Commercial Crime and Fidelity Coverage

Commercial Crime and Fidelity Coverage

Crime forms distinguish employee dishonesty, inside/outside-premises loss and other selected agreements. Discovery and loss-sustained triggers determine the relevant policy period.

Commercial Crime & Fidelity Bonds

Theft, burglary and robbery

Commercial crime protects selected direct loss of money, securities and other property. Theft is unlawful taking under the form; robbery involves the specified threat, force or witnessed taking from a person; safe burglary or burglary has the defined entry/exit and evidence requirements. Do not require forced-entry marks for every theft claim or treat every disappearance as proven burglary.

A robber threatening the store cashier presents robbery. An unknown person taking an unlocked cash drawer can be theft without the safe-burglary definition. A forced safe entry with required visible evidence may meet safe burglary. The coverage selected and contract definitions determine the result, rather than the claimant's informal use of the word robbed.

Employee theft

Employee theft covers qualifying direct loss caused by dishonest acts of defined employees, acting alone or in collusion. A bookkeeper diverting the employer's receipts is a typical exposure. Employee status depends on the definition; qualifying officers can be employees, while sole proprietors, partners, independent contractors and other persons can be outside it. The form and endorsements may modify treatment of leased workers, consultants or client property.

The outline warning about certain officers, employees and contractors must be applied to the particular agreement. Nonemployee crime grants can exclude employee dishonesty, while employee theft exists specifically to address covered employee acts. It would be wrong to say all employees or all officers are excluded from every crime policy. Identify the actor, employer relationship, insured property and selected insuring agreement.

Inside and outside premises

Inside-premises theft of money/securities can address theft, disappearance or destruction of those interests inside the described premises or a banking premises, subject to terms. An inside-premises robbery/safe-burglary agreement addresses the specified other property or custodial circumstances. Building damage caused by a covered burglary can have separate treatment. Inventory shortage shown only by a calculation can invoke an exclusion and requires evidence beyond an unexplained count discrepancy.

Outside-premises coverage addresses qualifying loss while property is in the care/custody of a messenger or armored carrier as specified. A deposit stolen from a covered employee messenger can differ from cash left unattended in a parked car. Identify who had custody, where the loss occurred and whether the property was covered. Employee-theft and outside-premises grants should not produce duplicate recovery for the same loss.

Forgery/alteration, computer fraud and funds-transfer fraud address their own instruments and causal requirements. A voluntarily authorized payment induced by a deceptive email does not automatically meet a grant requiring an unauthorized instruction to the bank. Social-engineering coverage may be needed. Obtain the instruction, authentication history and actual transaction instead of treating all internet-related loss as covered computer fraud.

Discovery and loss-sustained triggers

A discovery form generally focuses on when the insured discovers facts causing a reasonable belief that a covered loss has occurred or will occur, regardless of when the underlying acts happened, subject to exclusions and prior-insurance conditions. It does not automatically use a claims-made liability retroactive date. Discovery of loss and receipt of a lawsuit are different triggers.

A loss-sustained form ordinarily requires the loss during the policy period and discovery within the period or applicable extended discovery time. The common one-year extension has conditions and can terminate when replacement insurance takes effect. Loss under prior insurance and nonaccumulation provisions may prevent stacking several annual limits for one employee's continuous scheme. Read the issued form rather than simply adding each year's declarations amount.

Example: dishonest transfers occur in Year 1 but are discovered in Year 2. A Year 2 discovery form can be implicated under its terms. A Year 1 loss-sustained form requires its discovery-window and replacement-insurance analysis. The example does not authorize collecting two full limits for the same transferred funds.

Valuation and proof

Money, securities and other property use their respective valuation provisions, limits and deductibles. Separate the direct stolen amount from lost future profit, investigation costs and indirect business consequences, which may be excluded or separately insured. Preserve bank statements, access logs, invoices and interviews, and document recovered funds or property.

Assume covered direct loss is $40,000, recovered funds are $5,000 and the applicable deductible is $2,500, with sufficient limit and no other adjustment. Preliminary payment is $32,500. Apply the actual recovery and deductible clauses; a fraud referral does not by itself establish the amount. A fidelity bond functions as first-party dishonesty insurance, unlike a three-party surety's guarantee and customary indemnity arrangement.

Source: applicable commercial crime discovery/loss-sustained forms.

Comparison for claim analysis