14.2 Crime and Fidelity Coverage
Key Takeaways
- Crime/fidelity coverage (ISO CR 00 20/21) fills the property form's exclusion of employee dishonesty and theft of money and securities
- The Discovery form triggers on loss discovered during the policy period; the Loss Sustained form requires the loss to occur while a policy is in force, discovered within a set window after expiration
- Employee Theft is the modern name for fidelity coverage and can be written blanket (per loss) or per employee; robbery (force vs. a person), burglary (signs of forced entry), and theft (any stealing) are distinct triggers
- Money is valued at face value, securities at market value on the discovery date; crime coverage has a deductible but no coinsurance
- Fidelity is two-party (insurer pays employer); surety is three-party with the principal expected to reimburse the surety
Why Crime Coverage Is a Separate Line
Standard commercial property forms exclude dishonest acts of the insured's own employees and most theft of money/securities beyond small sublimits. The ISO Commercial Crime Program fills that gap, written either as a standalone policy or as a coverage part within a Commercial Package Policy.
Quick Answer: Crime insurance covers loss of money, securities, and other property from dishonesty, theft, robbery, burglary, forgery, and computer/funds-transfer fraud - exposures the property form excludes.
The two key forms are the CR 00 20 - Commercial Crime Coverage Form and the CR 00 21, each issued in a Loss Sustained version and a Discovery version. The trigger difference between these two is the most heavily tested crime concept.
Loss Sustained vs. Discovery Form - The Core Trigger
| Trigger Type | When a loss is covered |
|---|---|
| Discovery form | Loss is covered if it is DISCOVERED during the policy period (or extended discovery period), regardless of when it occurred |
| Loss Sustained form | Loss must be SUSTAINED (actually occur) during the policy period and discovered within a stated window (commonly 1 year) after expiration |
Worked scenario: An employee embezzles from 2023 through 2025. The crime is uncovered in March 2026.
- On a Discovery form effective in 2026, the full embezzlement is covered because it was discovered in the policy period.
- On a Loss Sustained form, only the portion of theft sustained while a policy was in force is recoverable, subject to the prior-insurance/superseded-coverage condition.
The Discovery form is broader for long-running, slowly uncovered schemes; the Loss Sustained form is the traditional default.
The Crime Insuring Agreements
The commercial crime form is built from numbered insuring agreements; the insured buys the ones it needs:
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Employee Theft - the modern name for fidelity (employee dishonesty) coverage; pays for loss of money, securities, or other property caused by employee dishonesty. Can be written per loss (blanket) or per employee.
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Forgery or Alteration - covers forged checks, drafts, and similar instruments.
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Inside the Premises - Theft of Money and Securities (includes robbery/safe burglary).
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Inside the Premises - Robbery or Safe Burglary of Other Property.
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Outside the Premises - money/securities/property in the care of a messenger.
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Computer Fraud - fraudulent transfer of property via computer.
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Funds Transfer Fraud - fraudulent electronic instructions to a financial institution.
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Money Orders and Counterfeit Money.
Definitions trap: Robbery requires force or threat against a person; burglary requires forcible, visible entry/exit (signs of forced entry); theft is the broadest term - any act of stealing. The exam routinely separates these three.
An employee secretly diverts company funds over four years. The scheme is discovered after the act has stopped, while the employer carries a commercial crime policy written on the Discovery form. How does coverage respond?
Limits, Deductibles, and Key Conditions
Crime coverage is written per occurrence with a chosen limit and a deductible (no coinsurance applies). Several conditions are tested:
- Loss of money is valued at face value; loss of securities at market value at the time of discovery; other property at ACV or actual cash cost to repair/replace.
- Territory is typically the United States, its territories, and Canada (broader for funds-transfer/computer fraud).
- Employee Theft excludes the dishonesty of partners and the named insured/owners - those need a different bond/structure.
- Termination as to any employee is automatic once the insured learns of that employee's prior dishonesty.
Surety vs. fidelity distinction: A fidelity bond/crime policy is two-party (insurer pays the insured employer for employee dishonesty). A surety bond is three-party (surety guarantees a principal's performance to an obligee) and the principal is expected to reimburse the surety - that is the line on the exam between crime/fidelity and bonds.
Commercial Crime and Fidelity Coverage
Commercial crime insurance covers loss of money, securities, and other property from criminal acts that property forms exclude. The ISO crime program offers a loss-sustained form (covers loss sustained during the policy period and discovered within one year after expiration) and a discovery form (covers loss discovered during the policy period regardless of when it occurred), and the discovery-vs-sustained trigger is a reliable exam point.
The most-tested insuring agreements are Employee Theft (the modern fidelity coverage protecting the employer against its own employees' dishonesty), 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, and Funds Transfer Fraud.
Know the term-of-art distinctions examiners exploit. Robbery requires taking by force or threat from a person; burglary requires unlawful entry with visible signs of forced entry; theft is the broadest term covering any act of stealing. Employee Theft behaves like insurance (no recovery expected from the employee), distinguishing it from surety. Coverage typically excludes the dishonesty of the named insured or its partners and inventory-shortage losses proven only by a count, because those invite manipulation.
A scenario that turns on whether there were 'visible marks of forced entry' is testing the burglary definition, while one that mentions a stick-up at the register is testing robbery.
Two more crime distinctions appear on exams. A blanket crime limit applies one amount to all covered employees or locations, while a scheduled form names specific employees or positions; the commercial blanket vs. blanket position contrast from the surety unit carries over here for employee-theft recoveries. And the crime program's territory is broader than property forms, often covering loss within the United States, Canada, and, for funds-transfer and computer fraud, anywhere money moves electronically.
When a stem turns on whether multiple colluding employees multiply the recoverable limit, it is testing the position-vs-blanket mechanic.
On a commercial crime policy, how is a covered loss of MONEY valued?