ISO COMMERCIAL CRIME
COVERAGE FORMS AND POLICIES ANALYSIS
(January 2026)
|
CR 00 21–Commercial Crime Coverage
Form (Loss Sustained Form) CR 00 20-Commercial Crime Coverage
Form (Discovery Form) |
This analysis covers the 06 22 edition of the
Insurance Services Office (ISO) coverage forms and policies. Changes from the 06 22 edition are
highlighted in bold. Editorial or format changes that do not impact
coverage are not included.
INTRODUCTION
Commercial crime
coverage may be written on either a discovery basis or a loss sustained basis.
It can be issued as a standalone policy or as a coverage part in a commercial
package policy. The following are the various coverage forms and policies
available.
- CR
00 20–Commercial Crime Coverage Form (Discovery Form)
- CR
00 21–Commercial Crime Coverage Form (Loss Sustained Form)
- CR
00 22–Commercial Crime Policy (Discovery Form)
- CR
00 23–Commercial Crime Policy (Loss Sustained Form)
This analysis starts
with CR 00 21–Commercial Crime Coverage Form (Loss Sustained Form), then
compares it to other coverage forms and policies.
The CR 00 21 policy
states that certain provisions limit coverage and recommends reading the entire
policy to understand what is covered, what is not, and the rights and
responsibilities of both the insured and the insurance company. It also
clarifies that "you or your" refers to the first named
insured, employee benefit plan, subsidiary, or other entity listed in
the Declarations or added by endorsement.
“We, us, and our"
as the company providing the insurance coverage. CR 00 21 includes other words
with special meanings, which are defined in section F. Definitions.
A. INSURING AGREEMENTS
(06 22 edition)
CR 00 21 now includes eight
insuring agreements, with the addition of Fidelity. Each agreement's
coverage is limited to the amount listed on the declarations next to that
specific agreement. Coverage applies to losses the named insured experiences
under the following conditions:
·
The
loss must be the result of an occurrence.
·
The occurrence must take place during the
policy period shown on the declarations, except as listed in the Loss
Sustained During Prior Insurance Condition.
·
A
designated person must discover the loss during the policy period or
the extended discovery period.
·
All of the above are subject to all of the following:
o
Condition
E.1.h: Extended Period To Discover Loss
o
Condition
E.1.l: Loss Sustained During Prior Insurance Issued By
Us Or Any Affiliate
o
Condition
E.1.m: Loss Sustained During Prior Insurance Not Issued By Us Or Any Affiliate
NOTE: Refer to Section
F—Definitions for the meanings of "discovered" and
"occurrence."
1. Fidelity
Fidelity is a new Insuring
Agreement with the 06 22 edition.
a. Employee Theft
While Fidelity is
a new Insuring Agreement with the 06 22 edition, Employee Theft is not new
coverage.
Employee Theft covers
losses caused by an employee's theft of the following:
·
Money
·
Securities
·
Other
property
Coverage applies:
·
Whether
the specific employee responsible can be identified or not.
·
The
theft was committed by an employee acting alone or in collusion with others.
·
The
definition of theft encompasses forgery.
NOTE: The statement about
employees acting in collusion is an important point because the limit of
insurance applies to each act, not to each employee.
|
Example:
Easy Pickings, Inc.'s employee theft
limit is $200,000. Scenario 1: Ten employees at Easy Pickings participate in a
scheme to siphon cash from the accounts receivable. The total loss is
$500,000. Easy Pickings contends that each employee should be insured for
$200,000, with a total potential payout of $2,000,000. However, this coverage
limits the payout to $200,000 per incident, not per employee, since all
employees are part of the same scheme. Scenario 2: An employee at Easy Pickings steals merchandise
from the warehouse and sells it to friends. This employee's actions are completely separate from the ten-person scheme. As a
result, the $200,000 insurance limit applies separately to this claim. |
b. ERISA Plan Official Dishonesty
(06 22 edition)
This is a new Insuring Agreement with the 06 22 edition.
This Insuring Agreement was added because three separate
Insuring Agreements provided by Fidelity Coverage are now included in the Crime
Policy.
The ERISA Plan Official Dishonesty covers loss of money,
securities, and other property resulting from fraud or dishonesty by a plan
official or the insured. However, coverage is only available to the insured if
they are a sole proprietor acting independently or working together with
others.
Coverage is available even if the specific plan official responsible for the loss cannot be identified.
c. Employee Theft of Clients' Property
This is a new Insuring Agreement with the 06 22 edition.
The insuring agreement covers losses to a customer's money,
securities, and other property caused by theft by a specifically identified
employee. This employee may act alone or with others. Additionally, in this
insuring agreement, the definition of theft is expanded to include forgery.
NOTE: This insuring agreement requires the employee to be identified
for coverage to apply.
2. Forgery or Alteration
(06
22 edition)
This insuring agreement
has been divided into two parts with the 06 22 edition.
a. Forgery of Negotiable Instruments
This insuring agreement treats
substitute checks, as defined in the Check Clearing for the 21st Century Act,
as equivalent to the original check they replace.
|
Example: Peter breaks into Plumber's Palace and steals
checks from the bottom of a stack he finds in the comptroller's office. Over
the following weeks, he writes checks using the company's account until the
controller discovers the unauthorized check cashing. |
(2) If the named insured refuses to
pay for an instrument they believe is forged, they may face a lawsuit. The
insurance company will cover the defense costs, but only if it has provided
written consent for the insured to defend the case. The expenses must be
reasonable.
These amounts are in addition to the limit of insurance under this
insuring agreement.
b. Forgery of Payment Card Instruments
This is new to the Forgery or Alteration Insuring Agreement
with the 06 22 edition.
3. Inside the Premises–Theft of Money and Securities
This coverage includes
losses from the following:
a. Loss of money and securities while it is inside the
premises or inside a financial institution's premises resulting directly from
either of the following:
·
Theft
committed by a person who is actually present within
the premises or within a financial institution premises
·
Destruction
or disappearance
NOTE: This Coverage Form defines premises. Its definition is much more
restrictive compared to the term used in the ISO Commercial General Liability
(CGL) or Commercial Property Coverage Forms.
|
Example:
Sharon owns a small card shop. Scenario 1: An armed robber enters her card shop and demands
all her money. This loss is covered. Scenario 2: Sharon gets a phone call. The caller claims he has
a weapon aimed at her property and instructs her to put money in a bag and
leave it outside her door. This loss is not covered. |
b. Loss resulting from damage to the premises or its exterior caused by an attempted or actual theft of money
or securities. However, this coverage applies
only if the named insured in the policy owns the premises or is legally
responsible for its damage to the owner. (06 22 edition)
c. Damage to or loss of a locked vault, safe, cash box, cash
drawer, or cash register is covered but only if these items are inside the
premises and the loss directly results from an attempted or actual theft or
unlawful entry into them.
4. Inside the Premises–Robbery or Safe Burglary of Other Property
This coverage includes
losses from the following:
a. Loss or damage to other property inside the premises due to
either of the following:
·
Resulting
directly from an attempted or actual robbery of a custodian.
·
Resulting
directly from an attempted or actual safe burglary. This applies to items
inside the safe or vault that were burglarized.
b. Loss resulting from damage to the premises or its exterior caused directly by an attempted or actual
robbery or safe burglary of other property. However, this coverage applies only
if the named insured owns the premises or is liable to the owners for the
damage.
c. Damage to or loss of a locked vault or safe inside the
premises. Coverage applies only if the loss directly results from an attempted
or actual robbery or safe burglary.
NOTE: Other property refers to property that
is not money or securities with intrinsic value and is not specifically
excluded. Black's Laws Dictionary, 12th Edition, defines intrinsic as
“belonging to a thing by its very nature; not dependent on external circumstances;
inherent; essential.” A chair has intrinsic value. An idea,
in itself, does not have intrinsic value unless it is applied and turned
into something.
This insuring
agreement’s coverage applies only to the robbery of a custodian or safe
burglary. The act must occur within premises located in a
described building. Robbery is a type of theft that involves actual
bodily harm, the threat of bodily harm, violence, intimidation, or the unlawful
taking of property that is witnessed by another person. A custodian may be the
named insured, members, partners, or employees, but NOT watchpersons or
janitors.
|
|
|
|
A Custodian |
Not a Custodian |
Losses from robberies during normal
business hours or after hours, not involving watchpersons or janitors, are
covered. A person who works late and turns on the alarm before leaving is not a
watchperson unless specifically hired to have custody of the property and to
perform no other duties. A watchperson is the security guard hired to watch the
premises during normal business hours.
|
Example:
Eric is working late at his
desk, so he is expected to lock up when he leaves. By
definition, Eric is the custodian of the premises. Scenario 1: Eric hears someone breaking into the
store. He quickly calls 911 and hides in a closet until the police arrive.
The thief escapes before the police arrive. While Eric cannot identify the
perpetrator, he did witness the unlawful entry into the building, so coverage
would apply. Scenario 2: Eric leaves the building for dinner.
When he returns, he notices the lock has been broken and calls 911. The thief
took many items, but the loss is not covered because
no custodian was on the premises when the thief broke in. |
Under this insuring
agreement, damage to the premises from an attempted or actual act of robbery or
safe burglary is covered, as well as damage to a LOCKED safe or vault. Damage
to an open safe or vault during a robbery is not covered. However, loss to property inside the safe or vault is covered.
5. Outside the Premises
This coverage includes losses
resulting from the following:
a. Loss of money and
securities occurring outside the premises, when the property is in the care and
custody of an armored car or messenger. The loss must directly result from
theft, disappearance, or destruction.
|
Example: A suitcase full of cash bounces out of the back of
a messenger’s pickup truck, tumbles across a bridge, falls 120 feet into a
river, and is never recovered. This loss is covered. |
b. Loss of or damage to
other property occurring outside the premises, when the property is in the care
of an armored car or messenger. The loss must directly result from an attempted
or actual robbery.
|
Example: A crate of rare vases falls
out of a messenger’s truck and into the river below, never to be seen again.
This loss is not covered. |
|
Example: A crate of rare vases is in a messenger’s truck.
The truck is carjacked, and shortly afterward, the thief throws the crate
into a river. This loss is eligible for coverage. |
NOTE: The definition of
messenger is provided in the F. Definitions Section. In this context,
messengers must have a connection to the named insured. A messenger can be a
relative, a partner, a member, or an employee. Therefore, a robbery involving a
hired courier is not covered.
|
Example: Pink Elephant Phine Liquors replaces its employee-operated
truck fleet with independent truck drivers. One of these drivers is robbed at
gunpoint while delivering a load of liquor to a Pink Elephant warehouse. There
is no coverage for this claim because the independent driver is not considered
a messenger. |
6. Computer and Funds Transfer Fraud
(06
22 edition)
This coverage includes
losses resulting from the following:
a. Loss incurred when
money, securities, or other property is transferred, paid, or delivered to a
person, entity, or account due to a fraudulent computer or
electronic data entry or change beyond the insured’s control. This can
happen within any computer system. It
also includes situations where the fraudulent entry or
change caused the insured’s account at a financial institution to be debited or
deleted without the insured’s knowledge or consent.
|
Example: Josie Proust, the leading salesperson at Cyberfroot Distributors, was staying in a Beijing hotel
room where she often conducted business. During a meeting with local lychee
and pomegranate farmers, someone broke into her room, stole valuables, and
hacked her laptop to transfer funds from her account. This loss is covered. |
b. Loss incurred when a financial institution debits the
insured’s transfer account based on a transfer instruction that appears to come
from the insured but was actually fraudulently issued
by an impostor without the insured’s knowledge or consent.
Related Court Case: Bond’s
Exclusion Provision was Conspicuous, Plain, and Clear
|
Example:
Kevin
receives an electronic file from his network provider and is told it is a
necessary patch. Kevin uploads the file as instructed. Cheryl’s financial
institution informs her that unusual charges are being made on the company's
account. Kevin and Cheryl review
the timing and realize the patch is actually malicious
software designed to redirect funds. Kevin switches network providers, and
Cheryl files a police report and a computer transfer claim. |
7. Fraudulent Impersonation
(06
22 edition)
This
is a new Insuring Agreement with the 06 22 edition.
This coverage includes
losses resulting from the following:
a.
The
insured acting upon a transfer instruction to alter a customer’s or vendor's
account or wire transfer account based on what appears to be an authorized request, but is actually from
an imposter without the customer's or vendor's knowledge or approval. The
insured, acting in good faith and beyond their control, makes the change, and
the money or securities is sent to a fraudulent
account.
b.
The insured, acting in good faith and beyond the insured’s control, sends money
or securities to a person, entity, or account based on fraudulent instructions
and without the consent or knowledge of the authorized individual, customer, or
vendor.
|
Example:
Ken receives an email from Miss Squeaky Clean, a vendor, with his usual
monthly invoice, but this time they ask him to pay it to a new account. The
email and information seem legitimate and come from an authorized person. Ken
pays the invoice as instructed. Later, he receives another email from Miss
Squeaky Clean saying his account is overdue. Ken contacts the vendor and
finds out the first email was fraudulent.
|
8. Money Orders and Counterfeit Money
This insuring agreement
covers losses resulting from the named insured accepting, in good faith,
either of the following:
a. When money orders are issued
by any financial institution, express company, or post office but are not paid
when presented.
b. Counterfeit money, but this only applies to money received
through business activities.
Coverage under this Insuring Agreement is only applicable if the
instruments were accepted in exchange for merchandise,
services, or money.
B. LIMIT OF INSURANCE
|
Example:
Acme Company incurs a loss involving
both employees and non-employees. It has been determined that this is a
single incident, and Insuring Agreements 1, 3, and 7 provide coverage. The
available limits of insurance are: ·
Insuring Agreement
1 - $300,000 ·
Insuring Agreement
3 - $100,000 ·
Insuring Agreement
7 - $250,000 The total loss is $500,000. The maximum recovery is $300,000, the highest limit
available. |
NOTE: A situation like this could lead
claimants and their attorneys to seek ways to apply the different definitions
of occurrence within the insuring agreements so that what might appear to be a
single occurrence could be split into multiple occurrences.
C. DEDUCTIBLE
D. EXCLUSIONS
(06 22 edition)
In the 06 22 edition, the
exclusion section is now divided into only two parts:
·
Section 1 applies to
all insuring agreements.
·
Section 2 applies only
to specific insurance agreements.
1. Exclusions applying to ALL Insuring Agreements, unless otherwise stated:
a. Acts Committed by You, Your Partners or Members
(06 22 edition)
There is no coverage
for theft, fraudulent or dishonest acts committed by the named insured,
its members, or partners. This applies whether the insured, partner, or member
acts alone or with others, unless it is covered by the A.1.b ERISA Plan
Official Dishonesty.
NOTE: The named insured cannot claim coverage
for an employee’s dishonest act if the named insured is involved in the same dishonest
act. For the purposes of this exclusion, a member is an owner of a Limited Liability Corporation (LLC).
b. Acts Committed by Your Employees, ERISA Plan Officials, Managers, Directors, Trustees, or Representatives
(06 22 edition)
Coverage does not apply to any fraudulent
or dishonest acts (including theft) committed by any of the named insured’s
employees, managers, ERISA Plan Officials, trustees, directors, or
authorized representatives. This exclusion applies whether they act alone or
with others. It applies regardless of whether the perpetrator is providing a
service to the named insured at the time of the loss, except when covered under
the Fidelity Insuring Agreement—A .1.a, A.1.b, or A.1.c.
|
Example: Trent has a troubled background, and
Rick, the vice president of operations, is aware of it. Rick leverages Trent
and his dubious contacts to fence items stolen from their company’s
warehouse. When the loss is discovered, the insurance company cannot deny
coverage because Rick is the only person at the company aware of Trent’s
dishonest past. |
c. Acts Committed by Your Employees or ERISA Plan Officials Prior to the Policy Period
(06 22 edition)
“Learned Of By You” has been
removed from the title of this exclusion in the 06 22 edition.
Coverage does not apply to any loss caused by an employee or ERISA plan official if the named
insured or designated person (not involved in collusion with the employee or ERISA
plan official) knew about the previous fraudulent or dishonest acts that
occurred before the policy's effective date.
However,
coverage does apply if the designated person, aware of the fraudulent or dishonest act, was collaborating with that
employee or ERISA plan official to carry it out.
|
Example: Jeremy, an employee at Jones and Sons, and three
friends broke into the company's warehouse and stole a significant amount of
electronics. His actions were recorded by the warehouse’s surveillance
cameras. Coverage under all Insuring Agreements, except for Insuring
Agreement A. 1, is denied because Jeremy was an employee of Jones and Sons. |
d. Confidential or Personal Information
(06 22 edition)
The insurance company
does not pay for loss resulting from either of the following:
(1) Disclosing confidential or personal information of the insured, another person, or entity.
|
Example:
Marguerite works in Acme College’s Records Department. Her boyfriend,
Phillip, asks for some information about his roommate, Paul, and uses it to
steal Paul's identity. Paul discovers the identity theft when he attempts to
secure a student loan. The police track the release of
information to Phillip and Marguerite, both of whom have left town. Paul
demands that Acme compensate him for the financial loss resulting from
Marguerite’s actions. Acme College’s Policy does not respond
to the loss because of this exclusion. |
(2) Using
another person’s or entity’s confidential or
personal information.
This does not apply to loss covered
under this insurance resulting from the use of the insured’s
or an employee benefit plan participant's confidential or personal information, when coverage is available in
certain insuring agreements, and when such information is used for dishonest
acts.
Examples of
such confidential or personal information include:
|
·
Client |
·
Payment card information |
|
·
Patents |
·
Trade secrets |
|
·
Health information |
·
Financial information |
|
·
Processing methods |
·
Customer or vendor information |
|
·
Retirement or health
savings account information |
·
Any other information generally not available to
the public |
These are only examples and are not meant to restrict the term
confidential or personal information.
NOTE: In the 06 22 edition, examples of employee benefit plan participants and
retirement or health savings account information were
added to align with the exclusion in the Commercial Crime Policy. Client and
vendor examples were added due to the addition of fraudulent impersonation
coverage.
e. Data Security Breach
(06 22 edition)
Coverage does not include any expenses
or costs the named insured must pay, such as fines, fees, or penalties
resulting from providing access to or disclosing another person's or
entity’s personal or confidential information. The types of personal or
confidential information are the same as those listed in Exclusion d. above and
for the same reasons.
|
Example: Acme College is reprimanded by its accreditation
board, along with the state and local governments, for allowing Paul’s
identity to be stolen. The college must conduct an audit, review and update
its procedures, and implement additional security levels to safeguard student
information. The college must also pay fines. None of these costs are covered.
|
f. Government Action
Coverage does not apply to loss
resulting from property being taken or destroyed due to an order from a
government authority.
|
Example: The owner of Shot Docks Fishing Boat Rentals files
a claim for the loss of a boat valued at $37,000. The insured states that
“some official persons” removed it from her premises. The claims adjuster
investigates and discovers that the boat was confiscated under federal
controlled substances law. As a result, the claim is denied. |
g. Indirect Loss
This
insurance does not cover losses that are indirect results of a covered
incident. The
following examples illustrate some of these excluded indirect losses, but the
list is not exhaustive.
·
Loss
of income as a result of not being able to use money, securities, or other
property.
NOTE: This means coverage does not include
loss of interest income on funds that could have been invested. It also
excludes loss of income from stock holdings that might have appreciated
during a market increase. Additionally, the loss of profit resulting from
missing an opportunity to sell stolen product is not
covered. Business income coverage in commercial property policies compensates
for income loss from property other than money or securities.
·
Damages
for which the named insured is legally liable. The
only exception is for direct damages covered by this
insurance.
NOTE: These costs, fees, or
expenses can be substantial.
|
Examples:
·
The costs of
hiring auditors to examine books that an employee “cooked.” ·
The costs associated with hiring independent investigators to
determine the extent of a financial loss and
identify who caused it. ·
The costs of
hiring forensic or other specialists to determine
how much of the missing inventory was stolen and how much was due to an
inventory shortage. Coverage for these costs and expenses is available
by attaching CR 25 40–Include Expenses Incurred to Establish Amount of
Covered Loss. |
Related Article: ISO Commercial
Crime Coverages Available Endorsements and Their Uses
h. Kidnap, Ransom, Extortion And Other Unlawful Demands
(06 22 edition)
This is a new exclusion with the 06 22 edition.
(1) This coverage does not extend to loss caused by
surrendering ransom in reaction to an illegal demand related to an actual or
suspected kidnapping, as detailed below:
·
Threatening physical harm
to any individual or property.
·
Threat to contaminate,
pollute, or degrade the insured’s products or goods.
·
Threats of preventing
access to any computer system.
·
Threat to install a
virus or malicious software to damage or destroy electronic data or programs in
the insured's computer system.
·
Threat to accessing the
insured's computer system to:
o
download, share,
disclose, or utilize the insured's or another person's or entity's information
o
access vulnerability in
the source code within any computer system
There are two exceptions:
·
Coverage applies as
outlined in Fidelity Insuring Agreement A.1.a or
A.1.b.
·
As provided by this
insurance, robbery is covered.
(2) No coverage is
provided for any payments related to:
·
denial of service
·
ransomware
·
viruses
·
other malicious
instructions
introduced into any computer system, causing:
·
denial or restriction
of access
·
encryption
·
downloads
·
damage
·
destruction
·
corruption
of the computer system, electronic data, or computer
program, unless it is covered under the Fidelity Insuring Agreement A.1.a or A.1.b.
(3) The policy does not cover fees, costs, or expenses the
insured incurs for any of the above.
i. Legal Fees, Costs, and Expenses
(06 22 edition)
j. Nuclear, Biological or Chemical Hazard
(06 22 edition)
There is no coverage for
any loss or damage caused by nuclear reactions, nuclear
radiation, radioactive contamination, or from pathogenic or poisonous
biological or chemical substances. This exclusion applies regardless of the
manner in
which these
losses happen.
k. Pollution
There is no coverage
for loss or damage caused by or resulting from pollution. Pollution is defined
as the release or escape of contaminants or irritants in solid, liquid,
gaseous, or thermal form, including vapor, smoke, acids, fumes, chemicals,
alkalis, and waste. Waste includes materials intended for reclaiming,
recycling, or reconditioning.
NOTE: This definition of pollutant is
identical to the one used in ISO Commercial Property Coverage Forms.
l. Virtual Currency
Any loss involving virtual currency is excluded. Virtual
currency is any type of electronic currency, such as digital or cryptocurrency.
The name of the currency and whether it is actual or fictitious are irrelevant
to this exclusion.
NOTE: Coverage is available
for this type of currency through CR 25 45–Include Virtual Currency as Money.
|
Example: Justine sells her products exclusively online and
accepts various payment methods, including bitcoin. A recent audit uncovers
that Chris, one of her employees, has been transferring bitcoin payments to
his personal bitcoin account. Justine files an Employee Theft claim, but it
is denied because the loss is entirely in virtual currency. |
m. War and Military Action
There is no coverage
for loss or damage resulting from:
·
war
·
undeclared
war
·
civil
war
·
military
force’s warlike actions
·
Actions
taken to prevent or protect against an attack by any government using military forces
or other agents.
·
Actions
taken by a governmental authority to defend against or hinder any of the
following are also not covered:
o
rebellion
o
insurrection
o
usurped
power
o
revolution
NOTE: This wording is identical to the wording
in ISO Commercial Property Coverage Forms.
2. Additional Exclusions Applicable To Specific Insuring Agreements
(06
22 edition)
a. Insuring Agreement A.1.a excludes:
(1) ERISA Employee Benefit Plans
This is a new exclusion
with the 06 22 edition.
·
There is no coverage for loss of property that belongs to
any ERISA employee benefit plan.
(2) Inventory Shortages
There is no coverage when
the fact of a loss is based solely on an inventory shortage or a profit and
loss statement.
However, inventory and
profit and loss statements can be used to calculate or verify a loss, but other
evidence of the actual physical loss must also be provided.
Related Court Case:Proof of
Employee Theft Held to Require More Than Inventory Loss
|
Example: Pellington Industries orders a comprehensive audit
that includes a physical inventory count. The audit uncovers a substantial
discrepancy between the actual stock and the inventory believed to be on
hand. Pellington immediately contacts its insurance carrier, which promptly
denies the claim for lack of proof of an actual loss. Pellington then hires a private investigator. The
investigator finds that the warehouse supervisor has
been collaborating with an accounting clerk to move product outside the
fence. Pennington presents this information along with the audit results, and
the company accepts the claims and begins its own investigation. |
(3) Trading
Losses from trading are
not covered. This applies even if the trading is in the insured’s name, is
genuine, or involves a fictitious account.
NOTE: Trading activities include
stock-trading losses, commodity-trading losses, and merchandise-trading losses
(where product is exchanged in batches). CR 25 16–Add Trading Coverage may
cover certain trading losses to a genuine, not a fictional, account.
Related Article: ISO Commercial
Crime Coverages Available Endorsements and Their Uses
(4) Warehouse Receipts
Warehouse receipts
document the storage and transfer of products from the entity holding them to
the recipient. Usually, the transferring party and the recipient are two
separate entities.
·
A
fraudulent transfer occurs when property is transferred to someone who is not
authorized to receive it.
·
A
forged instrument is frequently utilized by an individual who seems to have a
legitimate claim to the property but does not.
Coverage does not apply
to these situations or errors related to issuing, signing, canceling, or
failing to cancel any warehouse receipt.
NOTE: CR 25 17–Add Warehouse Receipts
Coverage can be attached to insure fraudulent transfer of warehouse receipts.
Related Article: ISO Commercial
Crime Coverages Available Endorsements and Their Uses
b. Insuring Agreement A.1.b. (ERISA Plan Official Dishonesty) excludes the following:
(06 22 edition)
· Inventory Shortages
There is no coverage
when the fact of a loss is based solely on an inventory shortage or a profit
and loss statement.
However, inventory and
profit and loss statements can be used to calculate or verify a loss, but other
evidence of the actual physical loss must also be provided.
c. Insuring Agreement A.1.c (Employee Theft of Clients' Property) excludes the following:
(06 22 edition)
(1) Inventory Shortages
There is no coverage
when the fact of a loss is based solely on an inventory shortage or a profit
and loss statement. However, if the loss is determined to be outside of this
condition and caused by theft from an identified employee, the client's
inventory record and physical count can be used to support the loss amount.
(2) Trading
Losses from trading are
excluded, whether the trading is in the client's name or involves a genuine or
fictitious account.
NOTE: Trading activities
include stock-trading losses, commodity-trading losses, and merchandise-trading
losses (where batches of product are exchanged). CR 25 16–Add Trading Coverage
may cover certain trading losses to a genuine, not a fictional, account.
(3) Warehouse Receipts
As stated above, warehouse
receipts document the storage and transfer of products from the entity holding
them to the recipient. Usually, the transferring party and the recipient are
two separate entities.
·
A
fraudulent transfer occurs when property is transferred to someone who is not
authorized to receive it.
·
A
forged instrument is frequently utilized by an individual who seems to have a
legitimate claim to the property but does not.
Coverage does not apply
to these situations or to errors related to issuing, signing, canceling, or
failing to cancel any warehouse receipt.
d. Insuring Agreement A.2.b. (Forgery
Of Payment Card Instruments) excludes the following:
(06 22 edition)
· Non-compliance With Payment Card Issuer’s Requirements
e. The following exclusions apply to Insuring Agreements:
(06 22 edition)
Ø A.3–Inside the
Premises–Theft of Money and Securities
Ø A.4–Inside the
Premises–Robbery or Safe Burglary of Other Property
Ø A.5–Outside the
Premises
(1) Accounting or Arithmetical Errors or Omissions
Mathematical
mistakes are not covered losses. If errors or omissions in accounting or arithmetic
cause a loss, the named insured is responsible, not the insurance company.
NOTE: This exclusion
cannot be bought back, nor is there a standard
endorsement available to add this coverage.
There is no coverage for loss in any exchange or purchase
of any property.
NOTE: This exclusion cannot be bought back, nor is
there a standard endorsement available to add this coverage.
|
Example: Sylvester pays the marked price of $2,000 for a
piece of furniture. It is later found that the
correct price was $20,000. Further investigation reveals that the price tag
was deliberately altered, and Sylvester, who paid in cash, provided false
contact information. Although this appears to be criminal activity, coverage
does not apply since the loss resulted from a purchase. |
(3) Fire
There is no coverage for loss or damage caused by fire,
regardless of what started the fire. However, there are two exceptions:
·
Coverage
applies to fire damage to money and securities.
NOTE: This is very important because other commercial
property coverage forms do not respond to fire damage to money and securities.
·
Coverage
applies when fire damages a safe or a vault.
NOTE: This is duplicate coverage with property
coverage forms. It could be considered primary because it is specific.
The loss of property from within vending machines or other coin-
or money-operated devices is excluded unless the machine continuously counts
and records the money.
NOTE: This
exclusion cannot be bought back, nor is there a standard
endorsement available to add this coverage.
(5) Motor Vehicles or Equipment and Accessories
Damage to or loss of any motor vehicle, its accessories, or
trailer is excluded.
NOTE: Theft coverage
for motor vehicles can be included under different commercial automobile
insurance policies. Additionally, vehicle manufacturers can obtain coverage
through commercial property insurance forms. Unlike other ISO coverage forms,
CR 00 21 does not define the term “motor vehicle.”
IMPORTANT NOTE: The Transfer Or
Surrender Of Property exclusion has been removed with
the 06 22 edition due to the new Kidnap, Ransom,
Extortion And Other Unlawful Demands exclusion.
(6) Vandalism
There is no coverage for any vandalism or malicious
mischief damage to the following:
·
premises
or exterior of the premises
·
other
property
·
safes
·
vaults
·
cash
registers or drawers
NOTE: Vandalism and
malicious mischief are properly covered under commercial property insurance
forms. In some cases, vandalism and theft can occur simultaneously, resulting
in multiple types of loss. However, it's important to note this exclusion does
not apply to money or securities. This means damage caused by vandalism and
malicious mischief to money and securities may be covered, which is significant
because such damage is not covered under the commercial property policy forms.
|
Example: Vandals break Oscar’s Office Outlet’s showroom
windows and vandalize the premises. They overturn the file cabinets,
destroying various securities stored inside. The commercial property coverage
form should cover the building and contents losses, but not the damage to the
securities. Damage to the securities is covered under the crime coverage, but
there is no coverage for damage to any of the other property. |
(7) Voluntary Parting of Title to or Possession of Property
(06 22 edition)
There is no coverage if the named insured or someone
working with them is tricked by any fraudulent or dishonest act into
parting with title to or possession of any covered property.
NOTE: CR 04 17–Fraudulent Impersonation
provides coverage for certain types of trickery.
Related Article: CR 04 17–Fraudulent Impersonation
f. The following exclusions apply to Insuring Agreement A. 6: Computer and Funds Transfer Fraud.
(06 22 edition)
(1) Authorized Access
Coverage does not apply
if the loss is caused by an employee, authorized
person, or entity committing fraud by entering or changing electronic data
or a computer program within any computer system. In the 06 22 edition, the phrase "owned, leased, or operated by the
insured" has been removed.
(2) Credit Card Transactions
Coverage does not apply
when a loss is due to any type of credit, debit, charge,
or other similar card being used. There is also no coverage when the loss results
from information contained on any of those cards. In the 06 22 edition, “stored
value” has been removed.
(3) Exchanges or Purchases
There is no coverage
for loss resulting from property relinquished during a
purchase or exchange.
NOTE: This exclusion cannot be bought back, nor is there a
standard endorsement available to add this
coverage.
(4) Fraudulent Instructions
Coverage does not apply
if an employee, other person, or entity
acts on any kind of false or fraudulent instructions to transfer, pay,
or deliver money or securities, or other property, which a financial
institution acted upon to debit or transfer from the insured's account.
This exclusion remains in effect even if the named insured's account is debited
or closed because of such instructions. In the 06 22 edition,
the term 'financial institution' has been replaced with 'other person or
entity.'
The only exceptions to
this exclusion are outlined in Insuring Agreement A.6.b., which details
specific fraudulent instruction situations that are covered.
NOTE: This exclusion
appears to be a way to clarify the specific circumstances when coverage applies
and exclude all other situations.
(5) Inventory Shortages
There is no coverage when the fact of a loss is based solely on an inventory
shortage or a profit and loss statement.
E. CONDITIONS
The conditions listed
below are in addition to the Common Policy Conditions.
1. Conditions Applicable to All Insuring Agreements
a. Additional Premises or Employees
Coverage automatically
extends when a named insured hires new employees and/or adds premises during
the policy period. The insured does not need to notify
the insurance company about these changes, and no additional premium
is charged for the remaining duration of the Policy Period specified on the Declarations.
However, there is an exception
to this condition. It does not apply when the new premises or employees result
from a consolidation, merger, or acquisition.
NOTE: Condition E. 1. c. Consolidation–Merger
or Acquisition below provides additional information on the exception.
b. Cancellation or Termination
(06 22 edition)
This is a new condition
with the 06 22 edition.
(1)
Coverage Termination
This cancellation
provision is in addition to the Common Policy Conditions.
For the First Named
Insured:
·
The insurance will terminate entirely and immediately on the
date of:
o A control change
o Voluntary dissolution
o Voluntary liquidation
For any Insured other
than the first named insured:
·
The insurance will terminate immediately on the date of:
o A change of control for
that insured
o Voluntary dissolution
o Voluntary liquidation
When the policy is
terminated for any reason above, the first named insured will receive a pro
rata premium refund.
(2)
Individual Insured or Coverage Cancellation
The Insurance Company,
or First Named Insured, may cancel the policy for any insured, Insuring
Agreement, or coverage, provided it follows the
requirements of the Common Policy Conditions.
(3)
Termination of Coverage As To
Any Employee or ERISA Plan Official
The designated person or human resources employee cannot be
in collusion with the employee or ERISA Plan official, and this condition
applies regardless of when they learn of the fraudulent or dishonest act.
The insurance company will send notice
to the first Named Insured at their latest known mailing address. If the
termination is sent by mail, proof of mailing will suffice as evidence notice
was provided.
c. Concealment, Misrepresentation, or Fraud
Related Court Case: Insured's
Material Misrepresentation in Application Warranted Denial of Coverage
d. Consolidation–Merger–Acquisition
(06 22 edition)
While this is not a new
condition in the 06 22 edition, a second provision has
been added for a subsidiary acquiring more than 50% of voting stock or rights.
(1) Notification Must Be Provided
When the named insured merges, consolidates, or acquires another entity, or if the insured
purchases or acquires the assets or liabilities from another entity and remains the only surviving entity, the insurance company must be informed promptly.
·
Notice
to the insurance company must be in writing.
·
The
insurance company must provide written consent to extend coverage.
·
The
insurance company has the option to accept or decline the additional exposure.
·
If
the insurance company accepts the additional exposure,
it may require an additional premium.
Because
the insurance company's decision may take some time, the following applies:
·
Automatic
coverage is provided for up to 90 days following the date of consolidation,
merger, purchase, or acquisition of the merged or acquired entity and its
employees for the following:
o
premises
o
assets
o
liabilities
·
Coverage
ends after 90 days unless the insurance company has approved continued
coverage.
·
Coverage
applies only to losses occurring after the date of consolidation, merger, or
acquisition and will not apply retroactively.
If
an employee benefit plan is acquired in the transaction, it is automatically
included as an insured.
(2) Coverage Automatically Provided
If
the named insured acquires a subsidiary and owns 50% or greater of voting stock
or rights, then the following applies:
·
Loss sustained coverage will automatically cover the
subsidiary if a loss takes place; and,
·
is discovered by a designated person at any time during the
policy period shown in the Declarations.
However,
the following are excluded:
·
Exceptions for the acquired subsidiary found in the Loss
Sustained During Prior Insurance Conditions E.1.i and E.1.m.
·
The time period specified in the
Extended Period to Discover Loss Condition E.1.h applies if the assets acquired
exceed the Percentage Of Total Assets Application To Subsidiary Acquisitions reported in the most recent
fiscal year-end financial statements before the policy's effective date.
·
No claims, whether reported or paid,
that would be covered under this insurance, have been made in the three years
before the acquisition date.
The
insured is not required to inform
the insurance company of the acquisition, and no additional premium is charged
for the remaining policy period specified on the
Declarations.
If
an employee benefit plan is acquired in the transaction, it is automatically
included as an insured.
e. Cooperation
The insured is required
to cooperate and collaborate with the insurance company, as outlined in the
policy’s terms and conditions.
Related Court Case: Breached
Policy Provisions Justify Denial of Coverage
f. Duties in the Event of Loss
(06 22 edition)
The insured has
specific duties to fulfill upon discovering a loss or a potential risk
of loss or damage to money, securities, or other property.
(1) The insured is
required to do all of the following, except as
outlined below in (2) Policy Deductible:
·
Inform
the insurance company as soon as possible.
NOTE: In the 06 22 edition, it is no longer required to notify local law enforcement
even if the insured has reason to believe a violation of the law has occurred.
·
Submit
a detailed, sworn proof of loss to the insurance company within 120
days of discovering the loss.
NOTE: This is longer than in most policies
because of the unusually long time that may be needed to work through a
complicated employee theft scheme or other type of fraud.
·
Work
with the insurance company during the investigation and settlement of the claim.
·
Provide
any relevant records related to the loss for the insurance company's review.
·
The
named insured must protect all rights of recovery it
has against any responsible party for a loss paid under this coverage. The
named insured must not relinquish those rights.
NOTE: This duty applies only
to events occurring after the loss. Therefore, the named insured can waive any and all rights of recovery against any party it chooses
before a loss.
|
Example: Paul performs all security checks for Jerry’s
employees. The agreement between Jerry and Paul states that Jerry will hold
Paul harmless for any errors made by Paul. Kenny, an employee who cleared all
of Paul’s security checks, stole $15,000 from Jerry and is now untraceable. An investigation by the insurance company shows
Kenny had multiple felony convictions that Paul failed to discover. However,
the insurance company cannot seek recovery from Paul because Jerry waived his
rights of recovery against Paul before the loss occurred. |
(2) Policy Deductible
If, at the time of loss, the loss is believed to be under
the deductible percentage specified on the Declarations,
the insured does not need to notify the insurance company. However, if the
insured discovers or suspects the loss exceeds or might exceed the deductible
percentage, they must take the following steps:
·
Notify the insurance
company within 15 days of:
o
the date on which the
loss was recognized to exceed the deductible percentage,
o
the termination or
cancellation date of the policy, or
o
the time limit
specified in the Extended Period To Discover Loss
Condition.
·
Within 120 days from
the date of notice to the insurance company, the insured:
o
must provide the
insurance company with a detailed and sworn proof of
loss, and
o
cooperate with the
insurance company as it investigates and settles the claim, and
o
secure all its recovery
rights against any responsible party for a loss
covered under this policy. The named insured must not give away those rights.
NOTE: This
obligation applies only to events occurring after a loss. Therefore, the named
insured may waive any or all rights of recovery against any party it chooses
prior to a loss.
(3) Law Enforcement
Must Be Notified
The insured must notify law enforcement if they suspect a
legal violation has occurred. This provision excludes losses covered under
Insuring Agreements A.1.a—Employee Theft, A.1.b—ERISA Plan Official Dishonesty,
A.1.c—Employee Theft of Clients’ Property, and A.2—Forgery or Alteration.
g. Employee Benefit Plans
(06 22 edition)
When a covered loss occurs, the payment will be
made directly to the employee benefit plan that incurred the loss. A payment to any plan releases the insurance company
completely.
NOTE: This is not employment
practices legal liability coverage, which protects against issues like failing
to enroll an employee during the open enrollment period. Employee benefit plans
coverage applies to fraudulent or dishonest acts, such as theft of retirement
funds by an employee.
h. Extended Period to Discover Loss
(06 22 edition)
Losses discovered by
a designed person must occur before the cancellation or termination
date of coverage for any insured, insuring
agreement, or coverage, but loss can be discovered during either of the
following:
·
Within
one year from the date coverage is cancelled or terminated. However, the
extended period to discover loss ends immediately on the date the named insured
obtains other coverage.
|
Example: Patty was unaware that her employees were
embezzling money from the cash registers. Her crime insurance expired on
01/01/2026 and was not renewed. She learned of the loss on 06/10/2026. The
insurance covers the theft if the employees started stealing before
01/01/2026. Any theft occurring after this date is not covered. |
·
Coverage
for any ERISA employee benefit plan ends one year after the coverage is
canceled or terminated. However, if the insured or ERISA employee
benefit plan acquires other coverage under Insuring Agreement A.1.b—ERISA Plan
Official Dishonesty that offers the same coverage, the extended discovery
period will end immediately on the effective date. The new coverage must be at
least the minimum required by ERISA, and the replacement policy must cover
losses incurred before the new policy's start date.
i. Joint Insured
(06 22 edition)
·
There may be cases where more than one insured is named on
the declarations. In those cases, the first named insured acts for itself and
all other insureds with respect to the coverage that CR 00 21 provides.
|
Example:
The named insured on the
declarations reads: John Wilson Wilson, LLC Wilson, Johnson, and Miles As the first named insured, John Wilson
is responsible for paying the premium, but he does not make the payment and
receives a cancellation notice since he is the first insured listed. John does
not inform the other entities that coverage has been canceled. Subsequently, a loss occurs, but there
is now no coverage because the policy has been canceled. The other named
insureds have no recourse against the insurance company because proper
notification was provided to the first named insured. |
·
Knowledge
possessed by a designated person about any insured's circumstances that
impact the insurance coverage is deemed to be knowledge held by all insureds.
This is crucial because the named insured might not be the sole owner of all
insured entities on the policy. These could be partnerships or corporations
with substantial external ownership.
|
Example:
Continuing with the previous example,
before the cancellation, John Wilson, the policy's designated person, permits
Wilson, Johnson, and Miles to hire Millie, an employee of his. John forgets
to inform them that Millie has a criminal record. Any employee theft loss involving Millie is
excluded because John knew about her background, and as the designated
person, Wilson, Johnson, and Miles are deemed to have known this as well. |
·
Employees
of one insured are regarded as employees of all insureds.
NOTE: In the 06 22
edition, paragraph (4) regarding the extended period to discover loss for an
individual insured has been removed and relocated to the Extended Period to
Discover Loss Condition.
·
The
insurance limit applies to all insureds collectively. A separate limit does not
apply to each insured.
|
Example:
All three named insureds
shared a single bookkeeper. When she didn’t return from her vacation, it was
discovered that all of the insured’s accounts had
been emptied. ·
John
Wilson sustains a $100,000 loss ·
Wilson, LLC sustains a $50,000 loss ·
Wilson,
Johnson, and Miles sustain a $75,000 loss From this single occurrence, the
insurance company pays only the $100,000 limit on the declarations. |
·
Once
the insurance company pays the first named insured for a loss affecting any
Insured or employee benefit plan, it is then fully released for that loss.
|
Example: The insurance company pays John Wilson $100,000
for the loss with Millie, the bookkeeper. After receiving the payment, he
leaves town. The other two insureds named in the policy do not receive any payout and can only pursue claims against John Wilson's
assets. |
j. Legal Action Against Us
As with most policies,
no insured can take legal action against the insurance
company for a loss until the following conditions have been satisfied.
·
The
insured has fulfilled all the conditions of the policy.
·
An
insured must wait 90 days after submitting a proof of
loss before initiating legal action.
·
A
lawsuit must be filed within two years of discovering the loss.
o
It
is important to note that the two-year period starts not from when the loss was
filed, but from when it was discovered.
o
If
a state law or local regulation mandates different timeframes, the policy is
amended or aligned accordingly to meet those requirements.
k. Liberalization
The insurance company
may revise the policy to expand the coverage without charging any additional
premium. If it does so 45 days before or during this policy period, the
expanded coverage applies to this policy.
l. Loss Sustained During Prior Insurance Issued by Us or Any Affiliate
(06 22 edition)
An individual or group
of individuals may engage in numerous dishonest acts over a period of years
before being caught. All of these acts, whether a
single event or multiple events over these years, are regarded as a single
occurrence.
If the named insured
maintains continuous coverage with the same insurance company or group of
insurance companies, coverage applies retrospectively to the date when the
continuous insurance started.
It is important to keep in mind, though,
that insurance limits do not carry over from year to year. Instead, the highest
limit available during the entire period is available to settle the total loss
when it occurs. This condition now has three parts and is illustrated with
three examples due to confusion and court cases like Auto Lenders Acc Ace.
Corp. v Gentilini Ford, Inc., 181 N.J. 245, 854 A.2d 378 (2004).
|
Example:
Alice stole the following from her
employer: ·
$50,000 two years
ago ·
$20,000 last year ·
$30,000 this year For a total of $100,000. Alice’s employer maintained an insurance coverage
limit of $50,000 annually over the course of these three years. These limits cannot be combined, even though the
thefts occurred over multiple years, because this provision treats them as a
single event. The maximum available limit for this single occurrence is
$50,000. |
(1) Loss Sustained Partly During This Insurance and Partly During Prior Insurance
If a loss occurs during
the Policy Period indicated on the Declarations and involves an incident partly
occurring during this policy term and partly during a canceled or terminated
policy from the same insurer or an affiliate, with no coverage gap, the policy
will cover the current period's loss first. Losses from previous periods will
be paid within the coverage periods of the prior insurance.
A designated person must discover the
loss.
(2) Loss Sustained Entirely During Prior Insurance
If a designated
person discovers a loss during the policy period caused by an event under a
previously canceled or terminated policy issued to the insured or any
predecessor, this policy will cover the loss if the following conditions are
met.
·
This
policy took effect when the previous insurance was canceled or terminated,
and
·
This
policy would have covered the loss had it been in effect at the time of the
incident.
The loss will be
settled as follows:
·
Initially,
the insurance company will cover the loss based on the most recent previous
policy.
·
Then,
it will settle the remaining amounts from any other previous policy(s).
(3) When the insurance company settles losses under sections (1) and (2) above:
·
The insurance company will pay no more than the
highest single Limit of Insurance for the entire loss occurring during the
policy period, whether the coverage is under this policy or a prior policy
issued by the insurer.
·
No settlement is issued until the applicable current
policy deductible is met. This deductible is the only one that applies to the
total loss settlement, regardless of how many policy periods are involved.
o If a loss does not occur under the current policy, the deductible shown
in the declarations under the most recent prior insurance will be applied.
o If the deductible exceeds the loss under this insurance or the most
recent prior insurance, the insurance company will apply the remaining
deductible to the remaining loss under the prior insurance.
o
No other deductible that might have been applicable
to the loss will be relevant to the loss.
|
Examples:
Bob has been stealing from Below Ground
Enterprises for three years, which they only discovered this year, and they
estimate the total loss at $100,000. Scenario 1: The current policy has an insurance
limit of $100,000, up from $25,000 three years ago. The insurance company
pays $100,000. Scenario 2: The limit was reduced from $100,000 to
$25,000 two years ago. However, the insurance company still pays Below Ground
$100,000 because that was the insurance limit at the time
of loss. |
m. Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate
(06 22 edition)
(1) No Lapse In Coverage
If a designated
person discovers a loss during the policy period resulting from an
event under a previously canceled or terminated policy issued by another
company, and the discovery period has expired, this policy will cover the loss
if the following conditions are met:
·
This
policy took effect when the previous insurance was canceled or terminated,
and
·
This
policy would have covered the loss had it been in effect at the time of the
incident.
This condition applies
only if there was no lapse in coverage between the current and previous
coverage. Even a one-day lapse without coverage invalidates this crucial
benefit.
(2) Loss Settlement Condition
·
The
maximum amount paid for the total loss is the lesser of the available Limits of
Insurance during the policy period, regardless of whether it applies under this
insurance or under the prior canceled or terminated policy.
·
The
deductible indicated on the Declarations for the prior cancelled or
terminated policy will be applicable.
(3) Coverage Under This Condition Is Subject to the
Following
·
If
a loss is partially covered by both the Loss Condition of E.1.l. and
this provision, the coverage cannot be combined with the coverage under Loss
Condition E.1.l to increase the insurance limits. The limits under Condition
E1.l. are considered alongside those of the previous insurer, and the
lesser limit is selected.
·
If
a loss is covered under this condition and not subject to the above paragraph,
the recoverable amount is part of and not in addition to the Limit of Insurance
applicable to this coverage.
o
This
amount is also limited to the lesser of the recoverable amount as of the
policy's effective date or the previous canceled or terminated policy,
if the prior policy had still been in effect.
NOTE: The important
distinction is that the highest limit applies to settling claims when coverage
is continuous with a single company or group. If coverage moves between
companies, the lowest limit applies to settling claims. This creates a
significant gap in coverage if coverage moves from one insurance company to
another.
|
Example:
Number One, Inc. moved its coverage
from STU Accident and Casualty Insurance Company to ABC Indemnity Company,
where it had been insured for five years. Number One, Inc. found a loss that occurred during the STU policy's term
but after the discovery period had ended. ABC Indemnity will cover the loss up to the lesser
of the limit specified in the STU policy or its own policy. |
n. Other Insurance
(06 22 edition)
This section contains only editorial changes
with the 06 22 edition.
Other insurance may
also be available to the named insured for a loss covered by this insurance. If
such coverage exists and can be collected, the following explains how the
insurance company will limit its responsibilities:
(1) Primary Insurance
·
If
other insurance is written under the same terms and conditions as this
insurance, the policies share any loss in proportion to their respective limits.
·
If
the other insurance is not written under the same terms and conditions, this
coverage is considered excess. This means it will pay only after the loss
exceeds either the limit of insurance under the other policy or the deductible
under this policy, whichever is greater.
NOTE: When payment is made
by this insurance, it is paid under the terms and conditions of this policy.
|
Example:
Hershel changes insurance companies.
Due to the cancellation and non-renewal terms and conditions, the two package
policies overlap by two days. A holdup occurs at his business on one of those
days. Scenario 1: Both crime coverages are the same, so each one
contributes equally. Scenario 2: One of the package policies includes an automatic
property extension endorsement that provides holdup coverage with a $2,500
limit. The policy with this extension is primary, while the crime coverages
are excess. |
The proportional
statement applies even if the insured cannot collect from the other coverage
carrier.
NOTE: This statement appears to conflict with
the lead language, which states that coverage must be both available and
collectible before the terms of this condition apply.
(2) Excess Insurance
·
If
this insurance is excess over another policy, this policy only pays after the
limit and deductible of the other coverage are exhausted.
·
If
a deductible applies to this coverage, the deductible amount is reduced by the
amount of the underlying coverage and the underlying deductible. This means the
insured does not have to jump the hurdle of both the deductible and the
underlying limits.
|
Example: Building on the previous example, each of the two
crime coverages had a $2,500 deductible. The property extension also had a
$2,500 limit, which was satisfied, so the crime coverages paid the remaining
loss, up to the limit of insurance condition. |
·
The
other coverage amount over which this coverage is
excess is not the responsibility of this insurance, even if that amount cannot
be collected by the insured.
o. Ownership of Property; Interests Covered
(06 22 edition)
This section contains only editorial changes.
This insurance only covers
the following types of property:
·
Property owned or leased by the named insured.
·
Property the named insured possesses, regardless of
the capacity in which it is held.
·
Property the named insured is legally responsible
for, but only if that liability existed prior to the loss.
This condition
clarifies that insurance coverage is exclusive to the named insured. Property
owners for whom the insured holds property or is legally responsible cannot
make direct claims with the insurance company. Instead, the named insured must
file any claims on their behalf.
p. Records
The insurance company
needs to verify the claimed loss amount, so the named insured must keep records
of their property to facilitate this process.
NOTE: This is a payment condition. If the named insured fails to maintain
records to verify claims, a loss may not be paid.
q. Recoveries
(06 22 edition)
Recoveries can occur
either before or after a claim is settled. Whether initiated by the insurance
company or the insured, they will be applied
net of recovery expenses. The recovery amount is first reduced by recovery
expenses, and the remaining balance is then returned in the following order:
·
First,
the named insured receives the difference between the total loss and what the
insurance company paid.
·
Next,
the insurance company receives the amount it paid for the loss.
·
Next,
the named insured is paid the deductible amount they were responsible for.
·
Lastly,
the named insured receives any remaining amount this insurance did not cover.
Recoveries do not
include reinsurance, suretyship, security, or indemnity recovered by the
insurance company, nor do they include the cost of original securities if
duplicates were issued.
r. Territory
(06 22 edition)
This insurance covers
losses incurred by the named insured due to an event occurring anywhere in
the world.
s. Transfer of Your Rights of Recovery Against Others to Us
(06 22 edition)
The only change to this section in the 06 22
edition is the replacement of the word “organization” with “entity,” which we
do not use in our content.
Under Condition f.—Duties in the Event of Loss above, the named
insured was required to secure all rights of recovery. Under this Condition,
the insured is required to transfer those rights to the insurance company after
the named insured sustains a loss and the insurance company pays. The named
insured continues to be required to secure and not impair those rights.
t. Valuation–Settlement
(06 22 edition)
Valuation is very
important and varies depending on the type of property. It will be
determined as follows:
(1) Money
·
Money
is valued at its face value.
·
Foreign
currency can be replaced by either its face value or its equivalent in U.S.
dollars, based on the insured's choice. The value used is the exchange rate
published in The Wall Street Journal on the day the loss was discovered.
|
Example: Mary is preparing for a trip to a foreign country,
where she has exchanged a significant amount of local currency, expecting to
stay for a long period to negotiate a contract. The day before her departure,
her money and other belongings were stolen, leading her to contact her
insurance company immediately. The next day, all flights to the country are
canceled due to a coup, causing the currency to lose value. Despite this, the
amount of Mary’s claim remains the same because it is calculated based on the
Wall Street exchange rate on the day she discovered the loss. |
(2) Securities
Securities are valued
at their closing price on the day the loss was discovered. The insurance
company determines the method of settling the claim.
·
It
can replace securities either in-kind or with cash, then require the named
insured to transfer all rights to the lost securities to the insurance company.
·
The
second option allows the insurance company to cover the cost of a lost
securities bond, enabling the issuance of duplicate securities.
o
The
cost for this option is limited, though, to a premium cost as
would be similar to a bond penalty amount equal to
either the market value of the securities as of the close of the business day when
the loss was discovered or the securities limit of insurance, whichever is
less.
(3) Property Other than Money and Securities
Other property is valued
at replacement cost.
·
Payment
is limited to the least of the following:
o
The
insurance limit for lost or damaged property shown on
the declarations.
o
The
amount to replace such property with similar property used
for the same purpose.
o
The
actual cost incurred by the named insured to repair or replace the property.
·
Payment
for the replacement cost valuation is made only after the property has been
repaired or replaced and occurs within a reasonable timeframe.
o
If
the property is not repaired or replaced, the payment is based on the actual
cash value of the property.
·
At
the named insured’s option, the insurance company pays for loss or damage to
such property:
o
in
the money of the country where the loss or damage was sustained, or
o
the
equivalent in U. S. dollars.
§ The equivalent value is
determined by the exchange rate or the value published in The Wall Street
Journal on the day the loss was discovered.
·
When
the insurance company pays for or replaces property, it assumes ownership of
that property.
2. Additional Conditions Applicable to Specific Insuring Agreements
(06 22 edition)
a. Under Insuring Agreement A.1.b—ERISA
Plan Official Dishonesty Insuring Agreement
This is a new condition with the 06 22 edition.
(1) Limit of Insurance
For A.1.b—ERISA Employee benefit plan, the insured is
responsible for providing the insurance company with the coverage limit. As of the effective date of the policy, the limit must be equal
to or exceed the minimum coverage amounts mandated by ERISA, which are as
follows:
·
If the plan does not
hold employee securities, the limit should be the lesser of 10% of the funds
handled or $500,000, but no less than $1,000.
·
If the plan holds
employee securities, the limit should reflect the lesser
of 10% of the amount of funds handled or $1,000,000, but not less than $1,000.
·
If the policy covers more
than one ERISA employee benefit plan, the limit of insurance must be enough to
cover each plan individually.
·
If the insured
discovers at the time of a loss that the ERISA plan limit no longer meets the
minimum coverage requirements, the insurance company will automatically
increase the coverage limit to the minimum amount. The insured is not required
to pay an additional premium for the increased limit.
·
If the ERISA-mandated
minimum coverage amount changes after the policy's effective
date, the new minimum coverage will automatically take effect without
additional premium for the remainder of the policy term.
(2) Payment for Loss Sustained By Multiple Plans
The insurance company will make payments to each individual
plan or to combined funds, securities, or other property belonging to multiple
ERISA employee benefit plans, based on the coverage amount required by each
plan.
(3) Deductible Amount
A deductible listed in Section C does not apply to losses
under an ERISA employee benefit plan covered by the A.1.b. Insuring Agreement.
b. Under Insuring Agreement A.1.c—Employee
Theft of Clients Property
The following replaces E.1.o—Ownership
of Property; Interests Covered Condition:
Property Covered in this Insuring Agreement is limited to:
·
Property that belongs
to or is rented by the insured’s client.
·
Property held for
others by the insured’s client.
·
Property for which the
insured client is legally responsible before the loss occurred.
This insurance benefits
only the insured, who is responsible for submitting claims. No other parties,
including the insured’s clients, have rights or benefits under this agreement.
c. Under Insuring Agreement A.2—Forgery or Alteration
(1) Deductible Amount
Legal expenses incurred under this insuring agreement are not subject to
a deductible.
(2) Electronic and Mechanical Signatures
The insurance company
considers electronically or mechanically generated or reproduced signatures
equivalent to handwritten signatures.
(3) Proof of Loss
The named insured must
include the instrument involved in the loss, such as a check, with the proof of loss. If they cannot, they must provide an
affidavit explaining the cause and amount of the loss.
NOTE: Since coverage is now worldwide,
“Territory” has been removed with the 06 22 edition.
d. Conditions Applicable to Insuring Agreement A.5.—Outside the Premises
Armored Motor Vehicle
Companies
With the 06 22 changes,
the Insuring Agreement associated with this condition has been changed from
A.4. to A.5.
If there is a contract
allowing recovery directly from the armored vehicle company or its insurance
company, this policy is excess over that recovery amount.
NOTE: b.—Special Limit of Insurance for Specified Property, 5.b.—Conditions Applicable to Insuring Agreement A.6—Computer
and Funds Transfer Fraud, and b.—Territory have been
removed with the 06 22 edition.
e. Under Insuring Agreement A.7—Fraudulent
Impersonation
(06 22)
This is a new
provision with the 06 22 edition.
(1) Change of Account Requests
Verification should be made with the client or vendor who claimed
to have submitted the change request, or with an authorized person, but not
with the authorized person who claimed to have made the change to the account.
NOTE: Verification cannot be made by email.
(2) Transfer Instructions
The insured should make
a reasonable attempt to verify the authenticity of any transfer instruction requests
from a customer or vendor. They must make a reasonable effort and document
these efforts before proceeding with transfers or modifications of property.
Verification should be
made with the client or vendor who claimed to have submitted the transfer request,
or with an authorized person, but not with the authorized person who claimed to
have made the request.
NOTE: Verification
cannot be made by email.
F. DEFINITIONS
(06 22 edition)
The following definitions
apply to all Insuring Agreements.
NOTE: The Editors added titles to
enhance clarity.
1. Authorized Person
(06 22 edition)
This
is a new definition with the 06 22 edition.
An authorized person is defined as follows:
·
Employee
·
Partner
·
Member
·
Manager
·
Director or Trustee
·
ERISA plan official
·
The insured, if a sole proprietor, who has the authority to:
o change an account
request
o issue a transfer
instruction
o direct others to do the
same
2. Change of Account Request
(06 22 edition)
This is a new
definition with the 06 22 edition.
3. Change of Control
(06 22 edition)
This is a new definition with the 06 22 edition.
·
When more than 50% of the insured's assets are purchased,
or when there is a merger or consolidation of the insured with an entity that
is not another insured, and the insured is not the surviving entity.
·
Any person, entity, or affiliated group of persons or
entities that obtains the right to elect,
appoint, or designate more than 50% - or exercise majority control - of the
board of directors, boards of trustees, or their functional equivalent of any
insured.
4. Client
(06 22 edition)
This is a new
definition with the 06 22 edition.
Any natural person or
entity receiving goods or services from the insured for a fee or under a
written agreement with the insured.
5. Computer Program
A set of related
electronic instructions that guide how a computer functions. This program also
controls attached devices. It enables computers and connected
devices to receive, process, store, or transmit electronic data.
6. Computer System
This is not a newly
defined term, but it has an entirely new definition in the 06 22 edition.
·
Any portable or handheld computer, electronic storage, and
related peripheral devices.
·
Any type of system and application software.
·
Any communication networks related to the two points above,
including:
o the internet connected
to or used with a computer or device that collects, transmits, processes,
stores, or retrieves electronic data, and
o is owned, leased, or
operated by:
§ the insured.
§ an employee, as long as they have agreed in writing to the insured’s
personal device use policy.
§ an authorized third
party while providing services for the insured, but only regarding electronic
data.
7. Counterfeit Money
This definition has two parts: first, it
must imitate money; second, the imitation is created to be accepted as genuine
money.
|
Example: Lacie manufactures hundreds of $100 bills. Scenario 1: Lacie is selling a board game that includes play money. This is not counterfeit money. Scenario 2: Lacie is working with a group of criminals to
obtain retail items in exchange for the counterfeit money. This is
counterfeit money. Scenario 3: Peter buys Lacie’s board game. He thinks the money
looks very real, so he passes it to another as though it is a real number.
Even though the original manufacturer intended the money to be play money,
Peter’s use of it makes it counterfeit. |
8. Custodian
The named insured,
along with any partners, members, or employees responsible for caring for
property inside the premises, is included. However, a custodian does not
include anyone acting as a watchperson or janitor at the time of the loss.
NOTE: A watchperson is defined as someone hired to watch. An employee who works
late and is responsible for locking up upon leaving is not considered a
watchperson. The term 'Janitor' is not specifically defined, which is
problematic because the custodian definition states that a person “acting” as a
watchperson or janitor is not considered a custodian.
|
Example: Becky is a very dedicated administrative assistant.
One Sunday night, she came in to clean the company conference room so it
would be ready for a partners' meeting on Monday morning. Although she’s not
a custodian during the Sunday night cleaning, she resumes custodial duties when
she returns to work on Monday. |
9. Designated Person
(06 22 edition)
This is a new
definition with the 06 22 edition. It is defined as
follows:
Any:
·
Insurance Risk Manager
·
Partner
·
Member
·
Manager
·
Director or Trustee
·
Elected, appointed, or otherwise titled officer
·
Administrator, fiduciary, director, trustee, or officer or
manager of an employee benefit plan.
·
Highest ranking employee of any insured who performs the majority of duties at the insured premises.
10. Discovery, Discover, or Discovered
(06 22 edition)
This is the point at
which a designated person has sufficient information to reasonably
believe that a covered loss is imminent or has already occurred. The named
insured does not need to know specific details, such as the exact time or
location of the event.
It also means the time
when a designated person receives notice of an actual or potential claim,
indicating that an insured might be liable for a loss potentially covered by
this policy.
NOTE: This definition may
cause confusion. The initial paragraph raises questions about how to determine
when there is sufficient information to notify the insurance company. The
following paragraph mentions "notice” but does not explain what it means.
As a result, different interpretations might lead to litigation.
11. Electronic Data
Sounds, images, facts,
and other information meeting all of the following
criteria:
·
On
any type of device that stores data, such as:
o
Hard
or Floppy disks
o
CD-ROM’s
o
Tapes
o
Dives
o
Cells
o
Data
processing devices, or
o
Media
·
Used
with electronically controlled devices like computers, and
·
Stored
or created on, transmitted to or from, or used with computer programs,
including software utilized with computer peripherals.
12. Employee
(06 22 edition)
Employees are natural persons (not corporations):
(1) Who Meet All Of The Following Criteria:
·
Is in the named insured’s service, applying up to
30 days after such a person is terminated, unless the termination is due to
theft or any fraudulent or dishonest act committed by the employee
·
Is
compensated by the named insured through wages, commissions, or salary,
and
·
The
insured has the authority to manage or direct activities during services
provided for the named insured.
NOTE: The distinction
between employees and independent contractors can be unclear and somewhat
fluid. Recent court cases have examined long-term independent contracts to
assess whether individuals are genuinely independent or effectively employees.
Each case varies and needs expert legal advice to decide if these individuals
should be classified as employees or not.
|
Example: Kent fires employee Bob. On his last day, Bob
gathers keys and personal belongings, but he had made and kept a duplicate
key. Two weeks later, he uses this key to steal merchandise from Kent’s
warehouse. Bob qualifies as an employee under the definition and Insuring
Agreement A.1. Employee Theft covers his actions. |
(2) Who Are Temporary Substitutes
For A Permanent Employee
This applies only if:
·
The
permanent employee is on leave.
·
Supplied
to address seasonal or short-term workload requirements.
NOTE: To qualify as
employees, individuals must be under the control or direction of the named
insured while providing services to the named insured.
(3) Who is Leased to
the Named Insured:
·
under
a written agreement with a leasing firm, and
·
performing
duties related to the conduct of the named insured’s business.
This does not include
temporary employees as defined above.
(4) Who is Part of a
Non-ERISA employee benefit plan as follows:
·
Administrators, directors, managers, trustees, or employees.
·
A
plan director, trustee, or employee may have administrative responsibilities
solely related to the plan that are distinct from the insured’s business
activities. In such cases, directors, trustees, or employees of non-ERISA
employee benefit plans are regarded as employees only when managing the
plan's funds, securities, or other property.
NOTE: Third-party
administrators or other independent contractors hired to manage Non-ERISA covered employee benefit plan(s) are not
considered employees.
(5) Who are former
employees, directors, partners, members, managers, representatives, or trustees
the named insured uses as consultants.
(6) Who are interns or
guest students pursuing studies or duties.
(7) Who are employees
of merged or consolidated entities, provided the merger or consolidation
occurred before the effective date of the current policy.
(8) Who is your
manager, director, or trustee during:
·
The
scope of the usual duties of an employee.
·
The
typical duties assigned when appointed or elected to a
committee at the request of the board of directors, trustees, or functional
equivalent body to carry out specific, as opposed to general, directorial
actions on the insured’s behalf.
Employees are not:
·
brokers
·
agents
·
commission
merchants
·
factors
·
consignees
·
independent
contractors
·
any
similar roles listed above
·
any
other parties not specifically listed above as employees
13. Employee Benefit Plan
(06 22 edition)
This is a new
definition with the 06 22 edition.
Any employee benefit
plan, whether ERISA or Non-ERISA, listed as the first named insured on the
Declarations, is considered included as an insured if it is:
·
solely sponsored by another insured, or
·
jointly sponsored by another Insured and an employee
organization that exclusively benefits the insured employees, including a labor
organization.
14. ERISA Employee Benefit Plan
(06 22 edition)
In the 06 22 edition, ERISA has been added to the term Employee Benefit
Plan, and the phrase “shown in the declarations you sponsor” has been removed.
This is due to these plans can either be listed as the first named insured or
added to the policy by endorsement or legal language.
This is a welfare or
pension plan subject to the Employee Retirement Income Security Act of 1974
(ERISA) and amendments.
NOTES: Examples of these plans
include defined benefit pensions, target benefit plans, profit sharing, 401(k),
Keogh, and Simplified Employee Pension (SEP) Plans. It also covers group
health, life, disability, unemployment, and cafeteria (Section 125) plans, along
with prepaid legal services. However, government plans such as Social Security
are not considered employee benefit plans. This definition differs from the one
provided in Liability Coverage Forms.
15. ERISA Plan Official
(06 22 edition)
This is a new
definition with the 06 22 edition.
ERISA plan officials
are defined as natural persons, not corporations,
meeting the following criteria:
·
An individual acting as an administrator, fiduciary,
director, trustee, manager, or employee engaged with an ERISA employee benefit
plan; or
·
A director, trustee, or employee involved with an
insured-sponsored ERISA benefit plan who manages the funds, securities, or
other assets of the plan.
The ERISA plan official does not encompass the following:
·
agents
·
brokers
·
financial institutions
·
registered representatives
·
investment advisors
·
independent contractors
·
roles similar to the above
16. Financial Institution
(06 22 edition)
When Insuring
Agreement A. 3.—Inside the Premises–Theft of Money and Securities is
referenced, the financial institution is a(n):
·
bank
·
savings
bank
·
savings
and loan association
·
credit
union
·
similar
depository institution
·
insurance
company
When Insuring
Agreement A. 6.—Computer and Funds Transfer Fraud
is referenced, the financial institution is a(n):
·
bank
·
savings
bank
·
savings
and loan association
·
credit
union
·
similar
depository institution
·
insurance
company
·
investment
company
·
stock
brokerage firm
In any other Insuring
Agreement, aside from A.3.—Forgery
of Payment Card Instructions or A.6.—Computer and Funds Transfer Fraud, the term “financial institution” means any financial institution.
17. Financial Institution Premises
(06 22 edition)
The term 'premises' has
a specific definition that differs from its usual everyday use, so it requires
careful review.
·
This
definition refers only to the interior space of a building occupied by a
financial institution, as shown in F.16, as to
Insuring Agreement A.3.—Forgery of Payment Card
Instruments.
o
Sidewalks
and parking lots are not considered part of the premises of the financial
institution, even if they are owned or maintained by it.
·
If
the financial institution occupies only a portion of a building, then the
premises refers only to the area occupied by the
institution.
o
This
means hallways, elevators, other businesses, and the lobby of that building are
NOT financial institution premises even if the financial institution owns the
building but leases space to other occupants.
o
Premises
refers only to the area of the building actually occupied by the financial institution.
NOTE: This definition
applies only to Insuring Agreement A.3—Inside the Premises–Theft of Money and
Securities.
18. Forgery
(06 22 edition)
There are two parts to
the definition of forgery.
·
Signing
of another person's or entity's name.
·
The
intent to deceive.
Forgery does not occur
when someone signs another person's name without intent to deceive. Also, if a
person signs using their own name but lacks the
authority to do so, no forgery takes place.
19. Fraud or dishonesty
(06 22 edition)
This is a new
definition with the 06 22 edition.
The definition of fraud
or dishonesty includes:
·
larceny
·
theft
·
embezzlement
·
forgery
·
misappropriation
·
wrongful abstraction and conversion
·
willful misapplication
·
fraudulent or dishonest acts
·
when an act or arrangement is prohibited under Title 18,
Section 1954 of the US Code
NOTE: Fraudulent
instruction has been removed with the 06 22 edition
due to updates to the Computer and Funds Transfer Fraud Insurance Agreement.
20. Manager
A natural person who is
a director of a limited liability company.
NOTE: Manager is not the
typical employee with supervisory responsibilities. That person is considered
an employee.
21. Member
An owner of a limited
liability company who might also act as a manager. A member can be a natural
person or a non-human entity, such as a corporation or nonprofit organization,
but to serve as a manager, one must be a natural person.
22. Messenger
(06 22 edition)
Messengers are
individuals who have care and control of property while off the insured premises.
They can be the named insured, a relative, partners, members, or employees
of the insured.
NOTE: Most entities are not
individuals and do not have relatives. The expansion of the term
"messenger" to include relatives applies only when the named insured
is an individual.
23. Money
(06 22 edition)
This term means:
·
Currency
·
Coins
·
Banknotes
with a face value in regular use
·
Traveler’s
checks
·
Money
orders held for sale
It also includes any of
the named insured’s deposits with a financial institution. This broadening
applies only to coverage provided by Insuring Agreements:
·
A.1.a—Employee Theft
·
A.1.b—ERISA Plan Official Dishonesty
·
A.1.c—Employee Theft of Clients Property
·
A.2.—Forger
or Alteration
When Insuring
Agreement A. 6.—Computer and Funds Transfer Fraud
provides coverage, deposits of the named insured in any
financial institutions listed in the F.16
definition of Financial Institutions are also considered money.
NOTE: Cashier’s checks are
not considered money.
24. Non-ERISA Employee Benefit Plan
(06 22 edition)
This is a new
definition with the 06 22 edition.
It pertains to any
welfare or pension benefit plan that does not qualify as an ERISA plan.
25. Occurrence
(06 22 edition)
This term has different
meanings under different Insuring Agreements.
a. Insuring Agreements A.1.a—Employee Theft – and – A.1.c—Employee Theft of Clients Property
When referenced in Insuring Agreement A.1.a and A.1.c., an occurrence can be one act, multiple
acts combined, or a series of acts committed by an employee during the policy
period. These acts do not need to be connected, though they can be. The
employee may carry them out alone or in collusion with others.
|
Examples: Scenario 1: Five employees collaboratively skim money from
their company’s accounts at various times and through different methods. This
is considered one occurrence. Scenario 2: Five employees, unaware of each other’s plans or
actions, skim money from their company’s accounts at various times and using
different methods. Each incident is considered a separate occurrence. |
The policy period is
the period listed on the declarations, but as modified by Conditions:
·
E.1.l.—Loss Sustained During Prior Insurance Issued By Us or Any Affiliate, and
·
E.1.m. —Loss Sustained During Prior Insurance Not
Issued By Us or Any Affiliate
These conditions
explain how losses from previous insurance periods are managed.
b. When used in Insuring Agreement A.1.b—ERISA
Plan Official Dishonesty
·
Occurrence refers to a
single act, the aggregate of multiple acts, or a series of acts committed by an
ERISA plan official during the policy period.
·
These acts do not have
to be related, although they may be.
·
The act can be carried
out by the official alone or in collusion with others.
·
The policy period is
the period listed on the declarations, but as modified by Conditions:
o
E.1.l.—Loss
Sustained During Prior Insurance Issued By Us or Any
Affiliate, and
o
E.1.m.—Loss
Sustained During Prior Insurance Not Issued By Us or
Any Affiliate
These conditions explain how losses from previous insurance
periods are managed.
c. When used in Insuring Agreement A. 2—Forgery or Alteration
·
Occurrence
refers to a single act, the aggregate of multiple acts, or a series of acts
committed by an employee during the policy period involving one or more
instruments.
·
These
acts do not have to be related, although they may be.
·
The
employee may commit the act(s) alone or in collusion
with others.
·
The
policy period is the period on the declarations, but as modified in Conditions:
o
E.1.l.—Loss Sustained During Prior Insurance Issued By Us or Any Affiliate, and
o
E.1.m.—Loss Sustained During Prior Insurance Not Issued By Us or Any Affiliate
These conditions
explain how losses from previous insurance periods are managed.
d. When used in any other Insuring Agreement
·
Occurrence
refers to a single act, the aggregate of multiple acts, or a series of acts committed
during the policy period.
·
These
acts do not have to be related, although they may be.
·
The
act(s) may be committed by a person acting alone or in collusion with others.
·
The
act(s) are not required to have been committed by a person.
|
Example: The individuals involved in the theft
ring have not been identified. However, evidence indicates that an organized
group has stolen hundreds of different products from the insured’s warehouse
over the past five months. This is a single occurrence. |
·
The
policy period is the period on the declarations, but as modified in Conditions:
o
E.1.l.—Loss Sustained During Prior Insurance Issued By Us or Any Affiliate, and
o
E.1.m.—Loss Sustained During Prior Insurance Not Issued By Us or Any Affiliate
These conditions
explain how losses from previous insurance periods are managed.
26. Other property
(06 22 edition)
Tangible property with
inherent value but is not classified as money, securities, electronic data, or
computer programs. Additionally, it does not include any property excluded
elsewhere in this Insurance.
27. Premises
Premises means only the
interior space. It does not include the sidewalk, parking lot, or any outdoor
areas. Additionally, it pertains only to the interior of the part of the
building occupied by the named insured for conducting its business.
NOTE: What part of the
building does the named insured occupy when they are a tenant in a mall with an
interior corridor or if they, operate a pushcart or
kiosk inside the mall? How is the storage locker located in a different part of
the mall considered? The lease of the premises serves as the initial basis for
determining the meaning of 'premises' in these situations.
28. Robbery
There are three
conditions that must be met for a robbery to occur:
·
Property
must be taken from a person who has custody of that property.
·
The
taking must be considered unlawful.
·
The
person taking the property must take one of the following actions:
o
Cause
harm to the person who has custody of the property.
o
Threaten
to harm the one having custody of the property.
o
Commit
an unlawful act that the person having custody of the property witnesses.
|
Examples:
Scenario
1: A customer at
the end of an aisle in a store is seen shoplifting, prompting security to be
notified. Since no one has taken control of the property from another person,
a robbery has not actually occurred. Scenario 2: An employee takes a
package of product from one store to another. When
the employee stops at a stop sign, a pedestrian reaches into the vehicle and
steals the package. This constitutes a robbery because the employee had the
package and witnessed it being taken. |
29. Safe burglary
There are two types of
safe burglary. Both require that the activity be an unlawful taking.
·
The
first type is when the entire vault or safe is removed from the premises.
·
The
second is when property is removed from inside a locked safe or vault.
o
There
must be proof the safe or vault was entered by
forcible entry.
o
If
the safe is left open and items are removed, there is no safe burglary.
30. Securities
Securities represent
money or property, but they are not money or property. They are instruments and
contracts and can be negotiable or nonnegotiable.
Examples of such
instruments or contracts are:
·
tokens
·
tickets
·
revenue
·
stamps,
including stamps in a postage meter.
Evidences of debt associated
with credit or charge cards qualifies as securities but only if the named
insured did not issue these cards.
NOTE: Some securities may
represent commodities, such as grain or coal.
31. Subsidiary
(06 22 edition)
This is a new
definition with the 06 22 edition.
·
Any entity owned by the insured and covered by this
insurance, whether directly or indirectly, as of or prior to the effective date
of the policy specified in the declarations.
·
The insured must own more than 50% of the outstanding
securities or voting rights and have the authority to elect, appoint, or
control a majority of the entity's board of directors,
trustees, or equivalent body.
·
Similarly, it can also be an entity that the insured
creates or acquires during the policy period but is subject to
Consolidation–Merger–Acquisition—E.1.d(2).
·
Unless added by endorsement, this definition excludes joint
ventures or partnerships, even if the insured holds an ownership interest.
32. Theft
(06 22 edition)
Theft includes safe
burglary and robbery, but is not limited to these. The
only requirement is that the property be taken, and that act deprives the
insured of it.
Also included in this
definition is the unlawful taking of property that deprives a client. This
applies only as described in Insuring Agreement A.1.c—Employee
Theft of Clients Property.
|
Example: Manny’s Book Publishing allocated 3,000 books with
the intention of recycling them. However, Phyllis, an inventory clerk,
collected the books, loaded them into her van, and sold them on eBay. This
situation is not considered theft, as Manny was not truly deprived of his
property. |
33. Transfer account
An account held by the
named insured at a financial institution, used for transferring, paying, or
delivering money and securities.
The transfer can be
made by electronic means, such as computer telefacsimile, telephone, or other
electronic means, or by following written instructions that authorize specific
types of electronic transfers. However, these instructions are not those
covered under Insuring Agreement A.2—Forgery or Alteration.
34. Transfer instruction
(06 22 edition)
This is a new
definition with the 06 22 edition.
Under Insuring
Agreement A.6.b.—Computer and Funds Transfer Fraud
This is an instruction
received by a financial institution transmitted by:
·
email
·
text message
·
instant message
·
fax
·
telephone
·
other electronic
·
in writing
directing a financial
institution to transfer, pay, or deliver money or securities from an insured transfer
account to a person, entity, or account outside the insured’s control.
NOTE: This does not
include the instruments covered under A.2.—Forgery or
Alteration.
Under Insuring
Agreement A.7.—Fraudulent Impersonation
This is an instruction received
by an insured transmitted by:
·
email
·
text message
·
instant message
·
fax
·
telephone
·
other electronic means
·
in writing
directing an insured to
transfer, pay, or deliver money or securities to a person, entity, or account
outside the insured’s control.
35. Vendor
(06 22 edition)
This is a new
definition with the 06 22 edition.
A natural person or
entity with a written agreement to supply goods or services to the insured.
This excludes financial institutions and armored vehicle providers.
36. Watchperson
A person whose only
duty is to care for and safeguard the insured property inside the insured
premises.
NOTE: A watchperson hired by the named insured to
patrol the grounds is not a watchperson under the definition.
CR 00 20–COMMERCIAL CRIME COVERAGE FORM (DISCOVERY FORM)
This analysis focuses only on the parts of CR
00 20 that differ from CR 00 21, including the following sections:
- A. Insuring Agreements
- E. Conditions
o
h.
Extended Period to Discover Loss
o
l.
Loss sustained During Prior Insurance Issued by Us or Any Affiliate
o
m. Loss
Sustained During Prior Insurance Not Issued by Us or Any Affiliate
o
n.
Policy Bridge–Discovery Replacing Loss Sustained
NOTE: The HOW, WHAT, WHO, and WHERE
of coverage are unchanged. All differences are based on the “simple”
question of WHEN.
A. INSURING AGREEMENT
The primary difference in CR 00 20 is
that the occurrence can occur at any time, not exclusively within the policy
period.
|
Example:
Martin discovers his
trusted employee, John, stole equipment from him. He discovered the theft on
12/05/2025, while the theft occurred on 08/03/2023. The current policy period is 10/01/2025 to 10/01/2026. Scenario 1: Martin is covered under CR 00 20. The
loss is covered in the current policy period. Scenario 2: Martin may be covered under CR 00 21.
The loss is not covered in the current policy period but may be covered under
the extended reporting period. |
E. CONDITIONS
h. Extended
Period to Discover Loss
(06 22 edition)
CR 00 20 provides a 60-day period to
discover loss prior to the effective date of cancellation or termination,
whereas CR 00 21 provides a one-year period. All other parts of this condition
are identical.
|
Example:
Paula’s commercial crime policy period
is 10/01/2025 to10/01/202026. She does not renew coverage when the policy
expires on 10/01/2026. Gerald and Nancy had been stealing from Paula for
three years. She discovers this on 1/31/2027. Scenario 1: Paula is covered under CR 00 20. The loss is not covered
because it was not discovered within 60 days of the date coverage ended. Scenario 2: Paula is covered under CR 00 21. The loss is
covered because it was discovered within one year of the date coverage ended. |
k. Loss
Sustained During Prior Insurance Issued by Us or Any Affiliate
l. Loss
Sustained During Prior Insurance not Issued by Us or
Any Affiliate
CR 00 20 does not
contain conditions k. or l. because it does not include a limitation requiring
the occurrence to occur during the policy period. In contrast, CR 00 21
includes both these conditions due to that limitation.
n. Policy
Bridge–Discovery Replacing Loss Sustained
This condition applies only to CR 00 20 and only when coverage written
on a discovery basis replaces coverage written on a loss sustained basis. It is
also relevant only if the policy being replaced offered an extended discovery
period. This restriction applies only if that extended period was still in
effect when this policy was issued.
If a loss is discovered within the
extended reporting period of the prior coverage, this coverage pays only in excess of that coverage’s limit of insurance plus its
deductible. However, the payment will not exceed the difference between that
coverage’s limit plus its deductible and this coverage’s limit of insurance.
|
Example:
·
Marjorie’s
coverage, written on a discovery basis, has a term from 01/01/2025 to 01/01/2026.
·
Her
prior coverage was written on a loss-sustained basis from 01/01/2024 to
01/01/2025, with a one-year extended reporting period. ·
Marjorie
discovers a $100,000 loss on 03/02/2025. Scenario 1: The current limit of insurance is
$100,000. The prior limit of insurance was $100,000. The prior policy limit
pays the loss. Scenario 2: The current limit of insurance is
$100,000. The prior limit of insurance was $50,000. Marjorie collects $50,000
from the prior policy and 50,000 from the current policy. Scenario 3: The current limit of insurance is
$50,000. The prior limit of insurance was $100,000. In this case, the prior
policy pays the entire loss. |
CR 00 22–COMMERCIAL CRIME POLICY (DISCOVERY FORM)
This is a monoline
policy. Its wording is identical to CR 00 21, except it incorporates six
conditions from IL 00 17–Common Conditions not in CR 00 21. This means there
are more conditions and different letters assigned to them, but the actual
content remains unchanged.
There are six conditions
from IL 00 17 incorporated into CR 00 22, and one policy condition that is not
located in the CR 00 21.
The six common policy conditions from the IL 00 17 are as follows:
b. Cancellation or Termination – formerly Cancellation of Policy
With the 06 22 edition, this condition
has a new name and is included in both CR 00 21 & CR 00 22; however, the
coverage under each policy differs. This condition in the CR 00 22 06 22
edition is as follows:
(1) Policy Cancellation
·
The insurance company will send the cancellation
notice to the last mailing address on record for the first named insured.
·
The cancellation notice will specify the date when
the policy period ends, which is the effective date of cancellation.
·
If any premium refund is due, the insurance company
will issue it to the first-named insured.
o If the insurance company cancels the policy, the refund will be pro rata.
o If the first named insured cancels the policy, the refund could be less
than on a pro rata basis.
o Even if a refund has not been made, the cancellation is still in
effect.
·
If the cancellation notice is sent by mail, proof of
mailing serves as enough proof that it has been mailed.
If the policy is cancelled by the Insured:
The first-named insured can cancel the policy by
providing written notice via mail or delivery, prior to the cancellation date.
If the policy is cancelled for nonpayment:
The insurance company may cancel the policy by mailing or delivering
written notice of cancellation to the first named insured at least 10 days
prior to the cancellation's effective date.
If the policy is cancelled for any other reason by the insurance company:
If the insurance company cancels the policy for reasons other than
non-payment, it must provide 30 days written notice
before the effective date of the cancellation.
NOTE: If the state
where the policy is written requires more than 30 days
written notice, the state regulation's time frame will take precedence over this
policy term.
(2) Policy Termination
This is a new condition with the 06 22 edition.
·
If the first-named
insured has a change of control, the policy will terminate immediately upon the
date of change.
·
If the first-named
insured is dissolved voluntarily or is liquidated, the policy will terminate
immediately.
·
If any insured, other
than the first named insured, has a change of control for that insured, the
policy will terminate immediately as to the date of change.
·
If any insured, other
than the first named insured, is voluntarily dissolved or liquidated for that
insured, the policy will terminate immediately for that insured.
If the policy terminates due to any of the reasons listed
above, the first named insured will receive any prorated refund owed.
(3) Individual Insured Or
Coverage Cancellation
This is a new condition with the 06 22 edition.
Either the first named insured or the insurance company may
cancel this policy at any time for any insured, insuring agreement, or
coverage, as described in the Policy Cancellation paragraph (1) above.
(4) Termination Of Coverage As To Any Employee Or ERISA Plan Official
This is a new condition with the 06 22 edition.
The policy will be terminated immediately for any employee
or ERISA plan official when:
·
A designated person, HR
employee, or equivalent, discovers theft or fraudulent act by the employee or
ERISA Plan Official, regardless of whether it is discovered before or after
their employment by the insured.
The policy will terminate at least 30 days after the date
on the notice mailed to the first-named insured. This notice will be mailed or
delivered to the first named insured’s last known mailing address on record by
the insurance company.
If the notice is mailed, proof of mailing is sufficient to
show it was sent.
c. Changes
Only the first named
insured on the declaration can make policy changes, but only with the insurance
company's approval. Any amendments or waivers to the policy terms must be
provided through an endorsement issued by the insurance company and become part
of the Policy.
i. Examination of Your Books and Records
The insurance company
may review and audit the insured’s books and records related to the policy at
any time during the policy period stated on the declarations. Additionally,
they have up to three years after the policy expires to conduct such examinations.
k. Inspections and Surveys
The insurance company
may, but is not required to, conduct inspections and surveys, provide reports
to the insured about what they find, and suggest improvements. These
inspections are solely for determining insurability and setting premiums. They
are not safety assessments and do not evaluate the health or safety of workers
or the public, nor do they verify compliance with laws, regulations, codes, or
standards.
r. Premiums
The first named insured on the declarations
is responsible for paying premiums and will also receive any returned premiums.
v. Transfer Of Your Rights And Duties Under This Policy
The insured must assign
all recovery rights against any individual or entity for losses paid or settled
by the insurance company. Additionally, the insured must protect these rights
and ensure their duty is not compromised.
Since the CR 00 22 is a
monoline policy, it does not include IL 00 03–Common Policy Declarations or IL
00 17–Common Policy Conditions. Only the CR DS 02–Crime Policy Declarations and
CR 00 22—Commercial Crime Policy (Discovery Form) are required for a complete
policy.
Ø Lastly, the following policy
condition appears in CR 00 22 but is absent from CR 00 21 since CR 00 22 is
designated as a Discovery Form.
q. Policy Bridge – Discovery Replacing Loss Sustained
(06
22 edition)
If this policy replaced
a policy providing the insured with an extended period of
time to discover a loss after cancellation or termination,
and that time period did not terminate at the time
this policy became effective, the insurance company:
·
Will
not cover any loss occurring during the previous policy period if the insured
discovers the loss during the extended discovery period, unless the loss
exceeds the prior insurance's coverage limits and deductible.
o
If
the loss amount exceeds the limit of insurance and the deductible of the
previous insurance, the insurance company will pay the excess amount, but this
will be subject to this policy's terms and conditions.
·
If
the insurance company covers any loss on an excess basis, the payment will be
limited to the difference between the previous insurance's limit and
deductible, and the insurance limit shown on the Declarations. Furthermore, the
deductible specified on the Declaration will not be applied to the excess
loss.
·
E.1.0—Other Insurance Condition is not applicable to this
condition.
CR 00 23–COMMERCIAL CRIME POLICY (LOSS SUSTAINED FORM)
Just as the CR 00
22—Commercial Crime Policy (Discovery Form) —the CR 00 23 is a monoline policy.
Its wording is identical to that of the CR 00 21—Commercial Crime Coverage Form
(Loss Sustained Form), except it incorporates six conditions from IL 00
17–Common Conditions not in CR 00 21. This means there are more conditions and
different letters assigned to them, but the actual content remains unchanged.
The six conditions from IL 00 17
incorporated into CR 00 23 and identical to CR 00 22 are as follows:
b. Cancellation or Termination – formerly Cancellation of Policy
With the 06 22 edition, this
condition has a new name and is included with the CR 00 21 and CR 00 23;
however, the coverage under each policy differs.
The provisions under the CR 00 23
are identical to those under the CR 00 22.
(1) Policy Cancellation
(2) Policy Termination
(3) Individual Insured Or Coverage
Cancellation
(4) Termination Of Coverage As
To Any Employee Or ERISA Plan
Official
c. Changes
i. Examination of Your Books and Records
k. Inspections and Surveys
s. Premiums
w. Transfer of Your Rights and Duties Under This Policy
Since CR 00 23 is a monoline policy, it
does not include IL 00 03–Common Policy declarations or IL 00 17–Common Policy
Conditions when issued. A complete policy requires only CR DS 02–Crime Policy
Declarations and CR 00 23—Commercial Crime Policy (Loss Sustained).