FL Adjuster Claim Professional Exam: Commercial Crime Policy

Overview of Commercial Crime Insurance

Commercial crime insurance provides named perils coverage for theft-related losses, addressing gaps in commercial property policies where money, securities, and employee dishonesty are typically excluded.

Named Perils: Covers theft (burglary, robbery, embezzlement), but typically only looting from riot or civil commotion in named perils forms.
Need for Coverage: Commercial property policies exclude money, securities, and employee dishonesty, making crime insurance essential.

Key Point: Crime insurance is critical because commercial property policies exclude money, securities, and employee dishonesty losses.

Key Definitions

Term	Definition	Example
Theft	Any act of stealing or attempted stealing.	Burglary, robbery, embezzlement.
Burglary	Theft from within a premises by forcible entry with criminal intent.	After-hours break-in at a store.
Robbery	Theft using or threatening force.	Threatening a cashier with a weapon to steal cash.
Embezzlement	Theft by an employee during job duties.	Employee fraudulently cashing company checks.

Coverage Triggers

Loss Sustained: Covers losses occurring during the policy period, discovered within one year after policy expiration.
Discovery: Covers losses discovered during the policy period or within 60 days after (1 year for employee benefit plans).

Test Your Knowledge

Question: How would you explain the difference between loss sustained and discovery coverage triggers?

Answer: Loss sustained applies to losses occurring during the policy period and discovered within one year after it ends. Discovery applies to losses discovered during the policy period or within 60 days after (1 year for employee benefit plans), regardless of when the loss occurred.

ISO Crime Coverage Forms

ISO offers two forms, identical except for employee theft agreements:

Commercial Crime Form (CR 00 21): Single employee theft insuring agreement (per loss).
Government Crime Form (CR 00 24/25): Two employee theft agreements (per loss and per employee).

Eight Non-Mandatory Insuring Agreements:

Employee Theft
Forgery or Alteration
Inside the Premises—Theft of Money and Securities
Inside the Premises—Robbery or Safe Burglary of Other Property
Outside the Premises
Computer Fraud
Funds Transfer Fraud
Money Orders and Counterfeit Money

Common Exclusions

Dishonest acts by the named insured, partners, or members.
Dishonest acts by employees known before the policy period.
Acts by employees, managers, directors, etc. (except employee theft coverage).
Unauthorized use or disclosure of confidential information.
Legal fees, costs, and expenses (except forgery/alteration).
Pollution, nuclear hazards, war, governmental action.
Indirect losses (e.g., lost income, claim establishment costs).

Insuring Agreements

Agreement	Coverage	Key Exclusions
Employee Theft	Theft of money, securities, or tangible property by employees. Blanket or scheduled (CR 04 08).	Trading, warehouse receipts, inventory shortages.
Forgery or Alteration	Loss from forged checks, drafts, or notes; includes legal defense costs.	Seven common exclusions.
Inside the Premises—Theft of Money and Securities	Theft, disappearance, or destruction of money/securities inside premises or bank.	Accounting errors, exchanges, motor vehicles, vandalism.
Inside the Premises—Robbery or Safe Burglary	Robbery of a custodian or safe burglary of other property inside premises.	Accounting errors, fire, vandalism, voluntary parting.
Outside the Premises	Theft, disappearance, or destruction of money/securities, or robbery of other property outside premises.	Accounting errors, fire, vandalism, voluntary parting.
Computer Fraud	Loss from fraudulent computer transfers of property.	Credit card transactions, inventory shortages, funds transfer fraud.
Funds Transfer Fraud	Loss from fraudulent instructions to transfer funds.	Computer-based transfers.
Money Orders and Counterfeit Money	Loss from accepting counterfeit money or unpaid money orders.	Seven common exclusions.

Key Point: Employee theft coverage applies per loss, not per employee, unless scheduled coverage is endorsed.

Additional Coverages and Endorsements

Lessees of Safe Deposit Boxes (CR 04 09): Covers securities or other property in safe deposit boxes, excludes money.
Securities Deposited with Others (CR 04 10): Covers securities not in safe deposit boxes or vaults.
Guests' Property (CR 04 11): Covers legal liability for guests’ property in hotels, hospitals, etc.
Safe Depository (CR 04 12): Covers customer property in safe deposit boxes or vaults at insured’s premises.
Extortion (CR 04 03): Covers ransom payments due to threats of harm or property damage.
Kidnap/Ransom and Extortion (CR 00 40/41): Covers ransom, expenses, detention, or in-transit property losses.

Identity Theft

Identity theft involves fraudulent use of personal information (e.g., Social Security Number) for financial gain.

Coverage: Reimburses expenses (e.g., recovery costs, credit monitoring), not fraudulent charges. Typically $10,000–$25,000 limits.
Availability: Stand-alone or added to homeowners/auto policies, often free from banks.
Key Feature: Strong recovery service component to minimize expenses.

Key Point: Identity theft policies focus on recovery expenses, not direct financial losses from fraud.

For Your Review

Crime policies cover named perils (theft, burglary, robbery) excluded by commercial property policies.
Employee theft is the most critical coverage, excluded in standard property policies.
Loss sustained vs. discovery triggers differ in when losses are covered based on occurrence or discovery.
Eight non-mandatory insuring agreements allow customizable coverage.
Endorsements expand coverage for specific risks like extortion or safe deposit boxes.