplement mandatory workers’ compensation insurance.

Worker’s Compensation Insurance

– Required for employers to provide employees protection from costs related to injuries incurred at work or while traveling for work.

For additional explanation of any of the above terms and for assistance with any insurance bad faith legal issues in Arizona, call 480-874-2918 to speak with Attorney Shane L. Harward.