November 7, 2010
The insured signed a merchant service agreement with ABC, Inc. for check verification and check conversion services. A processing terminal belonging to ABC was installed in the insured premises and every time a client paid with a check, the check was electronically verified using the equipment against a database. Using the equipment the data from the paper check was scanned at the point of sale then processed electronically in a manner similar to that of a credit card. The paper check is voided and handed back to the consumer.
Under the merchant service agreement ABC, Inc. agreed to transfer the funds to the insured account no later than the 3rd business day. A couple of years later the insured began to notice some discrepancies and errors in the amount of money transferred by ABC, Inc to the insured account. According to our insured ABC, Inc. owned them approximately $60,000.
The insured has the following coverage: Theft, Disappearance, and Destruction Coverage Form, CR 00 04 10 90.
The insurance broker believes that there is coverage for the loss under CR 00 04 10 90. We believe that there is no coverage under CR 00 04 10 90. There was no theft, disappearance, and destruction inside the “premises” or a “banking premises”. The form defines “premises” and “banking premises”. We believe that the lack of transfer of funds from the ABC, Inc. account to the insured's bank account does not constitute a theft, disappearance, and destruction inside the “premises” or “banking premises” as defined in the policy. ABC, Inc. initially received the funds legally, and the insured never had real possession of the funds.
Puerto Rico Subscriber
The insured location is certainly not a banking premises. It is a premises in that it is where the insured conducts business. The insured did not actually have possession of the funds; the ABC equipment verified that the check would clear and then sent the insured the funds in a few days. Therefore, we agree that the money was not taken from the insured premises. It's feasible that it's an accounting error or system malfunction unless there's some evidence of deceitful intent, but there's no coverage for the loss.