CO 1006, CO 1007 AND CO
1008–COMMERCIAL OUTPUT PROGRAM CRIME COVERAGE PARTS
(July 2025)
CO 1058–Crime Schedule Single Limit
CO 1057–Crime Schedule–Specific Limits
CO 1059–Crime Schedule – Covered Locations
CO 1054–Crime Schedule–Blanket Limits
CO 1055–Crime Schedule Scheduled Limits And Location
CO 1056–Crime Schedule – Covered Locations
CO 1007–Crime Coverage Part–Loss Sustained
CO 1006–Crime Coverage Part - Employee Fraud
And Dishonesty, Money And
Securities
Three Crime Coverage Parts are available
for use with the AAIS Commercial Output Program:
o
Employee
Fraud and Dishonesty
o
Money
and Securities
o
Inventory
Fees and Proof of Loss Expense
o
Loss
Sustained Prior to the Policy Period
o
Employee
Fraud and Dishonesty
o
Computer
and Telecommunications Fraud
o
Counterfeit
Money
o
Forged
Credit Card Written Instruments
o
Forged
Checks
o
Money
and Securities
This article starts
with an analysis of CO 1007. It then examines CO 1006 by comparing it to CO
1007. The final section compares CO 1007 with CO 1008 to highlight their
differences.
The CO 1050 and
1051–Schedules of Coverages used with the property coverage part do not contain
a crime section. Separate and specific Crime Schedules must be attached to
provide the coverage.
The Crime schedules to attach are based
on the coverage part being used and how limits and locations are to be
displayed.
|
Crime Coverage Form |
Available Crime
Schedules |
When to use |
|
CO 1006–Crime
Coverage Part Employee Fraud and Dishonesty Monday and Securities |
CO 1054–Crime
Schedule |
If coverage is
blanket over all locations. |
|
CO 1055–Crime
Schedule – Scheduled Limits and Locations |
If coverage limits
apply per location. |
|
|
CO 1056 –Crime
Schedule – Covered Locations |
If the blanket
coverage described on CO 1054 is to be limited to only scheduled locations. |
|
|
CO 1007-Crime Coverage Part – Loss Sustained |
CO 1057–Crime Schedule – Specific Limits |
If a different limit applies to each coverage being
provided. |
|
CO 1058–Crime Schedule – Single Limits |
If one single limit applies to all coverages being
provided. |
|
|
CO 1059–Crime Schedule – Covered Locations |
If the blanket coverage described on CO 1057 or CO
1058 is to be limited to only Scheduled locations. |
|
|
CO 1057–Crime
Schedule – Specific Limits |
If a different limit
applies to each coverage being provided. |
|
|
CO 1058–Crime
Schedule – Single Limits |
If one single limit
applies to all coverages being provided. |
|
|
CO 1059–Crime
Schedule – Covered Locations |
If the blanket
coverage described on CO 1057 or CO 1058 is to be limited to only Scheduled
locations. |
The following Crime Schedules are used with the CO 1007-Crime Coverage
Part – Loss Sustained or CO 1008-Crime Coverage Part – Discovery Basis. We
begin our analysis with CO 1058, as it is the broadest schedule available.
A limit and a
deductible must be entered. These apply separately to each of the coverages
listed and selected on the schedule.
The box next to one or
more of the listed coverages must be checked to indicate that the particular
coverage applies.
The coverage can be
issued without restrictions on locations, in which case the Blanket Location
Coverage box should be selected. If the coverage is limited to specific
locations, that box must be checked, and CO 1059–Crime Schedule–Covered
Locations must be attached.
NOTE: The default is for coverage to apply at
all covered locations. However, the addition of CO 1059 restricts coverage to
specific locations. There are no limits on the CO 1059, which means the single
limit continues to apply.
It's important to note, if no limit is indicated on the schedule, the default coverage is the full applicable coverage limit.
·
Outside the Coverage
Territory
(Employee Fraud and Dishonesty)
Coverage is extended to employees who are temporarily outside the
coverage territory. It provides
coverage up to the applicable coverage limit for up to 90 days, unless a
different limit and number of days are listed in the schedule. The schedule provides a space to enter
a limit and/or a number of days. The coverage part
makes no reference to the suggested number of additional days or the limit.
·
Conveyance by Armored Vehicle (Money and
Securities)
Coverage
is extended for money and securities in the care, custody, or control of an
armored vehicle company in which the insured has a contract and cannot collect.
Since this extension is not assigned a specific limit, it defaults to the
applicable coverage limit but can be amended by specifying a different limit on
the schedule. Nonetheless, the limit remains subject to the coverage limit and
is not in addition to it.
·
Personal Accounts Extension (Forged Credit Card
Written Instruments)
Coverage is extended for the personal accounts of
the named insured, its partners, officers, and LLC members. Since this
extension is not assigned a specific limit, it defaults to the applicable
coverage limit but can be amended by specifying a different limit on the
schedule. Nonetheless, the limit remains subject to the coverage limit and is
not in addition to it.
·
Personal Accounts Extension (Forged Checks)
Coverage is extended for the personal accounts of
the named insured, its partners, officers, and LLC members. Since this
extension is not assigned a specific limit, it defaults to the applicable
coverage limit but can be amended by specifying a different limit on the
schedule. Nonetheless, the limit remains subject to the coverage limit and is
not in addition to it.
The default for Other Covered Property is Replacement Cost.
If the Actual Cash Value option is selected, the valuation for Other Property
will be based on Actual Cash Value instead.
The name of any and all Employee Welfare or Pension Benefit
Plans to be covered by this coverage part must be listed in the space provided.
If they are not listed, they are not covered.
This section informs that any existing bond or crime
coverage is canceled on the same date the new crime coverage under this
coverage part is effective.
Optional or additional endorsements are listed in the
spaces provided by form number and title.
This schedule is nearly
identical to the CO 1058 – Crime Schedule Single Limit schedule, with one
exception. Instead of the limit and deductible applying to all covered
locations, each coverage extension applicable has its own limit and deductible.
only the single location listed on this schedule is covered. When Scheduled
Location Coverage is selected, a separate CO 1059 – Crime Schedule – Covered
Locations must be completed.
This schedule is a
supplemental declaration used with CO 1058–Crime Schedule Single Limit or CO
1057 – Crime Schedule – Specific Limits to restrict coverage to specified
locations. It is activated by an entry on the CO 1058 or CO 1057. This schedule
restricts the crime coverage to only the listed locations. No coverage exists
if a location is not listed. There are no separate limits, so all locations
listed are subject to the limits and coverages shown on the CO 1058 or CO 1057.
The following Crime
Schedules are used with the CO 1006 – Crime Coverage Part – Employee Fraud and
Dishonesty and Money and Securities.
This form is used with
the CO 1006 – Crime Coverage Part – Employee Fraud and Dishonesty and Money and
Securities. Highlights of this form are as follows:
Entries are available
for only Employee Fraud and Dishonesty and for Money and Securities, as these
are the only coverages available on the CO 1006 coverage form.
Blanket Location
Coverage or Scheduled Location Coverage must be selected. If coverage applies
only to scheduled locations, CO 1056 – Crime Schedule – Covered Locations must
also be completed and attached.
Employee Fraud and
Dishonesty – Outside the Coverage Territory and Conveyance by Armored Vehicle
(Money and Securities) are identical to CO 1058. However, extensions for
Forged Credit Card Written Instruments and Forged Checks Coverage to Personal Accounts
do not apply.
Inventory and Proof of
Loss Expense is the same as CO 1058. While the Loss
Sustained Prior to the Policy Period appears on the schedule as covered. Contact
your underwriter for further information, as we do not have any additional
information related to this field.
The following sections
are identical to the CO 1058:
·
Coverage
Options
·
Employee
Welfare or Pension Benefit Plan
·
Cancellation
of Prior Insurance
· Optional Endorsements
This schedule is
identical to the CO 1054 – Crime Schedule Blanket Limits schedule with one
exception. Instead of coverage applying to all covered locations, only the
single location listed on this schedule is covered. When multiple locations are
to be covered, a separate CO 1055 must be completed for each such location.
This schedule is used
when Schedule Location Coverage is selected on the CO 1054. All locations that
are to be covered must be listed.
This coverage part is
only complete when attached to CO 1000–Commercial Output Program–Property
Coverage Part, as the following sections are referenced in the Crime Coverages.
1. Computer Fraud
Computer fraud involves using hardware,
software, or other digital devices to illegally transfer, pay, or deliver
covered property to a location away from the designated covered area. This
activity can occur at a covered site, on the insured’s computer, or at a bank.
Ownership or control of the involved hardware, software, or devices is not
necessary for it to be considered computer fraud.
|
Example: The comptroller of Medical Technologies travels
with a company-issued laptop. When the computer is stolen, it is used to
access Medical Technologies’ files to order funds transferred to an offsite
bank location and account. Coverage applies. |
2. Employee
An employee is an
individual or natural person (as opposed to a corporation) who provides a
service to the named insured, is paid in the form of salary, wages, or
commissions, and is under the direction and control of the named insured while
performing these services. These individuals are considered employees while
actively employed and for up to 60 days after employment ends.
Employee also includes:
The following are not
employees:
Related Court Case: Trust
Administrators Were Independent Contractors, Not Employees or Officers
3. Forgery
There are three
components to forgery.
All three components
must be present to constitute forgery.
NOTE: Mechanical signatures
are treated the same as handwritten signatures.
4. Manager
A manager is an
individual in a limited liability company responsible for guiding the company's
direction.
5. Other covered property
This is tangible property owned by the named
insured or by others not excluded elsewhere in the coverage part.
6. Telecommunications Fraud
The term refers to
fraudulent transfer, payment, or delivery of covered property from inside a
covered location, financial institution, or the named insured’s computer to a
location or individual outside the covered location. The method used to
perpetrate this fraud must be one of the following:
Property referenced in
the following coverages is covered unless it is excluded. A covered item may be
subject to a limitation. To be covered, a loss must occur during the policy
period on the declarations.
Losses covered are
those caused by a peril described in one of the selected coverages.
Coverage applies as
follows:
·
When
CO 1058–Crime Schedule Single Limit is used, all coverages selected are
covered.
·
When
CO 1057–Crime Schedule Specific Limits is used, all coverages that are selected
and for which a limit and deductible are entered are covered.
·
When
a coverage is not selected and the words “Not Covered” are indicated beside a coverage
on the CO 1057, that coverage does not apply, and all references to that
coverage are considered to have been deleted from the policy.
·
Similarly,
if a coverage is not selected on the CO 1058, that coverage does not apply, and
all references to that coverage are considered to have been deleted from the
policy.
1. Employee Fraud and Dishonesty
The
coverage applies to money, securities, and other property. The named insured
must either own the item or hold it on behalf of someone else. It can also
include property for which the named insured is legally liable. This property
is covered even when it is located on the premises of a customer of the named
insured. Coverage is limited to direct physical damage or direct loss caused by
damage to the property.
To
qualify for coverage, the loss or damage must result from a dishonest or
fraudulent act committed by an employee of the named insured. This employee may
act independently or in collusion with others. The specific identity of the
employee does not need to be known for coverage to apply. The types of
dishonest or fraudulent acts covered include theft, computer fraud, forgery,
and alterations, but the coverage is not limited to just these examples.
The most paid for a single occurrence is
determined by the coverage limit listed in the Crime Schedule for Employee
Fraud and Dishonesty or the single limit shown on the Crime Schedule. An
occurrence is defined as the total loss resulting from one or a series of fraudulent
or dishonest acts, which can be committed by one or multiple employees and
still be considered a single incident.
|
Example: Mary and Bill conspired to remove
merchandise from their employer’s warehouse. Because she is in bookkeeping
and he is in warehousing, the plan works until a surprise audit catches them.
Mary and Bill committed twelve separate thefts, but because each was part of
a series of acts, coverage for the sum of all twelve acts was limited to the
single occurrence limit on the crime schedule. |
Related Court Case: Collusion
Limited Fidelity Insurer's Settlement Obligation for Separate Acts of Employees
2. Computer and Telecommunications Fraud
Loss of or direct loss
from damage to money, securities or other property is covered if caused by
computer or telecommunication fraud. The coverage territory is worldwide and
applies to both computer and telecommunication fraud. The most paid in a single
occurrence is the coverage part single limit or the limit for Computer and
Telecommunications Fraud on the Crime Schedule. An occurrence encompasses both
single acts or a series of related acts committed by one or more persons.
Coverage applies even if the individual responsible for the crime is not
identified.
Related Court Case: Wire Transfer Qualifies As
Computer Fraud
3. Counterfeit Money
A loss that occurs
because the named insured accepts any of the following is covered, provided the
items were accepted in good faith during a normal business exchange of goods, money,
or services:
The limit is the amount
specified on the Crime Schedule or the single limit listed on the Crime
Schedule. It applies per occurrence, where an occurrence is defined as a single
act or event, or a series of related acts by one or more individuals, whether known
or unknown.
4. Forged Credit Card Written Instruments
If a credit card, debit
card or charge card that is issued to the named insured, partners, members,
officers, employees, or managers is used and the written documentation needed
to complete the transaction is forged or altered, there is coverage up to the
limit on the Crime Schedule subject to the following:
The insurance company
will cover all defense costs related to the denial of payment to the card
issuer. However, before the named insured begins to incur any defense costs,
they must obtain written permission from the insurance company. These defense
costs will be paid in addition to the limit of insurance.
The limit applies per occurrence, which
is defined as any forgery or alteration committed by a specific individual,
regardless of the number of acts or written transactions involved.
|
Example: George's wallet was stolen while he was
traveling. Because his wife was traveling with him, they used her cash and
credit cards and waited until returning home to notify the credit card
company and the insurance company of the theft. The credit cards included a
requirement that the card issuer be notified promptly of the loss of a card
after it is lost. Because George did not do so, he did not comply with his
credit card agreements, and therefore this coverage did not apply to the
losses on the credit cards. |
5. Forged Checks
If a check, draft,
promissory note or similar written promise document or order from or alleged to
be from the named insured or its agent is forged or altered, there is coverage
up to the limit on the Crime Schedule or single limit shown on the Crime
Schedule and subject to the following:
6. Money and Securities
Money, securities,
bullion, and lottery tickets owned by the named insured or for which it is
legally liable are covered against loss from theft, disappearance, or
destruction. The covered property must be located at a covered location or at a
bank or other savings institution.
Coverage extends outside the covered
location but only when the items are in the care, custody, or control of the
named insured, its partners, officers, managers, employees, LLC members, or
when they are within the residence of any of these individuals. The residence
must be considered temporary, but there is no requirement that someone must be
present at the time of loss.
|
Example: Jerry was responsible for taking the
deposit to the bank after closing the restaurant on Saturday night. He
decided to visit a few bars on the way home. Once home, he put the deposit
bag in the freezer and had a good night’s sleep. He attended a breakfast the
next morning before golfing in the afternoon. On Monday morning, he retrieved the
deposit bag from the freezer and headed to the bank. When he opened the bag,
it was empty. The loss is covered because either the money was with Jerry or
in his residence the entire time it was away from the premises. |
The most paid in a
single occurrence is the limit on the Crime Schedule or the single limit on the
Crime Schedule. In this coverage, occurrence refers to an act, an event, or even
a series of related acts or events. The number of persons involved in the act
or event is not taken into consideration when determining an occurrence.
The limits that apply
to the Coverage Extensions are listed on the Crime Schedule. However, if a
limit is not shown, the full limit for the coverage being extended applies. All
coverages are subject to the deductible shown, and coverage limits are part of,
not in addition to, the policy limits.
1. Outside Coverage Territory (Employee Fraud and Dishonesty)
This is a temporary territorial
extension only and does not add or increase coverage limits. Coverage applies
to direct physical loss of, or direct loss to, money, securities, and other
covered property caused by fraudulent or dishonest acts committed by any
employee while that employee is temporarily outside the policy's territorial
limits for 90 days or less. Coverage includes loss or damage resulting from
theft, computer fraud, forgery, or alteration, but is not limited to these
specific causes. Payment of loss is subject to the Employee Fraud and
Dishonesty deductible, if applicable.
|
Example: Justin is in Mexico on company
business. His employer does not know that Justin is also a drug dealer. When
a connection he makes on his business trip gives him a chance to purchase
high quality cocaine to sell in the United States, Justin uses his company
expense checks to buy the drugs. Justin figures he will repay the company
from the money he makes when he sells the drugs. As soon as he returns, his
luggage is searched, the drugs are confiscated, and he is arrested. Justin's
company has coverage up to the limit of the Employee Fraud and Dishonesty
limit because of this Coverage Extension. |
NOTE: The Crime Schedule allows for the entry of a limit and a number of days,
but this coverage does not specifically specify either. If a limit is entered,
according to the opening paragraph of Coverage Extensions, the coverage would
be limited to the amount of that limit instead of the full policy limits.
However, if a higher limit than the policy limits is entered, it would not be
recognized because the paid limit is part of, not in addition to, the policy
limits.
2. Personal Accounts Extension (Forged Credit Card Written Instruments)
The named insured, its partners, officers,
and members with an ownership interest in a limited liability company (named as
an insured) are additional insureds under the Forged Credit Card Written
Instruments Coverage for their personal accounts.
|
Example: Frances is a partner with Craig and James. Her
wallet is stolen, and the credit cards are used. She reports the theft accurately
and in a timely manner. However, the company that issued the card in her name
demands payment and threatens to sue her. When she contacts the insurance
company, she is informed that she is an additional insured and is covered. |
3. Personal Accounts Extension (Forged Checks)
The named insured,
partners, officers, and members with an ownership interest in a limited
liability company (named as an insured) are additional insureds under the
Forged Check Coverage for forged or altered checks, drafts, or promissory notes
for their personal accounts.
4. Conveyance by Armored Vehicle (Money and Securities)
Coverage applies for loss
caused by theft, disappearance, or destruction of money, securities, bullion
and lottery tickets owned by the named insured, or for which it is legally
liable, when in the care, custody, or control of an armored vehicle company.
Coverage only applies to the amount that cannot be recovered from the armored
vehicle company and its insurance carrier.
The most paid in a
single occurrence is the Money and Securities Conveyance by Armored Vehicle
limit, as specified in the schedule of coverages. This is not an additional
limit of insurance. If no limit is entered, the entire limit of the crime
schedule is available.
Supplemental coverage
limits are distinct from and not included in the coverage limits outlined in
the Crime Coverage Part. If no limit is specified in the Crime Schedule,
coverage will apply according to the terms of the provision. The limit for any
described Supplemental Coverage will be either the limit stated in the Crime
Schedule or the limit stated in the provision, but these limits cannot be
combined. There are no additional limits available for this coverage, as it is
considered supplemental.
1. Inventory Fees and Proof of Loss Expenses
The reasonable expenses
incurred by the named insured in response to the insurance company's request to
prove that a loss occurred and to determine its value are covered. There is no
coverage for expenses incurred by a public adjustor or those related to the Appraisal
Provision. The limit of insurance is $5,000 unless a different limit is on the
Crime Schedule, but these limits cannot be combined. No deductible applies.
2. Loss Sustained Prior to the Policy Period of this Insurance
If a loss occurs during
a prior policy period, and the discovery period for that prior policy has
expired, and the insured cannot recover under that policy, this Supplemental
Coverage pays for the loss. This coverage is subject to the termination date of
the prior policy matching the start date of this policy, and the loss being
covered by this policy if it had been in force at the time of the loss.
The amount paid is limited to the lesser of the limit of coverage under
the current policy and the prior policy. The deductible that applies to the
loss is the lesser of the deductibles in the two policies.
|
Example: Thyme and
Rhyme Shop has crime coverage in its COP policy that runs from January 1,
2025, to January 1, 2026, and provides Employee Dishonesty coverage with a
$100,000 limit and a $2,500 deductible. The prior policy period had an Employee
Dishonesty limit of $25,000 with a $1,000 deductible. Thyme’s owner
discovers that a former clerk had a shipment of products routed to her home
instead of to the proper destination. The order was placed on February 1,
2024, and the prior policy denied coverage because the discovery period had expired.
The current policy covers the loss for up to the previous policy limit of
$25,000, subject to a $1,000 deductible. |
NOTE: Once a gap in coverage
occurs, this supplemental coverage will cease to exist. However, if there are
multiple policy years without gaps, this coverage applies back to the earliest
policy on which this coverage was provided.
|
Example: Lionel has the following coverages:
On January 15, 2025, an ex-employee confessed to
stealing $10,000 from Lionel during the policy term from January 1, 2023, to January
1, 2024. Coverage is provided under the current policy for the $10,000. This
action causes Lionel to hire an outside firm to investigate potential lapses
in its internal controls. The firm discovers that a former bookkeeper had
stolen $100,000 in small increments starting in the January 1, 2020, to
January 1, 2021, policy period and continuing through January 1, 2022. Although
$100,000 is available for the current policy period, recovery is limited to
the $25,000 limit from the prior policy. |
1. Broad Exclusions
The doctrine of
concurrent causation holds that coverage applies to a property loss that can be
attributed to two causes, one excluded and one covered. As a result, coverage
has been found for earth movement, flood, and other specifically excluded
events. This set of exclusions, often referred to as anti-concurrent causation
exclusions, aims to avoid concurrent causation by stating that the event is
excluded, regardless of any other causes that contribute to or exacerbate the
loss. With this approach, there is no coverage, even if the contributing cause
of loss is normally covered.
a. Civil Authority
Loss or damage caused
by the order of any civil authority is excluded. Seizure, confiscation, destruction,
or quarantine of any property are examples of excluded civil authority actions.
b. Nuclear Hazard
Loss caused by nuclear
reaction, nuclear radiation, or radioactive contamination is not covered. Any
loss that is caused by the nuclear hazard is not considered a loss caused by
fire, explosion, or smoke. Coverage for nuclear risk is available only through
nuclear coverage associations.
c. War and Military Action
There is no coverage
for loss or damage caused by any of the following:
·
War,
undeclared war and civil war
·
Warlike
action by a military force. Actions taken by the government to prevent or
defend against an expected or actual attack by any government or other
authority using military personnel or agents are excluded.
·
Rebellion,
revolution, insurrection, or unlawful seizure of power. Actions taken by the
government to prevent or defend against any of these are excluded.
If any action involves
nuclear reaction, nuclear radiation, or radioactive contamination, this
exclusion applies in place of the Nuclear Hazard exclusion.
2. Limited Exclusions
The second group of
exclusions applies to loss or damage caused by or resulting from any of the
following loss events. Some of these exclusions have exceptions, conditions, or
limitations that should be carefully noted and reviewed.
a. Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by
criminal, fraudulent, or dishonest acts is not covered if the act(s) is
committed alone or in collusion by any of the following:
·
The
named insured
·
Partners
·
Limited
liability company members with ownership rights and shown as a named insured.
·
Officers
who have more than 25% ownership rights in a named insured entity.
b. Discovery After the Policy Period
If a loss is discovered more than one
year after the policy period ends or the date of cancellation, there is no
coverage. If coverage is terminated for a particular employee, there is no
coverage if a loss caused by that employee is discovered more than one year
after that employee was removed from coverage under this policy.
|
Example: Leslie Products had crime coverage on
its COP during the period from February 1, 2023, to February 1, 2024. One of
the employees, Kelsey, was caught in a dishonest act on June 20, 2023. She
was terminated from coverage under the policy and fired on that day. On February 20, 2025, Leslie discovers that
Kelsey had committed another and separate dishonest act on March 3, 2023.
Coverage does not apply to this loss because it was discovered more than 12
months after Kelsey’s coverage termination date. Leslie might have coverage under the
supplemental coverage of her current policy’s “Loss Sustained Prior to the
Policy Period of this Insurance.” |
c. Indirect Loss
An indirect loss
results from a direct damage loss. Common examples of indirect losses include
loss of income, costs incurred to prove or determine a loss, and legal
liabilities. All these examples, along with other indirect losses, are
typically excluded from this coverage. However, there may be exceptions if the
coverage is specifically described in the coverage part.
d. Intangible Property or Trade Secrets
There is no coverage
for the loss of confidential information, processing methods, trade secrets, or
any other type of intangible property.
e. Inventory Shortage or Profit/Loss Computation
If the only evidence of
a loss is based on inventory counts or an accounting calculation, there is no
coverage. This information will be necessary to support an Employee Fraud and
Dishonesty or Computer and Telecommunications Fraud loss, but it cannot serve
as the sole proof of a loss.
f. Legal Expenses
All legal expenses for
defending or prosecuting a legal proceeding or claim are excluded. The only
exceptions are those specified in the Forged Credit Card Written Instruments or
Forged Checks coverage.
g. Trading
Losses from trading
stocks, commodities, bonds, futures, or other financial instruments, whether
incurred in the name of the named insured or through a legitimate or fictitious
account, are not covered.
3. Employee Fraud and Dishonesty Exclusions
The following
exclusions apply specifically to Employee Fraud and Dishonesty coverage, unless
stated otherwise. Coverage does not include loss or damage caused by or
resulting from any of the events listed below.
a. Discovery of Dishonest Acts
Fraudulent or dishonest acts committed
by an employee are not covered if the named insured, its partners, officers,
directors, managers, or LLC members (named as an insured) with ownership rights
knew that the employee had committed a fraudulent or dishonest act before or
after being hired. When the person with the knowledge was colluding with the
employee(s), this exclusion does not apply, and coverage remains in place.
|
Example: Philip is the son of one of the company's owners.
Despite having a rough start in life and spending some time in prison, his
mother decides to give him one more chance by offering him a job in the
warehouse. Despite Philip learning many lessons during his time in prison,
one day after work, he leaves with $50,000 worth of goods. Coverage does not
apply to this loss. |
b. Employee Cancelled Under Prior Insurance
If an employee of the
named insured or a firm acquired by the named insured was previously excluded
from a prior employee dishonesty coverage part and was never reinstated, that
employee remains excluded under this coverage.
c. Vandalism
Loss or damage caused
by any form of vandalism is not covered. Damage caused by a computer virus or from
hacking into the insured's computers, networks or websites are examples of vandalism
not covered.
4. Computer or Telecommunications Fraud
The following
exclusions apply specifically to Computer or Telecommunications Fraud coverage,
unless stated otherwise. Coverage does not include loss or damage caused by or
resulting from any of the events listed below.
a. Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by
criminal, fraudulent, or dishonest acts is not covered if the act(s) is
committed alone or in collusion by any of the following:
·
Employees
of the named insured
·
Officers,
directors, trustees, or managers of the named insured
·
Authorized
representatives of the named insured
b. Client Access
If electronic data
entered into the named insured’s client-controlled computer results in a loss,
coverage does not apply when the data was input by someone with authorized
access to the client's authentication code or device.
Related Court Case: Bond’s Exclusion Provision Was
Conspicuous, Plain, And Clear
5. Counterfeit Money
The following exclusion
applies specifically to Counterfeit Money coverage, unless stated otherwise.
Coverage does not include loss or damage caused by or resulting from the event
listed below.
Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by
criminal, fraudulent, or dishonest acts is not covered if the act(s) is
committed alone or in collusion by any of the following:
·
Employees
of the named insured
·
Officers,
directors, trustees, or managers of the named insured
·
Authorized
representatives of the named insured
6. Forged Credit Card Written Instruments and Forged Checks
The following exclusion
applies specifically to Forged Credit Card Written Instruments and Forged
Checks coverage, unless stated otherwise. Coverage does not include loss or
damage caused by or resulting from the events listed below.
Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by
criminal, fraudulent, or dishonest acts is not covered if the act(s) is
committed alone or in collusion by any of the following:
·
Employees
of the named insured
·
Officers,
directors, trustees, or managers of the named insured
7. Money and Securities
The following exclusion
applies specifically to Money and Securities coverage, unless stated otherwise.
Coverage does not include loss or damage caused by or resulting from any of the
events listed below.
a. Criminal, Fraudulent, Dishonest or Illegal Acts
Loss caused by
criminal, fraudulent, or dishonest acts is not covered if the act(s) is
committed alone or in collusion by any of the following:
·
Employees
of the named insured
·
Officers,
directors, trustees, or managers of the named insured
·
Authorized
representatives of the named insured
b. Errors or Omissions
Losses due to errors or
omissions in mathematical calculations or accounting entries are not covered.
c. Exchanges or Purchases
Coverage does not apply when the loss is
due to property being given away or surrendered in a purchase or exchange
transaction.
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Example: Perry buys office equipment advertised
on eBay. He sends in his money, expecting to receive a full-sized desk and
bookshelves. He receives a dollhouse-sized desk and bookshelf instead. Perry
tries to locate the seller but discovers he has vanished. There is no recovery
available from Perry's Money and Securities coverage. |
d. Money Operated Devices
Loss of covered
property inside a machine or device operated by deposited money is not covered
unless the device is specifically designed to continuously monitor and record
the deposited funds.
e. Property Surrender or Transfer
There is no coverage when a loss occurs
because property is given or transferred away from a covered location or
banking premises based on unauthorized instructions. There is also no coverage
when property is given or transferred away from a covered location or banking
premises because of a threat of bodily harm or property damage.
However, if a covered person is away
from the covered premises or a banking institution, they are provided coverage
if they are unaware of any threat of bodily harm or damage to the covered
property. This also applies if the loss is not related to a specific threat of
bodily harm or damage to covered property, and the threat to the covered person
or property differs from the specific threat they were aware of while away from
the covered premises or a banking institution.
|
Examples: Scenario 1: Katie receives a phone call instructing her to
take the day’s receipts and place them in a bag outside the building;
otherwise, the building will be detonated. She follows the instructions.
Coverage does not apply in this case. Scenario 2: Katie takes the day’s receipts to the bank. While
she is gone, a threat is phoned into her company. A man approaches her and
threatens to harm her with a knife if she does not surrender the money. She
complies with the demand. This loss is covered because it was off premises,
and the person with the property was not aware of the threat. |
f. Vandalism or Malicious Mischief
Loss or damage to a covered location,
cash box, cash drawer, safe, vault or similar receptacles caused by or
resulting from vandalism or malicious mischief is not covered.
|
Example: Thieves enter Marco’s office after it
closes on Friday evening and spend hours ransacking it. Coverage applies to
the money and securities taken, but there is no coverage for the spray
painting and general damage to the office and equipment. |
NOTE: Vandalism and malicious mischief should
be covered under the property coverage part.
g. Voluntary Parting
When the named insured
or any party acting on behalf of the named insured voluntarily gives up or
hands over covered property in a fraudulent scheme or trick or under false
pretenses, there is no coverage.
The following
provisions replace the Notice and Proof of Loss Conditions in the What Must Be
Done In Case of Loss Section in the Commercial Output Program–Property Coverage
Part, but only as they relate to this Coverage part. All other conditions of
the COP Property Coverage Part apply without change.
1. Notice for Crime Coverage
If a loss occurs, the
named insured must provide the insurance company or agent with prompt notice
and include a detailed description of the property. In addition, the following
circumstances require additional notification measures:
2. Proof of Loss For Crime Coverage
The named insured must submit
a signed and sworn proof of loss to the insurance company within 120 days after
the company requests it. The proof of loss must include the following:
These conditions are in
addition to CL 0100– Common Policy Conditions and CO 1000–Commercial Output
Program–Property Coverage Part Conditions.
Related Articles:
CL 0100–AAIS Commercial Lines
Common Policy Conditions
CO 1000–Commercial Output
Program Property Coverage Part Analysis
1. Acquisition of Employees or Additional Locations
Employees and locations
acquired by the named insured through consolidation, merger, or purchase are
automatically covered. This protection lasts up to 90 days from the date of the
acquisition. The insurance company must be notified of the event within this
90-day period. Premium payments for the additional employees and locations are
required and will be prorated from the date of the acquisition until the end of
the policy period.
If an Employee Welfare or Pension Benefit
Plan is acquired as a result of a consolidation, merger or purchase and is
sponsored by the named insured, it is included as an insured under Employee
Fraud and Dishonesty Coverage without any notification requirement.
|
Example: Iona owns a bookstore and purchases
the stationery store next door. Sara is a clerk at the stationery store and
is upset because she knows she will lose her job as a result of the purchase.
She removes stock valued at $50,000 from the store and leaves town. The loss
occurs 45 days after the purchase is finalized. Even though Iona had not yet
reported the purchase to the insurance company, coverage applies because the
purchase was within the 90-day automatic coverage period. |
2. Discovery Period Extension
While coverage ends when the policy
period ends, or the policy is cancelled or terminated, the named insured has
one year in which to discover and report a loss that occurred prior to the termination
date.
|
Example: Grace’s
COP policy runs from December 1, 2024, to December 1, 2025. On January 1, 2025,
Grace requests that the crime coverage be removed from the policy. Grace’s discovery
period changes from 12/1/2024 - 12/1/2025 to 1/1/2025 - 1/1/2026. |
3. Multiple Named Insureds
If more than one
insured is named on the policy, the following applies:
The first named insured
acts on behalf of all other insureds with respect to insurance issues under
this policy. If the first named insured is removed from the coverage part, the
next insured named becomes the first named insured.
An employee of any
named insured is considered an employee of all named insureds.
Knowledge by any
insured, or a partner or officer of that insured, is considered knowledge on
the part of each insured.
NOTE: The term insured is used here, not
named insured.
When payment is made to
the first named insured or any other named insured for a loss, the insurance
company no longer has any liability for that loss to any other named insured.
4. Employee Welfare or Pension Benefit Plans
These conditions are
required to comply with the Employee Retirement Income Security Act of 1974
(ERISA).
Related Court Case: State Law Voided Policy’s Statute Of
Limitations
5. Records Pertaining to Money and Securities
The named insured has a
responsibility to maintain its records in a manner that allows the insurance
company to use them to verify the amount of any reported loss.
The valuation
provisions in this section are in addition to the valuation provisions in CO
1000–Commercial Output Program–Property Coverage Part.
1. Bullion
Bullion is valued based
on the actual cost to replace it or the average replacement cost as published
by the London Metals Market for the 14 days preceding the date on which the
loss was discovered. Because bullion is a tradable commodity, a time period for
valuation must be established. The smaller of the two valuation methods is
used.
2. Money
Money losses are
adjusted according to face value and are paid in United States currency.
However, losses involving foreign currency can be paid in the currency of that
country or in its U.S. equivalent, based on the rate of exchange published by
The Wall Street Journal in New York on the day the loss was discovered. The
insurance company has the sole discretion to decide how to adjust foreign
currency losses.
3. Other Covered Property
Other covered property
is valued based on replacement cost unless actual cash value is selected on the
Crime Schedule. Replacement cost and actual cash value are defined and
explained in the Valuation Section of CO 1000–Commercial Output
Program–Property Coverage Part.
4. Securities
The value of securities is determined by
their value at the close of business on the day the loss is discovered. The
insurance company has the option to pay the value of the securities or to
replace them.
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Example: Thieves steal Paul’s stock securities and other
items kept in his office safe. He had 100 shares of Flatearth stock. The
value of each share was $50 on the date of loss, but it dropped to 10 cents
the very next day (the date of loss discovery) when Flatearth petitioned for
bankruptcy protection. The insurance company can pay Paul $5,000 or purchase
100 shares of the stock for 10 cents per share and give those shares to Paul.
|
These provisions apply
in addition to the How Much We Pay provisions in CO 1000–Commercial Output
Program–Property Coverage Part.
1. Limit of Insurance
Any loss payment made
under this coverage part does not reduce the limit of insurance available to
pay other losses. However, the payment cannot exceed the limit of insurance shown
on the Crime Schedule that is available for the particular coverage.
2. Deductible
The insurance company
pays only after the loss exceeds the deductible amount for the coverage
involved. If two or more deductibles could apply to the same loss, only the
highest is applied.
3. Prior Insurance That We Issued or Any Affiliate Issued
This provision addresses how a loss is
handled when covered in part by this coverage part and in part by prior
insurance issued by the same company or an affiliate. In these cases, the most
paid for a covered loss is the largest amount available under this Crime
Coverage Part or any previous coverage issued by the company or its affiliates
that was cancelled or terminated. The insured cannot collect more than the
amount of the loss, regardless of the number of coverages that apply to it.
|
Example: Pat worked in Family Motors’ parts warehouse for
ten years. A new accounting manager noticed discrepancies. Careful research
implicated Pat in theft of parts. When she was confronted with the evidence,
she confessed to thefts throughout the length of her employment. The total
amount of the loss was $125,000. The current policy limits were $150,000, but
prior time period limits were as low as $25,000. Because
Family Motors had the same carrier throughout the time the thefts were
committed, the $150,000 limit applies, and the entire loss can be paid. |
NOTE: Compare this to the Supplemental Coverage – Loss Sustained Prior to the
Policy Period of This Insurance.
4. Insurance Under More Than One Policy
When another policy or
policies cover the same loss, the insurance company pays only the amount of the
loss that exceeds the limit due from the other coverage, regardless of whether
it can be collected or not, subject to the limit of insurance of this coverage
part.
5. Limits and Multiple Years of Coverage
The limits of insurance
under the Crime Coverage Part do not accumulate from year to year, regardless
of the duration of time coverage has been in force. The limits for each year are
independent and do not accumulate with limits from any other year.
6. Payment of Loss Sustained By More Than One Named Insured
The insurance company
will not pay more for a loss involving two or more named insureds than it would
for a loss by a single insured for the entire loss.
This form offers only
two coverages. The following summarizes the form differences between the CO
1006 and CO 1007.
The definition for Telecommunications Fraud is not included because this coverage is
not part of this coverage form.
Four optional coverages
are not part of this coverage form:
Two Coverage Extensions
do not apply because the coverages are not part of the CO 1006:
·
Personal
Accounts Extension (Forged Credit Card Written Instruments)
·
Personal
Accounts Extension (Forged Checks)
There are no differences between the CO 1006
and CO 1007.
The exclusions that are
specific to the following coverages do not apply because the coverages are not
part of the CO 1006:
·
Computer and Telecommunications Fraud
·
Counterfeit Money
·
Forged Credit Card Written Instruments and Forged
Checks
This Coverage Part is
identical to CO 1007–Crime Coverage Part Loss Sustained, with one exception,
and that is in the first paragraph of the Coverage section.
·
CO
1007–Crime Coverage Part Loss Sustained covers losses that occur during the policy period.
·
CO
1008–Crime Coverage Part Discovery Basis covers losses discovered during the policy period.
This is a simple but
significant difference that could catch the named insured off guard with
coverage denials. When switching coverage from one basis to another, it is
important for the insured to understand the difference, or they may face
unexpected denials.
2. Loss Sustained Prior to the Policy Period of this Insurance
This coverage does not
apply to CO 1008 because it is irrelevant when coverage is on a discovery
basis.
2b. Discovery after the Policy Period
Under CO 1007, the
insured has 12 months after the policy expiration, termination or cancellation
date to discover losses covered by the policy. Under CO 1008, this period is
reduced to 90 days.
The wording of one
condition is revised and another condition is added.
2. Discovery Period Extension
This condition matches the Discovery after
the Policy Period exclusion outlined above. CO 1008 states that the loss must
be sustained prior to the end of the policy in order for the 90 days extension
to apply, but if other coverage takes effect at any time during those 90 days,
the discovery period extension automatically ends.
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Example: The Crime Coverage Part runs from January
1, 2024, to January 1, 2025. Nancy has been dipping into the payroll twice a
month for the past five years. Nancy becomes ill and is unable to work during
the week of February 15, 2025. It is at that time that all of her illegal
activities are revealed. The Crime Coverage Part for the January
1, 2024, to January 1, 2025, period pays the losses that occurred during the
previous five years but will not respond to any transactions that occur after
March 2, 2025. Additionally, it is important to note
that if another coverage part took effect on January 1, 2025, the coverage
part in effect from January 1, 2024, to January 1, 2025, would not respond to
the loss at all. |
If insurance applies to
an Employee Welfare or Pension Benefit Plan, the discovery period extension is
one year after the policy expiration, cancellation or termination date, as long
as the loss occurred before that date. However, if other coverage takes effect
at any time during the one-year period, the discovery period extension
automatically ends on the date that coverage takes effect.
3. Loss Discovery
This condition applies only
to the CO 1008. It explains that discovery occurs as soon as the named insured
is aware of information from which a reasonable person could deduce a loss has
either occurred or is about to occur. This information does not require
specific details about the loss.
NOTE: The named insured is
not required to have superhuman powers of deduction. However, the named insured
can be expected to draw reasonable conclusions.
|
Example: Jane receives emails from two
different customers who complain that they have been checking their invoices
and noticed a pattern of overbilling. Jane decides they are complainers and
does not investigate. When Jane’s bookkeeper is later discovered to have skimmed
money through a combination of techniques, including overbilling, the
insurance company sets the date of discovery as the date that Jane received
her customers’ overbilling complaints. |
One provision is deleted,
and another is changed significantly in the CO 1008.
3. Prior Insurance That We Issued or Any Affiliate Issued
This does not appear in
CO 1008 because coverage is written on a discovery basis.
4. Insurance Under More Than One Policy
This is broadened by
the addition of the following new section.
This provision responds
to situations where the previous coverage was written on a loss sustained (occurrence)
basis and is now written on a discovery basis. If a loss occurs during the loss
sustained policy period and is discovered during the extended discovery period
of the loss sustained form, the coverage available on the discovery basis is
excess over the coverage provided by the loss sustained form.
It is important to note that the excess
amount is the difference between the coverage amount on the prior policy and
the coverage amount on the current policy. This means that if the loss
sustained policy had a $100,000 blanket limit and the discovery policy also had
a $100,000 blanket limit, no excess coverage would be available.
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Example: Gerry’s crime coverage was first
written on January 1, 2019, and it was issued on loss sustained basis. There
is a one-year discovery period after the policy expiration date. Gerry’s coverage
is changed to a discovery basis form for the period of January 1, 2024 -
January 1, 2025. A loss that actually occurred on June
1, 2023, was discovered on March 1, 2024. In this case, the loss sustained
coverage for the January 1, 2023 - January 1, 2024, period responds and the
discovery coverage form for the January 1, 2024 - January 1, 2025, period is
excess. Gerry’s coverage limits were the same for both terms, so the
discovery policy will not respond at all. |