Financial Institution Combination Safe Depository Policy
ISO Form FI 00 40 05 08
December 3, 2014
Summary: In response to industry feedback that indicated an interest in ISO supporting the entire fidelity line of business, ISO developed a Financial Institutions Program as a new line of business. This article provides an overview of form FI 00 40 05 08. The form provides liability coverage for financial institutions providing safe deposit boxes; liability coverage is provided for the customers items in the boxes and property while on premises being transferred into or out of the safe deposit box. Defense costs are also covered, and the policy is subject to certain exclusions and conditions which are discussed. Definitions of terms specific to this type of coverage are also analyzed.
Topics covered:
Introduction
Insuring Agreement 1—Liability of Depository
Insuring Agreement 2—Loss of Customers' Property
Limits of Insurance/Deductible
Exclusions
Conditions
Definitions
Introduction
This policy contains two insuring agreements, and coverage is provided under these agreements when a limit of insurance is listed in the Declarations. The loss must arise from an occurrence and be discovered by a designated person during the policy period. The terms in quotation marks are defined terms and, as such, are discussed subsequently in this article. See Definitions.
This is a discovery form policy; losses that occurred at any time must be discovered during the policy period in order to be covered. Therefore, if a covered loss occurred prior to the effective date of the policy, but was discovered during the policy period, the loss would be covered under this policy.
Insuring Agreement 1 – Liability of Depository
Liability of Depository
a.We will pay for “loss” that the “insured” becomes legally obligated to pay, and “defense expenses”, as a result of a claim made against the “insured” for loss of or damage to “customers' property”, while:
(1)Inside your customers' safe deposit boxes in a vault inside your “premises”;
(2)Stored in such vault inside your “premises”; or
(3)Temporarily elsewhere inside your “premises” while in the course of deposit or removal from the safe deposit box or vault.
b.We will also investigate all claims against the “insured” for such “loss” of “customers' property” and defend any “suit” against the “insured” alleging “loss” and seeking damages which are payable under the terms of this Insuring Agreement, even if any of the allegations of the “suit” are groundless, false or fraudulent.
However, we will have no duty to defend the “insured” against any “suit” seeking damages for “loss” of “customers' property” to which this Insuring Agreement does not apply. Our right and duty to defend against any “suit” ends when we have used up the Limit of Insurance applicable to this Insuring Agreement.
Analysis
Insuring Agreement 1 defines the liability coverage for insureds and the nature of defense costs provided. The policy covers loss or damage to customers' property the insured becomes liable for under the following conditions: property is inside the customer's safe deposit box; property is in the vault inside the named insured's premises; property is temporarily inside the named insured's premises being deposited or removed from the vault by the owner.
Note that these conditions, which outline where the property must be located in order to trigger coverage, are specific as to the location. For example, it is required that the property be located within the bank's (the named insured) vault—whether within a safe deposit box or not—unless temporarily outside the vault during a transfer.
The property itself is also specifically defined. Customers' property that may be covered while inside the vault consists of money, securities, valuable papers and documents, jewelry and silverware. Tangible property not listed as covered in the safe deposit box is covered while stored in a vault on the insured's property. Any of these items are considered covered while being deposited or removed from the safe deposit boxes or vault.
Additionally, the insurer will investigate all claims and defend any suits, even if the allegations are groundless. The duty to defend ends when the Limit of Insurance has been reached, and the insurer has no duty to defend any suit to which the insuring agreement does not apply.
Insuring Agreement 2 – Loss of Customers' Property
2. Loss Of Customers' Property
We will pay for “loss” of “customers' property”, other than “money” (unless “money” is indicated as being covered in the Declarations) while:
(1)Inside your customers' safe deposit boxes in a vault inside your “premises”;
(2)Stored in such vault inside your “premises”; or
(3)Temporarily elsewhere inside your “premises” while in the course of deposit or removal from the safe deposit box or vault; resulting directly from an actual or attempted “robbery” or “burglary”, or damage thereto or destruction thereof.
Analysis
Insuring agreement 2 defines coverage to customers' property excluding “money” unless it is specifically covered on the Declarations. Property is covered for actual or attempted robbery or burglary, damage, or destruction while: property is inside customers' safe deposit boxes in a vault in insured's premises; property is stored in a vault inside your premises; or
property is temporarily elsewhere inside your premises while being deposited or removed from the safe deposit box or vault.
The property definitions for property in the safety deposit box, vault, and premises are the same except for money. Coverage is provided for customer's items only while inside the premises; for example, there is no coverage while the customer is in the parking lot preparing to enter the building or while at an attended outside window.
Robbery is the taking of another's property through force, intimidation, or threat. Burglary is the taking of another's property by unlawful entry.
Limit of Insurance and Deductible
B.Limit Of Insurance
1.Under Insuring Agreement 1., the most we will pay for all “loss”, and “defense expenses” resulting directly from an “occurrence” is the applicable Limit of Insurance shown in the Declarations.
2.Under Insuring Agreement 2., the most we will pay for all “loss” resulting directly from an “occurrence” is the applicable Limit of Insurance shown in the Declarations.
C.Deductible
1.Under Insuring Agreement 1., we will not pay for “loss”, and “defense expenses”, resulting directly from an “occurrence” unless the sum of the amount of “loss”, and “defense expenses”, exceeds the applicable Deductible Amount shown in the Declarations. We will then pay the amount of “loss”, and “defense expenses”, in excess of the Deductible Amount, up to the applicable Limit of Insurance.
2.Under Insuring Agreement 2., we will not pay for “loss” resulting directly from an “occurrence” unless the amount of “loss” exceeds the applicable 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
Analysis
These sections note that the company will pay the limit as described in the Declarations for an occurrence, subject to the deductible. Note that the defense costs are included within the limit of liability under Insuring Agreement 1.
Exclusions
The coverage is modified by ten exclusions.
1.”Loss” or “defense expenses” based upon, attributable to or arising out of the dispersal or application of pathogenic or poisonous biological or chemical materials, nuclear reaction, nuclear radiation or radioactive contamination, or any related act or incident.
2.”Loss” or “defense expenses” based upon, attributable to or arising out of pollution. Pollution means the discharge, dispersal, seepage, migration, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemical and waste. Waste includes materials to be recycled, reconditioned or reclaimed
Analysis
These exclusions are the common biological, chemical, nuclear, and pollution exclusions. Coverage is not provided for any loss resulting from biological or chemical pathogens, nuclear radiation, or contamination. The pollution exclusion defines pollutant and the mechanism by which it may occur on the property.
3.”Loss” or “defense expenses” based upon, attributable to or arising out of your holding “customers' property” in trust for more than thirty days or as collateral.
4.”Loss” or “defense expenses” based upon, attributable to or arising out of securities verified and recorded by you and held by you in any capacity and “money” segregated and identified as payroll or other funds for delivery to you or a customer.
Analysis
Coverage is removed for loss due to any customers' property being held as collateral or in trust for more than thirty days. Any securities verified and recorded by the named insured and held by the named insured in any capacity are also excluded, as is any money set aside and identified as payroll or other funds for delivery to the named insured or a customer. The intent of the policy is to provide coverage for the property of customers kept in the vault or safe deposit box. Costs to defend the insured in the event of such losses are also excluded.
5.”Loss” or “defense expenses” based upon, attributable to or arising out of:
a.War, including undeclared or civil war;
b.Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents;
c.Insurrection, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these; or
d.Riot or civil commotion outside the United States of America (its territories and possessions), Puerto Rico and Canada .
Analysis
There is no coverage for loss due to war, warlike action, insurrection, revolution, or military action to defend against any such actions. Riot or civil commotion outside the United States, its territories and possessions, Canada, and Puerto Rico is excluded. War is usually interpreted to be the actions of one sovereign entity against another. There are cases where radical groups, while not sovereign entities, have been considered the cause of an act of war when they were affiliated with a particular sovereignty and were fighting against another group with ties to a sovereignty.
6.”Loss” or “defense expenses” based upon, attributable to or arising out of any dishonest, fraudulent or criminal act committed by any of your employees, directors or trustees:
a.Whether acting alone or in collusion with other persons; or
b.While performing services for you or otherwise.
Analysis
Losses due to the dishonesty of directors or trustees, as well as employees, working either individually or in collusion with other persons, is excluded. This is noticeably different from the more common exclusion that prohibits coverage for dishonest directors or trustees only, yet allows coverage for employees. In this policy, losses due to dishonest employees are excluded as well, and no defense costs are provided.
An officer of a corporation is someone who is a high-level management official who is hired by the board of directors or owner and has actual or apparent authority to act on behalf of the corporation or business. An employee is hired for a wage, salary, fee or payment to perform work for an employer and does not have the authority to speak for the corporation. Employees are subordinate to officers.
7.”Loss” or “defense expenses” based upon, attributable to or arising out of fire, except when covered under Insuring Agreement 1.
8.”Loss” or “defense expenses” based upon, attributable to or arising out of wear and tear, gradual deterioration or inherent vice.
Analysis
Loss and defense expenses resulting from fire are excluded unless the property of the insured's customers is in a deposit box in a vault, in the vault, or elsewhere on the insured's premises while being deposited or removed from the vault. In any other situation, fire is excluded as a cause of loss for the property of customers. Natural decline in condition is also excluded. Over time items may deteriorate or show wear; any wear, gradual deterioration, or inherent vice is excluded. For example papers in a safe deposit box may fade, yellow, or become brittle, all of which would affect the value of the papers. However, such deterioration occurs naturally over time, and it is not covered under this policy.
9.All fees and other expenses related to any legal action, except when covered under Insuring Agreement 1.
10.”Loss” or “defense expenses” based upon, attributable to or arising out of an “insured's” assumption of liability under any contract, unless the liability arises from an otherwise covered “loss” and would be imposed on the “insured” regardless of the existence of the contract.
Analysis
Any expenses related to legal action beyond the defense costs offered in Insuring Agreement 1, Liability of Depository, are excluded.
Therefore, any costs beyond the expense costs to defend the insured related to suits stemming from loss of customers' property while in the safe deposit box, in the vault, or elsewhere on premises while being deposited or removed are excluded. Also excluded are losses or defense costs for any contract under which the insured assumes liability, except for losses arising from a covered loss or losses the insured would be liable for without the contract.
The Conditions section enumerates rights and duties of the insured and rights of the insurer.
1.Cooperation
You must cooperate with us in all matters pertaining to this policy as stated in its terms and conditions.
2.Representations
a.You represent that all information and statements contained in the application for this policy are true, accurate and complete. All such information and statements are the basis for our issuing this policy and shall be considered as incorporated into and constitute a part of this policy.
b.Any intentional:
(1)Misrepresentation;
(2)Omission;
(3)Concealment; or
(4)Misstatement of a material fact;
in the application or otherwise, shall be grounds for the rescission of this policy.
3.Territory
This policy covers “loss” resulting directly from an “occurrence” taking place within the United States of America (including its territories and possessions), Puerto Rico, and Canada.
Analysis
The first three conditions deal with duties of the named insured and some basic information. The insured is required to cooperate with the company, and any misrepresentation of truth or fact will be grounds for the rescission of the policy. The policy covers occurrences within the United States, its territories and possessions, Puerto Rico and Canada .
When a policy is rescinded due to intentional misrepresentation, the coverage can be void ab initio, which is from the beginning, that is, as if coverage never existed. The reasoning behind this is that if the insurer had known the truth from the beginning, they would not have agreed to provide coverage. Statutes concerning rescission of policies vary from state to state.
4.Additional Safe Deposit Boxes
If, while this policy is in force, you establish additional safe deposit boxes at any “premises”, other than through consolidation or merger with, or purchase or acquisition of assets or liabilities of another institution, such safe deposit boxes shall automatically be covered under this policy. Notice to us of an increase in the number of safe deposit boxes need not be given and no additional premium need be paid for the remainder of the Policy Period.
5.Consolidation – Merger Or Acquisition
a.Except as provided in Paragraph 5.b., if you consolidate or merge with, or purchase or acquire the assets or liabilities of, another institution, and you acquire additional safe deposit boxes:
(1)You shall notify us in writing as soon as practicable and obtain our written consent to extend the coverage provided by this policy to such safe deposit boxes. We may condition our consent by requiring payment of an additional premium; but
(2)For the first 90 days after the effective date of such consolidation, merger or purchase or acquisition of assets or liabilities, the coverage provided by this policy shall apply to such safe deposit boxes, provided all “occurrences” causing or contributing to a “loss” involving such safe deposit boxes must take place after the effective date of such consolidation, merger or purchase or acquisition of assets or liabilities.
b.For institutions you acquire, in which you own greater than 50% of the voting stock or voting rights, coverage under this policy shall automatically become effective on the date of such acquisition with no additional premium required, provided:
(1)All “occurrences” causing or contributing to a “loss” involving such safe deposit boxes must take place after the effective date of such acquisition; and
(2)The assets of the acquired institution do not exceed 10% of your total assets as reflected in your most recent calendar quarter consolidated financial statements immediately preceding the effective date of the policy.
Analysis
Condition 4, Additional Safe Deposit Boxes advises the insured that if additional boxes are acquired other than through a merger or consolidation with another institution, the insured does not need to advise the carrier of the increase in number of safe deposit boxes. They will be automatically covered through the end of the existing policy period without any additional premium charge. For example, if an insured expands the building and adds additional boxes, coverage is automatically applied.
If the insured consolidates, merges, or purchases/acquires the assets/liabilities of another institution including safe deposit boxes, the insured is required to notify the carrier in writing as soon as possible and acquire the carrier's written consent to extend coverage. The carrier may charge additional premium in order to cover the new boxes. Coverage will be provided for the new boxes for the first ninety days after the effective date of the consolidation as long as the date of loss is after the acquisition date. For example; the Bank of Hope Springs merges with Eternal Bank and Trust to form Hope Springs Eternal, the carrier must be notified in writing of the acquisition of additional boxes.
When acquiring another institution in which the insured owns greater than 50 percent of the voting stock or rights, coverage is provided without additional premium provided:
any loss is after the date of acquisition, and the assets of the newly acquired institution do not exceed 10 percent of the insured's total assets as shown in the most recent calendar quarter financial statements immediately preceding the date of the policy.
For example, Thrifty Savings and Loan purchases Savers Bank and Trust; as part of the purchase, Thrifty acquires 60 percent of the voting stock of Savers. Thrifty is a much larger institution than Savers, so while Thrifty controls the voting stock, the assets of Savers, when added to Thrifty's original assets, is less than 10 percent of Thrifty's total assets as reflected on the most recent quarterly financial statements. In order for any loss to be covered, it must occur during the policy period. If Savers had sustained a loss prior to the effective date of the acquisition by Thrifty, there would be no coverage.
6.Joint Insured
a.If more than one Insured is covered under this policy, the first Named Insured named in the Declarations shall act for itself and for every other Insured for all purposes of this policy.
b.Knowledge possessed or “discovery” made by a “designated person” of any Insured shall constitute knowledge or “discovery” by all Insureds for all purposes of this policy.
c.We will not pay more for “loss” or “losses” sustained by more than one Insured than the amount we would pay if all such “loss” or “losses” had been sustained by one Insured.
d.Payment by us to the first Named Insured for “loss” sustained by any Insured shall fully release us on account of such “loss”.
Analysis
When there is more than one insured on the policy, any action by the first named insured applies to every other insured. The first named insured can make coverage changes to the policy that affect all other insureds. Likewise knowledge possessed or discovery of information by a designated person (a defined term discussed later in the policy) of an insured shall constitute knowledge or discovery by all insureds on the policy. The designated person is critical in the discovery of losses; such a person has a high level of responsibility within the organization, or at minimum is the highest ranking employee on the insured's premises when a loss occurs. The designated person is responsible for acting promptly on any notice received on the occurrence of a loss.
If more than one insured sustains a loss, no more will be paid out than if all such losses had been sustained by one insured. Payment to the first named insured for loss sustained by any insured releases the insurer on account of such loss.
7.Change In Control or Ownership – Notice To Us
a.When you learn of a change in control, you shall notify us in writing as soon as practicable, but not to exceed 60 days from the date of such change in control.
b.As used in this Condition, control means the power to determine the management or policy of the Insured or of a controlling holding company by virtue of voting stock or voting rights ownership. A change in control for the purpose of giving the required notice, means a change in ownership of voting stock or voting rights which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 10% of such voting stock or voting rights.
c.A change in ownership which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 50% of the voting stock or voting rights of the first Named Insured shall cause this policy to be terminated as set forth in Condition 19.b.(1)(b).
Analysis
A change in control is defined as a change in ownership of voting stock or voting rights that results in any given stockholder having possession of more than 10 percent of such stock. The insured is required to notify the carrier immediately of such a change and must do so within sixty days after the effective date of the change. Any change in ownership which results in more than 50 percent of the voting stock or voting rights being held by one stockholder or organization will cause this policy to be cancelled. Under condition 19.b.(1)(b), Policy Termination, the policy is cancelled immediately upon the effective date that the first named insured is acquired by another company.
8.Notice To Us – Proof – Legal Proceedings Under Insuring Agreement 1.
a.After you “discover” a “loss”, you shall:
(1)Notify us at the earliest practicable moment, not to exceed 30 days after you receive notice of any legal proceeding brought to determine an “insured's” liability for any claim or damage, which if established, would constitute a collectible “loss” under this Insuring Agreement.
(2)Promptly notify the local law enforcement authorities if the “loss” is due to a violation of law.
(3)Produce for our examination all pleadings and pertinent records.
(4)Cooperate with us in the investigation or settlement of the claim or defense against the “suit”.
b.No person or organization has a right:
(1)To join us as a party or otherwise bring us into a “suit” asking for damages from an “insured”; or
(2)To sue us unless all of its terms have been fully complied with.
A person or organization may sue us to recover on an agreed settlement or on a final judgment against an “insured”; but, we will not be liable for damages that are not payable under the terms of Insuring Agreement 1. or that are in excess of the applicable Limit of Insurance. An agreed settlement means a settlement and release of liability signed by us, the “insured” and the claimant or the claimant's legal representative.
c.If any limitation embodied in this Condition is prohibited by law controlling the construction hereof, such limitation shall be deemed to be amended so as to equal the minimum period of limitation provided by such law.
9.Notice To Us – Proof – Legal Proceedings Under Insuring Agreement 2.
a.Upon “discovery”, you shall:
(1)Notify us at the earliest practicable moment, not to exceed 60 days.
(2)Promptly notify the local law enforcement authorities if the “loss” is due to a violation of law.
(3)Submit to examination under oath at our request and give us a signed statement of your answers.
(4)Produce for our examination all pertinent records.
(5)Cooperate with us in the investigation and settlement of any claim.
(6)Within six months from the date of “discovery”, furnish to us proof of loss, duly sworn to, with full particulars.
b.Legal proceedings for the recovery of any “loss” shall not be brought after the expiration of 24 months from the date of “discovery” of such “loss”.
c.If any limitation embodied in this Condition is prohibited by law controlling the construction hereof, such limitation shall be deemed to be amended so as to equal the minimum period of limitation provided by such law.
d.Insuring Agreement 2. affords coverage only in your favor. No “suit”, action or legal proceeding shall be brought under this Insuring Agreement by anyone other than you.
Analysis
Upon discovery of a loss or receipt of notice of legal proceedings, the insured is to notify the carrier as soon as possible but not more than the particular number of days noted in the applicable condition. Law enforcement authorities must be notified if the law has been violated in the course of the loss.
The insured is required to cooperate with the carrier in all aspects of the investigation of the loss, provide for the examination of all records and/or pleadings, and submit to examination under oath if requested.
Under Insuring Agreement 1, Liability of Depository, no one has the right to join the insurer as a party or bring them into suit against an insured, and the insurer cannot be sued until all terms of the policy have been complied with. The carrier is liable only for damages payable under Insuring Agreement 1. If any policy condition is prohibited by law, then the policy conforms to the legal limitation applied by the state.
Under Insuring Agreement 2, Loss of Customers' Property, legal proceedings cannot be brought against the insurer beyond twenty-four months after the date of discovery of said loss. Coverage in this section is for the benefit of the insured; no suit, action, or legal proceedings can be brought against the company by anyone other than the insured. Requirements in the event of a loss are similar to those for Insuring Agreement 1; the insured is to notify the carrier as soon as possible, not to exceed a certain number of days. Law enforcement authorities are to be notified if the law has been violated in the course of the loss.
10.Assignment – Subrogation – Recovery
a.In the event of payment under this policy, you shall deliver, if so requested by us, an assignment of your rights, title and interest and causes of action as you have against any person or entity to the extent of the “loss” payment.
b.In the event of payment under this policy, we shall be subrogated to all of your rights of recovery against any person or entity to the extent of such payment.
c.Recoveries, whether effected before or after any payment under this policy, whether made by us or by you, shall be applied net of the expenses of such recovery:
(1)First, to you in satisfaction of your covered “loss” or damages in excess of the amount paid under this policy;
(2)Second, to us in satisfaction for payment under this policy;
(3)Third, to you in satisfaction of any Deductible Amount; and
(4)Fourth, to you in satisfaction of any “loss” or damages not covered under this policy.
Recovery on account of “loss” of securities as set forth in Condition 18.b. or recovery from reinsurance and/or indemnity by us shall not be deemed a recovery as used herein.
11.Transfer Of Your Rights And Duties Under This Policy
Your rights and duties under this policy may not be transferred without our written consent.
12.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.
13.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 three years afterward.
14.Inspections And Surveys
a.We have the right to:
(1)Make inspections and surveys at any time;
(2)Give you reports on the conditions we find; and
(3)Recommend changes.
b.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 any workers or the public. And we do not warrant that conditions:
(1)Are safe or healthful; or
(2)Comply with laws, regulations, codes or standards.
c.Paragraphs 14.a. and 14.b. 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
Upon payment under this policy, the insured is required to assign any rights, title, interest, or causes of action against the other party to the insurer at his request. This allows the insurer to proceed against the other party to subrogate what they have paid out. Recoveries are applied as follows: first to the insured for any loss in excess of what the policy paid out; next to the insurer for payments made under the policy; then to the insured for any deductible, and lastly to the insured for any damages not covered under this policy.
The insured may not transfer rights or duties under this policy without written consent from the carrier. The first named insured is authorized to make changes to the policy with the consent of the insurer. Policy terms can only be amended by endorsement to the policy issued by the insurer.
The insurer has the right to examine and audit books and records up to three years after the policy period. The company may also make inspections, or surveys, and give the named insured reports and recommend changes. The company is not obligated to make surveys, and does so only to review insurability. No warranties are made that conditions are safe or comply with laws/regulations/codes.
15.Liberalization
If we adopt any revision that would broaden the coverage under this policy without additional premium within 45 days prior to or during the Policy Period, the broadened coverage will immediately apply to this policy.
16.Premiums
The first Named Insured shown in the Declarations:
a.Is responsible for the payment of all premiums; and
b.Will be the payee for any return premiums we pay.
17.Other Insurance
If there is any other valid and collectible insurance which would apply in the absence of this policy, the insurance under this policy shall apply only as excess insurance over such other insurance.
Analysis
When the insurer makes revisions to a policy that broadens coverage, and there is no additional premium, if the revisions are made forty five days prior to, or during the policy period, the policy will automatically expand to contain this coverage.
The first named insured is held responsible for any payments due and is the payee for any return premiums.
If the insured has another policy that is valid and collectible and that would apply, the insurance under this policy is considered excess.
18.Valuation – Settlement
Under Insuring Agreement 2.:
The value of any “loss” for purposes of coverage under this policy shall be the net loss to you after crediting any receipts, payments or recoveries, however denominated, received by you in connection with the transaction giving rise to the “loss”.
a.Money
Any loss of “money”, or loss payable in “money”, will be paid, at your option:
(1)In the “money” of the country in which the “loss” occurred; or
(2)In the United States of America dollar equivalent determined by the rate of exchange published in The Wall Street Journal on the day the claim was made or “loss” was “discovered”.
b.Securities
(1)We will settle in kind our liability under this policy on account of a “loss” of any “securities” or, at your option, will pay you the cost of replacing such “securities”, determined by the market value of such “securities” at the close of business on the day the “loss” was “discovered”.
In case of a “loss” of subscription, conversion or redemption privileges through the misplacement or “loss” of “securities”, the amount of such “loss” will be the value of such privileges immediately preceding their expiration.
(2)If the applicable coverage of this policy is subject to a Deductible Amount and/or is not sufficient in amount to indemnify you in full for the “loss” of “securities” for which claim is made under this policy, our liability under this policy is limited to the payment for, or the duplication of, so much of such “securities” as has a value equal to the limit of such applicable coverage.
c.Other Property Not Specified Above
(1)In case of “loss” of or damage to any property not specified in Paragraph 18.a. or 18.b., we will pay the replacement cost of such property without deduction for depreciation. However, we will not pay more than the least of the following:
(a)The Limit of Insurance applicable to the lost or damaged property;
(b)The cost to replace the lost or damaged property with property of comparable material and quality and used for the same purpose; or
(c)The amount you actually spend that is necessary to repair or replace the lost or damaged property.
(2)We will not pay on a replacement cost basis for any “loss” of or damage to property covered in Paragraph 18.c.(1):
(a)Until the lost or damaged property is actually repaired or replaced; and
(b)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.
(3)We will, at your option, pay for “loss” of or damage to such property:
(a)In the “money” of the country in which the “loss” or damage occurred; or
(b)In the United States of America dollar equivalent of the “money” of the country in which the “loss” or damage occurred determined by the rate of exchange published in The Wall Street Journal on the day the “loss” was “discovered”.
(4)Any property that we pay for or replace becomes our property.
Analysis
Money, securities and other unspecified property are covered under Insuring Agreement 2, Loss to Customers' Property. Any losses of money are payable, at the insured's request, either in the currency of the country in which the loss was sustained or in U.S. dollars. The dollar equivalent is based on the exchange rate published in the Wall Street Journal on the date the claim was made or the loss was discovered.
Loss of securities is settled in kind or, at the insured's option, the cost of replacing them will be paid. Their value is determined by the market value of the securities on the close of business on the day the loss was discovered. If subscription, conversion, or redemption privileges are lost, the amount of settlement will be the value of such privileges immediately preceding their expiration. Once the policy limits have been reached, the insurer's obligation for payment is complete, even though the loss may be greater than the applicable limits of coverage.
Other property not specified as money or securities will be paid on a replacement cost basis without deductions for depreciation. Payment will not be more than the least of: limit of applicable insurance, cost to replace damaged property with like kind and quality, or amount the insured actually spends to repair or replace the lost or damaged property.
While payment is on a replacement cost basis, payment will not be made until the lost or damaged property is repaired or replaced. The repairs or replacements are made as soon as possible. Payment again is offered in the currency of the country in which the loss occurred or in U.S. currency at the exchange rate on the day the loss was discovered.
19.Policy Cancellation Or Termination
a.Policy Cancellation
(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)60 days before the effective date of cancellation if we cancel for any other reason, other than for policy termination as provided in Paragraph 19.b.
(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.
b.Policy Termination
(1)This policy terminates immediately upon:
(a)Your being taken over by a receiver or other liquidator or by State or Federal officials;
(b)The effective date of the first Named Insured being acquired by another entity. As used in this Condition, acquired means a change in control where the power to determine the management or policy of the first Named Insured has changed by virtue of a change of ownership which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 50% of its voting stock or voting rights, regardless as to the changes to the core functions of the acquired institution; or
(c)The expiration of the Policy Period shown in the Declarations.
If this policy terminates for any reason specified in Paragraph 19.B.(1)(a) or 19.B.(1)(b), we will send the first Named Insured any premium refund due. The refund will be pro rata.
(2)This policy terminates as to any Insured, other than the first Named Insured, immediately upon its acquisition by another entity of more than 50% of its voting stock or being taken over by a receiver or liquidator or by State or Federal officials.
(3)Termination of the policy as to any Insured terminates liability for any “loss” sustained by such Insured which is “discovered” after the effective date of such termination.
The policy may be cancelled at the request of the insured; the request must be in writing from the first named insured. The company may cancel the policy by delivering notice to the last known address of the insured. If the policy is to be cancelled due to nonpayment of premium, notice must be given ten days in advance of the effective date of the action. For cancellations for any other reason, notice must be given sixty days in advance. Any refunds will be sent to the first named insured. These cancellation and time requirements are subject to individual state regulations.
The taking over of the first named insured by a receiver, or other liquidator, or by state or federal officials results in immediate termination of the policy. If the first named insured is acquired by another entity, the effective date of that takeover is the termination date of the policy. This acquisition indicates a change in control by management or stockholders controlling more than fifty per cent of the voting stock.
F.Definitions
1.”Burglary” means the unlawful taking of “customers' property”:
a.From inside a locked safe deposit box in a locked vault by a person unlawfully entering the box and vault, as evidenced by marks of forcible entry upon its exterior; or
b.If not contained in a safe deposit box, from inside a locked vault by a person unlawfully entering the vault, as evidenced by marks of forcible entry upon its exterior.
2.”Customers' property” means:
a.”Money”, “securities”, valuable papers and documents, jewelry and silverware, while inside your customers' safe deposit boxes inside a vault inside your “premises”.
b.Tangible items of customers' property not specified in Paragraph 2.a. while such property is stored inside a vault inside your “premises”.
c.Any customers' property specified in Paragraphs 2.a. and 2.b. temporarily elsewhere inside your “premises” while in the course of deposit or removed from such safe deposit boxes or vault.
3.”Defense expenses” means:
a.Reasonable and necessary fees (including attorneys' and experts' fees) and expenses incurred in the defense or appeal of a claim, excluding the wages, salaries, benefits or expenses of any director, officer or employee of yours.
b.All costs taxed against the “insured” in the “suit”.
c.All interest on the full amount of any judgment that accrues after entry of judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the Limit of Insurance for this Insuring Agreement.
d.Prejudgment interest awarded against the “insured” on that part of the judgment we pay. If we make an offer to pay the Limit of Insurance for this Insuring Agreement, we will not pay any prejudgment interest based on that period of time after the offer.
e.Premiums on appeal bonds and bonds to release attachments, but only in bond penalties within the Limit of Insurance. We may, but do not have to, furnish these bonds.
f.All reasonable expenses, other than “loss” of earnings, incurred by the “insured” at our request.
4.”Designated person” means:
a.Any insurance risk manager;
b.Any director or trustee;
c.Any elected, appointed or otherwise titled officer; or
d.The highest ranking employee at the “premises” where such employee performs the majority of his or her duties;
of any Insured.
Analysis
As the policy is specific to combination safes, the definitions serve to narrowly define what is covered and under what circumstances. The definition of burglary narrowly defines where the property must be in order for the policy to cover a loss under such circumstances. Burglary is the unlawful taking of property by forced entry; marks must be visible on the outside of the box to show forced entry.
Customers' property is defined to narrowly identify the types of customers' property that is covered and where it must be located. The policy will not cover customers' property that is in their private residences; the property must be located in specific areas on the insured's premises.
Defense expenses covers more than just attorney fees and expenses; also included are costs taxed against the insured in the suit, interest on the full amount of any judgment that accrues after entry of judgment and before offer of payment or payment is made, prejudged interest awarded against said judgment, and premiums on appeal bonds and bonds to release attachments within the limits of insurance. Reasonable expenses that the insured incurs at the request of the company are covered as well.
The designated person is instrumental in the discovery of losses in this policy; such a person has a high level of responsibility within the organization, or at minimum is the highest ranking employee on the insured's premises. The designated person is responsible for acting promptly on any notice received on the occurrence of a loss. A loss discovered by a lower level employee does not imply that the insured as an entity is aware of the loss; the loss must be reported to a designated person or discovered by a designated person in order for the insured to be considered aware of the loss.
5.”Discovery”, “discover”, or “discovered” also means the time when a “designated person” first becomes aware of facts which would cause a reasonable person to assume that a “loss” of a type covered by this policy has been or will be incurred, regardless of when the act or acts causing or contributing to such “loss” occurred, even though the exact amount or details of “loss” may not then be known.
“Discovery”, “discover”, or “discovered” also means the time when a “designated person” first receives notice of an actual or potential claim in which it is alleged that you are liable to a third party under circumstances which, if true, would constitute a “loss” under this policy.
6.”Insured”, when used in connection with Insuring Agreement 1., means any Named Insured and their officers and employees while acting within the scope of their duties as such.
7.”Loss” means:
a.Under Insuring Agreement 1., compensatory damages, settlement amounts and costs awarded pursuant to judgments. Loss does not include civil or criminal fines or penalties imposed by law, punitive or exemplary damages, the multiplied portion of multiplied damages, taxes or matters that are uninsurable pursuant to applicable law.
b.Under Insuring Agreement 2., loss of or damage to “customers' property”.
8.”Money” means:
a.A medium of exchange in current use authorized or adopted by a domestic or foreign government as part of its currency, bullion; and
b.Travelers checks, register checks and money orders.
9.”Occurrence” means:
a.Any one act or series of related acts involving one or more persons; or
b.Any one act or event, or a series of related acts or events other than in Paragraph 9.a; or
c.Any one casualty or event not specified in Paragraph 9.a or 9.b.
10.”Premises” means the interior of that portion of any building at any location which you occupy in conducting a banking or safe deposit business, unless excluded on the Declarations page.
11.”Robbery” means the unlawful taking of “customers' 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.
12.”Securities” means negotiable and nonnegotiable instruments or contracts representing either “money” or 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”.
13.”Suit” means a civil proceeding in which damages to which this insurance applies are claimed against you. “Suit” includes:
a.An arbitration proceeding in which such damages are claimed and to which you submit with our consent; or
b.Any other alternative dispute resolution proceeding in which such damages are claimed and to which you submit with our consent.
Analysis
Discovery is defined as the earliest possible moment when a designated person becomes aware of facts that would indicate a loss has, or will, occur, or when the designated person first receives notice of an actual or potential claim. The discovery of the claim is a major element in the conditions regarding proof of loss to the company; so the moment of discovery is critical in starting the clock for the insured to submit a notice of loss.
Insured is defined with respect to the Liability of Depository insuring agreement, which provides coverage for claims made against the insured for customers' property inside the safe deposit boxes, vault, or temporarily at another location on premises during the deposit or removal of property from the safe deposit box. The named insured, officers, and employees are considered insureds while acting within the scope of their duties involving such property.
Loss is defined separately under the insuring agreements. Under the Liability of Depository agreement, loss includes compensatory damages, settlements, amounts, and costs awarded according to judgments. Not included in the definition of loss are civil or criminal fines, penalties imposed by law, punitive or exemplary damages, the multiplied portion of multiplied damages, and taxes or matters that are uninsurable under the applicable law.
Loss under the Loss of Customers' Property agreement is defined as loss of or damage to customers' property.
The definition of money includes currency as authorized by a domestic or foreign government and includes travelers checks, register checks, and money orders.
Occurrence is defined as an act or event, or series of acts or events, which involves or does not involve one or more persons. An occurrence is a precipitating factor to a loss.
Unless excluded on the Declarations page, the premises are the interior of the building where a banking or safe deposit business is conducted.
Robbery is distinguished from burglary in that the threat of harm or actual harm has occurred to the person from whom the property was stolen, or the person has witnessed an obviously unlawful act. Burglary is the unlawful taking of property by force, but individuals are not threatened or harmed in the process.
The definition of securities does not include money; instruments that represent money are covered, as are tokens, tickets, stamps in current use, and evidences of debt in connection with credit or charge cards.
Suit includes arbitration proceedings and other alternative dispute resolution proceedings, as well as civil proceedings in which damages are claimed against the insured to which this insurance applies.