CR 04 14–UNAUTHORIZED REPRODUCTION OF COMPUTER SOFTWARE BY EMPLOYEES
(February 2026)
This endorsement covers
the fines and penalties of the named insured resulting directly from employees
reproducing computer software without permission. Coverage is only applicable
if the action breaches a licensing agreement with a third-party vendor. The
reproduction must occur without the knowledge of the named insured, a designated
person, or anyone responsible for ensuring compliance with software
licensing terms.
This analysis is of the
06 22 edition. Changes are highlighted in bold. It does not cover format
changes that do not affect coverage.
This endorsement can be
added to the Insurance Services Office (ISO) Commercial Crime or Government
Crime Coverage Forms or Policies.
This is an endorsement
to the ISO Commercial Crime or Government Crime Coverage Forms and Policies and
is subject to their conditions, definitions, and exclusions. The only changes
are those within this endorsement.
The following is added
to Insuring Agreements A:
Unauthorized Reproduction
of Computer Software by Employees:
This insuring agreement
covers the financial repercussions of fines and penalties the insured incurs if
an employee reproduces third-party software without authorization, and without
the knowledge of the insured, a designated person, or anyone responsible
for ensuring compliance with the software licensing terms.
No coverage is available if the party
responsible for compliance or anyone aware of employees reproducing the
software knows about the violation. The insured must also be legally liable for
the loss.
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Example:
Out
of this World Software Applications is a software development company. A
representative from Out of this World provides a copy of its research
software to one of the Smith Management managers for review.
The manager then passes it to the
system administrator for her feedback. The administrator not only reviews it
but also likes it so much that she installs it on Smith Management’s network
without informing the manager. The manager does not proceed with the purchase
and returns the copy to the representative. A year later, Out of this World
discovers that its software had been installed on Smith Management’s network.
The company sues Smith Management for the software’s cost ($695) multiplied
by the number of potential users (359 employees), amounting to $249,505. This
loss is covered because Out of this World’s policy includes Form CR 04 14. |
The Limit of Insurance
stated on the Declarations is the maximum amount the insurance company will pay
for a loss occurrence.
A loss must exceed the
deductible shown in the Declarations before any payment will be made, and then
only up to the Limit of Insurance.
The following exclusion is replaced by this
endorsement:
·
Acts
Committed by Your Employees, ERISA Plan Officials, Managers, Directors,
Trustees, or Representatives:
Loss resulting from theft, fraud, or
dishonesty, regardless if acting alone or with others, or while
performing services for the insured.
However, this exclusion does not apply when a loss is covered under
one or more of the following Insuring Agreements:
o A.1.a – Fidelity Employee Theft
o A.1.b. – ERISA Plan Official Dishonesty
o
A.1.c. – Employee Theft of Clients’ Property
o This insuring agreement.
The following exclusions are added by this
endorsement:
·
Errors
Or Omissions in Design of Computer Programs
Loss that results from the design of a computer
program.
·
Errors
or Omissions in Programming
Loss that results from any processing or
programming of electronic data.
The following exclusion is replaced by this endorsement:
·
Duties
In The Event Of Loss
The Insured must notify local law enforcement if it
is believed a loss involves a violation of the law.
However, this condition does not apply when a loss is covered under
one or more of the following Insuring Agreements:
o A.1.a – Fidelity Employee Theft
o A.1.b. – ERISA Plan Official
Dishonesty
o A.1.c. – Employee Theft of Clients’
Property
o A.2. –Forgery or Alteration
o This insuring agreement.
This endorsement adds the following conditions
under this provision:
·
Electronic Data
If there
is loss of or damage to electronic data, the insurance company will cover
reasonable costs to restore or replace it. This includes data entry and
consultative services. If the data cannot be recovered or replaced, the
cost to replace the storage media where the data was stored is also
covered.
However,
there is no coverage for the cost of reproducing the research that created
the insured’s electronic data.
·
Computer Programs
If
there is loss or damage to computer programs, the insurance
company will cover the reasonable cost of replacement or
restoration. This includes reprogramming and
consultative services. However, there is no coverage for the cost of
reproducing the research that created the insured’s computer programs.
The following is added
to the definition of occurrence:
·
a single act or event
·
the sum of multiple acts
·
a sequence of acts or events
These acts or
events can be committed by an employee or another individual. They do not have
to be related, although they can be. They may be committed alone or in
collusion with others. The occurrence must happen before, during, or both
within the Policy Period indicated on the Declarations.
A Government Crime section is now included
in the 06 22 edition of this endorsement. It provides
the same coverage as the Crime Form and Policy above, but the main differences
lie in the entities to which the exclusions apply and the relevant Insuring
Agreements.
The following exclusion is replaced by this
endorsement:
·
Acts Committed by Your Employees, Officials or
Representatives:
Loss resulting from theft, fraud, or dishonesty, regardless
if acting alone or with others, or while performing services for the
insured.
However, this exclusion does not apply when the loss is covered
under one or more of the following Insuring Agreements:
o
A.1.a – Employee Theft
– Per Loss Coverage
o
A.1.b. – Employee Theft
– Per Employee Coverage
o
This insuring
agreement.
The following exclusions are added by this
endorsement:
·
Errors Or Omissions in
Design of Computer Programs
Loss that results from the design of a computer
program.
·
Errors or Omissions in
Programming
Loss that results from any processing or programming of
electronic data.
The following condition is replaced by this endorsement:
·
Duties In The Event Of
Loss
The Named Insured must notify local law enforcement if it
is believed a loss involves a violation of the law.
However, this condition does not apply when a loss is
covered under one or more of the following Insurance Agreements:
o
A.1.a – Employee Theft
– Per Loss Coverage
o
A.1.b. – Employee Theft
– Per Employee Coverage
o
A.2. – Forgery or
Alteration
o
This Insuring Agreement.
The following conditions are added by this endorsement:
·
Electronic Data
If there is loss of or damage to electronic data, the
insurance company will cover reasonable costs to restore or replace it. This
includes data entry and consultative services. If the data cannot be recovered
or replaced, the cost to replace the storage media where the data was stored is
also covered.
However, there is no coverage for the cost of reproducing
the research that created the insured’s electronic data.
·
Computer Programs
If there is loss or damage to computer programs, the
insurance company will cover the reasonable cost of replacement or restoration.
This includes reprogramming and consultative services.
However, there is no coverage for the cost of reproducing
the research that created the insured’s computer programs.
The following is added
to the definition of Occurrence:
·
a single act or event
·
the sum of multiple acts
·
a sequence of acts or events
These acts or
events can be committed by an employee or another individual. They do not have
to be related, although they can be. They may be committed alone or in
collusion with others. The occurrence must happen before, during, or both within the
Policy Period indicated on the Declarations.