14.2 Crime and Fidelity Coverage

The ISO Commercial Crime Program

Crime insurance covers loss of money, securities, and other property from dishonest acts and criminal perils that standard property forms exclude or limit. The current ISO program uses the Commercial Crime Coverage Form, issued in two trigger versions:

• CR 00 20 - Discovery Form: covers loss discovered during the policy period, regardless of when the act occurred (subject to a one-year extended discovery window after cancellation).
• CR 00 21 - Loss Sustained Form: covers loss sustained during the policy period and discovered no later than one year after policy expiration.

Knowing the discovery-versus-loss-sustained trigger distinction is the most-tested crime concept. A separate Government Crime Form (CR 00 25/26) exists for public entities.

The seven (eight) insuring agreements

The crime form is built from individually selectable insuring agreements. Each gets its own limit and deductible:

Employee Theft (Agreement 1) is the modern name for what older texts call a fidelity bond. It can be written on a per-loss (blanket) basis covering all employees, or a per-employee/scheduled basis naming individuals or positions.

Definitions, traps, and a worked recovery

The crime form defines terms precisely - expect distractors:

• Robbery = taking by force, threat, or violence (from a person).
• Burglary = forcible entry/exit with visible marks (no person required).
• Theft = any act of stealing (broadest term).
• Safe burglary = forced entry into a locked safe/vault, or removal of the safe.

Common exclusions: loss the insured knew about before the policy began, indirect/consequential loss, expenses to establish a claim, acts committed by the named insured or its owners, and (for Employee Theft) loss proven only by inventory shortage or profit-and-loss computation.

Worked example

An employee embezzles $90,000. The Employee Theft agreement limit is $75,000 with a $5,000 deductible.

• Loss within the limit: lesser of $90,000 or $75,000 = $75,000
• Less deductible: $75,000 - $5,000 = $70,000 paid

The insured retains the $5,000 deductible AND the $15,000 of loss above the limit, recovering $70,000 of the $90,000 theft.

Limits, conditions, and how crime stacks with other lines

Each insuring agreement carries its own single per-loss limit rather than an aggregate, and a separate deductible. A key condition is the 'loss sustained during prior insurance' rule: when a policy replaces a prior crime policy without a gap, loss that began under the old policy but is discovered under the new one can still be covered, but recovery is capped at the greater of the two limits, never stacked. This prevents a discovery-form insured from collecting twice for one continuing scheme.

Other tested conditions and features:

• Territory is typically worldwide for employee theft and computer/funds-transfer fraud, but the premises agreements are often limited to the United States, its territories, and Canada.
• Recovery after settlement is applied first to the insured's uninsured loss (deductible and amounts over the limit), then to the insurer - the insured is made whole before the carrier recoups.
• Cancellation of an employee is automatic for any employee the insured learns has committed theft or dishonesty.

Crime coverage also coordinates with other lines. The BOP and Homeowners forms include small built-in money/securities and forgery limits; a standalone crime policy is purchased when those sublimits are inadequate. Financial institutions instead use the Financial Institution Bond (formerly Bankers Blanket Bond), a specialized fidelity form outside the commercial crime program.

Employee Theft vs. the Three Outside Crimes

The ISO Commercial Crime program centers on distinguishing insider from outsider losses. Employee Theft (fidelity) covers loss of money, securities, or property caused by dishonest employees. The outside-perpetrator coverages are: Forgery or Alteration (of checks/drafts), Theft of Money and Securities (inside the premises or while in a messenger's care), and Robbery/Burglary of other property. Computer Fraud and Funds Transfer Fraud address electronic theft.

Discovery vs. Loss-Sustained Forms

A signature exam distinction: crime policies are written on a Discovery form (covers losses discovered during the policy period, regardless of when they occurred) or a Loss-Sustained form (covers losses occurring during the policy period and discovered within a set window after). This matters because employee theft is often discovered long after it began. Note the prior dishonesty exclusion (no coverage once the employer knew of an employee's prior theft) and that crime coverage excludes inventory shortages proven only by an inventory computation.

ERISA Bonds and Limit Selection

Crime questions sometimes cross into benefit plans: ERISA requires a fidelity bond for persons handling employee-benefit-plan funds, generally 10% of funds handled (minimum $1,000, maximum $500,000, or $1,000,000 if the plan holds employer securities). This statutory bond is distinct from a commercial employee-theft policy — recognizing the ERISA requirement and its percentage formula is a frequent specialty-line exam point.