APPENDIX 1

• Jurisdiction: United States

APPENDIX 1

Definitions

Accelerant: A substance used to speed and spread destruction by fire and make extinguishment more difficult. Common accelerants are gasoline, kerosene, and barbecue lighter fluid.

Accounts Payable: A liability account that describes the purchase of goods or services, with no payment of cash at the time of acquisition.

Accounts Receivable: An asset account that describes goods or services sold, with no cash received at the time of the sale.

Accrual Basis: Revenues are recorded in the period earned (regardless of when collected) and expenses are recorded in the period incurred (regardless of when cash was paid out).

Actual Cash Value (ACV): The price a willing buyer will pay to a willing seller if neither is under an obligation or compulsion to buy or sell. Actual cash value is synonymous with Fair Market Value. It is sometimes computed as replacement cost less depreciation.

Actuary: A student of statistics who uses mathematics to apply the theory of probability to the business of insurance.

Additional Living Expense: An insurance coverage found in all homeowner’s policies. It provides indemnity for expenses incurred for usual living expenses more than the amount normally expended. It does not pay all living expenses, only the expenses over the insured’s normal expenses.

Adjuster: The person knowledgeable in insurance retained by an insurer for the purpose of assisting the insured in proving a loss to the insurer. A person who expresses to the insured the fidelity and good faith of the insurer.

Adjustment: The determination of the amount of loss, the cause of the loss, and the final settlement in cash value after all factors have been considered.

Advancing (Line): Moving a line of hose by hand toward a fire or position to be covered.

Affidavit: A sworn statement in writing.

Affirmative Warranty: The type of warranty where the insured declares a fact is true at the time given but does not make any statement about the future.

Aggregate Stop-Loss Reinsurance: A form of excess of loss reinsurance, which indemnifies the reinsured against the amount by which the reinsured’s losses incurred exceed either an agreed amount or an agreed percentage. This form of reinsurance is also known as stop-loss reinsurance, stop-loss-ratio reinsurance, or excess of loss ratio reinsurance.

All Other Perils Misfortunes: A phrase in an ocean marine cargo policy meaning perils of the same nature as those described specifically in the perils clause that may appear in an inland marine policy insuring movable goods.

All Risk Insurance Policy: Provides coverage for all perils except those specifically excluded or otherwise restricted under the terms of the policy.

Alligatoring: The irregular checked char patterns found on wood after a fire. The size, color, depth, and the location may have a bearing on fire cause, origin, and spread.

Application: A basic legal instrument used in an insurance transaction that provides the basic information used to decide whether an insurer wishes to accept a particular risk.

Appraisal: An arbitration by which the amount of loss is established. The award of the appraisers is binding on both the insurer and the insured and cannot be overturned except in extreme circumstances.

Appurtenance: Something belonging or attached to property as an accessory or adjunct.

Appurtenant Structure: A private structure located on the premises but not connected with the primary building that is insured, for example, an unconnected garage or garden house. Coverage is usually provided as a limited percentage of the building coverage in several property contracts.

Area Ignition: Simultaneous or rapid successive ignition of a number of individual fires that are spaced to support each other and spread the fire quickly.

Area of Origin: In fire investigation parlance, the place where a fire started.

Arson: The burning of a structure with intent to commit a felony. There are many types of arson, but the only type the adjuster must be concerned with as a fraud is arson for profit. Most arson fires are not for profit but are rather spite-, revenge-, or jealousy-inspired fires.

Attorney in Fact: One who is authorized to perform certain acts for another under a power of attorney. The power of attorney may be general or limited to a specific act or acts.

Autoignition temperature: The lowest temperature at which a flammable gas or vapor-air mixture will ignite without a spark or flame.

Average: A term used in settlement of claims. It may have originally come from the French word avarie, meaning loss or damage. There are both general and particular average clauses. Average clauses are the precursor of co-insurance clauses. They refer to any partial loss or damage due to insured perils. It requires the insured to maintain coverage equal to a stated percentage of the actual cash value of the subject of the insurance, otherwise the insured must pay a part of the loss.

Average Agreement: Document signed by property owners by terms of which they agree to pay any general average contribution properly due so that property may be released after a general average loss has occurred. Average agreements were often found in both marine and inland marine policies but have mostly been replaced by co-insurance clauses.

Average Clauses: Clauses in a property policy that determine the amount of particular average loss recovery. Average clauses are seldom found in modern property or inland marine policies but are often found in marine polices.

Average Irrespective of Percentage: Broadest “with average” clause. Losses by insured perils are paid regardless of percentage.

Back Draft: The explosion or rapid burning of heated gases that occurs when oxygen is introduced into a building that has not been properly ventilated and has a depleted supply of oxygen due to fire.

Bad Faith: A tort created by judicial decision that allows an insured to recover tort damages (bodily injury, emotional distress, loss of use, trouble and inconvenience, and punitive damages) if an insurer intentionally, or in willful disregard of the rights of the insured, does something that deprives the insured of the right to recover the benefits of the policy.

Bailee: Individual to whom goods are delivered to be held in trust in accordance with a contract, expressed or implied.

Balance Sheet: A financial statement consisting of asset, liability, and capital/equity accounts.

Balloon Payment: A final installment on an obligation that is greater than the preceding payments, and which discharges the obligation.

Beaded Wire: Molten and reformed metal found on the sides or end of a wire, which arced or was involved in a fire. Often considered evidence of an electrically caused fire.

Bilateral Contract: A contract where there is an exchange of a promise for a promise. Insurance contracts are always bilateral contracts.

Binder: A temporary contract entered into between an insurer and a party seeking insurance. The binder protects the party desiring insurance from the time a request is made for insurance until the policy is actually received. Agents usually issue binders.

Blanket Coverage: A policy issued in a single face amount of insurance for several locations, insuring clauses, or coverages. Regardless of a shift of values the total amount applies.

Block Policy: An inland marine policy that provides fire and theft coverages both on and off premises. These are now usually written as an all risk policy. Separate policies have been written for businesses such as jewelers, furriers, and other specialized businesses.

Bordereau(x): A detailed report of insurance premiums or losses affected by reinsurance or insurance. A loss bordereau contains a detailed list of claims and claims expenses outstanding and paid by the managing general agent, third party administrator or reinsured during the reporting period, reflecting the amount of indemnity applicable thereto.

Broadcast Burning: An intentional burning in which fire is meant to spread over a specific area.

British Thermal Unit (BTU): The amount of heat required to raise the temperature of one pound of water one degree Fahrenheit.

Cargo War Risk Policy: A separate cargo policy covering cargo while waterborne only (except at transshipping point, which may be on land or water). Insures against war risks.

Cause of Action: A statement in a lawsuit of a claim against the defendant. Modern lawsuits in the US usually state multiple causes of action or “counts” against the defendant. A multiple cause of action suit may seek damages for negligence, intentional infliction of emotional distress, negligent infliction of emotional distress, trespass, assault, battery, and breach of contract.

Central Station: Headquarters station for private fire or burglar alarm companies where the report of a fire or unauthorized entry into a premises is first recorded.

Certificate of Insurance or Special Policy: A document prepared by the insured, the producer, or the insurance company to provide evidence of insurance to the buyer or bank for an export/import shipment.

Chain of Evidence: The documentary requirement establishing where, and by whom, evidence was collected and stored up to the time it is presented to a court.

Char: Carbonaceous matter formed by incomplete combustion of organic material such as wood. To change into charcoal or carbon by pyrolysis. To burn or scorch.

Charged: A building...