Summary: As with the commercial crime policy—see Commercial Crime Policy—the new program incorporates two government crime forms, discovery and loss sustained. Eligible risks include most local governments, public utilities, fire districts, transit authorities, and state-funded hospitals. Also eligible are school districts or boards of education, and state schools, colleges, and universities.
These policies are almost identical to the commercial crime policy. This treatment discusses the differences. The only policy language reproduced is where the government policies differ from the commercial policy.
Definitions
As with the commercial crime policy, the definitions are discussed here first. Only those definitions that differ from the commercial crime policy are highlighted. The following terms that are defined in the commercial crime policy are not included in the government crime policy: client; employee benefit plan(s); manager; and member. Even though the government policy, like the commercial policy, defines an employee as one associated with or handling the funds of an employee benefit plan, only the commercial policy defines employee benefit plan.
The omission of the definition of “employee benefit plan” may be significant. If money is missing from an “employee benefit plan” there may be some question of coverage if “employee benefit plan” is not defined.
The government policy defines employee in a slightly different fashion, in the section on what does not constitute an employee. The commercial policy says that employee does not include “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.” The government policy eliminates from the exception: “broker,” “factor,” “commission merchant,” and “consignee.”
The government policy removes the following from the definition of “messenger”: “relative” of the named insured; and “partners” or “members.” The government policy also adds a section to the definition of “occurrence” to accommodate the “per employee” insuring agreement for employee theft (discussed below).
Employee Theft—Per Loss or Per Employee
The first difference between the government and commercial crime policies is in the insuring agreement for employee theft. The government policy has two agreements—one pays on a per loss basis; the other on a per employee basis.
A. Insuring Agreements
1. Employee Theft – Per Loss Coverage
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.
2. Employee Theft – Per Employee Coverage
We will pay for loss of or damage to “money”, “securities” and “other property” resulting directly from “theft” committed by each “employee”, whether identified or not, acting alone or in collusion with other persons.
Analysis
With these two agreements, the government policy promises to pay for loss of covered property due to theft by an employee (per loss) or by each employee (per employee).
Exclusions
D. Exclusions
1. This policy does not apply to:
a. Acts Committed by You
Loss resulting from “theft” or any other dishonest act committed by you; or any other dishonest act committed by you, whether acting alone or in collusion with other persons.
b. Acts Of Officials, Employees or Representative
Loss resulting from “theft” or any other dishonest act committed by any of your officials, “employees”, or authorized 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. or A.2.
Analysis
The wording of the government policy is different to recognize the fact that a government entity does not have “partners,” “members,” “managers,” “directors,” or “trustees.” The government policy does exclude coverage for acts committed by “employees” or “representatives.”
2. Insuring Agreements A.1 and A.2 do not apply to:
a. Bonded Employees
Loss caused by any “employee” required by law to be individually bonded.
e. Treasurers or Tax Collectors
Loss caused by any treasurer or tax collector by whatever name known.
Analysis
This exclusion emphasizes that any employee who must be individually bonded cannot be covered by the government crime policy. It also removes coverage for anyone who might be collecting taxes for the government entity.
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 official or employee authorized to manage, govern, or control your “employees” who is 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.
Analysis
Just like the commercial policy, the government policy is immediately cancelled for a particular employee when a theft or other dishonest act by that employee is discovered. The commercial policy says that the discovery may be made by the named insured or his or her “partners, members, managers, officers, directors, or trustees” who did not collude with the employee in the loss.
Recognizing the difference between a government entity and a private entity, the government crime policy specifies who may discover the dishonest act. It may be discovered by the named insured or anyone who “manages, governs, or controls” the employees. Again, there can be no collusion between the dishonest employee and the person who discovers the dishonesty.
Since government entities cannot buy and sell each other, there is no provision in the government crime policy for “consolidation—merger.”
g. Employee Benefit Plan(s)
(1) The employee benefit plan(s) shown in the Declarations are included as insureds under Insuring Agreements A.1. and A.2.
(2) Any payment we make to you for loss sustained by any plan will be held by you for the use and benefit of the Plan(s) sustaining the loss.
(3) The Deductible Amount applicable to Insuring Agreements A.1 and A.2 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 also recognizes that the employee benefit plans of a government entity differ from those of a private, commercial entity. In both policies, the policy agrees to pay loss to the named insured and requires the named insured to hold such payment for the “use and benefit” of the plan.
As in the commercial policy, the government policy does not apply the deductible amount to any loss sustained by an employee benefit plan. However, unlike the commercial policy, the government policy does not expand coverage for such plans. The commercial policy expands coverage to include “fraudulent and dishonest” acts that cause a loss; the government policy limits its coverage to “theft.”
j. Extended Period To Discover Loss
(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 sixty days 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
As with the commercial policy, the government policy provides an extended discovery period of sixty days. The commercial policy also provides a similar period of one year for employee benefit plans. Such plans are not mentioned at all in the government policy.
k. 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 official 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.i.
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
As with the commercial policy, this clause contains five provisions relating to joint insureds on the crime policy. The only difference between the two policies is in provision (2). Recognizing the difference in organization between a commercial enterprise and a government entity, the policy removes any reference to “partner, “member, or officer” of an insured and replaces it with “official of that insured.”
q. 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. 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
Since a government entity cannot have a “client” in the way that the commercial crime policy uses the term, any reference to property belonging to a client has been removed from the government policy.
u. Territory
This policy covers acts committed or events occurring within the United States of America (including its territories and possessions) and Puerto Rico.
Analysis
Again, since the intended insureds for this policy are government entities, the territory is limited to the United States . The commercial policy also covers in Canada.
x. 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.
(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
(iii) 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) Any property that we pay for or replace becomes our property.
Analysis
Since the intended insureds for this policy are government entities, the policy removes any reference to the currency of any other country and to U.S. dollar equivalents.
2. Conditions Applicable to Insuring Agreement A.1. and A.2.
a. Indemnification
We will indemnify any of your officials who are required by law to give individual bonds for the faithful performance of their duties, against loss through “theft” committed by employees who serve under them, subject to the applicable Limit of Insurance.”
Analysis
Here the policy agrees to indemnify officials for the dishonest acts of those who serve under them.
2. Conditions Applicable to Insuring Agreement A.1. and 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.
c. Proof of Loss
You must include with your proof of loss any instrument involved in that loss, or, if that is not possible, an affidavit setting forth the amount and cause of loss.
d. Territory
We will cover loss you sustain anywhere in the world. The territory condition E.1.u. does not apply to Insuring Agreement a.3.
Analysis
The government policy adds paragraphs “c” and “d” to this condition. It adds the requirement for a government insured to submit a proof of loss and it removes any territorial restrictions.
4. Conditions Applicable to Insuring Agreements A.5 and A.6
a. Armored Motor Vehicle Companies
Under Insuring Agreement A.6, 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: 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 of the government policy have the same two additional conditions as on the commercial policy. However, the second applies a sublimit of $5,000 to certain manuscripts, drawings, and records and does not mention such high value personal items as gems, furs, and precious stones.