A payment by an insurer to an insured for which there is no contractual liability. Such payments are sometimes made as a goodwill gesture if there is the possibility of a misunderstanding or a mistake.
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A payment made by underwriters “as a favour” or “out of kindness” without an admission of liability so as to maintain goodwill.
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REINSURANCE: A payment made for which company is not liable under the terms of the Policy. Usually made in lieu of incurring greater legal expenses in defending a claim. Rarely encountered in reinsurance as the reinsurer by custom and for practical reasons follows the fortunes of the ceding company.
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Compensation from the insurer that is not required by the contract. The insurer may occasionally pay a claim, although he or she is not liable as an act of goodwill.
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REINSURANCE: Latin: “by favor”. A voluntary payment made by an insurer or reinsurer in response to a loss for which it is not technically obligated under the terms of its contract.