Summary: The new crime program from Insurance Services Office (ISO) allows for crime to be written on a separate policy or as part of a package. It also now has two different policies—one for commercial entities and one for government entities. This treatment examines the form used for a separate policy for commercial entities.
While the previous crime program referred to this form as “employee dishonesty,” the current program incorporates “employee theft” and six other insuring agreements into one form, the “Commercial Crime Policy.” This form has two versions: CR 00 22 03 00 covers claims on a “discovery” basis and CR 00 23 03 00 provides coverage on a “loss sustained” basis. This treatment will note where the two forms differ.
The other insuring agreements are: forgery or alteration; theft of money and securities, inside the premises; robbery or safe burglary, inside the premises; outside the premises; computer fraud; and money orders and counterfeit paper currency. The insured chooses which of the agreements he or she needs and the declarations page is marked accordingly. The policy provides coverage where a limit is shown on the declarations.
Topics covered:
Definitions
Insuring agreement one—employee theft
Insuring agreement two—forgery or alteration
Insuring agreement three—inside the premises—theft of money and securities
Insuring agreement four—inside the premises—robbery or safe burglary of other property
Insuring agreement five—outside the premises
Insuring agreement six—computer fraud
Insuring agreement seven—money orders and counterfeit paper currency
Limit of insurance
Deductible
Exclusions applicable to the entire policy
Exclusions applicable to employee theft coverage
Exclusions applicable to other coverages
Conditions
Special condition—employee theft
Special conditions—forgery or alteration
Special conditions—robbery and safe burglary
Special conditions—computer fraud
Definitions
The defined terms come at the end of the policy. They are treated first here because the reader needs an understanding of the terms to better comprehend the policy. In the policy, any word in quotation marks is a defined term.
1. ”Banking Premises” means the interior of that portion of any building occupied by a banking institution or similar safe depository.
2. ”Client” means any entity for whom you perform services under a written agreement.
3. ”Counterfeit” means an imitation of an actual valid original which is intended to deceive and to be taken as the original.
4. ”Custodian” means you, any of your partners or “members”, or any “employee” while having care and custody of the property inside the “premises,” excluding any person while acting as a “watchperson” or janitor.
5. ”Employee”
a. ”Employee” means:
(1) Any natural person:
(a) While in your service (and for 30 days after termination of service); and
(b) Who you compensate directly by salary, wages or commissions; and
(c) Who you have the right to direct and control while performing services for you;
(2) Any natural person who is furnished temporarily to you:
(a) To substitute for a permanent “employee” as defined in Paragraph (1) above, who is on leave; or
(b) To meet seasonal or short-term work load conditions;
while that person is subject to your direction and control and performing services for you excluding, however, any such person while having care and custody of property outside the “premises”; or
(3) Any natural person who is:
(a) A trustee, officer, employee, administrator or manager, except an administrator or manager who is an independent contractor, of any “employee benefit plan(s)” insured under this policy; and
(b) Your director or trustee while that person is handling “funds” or “other property of any “employee benefit plan(s)” insured under this policy.
”Employee” does not mean:
(1) Any agent, broker, person leased to you by a labor leasing firm, factor, commission merchant, consignee, independent contractor or representative of the same general character, or
(2) Any “manager”, director or trustee except while performing acts coming within the scope of the usual duties of an “employee”.
6. ”Employee benefit plan(s)” means any welfare or pension benefit plan shown in the Declarations that is subject to the Employee Retirement Income Security Act of 1974 (ERISA).
7. ”Forgery” means the signing of the name of another person or organization with intent to deceive; it does not mean a signature which consists in whole or in part of one's own name signed with or without authority, in any capacity, for any purpose.
8. ”Funds” means “money” and “securities.”
9. ”Manager” means a person serving in a directorial capacity for a limited liability company.
10. ”Member” means an owner of a limited liability company represented by its membership interest, who also may serve as a manger.
11. ”Messenger” means you, or a relative of yours, or any of your partners or “members”, or any “employee” while having care and custody of property outside the “premises'
12. ”Money” means:
a. Currency, coins and bank notes in current use and having a face value; and
b. Travelers checks, register checks and money orders held for sale to the public.
13. ”Occurrence” means:
a. As respects insuring Agreement A.1., all loss caused by, or involving, one or more “employees”, whether the result of a single act or series of acts.
b. As respects Insuring Agreement A.2., all loss caused by any persons or in which that person is involved, whether the loss involves one or more instruments.
c. As respects all other Insuring Agreements:
(1) An act or series of related acts involving one or more persons; or
(2) An act or event, or a series of related acts or events not involving any person.
14. ”Other Property” means any tangible property other than “money” and “securities” that has intrinsic value but does not include any property excluded under this policy.
15. ”Premises” means the interior of that portion of any building you occupy in conducting your business.
16. ”Robbery” means the unlawful taking of property from the care and custody of a person by one who has:
a. Caused or threatened to cause that person bodily harm; or
b. Committed an obviously unlawful act witnessed by that person.
17. ”Safe burglary” means the unlawful taking of:
a. Property from within a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by marks or forcible entry upon its exterior; or
b. A safe or vault from inside the “premises.”
18. ”Securities” means negotiable and nonnegotiable instruments or contracts representing either “money” or other property and includes:
a. Tokens, tickets, revenue and other stamps (whether represented by actual stamps or unused value in a meter) in current use; and
b. Evidences of debt issued in connection with credit or charge cards, which cards are not issued by you;
but does not include “money.”
19. ”Theft” means the unlawful taking of “money”, “securities”, or “other property” to the deprivation of the Insured.
20. ”Watchperson” means any person you retain specifically to have care and custody of property inside the “premises” and who has no other duties.
Analysis
A “banking premises” is just that—a bank or some other place occupied as a depository institution. “Client” refers to a client of the named insured. “Counterfeit” is an imitation, but its intent must be to deceive.
The policy defines “custodian” as the named insured, any of the named insured's partners or “members”, or any “employee”. The definition excludes any person while acting as a “watchperson” or janitor, meaning that robbery of covered property in the care and custody of a “watchperson” or janitor, even though it occurs inside the premises, is not covered.
“Employee” means any “natural person” (1) while in the insured's service and for thirty days after termination of service, (2) whom the insured compensates directly by salary, wages, or commissions, and (3) whom the insured has the right to direct and control while performing services for the insured. Also considered employees are persons furnished temporarily to the named insured (from a “temp” agency), while those persons are serving in the capacity of an employee of the insured. However, such persons are not treated as employees while having care and custody of insured property outside the premises.
The concept of “employee” for coverage purposes does not encompass agents, brokers, factors, commissions merchants, consignees, independent contractors, or “representatives of the same general character.” The current version adds “leased employees” as another category not meeting the definition. Managers (of an LLP or LLC), directors, or trustees are not considered “employees” except while performing acts coming within the scope of the usual duties of an employee.
“Employee benefit plan(s)” is not just any benefit offered by an employer. Rather, to meet the definition, a plan must be subject to the Employee Retirement Security Act of 1974 (ERISA).
“Funds” is a new definition. It encompasses both money and securities.
“Manager” and “member” have been added, in order to recognize the growing number of businesses organized as limited liability companies (LLC).
A “messenger” is the named insured or any partner or “employee” of the named insured while having care and custody of the money or securities outside the insured's premises. The current edition of the form adds relatives of the named insured as well as “members” of an LLC to the definition of messenger.
“Money” means “currency, coins and bank notes in current use and having a face value; and travelers checks, register checks, and money orders held for sale to the public.” Because bullion does not have a face value it does not come within the scope of the definition of money and is considered to be “other property”.
“Occurrence” is defined in three slightly different ways. The first is for use under the “employee theft” insuring agreement. The form says that for employee theft, occurrence means ”all loss caused by, or involving, one or more employees, whether the result of a single act or series of acts.” This limits recovery to one limit of insurance in the event of employee collusion. For “forgery or alteration” occurrence is all loss caused by one person, regardless of the number of forged or altered instruments involved. For the other insuring agreements, an occurrence is an act or a series of acts.
“Other property” means any tangible property other than money (as defined) and securities (as defined) that has intrinsic value, but does not mean property specifically excluded by the policy.
A “premises” is the interior of the building where the insured conducts business.
“Robbery” is defined as the unlawful taking of property from the care and custody of a person by one who has (a) caused or threatened bodily harm to that person or (b) committed an obviously unlawful act witnessed by that person. By virtue of part (a) of the definition, there has clearly been a robbery in any case that the wrongdoer has harmed—or only threatened to harm—the custodian.
If covered property is stolen from a custodian who has been harmed by some other cause, that is not a robbery in the sense that it is defined in part (a) of the definition. An example is a custodian who has suffered a heart attack or other ailment on the premises and is unconscious during the theft. It is interesting to note that the definition of robbery in previous crime policies specifically included theft from a custodian who had been killed or rendered unconscious through no act of the thief.
As set forth in part 2 of the definition, a robbery need not involve threatened or actual violence against the custodian. If the custodian witnesses a theft of covered property from his or her care and custody, there will have been a robbery. If, for example, a storekeeper sees a customer grab an expensive coat off a rack and run outside with it, there will have been a robbery, even though the thief made no threats.
“Safe burglary” can be one of two things: the unlawful taking of property out of a locked safe or the taking of the safe itself.
Although the items listed in the definition of “securities” are specifically included in the definition, the term “securities” is not limited to such items. For example, in the Colorado case of Concordia Lutheran Evangelical Church v. United States Casualty Co., 115 A.2d 307 (1955), the meaning of securities (defined in virtually identical language) was held to include signed blank checks that were stolen from the insured before they were completed and successfully negotiated by the thief. (Although this case is over forty years old, it remains valid.)
“Theft” means the unlawful taking of the covered property. The current version adds “unlawful” to emphasize the criminal nature of the activity covered.
A “watchperson” is any person retained by the named insured specifically to have care and custody of property inside the premises and who has no other duties.
Insuring Agreement One—Employee Theft
A. Insuring Agreements Coverage is provided under the following Insuring Agreements for which a Limit of Insurance is shown in the Declarations:
1. Employee Theft
We will pay for loss of or damage to “money”, “securities” and “other property” resulting directly from “theft” committed by an “employee”, whether identified or not, acting alone or in collusion with other persons.
Analysis
The first insuring agreement covers money, securities, and other property for theft. The theft must be by an employee of the named insured. The theft is covered whether or not the employee can be identified, and whether or not the employee is acting “alone or in collusion with other[s].” Note that theft as well as the types of covered property are all defined terms which have been discussed previously.
The previous edition of the crime form covered “employee dishonesty” as opposed to “theft.” The previous form covered all dishonest acts committed by an employee that were intended to cause harm to the named insured. The new form covers theft of money, securities, or other property.
In the previous form, the dishonest acts had to have a dual intention: to cause harm to the employer and to result in financial gain for the dishonest employee. In the new form, the act must only result in loss to the “deprivation of the Insured.”
Insuring Agreement Two—Forgery or Alteration
2. Forgery or Alteration
a. We will pay for loss resulting directly from “forgery” or alteration of checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain in “money” that are:
(1) Made or drawn by or drawn upon you;
(2) Made or drawn by one acting as your agent;
or that are purported to have been so made or drawn.
b. If you are sued for refusing to pay any instrument covered in Paragraph a. above, on the basis that it has been forged or altered, and you have our written consent to defend against the suit, we will pay for any reasonable legal expenses that you incur and pay in that defense. The amount we will pay is in addition to the Limit of Insurance applicable to this insuring agreement.
Analysis
The second coverage, forgery or alteration, protects the insured in case someone forges or alters checks, promissory notes, etc. in the insured's name. The offending person does not have to be associated with the insured in any way.
A business may be sued if its checks are forged and it refuses to pay the check. In this event, the policy provides defense coverage for the insured to fight the suit.
Insuring Agreement Three—Inside the Premises—Theft of Money and Securities
3. Inside the Premises—Theft of Money and Securities
a. We will pay for loss of “money” and “securities” inside the “premises” or “banking premises” resulting directly form “theft”, disappearance or destruction.
b. We will pay for loss from damage to the “premises” or its exterior resulting directly from an actual or attempted “theft” of covered property if you are the owner of the “premises” or are liable for damage to it.
c. We will pay for loss of, and loss from damage to, a locked safe, vault, cash register, cash box or cash drawer located inside the “premises” resulting directly from an actual or attempted “theft” of or unlawful entry into those containers.
Analysis
The causes of loss in agreement 3—theft, disappearance, and destruction—represent an extremely broad scope of coverage, comparable to special causes of loss coverage under commercial property forms.
“Theft” is defined in the form as “unlawful taking” and therefore includes robbery, burglary, sneak theft, etc. Many of the exclusions found in the crime form (and discussed later in these pages) are aimed at defining what kinds of theft losses are not covered—the exclusions of employee dishonesty, extortion, and voluntary parting with property are examples.
Disappearance, undefined in the policy, is also capable of broad application. Note that the policy does not require that the disappearance be “mysterious” or accompanied by a presumption of theft.
Destruction, also undefined in the policy, is a broad term, encompassing loss by any cause of loss 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 the form.
Section “a”, the inside premises coverage, applies only within the interior of the part of any building that the insured occupies in conducting its business; or within the interior of the part of any building occupied by a bank or similar safe depository. Theft of money from the insured's parking lot, for example, would not be covered under section “a” even though the parking lot is on the insured's grounds. However, for an additional premium, the definition of premises can be amended, by endorsement, to include the entire plot of ground under the insured's control.
Two other coverages apply to inside premises coverage. The first covers damage to the premises or its exterior resulting from an actual or attempted theft of covered property. The named insured must be the owner of the premises or liable for damage to the premises. The second pays for loss of or damage to a locked safe, vault, cash register, cash box, or cash drawer in the premises that results from an actual or attempted theft of or unlawful entry into the container.
Insuring Agreement Four—Inside the Premises—Robbery or Safe Burglary of Other Property
4. Inside the Premises—Robbery or Safe Burglary of Other Property
a. We will pay for loss of or damage to “other property”:
(1) Inside the “premises” resulting directly from an actual or attempted “robbery” of a “custodian”; or
(2) Inside the “premises” in a safe or vault resulting directly from an actual or attempted “safe burglary”.
b. We will pay for loss from damage to the “premises” or its exterior resulting directly from an actual or attempted “robbery” or “safe burglary” of “other property”, if you are the owner of the “premises” or are liable for damage to it.
c. We will pay for loss of or damage to a locked safe or vault located inside the “premises” resulting directly from an actual or attempted “robbery” or “safe burglary”.
Analysis
Agreement four 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. In the earlier crime program, each coverage was separately rated and available to be purchased with or without the other. In the current program, they must be bought together under agreement four. As in agreement three, this agreement also covers damage to the premises if the insured owns—or is responsible for—the premises.
Included in the insuring agreement is coverage for damage to covered property, as well as coverage for direct loss of covered property. For example, if the property is damaged but not stolen in an attempted robbery, the damage to the property is covered.
Insuring Agreement Five—Outside the Premises
5. Outside the Premises
a. We will pay for loss of “money” and “securities” outside the “premises” in the care and custody of a “messenger” or an armored motor vehicle company resulting directly from “theft”, disappearance or destruction.
b. We will pay for loss of or damage to “other property” outside the “premises” in the care and custody of a “messenger” or an armored motor vehicle company resulting directly from an actual or attempted “robbery”.
Analysis
This agreement covers theft, disappearance, or destruction of covered property outside the premises. The property must be in the care of a messenger or armored car company.
Insuring Agreement Six—Computer Fraud
6. Computer Fraud
We will pay for loss of or damage to “money”, “securities” and other property resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the “premises” or “banking premises”:
a. To a person (other than a “messenger”) outside those “premises”; or
b. To a place outside those “premises.”
Analysis
Agreement six covers “money,” “securities,” and “other property”.
In the previous crime program, only theft was covered as a result of computer fraud. In the new program, loss of or damage to the covered property is insured as a result of computer fraud.
“Computer Fraud” means “the use of any computer to fraudulently cause a transfer of that property from inside the 'premises' or 'banking premises' to a person (other than a 'messenger') outside those 'premises' or to a place outside those 'premises.'”
Thus, the loss or damage must be accomplished through the use of a computer. This may be a computer on the premises that the perpetrator gains access to, or it may be a computer located outside the premises. The controlling factor here is that the computer was used to fraudulently cause a transfer of property from inside the premises to someone, or somewhere, outside the premises.
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 a fictitious payee at a particular location. If the perpetrator succeeded in cashing the check made out to the fictitious payee, he would have caused a loss payable under agreement six.
Computer fraud includes transfer of property from inside a “banking premises” to someone or someplace outside those premises. For example, if someone illegally gains access to the bank's computer and instructs it to transfer funds from the insured's account to the wrongdoer, the loss will be covered. “Banking premises” are defined as “the interior of that portion of any building occupied by a banking institution or similar safe depository.”
The definition of computer fraud states that transfer of covered property to a “messenger” is not covered. A “messenger” is the named insured, any of the named insured's partners or relatives, or any “member” or “employee” while having care and custody of the property outside the “premises.” “Premises” is defined as the interior of that portion of any building the named insured occupies in conducting its business.
Insuring Agreement Seven—Money Orders and Counterfeit Paper Currency
7. Money Orders and Counterfeit Paper Currency
We will pay for loss resulting directly from your having accepted in good faith, in exchange for merchandise, “money” or services:
a. Money orders issued by any post office, express company or bank that are not paid upon presentation; or
b. ”Counterfeit” paper currency that is acquired during the regular course of business.
Analysis
Insuring agreement seven provides coverage for acceptance in good faith of counterfeit money orders and paper currency.
Note that a money order need not be counterfeit in order to be worthless. The money order may appear valid, but upon presentation it is not honored, perhaps because it was stolen, or an incorrect issuing signature used. The difference becomes apparent when reviewing the definition of “counterfeit”: “made in imitation of something else with intent to deceive” (Webster's Collegiate Dictionary, Tenth Edition). In other words, a money order may prove to be invalid without necessarily being counterfeit. Obviously, this distinction cannot apply to paper currency, so that only counterfeit currency is covered.
The previous form limited coverage to currency from only the United States and Canada. The current edition covers any counterfeit currency.
The money order or currency must be accepted in good faith, and must be in exchange for goods, money or services. Black's Law Dictionary, Sixth Edition, defines “good faith” as “an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud…”. The person or persons accepting the money order or currency must genuinely believe the money order or currency to be valid, and must accept them in the normal course of business. Note that this form makes no reference to “premises.” It is only important that the act take place during the regular course of business.
Limit of Insurance
B. Limit of Insurance
The most we will pay for loss in any one “occurrence” is the applicable limit of insurance shown in the declarations.
Analysis
The form provides coverage for loss in any one occurrence. The most the insurer is obligated to pay for loss in any one occurrence is the applicable limit of insurance shown in the crime policy declarations. There are three definitions of “occurrence” in the form. The first applies to employee theft coverage: “all loss caused by, or involving, one or more employees, whether the result of a single act or series of acts.” This limits recovery to one limit of insurance in the event of employee collusion.
For example, assume three employees discover they can steal cash at the end of each shift, and with each other's assistance, are able to cover the theft for several months. This would be one occurrence. However, if these employees are involved in theft from their employer independently and without knowledge of each other's actions, there would be three occurrences.
The second definition of occurrence applies to forgery or alteration coverage. It is based on a person's involvement. No matter how many instruments one person forges or alters, the policy considers it to be one occurrence.
For all other insuring agreements, an occurrence is an act or event or a series of acts or events.
Deductible
C. Deductible
We will not pay for loss in any one ” occurrence” unless the amount of the loss exceeds the deductible amount shown in the Declarations. We will then pay the amount of loss in excess of the deductible amount, up to the limit of insurance. In the event more than one Deductible Amount could apply to the same loss, only the highest Deductible Amount may be applied.
Analysis
The deductible clause states that the insurer is liable in excess of the deductible up to the limit of coverage for an insured occurrence. Though the insurer incurs no liability for loss up to the deductible amount, a provision requires the insured to report all losses caused by employee dishonesty and, if requested, to provide a statement describing the loss. Such a report causes the “cancellation as to any employee” provision to come into effect (see below).
Exclusions Applicable to the Entire Policy
D. Exclusions
1. This policy does not apply to:
a. Acts Committed by You or Your Partners
Loss resulting from “theft” or any other dishonest act committed by:
(1) You; or
(2) Any of your partners or “members”;
whether acting alone or in collusion with other persons.
b. Acts of Employees, Managers, Directors, Trustees or Representatives
Loss resulting from “theft” or any other dishonest act committed by any of your employees, managers, directors, trustees or representatives:
(1) Whether acting alone or in collusion with other persons; or
(2) While performing services for you or otherwise;
except when covered under Insuring Agreement A.1.
c. Governmental Action
Loss resulting from seizure or destruction of property by order of governmental authority.
d. Indirect Loss
Loss that is an indirect result of any act or “occurrence” covered by this insurance including, but not limited to, loss resulting from:
(1) Your inability to realize income that you would have realized had there been no loss of or damage to “money”, “securities”, or “other property”.
(2) Payment of damages of any type for which you are legally liable. But, we will pay compensatory damages arising directly from a loss covered under this insurance.
(3) Payment of costs, fees or other expenses you incur in establishing either the existence or the amount of loss under this insurance.
e. Legal Expenses
Expenses related to any legal action, except when covered under Insuring Agreement A.2..
f. Nuclear: Loss resulting from nuclear reaction, nuclear radiation or radioactive contamination, or any related act or incident.
g. War and Similar Actions: Loss resulting from war, whether or not declared, warlike action, insurrection, rebellion or revolution, or any related act or incident.
Analysis
The above exclusions apply to all insuring agreements of the commercial crime policy. Below, exclusions are specified as applying to a certain insuring agreement. Two of the exclusions—war and nuclear reaction or radiation—are commonly found in many property and liability coverage forms.
There is no coverage for loss resulting from any dishonest or criminal act committed by the insured or any partner while acting alone or in collusion with others. The current form adds “member” to this exclusion.
Coverage is excluded for loss resulting from seizure or destruction of property by order of governmental authority (this exclusion was developed to clarify that this exposure is not intended to be covered under a crime policy).
It is important to note that coverage is excluded for any indirect or “consequential” loss resulting from any covered act or occurrence. The form lists three examples of indirect losses: (a) the insured's loss of income that would have been realized had there been no loss (thieves' ransacking of the premises causes the shop to close for a day while shelves are rearranged and restocked); (b) payment of damages of any type for legal liability (as for a customer's loss of use of stolen property—but compensatory damages arising directly from a covered loss are covered); and (c) payment of costs, fees, or other expenses incurred in establishing either the existence or the amount of a loss. The foregoing are only examples. They do not exhaust the possibilities of indirect—and uninsured—loss.
The policy does not cover expenses related to any legal action, with one exception. If the insured has purchased agreement two, forgery or alteration, the policy does provide expenses for the defense of a suit over a forged or altered instrument.
2. Insuring Agreement A.1 does not apply to:
a. Employee Cancelled Under Prior Insurance
Loss caused by any “employee” of yours, or predecessor in interest of yours, for whom similar prior insurance has been cancelled and not reinstated since the last such cancellation.
b. Inventory Shortages
Loss, or that part of any loss, the proof of which as to its existence or amount is dependent upon:
(1) An inventory computation; or
(2) A profit and loss computation.
However, where you establish wholly apart from such computations that you have sustained a loss, then you may offer your inventory records and actual physical count of inventory in support of the amount of loss claims.
c. Trading
Loss resulting directly or indirectly from trading, whether in your name or in a genuine or fictitious account.
d. Warehouse Receipts
Loss resulting from fraudulent or dishonest signing, issuing, cancelling or failing to cancel, a warehouse receipt or any papers connected with it.
Analysis
Insuring agreement A.1, employee theft, is subject to four additional exclusions. The insurer is not liable for losses caused by any employee of the named insured, or predecessor in interest of the named insured, for whom coverage has been cancelled under a similar prior policy and not reinstated since the last cancellation. There is also an exclusion of loss, or that part of any loss, dependent upon an inventory computation or a profit and loss computation to prove the existence of the loss. There is also no coverage if the insured suffers loss from trading or from fraudulent or dishonest warehouse receipts.
Exclusions Applicable to Other Coverages
3. Insuring Agreements A.3, A.4, and A.5 do not apply to:
a. Accounting or Arithmetical Errors or Omissions
Loss resulting from accounting or arithmetical errors or omissions.
Analysis
Because of this exclusion, the insurer is not liable, for example, for losses such as giving a customer too much change.
b. Exchange or Purchases
Loss resulting from the giving or surrendering of property in any exchange or purchase.
Analysis
Loss resulting from giving or surrendering property in any exchange or purchase is excluded. If, for example, the insured gives or surrenders covered property in a fraudulent transaction, the resulting loss is not covered. Note that much the same exposure is excluded by the exclusion of voluntary parting of the title to property, as discussed below.
c. Fire
Loss from damage to the “premises” resulting from fire, however caused, except:
(1) Loss from damage to a safe or vault; and
(2) Under Insuring Agreement A.3., loss of or damage to “money” and “securities.”
Analysis
There is no coverage for fire damage to the “premises” (i.e., the interior of that part of any building the insured occupies in conducting its business). This exclusion does not apply to loss of money or securities by fire, nor to damage to a safe or vault by fire. The exclusion would eliminate coverage, for example, for fire damage to the premises resulting from a break-in. Such damage is properly covered by a property policy.
d. Money Operated Devices
Loss of property contained in any money operated device unless the amount of “money” deposited in it is recorded by a continuous recording instrument in the device.
Analysis
Loss of property contained in any money operated device (e.g., a vending machine) is excluded. However, the exclusion does not apply if the amount of money deposited in the device is recorded by a continuous recording instrument in the device. This raises the question of whether coverage applies if the whole machine is taken. A stolen machine may have a continuous recording device in it, so that money in the machine would be covered—and the question becomes one of determining the amount of loss.
e. Motor Vehicles or Equipment and Accessories
Loss of or damage to motor vehicles, trailers or semitrailers or equipment and accessories attached to them.
Analysis
The policy provides no coverage for these items. Again, they are better covered elsewhere.
f. Transfer or Surrender of Property
(1) Loss of or damage to property after it has been transferred or surrendered to a person or place outside the “premises” or “banking premises”:
(a) On the basis or unauthorized instructions;
(b) As a result of a threat to do bodily harm to any person; or
(c) As a result of a threat to do damage to any property.
(2) But, this exclusion does not apply under Insuring Agreement A.5 to loss of “money”, “securities”, or “other property” while outside the “premises” in the care and custody of a “messenger” if you:
(a) Had no knowledge of any threat at the time the conveyance began; or
(b) Had knowledge of a threat at the time the conveyance began, but the loss was not related to the threat.
Analysis
This exclusion eliminates coverage for loss of property after it has been transferred or surrendered to a person or place outside the premises, in either of two situations: (1) when the money or securities have been transferred or surrendered on the basis of unauthorized instructions; or (2) when the transfer or surrender occurs because of a threat to do bodily harm to any person or damage to any property. The transfer or surrender exclusion does not apply under agreement A.5 (outside premises coverage) if the named insured had no knowledge of any threat at the time the conveyance of the property began, or if the loss is unrelated to the threat.
The first part of this exclusion eliminates coverage for theft by computer fraud, which can be insured under agreement six. Other losses caused by unauthorized instructions would also be excluded. For example, if someone impersonating a creditor informs the insured of a fraudulent address change and a check is sent to the criminal's address, no coverage applies. The second part of the exclusion eliminates coverage for extortion losses, where, typically, an extortionist threatens to harm a person or destroy property unless demands, usually for cash, are met. Insurance against threats to do damage to property is available only as a specialty coverage; there is no ISO form or endorsement.
g. Vandalism
Loss from damage to the “premises” or its exterior or to any safe, vault, cash register, cash box, cash drawer, or “other property” by vandalism or malicious mischief.
Analysis
Loss by vandalism or malicious mischief to the “premises” or its exterior is excluded. The policy also excludes damage or loss to containers of covered property. It then goes on to list examples of such containers. Loss by vandalism or malicious mischief to covered money and securities is not excluded, however.
With respect to property other than money and securities, this exclusion needs to be considered in connection with two of the coverages under Agreement Three discussed earlier, relating to damage to containers of covered property on the premises caused by actual or attempted theft or unlawful entry. Thus, in a money or securities loss involving damage to containers or the premises, it is necessary to distinguish between vandalism or malicious mischief on the one hand and damage resulting from actual or attempted theft or unlawful entry on the other. If burglars break a window to enter the insured's building, that portion of the loss is insured under agreement three. If the burglars then damage a cash drawer to open it, that portion of the loss is also covered. But, if the burglars proceed to vandalize the premises—splashing paint on the walls, breaking office machines, destroying records, or otherwise damaging property out of sheer spite rather than in an effort to gain access to covered property—none of the vandalism will be covered. Ordinarily, a commercial insured has coverage against vandalism or malicious mischief under its building or personal property insurance.
h. Voluntary Parting of Title to or Possession of Property
Loss resulting from your, or anyone acting on your express or implied authority, being induced by any dishonest act to voluntarily part with title to or possession of any property.
Analysis
This exclusion eliminates coverage for what has traditionally been called the “trick or device” exposure. The commercial crime policy does not cover loss that results from “tricking” the named insured. “Tricking” of anyone acting on the named insured's express or implied authority is also not covered. Specifically, such “tricking” involves convincing the person to “voluntarily part with title to or possession of any property.”
If, for example, someone impersonating a messenger induces the named insured or an employee to entrust him with the insured's daily deposits and absconds with the property, the loss will not be covered. Unlike exclusion f, voluntary parting or surrender of property need not be based on unauthorized instructions.
4. Insuring Agreement A.6 does not apply to:
Inventory Shortages
Loss, or that part of any loss, the proof of which as to its existence or amount is dependent upon:
(1) An inventory computation; or
(2) A profit and loss computation.
Analysis
The final exclusion applies only to “computer fraud” coverage. It eliminates coverage for any loss that can only be documented by an inventory computation or a profit and loss computation.
Unlike the same exclusion that applies to “employee theft” coverage, this one does not allow the insured to use inventory records to support the amount of a loss.
Conditions
E. Conditions
1. Conditions Applicable to All Insuring Agreements
a. Cancellation as to any Employee
This insurance is cancelled as to any “employee”:
(1) Immediately upon discovery by:
(a) You; or
(b) Any of your partners, “members”, “managers”, officers, directors or trustees not in collusion with the “employee”;
of “theft” or any other dishonest act committed by the “employee” whether before or after becoming employed by you.
(2) On the date specified in a notice mailed to you. That date will be at least 30 days after the date of mailing.
We will mail or deliver our notice to the first Named Insured's last mailing address known to us. If the notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
The first condition that applies to all agreements is “cancellation as to any employee”. This states that coverage is cancelled on any employee immediately upon discovery by the insured or a partner, member, manager, officer, or director of any dishonest act committed by that employee before or after becoming employed by the insured. It is important to note that the discovery may not be by someone who is “in collusion” with the dishonest employee.
The insured is required to notify the insurer as to any dishonest act, even if the loss does not exceed the deductible. In such a case, coverage ceases immediately on that employee (although the act prompting the report is covered, provided the loss exceeds the deductible). An insured could encounter severe coverage problems in the event that a “minor” employee dishonesty loss went unreported. If that employee became involved in another fidelity loss and the earlier incident came to light, the insured would not be covered. The insurer also reserves the right to cancel coverage as to any employee with 30 days notice.
b. Cancellation of Policy
(1) The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.
(2) We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:
a. 10 days before the effective date of cancellation if we cancel for nonpayment of premium; or
b. 30 days before the effective date of cancellation if we cancel for any other reason.
(3) We will mail or deliver our notice to the first Named Insured's last mailing address known to us.
(4) Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.
(5) If this policy is cancelled, we will send the first Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.
(6) If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
The commercial crime policy incorporates the cancellation provision out of the general provisions endorsement, used in earlier versions. It allows the first named insured to cancel at any time by returning the policy. In this case, the return premium may be calculated at “less than pro rata.” The insurer may cancel at any time for any reason with a thirty-day notice mailed to the first named insured. Ten days notice is required if cancelling for nonpayment of premium.
c. Changes
This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy.
Analysis
This condition is incorporated from the general provisions endorsement. The policy may be changed only by the first named insured with the consent of the insurer.
d. Concealment, Misrepresentation or Fraud
This insurance is void in any case of fraud by you as it relates to this insurance at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:
(1) This policy;
(2) The property covered under this policy;
(3) Your interest in the property covered under this policy;
(4) A claim under this insurance.
Analysis
Another incorporation from the general provisions endorsement states that the insurer may declare a policy void if any insured conceals or misrepresents a material fact. Note that the insurer may declare the policy void—it may say that the policy never existed.
e. Consolidation – Merger
If through consolidation or merger with, or purchase or acquisition of assets or liabilities of, some other entity any additional persons become “employees” or you acquire the use and control of any additional “premises”;
(1) You must give us written notice and obtain our written consent to extend this insurance to such additional “employees” or “premises”. We may condition our consent upon payment of an additional premium.
(2) For the first 90 days after the effective date of such consolidation, merger, or purchase or acquisition of assets or liabilities, any insurance afforded for “employees” or “premises” also applies to these additional “employees” and “premises” for acts committed or events occurring within this 90 day period.
Analysis
The newest version of the crime policy provides automatic coverage for newly acquired employees and premises for ninety days. The previous version provided sixty days of coverage.
f. Discovery
(1) We will pay for loss that you sustain through acts committed or events occurring at any time and discovered by you:
(a) During the policy period shown in the Declarations; or
(b) During the period of time provided in the Extended Period to Discover Loss Condition E.1.j.
(2) Discovery of loss occurs when you first become aware of facts which would cause a reasonable person to assume that a loss covered by this policy has been or will be incurred, even though the exact amount of details of loss may not then be known.
Discovery also occurs when you receive notice of an actual or potential claim against you alleging facts that if true would constitute a covered loss under this policy.
Analysis
Form CR 00 22 promises to pay for a loss that the insured “discovers” either during the policy period or the extended period of discovery. The loss may occur “at any time.” The only requirement is that the named insured “discover” the loss during the time period allowed. The policy details when “discovery” actually takes place.
Form CR 00 23, “loss sustained form,” handles losses differently, as outlined immediately below.
The “loss sustained” form adds the following provision:
o. Loss Covered under this Policy and Prior Insurance Issued by Us or any Affiliate
If any loss is covered:
(1) Partly by this policy; and
(2) Partly by any prior cancelled or terminated insurance that we or any affiliate had issued to you or any predecessor in interest;
the most we will pay is the larger of the amount recoverable under this insurance or the prior insurance.
Regardless of the number of years this policy remains in force or the number of premiums paid, no limit of insurance cumulates from year to year or period to period.
Analysis
If any loss is covered partly by a current crime policy and partly by any prior cancelled or terminated insurance issued by the same insurer or any affiliate, the insurer's liability is the larger of the amount recoverable under either policy.
p. Loss Sustained (form CR 00 23)
Subject to the Loss Sustained During Prior Insurance Condition E.1.q., we will pay for loss that you sustain through acts committed or events occurring during the policy period shown in the Declarations and discovered by you:
(a) During the policy period shown in the Declarations; or
(b) During the period of time provided in the Extended Period to Discover Loss Condition E.1.i.
q. Loss Sustained During Prior Insurance
(1) If you, or any predecessor in interest, sustained loss during the period of any prior insurance that you or the predecessor in interest could have recovered under that insurance except that the time within which to discover loss had expired, we will pay for it under this policy, provided:
(a) This insurance became effective at the time of cancellation or termination of the prior insurance; and
(b) The loss would have been covered by this insurance had it been in effect when the acts or events causing the loss were committed or occurred.
(2) The insurance under this Condition is part of, not in addition to, the Limits Of Insurance applying to this policy and is limited to the lesser of the amount recoverable under:
(a) This policy as of its effective date; or
(b) The prior insurance had it remained in effect.
Analysis
The “loss sustained form” covers losses from events that occur and that are sustained during the policy period. It also agrees to cover losses sustained during prior coverage under certain conditions.
g. Duties in the Event of Loss (condition f. in the “loss sustained” form)
After you discover a loss or a situation that may result in loss of, or loss from damage to, “money”, “securities”, or “other property” you must:
1. Notify us as soon as possible. If you have reason to believe that any loss (except for loss covered under insuring agreements A.1 or A.2) involves a violation of law, you must also notify the local law enforcement authorities.
2. Submit to examination under oath at our request and give us a signed statement of your answers.
3. Give us a detailed, sworn proof of loss within 120 days.
4. Cooperate with us in the investigation and settlement of any claim.
Analysis
After discovery of a loss or a situation that may result in a loss, the insured is required to (1) notify the insurer “as soon as possible,” (2) submit to a request for examination under oath and provide a signed statement of the answers, (3) provide a detailed, sworn proof of loss within 120 days, and (4) cooperate in the investigation and settlement of any claim.
h. Employee Benefit Plan(s)
(1) The “employee benefit plan(s)” shown in the Declarations are included as insureds under Insuring Agreement A.1.
(2) If any “employee benefit plan(s)” is insured jointly with any other entity under this policy, you or the Plan Administrator must select a Limit of Insurance for Insuring Agreement A.1 that is sufficient to provide a limit of insurance for each Plan that is at least equal to that required if each Plan were separately insured.
(3) With respect to losses sustained or discovered by any such Plan, Insuring Agreement A.1. is replaced by the following:
We will pay for loss of or damage to “funds” and “other property” resulting directly from fraudulent or dishonest acts committed by an “employee” whether identified or not, acting alone or in collusion with other persons.
(4) If the first Named Insured is an entity other than a Plan, any payment we make to that insured for loss sustained by any plan will be held by that Insured for the use and benefit of the Plan(s) sustaining the loss.
(5) If two or more Plans are insured under this policy, any payment we make for loss
(a) Sustained by two or More Plans; or
(b) Of commingled “funds” or “other property” of two or more Plans;
that arises out of one “occurrence” is to be shared by each Plan sustaining loss in the proportion that the Limit of Insurance required for each Plan bears to the total of those limits.
(6) The Deductible Amount applicable to Insuring Agreement A.1 does not apply to loss sustained by any “employee benefit plan(s).”
Analysis
This provision recognizes that employee benefit plans differ from other types of insureds. It reminds the insured to choose a limit of liability that is sufficient for just the plan, if the plan and an other entity are jointly insured. It also broadens agreement A.1, employee theft, to include “employee dishonesty” for benefit plans. More acts than mere theft are covered for such plans. Any loss from more than one fund is pro-rated among the funds insured and the deductible does not apply to employee benefit plan losses.
i. Examination Of Your Books And Records
We may examine and audit your books and records as they relate to this policy at any time during the policy period and up to 3 years afterward.
Analysis
The insurer reserves the right to audit the insured's records for up to three years after the policy expires.
j. Extended Period To Discover Loss (Discovery Form)
(1) We will pay for loss that you sustained prior to the effective date of termination or cancellation of this policy, which is discovered by you:
(a) No later than 60 days from the date of that termination or cancellation; and
(b) As respects any “employee benefit plan(s)” no later than 1 year from the date of that termination or cancellation.
(2) However, this extended period to discover loss terminates immediately upon the effective date of any other insurance obtained by you replacing in whole or in part the insurance afforded by this policy, whether or not such other insurance provides coverage for loss sustained prior to its effective date.
Analysis
The “discovery form” provides a period of sixty days beyond policy termination for the insured to report a loss that was sustained during the policy period. For a policy that covers an employee benefit plan, that period is one year. The extended period ends when the insured obtains replacement coverage.
i. Extended Period To Discover Loss (Loss Sustained Form)
(1) We will pay for loss that you sustained prior to the effective date of termination or cancellation of this policy, which is discovered by you no later than 1 year from the date of that termination or cancellation
(2) However, this extended period to discover loss terminates immediately upon the effective date of any other insurance obtained by you replacing in whole or in part the insurance afforded by this policy, whether or not such other insurance provides coverage for loss sustained prior to its effective date.
Analysis
The “loss sustained form” provides an extended period of one year for all types of insureds. Any loss that the insured sustains during the policy period is payable under the policy for up to one year after termination. This form has the same provision about termination of the extended period as does the “discovery form.”
k. Inspections And Surveys
(1) We have the right to:
a. Make inspections and surveys at any time;
b. Give you reports on the conditions we find; and
c. Recommend changes.
(2) We are not obligated to make any inspections, surveys, reports or recommendations and any such actions we do undertake relate only to insurability and the premiums to be charged. We do not make safety inspections. We do not undertake to perform the duty of any person or organization to provide for the health or safety of workers or the public. And we do not warrant that conditions:
a. Are safe or healthful; or
b. Comply with laws, regulations, codes or standards.
(3) Paragraphs 1. and 2. above apply not only to us, but also to any rating, advisory, rate service or similar organization which makes insurance inspections, surveys, reports or recommendations.
Analysis
This condition allows the insurer to make inspections and surveys to check out the exposures facing the insureds that could affect the crime policy. Also, the inspections and surveys help the insurer come up with an adequate premium. The insurer makes clear that it does not take upon itself the role of safety inspector or loss control/risk manager. Some courts have held that just because the insurer inspects the insured's premises or operations, that the insurer has then taken on a duty to make sure that all exposures and possibilities of loss will be fixed; then, if a loss does occur, the insured can sue the insurer for a faulty loss control inspection, a breach of the duty assumed by the insurer toward the insured. Even though the wording of this condition should clarify the insurer's role, it is best to check court decisions in the appropriate jurisdiction.
l. Joint Insured
(1) If more than one insured is named in the declarations, the first named insured will act for itself and for every other insured for all purposes of this insurance. If the first named insured ceases to be covered, then the next named insured will become the first named insured.
(2) If any insured, or partner, “member”, or officer of that insured has knowledge of any information relevant to this policy, that knowledge is considered knowledge of every insured.
(3) An “employee” of any insured is considered to be an “employee” of every insured.
(4) If this policy or any of its coverages is cancelled or terminated as to any insured, loss sustained by that insured is covered only if discovered by you during the period of time provided in the Extended Period to Discover Loss Condition E.1.j.
However, this extended period to discover loss terminates as to that insured immediately upon the effective date of any other insurance obtained by that insured replacing in whole or in part the insurance afforded by this policy, whether or not such other insurance provides coverage for loss sustained prior to its effective date.
(5) We will not pay more for loss sustained by more than one insured than the amount we would pay if all the loss had been sustained by one insured.
Analysis
This clause contains five provisions relating to joint insureds on the crime policy. When there are joint insureds, the first named insured will act for itself and every other insured for all purposes of the insurance. (If the first named insured ceases to be covered, the next named insured becomes the first named insured.) Further, if any insured, partner, officer, or member of any insured has knowledge of information relevant to coverage, that knowledge is considered to be knowledge of every insured. Similarly, employees of any insured are considered employees of every insured. With respect to any one insured, if the policy or any of its coverage parts is cancelled as to that insured, loss sustained by that insured is covered only if discovered within one year from the date of termination. The insurer will not pay more for loss sustained by more than one insured than the amount recoverable had the whole loss been sustained by one insured.
m. Legal Action Against Us
You may not bring any legal action against us involving loss:
(1) Unless you have complied with all the terms of this insurance; and
(2) Until 90 days after you have filed proof of loss with us; and
(3) Unless brought within 2 years from the date you discover the loss.
If any limitation is prohibited by law, such limitation is amended so as to equal the minimum period of limitation provided by such law.
Analysis
The insured may bring a suit against the insurer only after the insured has fully complied with all the terms of the policy. Further, suit cannot be brought until 90 days after the insured has filed proof of loss with the insurer, and must be brought within two years of the date of loss discovery.
The last paragraph about limitations prohibited by law was added in the current edition to clarify that the policy automatically amends to reflect the law of the jurisdiction where it is in force.
n. Liberalization
If we adopt any revision that would broaden the coverage under this insurance without additional premium within 45 days prior to or during the policy period, the broadened coverage will immediately apply to this policy.
Analysis
If a form change is made that provides broadened coverage, but does not involve an additional premium, the broadened coverage applies. The change must have been made within forty-five days prior to the policy period, or within it.
o. Loss Covered Under More than one Coverage of this Policy
If two or more coverages of this insurance apply to the same loss, we will pay the lesser of:
(1) The actual amount of loss; or
(2) The sum of the limits of insurance applicable to those coverages.
Analysis
This condition applies to coverages within the same policy, and was developed to prevent recovery in excess of the loss sustained in the event that two or more coverage forms in a policy apply to the same loss. In this situation, the insurer is liable for the lesser of the actual amount of loss or the sum of the limits of insurance applicable to those coverages.
p. Non-Cumulation of Limit of Insurance
Regardless of the number of years this policy remains in force or the number of premiums paid, no limit of insurance cumulates from year to year or period to period.
Analysis
This provision states that no limit of insurance cumulates from year to year or policy period to policy period.
q. Other Insurance
This policy does not apply to loss recoverable or recovered under other insurance or indemnity. However, if the limit of the other insurance or indemnity is insufficient to cover the entire amount of the loss, this policy will apply to that part of the loss, other than that falling within any deductible amount, not recoverable or recovered under the other insurance or indemnity.
However, this insurance will not apply to the amount of loss that is more than the applicable limit of insurance shown in the declarations.
Analysis
This clause provides that the crime policy is excess insurance over any other collectible coverage, subject to deductibles of the former policy and limits of the current insurance.
r. Ownership of Property; Interests Covered
The property covered under this insurance is limited to property:
(1) That you own or lease; or
(2) That you hold for others; or
(3) For which you are legally liable, except for property inside the premises of a “client” of yours.
However, this insurance is for your benefit only. It provides no rights or benefits to any other person or organization. Any claim for loss that is covered under this policy must be presented by you.
Analysis
The crime policy limits covered property to property that the insured owns or for which the insured is legally responsible. The current version creates a separate category for property that the insured “holds for others.” However, the insurance is for the insured's benefit only and confers no rights or benefits on anyone else.
s. Premiums
The first named insured shown in the declarations:
(1) Is responsible for the payment of all premiums; and
(2) Will be the payee for any return premiums we pay.
Analysis
This provision clarifies that the first named insured is responsible for paying the premium and is the person with whom the insurer will deal regarding premium refunds.
t. Records
You must keep records of all covered property so we can verify the amount of any loss.
Analysis
The policy requires the insured to keep records of all covered property so that the insurer can verify the amount of any loss.
u. Recoveries
(1) Any recoveries, less the cost of obtaining them, made after settlement of loss covered by this policy will be distributed as follows:
a. To you, until you are reimbursed for any loss that you sustain that exceeds the limit of insurance and the deductible amount, if any:
b. Then to us, until we are reimbursed for the settlement made;
c. Then to you, until you are reimbursed for that part of the loss equal to the deductible amount, if any.
(2) Recoveries do not include any recovery:
a. From insurance, suretyship, reinsurance, security or indemnity taken for our benefit; or
b. Of original “securities” after duplicates of them have been issued.
Analysis
This section spells out how recoveries (subrogation proceeds) will be made. Recovery goes to the insured for loss sustained in excess of the limit of insurance and the deductible amount. Subsequently, the recovery goes to the insurer until reimbursed for the settlement amount. Any remainder goes to the insured until reimbursed for that part of the loss equal to the deductible amount. However, recoveries do not include any recovery from insurance, suretyship, reinsurance, security, or indemnity taken for the insurer's benefit, or of original securities after duplicates of them have been issued.
v. Territory
This policy covers acts committed or events occurring within the United States of America (including its territories and possessions), Puerto Rico and Canada.
Analysis
The policy covers only those insured events occurring within the United States, U.S. territories and possessions, Puerto Rico, or Canada. Note that the previous version of the form also specified the Panama Canal Zone as part of the territory.
w. Transfer of Your Rights and Duties Under This Policy
Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.
If you die, your rights and duties will be transferred to your legal representative but only while acting with the scope of duties as your legal representative. Until your legal representative is appointed, anyone having temporary custody of your property will have your rights and duties but only with respect to that property.
Analysis
This condition outlines what happens in the event of the death of the named insured. It outlines that the rights and duties under the policy transfer to the named insured's legal representative.
x. Transfer of Your Rights of Recovery Against Others to Us
You must transfer to us all your rights of recovery against any person or organization for any loss you sustained and for which we have paid or settled. You must also do everything necessary to secure those rights and do nothing after loss to impair them.
Analysis
Under this standard subrogation condition, the insured transfers to the insurer all rights of recovery against any person or organization for loss sustained for which the insurer has made settlement. Further, the insured is required to do everything necessary to secure those rights and do nothing after loss to impair them.
y. Valuation – Settlement
(1) Subject to Section B. Limit of Insurance, we will pay for:
(a)Loss of “money” but only up to and including its face value. We may, at our option, pay for loss of “money” issued by any country other than the United States of America:
(i) At face value in the “money” issued by that country; or
(ii) in the United States of America dollar equivalent determined by the rate of exchange on the day the loss was discovered.
(b)Loss of “securities” but only up to and including their value at the close of business on the day the loss was discovered. We may, at our option:
(i) Pay the value of such “securities” or replace them in kind, in which event you must assign to us all your rights, title and interest in and to those “securities;” or
(ii) Pay the cost of any lost securities bond required in connection with issuing duplicates of the “securities.” However, we will be liable only for the payment of so much of the cost of the bond as would be charged for a bond having a penalty not exceeding the lesser of the:
i. Value of the “securities” at the close of business on the day the loss was discovered; or
ii. Limit of insurance.
(c) Loss of, or loss from damage to, “other property” or loss from damage to the “premises” or its exterior for the replacement cots of the property without deduction for depreciation. However, we will not pay more than the least of the following:
(i) The Limit of Insurance applicable to the lost or damaged property.
(ii) The cost to replace the lost or damage property with property of comparable material and quality and used for the same purpose; or
(ii) The amount you actual spend that is necessary to repair or replace the lost or damaged property.
We will not pay on a replacement cost basis for any loss or damage:
(i) Until the lost or damaged property is actually repaired or replaced; and
(ii) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.
If the lost or damaged property is not repaired or replaced, we will pay on an actual cash value basis.
(2) We may, at our option, pay for loss of or damage to property other than “money”:
(a) In the “money” of the country in which the loss occurred; or
(b) In the United States of America dollar equivalent of the “money” of the country in which the loss occurred determined by the rate of exchange on the day the loss was discovered.
(3) Any property that we pay for or replace becomes our property.
Analysis
Loss of money is settled only up to and including its face value. At the insurer's option, it may pay for loss of money issued by a country other than the United States either at the face value in the money issued by that country, or in the United States dollar equivalent at the rate of exchange on the day the loss is discovered. Securities are valued only up to and including their worth at the close of business on the day the loss is discovered. The insurer has the option to pay the value of securities or replace them in kind, or pay the cost of any “lost securities bond” required in connection with issuing duplicates of the securities. Loss of “other property” or loss from damage to the premises (or exterior) is valued at not more than (a) the actual cash value of the property on the day the loss is discovered; (b) the cost of repairing the property or premises; or (c) the cost of replacing the property with property of like kind and quality. The insurer has the option (within the confines of the itemized valuations) of paying the actual cash value of the property or repairing or replacing it. In the case of property in a foreign country, other than money, the insurer has the option of paying for the loss in the money of the country where the loss occurs, or in the United States dollar equivalent—determined by the rate of exchange on the day the loss is discovered.
Special Condition—Employee Theft
2. Condition Applicable to Insuring Agreement A.1., Territory
We will pay for loss caused by any “employee” while temporarily outside the territory specified in the Territory Condition fro a period of not more than 90 days.
Analysis
The policy expands the coverage for employee theft for up to 90 days while the employee is outside of the defined territory.
Special Conditions—Forgery or Alteration
3. Conditions Applicable to Insuring Agreement A.2.
a. Deductible
The Deductible Amount does not apply to legal expenses paid under insuring agreement A.2.
b. Facsimile Signatures
We will treat mechanically reproduced facsimile signatures the same as handwritten signatures.
Analysis
Facsimile signatures, such as those reproduced by a computer or FAX machine, are considered to be as good as handwritten signatures.
Special Conditions—Robbery and Safe Burglary
4. Conditions Applicable to Insuring Agreements A.4 and A.5
a. Armored Motor Vehicle Companies
Under Insuring Agreement A.5, we will only pay for the amount of loss you cannot recover:
(1) Under your contract with the armored motor vehicle company; and
(2) From any insurance or indemnity carried by, or for the benefit of customers of, the armored motor vehicle company.
b. Special Limit of Insurance for Specified Property
We will pay to $5,000 for any one “occurrence” of loss of or damage to:
(1) Precious metals, precious or semiprecious stones, pearls, furs, or completed or partially completed articles made of or containing such materials that constitute the principal value of such articles; or
(2) Manuscripts, drawings or records of any kind or the cost of reconstructing them or reproducing any information contained in them.
Analysis
The robbery and safe burglary agreements have two additional conditions. The first limits the insurer's liability for loss when an armored car company is involved. The crime policy pays only what the insured cannot collect from the armored car company or that company's insurer. The second applies a sub-limit of $5,000 to certain types of property such as gems, furs, manuscripts, drawings, and records.
Special Conditions—Computer Fraud
5. Conditions Applicable To Insuring Agreement A.6.
a. Special Limit of Insurance For Specified Property
We will only pay up to $5,000 for any one “occurrence” of loss of or damage to manuscripts, drawing, or records of any kind or the cost of reconstructing them or reproducing any information contained in them.
b. Territory
We will cover loss you sustain anywhere in the world. the Territory Condition E.1.v does not apply to Insuring Agreement A.6.
Analysis
This condition limits the insurer's liability for reproducing records damaged by computer fraud to $5,000, It also makes the territory for computer fraud coverage worldwide.