Auto Insurance Glossary – B Definitions
Bad Faith
Conduct by an insurer which goes beyond negligence and extends into the area of egregious behavior against an insured. In most states, it is an implied term in every insurance contract that insurance companies owe a duty of good faith and fair dealing to insured persons. For example, if an auto insurer gratuitously declines a valid claim then the insured may not only file a claim for breach of contract, but may file a tort claim for bad faith conduct. This means that awards against insurers for bad faith can exceed the nominal value of the coverage under the policy, and Courts have often made awards which exceed those policy limits.
Basic Limit
The minimum amount of personal liability insurance which may be purchased from an insurance company. The limit can be either mandated by state law or set by the insurer.
Betterment Clause
In relation to auto insurance, a provision in an insurance policy which stipulates that the insurer is not liable to pay for a car part which is of greater value than the part which it replaces, to the extent that the value of the new part exceeds the value of the replaced part. For example, if an already-damaged fender is further damaged in a crash, then the insurer is only liable to pay an amount equivalent in value to the pre-accident damaged fender. This is to uphold one of the most fundamental tenets of insurance, which is that an insured’s position may only be restored as a result of a claim and not bettered.
Binder
A written undertaking provided by an insurance company that the insurer is on risk with respect to specified perils, before the insurance policy is issued or the insurance premium is paid. See also cover note.
Broad Form Drive-Other-Car Coverage
Auto coverage for employees who have been supplied a company-owned vehicle but who do not personally own a vehicle, and who do not as a consequence have personal auto coverage. The coverage is provided by way of endorsement to the employer’s business auto insurance, and it provides protection to named employees and their spouses when they are driving a car which is owned by a third party. See also non-owned auto coverage.
Broker
A person or company who represents an insured rather than an insurer (as in the case with an agent). However, a broker may also be the agent of an insurer for certain specified tasks.
Business Auto Coverage Form
A commercial auto insurance coverage form which is written either as a standalone policy or as part of a business insurance package.
