14.2 Crime and Fidelity Coverage

Commercial Crime and Fidelity

Crime insurance covers loss of money, securities, and other property from criminal acts - theft, robbery, burglary, forgery, and employee dishonesty. Standard property policies exclude or sharply sublimit these losses, so a dedicated crime form fills the gap. The ISO program uses the Commercial Crime Coverage Form in two flavors: CR 00 20 (Discovery form) and CR 00 21 (Loss Sustained form), plus the CR 00 23 Government Crime versions.

Fidelity coverage specifically protects an employer against loss caused by its own employees - the employee theft insuring agreement, the modern successor to the old 'employee dishonesty' bond.

Distinguish a fidelity bond (covers the employer against dishonest employees) from a surety bond (a three-party guarantee of performance). Crime coverage is also distinct from property coverage: a building fire is a property loss, while theft of the cash register's contents is a crime loss. The exam frequently asks you to route a fact pattern to the correct line - property, crime, or surety.

Key definitions - know these cold

The exam lives on precise crime definitions:

• Theft - the broadest term: any unlawful taking of property.
• Robbery - taking property from a person by threat or violence (the victim is aware).
• Burglary - unlawful entry into a premises with visible signs of forced entry to commit a felony.
• Safe burglary - forced entry into a locked safe/vault (visible marks required).
• Forgery or alteration - signing/altering checks, drafts, or promissory notes.
• Robbery vs. burglary trap: robbery involves a person; burglary involves forced entry with no person necessarily present.

The insuring agreements

The Commercial Crime form is modular - the insured selects insuring agreements and limits each:

Each insuring agreement has its own limit and deductible.

Discovery vs. Loss Sustained - the central crime distinction

Crime coverage triggers are unusual and heavily tested:

• Discovery form (CR 00 20): pays losses discovered during the policy period (or the extended discovery period), no matter when the loss actually occurred.
• Loss Sustained form (CR 00 21): pays losses that occurred during the policy period and are discovered during the term or within a limited time (commonly 1 year) after expiration.

Trap: If an embezzlement happened three years ago but is discovered this year, only the Discovery form responds. The Loss Sustained form would not, because the loss did not occur during its policy period.

Employee theft - who counts, and exclusions

Employee theft is the fidelity core. An 'employee' includes regular workers and, by endorsement, leased/temporary workers and certain volunteers. Coverage is excluded once dishonesty is discovered about a specific employee - continued coverage on that person ends. Other exclusions: loss the insured cannot prove except by inventory shortage (profit-and-loss computations alone are not enough), acts of the named insured/partners/owners, and trading/securities losses.

Trap: Inventory-shortage-only proof is not sufficient to establish an employee-theft claim; the insured must independently prove a covered employee committed theft.

Worked numeric - shared limit and per-loss treatment

Suppose Employee Theft is written at a $100,000 limit with a $1,000 deductible per occurrence, and a single employee steals across many transactions totaling $150,000.

• All acts of one employee (or in collusion) are treated as a single occurrence.
• Recoverable = limit applied once = $100,000, minus the $1,000 deductible = $99,000.

Do not multiply the limit by the number of transactions. The series of acts by one employee is a single loss, capped at the per-occurrence limit. This 'single occurrence per employee' rule is a common calculation trap.

Government Crime Forms and the ERISA Bonding Rule

Beyond the commercial crime forms, the exam touches two specialty bonding points. Government Crime forms (CR 00 24/25) adapt crime coverage for public entities. Separately, ERISA requires anyone who handles employee benefit plan funds to be covered by a fidelity bond of at least 10% of the funds handled, with a $1,000 minimum and a $500,000 maximum ($1,000,000 if the plan holds employer securities).

Trap: The ERISA fidelity-bond requirement is mandatory for plan fiduciaries and is separate from ordinary employee-theft crime coverage. A series of thefts by one employee is a single occurrence capped once at the limit - do not multiply by the number of transactions.

Robbery, Burglary, and the Money/Securities Split

The crime form's recovery turns on precise definitions and on where the money sits. Inside the Premises - Money & Securities covers theft/disappearance/destruction on the premises; Outside the Premises covers money in a messenger's custody; Robbery/Safe Burglary - Other Property covers non-money property by those specific crimes.

Trap: Loss provable only by an inventory shortage (profit-and-loss computation) is not enough to establish an employee-theft claim - the insured must independently prove a covered employee committed the theft. And all acts of one employee form a single occurrence, capped once at the limit.