Claims & duties terms

Actual Loss Sustained

Actual loss sustained is a business income valuation method under which the insurer reimburses the real income you actually lose during a covered shutdown, rather than a pre-set dollar figure.

Also: ALS · actual loss sustained meaning · actual loss sustained business income

Books and Records Demand

A shareholder's formal request to inspect a company's books and records, often used to gather evidence before filing a derivative or securities lawsuit.

Also: books and records demand · books and records request · Section 220 demand

Business Judgment Rule

The business judgment rule is a corporate-law doctrine that presumes directors and officers made a decision on an informed basis, in good faith, and in the honest belief that it served the company's best interests, so courts will not second-guess that decision just because it turned out badly.

Also: business judgment rule · business judgement rule · BJR

Claim

A demand for payment or defense under your insurance policy, typically triggered by a lawsuit, written demand, or regulatory action against your business.

Also: Insurance Claim · Notice of Loss · Demand for Coverage

Claim History

Your claim history is the record of past insurance claims you have filed, which carriers review to price coverage and decide whether to offer it.

Also: claim history · claims history · insurance claim history

Claims Audit

A claims audit is a structured review of claim files to confirm they were handled, reserved, and paid correctly.

Also: claim audit · claims audit · claims file review

Clawback Insurance

A D&O coverage enhancement that reimburses a director or officer for the personal legal costs of defending an attempt to claw back their compensation, though not the repayment of the compensation itself.

Also: clawback insurance · clawback coverage · compensation clawback coverage

Codefendant

A codefendant is a party sued in the same lawsuit as you, named alongside you by the plaintiff to answer the same or related claims.

Also: codefendant meaning · co-defendant · codefendant vs plaintiff

Consent to Settle

Consent to settle is a policy provision that governs who controls the decision to settle a claim, typically requiring the insurer to get the insured's agreement before resolving a claim, or letting the insurer settle while using a hammer clause to discourage an unreasonable refusal.

Also: consent to settle · consent to settlement · settlement consent · consent-to-settle clause

Cooperation Clause

A policy condition requiring you to assist your insurer in investigating and defending a claim.

Counterclaim

A claim a defendant files back against the party that sued them, within the same lawsuit.

Also: counterclaim meaning · what is a counterclaim · counter claim

Cyber Extortion

Cyber extortion is a threat to lock, steal, or expose your data or systems unless you pay a ransom, and a cyberextortionist is the attacker making that demand.

Also: cyberextortionist definition · cyber extortion coverage · ransomware extortion

Defense Costs

Defense costs are the attorney fees, court costs, expert fees, and related expenses an insurer pays to defend you against a covered claim.

Also: defense expenses · cost of defense · claims expenses

Derivative Demand

A derivative demand is a formal written request from a shareholder asking a company's board of directors to investigate and pursue legal action, on the company's behalf, against directors or officers accused of harming the company.

Also: derivative demand · shareholder derivative demand · derivative demand letter

Duty to Defend vs Duty to Indemnify

Duty to defend pays your legal costs; duty to indemnify pays the judgment or settlement.

Final Adjudication

Final adjudication is a court's conclusive, non-appealable ruling on the merits, and in D&O policies it is often the trigger that activates conduct exclusions.

Also: final adjudication meaning · final adjudication clause · final adjudication vs in fact

Guaranty Agreement

A contract in which one party, the guarantor, agrees to be responsible for another party's debt or obligation if that party defaults.

Also: guaranty agreement meaning · personal guaranty · guarantor agreement

Hammer Clause

A hammer clause is a liability policy provision that limits how much your insurer must pay if you refuse to consent to a settlement it recommends and the claim later resolves for more.

Also: hammer clause · blackmail clause · settlement cap provision

Indemnitor

The party that agrees to cover another party's losses under an indemnification or hold harmless clause.

Also: indemnitor meaning · what is an indemnitor · indemnitor vs indemnitee

Loss

The financial damage resulting from a covered event.

Loss Adjustment Expense (LAE)

Loss adjustment expense (LAE) is the money an insurer spends to investigate, defend, and settle a claim, separate from the actual payout for the loss itself.

Also: ALAE · allocated loss adjustment expense · ULAE · loss adjustment expense meaning

Malfeasance

A wrongful, unlawful, or intentionally harmful act—especially by someone in a position of trust such as a director, officer, or public official.

Also: Malfeasance Meaning · Malfeasance Definition · Official Misconduct

Negligence in Contract Law

Negligence in contract law is the failure to use reasonable care while performing a contractual duty, which can create liability separate from the contract's own terms.

Also: negligence in contract law · negligent breach of contract · negligence vs breach of contract

Notice of Circumstance

Reporting a situation that might become a claim, before it actually does.

Notice of Claim

The formal notification you must give your insurer when a claim is made against you.

Panel Counsel

Pre-approved law firms your insurer uses to defend claims.

Personal and Advertising Injury

Personal and Advertising Injury, or Coverage B, is the part of a Commercial General Liability policy that covers a defined list of offenses like libel, slander, privacy violations, and copying an ad, separate from bodily injury and property damage.

Also: personal and advertising injury · personal injury liability · advertising injury · Coverage B

Professional Misconduct

Professional misconduct is a breach of the standards, ethics, or duties expected of a licensed or skilled professional, ranging from negligent errors to intentional dishonesty.

Also: professional misconduct examples · professional misconduct meaning · malpractice

Punitive Damages

Punitive damages are extra money a court orders a defendant to pay to punish especially reckless, willful, or malicious conduct, on top of compensating the victim's actual losses.

Also: exemplary damages · define punitive damages · are punitive damages insurable

Reservation of Rights

A letter from your insurer saying they'll investigate your claim but may not cover it.

Securities Claim

A securities claim alleges that a company or its leadership violated securities laws in connection with the purchase, sale, or offer of the company's stock or other securities, and is usually brought by shareholders, investors, or a regulator such as the SEC.

Also: securities claim · securities claims · securities litigation

Settlement Costs

Settlement costs are the amounts an insurer pays to resolve a claim by agreement rather than fighting it to a verdict, including the settlement payment itself and related expenses.

Also: settlement charges · cost to settle a claim · settlement expenses

Special Investigative Unit (SIU)

A Special Investigative Unit (SIU) is the team inside an insurer that investigates claims it suspects may be fraudulent or misrepresented.

Also: siu definition · siu insurance · special investigations unit

Subrogation

An insurer's right, after paying your claim, to step into your shoes and pursue whoever actually caused the loss to recover what it paid.

Also: subrogation meaning · right of subrogation · subrogate

Tender of Defense

A tender of defense is a formal demand that another party or its insurer take over defending you in a claim, usually based on an indemnity agreement or additional insured status.

Also: tender of defense · tendering defense · defense tender

Tolling Agreement

A written agreement between parties to pause the running of the statute of limitations on a potential claim so they can investigate or negotiate before anyone files a lawsuit.

Also: tolling agreement · statute of limitations tolling · tolling of the statute of limitations

Unfair Competition

Unfair competition is a group of business torts, such as false advertising, passing off, and misappropriation, where one company gains an edge through deceptive or wrongful conduct.

Also: unfair competition · unfair competition claim · unfair business practices

Vicarious Liability

Legal responsibility a business bears for the acts of its employees, contractors, or agents carried out on its behalf.

Also: vicarious liability meaning · imputed liability

Wrongful Act

A Wrongful Act is the defined trigger in a D&O, E&O, or management-liability policy, meaning the actual or alleged act, error, omission, misstatement, misleading statement, neglect, or breach of duty by an insured that gives rise to a covered claim.

Also: wrongful act · wrongful act definition · wrongful act coverage