In transit

Forged or altered instruments

Forged, altered or counterfeit securities

Counterfeit money

Computer fraud

Fraudulent transfer instructions

Automated teller machines

Fraudulent mortgages

Stop payment or wrongful refusal to pay

Cash letter

Claims expense

Toll charge fraud

Uncollectible items of deposit

Unauthorized signatures

Safe depository

Business credit or debit cards

Fidelity

A. Fidelity

1. Loss resulting directly from dishonest or fraudulent acts (except for that portion of any loss arising totally or partially from any "loan" or trading) committed by an "employee" acting alone or in collusion with others. Such dishonest or fraudulent acts must be committed by the "employee" with the manifest intent to:
   1. Cause the Insured to sustain such loss; or
   2. Obtain an improper financial benefit for the "employee" or another person or entity.
2. Loss arising totally or partially from any "loan" resulting directly from dishonest or fraudulent acts committed by an "employee" acting in collusion with another party to the "loan" transaction, provided that the Insured first establishes that the loss was caused directly by such dishonest or fraudulent acts committed by the "employee" with the manifest intent to:
   1. Cause the Insured to sustain such loss; and
   2. Obtain an improper financial benefit for the "employee" and which is received by the "employee". However, if the "employee" failed to receive such improper financial benefit, such loss will nevertheless be covered if the Insured establishes that:

(1) Another party to the "loan" transaction that the "employee" was acting in collusion with received the proceeds from the "loan"; and

(2) The "employee" intended to obtain an improper financial benefit.

3. Loss arising totally or partially from trading resulting directly from dishonest or fraudulent acts committed by an "employee" acting alone or in collusion with others. Such dishonest or fraudulent acts must be committed by the "employee" with the manifest intent to:
   1. Cause the Insured to sustain such loss; and
   2. Obtain an improper financial benefit for the "employee" or another person or entity.
4. Reasonable costs incurred by the Insured to restore, replace or reproduce damaged or destroyed books of account and other records, "electronic data" or "computer programs" resulting directly from vandalism or malicious mischief caused by an "employee".

      As used throughout this Insuring Agreement, improper financial benefit does not include any employee benefits earned in the normal course of employment including, but not limited to, salaries, salary increases, commissions, fees, bonuses, promotions, awards, profit sharing, incentive plans, pensions or other emoluments.

 Analysis

The first insuring agreement is fidelity, issues of honesty and trust involving employees. Coverage is provided for loss that results from the dishonest or fraudulent acts committed by an "employee" acting alone or in conjunction with others, with the intent to cause the insured to sustain losses or for the "employee" to obtain improper financial benefit for himself or another party, either a person or entity. This does not include losses arising partially or totally from any "loan" or trading. If an employee diverts funds from various accounts into his account or into an accomplice's account, that loss is covered.

 Losses derived from "loans" resulting directly from dishonest or fraudulent actions committed by an "employee" either alone or in collusion with others, have their own parameters. As long as the insured first establishes that the loss was caused directly by such dishonest acts committed by the "employee" with the intent to cause the insured to sustain such a loss, and obtain an improper financial benefit for the "employee," and which is received by the "employee", there is coverage. If the "employee" does not receive such a financial benefit, there is still coverage as long as the insured establishes that another party to the "loan" acting in collusion with the "employee" received the proceeds from the "loan" and that "employee" intended to obtain an improper financial benefit. For example, an employee approves loans for friends that don't qualify for loans, and the friends have no intention of repaying the loans. The employee receives a cut of the loan amount for approving the loan for his friends. This loss would be covered. Even if the employee didn't get a cut of the loan amount, the fact the employee had intended to receive a cut of the loan makes the loss covered. The other party may have reneged on the employee, leaving him having taken the risk and abetted the other party, but receiving no benefit. The employee may have falsified loan applications so his friends could get loans for million dollar homes, for example. The employee was supposed to get a percentage; regardless if the employee did or did not receive a percentage, , since the employee worked in collusion with someone and intended to get a percentage, that loss is still paid.

 Losses from trading are the next covered losses if they are generated from dishonest or fraudulent acts of an "employee" with the manifest intent to cause the insured to sustain a loss and for either the "employee" or another person or entity to benefit from the insured's loss.

 Costs incurred by the insured to restore, replace or reproduce damaged or destroyed books of account, other records, "electronic data" or "computer programs" resulting directly from vandalism or malicious mischief of an "employee" are covered as well. A number of items are not considered as part of improper financial benefits. These are employee benefits earned in the normal course of employment, including but not limited to salary, salary increases, commissions, fees, bonuses, promotions, awards, profit sharing, incentive plans, pensions or other benefits. For example, an employee commits fraudulent acts over time causing the insured to lose several thousand dollars. The salary that employee earned while committing these fraudulent acts is not considered part of the improper financial benefit. The employee may have siphoned off thousands of dollars into an offshore account for himself, but the salary that went into his local bank account is not included in those funds.

 On Premises

  On Premises

1. Loss of "property" resulting directly from:

1. Robbery, burglary, misplacement, mysterious unexplainable disappearance, damage or destruction; or
2. Theft, false pretenses, common-law or statutory larceny, committed by a person physically present in the Insured's offices or on the Insured's premises at the time the "property" was surrendered; while the "property" is lodged or deposited within offices or premises located anywhere. The premises of The Depository Trust & Clearing Corporation or other similar securities depository shall be deemed to be the Insured's premises, but only with respect to "certificated securities" and then only to the extent of the Insured's interest in such "certificated securities" as evidenced in such depository's books and records.

2. Loss of "property" in the possession of a "customer", the "customer's" representative or an "employee" resulting directly from robbery of such "customer", "customer's" representative or "employee", while they are:

1. Inside the Insured's offices or premises;
2. Outside the Insured's offices or premises and transacting banking business at an outside window attended by an "employee"; or
3. On a driveway or parking lot maintained by the Insured, for the purpose of transacting banking business with the Insured; whether or not the Insured is liable for the loss, provided that such loss is included in the Insured's proof of loss.

3. Loss of or damage to furniture, fixtures, supplies or equipment within the Insured's offices or premises, or loss from damage to the interior or exterior of the Insured's offices or premises, resulting directly from an actual or attempted robbery, burglary, theft, common-law or statutory larceny, provided that the Insured is:

1. The owner of such furniture, fixtures, supplies, equipment, office or premises; or
2. Liable for such loss or damage; and

the loss or damage is not caused by fire.

 Analysis

This insuring agreement addresses loss of "property" on the insured's premises, whether the property is the insured's, a customer's, or the insured's furnishings or equipment. Covered causes of loss include robbery, burglary, misplacement, mysterious unexplainable disappearance, damage or destruction; or theft, false pretense, common-law or statutory larceny, committed by a person physically present in the insured's offices or premises when the "property" was surrendered. Securities depositories such as The Depository Trust & Clearing Corporation or similar depositories are considered the insured's premises with respect to "certificated securities" and only to the extent of the insured's interest in such securities as evidenced by the depository's books and records. There is a separation in the causes of loss; the first causes listed, robbery through destruction, have no qualifying language attached. The other losses, theft through statutory larceny, must be committed by a person physically present in the insured's offices, or a person on the insured's premises when the "property" was surrendered; while the "property" was deposited within the offices or other premises located anywhere. For example, a thief present on the insured's premises while a customer is depositing "property". "Property" includes money, securities, titles, deeds, stamps, books of account and other records, gems, jewelry precious metals and other such property.  

 "Property" in the possession of a "customer", "customer's" representative, or "employee" is covered for loss by robbery of the "customer", representative or "employee" while that person is inside the insured's offices or premises, outside the offices or premises and transacting banking business at an outside window attended by an employee, or on the driveway or parking lot maintained by the insured for the purpose of others transacting banking activity with the insured. Such loss is covered even if the insured is not liable for the loss, as long as such loss is included in the insured's proof of loss. This is goodwill coverage for the insured; while not liable for losses that occur on the property, it is good for business if the insured can provide coverage to customers for property stolen from the insured's premises. For example, robbers enter a bank and demand money from the bank and all customers in the bank; this provides coverage to those customers for their stolen property.

 The last section provides coverage for loss or damage to furniture, fixtures, supplies or equipment within the insured's offices or premises; or loss from damage to the interior of the insured's office or premises that results from an actual or attempted robbery, burglary, theft, common-law or statutory larceny. Common-law larceny is the unlawful taking of the personal property of another with the intent to permanently deprive the owner of the property; it was originally an offence under English common law.  Over time, the definition of larceny was broken out into separate parts such as robbery, burglary, theft, etc. Statutory larceny is that which is defined in state statutes. This coverage applies as long as the insured is the owner of the furniture, fixtures, supplies, equipment, office or premises, or liable for such loss or damage and the loss or damage is not caused by fire. This is not a standard property policy; its purpose is to provide coverage for specific types of losses related to banking and related businesses.

 In Transit

 C. In Transit

Loss of "property" resulting directly from robbery, common-law or statutory larceny, theft, misplacement, mysterious unexplainable disappearance, damage or destruction, while the "property" is in transit anywhere in the custody of:

1. A "messenger";
2. A "transportation company", while being transported in an armored motor vehicle; or
3. A "transportation company", while being physically (not electronically) transported in a conveyance other than an armored motor vehicle, provided that covered "property" transported in such manner is limited to the following:

1. Books of account and other records whether recorded in writing or recorded on electronic storage media;
2. "Certificated securities" issued in registered form and not endorsed or with restrictive endorsements; and
3. "Negotiable instruments" not payable to bearer and not endorsed or with restrictive endorsements.

Coverage under this Insuring Agreement begins immediately upon the receipt of such "property" by the "messenger" or "transportation company" and ends immediately upon delivery to the designated recipient or its agent, but only while the "property" is being conveyed.

 Analysis

Banks often transport money, certificates and other property from one place to another. They may deliver cash to another branch, a different bank, or another organization. When "property" is in transit, coverage is provided for loss from robbery, larceny, theft, misplacement, disappearance, damage or destruction as long as the property is in transit anywhere and is in the custody of a "messenger", a "transportation company" while being transported in an armored vehicle, or "a transportation company" while being transported in other than an armored vehicle. When "property" is transported in other than an armored vehicle the property covered is limited to books of account and other records either written or on electronic storage media, "certificated securities" in registered form and not endorsed or with restrictive endorsements, and "negotiable instruments" not payable to bearer and not endorsed or with restrictive endorsements. Money, jewelry and other such property should be transported in an unarmored vehicle due to the value and ease with which they can be stolen and converted before the theft is discovered. Coverage begins as soon as the "messenger" or "transportation company" receives the "property" to be transported and ends immediately upon delivery to the designated recipient or agent, but only while the "property" is being conveyed. Once the "messenger" lets go of the "property", coverage ceases.

 Forged or Altered Instruments

 D. Forged Or Altered Instruments

1. Loss resulting directly from the Insured having, in good faith, paid or transferred any "property" in reliance upon any "original":

1. "Negotiable instrument" (except an "evidence of debt");
2. "Acceptance";
3. "Withdrawal order";
4. Receipt for the withdrawal of "property";
5. "Certificate of deposit";
6. "Letter of credit"; or
7. Instruction or advice directed to the Insured and purportedly signed by a "customer" or by a financial institution; which, with regard to the items listed in Paragraphs 1.a. through 1.g. above:

(1) Bears a handwritten signature which is a "forgery", but only to the extent the "forgery" causes the loss; or

(2) Is altered, but only to the extent the alteration causes the loss.

Actual physical possession of the items listed in Paragraphs 1.a. through 1.g. above, by the Insured or an authorized representative of the Insured, is a condition precedent to the Insured having relied on the validity of such items.

A reproduction of a handwritten signature is treated the same as the handwritten signature. A signature written on an electronic pad, which captures the signature for the purpose of creating an electronic digitized image of a handwritten signature, shall be treated the same as a handwritten signature.

2. The Company will deem an electronic image of a "negotiable instrument" (except an "evidence of debt") that is transmitted by a "customer" for deposit in the "customer's" account as an "original" in the physical possession of the Insured, provided that such transmission from the "customer" is received directly by:
   1. The Insured; or
   2. A third party under written contract with the Insured to process such deposits on the Insured's behalf;

and before crediting the "customer's" account, the electronic image of such "negotiable instrument" is received by the Insured or the third party in a format that can be reproduced.

 Analysis

The section on forged or altered instruments addresses loss that results directly from the insured having in good faith paid or transferred any "property" in reliance upon an "original" of a number of types of documents. These documents are "negotiable instruments" (except as "evidence of debt"), "acceptance", "withdrawal order", receipt for the withdrawal of "property", "certificate of deposit", and "letter of credit".  Also included is instruction directed to the insured purportedly signed by a "customer" or a financial institution that bears a handwritten signature which is a "forgery" but only to the extent that the "forgery" causes the loss, or is altered but only to the extent that the alteration causes the loss. A check may be altered to show $10,000 instead of $1,000; that alteration causes the bank to lose $9,000, and that alteration is the cause of the loss. The insured or authorized representative must have physical possession of the altered or forged documents, because possession of the documents provides proof that the insured relied on falsified documents to release or transfer "property".

 There are cases where a physical document is not provided, such as a signature written on an electronic pad that captures the signature and digitizes the image. Such signatures will be treated the same as a handwritten signature. Likewise, an electronic image of a "negotiable instrument" other than an "evidence of debt" transmitted by a "customer" to deposit in the "customer's" account will be taken as an "original" in physical possession of the insured. The transmission must be from the "customer" and be received by the insured or a third party under contract with the insured to process deposits on the insured's behalf. The electronic document must be in a format that can be reproduced.

 Forged, Altered or Counterfeit Securities

E. Forged, Altered Or Counterfeit Securities

Loss resulting directly from the Insured having, in good faith, for its own account or for the account of others:

1. Acquired, sold, delivered, or given value, extended credit or assumed liability in reliance upon any "original":

1. "Certificated security";
2. "Document of title";
3. Deed, mortgage or other instrument conveying title to, or creating or discharging a lien upon, real property;
4. "Certificate of origin or title";
5. "Certificate of deposit";
6. "Letter of credit";
7. "Evidence of debt";
8. Corporate, partnership or personal "guarantee";
9. "Security agreement"; or
10. "Instruction";

which, with regard to the items listed in Paragraphs 1.a. through 1.j. above:

(1) Bears a handwritten signature that is material to the validity or enforceability of the security, which is a "forgery", but only to the extent the "forgery" causes the loss;

(2) Is altered, but only to the extent the alteration causes the loss; or

(3) Is lost or stolen;

2. Guaranteed in writing or witnessed any signature upon any transfer, assignment, bill of sale, power of attorney, "guarantee", endorsement or any of the items listed in Paragraphs 1.a. through 1.j. above; or
3. Acquired, sold, delivered, or given value, extended credit or assumed liability, in reliance upon any item listed in Paragraphs 1.a. through 1.f. above, which is a "counterfeit", but only to the extent the "counterfeit" causes the loss.

Actual physical possession of the items listed in Paragraphs 1.a. through 1.j. above, by the Insured, the Insured's correspondent financial institution or an authorized representative of the Insured, is a condition precedent to the Insured having relied on the validity of such items.

 Analysis

This insuring agreement is very similar to the previous one, except it addresses loss that results directly from the insured having in good faith acquired, sold, provided credit, or assumed liability upon an "original" of a number of types of documents. These documents are "certificated security", "document of title", deed, mortgage or other instrument conveying property ownership, "certificate of origin or title", "certificate of deposit", "letter of credit", "evidence of debt", corporate, partnership or personal "guarantee", "security agreement" or "instruction". The documents must have a handwritten signature material to the validity or enforceability of the document, but only to the extent that the "forgery" causes a loss, is altered, but only to the extent the alteration causes the loss, or the document is lost or stolen. As in the earlier clause, possession of the document is required to show the insured relied on the validity of the documents. To illustrate, the bank president signs a document; his signature makes the document valid; his signature is forged by another party, and that document is presented as valid. The bank pays out on the belief that the document and the president's signature is valid; the bank loses funds since the document was forged.

 Loss is also covered if the insured guaranteed in writing or witnessed any signature upon any transfer, assignment, bill of sale, power of attorney, "guarantee", endorsement of any of the documents listed, or if the insured acquired, sold, delivered, gave value, extended credit or assumed liability in reliance upon any of the documents listed which were "counterfeit", as long as the "counterfeit" is what caused the actual loss. If the insured didn't actually rely on the counterfeit document and sustained a loss, coverage is not provided here. The insured must rely on the apparent veracity of the document presented and have physical possession of said document in order for there to be coverage of a financial loss from reliance on that document.

 Counterfeit Money and Computer Fraud

F. Counterfeit Money

Loss resulting directly from the Insured having, in good faith, accepted any "counterfeit money" of any country.

G. Computer Fraud

1. Loss resulting directly 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", including any such entry or change made through access to the Internet or a "network", provided that the fraudulent entry or fraudulent change causes, with regard to Paragraphs 1.a. and 1.b. above:

(1) "Property" to be transferred, paid or delivered;

(2) An account of the Insured's, or of a "customer", to be added, deleted, debited or credited; or

(3) An unauthorized account or a fictitious account to be debited or credited.

As used throughout this Insuring Agreement, 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 the Insured to design, implement or service "computer programs" for a "computer system" covered under this Insuring Agreement.

2. Reasonable costs incurred by the Insured to restore or replace damaged or destroyed "electronic data" or "computer programs" resulting directly from:
   1. Fraudulent entry or fraudulent change of such "electronic data" or "computer program"; or
   2. Virus or malicious instruction;

while such "electronic data" or "computer program" is stored within a "computer system".

  Analysis

The section on counterfeit money is self-explanatory. If an insured accepts "counterfeit money" in good faith and suffers a loss, from money from any country, coverage is available. "Counterfeit money" is defined as an imitation of "money" designed to deceive and be taken as genuine.

 Computer fraud provides coverage when a loss resulted from fraudulent entry or change of "electronic data" or "computer program" within any "computer system". This includes entry made through internet access or a "network", provided that the fraudulent entry or changes caused "property" to be transferred, paid or delivered, or an account of the insured's or a customer's to be added, deleted, debited or credited, or an unauthorized or fictitious account to be debited or credited. Fraudulent entry or change of data or programs includes such entries or changes made by "employees" acting in good faith upon fraudulent instruction received from a software contractor with a written agreement with the insured to design, implement, or service "computer programs" for a "computer system" covered under the insuring agreement. It would be easy enough for a contractor to start giving an employee instructions to change the computer code so that money was funneled into an account for that contractor without the employee realizing that account was fraudulent.

 Coverage is provided for reasonable costs of the insured to restore or replace damaged or destroyed data or programs resulting directly from fraudulent entry or changes to the data or programs, virus or malicious instruction when the data or program is stored within a "computer system". When the employee makes changes within the "computer program" that operates the "computer system", based on fraudulent instructions, the costs to restore the operating system are covered.

 Fraudulent Transfer Instructions

H.Fraudulent Transfer Instructions

1. Loss resulting directly from the Insured having, in good faith, transferred or delivered "funds", "certificated securities" or "uncertificated securities" from a "funds transfer customer's" account in reliance upon a transfer instruction directed to the Insured, that is transmitted:

1. By telefacsimile or email and purports and reasonably appears to be from:

(1) The "funds transfer customer";

(2) Another financial institution; or

(3) Another of the Insured's offices;

but which, in fact, proves to have been fraudulently sent without the knowledge and authorization of the "funds transfer customer" or entity whose identification it bears;

b. By telephone and purports to be from:

(1) The "funds transfer customer";

(2) A person authorized by the "funds transfer customer" to instruct the Insured to make such

transfers; or

(3) An "employee" who was authorized by the Insured to instruct other "employees" to transfer "funds", "certificated securities" or "uncertificated securities";

but which, in fact, proves not to have been initiated by a person described in Paragraphs 1.b.(1) through 1.b.(3) above; or

c. Through an on-line banking system operated by the Insured or on the Insured's behalf and purports and reasonably appears to be from the "funds transfer customer", but which, in fact, proves to have been fraudulently sent without the knowledge and authorization of the "funds transfer customer";

provided, with regard to Paragraphs 1.a. through 1.c. above, that before transferring the "funds", "certificated securities" or "uncertificated securities" the Insured used its best efforts to:

(1) Verify the identity of the person transmitting the transfer instruction using the contact information provided to the Insured by the "funds transfer customer"; and

(2) Confirm the validity of the transfer instruction according to the "transfer instruction verification procedure" established between the Insured and the "funds transfer customer".

2. Loss resulting directly from a fraudulent Automated Clearing House (ACH) debit from a "funds transfer customer's" account that originated through another financial institution, provided that:

1. The "funds transfer customer" submits a sworn affidavit stating that the debit was not authorized; and
2. The Insured attempted to recover the unauthorized ACH debit as allowed under the ACH rules.

 Analysis

The fraudulent transfer instructions coverage is similar to the other insuring agreements. Coverage exists for losses that result when the insured relied on fraudulent instructions to transfer "funds", "certificated securities", or "uncertificated securities" from a "funds transfer account" in the customer's name. Again, reliance must be on one of a specific type of instructions from other organizations. Instructions must be submitted via fax or email and reasonably appear to be from the "funds transfer customer", another financial institution or another of the insured's offices but which in reality is a fraudulent instruction sent without the customer's knowledge. Likewise, communication by telephone that appears to be from the "funds transfer customer" or a person authorized by that customer, or an "employee" authorized by the insured to instruct other "employees" to transfer funds but which again turns out to not have been initiated by the person with actual authority to make such instructions, is covered. Instructions through an on-line banking system operated by the insured that receives instructions that reasonably appear to have been from a "funds transfer customer" but were fraudulently send by someone else is covered. Before coverage applies, the insured must have used best efforts to verify the identity of the person authorizing the transfer using the previously provided contact information and confirm the validity of the instruction according to the "transfer instruction verification procedure" established between the insured and the customer. Proper verification of identity and validity of the person requesting action on accounts can prevent many fraudulent acts.

 When loss results from a fraudulent Automated Clearing House (ACH) debit from a customer's account that originated from a different financial institution, coverage will be provided as long as the customer submits a sworn affidavit stating that the debit was not authorized and the insured tries to recover the funds from the ACH as allowed by the ACH rules.

Automated Teller Machines

I. Automated Teller Machines

1. Loss of "property" contained within any "automated teller machine" resulting directly from:
   1. Burglary, damage or destruction of such "property"; or
   2. An actual or attempted robbery of an "employee", while the "employee" is servicing such "automated teller machine".
2. Loss resulting directly from the fraudulent withdrawal of "money" contained within any "automated teller machine" that was caused, or facilitated, by the unlawful:
   1. Installation of a device; or
   2. Introduction of malware;

which manipulated the operating system of such "automated teller machine", thereby enabling such

withdrawal of "money".

3. Loss of or damage to any "automated teller machine" resulting directly from an actual or attempted burglary or other unlawful entry into such "automated teller machine", provided that:
   1. The Insured is:

(1) The owner of such "automated teller machine"; or

(2) Liable for such loss or damage; and

b. The loss or damage is not caused by fire.

  Analysis

The coverage for automated teller machines is straightforward. Loss due to theft, damage or destruction of the machine, attempted or actual robbery of "employees" servicing the machine, fraudulent withdrawals accomplished by installation of a device or introduction of malware that affects the operating of the machine are all covered. Likewise, loss or damage to the machine that results from actual or attempted burglary or unlawful entry is covered provided the insured is the owner of the machine, liable for such loss or damage, and the damage was not caused by fire. Fire is an unrelated peril and is basic property damage, not related to losses this policy is designed to cover.

 Fraudulent Mortgages

J. Fraudulent Mortgages

Loss resulting directly from the Insured having, in good faith, in connection with any "loan", accepted, received or acted upon the validity of any "original":

1. Real property mortgage;
2. Real property deed of trust or like instrument pertaining to realty; or
3. Assignment of such mortgage, deed of trust or like instrument;

which, with regard to the items listed in Paragraphs 1. through 3. above, proves to have been unenforceable by reason of:

1. The signature of any natural person on such document having been obtained through trick, artifice, fraud or false pretenses; or
2. The signature on the recorded deed conveying such real property to the mortgagor or grantor of such mortgage or deed of trust having been obtained by, or on behalf of, such mortgagor or grantor through trick, artifice, fraud or false pretenses.

 Analysis

Coverage is available when the insured accepts in good faith a real property mortgage, deed of trust or similar instrument dealing with realty or an assignment of such mortgage or instrument, and that instrument later proves to be unenforceable due to invalid signatures. The signature of a natural person or the signature on the recorded deed must be invalid because the signature was obtained through trick, artifice, fraud or false pretenses. If the signatures on the mortgage documents are invalid because an individual was tricked into signing the paperwork, the loan is unenforceable.

Stop Payment or Wrongful Refusal to Pay

K. Stop Payment Or Wrongful Refusal To Pay

Loss which the Insured becomes legally obligated to pay as damages resulting directly from the Insured having:

1. Failed to comply with any request from a "customer", or the "customer's" authorized representative, to stop payment on any check or draft made or drawn by such "customer"; or
2. Wrongfully refused to pay or certify any check or draft made or drawn upon the Insured by a "customer" or the "customer's" authorized representative.

Analysis

If the insured fails to comply with a "customer's" request to stop payment on any check or draft made by such "customer", or refuses to pay a check or draft drawn upon the insured by a "customer" or "customer's" authorized representative, there is coverage if the insured becomes legally obligated to pay damages. If the bank fails to stop payment when a "customer" requests that a check be stopped, that negatively affects that "customer's" bank balance and can significantly impact that individual's other banking transactions. The "customer" may be charged late fees and other penalties as a result of other checks bouncing because one check was not stopped as requested. Likewise, if a check the "customer" wrote is not honored, the "customer" may still receive penalties.

 Cash Letter

 L. Cash Letter

1. Loss of:

1. Any item enclosed in or attached to a "cash letter", while in transit during the course of deposit, payment, collection or encashment between any of the Insured's offices or premises and any place in the United States of America (including its territories and possessions) and Canada, provided that such item is still missing at least 21 days after the Insured learns that the item has not arrived at its destination; or
2. Any cancelled check drawn by a "customer", including an electronic image or data representing such check, after such check has been charged to the "customer's" account and after a statement of the condition of that account purporting to enclose such check, or an electronic image or data representing such check, has been delivered or dispatched to the "customer".

2. Wages paid to temporary "employees" and overtime wages paid to regular "employees" for necessary services rendered in identifying the depositor of the lost item, or the item whose electronic image or data that was lost, and assisting the depositor in obtaining a duplicate thereof.
3. Necessary costs incurred by the Insured for the use of mechanical devices and materials in obtaining duplicates of the "cash letter" item when such mechanical devices and materials are not owned by the Insured.

As a condition precedent to coverage under Paragraphs 1. through 3. above:

1. The Insured shall make a record of the name of the issuer, drawer or maker of each check, promissory note, draft or similar item and a record of the name of the person presenting each check, promissory note, draft or similar item with all other descriptive data necessary for the purpose of reconstruction; or
2. The Insured shall make a photograph or an image of each check, promissory note, draft or similar item in its entirety. However, if the Insured is unable to produce a photograph or image of the item because of:

(1) The failure of such equipment to record or otherwise make a legible copy of such item;

(2) Error by an "employee"; or

(3) The unintended destruction of the photograph or image of such copy after it has been made; 

coverage shall not be denied for that reason.

Analysis

A "cash letter" is a recording of deposits, drafts or similar items listed by accounts that the insured accepted for deposit, payment, collection or encashment, or an electronic image such as a picture or a scan of the same data. A "cash letter" can also be the same type of information in a list transmitted electronically. Cash letters are transmitted by the insured or the insured's correspondent financial institution, an authorized representative or the Federal Reserve Bank.

 Coverage for "cash letters" includes coverage for any items such as cancelled checks or other documents attached to a "cash letter" while the documents are in transit during the course of deposit, payment, or collection between the insured's offices and any place in the United States, territories and possessions, and Canada, if the item is still missing after 21 days.  Also included is coverage for cancelled checks drawn by a "customer", including electronic images of same, after the check has been charged to the "customer's" account. Wages paid to temporary "employees" and overtime wages paid to regular "employees" for services rendered in identifying the depositor of the lost item and assisting the depositor in obtaining a duplicate of that item are also covered. This is coverage for recreating the lost document; wages paid to permanent or temporary staff to investigate the lost document and who originated it, as well as creating a duplicate of that document, are considered part of the loss and are paid. Likewise, necessary costs to use mechanical devices and materials in obtaining duplicates of the "cash letter" are covered when the devices do not belong to the insured. If the insured has to rent equipment in order to process the duplicates, those charges are covered.

 There are conditions, however. In order for coverage to be granted, the insured must record the name of issuer, drawer of each check, promissory note, draft or similar item and a record of the person presenting each check, note, draft or other item with all descriptive information for reconstructing the document. Or, the insured can photograph or make an image of each check, note, draft or similar document in its entirety. If the insured cannot make a photograph or image of the document because of failure of recording equipment to make a legible copy, error by an "employee" or unintended destruction of the photograph or image after it is made, coverage will not be denied.

 Claims Expense

M. Claims Expense

Reasonable expenses incurred by the Insured that are directly related to the preparation of a proof of loss, including that part of the cost of audits or examinations conducted by state or federal supervisory authorities, or by independent accountants or auditors, in support of a claim covered under this Bond.

However, the Company will not pay any such expenses if the amount of the covered loss does not exceed the Single Loss Deductible Amount applicable to the Insuring Agreement under which the loss is covered.

 Analysis

The claims expense is straightforward. Costs related to preparation of the proof of loss, including cost of audits or examinations by state or federal authorities or independent accountants or auditors are covered. Such costs are not paid if the amount of loss does not exceed the deductible.

Toll Charge Fraud

 N. Toll Charge Fraud Loss from long-distance telephone toll call charges incurred by the Insured resulting directly from fraudulent use or fraudulent manipulation of an "account code" or "system password" required to gain access into the Insured's "voice computer system", provided that such loss did not result from the failure to:

1. Install and maintain in operating condition a call disconnect feature to terminate a caller's access after three unsuccessful attempts to enter an "account code"; 2. Incorporate a "system password"; or 3. Change a "system password" within the number of days shown in the Declarations.

Analysis

This is straightforward. Many companies use a code or password to allow employees to gain access to the insured's "voice computer system". It allows the company to restrict access to its phone system to employees or other authorized persons. Coverage is provided when the system is accessed fraudulently and used to make long-distance toll calls, as long as the insured maintains a disconnect feature that will disconnect a caller's access after three unsuccessful tries to enter the "account code", incorporates a "system password" or changes the "system password" within the number of days shown in the declarations. The declarations may show that the password is to be reset every so many days; for example every seven or every thirty days.

Uncollectible Items of Deposit

). Uncollectible Items Of Deposit

Loss resulting directly from the Insured having credited a "customer's" account on the faith of any "item of deposit" which proves to be uncollectible, provided that:

1. The "customer" intended to deceive the Insured and commit fraud against the Insured by depositing the "item of deposit"; and
2. The Insured made payment or extended credit against the "item of deposit".

An "item of deposit" shall not be deemed uncollectible until after the Insured's collection procedures have failed.

 Analysis

If the insured credited "customer" accounts based on the faith of "items of deposit" and the account becomes uncollectible, coverage exists if the "customer" intended to deceive the insured and commit fraud, and the insured made payment or extended credit against the "item of deposit". An "item of deposit" is simply a check or draft drawn upon a finance institution of the United States, its territories and possessions and Canada. This is basically a bad check. An account isn't considered uncollectible until the insured's collection attempts have failed. The insured must make an effort to collect the funds before filing a claim.

 Unauthorized Signatures

P. Unauthorized Signatures

Loss resulting directly from the Insured having accepted, paid or cashed any check, draft or "withdrawal order" made or drawn on a "customer's" account, which bears a signature of someone other than a person whose name and signature is on the application on file with the Insured as a signatory on such "customer's" account.

The Insured having on file the signatures of all persons who are authorized signatories on such "customer's" account, is a condition precedent to coverage under this Insuring Agreement.

 Analysis

The insured should have on file a list of all persons authorized as signatories on "customers" accounts. As long as the insured has this information on file, losses that result from the insured having accepted, paid or cashed any check, draft or "withdrawal order" made or drawn on the "customers" account which bears the signature of an unauthorized person, someone not on file, the loss is covered. A "withdrawal order" is a negotiable written instrument.

 Safe Depository

 Q. Safe Depository

1. Liability Of Depository

Loss which the Insured becomes legally obligated to pay as damages resulting directly from loss, damage or destruction of "customers'" property, including "money", "certificated securities", valuable papers and documents, jewelry, silverware and other tangible items of "customers'" property, while:

1. Inside the "customers'" safe deposit boxes in a vault inside the Insured's premises;
2. Stored in a vault inside the Insured's premises; or
3. Temporarily elsewhere inside the Insured's premises during the course of deposit or removal from the safe deposit box or vault.
4. Loss Of Customers' Property

Loss of "customers'" property (other than "money", unless "money" is indicated in the Declarations as being covered) including "certificated securities", valuable papers and documents, jewelry, silverware and other tangible items of "customers'" property, while:

1. Inside the "customers"' safe deposit boxes in a vault inside the Insured's premises;
2. Stored in a vault inside the Insured's premises; or
3. Temporarily elsewhere inside the Insured's premises during the course of deposit or removal from the safe deposit box or vault; resulting directly from an actual or attempted robbery, burglary, damage or destruction.

 Analysis

There are two types of coverage concerning safe depositories. The first is for liability of the insured, if the insured becomes legally obligated to pay damages resulting from loss, damage, destruction of "customers" property, including "money", "certificated securities", valuable papers, records, and documents, jewelry, silverware and other tangible property. For coverage to apply the property must be inside the "customers" safe deposit boxes in a vault inside the insured premises, stored in a vault inside the insured's premises, or temporarily elsewhere in the insured's premises during the course of deposit or removal from the safe deposit box or vault. There are often rooms where a depositor can put his box on the table to handle his property and either remove items or add items. Coverage is for damage or loss that the insured is liable for; if the customer has loose diamonds in his deposit box and an employee is careless when handling the box and several loose diamonds are lost, the insured may become liable for the loss.

 The second coverage is for the actual loss of the "customers" property while inside the "customers" safe deposit boxes are in a vault inside the insured's premises, stored in a vault inside the insured's premises, or temporarily elsewhere inside the insured's premises during the course of deposit or removal from the box or vault. The loss or damage must be because of an actual or attempted robbery, burglary, damage or destruction. If thieves attempt, or are successful in stealing property of the insured's customers when the customers' property is in the insured's premises, there is coverage for the loss, including the damage or destruction of the property. For example, thieves uses explosives to break into the vault; damage to property caused by the thieves is covered.

 Business Credit or Debit Cards

 Business Credit Or Debit Cards

Loss resulting directly from:

1. The unauthorized use of a lost or stolen credit or debit card; or
2.  The unauthorized use of the card number associated with a lost or stolen credit or debit card;

which was issued to the Insured by another financial institution for use by the Insured's directors, trustees or "employees" to pay for their expenses related to the Insured's business.

 Analysis

Two types of losses are covered here; the first is simply the unauthorized use of a lost or stolen credit or debit card. For example, the cardholder loses his card on the subway and a stranger picks it up and starts using it; that type of loss is covered. The second type of loss is the unauthorized use of the card number associated with a lost or stolen card, if the card was for the insured's directors, trustees, or employees to use for business expenses. For example, an employee leaves the company card at a bar, but later goes back and retrieves it. Unfortunately, in the meantime, the person who found the card and turned it in wrote down the card number and began using it for his personal purposes. Those unauthorized charges will be covered.

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