Crime Insurance - Kenneth Rhodes & Associates

Commercial crime insurance protects large and small businesses from monetary losses caused by internal or third party business related crimes.

Stand-alone commercial property policies typically do not cover financial loss caused by employees, whereas commercial crime insurance policies are designed for them.

What Can it Cover?

A commercial crime insurance policy typically offers protection against employee dishonesty and theft, theft of securities, robbery, burglary, forgery, or electronic fraud.

A commercial crime policy may protect against fraudulent transferring of funds, computer fraud, extortion, kidnapping, ransom, and counterfeit money orders and currency.

Fraudulent transfer protection: If a bank receives a fraudulent request to transfer funds out of your business account, you may not be able to recoup the lost funds unless you have coverage provided by a commercial crime insurance policy.
Protection against altered, forged, or fake financial material: with a commercial crime insurance policy, you’re covered if someone provides altered financial material, a forged check, or counterfeit money to commit a criminal action against your business or company.
Protection against financial losses inside your place of business: In other words, if someone steals money that is kept on your company’s premises, commercial crime insurance can protect you against incurring the financial burden resulting from the loss.
Protection from losses that occur outside of the business property: If theft occurs, or damage to securities or other property occurs, outside of the business premises, you may be covered by commercial crime insurance.

What Does it Not Cover?

A commercial crime insurance policy will not cover business related losses caused by an employee after the insured has been made aware of the said crime, legal expenses, or fire related property damage.

In addition, commercial crime insurance does not cover:

Indirect business related losses: Commercial crime insurance does not cover business financial losses due to an interruption of work or otherwise losing potential income.
Theft of data: Data theft is not covered by commercial crime insurance, including trade secrets, lists of clients, specific company data, as well as intellectual property.

Are there Policy Limits?

Yes, commercial crime insurance has policy limits. While this may vary according to individual policy providers, there are a few common exclusions.

For instance, commercial crime policies will not cover losses caused by business-related crimes committed by managers or owners of a company.

Also, for a commercial crime insurance policy to cover a potential business related loss, it must fall under the categories of crimes listed in the policy.

Furthermore, the limit for commercial crime policies applies to each loss as a separate event and a series of different crimes are deemed a single loss if the crimes are committed by the same person or group.

Types of Crime Insurance Coverage

The Commercial Crime Program was introduced in 1986 and has undergone numerous revisions. There are seventeen coverage forms in the program. The seventeen forms are listed with brief descriptions. One or more of these forms can be issued as a monoline (stand alone) policy or as a “coverage part” of a commercial package (a combination of coverage forms as discussed previously).

Coverage Form A – Employee Dishonesty

Losses caused by employee dishonesty, regardless of the type property involved, are not covered under regular property insurance. So, a crime policy with employee dishonesty should be considered by any business with employees.

Many packages such as BOP (Business Owners Program) and CBOP (Contractors Business Owners Program) contain employee dishonesty coverage or offer it as an option. Businesses that do not fit into these classifications (BOP or CBOP) should consider crime policy.

For example, an employee who is given a company vehicle to drive home in connection with his job duties is trusted by his/her employer. The vehicle and its equipment is for the employee’s use to conduct the business of the employer.

Since the employer allows the use of this vehicle, it is not considered a “theft” in terms of the employer’s insurance coverage if one day the employee decides to take the vehicle, tools, and equipment.

Being that the employer voluntarily parted with the vehicle, he/she can’t recoup loss unless the employer has crime coverage for employee dishonesty.

Coverage Form B – Forgery or Alteration

This provides coverage on out-going instruments such as checks, drafts, promissory notes, bills of exchange, or similar documents drawn against the insured’s account.

Coverage Form C – Theft, Disappearance, and Destruction

This provides protection against theft, disappearance, and destruction. It is an extremely broad coverage. Theft is defined as “any act of stealing,” including robbery, burglary, sneak theft, etc. Disappearance is undefined.

There is no requirement that the disappearance be “mysterious” or have a presumption of theft. For example, if a messenger carrying a bag of money over a bridge accidentally drops the bag into the river and the bag cannot be recovered, the loss is covered.

Destruction, also undefined in the policy, is a broad term, encompassing loss by any cause that destroys money or securities. Protection against fire loss to money and securities is a principal benefit to the insured.

Of course, destruction does not include loss by nuclear reaction, war, governmental action, or any other cause of loss excluded in either the Crime General Provisions Form or Coverage Form C itself.

Coverage Form D – Robbery & Safe Burglary, Other than Money and Securities

This provides two coverages. Section 1 covers actual or attempted robbery and safe burglary inside the premises, and Section 2 covers loss from robbery or attempted robbery of a messenger outside the premises.

Under form D there isn’t coverage for taking property due to burglary of the rest of the premises, i.e., from other than a safe or vault. Coverage forms D, E, and H cover the same type of property, but for different perils or causes of loss.

Coverage H provides broader coverage than forms D and E.

Coverage Form E – Premises Burglary

This provides coverage for burglary and robbery of a watchperson inside the premises. Form E does not provide any protection outside the premises.

Coverage Form F – Computer Fraud

“Computer Fraud”’ means theft of property following and directly related to the use of any computer to fraudulently cause a transfer of that property from inside the “premises” or “banking premises” to some one or some place outside the premises.

The form does not cover simple vandalism of files or other information by those who gain unauthorized access to computer files. For example, a person might use his own computer to “break into” the computer of a business and issue instructions to pay a certain amount of money to someone.

If the check is successfully cashed there would be a loss payable under coverage form F.

Coverage Form G – Extortion Crime

This insures against loss of money, securities, and property other than money and securities, resulting directly from “extortion.”

Extortion means the surrender of property away from the premises as a result of a communication threat to do bodily harm to the insured or relative held captive.

Coverage Form H – Premises Theft and Robbery Outside the Premises, Other than Money and Securities

This form is used if a business wishes to insure property inside the premises and outside the premises, other than money and securities, against actual or attempted theft.

Form H Section 1 provides inside premises theft, while Section 2 provides the same coverage for robbery if a messenger is outside the premises. This form would provide better coverage than the narrower coverage of burglary form D and Robbery form E.

Coverage Form I – Lessee of a Safe Deposit Box

Section 1 insures securities for theft, disappearance, or destruction while inside the insured’s safe deposit box in a vault (depository premises), or during the course of deposit or removal from the safe deposit box.

Section 2 covers property other than money and securities in depository premises but only against actual or attempted burglary, robbery, or vandalism.

Coverage Form J – Securities Deposited with Others

This covers theft, disappearance, or destruction of securities deposited with others such as banks or trust companies. The coverage applies both inside and outside while being conveyed by a custodian.

For coverage to apply, the custodian and the depository must be named in the Form J schedule. Unlike most other coverage forms, this form cannot be amended or modified by endorsement.

Coverage Form K – Liability for Guests’ Property, Safe Deposit

This is used by lodging facilities to provide legal liability coverage for guests’ property. It covers legal liability for guests’ property stored in an insured’s safe deposit box.

This form contains no limitations on the type of property covered. Any property belonging to guests of the insured is covered while in a safe deposit box on premises.

Coverage Form L – Liability for Guests’ Property, Premises

This is used by lodging facilities to provide legal liability coverage for guests’ property. It covers the insured’s legal liability for guests’ property while on the premises or in the insured’s possession. Any property is covered, unless it is “excluded property.”

Excluded property is defined as samples or articles carried or held for sale or delivery, any vehicle – including equipment and accessories, or any property contained in or on a vehicle.

Coverage for samples and articles held for sale can be purchased by endorsement to the policy. These are strictly legal liability policies and do not provide coverage against loss of property if the insured is not legally liable.

Coverage Form M – Safe Depository General Provisions Form

Because safe deposit boxes are designed for the protection of valuables and that protection is expected by customers, safe deposit facilities create an important exposure for insured’s offering this service.

Two coverage forms (M and N) are used and each form is written with a separate limit of insurance. Coverage Form M provides safe depository liability coverage for loss of a customer’s property arising out of the insured’s having custody of others property as well as the requirement to return it in the same condition or prove that they took reasonable steps to protect it.

Coverage Form N – Safe Depository General Provisions Form

Two coverage forms (M and N) are used and each form is written with a separate limit of insurance. Coverage Form N provides safe depository direct loss coverage that covers customers’ property against direct loss or damage.

Unlike the majority of coverage forms in the Commercial Crime Program, these forms are not subject to the Commercial Crime General Provisions Form, but instead are used with a separate Safe Depository General Provision Form.

Coverage Form O – Public Employee Dishonesty Coverage

Used to cover employee dishonesty for governmental entities, Coverage Form O covers public employees on a per loss basis. It covers money, securities, and property other than money and securities against loss coerced by employee dishonesty.

Employee dishonesty means “only dishonest act committed by an employee, whether identified or not, acting alone or in collusion with other persona…” The act must be committed with the manifest intent to cause the insured to sustain loss and obtain financial benefit for the employee.

Coverage Form P – Public Employee Dishonesty Coverage

Used to cover employee dishonesty for governmental entities, Coverage Form P provides coverage per employee. It covers money, securities, and property other than money and securities against loss coerced by employee dishonesty.

Coverage Form Q – Robbery and Safe Burglary, Money and Securities

This covers money and securities robbery and safe burglary inside the premises as well as money and securities robbery of messengers outside the premises.

This coverage only insures money and securities. Section 1 contains two distinct coverages: one for actual or attempted robbery of a custodian inside the premises, the other for actual or attempted safe burglary inside the premises or banking premises.

Section 2 covers loss outside the premises resulting from actual or attempted robbery of a messenger.

Crime Package Plans

As stated earlier, the above forms can be written as a monoline policy or in a combination with other forms to form a Commercial Crime Package. The forms are combined in each package to give a particular scope of crime coverage. The following is a brief description of the designed packages:

Plan 1 – Commercial Crime

Any combination of Forms A through J and Q may be written. A separate limit of insurance and deductible may apply to each coverage form, coverage form section, or sub-section.

Plan 1 may be written for any insured except one that is eligible for a Financial Institution Bond. However, endowment funds, foundations, and mutual funds having one employee sales representative, although eligible for a Financial Institution Bond, are eligible for Plan 1.

It may not be written for public officials, political subdivisions, or any entity eligible for a Public Employee Blanket Bond, except state universities, colleges, or schools that meet certain requirements.

Plan 2 – Combination Crime, Single Limit

This plan was withdrawn November, 1988.

Plan 3 – Storekeepers Broad Form

This may be written for any insured with a single location and not more than four employees, other than an insured eligible for a Public Official Bond or Public Employee Blanket Bond.

Coverage Forms A through E are mandatory, with a uniform limit applying separately to each form. The limit may be $1,000; $1,500; $2,000; or $2,500. No other limits are available.

Plan 4 – Storekeepers Burglary and Robbery

This may be written for any insured. Forms D, E, and sections one and two of Form Q, are mandatory. Coverage can be changed from blanket to schedule by endorsement. As with Plan 3, a uniform limit – $1,000; $1,500; $2,000; or $2,500 – applies separately to each form.

Plan 5 – Office Burglary and Robbery

This covers money, securities, and other property pertaining to an office against burglary and robbery. Any insured is eligible. Coverage Forms D, H, and sections one and two of Form Q are mandatory, with a uniform limit of at least $1,000 applying separately to each form.

Form H must be amended with endorsement to limit covered property of office equipment. Coverage can be changed from blanket to schedule by endorsement.

Plan 6 – Guests’ Property, Safe Deposit Box

This is available for any insured that provides lodging facilities. Coverage Form K, insuring legal liability for loss of guests’ property from safe deposit boxes, is used without any coverage amendments.

Plan 7 – Guests’ Property, Premises

This covers legal liability for loss of guests’ property from within the premises, through Coverage Form L. Eligibility is the same for Plan 6.

Plan 8 – Safe Depository

This is only available to insureds other than financial institutions that provide safe deposit box facilities. Either Coverage Form M or N, or both, may be used.

If both forms are used, a separate limit applies to each. An endorsement may be used to reduce the limit of insurance for specified premises. Another endorsement may be used to extend coverage to the transfer of boxes between designated premises.

Plan 9 – Excess Bank Burglary and Robbery

This uses amended Coverage Form D, covering money, securities, and other property against robbery and safe burglary. Separate limits apply to robbery of a custodian and safe burglary.

Any banking or trust institution that is authorized to conduct business by the federal or state government is eligible.

Plan 10 – Bank Excess Securities

This provides coverage for theft, disappearance, or destruction of securities of the same types of institutions eligible for Plan 9. Coverage Form C is used with an amendment.

Plan 11 – Commercial Crime, Government Entities

Coverage Forms O, P, and B are used to cover money, securities, and property other than money and securities against public employee dishonesty.

Eligible types include local government, public utility, fire district, bridge or transit authority, state university, state college or state school, school district, board of education or similar authority, or public funded hospital.