Key Takeaways
- Two coverage triggers: DISCOVERY form (covers losses discovered during policy period) vs. LOSS SUSTAINED form (covers losses occurring during policy period)
- Employee dishonesty coverage protects against theft, embezzlement, and fraud by employees—the most common crime coverage
- FORGERY AND ALTERATION covers forged checks and fraudulent documents—critical for businesses accepting checks
- Computer fraud covers theft of money/securities through fraudulent computer use—increasingly important with cyber crime
- Inside/outside premises coverage protects against robbery (threat of force) and burglary (forcible entry)
Commercial Crime Insurance
What is Commercial Crime Insurance?
Commercial crime insurance protects businesses against financial losses from criminal acts including employee theft, forgery, robbery, and computer fraud.
Quick Answer: Crime insurance covers losses from dishonest employees, forged checks, robbery, burglary, and computer fraud. Unlike property insurance which covers natural perils, crime insurance specifically addresses intentional criminal acts.
Coverage Triggers: Discovery vs. Loss Sustained
Discovery Form
| Feature | Details |
|---|---|
| Trigger | Loss must be DISCOVERED during policy period |
| When Loss Occurred | Doesn't matter—can be years earlier |
| Advantage | Covers old losses just discovered |
| Common For | Employee dishonesty |
Example: Embezzlement that occurred 3 years ago is discovered today—Discovery form covers it.
Loss Sustained Form
| Feature | Details |
|---|---|
| Trigger | Loss must OCCUR during policy period |
| Discovery Time | Must discover within 1 year after policy ends |
| Advantage | More predictable for insurers |
| Common For | Some commercial crime forms |
Example: Loss occurred and discovered during policy period—both forms cover. Loss occurred during policy but discovered 2 years after policy ended—only Discovery form covers.
Types of Crime Coverage
1. Employee Dishonesty (Coverage A)
Covers: Theft, embezzlement, and forgery by employees.
Key Points:
- Most common crime coverage
- Covers direct loss only (not consequential)
- May require fidelity schedules for key employees
- Coverage limit applies per occurrence or per employee
2. Forgery and Alteration (Coverage B)
Covers: Forged or altered negotiable instruments (checks).
Examples:
- Forged endorsements on checks
- Altered check amounts
- Counterfeit checks
3. Inside Premises - Theft of Money and Securities (Coverage C)
Covers: Theft of money and securities from inside the premises.
Includes:
- Robbery (threat of violence)
- Safe burglary
- Employee areas and public areas
4. Inside Premises - Robbery or Safe Burglary of Other Property (Coverage D)
Covers: Theft of property other than money/securities by robbery or safe burglary.
5. Outside Premises (Coverage E)
Covers: Theft of money/securities while being transported outside premises.
Examples:
- Messenger robbery
- Armored car theft
- Night deposit box theft
6. Computer Fraud (Coverage F)
Covers: Theft through fraudulent computer use.
Examples:
- Unauthorized fund transfers
- Computer system manipulation
- Electronic theft
7. Funds Transfer Fraud (Coverage G)
Covers: Fraudulent instructions to transfer funds from accounts.
Key Terms: Robbery vs. Burglary
| Term | Definition | Key Element |
|---|---|---|
| Robbery | Taking property by threat or violence | Person present, threat of force |
| Burglary | Unlawful entry with intent to steal | Forcible entry, no one present |
| Theft | Broad term for all stealing | Includes robbery, burglary, and more |
What is the difference between a Discovery form and a Loss Sustained form in crime insurance?
An armed robber enters a store, threatens the cashier, and takes cash from the register. This is an example of:
11.4 Surety Bonds
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