6.5 Commercial Crime Coverage
Key Takeaways
Commercial Crime coverage protects money, securities, and property against employee and outsider criminal acts.
Forms are triggered by Discovery (loss discovered during the policy period) or Loss Sustained (loss occurred during the policy period, discovered during term or within one year after).
The nine ISO insuring agreements cover employee theft, forgery, inside/outside premises, computer fraud, funds transfer fraud, counterfeit money, and extortion.
Burglary requires visible marks of forced entry on a locked building; robbery requires threat or use of violence.
6.5 Commercial Crime Coverage
Commercial Crime Insurance protects businesses against loss of money, securities, and other property from criminal acts by employees or outsiders. It is written as a monoline policy or as a coverage part in a Commercial Package Policy.
Form Triggers
- Discovery Form: Covers losses discovered during the policy period, regardless of when the criminal act occurred.
- Loss Sustained Form: Covers losses that occurred during the policy period and were discovered during the policy term or within one year after policy expiration.
Legal Definitions of Crime Perils
- Theft: The broadest term — any unlawful taking of property.
- Robbery: Taking property from a person by threat or use of violence, or by creating fear of bodily harm.
- Burglary: Unlawful taking of property from inside a locked building by a person who forcibly enters or exits, leaving visible marks of forced entry/exit (broken locks, jimmied doors).
- Safe Burglary: Taking property from a locked safe or vault by forcible entry leaving visible marks.
The Nine ISO Crime Insuring Agreements
| # | Insuring Agreement | Covers |
|---|---|---|
| 1 | Employee Theft | Money, securities, and property taken by fraudulent or dishonest acts of employees |
| 2 | Forgery or Alteration | Forgery or alteration of checks, drafts, or promissory notes drawn on the insured’s accounts |
| 3 | Inside the Premises — Theft of Money & Securities | Theft, disappearance, or destruction of money and securities inside the premises, plus damage to the premises |
| 4 | Inside the Premises — Robbery or Safe Burglary of Other Property | Robbery of a custodian or safe burglary of property other than money and securities inside the premises |
| 5 | Outside the Premises | Money and securities in transit outside the premises in the care of a messenger or armored vehicle company |
| 6 | Computer Fraud | Loss resulting from unauthorized entry to the insured’s computer system or fraudulent computer instructions |
| 7 | Funds Transfer Fraud | Fraudulent instructions directing a financial institution to transfer funds from the insured’s account |
| 8 | Money Orders & Counterfeit Money | Counterfeit money orders or counterfeit currency accepted in good faith |
| 9 | Extortion — Commercial Entities | Money paid to extortionists threatening to damage the insured’s property or persons |
Government Crime Coverage
Governmental entities use specialized crime forms covering public-employee dishonesty, money and securities, and forgery, structured similarly to commercial forms.
Adjuster Notes
- The key adjuster task is determining which insuring agreement applies and whether the form is discovery or loss sustained.
- Employee Theft is limited to money, securities, and "other property"; it does not cover employees’ own property.
- Burglary requires visible marks of forced entry — a merely unlocked door is not burglary.
Limits and Employee Theft Mechanics
- Employee Theft is written on a per-loss or per-employee aggregate basis. A per-employee aggregate means one limit applies to all dishonest acts of one employee across the bond period.
- Coverage applies to "money, securities, and other property" — employees' own property and trade secrets are not covered.
- Most policies exclude losses the insured knew of more than a set period (often 90 days) before discovery, and losses whose perpetrators had prior dishonest acts the insured knew about.
Inside and Outside the Premises
- Inside the Premises — Theft of Money & Securities covers theft, disappearance, or destruction of money/securities inside the premises or a bank depository, plus damage to the premises caused during the attempted theft.
- Inside the Premises — Robbery or Safe Burglary of Other Property requires either a robbery of a custodian or a safe burglary; mere theft of unsafed property does not trigger this agreement.
- Outside the Premises covers money and securities in transit while in the custody of a messenger (the insured's employee) or an armored motor vehicle company; an armored car company bond covers the carrier's own liability.
Government and Public Entity Crime Forms
Governmental entities use ISO governmental crime forms covering:
- Public employee dishonesty (public official bonds overlap with fidelity).
- Money and securities inside and outside the premises.
- Forgery or alteration of public checks.
Adjuster Workflow
- Identify the insuring agreement triggered (employee theft, inside premises, outside premises, computer/funds transfer).
- Establish discovery vs. loss sustained timing and whether the loss falls within the policy period or extended discovery window.
- Verify the definition (robbery requires threat/violence; burglary requires visible forced entry; safe burglary requires a locked safe).
- Apply the applicable limit (per-loss vs. per-employee aggregate).
Under a Discovery Form crime policy, when must a loss occur to be covered?
During the policy period
Within one year after expiration
It must be discovered during the policy period, regardless of when it occurred
Only before the policy starts
Which insuring agreement covers fraudulent instructions directing a bank to transfer funds from the insured’s account?
Employee Theft
Funds Transfer Fraud
Forgery or Alteration
Computer Fraud
What distinguishes burglary from other theft for crime coverage?
Visible marks of forced entry or exit on a locked building
No forced entry is required
The property must be money only
It must occur outside the premises
Sections you finish are checked off in the contents.