7.4 Farm Property & Liability Coverage and Commercial Crime Coverage Forms

Farm Property & Liability Coverage and Commercial Crime Coverage Forms

Quick Answer: Farm Insurance is a hybrid coverage part (callable as a monoline policy or within a CPP) that blends Homeowners-style residential protection (Coverages A–D) with Commercial agricultural property (Coverages E–G) and Farm Liability (Coverages H–J). Commercial Crime Insurance protects businesses against internal dishonesty (Employee Theft) and external crime (Forgery, Burglary, Safe Burglary, Robbery, Computer Fraud, Funds Transfer Fraud, and Counterfeit Currency) on either a Discovery (CR 00 20) or Loss Sustained (CR 00 21) basis.

Both Farm and Commercial Crime appear on the PSI Michigan Claims Adjuster examination with strict definitional rules—such as "livestock" vs. "poultry", the $5,000 Custom Farming threshold, "custodian" vs. "messenger" vs. "watchperson", and automatic termination of coverage for a dishonest employee.

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1. ISO Farm Coverage (Property Coverages A–G & Liability Coverages H–J)

A. Eligibility & Hybrid Structure

The ISO Farm program covers individuals, partnerships, corporations, or estates operating agricultural, ranching, dairy, orchard, or livestock farms (whether owner-occupied or tenant-operated). Farms that engage in large-scale commercial processing, manufacturing, or retail merchandising on site are generally ineligible and require standard Commercial Property/CGL forms.

B. The 7 Farm Property Coverages (FP 00 12, FP 00 13, FP 00 14)

C. Farm Causes of Loss (FP 10 60) & the "Livestock" vs. "Poultry" Distinction

• Causes of Loss (FP 10 60): Available as Basic, Broad, or Special for each coverage. The Special form does not cover "livestock" or poultry (or bees, fish, worms, other animals, or hay, straw, and fodder), so livestock is insured for Basic or Broad causes of loss.
• "Livestock" vs. "Poultry" Definition (Exam Trap):
  • "Livestock" is defined strictly as cattle, sheep, swine, goats, horses, mules, and donkeys.
  • "Poultry" (chickens, turkeys, ducks, geese, and other domestic fowl) is NOT included in the definition of "livestock" and must be scheduled separately under Coverage E!
• Broad Form Perils Specific to Covered Livestock: When Broad Form (FP 10 60) applies to "livestock", it adds:
  1. Electrocution of covered livestock;
  2. Attacks on covered livestock by dogs or wild animals (Excludes attacks by dogs or animals owned by the insured, a resident family member, or an employee of the insured!);
  3. Accidental shooting of covered livestock (Excludes shooting by the insured, a resident family member, or an employee);
  4. Drowning of covered livestock from external causes;
  5. Loading or unloading accidents onto or from transporting vehicles.

D. Farm Liability Coverage Form (FL 00 20) & the $5,000 Custom Farming Rule

• Coverage H (Bodily Injury and Property Damage Liability): Combines Homeowners Coverage E personal/family liability with CGL Coverage A commercial farm operations and farm products-completed operations liability.
• Coverage I (Personal and Advertising Injury Liability): Mirrors CGL Coverage B.
• Coverage J (Medical Payments): Mirrors CGL Coverage C / Homeowners Coverage F (no-fault medical expenses for third parties injured on the farm premises or by farm operations).
• Custom Farming Rule (High-Yield Exam Rule): "Custom farming" means performing agricultural work (plowing, planting, spraying, harvesting, baling) for neighboring farmers for a fee using the insured's machinery. Under FL 00 20, Custom Farming is automatically covered under Coverage H if the insured's gross annual receipts from custom farming do NOT exceed $5,000 during the prior 12 months! If gross receipts exceed $5,000, a Custom Farming Endorsement must be purchased.

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2. Commercial Crime Coverage Forms (CR 00 20 & CR 00 21)

A. Essential Commercial Crime Definitions (Property, Persons, and Perils)

Adjusters must apply the exact ISO Commercial Crime definitions—because coverage under each insuring agreement depends on what was stolen, who had custody, where it happened, and how it was taken:

1. Three Classes of Covered Property

• "Money": Currency, coins, and bank notes in current use and having a face value, plus travelers checks, register checks, and money orders held for sale to the public.
• "Securities": Negotiable and nonnegotiable instruments or contracts representing either "money" or property, including checks, drafts, promissory notes, stock certificates, bonds, tokens, tickets, and revenue and other stamps (whether represented by actual instruments or electronic book-entry) in current use, excluding "money".
• "Other Property": Any tangible property other than "money" and "securities" that has intrinsic value (merchandise, inventory, raw materials, office computers, precious metals/bullion, jewelry).

2. Four Crime Person Definitions

• "Employee": Any natural person in your service (and for 30 days after termination of service) whom you compensate directly by salary, wages, or commissions, and whom you have the right to direct and control while performing services (also includes temporary workers furnished to substitute for a permanent employee or meet seasonal workloads, leased workers, guest students, and managers/directors/trustees only while performing acts within the scope of the usual duties of an employee). Excludes independent contractors, agents, brokers, factors, commission merchants, and consignees!
• "Messenger": You, a partner, an LLC member, or any "employee" while having care and custody of property OUTSIDE the "premises" (e.g., an employee walking the daily bank deposit to the bank).
• "Custodian": You, a partner, an LLC member, or any "employee" while having care and custody of property INSIDE the "premises", EXCLUDING any person while acting as a "watchperson" or "janitor"! (Exam Trap: If robbers tie up a night janitor or watchperson inside the store and steal merchandise, that is NOT "robbery of a custodian"!)
• "Watchperson": Any person you retain specifically to have care and custody of property inside the "premises" and who has no other duties.

3. Four Crime Peril Definitions

• "Theft": The unlawful taking of property to the deprivation of the Insured (the broadest crime peril—encompasses burglary, robbery, larceny, embezzlement, and shoplifting).
• Burglary: The unlawful taking of property from inside the premises by a person unlawfully entering or leaving the premises when closed for business, as evidenced by visible marks of forcible entry or exit made by tools, explosives, electricity, or chemicals at the point of entry or exit.
• "Robbery": The unlawful taking of property from the care and custody of a person ("custodian" or "messenger") by one who has (1) caused or threatened to cause that person bodily harm, OR (2) committed an obviously unlawful act witnessed by that person!
• "Safe Burglary": The unlawful taking of (1) property from within a locked vault or safe located inside the "premises" by a person unlawfully entering the vault or safe as evidenced by visible marks of forcible entry upon its exterior made by tools, explosives, electricity, or chemicals, OR (2) the entire locked vault or safe itself from inside the "premises".

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3. Discovery (CR 00 20) vs. Loss Sustained (CR 00 21) Triggers & the 8 Crime Insuring Agreements

A. Discovery Form (CR 00 20) vs. Loss Sustained Form (CR 00 21)

B. The 8 Core ISO Commercial Crime Insuring Agreements

1. Insuring Agreement 1 — Employee Theft: Covers loss of or damage to "money", "securities", and "other property" resulting directly from "theft" (or forgery) committed by an "employee", whether identified or not, acting alone or in collusion with other persons.
   • CRITICAL EXAM RULE — Termination as to Any Employee: This insuring agreement terminates as to any "employee" IMMEDIATELY as soon as the insured (or any partner, LLC member, manager, officer, or director not in collusion with the employee) discovers that the "employee" has committed a "theft" or any other dishonest act, whether in the insured's service or prior to employment by the insured! (If an employer discovers an employee stole $50 from petty cash, forgives the employee, and keeps them on payroll—or hires someone knowing they had a prior conviction for embezzlement—any future theft by that employee is 100% excluded unless the insurer specifically agrees in writing to reinstate coverage for that individual!)
   • Inventory Shortage Exclusion: The policy does NOT cover loss, or that part of any loss, the proof of which as to its existence or amount is dependent solely upon an inventory computation or a profit-and-loss computation (however, once independent physical/accounting evidence proves that an employee is stealing, inventory records may be used to support the dollar amount of the claim).
2. Insuring Agreement 2 — Forgery or Alteration: Covers loss resulting directly from "forgery" or alteration of checks, drafts, promissory notes, or similar written promises/directions to pay a sum certain in "money" that are made or drawn by or drawn upon the insured (or by an agent of the insured).
   • Exam Trap: This covers outgoing checks drawn on the insured's own bank account—it does NOT cover bad or forged checks received from customers in payment for merchandise!
3. Insuring Agreement 3 — Inside the Premises — Theft of Money and Securities: Covers loss of "money" and "securities" inside the "premises" or "banking premises" resulting directly from "theft", disappearance, or destruction (plus damage to the premises or locked safe/vault/cash register caused by the actual or attempted theft).
4. Insuring Agreement 4 — Inside the Premises — Robbery or Safe Burglary of Other Property: Covers loss of or damage to "other property" (merchandise, inventory, equipment) inside the "premises" resulting directly from:
   • An actual or attempted "robbery" of a "custodian"; OR
   • An actual or attempted "safe burglary".
   • Exam Trap: Notice that Insuring Agreement 4 does NOT cover ordinary shoplifting or mysterious disappearance of merchandise ("other property")—and if a burglar breaks into a store at night when closed, merchandise is covered under this agreement only if taken via "safe burglary" (for ordinary night burglary of merchandise not in a safe, a separate Inside the Premises — Theft of Other Property endorsement is required, or the insured relies on CP 10 30 Special Form property coverage!).
5. Insuring Agreement 5 — Outside the Premises: Covers:
   • Loss of "money" and "securities" outside the "premises" in the care and custody of a "messenger" or an armored motor vehicle company resulting directly from "theft", disappearance, or destruction; AND
   • Loss of or damage to "other property" outside the "premises" in the care and custody of a "messenger" or an armored motor vehicle company resulting directly from an actual or attempted "robbery".
6. Insuring Agreement 6 — Computer Fraud: Covers loss of or damage to "money", "securities", and "other property" resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the "premises" or "banking premises" to a person (other than a "messenger") or a place outside those premises (i.e., an external hacker penetrates the insured's computer system).
7. Insuring Agreement 7 — Funds Transfer Fraud: Covers loss of "money" and "securities" resulting directly from a "fraudulent instruction" (written, electronic, telegraphic, cable, teletype, or telephone instruction) transmitted to a financial institution directing it to transfer, pay, or deliver "money" or "securities" from the insured's transfer account without the insured's knowledge or consent.
8. Insuring Agreement 8 — Money Orders and Counterfeit Money: Covers loss resulting directly from the insured having accepted in good faith, in exchange for merchandise, "money", or services:
   • Any post office or express money order issued (or purporting to have been issued) by any post office or express company, if it is not paid upon presentation; OR
   • "Counterfeit money" (counterfeit United States or Canadian paper currency—does not cover counterfeit coins or other foreign currencies) acquired during the regular course of business.