A. INSURING AGREEMENTS
CR 00 21 contains seven
insuring agreements. Coverage for a specific insuring agreement applies only if
there is a limit of insurance on the declarations beside that insuring
agreement. Coverage applies to losses the named insured sustains under the
following circumstances:
- The loss must be the result of an occurrence.
- The occurrence must take place DURING the policy
period on the declarations.
- The named insured must discover the loss DURING the
policy period or the extended discovery period.
All
of the above are subject to all of the following:
- Condition E. 1. g: Extended Period To Discover Loss
- Condition E. 1. k: Loss Sustained During Prior
Insurance Issued By Us Or Any Affiliate
- Condition E. 1. l: Loss Sustained During Prior
Insurance Not Issued By Us Or Any Affiliate
- Definitions of the terms discovered and occurrence
in Section F
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6. Computer and Funds Transfer Fraud
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a. The insurance company pays the following:
·
(1) Loss caused when money, securities, or other
property is transferred, paid, or delivered because of a fraudulent computer
entry or change or a fraudulent electronic data entry or change. The entry or
change must be within a computer system that the named insured owns, operates,
or leases. This also applies if the fraudulent entry or change resulted in the
named insured’s account at a financial institution being either debited or
deleted.
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Example: Josie Proust, the top salesperson
for Cyberfroot Distributors, was staying in a hotel
in Beijing. She regularly conducted business from her room. While at a
meeting with a local group of lychee and pomegranate farmers, someone broke
into her room, stole some of her valuables and hacked into her laptop to
transfer funds from her account. This insuring agreement covers this computer
fraud loss.
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·
(2) Loss caused when money or securities are
transferred, paid, or delivered from the named insured’s account at a financial
institution based on fraudulent instructions.
·
Related
Court Case: Bond’s Exclusion Provision was Conspicuous, Plain, and
Clear
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b. Fraudulent entry or fraudulent change of
electronic data or a computer program as described in 6. a. (1) above is
broadened to include such entries when made in good faith by employees.
However, coverage applies only if the entries are made based on fraudulent
instructions received from a computer software contractor. This contractor must
have a written agreement with the named insured to design, implement, or
service computer programs for computer systems that this insuring agreement
covers.
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Example: Ken receives an electronic update
file from his network provider and is told that it is a required patch. Ken
uploads the file as instructed. Charlene’s financial institution informs her
that unusual charges are being made against the company account. Ken and
Charlene review the timing and realize the patch is actually a program designed
to redirect funds. Ken changes network providers and Charlene files a police
report and a computer transfer claim.
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D. EXCLUSIONS
1. These exclusions apply
to all insuring agreements unless stated otherwise.
a. Acts Committed by You,
Your Partners or Members
There is no coverage for
theft or any other dishonest act the named insured or its members or partners
commit. This applies if the named insured, partner or member acts alone or
involves others in the dishonest event. Note: The named
insured cannot claim coverage for an employee’s dishonest act if the named
insured is involved in the same dishonest act. For the purposes of this
exclusion, a member is an owner of a Limited Liability Corporation (LLC).
b. Acts Committed by Your
Employees Learned of by You Prior to the Policy Period
This exclusion applies to
losses caused by employees with a history of committing dishonest acts.
Coverage does not apply to any loss that employee causes if the named insured,
its partners, members, managers, officers, directors, or trustees knew about
his or her previous dishonest acts that took place prior to the policy period.
However, coverage does apply if the member, partner, manager, officer,
director, or trustee who knew about the dishonest acts was working with that
employee to commit the dishonest act.
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Example: Trent has a troubled background and
Rick, the vice president of operations, knows about it. Rick uses Trent and
his shady contacts to help him fence items they steal from their company’s
warehouse. When the loss is discovered, the insurance company cannot deny
coverage because Rick is the only one at the company who was aware of Trent’s
dishonest past.
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c. Acts Committed by Your
Employees, Managers, Directors, Trustees, or Representatives
This exclusion applies to
all insuring agreements except Insuring Agreement A. 1. Employee Theft.
Coverage does apply to any
dishonest act (including theft) any of the named insured’s employees, managers,
trustees, directors, or authorized representatives commit. This exclusion
applies whether they act alone or with any other persons. It applies whether
the perpetrator is providing a service for the named insured at the time of the
loss or not.
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Example: Jeremy is an employee at Jones
and Sons. He and three of his friends broke into the Jones and Sons warehouse
and stole a substantial amount of electronics. Jeremy’s involvement was
captured by the warehouse’s surveillance cameras. Coverage under all Insuring
Agreements except for Insuring Agreement A. 1 is denied because Jeremy was an
employee of Jones and Sons.
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d. Confidential or
Personal Information (11 15 changes)
The insurance company does
not pay for loss that result from either of the following:
(1) Disclosing another
person’s or organization’s confidential or personal information.
It also does not pay for loss resulting from any use of such information.
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Example: Marguerite works
in Acme College’s Record’s Department. Her boyfriend, Phillip, asks
for some information about his roommate, Paul, and uses it to steal Paul's
identity. Paul discovers the identity theft when he attempts to secure a
student loan. The police track the release of information to Phillip and
Marguerite, both of whom have left town. Paul demands that Acme compensate
him for the monetary loss due to Marguerite’s actions. One reason the crime
coverage written on Acme College does not respond is because of this
exclusion.
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(2) Disclosing the named
insured’s confidential or personal information. However, this
exclusion does not apply to coverage that is available in certain insuring
agreement when such information is used for dishonest acts.
Examples of such
confidential or personal information mentioned in this exclusion are patents,
trade secrets, customer lists, processing methods, credit card information,
financial information, health information, or any other kind of information
that is generally not available to the public. These are only examples and are
not meant to restrict the term confidential or personal information.
Note: This exclusion was
rewritten to clarify that only loss due to the disclosure of the named
insured’s personal and confidential information is not covered. Coverage
provided in an insuring agreement that is due to the use of the named insured’s
personal or confidential information could still be covered.
e. Data Security Breach
Coverage does not apply
for any expenses or costs the named insured must incur or for any fines, fees
or penalties it must pay because access was provided to another person or
organization’s personal or confidential information or that information was
somehow disclosed. The personal or confidential information examples are the
same as described in Exclusion d. above.
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Example: Acme College is reprimanded by its
accreditation board and both the state and local governments for permitting
Paul’s identity to be stolen. The college must perform an audit, review and
update its procedures, and add levels of security to protect student
information. The college must also pay fines. None of these costs are
covered.
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f. Government Action
Coverage does not apply to
loss that results when property is taken or destroyed because of an order from
a governmental authority.
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Example: The owner of Shot Docks Bass Boat
Rentals files a claim for the loss of a boat. The boat is valued at $37,000
and the owner states that “some official persons” took it from her premises.
The claims adjuster investigates and learns that the boat was confiscated
under a federal controlled substances law. The claim is denied.
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g. Indirect Loss
There is no coverage for
loss that is an indirect result of an occurrence that this insurance covers.
The following are examples of such excluded indirect losses but the exclusion
is not limited to just these:
· Loss of income as a result of not being able to use money, securities, or
other property.
Note: This means that coverage
does not apply to loss of interest income on money that could have been
invested. There is no coverage for loss of income on stock holdings that could
have appreciated during an upturn in the market. Finally, loss of profit due to
the loss of a chance to sell product stolen from an insured is excluded.
Business income coverage available in commercial property forms pays for the
loss of income on property other than money or securities.
· Damages for which the
named insured is legally liable. The only exception is for any direct damages
that this insurance covers.
· Costs, fees, or other
expenses the named insured incurs in order to establish that a loss actually
happened or to determine the amount of a loss.
Note: These costs, fees, or
expenses can be substantial.
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Examples:
- The expenses to hire auditors
to examine books that an employee “cooked”
- The costs to hire independent
investigators to ferret out the scope of a financial loss and who caused
it
- The costs to hire forensic or
other specialists to determine the part of missing inventory that was
stolen and the part that was simply part of an inventory shortage
Coverage for these costs and expenses
is available by attaching CR 25 40–Include Expenses Incurred to Establish
Amount of Covered Loss.
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Related Article: ISO Commercial Crime Coverages Available Endorsements and
Their Uses
h. Legal Fees, Costs, and
Expenses
There is no coverage for
any legal fee, cost, or expense the named insured incurs. However, there is an
exception explained under Insuring Agreement A. 2.
i. Nuclear Hazard
There is no coverage if
nuclear reaction or radiation causes loss or damage. Radioactive contamination
is also excluded. This exclusion applies regardless of how such losses occur.
j. Pollution
Loss or damage caused by
or that results from pollution is excluded. Pollution means any release or
escape of any solid, liquid, gaseous, or thermal contaminant or irritant. These
include vapor, smoke, acids, fumes, chemicals, alkalis, and waste. Waste
includes materials to be reclaimed, recycled, or reconditioned.
Note: This definition of
pollutant is identical to the one used in ISO Commercial Property Coverage
Forms.
k. Virtual Currency (11 15
addition)
Any loss that involves
virtual currency is excluded. Virtual currency is any type of electronic
currency such as digital or crypto currency. The name of the currency and
whether it is actual or fictitious is irrelevant to this exclusion.
Note: Coverage is available for
this type of currency through CR 25 45–Include Virtual Currency as Money.
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Example: Justine sells products only online
and accepts many forms of payment, including bitcoin. A recent audit reveals
that Chris, one of her employees, has been siphoning the bitcoin payments to
his personal bitcoin account. Justine submits an Employee Theft claim that is
denied because the loss is entirely in virtual currency.
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l. War and Military Action
There is no coverage for
loss or damage that results from war, undeclared war, or civil war. This
includes a military force’s warlike actions or actions to hinder or defend
against an expected or actual attack by any governmental authority that uses
military personnel or other agents.
Loss or damage due to
rebellion, insurrection, usurped power, revolution, or action a governmental
authority takes to defend against or hinder any of these is also not covered.
Note: This wording is identical
to the wording in ISO Commercial Property Coverage Forms.
4. The following
exclusions apply to Insuring Agreement A. 6: Computer and Funds Transfer Fraud.
a. Authorized Access
Coverage does not apply when
the loss results from actions of any party that is authorized to access that
computer system. The only exception is described in Insuring Agreement A.
6. b. which explains that when an employee acting in good faith takes an
action based on fraudulent information of a specific type of contractor there
is coverage.
b. Credit Card
Transactions
Coverage does not apply
when a loss is due to any type of credit, debit, charge, or other similar card
being used. There is also no coverage when the loss is the result of
information that was contained on any of those cards.
c. Exchanges or Purchases
There is no coverage for
loss that occurs because property was relinquished as a part of a purchase or
an exchange.
Note: There is no standard
endorsement available to "buy back" this exclusion or to purchase
this coverage.
d. Fraudulent Instructions
There is no coverage when
an employee or financial acting on false or fraudulent instructions transfer,
pay or deliver money or securities or other property. This exclusion applies
even if the named insured’s account is debited or deleted based on those
instructions.
The only exceptions are
described in Insuring Agreement A. 6.a.(2) and 6. b. These both describe very
specific fraudulent instruction situations that are covered.
Note: This exclusion appears
to be a way to clarify the exact circumstances when coverage is provided and
then to eliminate all others.
e. Inventory Shortages
There is no coverage when
the fact that a loss has occurred is based solely on an inventory shortage or a
profit and loss statement. The inventory and profit and loss can be used to
calculate or substantiate a loss but other evidence of the actual physical loss
must be provided.
