Commercial Crime Coverage Form
Discovery and Loss Sustained Forms
Includes copyrighted material of Insurance Services Office, Inc., with its permission.
October 26, 2015
Summary: The current commercial crime discovery form, CR 00 20 11 15, and loss sustained form CR 00 21 11 15, are revisions of earlier discovery and loss sustained forms. The revisions include simple wording changes for clarification and a new exclusion. This article discusses the revised forms.
Topics covered:
Introduction
These policies contain seven insuring agreements, and coverage is provided under these agreements when a limit of insurance is listed in the Declarations. In the discovery form, the loss must arise from an occurrence and be discovered by the named insured during the policy period or during the extended period to discover loss. The extended period of loss is described in the conditions section E.1.g. The loss sustained form is worded differently because it also applies to loss that the named insured sustains resulting directly from an occurrence taking place during the policy period, except as provided in conditions E.1.k. or E.1.l. (These conditions will be reviewed in detail later in this discussion).
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.
For the purposes of this Insuring Agreement, "theft" shall also include forgery.
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. Note the inclusion of forgery in the definition of "theft" for this insuring agreement. Loss or damage to money, securities and other property that results from forgery is also covered in this insuring agreement.
(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.
For the purposes of this Insuring Agreement, a substitute check as defined in the Check Clearing for the 21st Century Act shall be treated the same as the original it replaced.
b.If you are sued for refusing to pay any instrument covered in Paragraph 2.a., 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.
Note the language stating that a substitute check as defined in the Check Clearing for the 21st Century Act shall be treated the same as the original it replaces. Check Clearing 21 is a federal law designed to allow banks to handle checks electronically, thus making processing faster and more efficient. A substitute check is a paper copy of the front and back of the original check; it is slightly larger so that a picture of the original check can be presented. Very specific standards dictate how the substitute check is printed so that it can be used the same way as the original check. With a substitute check, banks can transmit the information electronically instead of physically moving a paper check. This is different than converting checks to electronic payments; different regulations govern electronic funds and paper checks.
(1)Resulting directly from "theft" committed by a person present inside such "premises" or "banking premises"; or
(2) Resulting directly from disappearance or destruction.
b.Loss from damage to the "premises" or its exterior resulting directly from an actual or attempted "theft" of "money" and "securities", if you are the owner of the "premises" or are liable for damage to it.
c.Loss of or damage to a locked safe, vault, cash register, cash box or cash drawer located inside the "premises" resulting directly from an actual or attempted "theft" of or unlawful entry into those containers.
Analysis
There are several things to point out here.
The loss of money and securities inside the area that the named insured occupies in conducting his or her business is covered whether this loss is by theft, destruction, or some unidentified disappearance. The thief must be inside the premises; theft by remote computer is not covered under this insuring agreement.
This restricts coverage so that if an employee had bank money and securities in his possession and was outside the premises when the property was stolen, coverage would not be available unless the employee was considered a messenger as outlined in insuring agreement five. The disappearance or destruction of the property is covered as before.
The insuring agreement extends to cover damage done to the building (inside and outside) where the insured conducts his business if that damage is done due to an actual or attempted theft of money or securities. So, if someone tries to break into the insured's building to steal the company payroll, that damage is covered. This coverage does have its limitations. The insured has to own the premises or be liable for damage to it. Furthermore, there is no attempt in this insuring agreement to draw a bright line between damage due to an attempted theft and damage due to vandalism. The insuring agreement does insist that the damage to the premises be a direct result of an actual or attempted theft, but how can this be distinguished from damage by vandalism? There is a vandalism exclusion that could lead to disputes over coverage. For example, how can it be shown that damage to the insured's building is damage due to an attempted break-in? The insurer could argue that the damage was mere vandalism or malicious mischief and deny the claim. Of course, since the insurer wrote the policy, the insured would be entitled to the benefit of the doubt; but a clarification in the coverage would be appropriate and beneficial to both the insured and the insurer.
The third insuring agreement also covers loss of or damage to a locked safe, vault, or cash register located inside the insured's building. Here again, as with the damage to the building, the damage has to be a direct result of an actual or attempted theft from the insured. But, if a teenager breaks into the insured's building just to tear the place up and, in the process, smashes the cash registers, how can it be shown that this is vandalism (excluded) as opposed to an attempted theft (covered)? Each incident would have to be judged on its own merits, but the insured is entitled to the benefit of any reasonable doubt.
a.Loss of or damage to "other property":
(1)Inside the "premises" resulting directly from an actual or attempted "robbery" of a "custodian"; or
(2)Inside the "premises" in a safe or vault resulting directly from an actual or attempted "safe burglary".
b.Loss from damage to the "premises" or its exterior resulting directly from an actual or attempted "robbery" or "safe burglary" of "other property", if you are the owner of the "premises" or are liable for damage to it.
c.Loss of or damage to a locked safe or vault located inside the "premises" resulting directly from an actual or attempted "robbery" or "safe burglary".
Analysis
"Other property" is the focus of this insuring agreement. This defined term includes just about any tangible property other than money or securities that has intrinsic value. As an example, if the insured has a diamond ring in his safe at work and someone breaks into the safe and steals the ring; coverage for the loss is provided. And, if the "other property" is being carried around inside the insured's premises by a "custodian" and that person is robbed, coverage is again provided. "Custodian" is a defined term and it includes the named insured and his employees, but not a watchperson or janitor.
We will pay for:
a.Loss of "money" and "securities" outside the "premises" in the care and custody of a "messenger" or an armored motor vehicle company resulting directly from "theft", disappearance or destruction.
b.Loss of or damage to "other property" outside the "premises" in the care and custody of a "messenger" or an armored motor vehicle company resulting directly from an actual or attempted "robbery".
Analysis
This agreement applies to loss of money and securities and other tangible property that has intrinsic value when the loss occurs outside the insured's premises. The property must be in the custody of a messenger who can be the named insured, or a relative, partner, or employee of the named insured. Loss of money and securities is covered if due to theft, disappearance, or destruction; the loss to "other property" has to be from an actual or attempted robbery. Note the difference.
Loss of money is covered regardless of the circumstances of the loss; loss of "other property" is covered only under certain circumstances. If an employee is carrying money to be deposited into the insured's bank account and he is robbed, the loss is covered; if the employee somehow loses the money along the way, the loss is covered. Now, if the insured tells his employee to take a diamond ring from the safe to the bank and the employee is held up on the way to the bank by a robber, the policies will respond to the loss. But on the other hand, if the employee loses the ring or accidentally drops it in the river, there is no coverage for that type of loss.
The same can be said of the armored truck situation. If the truck is carrying the insured's payroll, the loss of that money by a robbery or because of an auto accident is covered. If the truck is carrying a diamond ring, there must be an actual or attempted robbery for coverage to be applicable; if the armored truck is involved in an auto accident and the ring disappears, coverage is not provided.
a.We will pay for:
(1)Loss resulting directly from a fraudulent:
(a)Entry of "electronic data" or "computer program" into; or
(b)Change of "electronic data" or "computer program" within:
any "computer system" owned, leased or operated by you, provided the fraudulent entry or fraudulent change causes, with regard to Paragraphs 6.a.(1)(a) and 6.a.(1)(b):
(i)"Money", "securities" or "other property" to be transferred, paid or delivered; or
(ii)Your account at a "financial institution" to be debited or deleted.
(2)Loss resulting directly from a "fraudulent instruction" directing a "financial institution" to debit your "transfer account" and transfer, pay or deliver "money" or "securities" from that account.
b.As used in Paragraph 6.a.(1), fraudulent entry or fraudulent change of "electronic data" or "computer program" shall include such entry or change made by an "employee" acting, in good faith, upon a "fraudulent instruction" received from a computer software contractor who has a written agreement with you to design, implement or service "computer programs" for a "computer system" covered under this Insuring Agreement.
Analysis
Many movies and books today show money being transferred by computer from a bank or a company headquarters to a bank or an individual in the Bahamas or in Switzerland. If these computer transfers are fraudulent and cause the insured to suffer a loss of money, securities, or other property, coverage is provided in these policies.
This agreement provides additional coverage that was previously available as an endorsement. Coverage is provided for a loss of funds as a result of a fraudulent instruction upon which an institution relied in order to transfer funds from the transfer account. A transfer account is an account kept at a financial institution for the purpose of being able to transfer funds as needed based on various forms of instructions from the named insured. Funds are defined as money and securities. A fraudulent instruction is a defined term in this policy. It is defined as an instruction supposedly transmitted by the named insured but was in fact transmitted by someone else without the named insured's consent or knowledge. The instruction can be, telefacsimile, telephone or other electronic instruction. The definition has removed reference to cables, teletypes, and telegraph, all old technologies no longer in use. A forged written instruction is also considered fraudulent instruction, as is an instruction supposedly transmitted by an employee but which was fraudulently transmitted without the named insured's or employee's knowledge or consent.
For example; instructions are received seemingly from the named insured stating that funds are to be transferred to an account for D.S. Honest. Only after the funds are transferred is it discovered that the instructions were fraudulent, and were not actually from the named insured. The loss of those funds would be covered under this agreement.
We will pay for loss resulting directly from your having, in good faith, accepted in exchange for merchandise, "money" or services:
a.Money orders issued by any post office, express company or "financial institution" that are not paid upon presentation; or
b."Counterfeit money" that is acquired during the regular course of business.
Analysis
This is fairly straightforward. If the insured accepts counterfeit money orders or currency in exchange for merchandise or services that he or she provides, the insured has suffered a loss due to a crime and coverage is provided.
The most we will pay for all loss resulting directly from an "occurrence" is the applicable Limit of Insurance shown in the Declarations.
If any loss is covered under more than one Insuring Agreement or Coverage, the most we will pay for such loss shall not exceed the largest Limit of Insurance available under any one of those Insuring Agreements or Coverages.
C.Deductible
We will not pay for loss resulting directly from an "occurrence" unless the amount of loss exceeds the 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 clauses refer the reader to the declarations page. Remember that if the insured wants a particular insuring agreement to be in effect, he must have a limit of insurance and a deductible amount listed on the declarations page next to the insuring agreement.
The limit of insurance now stipulates that if any loss is covered under more than one insuring agreement or coverage, the most that will be paid is the largest limit of insurance or coverage available. For example, a loss occurs and there is coverage in the policy with the following limits: $10,000; $15,000; and $20,000. The most that will be paid for the loss is $20,000; coverage is not stackable among insuring agreements or coverages. If the loss is $30,000 the payout will be $20,000; the highest coverage available.
Note that the insurer promises to "pay the amount of loss in excess of the deductible". In other words, the deductible applies to the total amount of loss, not to the amount of insurance available. As an example, say the insured suffered a counterfeit loss of $200,000, and had a $100,000 limit of insurance for that type of loss with a $1,000 deductible. The deductible is applied to the total loss of $200,000, leaving a total loss of $199,000. The insured is then paid his limit of $100,000. Multiple deductibles to be applied to the same loss.
a.Acts Committed By You, Your Partners Or Your Members
Loss resulting from "theft" or any other dishonest act committed by:
(1)You; or
(2)Any of your partners or "members";
whether acting alone or in collusion with other persons.
b. Acts Committed By Your Employees Learned Of By You Prior To The Policy Period
Loss caused by an "employee" if the "employee" had also committed "theft" or any other dishonest act prior to the effective date of this insurance and you or any of your partners, "members", "managers", officers, directors or trustees, not in collusion with the "employee", learned of such "theft" or dishonest act prior to the Policy Period shown in the Declarations.
Analysis
Exclusion 1a., acts committed by you, partners or your members clarifies that this insurance does not apply to dishonest acts committed by the named insured, partners, or managers. Exclusion 1b., Acts of employees learned of by you prior to the policy period excludes coverage if the named insured or any partners, members, trustees, directors or officers became aware of theft or loss by the employee that occurred before the start of the policy period as shown in the declarations. For example, the policy period begins October first; an employee steals $4,000 from an account of the insured in August. Her manager learns of this in September. In November, the same employee is caught using the computer system to transfer money to an outside account in the name of another individual. Because the manager was aware of the earlier theft and that occurred prior to the effective date of the policy, there is no coverage for the subsequent loss.
c.Acts Committed By Your Employees, Managers, Directors, Trustees Or Representatives
Loss resulting from "theft" or any other dishonest act committed by any of your "employees", "managers", directors, trustees 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.
d.Confidential Or Personal Information
Loss resulting from:
(1)The disclosure or use of another person's or organization's confidential or personal information; or
(2)The disclosure of your confidential or personal information. However, this Paragraph 1.d.(2) does not apply to loss otherwise covered under this insurance that results directly from the use of your confidential or personal information.
For the purposes of this exclusion, confidential or personal information includes, but is not limited to, patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information.
e.Data Security Breach
Fees, costs, fines, penalties and other expenses incurred by you which are related to the access to or disclosure of another person's or organization's confidential or personal information including, but not limited to, patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information.
f.Governmental Action
Loss resulting from seizure or destruction of property by order of governmental authority.
g.Indirect Loss
Loss that is an indirect result of an "occurrence" covered by this insurance including, but not limited to, loss resulting from:
(1)Your inability to realize income that you would have realized had there been no loss of or damage to "money", "securities" or "other property".
(2)Payment of damages of any type for which you are legally liable. But, we will pay compensatory damages arising directly from a loss covered under this insurance.
(3)Payment of costs, fees or other expenses you incur in establishing either the existence or the amount of loss under this insurance.
Analysis
Exclusion c., acts of employees, managers, directors, trustees or representatives clarifies that this insurance does not apply to dishonest acts committed by any of those close to the named insured in his or her business, such as partners, managers, trustees. The confidential information exclusion excludes loss that results from the unauthorized disclosure of confidential information that is exclusive to the organization including processes, trade secrets, customer lists. Also excluded is the unauthorized use or disclosure of confidential information of another person that is held by the named insured such as credit card, financial and other personal information. This has been revised for clarification. Also, an exception has been added that eliminates the exclusion if coverage is provided elsewhere in the policy that results directly from use of the insured's confidential or personal information. If an employee steals a customer's patented formula for Fantastic Fizzy Pop with intent to sell it to the leading competitor that loss is not covered. Likewise, the disclosure of the insureds credit card information of the named insured's customer base is also not covered.
The insuring agreements are fond of using the phrase "loss … resulting directly from…." The point is that this insurance coverage is meant for loss that the insured suffers as a result of a close causal and straightforward event. To fortify this "direct loss" coverage, an exclusion exists that pertains to indirect loss. As an example: the insured's employee is carrying a huge amount of money to a business meeting to make a down payment on a contract that will result in the insured's company winning a bid to build a costly sports stadium. Along the way, the employee is held up and the money is taken. The employee goes to the meeting and explains the problem, but the delay in payment results in the insured's company losing the contract and the income that the stadium project would have brought to the insured. The money that was stolen will be covered, but the insured cannot expect payment for the loss of income that resulted from the theft of the money.
Also excluded by this indirect loss exclusion is payment of costs and other expenses that the named insured incurs in establishing that a loss (and the amount of that loss) actually occurred. So, if the insured has to hire auditors or investigators to show he suffered a counterfeit loss or a computer fraud, those expenses are not covered. The policies are for direct loss and not the indirect consequences of that direct loss.
The indirect loss exclusion also deals with costs that the insured may have as a result of legal actions. While payment of damages of any type for which the named insured is legally liable is excluded as an indirect loss, an exception is made for compensatory damages arising directly from a covered loss. As an example: the insured receives a forged check in the amount of $2,000 made against the account of Mr. Jones. The insured pays the amount and draws the $2,000 out of Mr. Jones' account. As a result of the loss of the $2,000, Mr. Jones bounces a check to a contractor he had hired to build a deck onto Mr. Jones' house. The contractor files a mechanic's lien against Mr. Jones who then sues the named insured, seeking reimbursement for damages. The $2,000 will be paid as a covered loss and as compensatory damages that Mr. Jones suffered; that is, damages, that when paid, compensate the injured party for the loss sustained—it makes good the loss caused by the named insured. Other types of damages, such as emotional injury to Mr. Jones or legal fees to have the mechanic's lien lifted are not covered.
h.Legal Fees, Costs And Expenses
Fees, costs and expenses incurred by you which are related to any legal action, except when covered under Insuring Agreement A.2.
i.Nuclear Hazard
Loss or damage resulting from nuclear reaction or radiation or radioactive contamination, however caused.
j.Pollution
Loss or damage caused by or resulting from 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, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
k. Virtual Currency
Loss involving virtual currency of any kind, by whatever name known, whether actual or fictitious including, but not limited to, digital currency, crypto currency or any other type of electronic currency.
l.War And Military Action
Loss or damage resulting from:
(1)War, including undeclared or civil war;
(2)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; or
(3)Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
Analysis
Fees and costs are now specifically mentioned in the exclusion for legal expenses. The fees must also specifically be incurred by the named insured; prior policies did not have such specific wording. The policies will not pay for expenses related to any legal action, except for those covered under insuring agreement A.2. Using the above example of the forged $2,000 check, the named insured's legal expenses defending against Mr. Jones' lawsuit will not be paid. The exception to not paying legal expenses is only when the named insured is sued for refusing to pay any instrument covered in insuring agreement A.2. If the $2,000 check had been legitimate but the named insured chose not to honor it because of fears that it was forged, the defense costs for a named insured for a resultant lawsuit against the insured would be covered.
The nuclear hazard exclusion has minor wording changes; damage as well as loss is excluded. The policies also state that however caused, loss from nuclear radiation, reaction, or contamination is not covered.
The standard pollution exclusion has been added to the policy. Pollution from any cause is excluded; there is no coverage if a peril insured against results in a pollution loss.
A new exclusion has been added for virtual currency. Virtual currency is not defined in the policy; it has been defined by the European Central Bank as "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community." While considered to be currency by its users, the Internal Revenue Service has decided to treat virtual currencies as property for tax purposes, not currency. Bitcoin is a well-known virtual currency. Bitcoins are generated by a computer network, and have no central monetary authority. They are not backed by gold or any government. Bitcoins are mined by computers processing difficult number-crunching formulas, called mining. The mining network monitors and verifies the creation of new bitcoins and the transfer of bitcoins between users. Bitcoins can be bought and sold in return for traditional currency on many exchanges. It is a token of value as well as a method of transferring that value. The value of bitcoins changes rapidly and they can only be used once. There is a public ledger of all Bitcoin transactions called the blockchain, so buying a Bitcoin is really buying a spot in the blockchain. Bitcoins are bought and sold through online exchanges and can be hacked like any other computer information. If a Bitcoin user's wallet gets hacked, there is no recourse for the owner of the coins. Unlike credit cards where an unauthorized transaction can be reported or a new card can be issued, once a Bitcoin is gone it's gone. Therefore, with the prevalence of sites being hacked for credit card and other information, and the fact that virtual currency is complicated and difficult to manage, virtual currency in any form is excluded from coverage.
The exclusion for war and similar actions excludes loss or damage, and warlike action is separately described as 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. For example, securities are in the possession of a messenger for the insured outside the insured's premises. The government is defending the area from terrorist bombs and in the course of defense the securities are destroyed; there is no coverage for the loss of the securities because they were destroyed by a warlike action.
2.Insuring Agreement A.1. does not cover:
a.Inventory Shortages
Loss, or that part of any loss, the proof of which as to its existence or amount is dependent upon:
(1)An inventory computation; or
(2)A profit and loss computation.
However, where you establish wholly apart from such computations that you have sustained a loss, then you may offer your inventory records and actual physical count of inventory in support of the amount of loss claimed.
b.Trading
Loss resulting from trading, whether in your name or in a genuine or fictitious account.
c.Warehouse Receipts
Loss resulting from the fraudulent or dishonest signing, issuing, cancelling or failing to cancel, a warehouse receipt or any papers connected with it.
Analysis
Note that this set of exclusions applies only to insuring agreement A.1., employee theft coverage. The language that excluded loss caused by employees cancelled under prior insurance policies has been removed from this policy. Therefore, under insuring agreement A1., employee theft, if an employee causes a loss and prior coverage for that employee had been cancelled, there is still coverage for that employee under this policy.
Also excluded from employee theft coverage is an inventory shortage. If the annual inventory turns up a shortage, it is a reasonable assumption that an employee may have been responsible; a reasonable assumption, but a difficult one to prove and, thus prevent from happening again. Besides, the shortage may be the result of employee theft or it may be a miscount or a mistake in the paperwork or an outright fraud. No matter what the cause, this is one mysterious disappearance that the policies are not meant to cover.
The threat of employee theft and the difficulty in proving it or preventing it is also the reason behind the trading and warehouse receipts exclusions.
3.Insuring Agreements A.3., A.4. and A.5. do not cover:
a.Accounting Or Arithmetical Errors Or Omissions
Loss resulting from accounting or arithmetical errors or omissions.
b.Exchanges Or Purchases
Loss resulting from the giving or surrendering of property in any exchange or purchase.
c.Fire
Loss or damage resulting from fire, however caused, except:
(1)Loss of or damage to "money" and "securities"; and
(2)Loss from damage to a safe or vault.
d.Money Operated Devices
Loss of property contained in any money operated device unless the amount of "money" deposited in it is recorded by a continuous recording instrument in the device.
e.Motor Vehicles Or Equipment And Accessories
Loss of or damage to motor vehicles, trailers or semi-trailers or equipment and accessories attached to them.
f.Transfer Or Surrender Of Property
(1)Loss of or damage to property after it has been transferred or surrendered to a person or place outside the "premises" or "financial institution premises":
(a)On the basis of unauthorized instructions;
(b)As a result of a threat including, but not limited to:
(i)A threat to do bodily harm to any person;
(ii)A threat to do damage to any property;
(iii)A threat to introduce a denial of service attack into any "computer system";
(iv)A threat to introduce a virus or other malicious instruction into any "computer system" which is designed to damage, destroy or corrupt "electronic data" or "computer programs" stored within the "computer system";
(v)A threat to contaminate, pollute or render substandard your products or goods; or
(vi)A threat to disseminate, divulge or utilize:
i. Your confidential information;
ii. Confidential or personal information of another person or organization; or
iii. Weaknesses in the source code within any "computer system".
(2)However, this exclusion does not apply under Insuring Agreement A.5. to loss of "money", "securities" or "other property" while outside the "premises" in the care and custody of a "messenger" if you:
(a)Had no knowledge of any threat at the time the conveyance began; or
(b)Had knowledge of a threat at the time the conveyance began, but the loss was not related to the threat.
g.Vandalism
Loss from damage to the "premises" or its exterior, or to any safe, vault, cash register, cash box, cash drawer or "other property" by vandalism or malicious mischief.
h.Voluntary Parting Of Title To Or Possession Of Property
Loss resulting from your, or anyone acting on your express or implied authority, being induced by any dishonest act to voluntarily part with title to or possession of any property.
Analysis
This set of exclusions applies to insuring agreements A.3., A.4., and A.5., inside the premises theft, inside the premise robbery or safe burglary, and outside the premises loss respectively.
The accounting exclusion is akin to the inventory shortage exclusion that applies to insuring agreement A.1. There is simply too great a threat of fraud, simple mistakes, and a lack of preventable measures to allow coverage for accounting or arithmetical errors or omissions.
The exchange or purchase exclusion applies when the insured has suffered a loss due to the failure to recognize the true value of an item. For example, if the insured buys an item from a customer on the business premises and pays $500 for an item that is actually worthless, the insured cannot call that a theft or a disappearance of money. It may have been a fraud perpetrated on the insured or simply a bad business judgment, but either way, the insured will not be reimbursed for his mistake.
Loss by fire is covered by a standard property policy in just about any circumstances. These policies do not wish to duplicate that coverage, so a fire exclusion is included. The following exceptions to this exclusion apply: when a fire damages a safe or a vault, or damages money or securities. The safe or vault exception is made because the insuring agreements cover damage to safes and vaults done in the process of an actual or attempted theft or burglary, and it is possible that a fire may be used in the attempt to break into the safe or vault; so, rather than allow disputes with the insured over what the purpose of the fire was, the insurer covers the fire damage. As for the money and securities exception, the standard property policy does not consider money or securities as covered property; so, these policies do extend coverage to these items, at least for a loss by fire.
The money operated device exclusion is on the coverage form due to the ease of theft or fraud when it comes to these types of machines, and the resulting difficulty of insuring against such actions. The motor vehicle exclusion is self-explanatory. The voluntary parting exclusion is akin to the false pretense exclusion found on the garage coverage form; for more information on this type of exclusion, see False Pretense Insurance.
The transfer or surrender of property exclusion can be used to deny coverage for loss of money paid to an extortionist. For example, if the insured is threatened with bodily injury unless $500,000 is delivered to an unknown person at a location off the business premises, and that payoff is lost or damaged during or after delivery, there is no coverage. This exclusion is meant to prevent insurance monies from being used to aid or reward such criminal activities. Besides, fraud on the part of an insured is a real possibility when it comes to extortion threats, and this exclusion aims to fight that possibility. Also excluded is loss of money paid to an extortionist not only for threat of physical harm to an individual but threat to the insured's computer systems, products, goods, or divulgence of confidential information.
The vandalism exclusion is one that is difficult to enforce. As was noted before, insuring agreements A.3. and A.4. cover damage to safes, vaults, cash registers, and cash boxes if someone does the damage while trying to steal money or property from the insured. Where is the bright line separating damage done in an attempted theft from damage done in an act of vandalism?
4.Insuring Agreement A.6. does not cover:
a.Authorized Access
Loss resulting from a fraudulent:
(1) Entry of "electronic data" or "computer program" into; or
(2) Change of "electronic data" or "computer program" within
any "computer system" owned, leased or operated by you by a person or organization with authorized access to that "computer system", except when covered under Insuring Agreement A.6.b.
b.Credit Card Transactions
Loss resulting from the use or purported use of credit, debit, charge, access, convenience, identification, stored-value or other cards or the information contained on such cards.
c. Exchanges Or Purchases
Loss resulting from the giving or surrendering of property in any exchange or purchase
d.Fraudulent Instructions
Loss resulting from an "employee" or "financial institution" acting upon any instruction to:
(1) Transfer, pay or deliver "money", "securities", or "other property"; or
(2) Debit or delete your account
which instruction proves to be fraudulent, except when covered under Insuring Agreement A.6.a(2) or A.6.b.
e.Inventory Shortages
Loss, or that part of any loss, the proof of which as to its existence or amount is dependent upon:
(1)An inventory computation; or
(2)A profit and loss computation.
Analysis
The current forms expand this exclusion to also exclude credit card transactions as well as funds transfer fraud and inventory shortages. The exclusion of loss from exchanges or purchases is also present. Loss due to authorized access computer fraud is not covered.
1.Conditions Applicable To All Insuring Agreements
a.Additional Premises Or Employees
If, while this insurance is in force, you establish any additional "premises" or hire additional "employees", other than through consolidation or merger with, or purchase or acquisition of assets or liabilities of, another entity, such "premises" and "employees" shall automatically be covered under this insurance. Notice to us of an increase in the number of "premises" or "employees" need not be given and no additional premium need be paid for the remainder of the Policy Period shown in the Declarations.
b.Concealment, Misrepresentation Or Fraud
This insurance is void in any case of fraud by you as it relates to this insurance at any time. It is also void if you or any other Insured, at any time, intentionally conceal or misrepresent a material fact concerning:
(1)This insurance;
(2)The property covered under this insurance;
(3)Your interest in the property covered under this insurance; or
(4)A claim under this insurance.
c.Consolidation – Merger Or Acquisition
If you consolidate or merge with, or purchase or acquire the assets or liabilities of, another entity:
(1)You must give us written notice as soon as possible and obtain our written consent to extend the coverage provided by this insurance to such consolidated or merged entity or such purchased or acquired assets or liabilities. 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 insurance shall apply to such consolidated or merged entity or such purchased or acquired assets or liabilities, provided that all "occurrences" causing or contributing to a loss involving such consolidation, merger or purchase or acquisition of assets or liabilities, must take place after the effective date of such consolidation, merger or purchase or acquisition of assets or liabilities.
d.Cooperation
You must cooperate with us in all matters pertaining to this insurance as stated in its terms and conditions.
e.Duties In The Event Of Loss
After you "discover" a loss or a situation that may result in loss of or damage to "money", "securities" or "other property" you must:
(1)Notify us as soon as possible. If you have reason to believe that any loss (except for loss covered under Insuring Agreement A.1. or A.2.) involves a violation of law, you must also notify the local law enforcement authorities;
(2)Give us a detailed, sworn proof of los within 120 days;
(3)Cooperate with us in the investigation and settlement of any claim;
(4)Produce for our examination all pertinent records;
(5)Submit to examination under oath at our request and give us a signed statement of your answers; and
(6)Secure all of your rights of recovery against any person or organization responsible for the loss and do nothing to impair those rights.
Analysis
The discovery by the named insured or any partners, etc. of theft or a dishonest act committed by an employee before or after becoming employed no longer automatically cancels the policy.
Also in the conditions is the automatic coverage of additional employees or premises established by the named insured other than through consolidation, merger, or purchase or another entity. The named insured is not required to give notice to the insurer and no additional premium is required to be paid.
The concealment, misrepresentation, or fraud condition is a normal one found in most property forms.
The consolidation/merger condition gives coverage for employees or premises acquired through a merger/consolidation or purchase. Written notice to the company is required as soon as possible, and the company may require additional premium. Coverage is provided for the first ninety days provided that all occurrences causing a loss occur after the effective date of the merger or purchase.
Cooperation of the insured is often required in policies. It is specifically stated that the insured is required to cooperate with the insurer in all matters pertaining to the coverage as stated in the terms and conditions.
f.Employee Benefit Plans
The "employee benefit plans" shown in the Declarations (hereafter referred to as Plan) are included as Insureds under Insuring Agreement A.1., subject to the following:
(1)If any Plan is insured jointly with any other entity under this insurance, you or the Plan Administrator must select a Limit of Insurance for Insuring Agreement A.1. that is sufficient to provide a Limit of Insurance for each Plan that is at least equal to that required if each Plan were separately insured.
(2)With respect to loss sustained or "discovered" by any such Plan, Insuring Agreement A.1. is replaced by the following:
We will pay for loss of or damage to "funds" and "other property" resulting directly from fraudulent or dishonest acts committed by an "employee", whether identified or not, acting alone or in collusion with other persons.
(3)If the first Named Insured is an entity other than a Plan, any payment we make for loss sustained by any Plan will be made to the Plan sustaining the loss.
(4)If two or more Plans are insured under this insurance, any payment we make for loss:
(a)Sustained by two or more Plans; or
(b)Of commingled "funds" or "other property" of two or more Plans;
resulting directly from an "occurrence" will be made to each Plan sustaining loss in the proportion that the Limit of Insurance required for each Plan bears to the total Limit of Insurance of all Plans sustaining loss.
(5)The Deductible Amount applicable to Insuring Agreement A.1. does not apply to loss sustained by any Plan.
g.Extended Period To Discover Loss
We will pay for loss that you sustained prior to the effective date of cancellation of this insurance, which is "discovered" by you:
(1)No later than 60 days from the date of that cancellation. However, this extended period to "discover" loss terminates immediately upon the effective date of any other insurance obtained by you, whether from us or another insurer, replacing in whole or in part the coverage afforded under this insurance, whether or not such other insurance provides coverage for loss sustained prior to its effective date.
(2)No later than one year from the date of that cancellation with regard to any "employee benefit plans".
h.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 partner, "member" "manager" officer, director or trustee of that Insured has knowledge of any information relevant to this insurance, 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 insurance or any of its coverages is cancelled as to any Insured, loss sustained by that Insured is covered only if it is "discovered" by you:
(a)No later than 60 days from the date of that cancellation. However, this extended period to "discover" loss terminates immediately upon the effective date of any other insurance obtained by that Insured, whether from us or another insurer, replacing in whole or in part the coverage afforded under this insurance, whether or not such other insurance provides coverage for loss sustained prior to its effective date.
(b)No later than one year from the date of that cancellation with regard to any "employee benefit plans".
(5)We will not pay more for loss sustained by more than one Insured than the amount we would pay if all such loss had been sustained by one Insured.
(6)Payment by us to the first Named Insured for loss sustained by any Insured, or payment by us to any "employee benefit plan" for loss sustained by that Plan shall fully release us on account of such loss.
i.Legal Action Against Us
You may not bring any legal action against us involving loss:
(1)Unless you have complied with all the terms of this insurance;
(2)Until 90 days after you have filed proof of loss with us; and
(3)Unless brought within two years from the date you "discovered" the loss.
If any limitation in this condition is prohibited by law, such limitation is amended so as to equal the minimum period of limitation provided by such law.
Analysis
Condition f. makes the employee benefit plan an insured for insuring agreement A.1.—employee theft—if named on the declarations page. The employee benefit plan is a defined term meaning any welfare or pension benefit plan that is subject to ERISA or amendments thereto. The condition changes insuring agreement A.1. with respect to any losses to the benefit plan so that the agreement reflects coverage for loss to the employee benefit funds due to a fraudulent or dishonest act committed by an employee. Note that the loss is not by "theft", but by "any fraudulent or dishonest acts"; this wording is more in tune with the type of loss that an employee benefit plan would suffer. Also note the deductible amount applicable to insuring agreement A.1. does not apply to a loss sustained by an employee benefit plan.
The extended period to discover loss clause is in both the discovery (CR 00 20) and loss sustained (CR 00 21) forms. Both the discovery form and the loss sustained form give the insured 60 days from the date of cancellation to discover a loss in order for that loss to be covered. The loss sustained form gives the insured one year to discover the loss. Both policies state that the loss sustained must be prior to the effective date of cancellation; only the time to discover the loss is extended. Furthermore, the extended period to discover loss terminates immediately if the insured gets another policy to replace the one that is cancelled, a condition that fairly well eliminates the desire of the insured to rush out and find a replacement policy. Note that the discovery period under the coverage forms for a loss with respect to any employee benefit plan is one year as opposed to the 60 day limit for any other type of loss.
The joint insured condition describes the relationships between the insurer and insureds and between insureds under the coverage form. If more than one entity is named as an insured, care must be taken in setting up the arrangement for the first named insured will act for itself and every other insured for all purposes of the insurance. (If the first named insured ceases to be covered, the next named insured becomes the first named insured.) If any insured or partner or member or officer of any insured has knowledge of information relevant to coverage, that knowledge is considered to be knowledge of every insured; insureds should be aware of this and make a habit of conferring with one another. This has been expanded to include not only "members" and offices, by "managers" and directors or trustees as well.
Employees of any insured are considered employees of every insured and this could be quite significant if an employee theft occurs. With respect to any one insured, if the policy or any of its coverage parts is cancelled as to that insured, loss sustained by that insured is covered only if discovered within the time periods as described in the extended period to discover loss clause. Finally, the insurer will not pay more for loss sustained by more than one insured than the amount recoverable had the whole loss been sustained by one insured; in other words, if four insureds suffer a loss under insuring agreement A.2. (forgery or alteration), the most the insurer will pay is the limit of insurance stated on the declarations page—not four times that amount.
Payment by the insurer to the first named insured fully releases the insurer on account of the loss. Note that the payment does not have to reach the policy limits in order to release the carrier; any payment to the first named insured releases the carrier.
The legal action condition requires that, if a legal action against the insurer is planned by the named insured, it must be predicated upon the insured's full compliance with all the terms of the policy. Further, suit cannot be brought until ninety days after the insured has filed proof of loss with the insurer, and must be brought within two years of the date of loss discovery. Of course, if state law requires different time periods than the ninety days or two years, the law prevails.
j.Liberalization
If we adopt any revision that would broaden the coverage under this insurance without additional premium within 45 days prior to or during the Policy Period shown in the Declarations, the broadened coverage will immediately apply to this insurance.
Analysis
If a form change is made that provides broadened coverage, but does not involve an additional premium, the broadened coverage applies. The change must have been made within forty-five days prior to the policy period, or within it. The forms specify that the policy period is what is shown in the declarations.
At this point the policies diverge briefly; the next section appears only in the loss sustained form.
(1)Loss Sustained Partly During This Insurance And Partly During Prior Insurance
If you "discover" loss during the Policy Period shown in the Declarations, resulting directly from an "occurrence" taking place:
(a)Partly during the Policy Period shown in the Declarations; and
(b)Partly during the Policy Period(s) of any prior cancelled insurance that we or any affiliate issued to you or any predecessor in interest;
and this insurance became effective at the time of cancellation of the prior insurance, we will first settle the amount of loss that you sustained during this Policy Period. We will then settle the remaining amount of loss that you sustained during the Policy Period(s) of the prior insurance.
(2) Loss Sustained Entirely During Prior Insurance
If you "discover" loss during the Policy Period shown in the Declarations, resulting directly from an "occurrence" taking place entirely during the Policy Period(s) of any prior cancelled insurance that we or any affiliate issued to you or any predecessor in interest, we will pay for the loss, provided:
(a)This insurance became effective at the time of cancellation of the prior insurance; and
(b)The loss would have been covered under this insurance had it been in effect at the time of the "occurrence".
We will first settle the amount of loss that you sustained during the most recent prior insurance. We will then settle any remaining amount of loss that you sustained during the Policy Period(s) of any other prior insurance.
(3)In settling loss under Paragraphs k.(1) and k.(2):
(a)The most we will pay for the entire loss is the highest single Limit of Insurance applicable during the period of loss, whether such limit was written under this insurance or was written under the prior insurance issued by us.
(b)We will apply the applicable Deductible Amount shown in the Declarations to the amount of loss sustained under this insurance. If no loss was sustained under this insurance, we will apply the Deductible Amount shown in the Declarations to the amount of loss sustained under the most recent prior insurance.
If the Deductible Amount is larger than the amount of loss sustained under this insurance, or the most recent prior insurance, we will apply the remaining Deductible Amount to the remaining amount of loss sustained during the prior insurance.
We will not apply any other Deductible Amount that may have been applicable to the loss.
(4)The following examples demonstrate how we will settle losses subject to this condition :
Example No. 1:
The insured sustained a covered loss of $10,000 resulting directly from an "occurrence" taking place during the terms of Policy A and Policy B.
Policy A
The current policy. Written at a Limit of Insurance of $50,000 and a Deductible Amount of $5,000.
Policy B
Issued prior to Policy A. Written at a Limit of Insurance of $50,000 and a Deductible Amount of $5,000.
Settlement of Loss
The amount of loss sustained under Policy A is $2,500 and under Policy B is $7,500.
The highest single Limit of Insurance applicable to this entire loss is $50,000 written under Policy A. The Policy A Deductible Amount of $5,000 applies. The loss is settled as follows:
1.The amount of loss sustained under Policy A ($2,500) is settled first. The amount we will pay is nil ($0.00) because the amount of loss is less than the Deductible Amount (i.e., $2,500 loss – $5,000 deductible = $0.00).
2.The remaining amount of loss sustained under Policy B ($7,500) is settled next. The amount recoverable is $5,000 after the remaining Deductible Amount from Policy A of $2,500 is applied to the loss (i.e., $7,500 loss – $2,500 deductible = $5,000).
The most we will pay for this loss is $5,000.
Example No. 2:
The insured sustained a covered loss of $250,000 resulting directly from an "occurrence" taking place during the terms of Policy A and Policy B.
Policy A
The current policy. Written at a Limit of Insurance of $125,000 and a Deductible Amount of $10,000.
Policy B
Issued prior to Policy A. Written at a Limit of Insurance of $150,000 and a Deductible Amount of $25,000.
Settlement of Loss
The amount of loss sustained under Policy A is $175,000 and under Policy B is $75,000.
The highest single Limit of Insurance applicable to this entire loss is $150,000 written under Policy B. The Policy A Deductible Amount of $10,000 applies. The loss is settled as follows:
1. The amount of loss sustained under Policy A ($175,000) is settled first. The amount we will pay is the Policy A Limit of $125,000 because $175,000 loss – $10,000 deductible = $165,000 which is greater than the $125,000 policy limit.
2. The remaining amount of loss sustained under Policy B ($75,000) is settled next. The amount we will pay is $25,000 (i.e., $150,000 Policy B limit – $125,000 paid under Policy A = $25,000).
The most we will pay for this loss is $150,000.
Example No. 3:
The insured sustained a covered loss of $2,000,000 resulting directly from an "occurrence" taking place during the terms of Policies A, B, C and D.
Policy A
The current policy. Written at a Limit of Insurance of $1,000,000 and a Deductible Amount of $100,000.
Policy B
Issued prior to Policy A. Written at a Limit of Insurance of $750,000 and a Deductible Amount of $75,000.
Policy C
Issued prior to Policy B. Written at a Limit of Insurance of $500,000 and a Deductible Amount of $50,000.
Policy D
Issued prior to Policy C. Written at a Limit of Insurance of $500,000 and a Deductible Amount of $50,000.
The amount of loss sustained under Policy A is $350,000, under Policy B is $250,000, under Policy C is $600,000 and under Policy D is $800,000.
The highest single Limit of Insurance applicable to this entire loss is $1,000,000 written under Policy A. The Policy A Deductible Amount of $100,000 applies. The loss is settled as follows:
(1).The amount of loss sustained under Policy A ($350,000) is settled first. The amount we will pay is $250,000 (i.e., $350,000 loss – $100,000 deductible = $250,000).
(2).The amount of loss sustained under Policy B ($250,000) is settled next. The amount we will pay is $250,000 (no deductible is applied).
(3).The amount of loss sustained under Policy C ($600,000) is settled next. The amount we will pay is $500,000, the policy limit (no deductible is applied).
(4).We will not make any further payment under Policy D as the maximum amount payable under the highest single Limit of Insurance applying to the loss of $1,000,000 under Policy A has been satisfied.
The most we will pay for this loss is $1,000,000.
l.Loss Sustained During Prior Insurance Not Issued By Us Or Any Affiliate
(1)If you "discover" loss during the Policy Period shown in the Declarations, resulting directly from an "occurrence" taking place during the Policy Period of any prior cancelled insurance that was issued to you or a predecessor in interest by another company, and the period of time to discover loss under that insurance had expired, we will pay for the loss under this insurance, provided:
(a)This insurance became effective at the time of cancellation of the prior insurance; and
(b)The loss would have been covered under this insurance had it been in effect at the time of the "occurrence".
(2)In settling loss subject to this Condition:
(a)The most we will pay for the entire loss is the lesser of the Limits of Insurance applicable during the period of loss, whether such limit was written under this insurance or was written under the prior cancelled insurance.
(b)We will apply the applicable Deductible Amount shown in the Declarations to the amount of loss sustained under the prior cancelled insurance.
(3)The insurance provided under this Condition is subject to the following:
(a)If loss covered under this Condition is also partially covered under Condition E.1.k., the amount recoverable under this Condition is part of, not in addition to, the amount recoverable under Condition E.1.k.
(b)For loss covered under this Condition that is not subject to Paragraph l.(3)(a), the amount recoverable under this Condition is part of, not in addition to, the Limit of Insurance applicable to the loss covered under this insurance and is limited to the lesser of the amount recoverable under:
(i)This insurance as of its effective date; or
(ii)The prior cancelled insurance had it remained in effect.
Analysis
This entire section is specific to the loss sustained form only and provides examples of how losses are settled dependent upon when the loss was sustained- during a prior policy and the current policy, during the prior policy only, or during a prior policy when that policy was not issued by the current insurer or an affiliate. The first part of condition k. applies when a loss is discovered during the current policy period and the loss occurred partly during the current period and partly during the prior policy that had been issued by the same carrier or an affiliate. As long as the current policy became effective at the time of cancellation of the prior policy, settlement is made. Settlement is made for the loss that occurred during the current policy first, and then the remaining amount is settled from the prior insurance.
Part (2) states that when a loss is sustained entirely during a prior policy period, payment under the current policy is available providing that the current policy became effective at the point of cancellation of the prior insurance and the loss would have been covered under the current policy if it had been in force at the time of the loss.
Similar to the first part of condition k., the loss sustained during the most recently cancelled policy is paid first.
As there are multiple limits and deductibles, the settlements are handled as follows; regardless of which policy it is written under, the most that will be paid is the highest single limit of liability applicable during the loss period. The limits of the policies are not combined, only the highest limit applies. The deductible is applied under the current policy if the loss was sustained under the current policy; if not the prior policy's deductible is used. When the loss occurs under both a current and prior policy and the loss sustained under the current policy is less than the deductible amount, the remaining deductible amount from the current policy will be applied to the remaining amount of loss that occurred during a prior policy.
Example number one clearly shows the application of the deductible. The loss is $10,000 and occurs during both terms. The current policy, policy A sustains $2,500 of the loss and has a $5,000 deductible and a limit of $50,000. As the loss is less than the deductible, nothing is paid under the current policy- policy A but $2,500 is applied to the deductible. Policy B has the same limits and deductible as policy A. The amount of loss under policy B is $7,500. As $2,500 of the loss was applied to the deductible in policy A, the remaining $2,500 of the deductible is applied under policy B. The settlement then is $5,000; the loss of $7,500 less the deductible applied of $2,500. The deductible is applied one time to the entire loss, and not separately between the policies.
Example number three shows how only one deductible is applied even though many policies are involved. Also, the single highest limit of liability of any of the policies is used. There is no stacking of limits or deductibles.
The next condition, condition l., deals with loss that occurred during a prior policy and that policy was not issued by the current carrier or an affiliate. Coverage is provided under this policy following the same terms as 1 and 2 above. What changes in this circumstance is how the settlement itself is handled. Under these conditions, the most that is paid is the lesser of the limits of insurance applicable under the period of loss, whether or not the limit was written under the current policy or prior policy. So, if the current policy has a limit of $100,000 and the prior policy has a limit of $150,000 the maximum payable amount is $100,000- the lesser of the limits. The deductible from the current policy is applied to the loss, even when the loss occurs under a prior cancelled policy.
In the event that a loss is covered under condition k. and condition l. the amount of recovery is part of, and not in addition to the limits in condition k. A loss covered under condition l that does not meet the above requirements, the loss again is part of, not in addition to the limits applicable, but is also limited to the lesser of the amount recoverable under either the current policy or the prior canceled policy.
Note that the following information reverts to the clause designations as they appear on CR 00 20. The information on CR 00 21 is the same, only the clause designation is different. For example, the other insurance clause on CR 00 20 is clause k. and the other insurance clause on CR 00 21 is m.
k.Other Insurance
If other valid and collectible insurance is available to you for loss covered under this insurance, our obligations are limited as follows:
(1)Primary Insurance
When this insurance is written as primary insurance, and:
(a)You have other insurance subject to the same terms and conditions as this insurance, we will pay our share of the covered loss. Our share is the proportion that the applicable Limit of Insurance shown in the Declarations bears to the total limit of all insurance covering the same loss.
(b)You have other insurance covering the same loss other than that described in Paragraph k.(1)(a), we will only pay for the amount of loss that exceeds:
(i)The Limit of Insurance and Deductible Amount of that other insurance, whether you can collect on it or not; or
(ii)The Deductible Amount shown in the Declarations;
whichever is greater. Our payment for loss is subject to the terms and conditions of this insurance.
(2)Excess Insurance
(a)When this insurance is written excess over other insurance, we will only pay for the amount of loss that exceeds the Limit of Insurance and Deductible Amount of that other insurance, whether you can collect on it or not. Our payment for loss is subject to the terms and conditions of this insurance.
(b)However, if loss covered under this insurance is subject to a Deductible, we will reduce the Deductible Amount shown in the Declarations, by the sum total of all such other insurance plus any Deductible Amount applicable to that other insurance.
l.Ownership Of Property; Interests Covered
The property covered under this insurance is limited to property:
(1)That you own or lease; or
(2)That is held by you in any capacity; or
(3)For which you are legally liable, provided you were liable for the property prior to the time the loss was sustained.
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 insurance must be presented by you.
Analysis
This section is in both the discovery and loss sustained forms, and the wording is identical. When the coverage in this policy is primary and other insurance exists subject to the same terms and conditions, payment is based on the proportion of the limit of insurance to the total limit of all insurance covering the loss. For example, the limit of applicable insurance on this policy is $400,000 and the other policy limit is $600,000. The loss sustained is $500,000. As this policy provides 40% of the available limits for the loss, this policy will pay 40 percent of the loss, or $200,000.
When the other insurance is not subject to the same terms and conditions, this policy will pay the amount of loss that exceeds the other policy's limit of insurance and deductible, regardless of whether or not the insured can collect it, or the deductible amount shown in this policy's declarations, whichever is greater. For example, the loss is $800,000. The other policy's limit of insurance and deductible are $600,000, and the deductible for this policy is $500,000. Since the amount that exceeds this deductible is the greatest amount, this policy will pay $300,000 of the loss.
When the coverage in this policy is excess over other insurance, this policy will only pay the amount of loss that exceeds the other policy limit and deductible, whether or not the insured can collect on it. If the loss covered under this policy is subject to a deductible, the deductible amount will be reduced by the total of all such other insurance including any applicable deductible to that other insurance. The loss is $1,800,000 and the other policy's limit and deductible is $600,000. The deductible on this policy is $800,000. The $800,000 deductible is reduced by the amount of the limit and deductible of the other insurance, the $600,000. Therefore, the remaining $200,000 is taken from the loss for this policy's deductible and this policy pays the remaining $1,000,000 to the insured.
The ownership of property clause is something of a no benefit to bailee clause and was slightly changed in 2006. This condition makes it clear that the property covered by the policy is limited to the named insured's property (owned or leased), property that the named insured holds for others. The insurance is for the benefit of the named insured only and confers no rights or benefits on anyone else.
m.Policy Bridge – Discovery Replacing Loss Sustained
(1)If this insurance replaces insurance that provided you with an extended period of time after cancellation in which to discover loss and which did not terminate at the time this insurance became effective:
(a)We will not pay for any loss that occurred during the Policy Period of that prior insurance which is "discovered" by you during the extended period to "discover" loss, unless the amount of loss exceeds the Limit of Insurance and Deductible Amount of that prior insurance. In that case, we will pay for the excess loss subject to the terms and conditions of this policy.
(b)However, any payment we make for the excess loss will not be greater than the difference between the Limit of Insurance and Deductible Amount of that prior insurance and the Limit of Insurance shown in the Declarations. We will not apply the Deductible Amount shown in the Declarations to this excess loss.
(2)The Other Insurance Condition E.1.k. does not apply to this Condition.
Analysis
This clause does not appear in the loss sustained form. This policy will pay a loss that was discovered during the extended period only after the prior policy limits and deductible have been exceeded. The deductible from this policy will not be applied, and any payment for the excess loss will not exceed the difference between the limits and deductible of the first policy and the limits and deductible of this policy. For example, the limits of the first policy are two million dollars. This policy's limits are three million dollars. The loss is four million; this policy will only pay one million of the loss, which is the difference between the limits of the first policy limits and this policy's limits. The other insurance condition E.1.k. that defines how primary and excess coverage applies does not apply to this condition.
n.Records
You must keep records of all property covered under this insurance so we can verify the amount of any loss.
o.Recoveries
(1)Any recoveries, whether effected before or after any payment under this insurance, whether made by us or you, shall be applied net of the expense of such recovery:
(a)First, to you in satisfaction of your covered loss in excess of the amount paid under this insurance;
(b)Second, to us in satisfaction of amounts paid in settlement of your claim;
(c)Third, to you in satisfaction of any Deductible Amount; and
(d)Fourth, to you in satisfaction of any loss not covered under this insurance.
(2)Recoveries do not include any recovery:
(a)From insurance, suretyship, reinsurance, security or indemnity taken for our benefit; or
(b)Of original "securities" after duplicates of them have been issued.
p.Territory
This insurance covers loss that you sustain resulting directly from an "occurrence" taking place within the United States of America (including its territories and possessions), Puerto Rico and Canada.
q.Transfer Of Your Rights Of Recovery Against Others To Us
You must transfer to us all your rights of recovery against any person or organization for any loss you sustained and for which we have paid or settled. You must also do everything necessary to secure those rights and do nothing after loss to impair them.
r.Valuation – Settlement
The value of any loss for purposes of coverage under this insurance shall be determined as follows:
(1)Money
Loss of "money" but only up to and including its face value. We will, at your option, pay for loss of "money" issued by any country other than the United States of America:
(a)At face value in the "money" issued by that country; or
(b)In the United States of America dollar equivalent, determined by the rate of exchange published in The Wall Street Journal on the day the loss was "discovered".
(2)Securities
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:
(a)Pay the market 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
(b)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)Market value of the "securities" at the close of business on the day the loss was "discovered"; or
(ii)Limit of Insurance applicable to the "securities".
(3)Property Other Than Money And Securities
(a)Loss of or damage to "other property" or loss from damage to the "premises" or its exterior for the replacement cost 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 damaged property with property of comparable material and quality and used for the same purpose; or
(iii)The amount you actually spend that is necessary to repair or replace the lost or damaged property.
(b)We will not pay on a replacement cost basis for any loss or damage to property covered under Paragraph r.(3)(a):
(i)Until the lost or damaged property is actually repaired or replaced; and
(ii)Unless the repair or replacement is 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.
(c)We will, at your option, pay for loss or damage to such property:
(i)In the "money" of the country in which the loss or damage was sustained; or
(ii)In the United States of America dollar equivalent of the "money" of the country in which the loss or damage was sustained, determined by the rate of exchange published in The Wall Street Journal on the day the loss was "discovered".
(d)Any property that we pay for or replace becomes our property.
Analysis
The remaining sections of the policies contain identical language. The records and the territory conditions are standard fare. The recoveries condition sets out the pattern of disbursement should any property be recovered after settlement has been made. Language in the policies state that recoveries are applied net of the expense of the recovery. The named insured is made whole first for any loss that the named insured sustains in excess of the limit of insurance and the deductible. The insurer is then paid until it is reimbursed for the amount it paid out for the loss. Third, the insured receives compensation for the deductible he or she has chosen and lastly to the insured for any losses not covered under this insurance.
The transfer of rights clause is the subrogation clause. The insured is to do nothing to impair the insurer's rights of recovery after a loss has occurred.
The valuation and settlement condition discusses the value of lost money, securities, and other property that the policies cover. Loss of money is settled only up to and including its face value; it may pay for loss of money issued by a country other than the United States either at the face value in the money issued by that country, or in the United States dollar equivalent at the rate of exchange on the day the loss is discovered. In the current forms, this is now at the insured's option, and no longer at the insurer's option. Since exchange rates can vary, the forms specify that the rate used will be the one published by The Wall Street Journal on the day of the loss. Securities are valued only up to and including their worth at the close of business on the day the loss is discovered. The insurer has the option to pay the value of securities or replace them in kind, or pay the cost of any "lost securities bond" required in connection with issuing duplicates of the securities. Loss of property other than money or securities or loss from damage to the premises is valued at the replacement cost of the property without a deduction for depreciation. Of course, the replacement cost valuation is based on the insured actually repairing or replacing the damaged property; if this is not done, the insurer pays on an actual cash value basis. In the case of property other than "money," the insured, not the insurer, has the option of being paid for the loss in the money of the country where the loss occurs, or in the United States dollar equivalent—determined by the rate of exchange published in the Wall Street Journal on the day the loss is discovered. The decision as to the type of payment is now up to the insured, and the rate of exchange is determined by what was published by the Wall Street Journal on the date of the loss, not just the rate of exchange as reported by different banks.
2.Conditions Applicable To Insuring Agreement A.1.
a.Termination As To Any Employee
This Insuring Agreement terminates as to any "employee":
(1)As soon as:
(a)You; or
(b)Any of your partners, "members", "managers", officers, directors or trustees not in collusion with the "employee";
learn of "theft" or any other dishonest act committed by the "employee" whether before or after becoming employed by you.
(2)On the date specified in a notice mailed to the first Named Insured. That date will be at least 30 days after the date of mailing.
We will mail or deliver our notice to the first Named Insured's last mailing address known to us. If notice is mailed, proof of mailing will be sufficient proof of notice.
b.Territory
We will pay for loss caused by any "employee" while temporarily outside the territory specified in the Territory Condition E.1.p. for a period of not more than 90 consecutive days.
Analysis
The policy terminates as to any employee as soon as the named insured, any partners, officers, managers or directors not in collusion with the employee learn of theft or any dishonest act committed by the employee whether before or after becoming employed by the named insured. Therefore, the employee does not have to engage in dishonest conduct while employed for the policy to exclude coverage. If it is discovered that one year prior to being employed by the named insured the employee in question embezzled from a former employer, these policies will not apply to that employee.
The territory section of this condition has not changed from the prior policies. If an employee is in Japan on a business trip and steals the insured company's money, coverage will be provided for the theft even though Japan is outside the stated territorial limits of the policy. The coverage is for ninety days and it can be assumed that the ninety day period is ninety consecutive days, not business days or some other variation on the counting of days.
3.Conditions Applicable To Insuring Agreement A.2.
a.Deductible Amount
The Deductible Amount does not apply to legal expenses paid under Insuring Agreement A.2.
b.Electronic And Mechanical Signatures
We will treat signatures that are produced or reproduced electronically, mechanically or by other means 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 that you sustain resulting directly from an "occurrence" taking place anywhere in the world. Territory Condition E.1.p. does not apply to Insuring Agreement A.2.
Analysis
The forgery or alteration insuring agreement is modified by this condition. That insuring agreement allows for the payment by the insurer of any reasonable legal expenses that the named insured incurs in defense of a lawsuit over the insured's refusing to pay any instrument listed in insuring agreement A.2. This condition declares that the deductible amount applicable to the insuring agreement does not apply to the legal expenses that the insurer will pay.
This condition also notes that if the insured presents a loss under the forgery or alteration insuring agreement, the instrument involved in the loss has to be sent to the insurer. So, if the insured has received a forged check or promissory note and has made a claim, that check or note has to be sent to the insurer with the claim of loss so as to strengthen the proof of loss in the eyes of the insurer.
The territorial limits are lengthened to cover the whole world for insuring agreement A.2. There is no time limit on the coverage as there is with the previous condition that was applicable to insuring agreement A.1. The forms specify that the loss the policies cover is to result directly from an occurrence.
The insurer is notifying the insured in this condition that all signatures will be treated as handwritten—whether they are handwritten or reproduced mechanically or electronically. This is a convenience for the insured since so much business these days is handled by FAX and e-mail.
4.Conditions Applicable To Insuring Agreements A.4. And A.5.
a.Armored Motor Vehicle Companies
Under Insuring Agreement A.5., 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 only pay up to $5,000 for any one "occurrence" of loss of or damage to:
(1)Precious metals, precious or semi-precious stones, pearls, furs, or completed or partially completed articles made of or containing such materials that constitute the principal value of such articles; or
(2)Manuscripts, drawings, or records of any kind, or the cost of reconstructing them or reproducing any information contained in them.
Analysis
The insuring agreements modified by this condition deal with inside the premises robbery or safe burglary and outside the premises loss. The insurer assumes that the insured has chosen a good risk management option and has a contract with the armored vehicle company that makes that company liable for losses that occur while the insured's property is in the care, custody, and control of the armored car company. Based on this, the insurer then declares that it will pay only the amount of loss that the named insured cannot recover from the armored car company.
The insurer then limits the coverage for certain enumerated property. The insurer will pay only up to $5,000 for pearls, furs, precious stones, etc. Such items are usually considered specialty type property that should be insured by special property floaters. This $5,000 limitation is in keeping with the manner in which such items are usually treated in property coverage forms, such as a homeowners policy.
5.Conditions Applicable To Insuring Agreement A.6.
a.Special Limit Of Insurance For Specified Property
We will only pay up 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.
b.Territory
We will cover loss that you sustain resulting directly from an "occurrence" taking place anywhere in the world. Territory Condition E.1.p. does not apply to Insuring Agreement A.6.
Analysis
Insuring agreement A.6 deals with computer and funds transfer fraud. This condition extends the coverage worldwide and limits the amount paid for reconstructing or reproducing lost information that was on the insured's computer. Due to the worldwide reach of many businesses these days, and the increasing use of computers in that worldwide business, the extension of territorial limits makes sense. As for the $5,000 limitation this is in keeping with most commercial property forms.
2."Computer system" means:
a.Computers, including Personal Digital Assistants (PDAs) and other transportable or handheld devices, electronic storage devices and related peripheral components;
b.Systems and applications software; and
c.Related communications networks;
by which electronic data is collected, transmitted, processed, stored or retrieved.
3."Counterfeit money" means an imitation of "money" that is intended to deceive and to be taken as genuine.
4."Custodian" means you, or any of your partners or "members", or any "employee" while having care and custody of property inside the "premises", excluding any person while acting as a "watchperson" or janitor.
5."Discover" or "discovered" means the time when you first become aware of facts which would cause a reasonable person to assume that a loss of a type covered by this insurance 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.
"Discover" or "discovered" also means the time when you first receive 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 insurance.
Analysis
Many of the definitions are self-explanatory and need not be analyzed; some do deserve a discussion.
The definition of counterfeit specifically refers to money only. The definition notes that the counterfeit has to be an item that is intended to deceive and to be taken as genuine. The intent to deceive is not always so easy to prove. If a customer of a bank unwittingly gets a bundle of counterfeit twenty dollar bills and then innocently passes them onto the insured bank, where is the intent to deceive? The customer did not intend to deceive the bank, but the bank surely can put in a claim for loss resulting from accepting counterfeit paper currency. More than likely, the insurer will presume that if the insured has accepted counterfeit currency, there was an intent to deceive on someone's part and pay the claim.
Custodian is a defined word that insureds need to know does not include a watchperson or a janitor. If a watchperson has possession of the insured's property (other than money or securities) and is robbed, that is not within the insuring agreement for robbery inside the premises; the robbery has to be from a custodian and that does not include the watchperson. Also, custodian does not include a family member of the named insured.
Discover is defined as when the named insured first becomes aware of information that would cause a reasonable person to believe that a loss that would be covered under this policy has or will occur. It also includes the receipt of first notice of an actual loss to a third party which would be considered a loss under this policy.
6."Electronic data" means information, facts, images, or sounds stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software) on data storage devices, including hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
7."Employee":
a.means:
(1)Any natural person:
(a)While in your service and for the first 30 days immediately after termination of service, unless such termination is due to "theft" or any other dishonest act committed by the "employee";
(b)Who you compensate directly by salary, wages or commissions; and
(c)Who you have the right to direct and control while performing services for you;
(2)Any natural person who is furnished temporarily to you:
(a)To substitute for a permanent "employee" as defined in Paragraph 7.a.(1), who is on leave; or
(b)To meet seasonal or short-term work load conditions;
while that person is subject to your direction and control and performing services for you, excluding, however, any such person while having care and custody of property outside the "premises";
(3)Any natural person who is leased to you under a written agreement between you and a labor leasing firm, to perform duties related to the conduct of your business, but does not mean a temporary employee as defined in Paragraph 7.a.(2);
(4) Any natural person who is:
(a)A trustee, officer, employee, administrator or manager, except an administrator or manager who is an independent contractor, of any "employee benefit plan"; and
(b) A director or trustee of yours while that person is engaged in handling "funds" or "other property" of any "employee benefit plan";
(5)Any natural person who is a former "employee", partner, "member", "manager", director or trustee retained as a consultant while performing services for you;
(6)Any natural person who is a guest student or intern pursuing studies or duties;
(7)Any natural person employed by an entity merged or consolidated with you prior to the effective date of this policy; and
(8)Any natural person who is your "managers", directors or trustees while:
(a)Performing acts within the scope of the usual duties of an "employee"; or
(b)Acting as a member of any committee duly elected or appointed by resolution of your board of directors or board of trustees to perform specific, as distinguished from general, directorial acts on your behalf.
b.Does not mean any agent, broker, factor, commission merchant, consignee, independent contractor or representative of the same general character not specified in Paragraph 7.a.
8."Employee benefit plan" means any welfare or pension benefit plan shown in the Declarations that you sponsor and which is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and any amendments thereto.
Analysis
The definition of employee is rather long. The key points here are: the employee has to be a natural person—corporate entities may be legal persons, but they are not natural persons and so, cannot be employees of the named insured; the employee is considered as such for thirty days after termination of service. If the employee was terminated due to theft or other dishonest conduct committed by the employee, that person does not fit the definition of employee for thirty days after termination. If the terminated employee somehow manages to steal from the insured after being fired, coverage could still exist under insuring agreement A.1. for a while at least unless the employee was terminated because of theft or dishonest acts.
The definition makes note of the right to control and direct the services of the worker which is usually accepted as the sign of employment; temporary workers are considered as employees of the insured; managers are insureds, but only while performing acts coming within the scope of their usual duties and not under all circumstances. The forms extend employee status to leased employees, recognizing how common this arrangement has become. The forms add the following as employees, when working as a consultant for the named insured: former employees, directors, partners, members, managers, representatives, or trustees. Employee status is also given to guest students or interns, while they are on the premises.
One more point about "employee": the status of executive officers is not clarified in this definition of employee. An officer of an employee benefit plan is considered an employee, but what about the president of the company or the secretary? The definition does not specifically exclude executive officers, but do they fit within the confines of the definition? They are natural persons; they can be in the service of the named insured; they certainly are compensated; but, are they subject to the control and direction of the named insured, especially if they set the named insured corporation's agenda?
9."Financial institution" means
a.With regard to Insuring Agreement A.3:
(1)A bank, savings bank, savings and loan association, trust company, credit union or similar depository institution;
(2)An insurance company; or
(3)A stock brokerage firm or investment company
10."Financial institution premises" means the interior of that portion of any building occupied by a financial institution.
11."Forgery" means the signing of the name of another person or organization with intent to deceive; it does not mean a signature which consists in whole or in part of one's own name signed with or without authority, in any capacity, for any purpose.
12."Fraudulent instruction" means:
a.With regard to Insuring Agreement A.6.a.(2);
(1)A computer, telefacsimile, telephone or other electronic instruction directing a "financial institution" to debit your "transfer account" and to transfer, pay or deliver "money" or "securities" from that "transfer account", which instruction purports to have been issued by you, but which in fact was fraudulently issued by someone else without your knowledge or consent; or
(2)A written instruction (other than those covered under Insuring Agreement A.2.) issued to a "financial institution" directing the "financial institution" to debit your "transfer account" and to transfer, pay or deliver "money" or "securities" from that "transfer account", through an electronic funds transfer system at specified times or under specified conditions, which instruction purports to have been issued by you, but which in fact was issued, forged or altered by someone else without your knowledge or consent.
b.With regard to Insuring Agreement A.6.b.:
A computer, telefacsimile, telephone or other electronic, written or voice instruction directing an "employee" to enter or change "electronic data" or "computer programs" within a "computer system" covered under the Insuring Agreement, which instruction in fact was fraudulently issued by your computer software contractor.
13."Manager" means a person serving in a directorial capacity for a limited liability company.
14."Member" means an owner of a limited liability company represented by its membership interest, who, if a natural person, may also serve as a "manager".
15."Messenger" means you, or a relative of yours, or any of your partners or "members", or any "employee" while having care and custody of property outside the "premises".
16."Money" means:
a.Currency, coins and bank notes in current use and having a face value;
b.Travelers checks, register checks and money orders held for sale to the public; and
c.In addition, includes:
(1)Under Insuring Agreements A.1, and A.2, deposits in your account at any financial institution; and
(2)Under Insuring Agreement A.6, deposits in your account at a financial institution as defined in Paragraph F.9.b.
Analysis
Forgery means the signing of another's name; a person cannot forge his or her own signature under the terms of the definition. A messenger can include relatives of the named insured, so if the named insured is a person and has his spouse carry the business receipts to the bank, insuring agreement A.5. will respond if the spouse if robbed along the way. Note that "messenger" is the only defined term that directly includes a relative or family member of the named insured. As for the definition of "money", note that it does not include bullion. Bullion does not have a face value and so, it does not come within the scope of the definition of money and is considered to be property other than money and securities.
Since the forms cover funds that are transferred via fraudulent instruction, it is important to define fraudulent instruction. A fraudulent instruction may come from an employee or a non-employee. If the instruction to transfer funds is made without the insured's consent, then the claim is covered under this form. The fraudulent instruction may even be made the old-fashioned way – in writing. If the instruction is forged or altered, the crime form covers the loss. The definition of fraudulent has been revised for clarification. The terms telegraphic, cable and teletype have been removed from the definition as they are obsolete technologies.
17."Occurrence" means:
a.Under Insuring Agreement A.1.:
(1)An individual act;
(2)The combined total of all separate acts whether or not related; or
(3)A series of acts whether or not related;
committed by an "employee" acting alone or in collusion with other persons, during the Policy Period shown in the Declarations, except as provided under Condition E.1.k. or E.1.l. (CR 00 20 ends this clause with the phrase "before such Policy Period or both.)
b.Under Insuring Agreement A.2.:
(1)An individual act;
(2)The combined total of all separate acts whether or not related; or
(3)A series of acts whether or not related;
committed by a person acting alone or in collusion with other persons, involving one or more instruments, during the Policy Period shown in the Declarations, except as provided under Condition E.1.k or E.1.l. (CR 00 20 ends this clause with the phrase "before such Policy Period or both".)
c.Under All Other Insuring Agreements:
(1)An individual act or event;
(2)The combined total of all separate acts or events whether or not related; or
(3)A series of acts or events whether or not related;
committed by a person acting alone or in collusion with other persons, or not committed by any person, during the Policy Period shown in the Declarations, except as provided under Condition E.1.k. or E.1.l. (CR 00 20 ends this clause with the phrase "before such Policy Period or both.)
Analysis
The definition of "occurrence" is divided into sections based on the different insuring agreements. Insuring agreement A.1. applies to theft by an employee. Since, with respect to this agreement, "occurrence" means all loss caused by an employee, whether due to a single act or series of acts, if the employee has been stealing from the insured over a period of time—say, $100 here and $250 there—that is considered one occurrence. The deductible is on a per occurrence basis, so the deductible is applied to the total amount taken by the employee on a one time shot, and not to each and every time the employee took the money. The same is true of insuring agreement A.2.—the total loss caused by any person is considered one occurrence and not a series of occurrences, no matter how many forged or altered instruments are involved. Finally, with respect to the other insuring agreements, an occurrence is an act or series of related acts. This means that if the acts that cause the loss are numerous but related they are considered to be one occurrence. For example, if the same person commits computer fraud over a period of several months, that is one occurrence.
18."Other property" means any tangible property other than "money" and "securities" that has intrinsic value. "Other property" does not include computer programs, electronic data or any property specifically excluded under this insurance.
19."Premises" means the interior of that portion of any building you occupy in conducting your business.
20."Robbery" means the unlawful taking of 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.
21."Safe burglary" means the unlawful taking of:
a.Property from within a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by marks of forcible entry upon its exterior; or
b.A safe or vault from inside the "premises".
22."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".
23."Theft" means the unlawful taking of property to the deprivation of the Insured.
24."Transfer account" means an account maintained by you at a financial institution from which you can initiate the transfer, payment or delivery of money or securities:
a.By means of computer, telegraphic, cable, teletype, telefacsimile, telephone or other electronic instructions; or
b.By means of written instructions (other than those described in Insuring Agreement A.2.) establishing the conditions under which such transfers are to be initiated by such financial institution through an electronic funds transfer system.
25."Watchperson" means any person you retain specifically to have care and custody of property inside the "premises" and who has no other duties.
Analysis
The "other property" definition is rather all encompassing, but there are limits to its scope. Other property does not include computer programs, electronic data, and any property that is specifically excluded. Motor vehicles and accessories are such specifically excluded items. And, property such as diamonds or furs, do have a special limit of insurance that applies in case of a loss. So, the entire policy has to be read to see if "other property" of the insured is covered and for how much.
The "premises" of the insured is the interior of the building, and not the entire area where the insured has his business. The insuring agreements make a distinction between inside the premises and outside, so this definition is meant to clarify those situations.
Note that safe burglary requires evidence of forced entry; an unlocked safe or vault will not meet the definition so as to activate insuring agreement A.4.
The definition of "watchperson" is included simply to make sure the distinction between custodian and watchperson is known. Both could have care and custody of property inside the insured's premises, but robbery of a watchperson is not included in insuring agreement A.4., while robbery of a custodian is a covered occurrence. The insured should know that a person hired to be a watchperson and who has no other duties is not considered to be a custodian covered under insuring agreement A.4., even if the insured calls the watchperson a custodian.