Crime and Fidelity Coverage

Why Crime Is Its Own Line

Most commercial property forms exclude or sharply limit dishonest acts of employees and theft of money and securities. The CP 00 10 building/personal property form, for example, excludes employee dishonesty and limits 'money and securities' to a token amount. To fill that gap, ISO publishes a separate Commercial Crime program, the current edition being the CR 00 20 (loss-sustained form) and CR 00 21 (discovery form), plus a parallel Government Crime series.

Crime coverage protects against loss of money, securities, and other property caused by employee dishonesty, theft, robbery, burglary, forgery, and computer/funds-transfer fraud. The distinction between these perils - and between the two coverage triggers - drives most exam questions.

The Insuring Agreements You Must Know

ISO crime forms are built from numbered insuring agreements the insured selects and limits separately:

Agreement 1 (Employee Theft) is the heart of fidelity coverage. The others address third-party criminal acts.

Defining the Perils: Burglary vs. Robbery vs. Theft

The exam relentlessly tests these definitions:

• Theft - the broadest term: any unlawful taking of property. Includes both robbery and burglary.
• Robbery - taking property from a person by force, threat, or violence (or witnessing an obvious act). It requires a victim present.
• Burglary - unlawful entry into premises shown by visible signs of forced entry (marks on doors, windows). No person need be present.
• Safe burglary - forced entry into a locked safe/vault, evidenced by visible marks, or removal of the safe itself.

Mnemonic: Robbery = a Real person threatened; Burglary = Broken-in (forced entry marks); Theft = Total/any taking. A 'mysterious disappearance' is covered only under money & securities agreements, not under robbery or burglary agreements.

Loss-Sustained vs. Discovery Trigger

This is the crime-line equivalent of occurrence vs. claims-made and is heavily tested.

• Loss-Sustained form (CR 00 20): covers loss that occurs during the policy period and is discovered no later than one year after the policy ends. It also adds limited coverage for prior-policy losses if continuous coverage existed.
• Discovery form (CR 00 21): covers loss discovered during the policy period, no matter when it actually occurred (subject to the retroactive date and prior-insurance conditions).

Fidelity losses (employee dishonesty) often span years before detection, so the discovery trigger is valuable when an employer suspects long-running embezzlement. The form also includes a loss-sustained-during-prior-insurance condition to prevent gaps when switching forms.

Worked Example: ERISA Bond and the Per-Loss Limit

Employee benefit plans under ERISA require a fidelity bond of at least 10% of plan assets, minimum $1,000, maximum $500,000 ($1,000,000 if the plan holds employer securities). A plan holding $3,000,000 in assets needs 10% = $300,000 in fidelity bonding.

Crime forms also distinguish a per-loss limit from an aggregate. If an embezzling employee steals over three years and the limit is $100,000 per occurrence, the recovery is capped at $100,000 regardless of the multi-year total - all acts of one employee are treated as a single loss. Candidates miss this and incorrectly multiply the limit by the number of years.

The ISO Crime Insuring Agreements

The ISO Commercial Crime form is organized into numbered insuring agreements, and the exam tests which one responds to a given loss. Employee Theft covers loss of money, securities, and other property caused by an employee's dishonesty; it is the modern successor to the old employee-dishonesty fidelity bond.

Forgery or Alteration covers loss from forged or altered checks, drafts, and similar instruments drawn on the insured's accounts. Inside the Premises - Theft of Money and Securities covers robbery or safe burglary at the insured's location, while Inside the Premises - Robbery or Safe Burglary of Other Property covers non-money property.

Three more agreements complete the core. Outside the Premises covers money, securities, and property in the care of a messenger away from the premises. Computer and Funds Transfer Fraud covers theft accomplished by fraudulent electronic instructions, an increasingly tested exposure. Money Orders and Counterfeit Money covers loss from accepting bad instruments in good faith. Each agreement carries its own limit, and the insured selects only the ones its exposure requires.

Two coverage-trigger choices matter on the exam. A discovery form covers losses discovered during the policy period no matter when they occurred, while a loss-sustained form covers losses that both occurred and were discovered during the period (with a limited extended discovery window after expiration). Crime forms also exclude loss caused by the named insured or its partners, loss whose proof depends solely on a profit-and-loss computation or inventory shortage, and acts of the insured's own owners.

Worked scenario: a bookkeeper forges company checks ($40,000) and a separate hacker initiates a fraudulent wire ($75,000). The forgery loss responds under Forgery or Alteration, and the wire responds under Computer and Funds Transfer Fraud, each against its own limit; they are not added against a single employee-theft limit. Routing each loss to the correct insuring agreement is the central crime-coverage skill.

Key Takeaways

The ISO Commercial Crime form responds through separate insuring agreements (employee theft, forgery/alteration, inside/outside premises, computer/funds-transfer fraud, money orders/counterfeit), each with its own limit. Forms are written on a discovery or loss-sustained trigger, all acts of one employee are a single loss capped at the per-loss limit, and inventory-shortage-only proof is excluded. ERISA plans need a fidelity bond of 10 percent of assets, up to $500,000 (or $1,000,000 with employer securities).