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F

Factory mutual - A mutual insurance company insuring only properties that meet high underwriting standards. The typical risk is fire-resistive construction with a central station alarm.

Facultative reinsurance - A separate reinsurance agreement that is negotiated for a particular risk or insurance policy.

Fair Credit Reporting Act - Public Law 91-508 requires that an insurer tell an applicant if a consumer report may be requested. The applicant must also be told the scope of the possible investigation. Should the application be declined because of information contained in that report, the applicant must be given the name and address of the reporting agency. The insurer may not reveal the contents of the report. Only the agency that compiled the report may release its contents.

FAIR plan - An acronym for Fair Access to Insurance Requirements, these plans have been established in many states to make fire and extended coverage (and homeowners in some states) available in areas otherwise not addressed by the voluntary market.

Fair rental value - An amount payable to an insured homeowner for loss of rental income due to damage that makes the premises uninhabitable.

Farmowners-ranchowners policy - A "homeowners" type package policy adapted to include farm and ranch exposures.

FEMA - Federal Emergency Management Agency. This agency administers the National Flood Insurance Program.

Fidelity bond, see Employee dishonesty coverage.

Fiduciary - A generic term for persons or legal entities such as executors, trustees, and guardians appointed by the court, under a will, or by a trust to manage, control, or dispose of the property of others.

Fiduciary bonds, see Judicial bonds.

Fiduciary liability insurance - This insurance covers claims arising from: (1) a breach of the responsibilities or duties imposed on a benefit plan administrator; or (2) a negligent act, error, or omission of the administrator.

File and use rating laws - State laws that permit the use of new rates by an insurance company without first obtaining the approval of that state’s insurance department.

Financial responsibility clause - The clause in an auto policy stating that, when the policy is certified as future proof of financial responsibility, then the policy will comply with the financial responsibility laws to the extent required.

Financial responsibility law - When applied to automobile operations, this term signifies the minimum statutory limits of an operator’s responsibility for bodily injury and property damage caused by negligent operation of the vehicle.

Fine arts floater, see Floater.

Fire - Combustion evidenced by a flame or glow. Insurance distinguishes between a "hostile" fire (one out of bounds) and "friendly" fire (such as that contained within the firebox of a stove).

Fire department service charge - A fee that may be imposed by a fire department for responding to a call. Most fire coverage agreements include indemnification provisions for such eventualities.

Fire legal liability - Public liability policies routinely exclude coverage for damage to property in an insured’s care, custody, or control. This leaves a big gap in a tenant’s coverage, a gap partially filled by an exception in the commercial general liability policy that restores limited coverage for fire damage to the landlord’s building. Perhaps the best benefit of the exception is to call attention to the exposure so arrangements can be made for broader coverage at appropriate limits.

Fire mark - An insignia, attached to the outside of a house, that represented the insurer of the house.

First named insured - An insurance policy may have more than one party named as insured. In such cases, the first named insured attends to policy "housekeeping," i.e., pays premiums, initiates (or receive notice of) cancellation, or calls for interim changes in the contract. This is spelled out in commercial policies in the "common policy conditions."

Fixtures - Generally, something tangible that is fixed or attached, as to a building, so that it becomes an appendage or structural part.

Flat cancellation, see Cancellation.

Fleet policy - Written for a risk that has five or more vehicles.

Flesch test - A method to determine the degree of ease or difficulty for reading material. It counts not only the number of words in a sentence, but also the number of syllables in each word. Some states require that insurance con-tracts be written so that they have a certain readability level (often, 8th grade).

Floater - An inland marine form covering movable property wherever located within territorial limits.

Flood - A general and temporary condition of partial or complete inundation of dry land caused by the overflow of the natural boundaries of a body of water or the unusual and rapid accumulation of surface water runoff. Some insurance policies that include flood as a covered peril only insure against damage caused by overflow of the natural boundaries of a body of water, but other policies also may insure against surface water losses.

Flood insurance - Flood insurance, like earthquake coverage, is usually only of interest to those relatively few whose property is exposed. Consequently, losses among this small group will be high and premiums can be prohibitive. However, in 1968 the Federal government stepped in to help property owners in designated "flood plains" with the National Flood Insurance Act of 1968. Coverage is not only available, but may even be required to obtain financing for exposed properties.

Flood Insurance Rate Map (FIRM) - Provided by FEMA (Federal Emergency Management Agency), this map delineates base flood elevations and flood risk zones, and is used for rating purposes for flood insurance.

Forgery or alteration coverage - This type of insurance covers loss sustained through forgery or alteration of outgoing negotiable instruments made or drawn by the insured; drawn on the insured’s account(s); or made or drawn by someone acting as the insured’s agent. This includes loss caused by any of the following: (1) Checks or drafts made or drawn in the insured’s name, payable to a fictitious entity; (2) Checks or drafts, including payroll checks, executed through forged endorsements; and (3) Alteration of the amount of a check or draft.

Form - The central document or documents of an insurance contract. Forms may be altered by endorsement.

Fraud - The intentional perversion of the truth in order to mislead someone into parting with something of value.

Friendly fire, See Fire.

Fronting - The practice, in reinsurance, of the ceding company retaining only a small portion of a risk and ceding the remainder to a reinsurer.

Functional replacement cost - The cost to repair or replace damaged property with materials that are functionally the equivalent of the damaged or destroyed property. For example: replacing a solid mahogany banister with a pine banister.

Fur floater, see Floater.

Furriers customers insurance, see Bailees floater.