Commercial Crime Coverage Form—Archived Article

February, 2003

Discovery and Loss Sustained Versions

Summary: The commercial crime coverage form provides coverage under the following insuring agreements:

     1. Employee Theft.

     2. Forgery or Alteration.

     3. Inside the Premises – Theft of Money and Securities.

     4. Inside the Premises – Robbery or Safe Burglary of Other Property.

     5. Outside the Premises.

     6. Computer Fraud.

     7. Funds Transfer Fraud.

     8. Money Orders and Counterfeit Paper Currency

The discovery version is CR 00 20 07 02; the loss sustained version is CR 00 21 07 02. The two versions are similar in most respects, but the differences will be noted for the benefit of the reader.

This article lists and analyzes the insuring agreements, exclusions, conditions, and definitions that make up the coverage forms.

Topics covered:
Declarations page
Insuring agreements
Exclusions
Conditions
Definitions

Declarations Page

The declarations page is considered part of the commercial crime coverage. The dec page that accompanies the commercial crime coverage form allows the insured to choose among the form's seven insuring agreements so that his or her insurance needs are properly met. To choose an insuring agreement, the insured has to list a limit of insurance (per occurrence) and a deductible amount (per occurrence) next to the chosen insuring agreement(s). If the insured does not want a specific coverage, he can insert “not covered” next to the specified insuring agreement. Any applicable endorsements that form part of the coverage are then noted. The declarations page is the same for both CR 00 20 and CR 00 21.

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 key points in this insuring agreement are the defined terms (especially “employee”), which will be discussed later in this article. This insuring agreement provides coverage in case an employee takes money, securities, or other property unlawfully from the insured, thereby depriving the insured of that item.

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; or

(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 that we will pay is in addition to the Limit of Insurance applicable to this Insuring Agreement.

Analysis

This insuring agreement offers the insured protection from forgeries or alterations in several instances. If a forged check is presented to the insured for payment, and the insured hands over the money, such a loss is covered. If a third party is handed a check from the insured that has been altered and pays the false amount on the check, such a loss is covered. If an agent of the insured presents a forged draft to a third party and receives a “sum certain in money,” such a loss is covered.

This insuring agreement also provides defense costs. If the insured is sued for refusing to pay a check or draft or promissory note because he or she thinks the item is forged or altered, this insuring agreement requires the insurer to pay defense costs. The insured has to have the written consent of the insurer to defend against the lawsuit and the legal expenses have to be reasonable. The defense costs are in addition to the stated limit of insurance applicable to the forgery or alteration coverage. However, the insured has to pay the defense costs up front; this is an indemnification agreement.

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