B.
LIMIT OF INSURANCE
The limit on the declarations is the most
paid for all loss that result from a single occurrence. If a loss is covered
under more than one insuring agreement, the company pays ONLY the largest limit
of insurance available, not the sum of each available limit.
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Example: Acme Company sustains a
loss that involves both employees and non-employees. It is determined that it
is one occurrence and that Insuring Agreements 1, 3, and 7 provide coverage.
The available limits of insurance are:
- Insuring Agreement 1 - $300,000
- Insuring Agreement 3 - $100,000
- Insuring Agreement 7 - $250,000.
The total loss is $500,000.
The maximum recovery is
$300,000, the highest limit available.
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Note: A situation like
this could have claimants and their attorneys seeking ways to utilize the
different definitions of occurrence within the insuring agreements so that what
might appear to be a single occurrence could be separated into multiple
occurrences.
E.
CONDITIONS
These conditions
apply in addition to the Common Policy Conditions.
1. Conditions Applicable to All Insuring
Agreements
g.
Extended Period to Discover Loss
Losses
must occur prior to the cancellation date of coverage but may be discovered at either
of the following:
· Within one year
from the date that coverage is cancelled. However, this extended period to
discover loss ends immediately on the date that the named insured obtains other
coverage.
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Example: Peggy did not know that her
employees were skimming money from the cash registers. Her crime coverage
expired on 01/01 2017and was not renewed. She discovered the loss on
06/10/2017. The loss is covered if the employees began stealing the money
from the cash registers before 01/01/2017. Any money stolen after 1/1/2017 is
not covered.
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· Not more than one
year from the date that cancellation is effective with respect to employee
benefit plans. There is no exception.
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.
F.
DEFINITIONS
These definitions
apply to all insuring agreements. There are 25 definitions.
17.
Occurrence
This
term has different meanings under different Insuring Agreements.
a. When used in
Insuring Agreement A. 1., occurrence is one act, the total of
multiple acts, or a series of acts an employee commits during the policy
period. The acts are not required to be related but they may be. The employee
may commit them alone or in collusion with others.
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Examples:
Five employees work
together to skim money from their company’s accounts at different times and
in different ways. This is treated as a single occurrence.
Five employees who do not
know of each other’s plans or what they are doing skim money from their
company’s accounts at different times and in different ways. This is treated
as five different occurrences.
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The
policy period is the period on the declarations but modified in Conditions E.
1. k. and E. 1. l. that explain how losses sustained during prior
insurance are handled.
b. When used in
Insuring Agreement A. 2., occurrence is one act, the total of
multiple acts or a series of acts an employee commits during the policy period
that involve one or more instruments. The acts are not required to be related
but they may be. The employee may commit them alone or in collusion with
others. The policy period is the period on the declarations but modified in
Conditions E. 1. k. and E. 1. l. that explain how losses sustained
during prior insurance are handled.
c. When used in any
other Insuring Agreement, occurrence is one act, the total of multiple acts, or
a series of acts committed during the policy period. The acts are not required
to be related but they may be. The act(s) may be committed by a person who acts
alone or in collusion with others. The act(s) are not required to have been
committed by a person.
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Example: The individual(s) who were
a part of a theft ring have never been identified but there is evidence that
an organized ring had stolen hundreds of different products from the
insured’s warehouse during the past five month. This is a single occurrence.
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The
policy period is the period on the declarations but modified in Conditions E.
1. k. and E. 1. l. that explain how losses sustained during prior
insurance are handled.
