E.
CONDITIONS
k. Loss Sustained During
Prior Insurance Issued by Us or Any Affiliate
A person or persons may
engage in numerous dishonest acts over a period of years before being caught.
However, all such acts are considered one occurrence. If the named insured
maintains continuous coverage with the same insurance company or group of insurance
companies, coverage applies back to the date that the continuous insurance
began. However, the limits of insurance do not accumulate because of the
multiple years. Instead, the highest limit available during the total period is
available to settle the total loss over the years when they occurred. This
condition now has three parts and includes three examples because of some
confusion and court cases such as Auto
Lenders Acc Ace. Corp.v
Gentilini Ford, Inc., 181 N.J. 245, 854 A.2d 378 2004.
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Example: Alice stole $50,000 two years ago,
$20,000 last year, and $30,000 this year, for a total of $100,000. Alice’s
employer carried a $50,000 limit of insurance each of these three years.
These limits cannot be added together even though the dishonest acts took
place during each of these years because this provision treats the series of
thefts as a single occurrence. $50,000 is the maximum limit available for
this single occurrence.
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(1) Loss Sustained Partly
during this Insurance and Partly during Prior Insurance
If a loss is sustained in
part during the current insurance and in part during prior policies and there
was no break in coverage, the loss in the current policy period is settled
first. The losses in the prior periods are then settled.
(2) Loss Sustained
Entirely during Prior Insurance
If a loss is sustained
entirely during a previous policy period and there was no break in coverage
between the date of loss and the current policy and the current policy covers
the loss, the insurance company settles the loss under the most recent previous
insurance first. It then settles the remaining amounts during previous
insurance.
(3) When the insurance
company settles losses under k. (1). And k. (2) above:
· The highest single limit
of insurance available during any policy period when the loss occurred is
available for the loss.
· No settlement is paid
until the deductible that applies under the current policy is satisfied. That
deductible is the only one applied to the entire loss settlement, regardless of
the number of policy periods involved.
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Examples:
Low down Bob has been stealing from
Below Ground Enterprises for three years. Below Ground discovers the loss
this year and calculates that the amount of loss is $100,000.
Scenario 1: The limit of insurance on the
current policy is $100,000. However, it was only $25,000 three years ago. The
insurance company pays $100,000.
Scenario 2: The limit was reduced from $100,000
to $25,000 two years ago. The insurance company still pays Below Ground
$100,000 because the limit of insurance was $100,000 at the time of the
occurrence.
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l. Loss Sustained During
Prior Insurance Not Issued by Us or Any Affiliate
(1) This condition applies
only if there was no lapse in coverage between the current coverage and the
previous coverage. Even a one-day lapse in coverage nullifies this important
benefit. If a loss sustained in a previous policy term is discovered after the
end of that policy's discovery period, coverage applies under the current
policy if both the old and new policy have the same coverage and one
immediately replaces the other. The limit of insurance available is the lesser
of the two policy limits.
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Example: Number One, Inc. moved its coverage
from STU Accident and Casualty Insurance Company to ABC Indemnity Company. It
had been with STU for five years. Number One discovered a loss that occurred
during the STU policy but after the discovery period expired. ABC Indemnity
covers the loss for either the limit of insurance under the STU policy or the
limit under its policy, whichever is less.
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The coverage available
under this condition cannot be combined with the coverage available under
Condition k. to increase the insurance limits. The limits under Condition k.
are taken into consideration with the limits of the previous company and the
lesser is the one chosen.
Note: The important distinction
is that the highest limit is used to settle claims if coverage is continuously
with one company or group. If coverage moves between companies, the lowest
limit is used to settle claims. This creates a significant gap in coverage if
coverage moves from one insurance company to another.
