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FIL 350 - Chapter 9

Commercial Crime Insurance

QuestionAnswer
4 types of crime subject to insurance 1. Theft 2. Robbery 3. Burglary 4. Safe burglary
Theft The unlawful taking of property to the deprivation of the insured - Includes robbery, burglary, shoplifting, employee theft & forgery
Robbery Unlawful taking of property by someone who: (1) has caused or threatens to cause bodily harm OR (2) has committed an obviously unlawful act witness by that person
Burglary The unlawful taking of property by a person who unlawfully enters or leaves the premises through forcible entry or exit
Safe burglary The taking of property from within a locked safe or vault - Must be marks of forcible entry
Commercial Crime Insuring Agreements (1-4) 1. Employee theft 2. Forgery or alteration 3. Inside the premises - theft of money or securities 4. Inside the premises - robbery or safe burglary of other property
Commercial Crime Insuring Agreements (5-8) 5. Outside the premises 6. Computer fraud 7. Funds transfer fraud - money and securities 8. Money orders and counterfeit paper currency
Insuring Agreement 1 - Employee theft - Covers theft of money, securities, and other tangible property (not computer programs or data) - It is NOT required that employee be guilty of a crime - Includes forgery of employee
Insuring Agreement 2 - Forgery or alteration - Pays for a loss that results directly from forgery or alteration of checks drawn by the insured or their agent - Must be for the intent to deceive - Excludes losses from insured or employees (that's Employee Theft) and losses from accepting forged doc
Insuring Agreement 3 - Inside the premises - theft of money and securities - Pays for the loss of money and securities inside the premises against theft, disappearance, or destruction (Fire) - Extensions for damage to the premises or containers (vaults) if related to the theft
Insuring Agreement 4 - Inside the premises - robbery or safe burglary of other property - Must have evidence of forcible entry - Extensions for damage to premises & containers - Internal limit of $5,000 for precious metals, gems, furs, or records
Insuring Agreement 5 - Outside the premises - Covers theft, disappearance, or destruction (fire) of money & securities while in the custody of a messenger - Also covers losses due to the actual or attempted robbery of other prop. - Internal $5,000 limit for precious metals, gems, furs, or records
Insuring Agreement 6 - Computer fraud - Covers loss of money, securities, and other prop if a computer is used to transfer property to hacker anywhere outside premises
Insuring Agreement 7 - Funds transfer fraud - money and securities - Covers fraudulent instructions directing a financial institution to transfer funds
6 additional Insuring Agreement options 1. Lessees of safe deposit boxes 2. Securities deposited w/ others 3. Guests' property 4. Destruction of electronic data or computer programs 5. Unauthorized reproduction of computer software by employees 6. Kidnap, ransom, and extortion coverage
Additional Insuring Agreement - Lessees of safe deposit boxes - Box owners only liable for damages if negligent - Provides bank customer recovery from insurer w/o proving negligence - Covers money & securities from theft, disappearance, or destruction & other prop from robbery, burglary, vandalism
Additional Insuring Agreement - Securities deposited with others - Protects owner of securities who may use them as collateral - Covers theft, disappearance, destruction
Additional Insuring Agreement - Guests' property - Designed for hotels to protect against liability from property loss of guests - Guests' property must be on insured's premises
Additional Insuring Agreement - Destruction of E-data or computer programs - BPP had small coverage - Covers data & programs against viruses and vandalism - Does NOT exclude employees
Additional Insuring Agreement - Unauthorized reproduction of computer software by employees - Covers heavy fines for employees who copy software without knowledge of insured
Additional Insuring Agreement - Kidnap, ransom, & extortion coverage (K&R) - Reimburses companies who may operate in high-risk areas
Government Crime Forms - Has two employee theft insuring agreements: (1) Per loss coverage w/ separate limit per occurrence of loss, (2) Per employee coverage is a high limit for all losses due to 1 employee
3 meanings of "occurrence" 1. An individual act; 2. The combined total of all separate acts whether or not related; or 3. A series of acts whether or not related committed by an employee acting alone or with others
Commercial crime general exclusions (1-3) 1. Dishonest acts or theft committed by named insured 2. Knowledge of dishonest acts of employees prior to policy period 3. No coverage for dishonest acts of employees (other than theft)
Commercial crime general exclusions (4-6) 4. Loss of confidential info such as trade secrets 5. Indirect loss such as BI after a burglary or expenses incurred to prove a loss 6. Damage from pollution, nuclear hazard, war, military action, gov't action/seizure
Employee theft exclusions - Inventory shortages (may have other causes, but records may be used if a loss has been proven) - Losses from unauthorized trading in securities - Losses from fraudulent warehouse receipts (which indicate ownership of a commodity by receipt owner)
Exclusions for Inside/outside the premises (Ins. Agreements 3, 4, & 5)(1-4) 1. Accounting or arithmetical E&O 2. Exchanges or purchases 3. Fire - except for $/securities & safe/vault 4. Money operated devices (vending/change machines) unless there is a continuous recording instrument tracking $
Exclusions for Inside/outside the premises (Ins. Agreements 3, 4, 5)(5-8) 5. Motor vehicles or equipment & accessories 6. Transfer or surrender of property (voluntary parting) 7. Vandalism 8. Voluntary parting w/ title to or possession of prop
Computer fraud exclusions - Credit (or debit) card transactions or loss of info on cards - Funds transfer fraud - Inventory shortages
Funds transfer fraud exclusion - Computer fraud (that's what Coverage 6 - Computer Fraud is for)
Loss-sustained version of crime coverage forms - Covers a loss that OCCURS during the policy period and the loss is discovered during the policy period or within the Extended Period to Discover Loss (usually 1 yr after policy term)
Discovery version of crime coverage forms - Covers a loss that is DISCOVERED during the policy period within the Extended Period to Discover Loss condition (usually 60 days after policy term) - Doesn't matter when loss occurred - Discovering loss means insured is aware of a loss
Extended Period to Discover Loss condition - Establishes the cutoff date for discovering losses if the policy is cancelled (1 yr for Loss-sustained Form, 60 days for Discovery Form) - This period ends as soon as replacement policy purchased
Loss Sustained During Prior Insurance condition Enables a business to change insurers without penalty provided there is no gap in coverage
Employee An individual who is currently employed by the insured or someone who was terminated within the past thirty days, subject to the control of the insured, and receives salary, wages, or commissions from the insured.
Money Currency, coins, bank notes, travelers checks, and money orders for sale to the public.
Securities Negotiable and nonnegotiable instruments or contracts representing either money or other property
Other Property Tangible property other than money and securities that has intrinsic value.
Forgery Signing the name of another individual or organization with intentions of deception.
Alteration Changing the meaning or terms of an instrument without consent of all parties to the instrument.
Include Retroactive Date for Named Insured endorsement Modification of discovery form through limiting coverage coverage to losses the insured incurs because of events occurring after the policy's retroactive date.
Policy Bridge- Discovery Replacing Loss Sustained endorsement Endorsement that smooths the transition between replacing a loss sustained form with a discovery form.
Created by: FIL350