Stolen Credit Card Transaction is Uninsurable Business Risk

Our insured is a merchant with commercial crime coverage under CR 00 20 07 02, Commercial Crime Coverage form. A customer paid with what the merchant believed was a valid credit card. The merchant shipped the merchandise, and when the sale showed up on the cardholder's statement, the cardholder claimed that the credit card had been stolen. The merchant is now responsible for refunding the cardholder's money. Is this loss covered under his commercial crime policy?

Missouri Subscriber

Usually, the credit card issuer is ultimately responsible for reimbursing cardholders for purchases made on stolen credit cards. Taking the risk of accepting stolen credit cards for payment, much like the risk of accepting forged checks, is a transactional cost of doing business and a business risk that is not covered by the commercial crime policy.