Cancellation

The termination of an insurance by notice.

Cancellation clause

A clause in a general insurance policy that sets out details of the insurer's obligation to give notice when cancelling a policy during its term. The insurer will make a proportionate refund of premium, corresponding to the unexpired period of insurance. It is rare for the insured to have such a right (except in marine hull insurance); where it is granted, the insurer will usually charge short-period rates for the time on risk and refund any balance to the insured.

Capital additions

A clause that may be added to a property insurance policy to provide limited automatic cover for small additional items of buildings and machinery (subject to a financial limit) during the policy period.

Captive insurance company

An insurance company that is normally a subsidiary of a substantial business corporation, set up principally to carry many of the primary risks of the parent company. Such companies are often set up in low-tax locations and may insure risks that are uninsurable in the conventional market. As authorised insurers they are able to access the reinsurance market for any spreading of risk that is necessary.

Cargo insurance

The insurance of goods transported partially or wholly by sea or air, policies for both being written in the marine insurance market.

Catastrophe

A sudden and severe disaster causing a very large loss or series of losses.

Certificate of insurance

(a) A document required in a prescribed form by law as evidence of the existence of an insurance policy that meets at least minimum legal requirements; in the UK, motor and employers' liability are the most common classes where a certificate is required.

(b) In international trade, a document of title to goods that provides evidence of cargo insurance and that must be produced in the event of a claim.

Claims incurred

The total value of all paid claims in the period under review, plus outstanding claims at the end of the period and incurred but not reported (IBNR) claims at the end of the period, less outstanding and IBNR claims at the end of the preceding period.

Claims-made basis

The term used to describe liability insurances under which payment of claims is dependent on the date that claims are made (the claim must be made during the period of insurance or some additional specified period), regardless of when the incident giving rise to the claim occurred.

Claims-occurring basis

See Losses-occurring basis.

Claims sharing agreement

An agreement between two or more insurers who provide cover for the same event but for different interests to share losses in agreed proportions without the need to allocate blame for the incident giving rise to the claim.

Clause

A distinct section of a policy or other form of contract.

CMR Convention

The principal international agreement covering hauliers' liability. Most European countries, including the UK, but few non-European countries, have incorporated this into their own laws.

Co-insurance

An insurance policy shared between insurers who are each liable to the insured for their proportion of the risk accepted

Collapse

A specified peril under a policy for boilers and pressure plant defined in the ABI recommended policy wording as "the sudden and dangerous distortion (whether or not attended by rupture) of any part of the plant caused by crushing stress by force of steam, gas, air or liquid pressure"

Collective policy

A co-insurance policy issued by a leading office on behalf of a number of insurers.

Collusion

An agreement between two or more people to deceive another. In theft insurance it is more narrowly applied, to losses that arise as a result of the involvement of employees.

Combined liability policy

A policy combining employers' liability, public and (commonly) products liability covers in a single document.

Combined policy

A policy that is constructed as a shell capable of including several different types of general insurance including property, business interruption, liability and personal accident (but not motor).

Common law

The part of English law that has been founded on usage, established custom and decisions in legal cases (as distinct from statute law).

Compulsory excess

A provision in an insurance policy imposed by the insurer indicating that the insured must bear the first part of each claim.

Compulsory insurance

An insurance that is compulsory by law, for example motor insurance by virtue of the Road Traffic Acts.

Condition

A provision in an insurance policy that supplements the operative clause and exclusions by stating procedures, requirements, qualifications or stipulations relating to an important matter. A condition may be either:

(a) A condition precedent to the contract, a breach of which entitles the insurer to avoid the policy as a whole.

(b) A condition precedent to liability, a breach of which entitles the insurer to avoid paying the particular claim, but not future claims if the condition is observed subsequently.

Consensus ad idem

Parties being of the same mind. One of the main requirements for a valid contract.

Consequential loss

Same as business interruption insurance.

Constructive total loss

(a) In marine insurance the subject-matter is reasonably abandoned on account of its actual total loss being unavoidable or because it could not be preserved without expenditure that would exceed its total value after the expenditure had been incurred.

(b) In non-marine insurance the term is used to describe a situation in which repair is uneconomic; this may be defined in the policy. Some motor insurance policies refer to treating a vehicle as a write-off if estimated repair costs exceed 60% of value.

Contingency insurance

(a) Insurance against relatively remote possibilities, such as loss arising through the reappearance of a missing beneficiary under a will, or multiple birth cover.

(b) A general term for insurances that relate to honesty, including bonds and fidelity guarantee.

(c) Insurance when the policyholder's interest is only contingent (it may attach or reattach later). In practice this relates to cargo insurance, effected by a buyer or seller when the obligation to insure rests on the other party to the sale, to come into effect if there is a loss and the other party and his insurer both fail to pay; also termed "seller's/buyer's interest".

Contingent third party motor insurance

A commercial insurance policy designed to protect the employer against third party liabilities that arise while employees are using their own vehicles on company business, in the event of the ineffectiveness of the individual's own policy.

Contra Proferentem rule

A rule in English law providing that any ambiguity in the wording of a document will be construed against the party that has drawn it up.

Contract guarantee

A bond providing for a sum of money to be paid to an insured party if the other party to a contract has failed to fulfil specified obligations.

Contract of insurance

A contract of utmost good faith in which one party, the insurer, agrees in return for an agreed consideration (the premium) from another party, the insured, to provide financial compensation or pay benefits on the happening of defined events.

Contractors' Plant-hire Association (CPA) conditions

Model conditions frequently used when plant is hired out, identifying the responsibilities of the plant owner and hirer.

Contractual liability

Liability that arises solely by virtue of the terms of a contract and that would not have arisen under common or statute law in the absence of that contract.

Contribution

A concept that supports the principle of indemnity by requiring that when there are two or more indemnity policies covering the same interest, in the same subject-matter, for the same peril that causes loss, damage or liability, insurers will share the loss, damage or liability proportionately. See Indemnity, Independent liability, Subrogation.

Contributory negligence

The practice of discounting an award against a defendant in circumstances where the claimant was partially at fault and this fact contributed to the seriousness of the injury suffered, for example a claim for personal injury in a car accident where the claimant was not wearing a seat belt.

Conversion

(a) The passing on of goods to which the seller has no title.

(b) An extension of cover, which may be granted under a motor trade policy for car sales, subject to a substantial excess.

Cooling-off period

A prescribed period for general insurance during which the person effecting the contract may withdraw without incurring any financial penalty.

Cost and freight (CFR)

A contract term for the sale of goods whereby the seller pays costs and freight as far as the port of destination. Risk passes to the buyer as from shipment, and it is his responsibility to insure from that point.

Cost, insurance and freight (CIF)

A contract term for the sale of goods whereby the seller is responsible for the freight through to port of destination and insurance through to the agreed destination, which may be inland. As with cost and freight the risk and title in the goods pass to the buyer when delivered on board the ship by the seller; the seller pays transportation and insurance costs to the final destination.

Cover note

(a) In general, an interim document confirming the cover that is in force pending the issue of the policy.

(b) In motor insurance, a document in a prescribed form that acts as a temporary policy and a temporary certificate of motor insurance, issued usually for 15 or 30 days.

Credit insurance

A policy that provides cover against the inability of the insured to meet credit payments as a result of specified contingencies, such as sickness.

Crop insurance

A policy designed to cover crop failure or reduction following damage by specified events, for example hailstorm.

Cross-liabilities clause

A provision in a liability policy with two or more insured parties designed to ensure that if circumstances arise where one of the parties may sue another for an incident that would otherwise have given rise to a claim, the insurers will meet the claim.

Curtailment

A type of cover available under a holiday or travel policy paying a specific benefit if a trip is cut short due to specified causes, such as illness.

Customers' extension

An extension to a business interruption policy that provides cover for the insured's increase in cost of working and reduction in turnover as a consequence of physical damage by insured perils at the premises of customers of the insured.

Customs bond

A guarantee that provides security against failure to comply with customs authority requirements.

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