Summary: Category 04 of crime forms in the ISO program lists sixteen optional crime and fidelity insuring agreement endorsements. Many of these endorsements have been updated in the past two years. The endorsements amend the commercial crime policy and coverage form and/or the government crime policy and coverage form by adding various insuring agreements. The changes to these endorsements are the subject of this treatment.

Each endorsement contains language stating that the provisions of the form or policy that the endorsement is attached to apply unless the endorsement modifies those provisions. This is to clarify that all other policy provisions apply unless specified. This article is broken into three sections as follows:

Topics covered:

Destruction of Electronic Data Or Computer Programs By Employees—CR 04 13 06 22

Unauthorized Reproduction of Computer Software by Employees—CR 04 14 06 22

Identity Fraud Expense—CR 04 15 06 22

Toll Charge Fraud—CR 04 16 06 22

Fraudulent Impersonation – Extended Coverage—CR 04 18 06 22

CR 04 13 adds an insuring agreement to section A. of the crime coverage forms. The insurer, through CR 04 13, agrees to pay for costs that the named insured incurs to restore or replace damaged or destroyed "electronic data" or "computer programs" stored within any computer system owned, leased or operated by the insured resulting directly from vandalism by an "employee". This broadens coverage significantly, depending on how much equipment the insured owns, borrows, or rents. The 2022 revision of this endorsement removes coverage for damage or destruction that results from a virus designed to damage or destroy data or computer programs, or from vandalism by a person who has gained unauthorized access to the computer system, as a Cyber policy would be more appropriate to cover those exposures. 

The endorsement also adds some exclusions. Loss resulting from errors or omissions in the design of computer programs is not covered, as well as loss resulting from errors or omissions in the programming or processing of electronic data.

The 2022 revision of this endorsement amends the duties in the event of the loss condition to no longer require the notification of local law endorsement in the event a loss involves a violation of law. The valuation – settlement condition is also amended to discuss how loss to electric data and computer programs will be settled. 

For loss to electronic data, the insurer will pay for reasonable costs to restore or replace the data, including the cost of data entry and computer consultation services. However, the insurer will not pay for the cost to duplicate research that led to the development of the insured's electronic data. If any data cannot be restored or replaced, the insured will pay the cost to replace the electronic storage media on which the data was recorded. 

For loss to computer programs, the insurer will pay for reasonable costs to restore or replace the computer programs, including reprogramming and computer consultation services. However, like with electronic data, they will not pay the cost to duplicate research that led to the development of any computer programs.

This endorsement can be used with the Commercial Crime Coverage Form, the Commercial Crime Policy, the Government Crime Coverage Form, and the Government Crime Policy.

This endorsement provides coverage for fines and penalties that the named insured incurs resulting directly from the unauthorized reproduction of computer software by an employee that is in violation of a licensing agreement with a third-party vendor. The coverage is provided if the unauthorized reproduction is done without the knowledge of the named insured, a "designated person", or without the knowledge of any other person having responsibility for compliance with the terms of the software licensing agreement.  

Like with CR 04 13, the 2022 revision of this endorsement adds exclusions for loss resulting from errors and omissions in the design of computer programs and in the programming or processing of electronic data. The duties in the event of the loss condition is also amended to not require the notification of local law endorsement in the event a loss involves a violation of law. Lastly, the valuation – settlement condition is amended and matches the changes in CR 04 13 to explain how loss to electronic data and computer programs are to be settled.

This endorsement can be used with the Commercial Crime Coverage Form, the Commercial Crime Policy, the Government Crime Coverage Form, and the Government Crime Policy. 

With this endorsement, the insurer agrees to pay for the expenses incurred by the insured or any "insured person" resulting directly from "identity fraud". This endorsement adds definitions for insured person and identity fraud.

Identity fraud means the act of knowingly transferring or using, without lawful authority, a means of identification of the business shown in the Declarations or any insured person with the intent to commit any unlawful activity that constitutes a violation of law. Insured person means any director, trustee, partner, member, manager, employee, or ERISA plan official of any insured, and any spouse, child under the age of 18 or relative residing in the household of any insured person, unless excluded in the Schedule. The endorsement provides a Schedule to specifically exclude persons not covered.

There is an exclusion for "expenses" due to theft committed by the named insured, any insured person, or any person shown in the Schedule, whether acting alone or in collusion with others. The duties in the event of loss condition is revised to say the insured must send within 60 days after the insurer requests any receipts, bills, or other records that support any claim of "expenses" covered under this endorsement. 

A definition of "expenses" is provided and includes the following:

  • Advertising and public relations expenses incurred by the insured to restore business reputation as a result of identity fraud
  • Costs incurred by any insured person for notarizing affidavits or similar documents attesting to fraud
  • Costs incurred by an insured person for certified mail to law enforcement agencies, credit agencies, financial institutions, or similar credit grantors
  • Costs incurred by any insured person for obtaining credit reports
  • Lost income incurred by any insured person resulting from time taken off work to complete fraud affidavits, meet with law enforcement or legal counsel, up to a maximum of $250 per day. Total payment for lost income is the lesser of $10,000 or up to the limit shown in the declarations
  • Loan application fees incurred by any insured person 
  • Reasonable attorney fees for actions related to identify fraud
  • Charges incurred by any insured person for long distance phone calls to report or discuss an actual identity fraud
  • Any other reasonable expenses incurred by the insured with written consent from the insurer

This endorsement can be used with the Commercial Crime Coverage Form and the Commercial Crime Policy.

This endorsement will pay for loss from long-distance telephone toll call charges incurred by the insured resulting directly from fraudulent use of an "account code" or "system password" required to gain access to their "voice computer system". The loss will not be covered if it resulted from a failure to install and maintain a call disconnect feature to end a caller's access after three unsuccessful attempts to enter an account code, failure to incorporate a system password, or failure to change a system password within the number of days shown in the Schedule. 

The following definitions are added: 

  • "Account code" means a confidential and protected string of characters that authenticates a person and permits them to gain access to a voice computer system for the purpose of making long-distance toll calls
  • "System administration" means the performance of any security function
  • "System maintenance" means performing hardware and software installation, and diagnostic and correction and similar activities that are performed to maintain the operational functionality of a voice computer system
  • "System password" means a confidential and protected string of characters that authenticates a person and permits them to gain access to a voice computer system to perform system administration or system maintenance
  • "Voice computer system" means a computer system installed in one location which functions as a private branch exchange, voice mail processor, or automated call attendant. 

This endorsement can be used with the Commercial Crime Coverage Form, the Commercial Crime Policy, the Government Crime Coverage Form, and the Government Crime Policy. 

The crime policy and coverage forms provide coverage for fraudulent impersonation for loss of money or securities. The insurer will pay for loss resulting directly from the insured acting in good faith reliance on a change of account request purportedly issued by an authorized person, but that proves to have been fraudulently issued by an imposter, and results in the transfer of money or securities to a fraudulent person or account. This endorsement extends that coverage to include loss of "other property", in addition to money and securities.

This endorsement can be used with the Commercial Crime Coverage Form, the Commercial Crime Policy, the Government Crime Coverage Form, and the Government Crime Policy. 

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