Claims

Replacement cost minus depreciation — what the property was worth the moment before the loss, not what a new one costs.

Actual cash value is a claim settlement basis that pays the cost to replace damaged property minus depreciation for age, wear and obsolescence. It is the value of the item as it existed, not the value of a new equivalent.

Why it matters: The gap between actual cash value and replacement cost is the single most common source of disappointment in a property claim. A ten-year-old commercial roof destroyed by hail might cost $40,000 to replace and settle for $14,000 on an ACV basis, and the difference is your problem.

A dispute-resolution clause in property policies: each side hires an appraiser to value the loss, and a neutral umpire breaks a tie.

Appraisal is a provision in most property policies for resolving disagreement about the amount of a loss — not about whether the loss is covered. Each party selects and pays a competent appraiser; the two appraisers select an umpire, and an agreement between any two of the three sets the amount.

Why it matters: Appraisal is faster and far cheaper than litigation, and it is available to you as a policyholder right in the policy. Most small businesses never invoke it because they do not know it exists, and instead either accept a low settlement or hire a lawyer.

The value a taxing authority puts on property for property tax purposes. It has nothing to do with what your insurance will pay.

Assessed value is the dollar figure a local government assigns to real property in order to calculate property tax. It is often a fraction of market value, set by formula and updated on a reassessment cycle rather than continuously.

Why it matters: Business owners regularly insure a building for its assessed value and discover after a fire that they are dramatically underinsured. Assessed value is a tax number; insurance pays to rebuild, and rebuilding cost includes labour, materials, code upgrades, debris removal and design fees that a tax assessment never contemplates.

A demand for payment under a policy — and, on claims-made policies, the event that has to happen during the policy period.

A claim is a demand for money or services alleging liability, or a request for payment of a loss, made under an insurance policy. Policy definitions of claim vary and control when coverage is triggered on claims-made forms.

Why it matters: On a claims-made policy the definition of claim is a coverage trigger, not vocabulary. A demand letter, a regulatory inquiry or a subpoena may or may not constitute a claim depending on the wording — and reporting the wrong thing at the wrong time can forfeit coverage.

The party making the claim — an injured third party, a client, or an employee filing for benefits.

A claimant is the person or entity asserting a claim: a third party alleging injury or damage caused by the insured, a client alleging financial loss, or in workers’ compensation the injured employee seeking benefits.

Why it matters: Knowing who the claimant is tells you which policy responds. A third party goes to general liability, a client alleging financial loss to professional liability, an employee to workers’ compensation, and a former employee alleging discrimination to employment practices liability.

Workers’ comp benefits paid to dependents and for burial costs after a fatal work injury.

Workers’ compensation death benefits are payments to a deceased worker’s dependents, plus a burial allowance, following a fatal work-related injury or occupational disease, calculated by state statute from the worker’s wage.

Why it matters: These are statutory, not negotiated. Each state sets the dependent benefit as a percentage of average weekly wage, the duration, and a burial allowance — and the totals reach into the hundreds of thousands over a benefit period.

The insurer’s obligation to provide and pay for your legal defense — broader than its duty to pay a judgment.

The duty to defend is the insurer’s obligation to provide a legal defense for claims that potentially fall within coverage. It is triggered by the allegations in the complaint rather than by the eventual facts, and is broader than the duty to indemnify.

Why it matters: This is the most valuable thing most liability policies do. Defense costs dominate small business claims: a meritless suit still costs $40,000 to $150,000 to defend, and the duty to defend means the carrier funds that from the start.

A consent-to-settle provision that lets you refuse a settlement — but caps what the insurer pays if you do.

A hammer clause is a provision in a liability policy under which the insurer may settle a claim with the insured’s consent, but if the insured refuses a settlement the insurer recommends, the insurer’s further liability is limited to the amount it could have settled for plus defense costs to that date.

Why it matters: For professionals whose reputation is the business, the right to refuse a settlement matters. A settled claim can be reportable, can appear in licensing records, and can be used against you commercially — so a policy where the carrier can settle over your objection is a real risk.

Workers’ comp benefits for lasting impairment after an injury has stabilized. Where comp claim costs get large.

Permanent disability benefits are workers’ compensation payments for lasting impairment remaining after an injured worker reaches maximum medical improvement, classified as permanent partial or permanent total and calculated by state schedules and impairment ratings.

Why it matters: This is where comp claims become expensive. Temporary benefits are bounded by the recovery period; permanent disability is rated on an impairment percentage and can produce a settlement or an annuity that dwarfs the medical costs — which then feeds your experience modification factor for three years.

Failing to meet the standard of care your profession expects. The core allegation in nearly every E&O claim.

Professional negligence is the failure to exercise the degree of skill and care that a reasonably competent member of the same profession would exercise, resulting in financial loss to a client.

Why it matters: This is what professional liability insurance is for. The standard is not perfection — it is what a reasonably competent peer would have done. A defensible judgement call that turned out badly is not negligence; missing a deadline, a filing or a known industry standard usually is.

The sworn statement documenting your claim. A condition of coverage with a hard deadline.

A proof of loss is a formal, usually sworn statement submitted to an insurer detailing the loss — date, cause, damaged property and amount claimed — required as a condition of payment under most property policies.

Why it matters: This is a condition, not a courtesy. Property policies commonly require a sworn proof of loss within 60 days of the insurer’s request, and failing to submit it can bar the claim regardless of coverage.

Injury from repeated motion rather than one accident. Comp covers it, and it arrives years late.

A repetitive stress injury is a musculoskeletal or nerve condition — carpal tunnel, tendinitis, bursitis, epicondylitis — caused by cumulative exposure to repeated motion, force, vibration or awkward posture rather than a single traumatic event.

Why it matters: These are compensable workers’ compensation claims in every state, and they are the hardest to defend because there is no accident date. The claim is dated to exposure, so a worker can file years after the fact or shortly before retirement.

Settlement basis that pays what it costs to replace the damaged property with new equivalent, with no deduction for depreciation.

Replacement cost coverage pays the cost to repair or replace damaged property with new property of like kind and quality, without deducting for age or wear. On a replacement cost form the payment typically arrives in two parts: actual cash value first, with the depreciation holdback released once repairs are complete.

Why it matters: This is the coverage basis you want on almost everything. The difference against actual cash value on an older building or an aging equipment fleet is frequently the difference between reopening and closing.

After paying your claim, your insurer steps into your shoes to recover from whoever actually caused the loss.

Subrogation is the insurer’s right, after paying a claim, to pursue recovery from a third party responsible for the loss, standing in the legal position of the insured up to the amount paid.

Why it matters: Subrogation keeps premiums down by shifting losses to the party at fault, and it can benefit you directly: recoveries often include your deductible, and a subrogated claim may be removed from your loss experience.

Wage replacement while an injured worker cannot work at all. Duration is the cost driver you can influence.

Temporary total disability benefits replace a portion of lost wages — commonly around two-thirds of average weekly wage — while an injured worker is medically unable to work at all, ending at return to work or maximum medical improvement.

Why it matters: TTD duration, not the weekly rate, is what drives indemnity cost. The rate is set by statute; the number of weeks is influenced by how quickly treatment starts, whether restrictions are documented, and whether modified duty is genuinely offered.