13.3 Insuring Agreements

The Crime coverage forms offer 8 types of coverage, or Insuring Agreements:

Employee Theft	Forgery or Alteration	Inside the Premises – Theft of Money and Securities
Inside the Premises – Robbery and Safe Burglary of Other Property	Outside the Premises	Computer Fraud
Funds Transfer Fraud	Money Orders and Counterfeit Money

The insured may choose one, several, or all of the available coverages—none are mandatory. A coverage applies only if a limit of insurance for that Insuring Agreement is shown in the Declarations.

Employee Theft (Form A)

Employee Theft Coverage: The insurer pays for direct loss or damage to money, securities, and other property caused by employee theft, including employee forgery. Coverage applies whether or not the employee is identified and whether the employee acted alone or with others.

Employee Theft Exclusions: This coverage does not apply to losses that:

• Can be proven only by an inventory or profit-and-loss calculation.
• Result from trading, whether conducted in the insured's name or a fictitious account.
• Result from the fraudulent or dishonest signing, issuing, or canceling of a warehouse receipt.

Further, employee theft coverage may not apply to certain employees. Dishonest acts committed by the named insured, partners, or other members are not covered. If an employee committed theft or another dishonest act before the policy's effective date, any subsequent losses caused by that employee are not covered if the insured, or a partner, member, manager, officer, director, or trustee, knew of the prior act before the policy period began.

Similarly, under the Termination As To Any Employee condition, coverage for an employee ends as soon as the named insured, or a partner, member, manager, officer, director, or trustee, learns that the employee committed a theft or other dishonest act, whether it occurred before or during the employee's employment.

An Insurance Story

A salesperson at The Furniture Company steals cash from a retail store register. At another location, a group of employees works together to steal a mattress and several pieces of décor. Jordan, one of the company's accountants, forges the owner's signature on a check to obtain an unauthorized bonus. Each of these losses is covered under the Employee Theft Insuring Agreement.

However, once the named insured or an authorized representative learns that an employee has committed a theft or other dishonest act, coverage for that employee ends under the Termination As To Any Employee condition. As a result, if these employees remain employed, any future losses they cause will not be covered.

Likewise, if the owners knew before the policy began that Jordan had committed theft while working for a previous employer, the policy would not cover the loss caused by Jordan.

Forgery or Alteration

The Forgery or Alteration Insuring Agreement covers losses resulting from the forgery or alteration of checks, drafts, promissory notes, or similar written promises or orders to pay money. Covered items may be made or issued by the insured, by someone acting on the insured’s behalf, or drawn on the insured’s account. Forgery means signing another person’s or organization's name with the intent to deceive. Signing your own name without authorization is not considered forgery. Electronic signatures are treated the same as handwritten signatures.

An Insurance Story

A supplier of The Furniture Company alters a company check by changing the payment amount after it is issued. The altered check is paid by the bank before the fraud is discovered. Because the loss resulted from the alteration of a covered financial instrument, the insurer pays the loss under the Forgery or Alteration Insuring Agreement.

If the insured is sued for refusing to pay a written direction they believe has been forged or altered, the insurer will pay the reasonable legal expenses and defense costs associated with the lawsuit.

Inside the Premises – Theft of Money and Securities

This Insuring Agreement covers three types of loss:

• Loss of money and securities inside the insured's premises or a banking premises resulting from theft by a person inside the premises, or from disappearance or destruction
• Damage to the insured's premises, including the building's interior or exterior, caused by an actual or attempted theft of money or securities
• Loss to a locked safe, vault, cash register, cash box, or cash drawer located inside the insured's premises resulting from an actual or attempted theft of, or unlawful entry into, those containers

Example

During business hours, a robber forces open a locked cash register, steals a safe containing cash, and breaks a window while fleeing. The damage to the cash register, the loss of the safe and the money, and the broken window are all covered under the Inside the Premises – Theft of Money and Securities Insuring Agreement. However, damage to merchandise is not covered because merchandise is not part of the building or a covered money or securities container.

The Inside the Premises – Theft of Money and Securities Insuring Agreement does not cover most fire losses resulting from an actual or attempted theft, except for fire damage to money and securities. It also excludes damage to the premises, its exterior, or any safe, vault, cash register, or cash box caused by vandalism or malicious mischief rather than the theft itself. These losses are generally covered under standard commercial property policies.

Coverage is also excluded for losses caused by accounting or mathematical errors, as well as losses involving property contained in a money-operated device, such as a vending machine.

Inside the Premises – Robbery or Safe Burglary of Other Property

This coverage is similar to the Inside the Premises – Theft of Money and Securities Insuring Agreement, but it applies to certain types of tangible property, referred to as other property, such as jewelry, firearms, and computers. Coverage applies to:

• Loss of or damage to other property inside the insured's premises resulting from an actual or attempted robbery of a custodian
• Loss of or damage to other property inside a safe or vault on the insured's premises resulting from an actual or attempted safe burglary
• Damage to the insured's premises, including the building's exterior, caused by an actual or attempted robbery or safe burglary involving other property
• Loss to a locked safe or vault inside the insured's premises resulting from an actual or attempted robbery or safe burglary involving other property

Example

During business hours, a robber enters a jewelry store, threatens the employees and customers, and steals jewelry from the display cases. Later that night, a burglar breaks into the store, forces open a locked safe, and steals the jewelry stored inside. Both losses are covered under the Inside the Premises – Robbery or Safe Burglary of Other Property Insuring Agreement.

However, this Insuring Agreement does not cover burglary of other property that is not stored in a safe or vault. Coverage for that type of loss requires a separate endorsement.

This Insuring Agreement excludes fire losses resulting from an actual or attempted theft, vandalism and malicious mischief (VMM) losses, losses caused by accounting or mathematical errors, and losses involving property contained in money-operated machines.

Outside the Premises

The Outside the Premises Insuring Agreement applies to covered property while it is away from the insured's premises and in the care and custody of a messenger or an armored motor vehicle company. The insurer will pay for:

• Loss of money and securities resulting directly from theft, disappearance, or destruction
• Loss of other property resulting directly from an actual or attempted robbery

Example

An employee of a coffee shop is transporting the day's cash deposit to the bank when they are robbed. Because the employee is acting as a messenger and the loss occurs away from the insured's premises, the loss is covered under the Outside the Premises Insuring Agreement.

This Insuring Agreement excludes fire losses resulting from an actual or attempted theft, vandalism and malicious mischief (VMM) losses, losses caused by accounting or mathematical errors, and losses involving property contained in money-operated machines. It also does not cover damage to motor vehicles or their accessories, or property voluntarily transferred because of fraud, trickery, or threats.

Computer Fraud

This coverage applies to the direct loss of money, securities, and other property resulting from the fraudulent use of a computer to transfer covered property from the insured's premises or a banking premises to a person—other than a messenger—or to a location outside those premises.

Example

A cybercriminal gains unauthorized access to an employee's computer and uses it to transfer funds directly from the insured's bank account to the criminal's account. Because the loss results from the fraudulent use of a computer to transfer funds, it is covered under the Computer Fraud Insuring Agreement.

The Computer Fraud Insuring Agreement excludes losses involving credit card transactions, funds transfer fraud, and inventory shortages. It also does not provide computer or cyber property coverage. Damage to computer hardware, software, or data caused by events such as a computer virus is not covered. Instead, this coverage protects against direct losses resulting from fraudulent acts committed through the use of a computer.

Funds Transfer Fraud

Under the Funds Transfer Fraud Insuring Agreement, the insurer will pay for the direct loss of funds (money or securities) resulting from a fraudulent instruction directing a financial institution to transfer, pay, or deliver funds from the insured's transfer account. A fraudulent instruction includes:

• An electronic, telegraphic, cable, or telephone instruction that appears to have been sent by the insured but was fraudulently transmitted by someone else without the insured's knowledge or consent
• A written instruction, other than one covered by the Forgery or Alteration Insuring Agreement, that was fraudulently transmitted, forged, or altered without the insured's knowledge or consent
• An electronic, telegraphic, cable, telephone, or written instruction received by the insured that appears to have been sent by an employee but was fraudulently transmitted by someone else without the employee's knowledge or consent

Example

A fraudster impersonates one of the insured's employees and contacts the insured's bank to request a transfer of funds from the insured's transfer account. The bank processes the fraudulent instruction, resulting in a financial loss. Because the loss results from a covered fraudulent instruction, it is covered under the Funds Transfer Fraud Insuring Agreement.

Because of their similar coverage, some versions of the Commercial Crime Coverage Form combine the Computer Fraud and Funds Transfer Fraud Insuring Agreements into a single Insuring Agreement that provides both types of protection.

Money Orders and Counterfeit Money

This Insuring Agreement covers losses resulting from money orders that are not paid upon presentation and from counterfeit money accepted in good faith during the normal course of business in exchange for merchandise, money, or services.

Example

A customer purchases merchandise using a money order. When the insured later presents the money order for payment, the financial institution refuses to honor it. Because the money order was not paid upon presentation, the loss is covered under the Money Orders and Counterfeit Money Insuring Agreement.