Buy Commercial Crime Insurance

Commercial crime insurance is a type of insurance coverage that is specifically designed to protect businesses from the financial losses that are associated with burglary, theft, fraud, and even forgery.

While the majority of carriers that offer commercial property insurance will cover the losses that occur when a third-party steals from your business, often, that coverage is limited.

Additionally, this type of policy does not provide coverage for crimes that are committed by employees. In order to ensure that you are protected from these types of incidents, you would need commercial crime insurance.

For example, if you own a clothing store and an associate steals $10,000 in merchandise from you, your commercial property insurance policy may not cover the losses, but a commercial crime insurance policy would. This type of policy covers your commercial property and merchandise, as well as cash and securities from losses that are associated with employee-related theft, forgery, or embezzlement. Additionally, it can protect you from third parties who are not employees and steal from your company.

Commercial crime insurance can be purchased as a stand-alone policy, or it can be added to a commercial package policy.

Commercial crime insurance costs vary widely and range from under $47 into the thousands per month - based on the type of business, location, industry, size, company financials and more.

Though you have made every effort to protect your business from theft, robbery, fraud, and forgery - you've done extensive background checks on all of your employees, have a state-of-the-art security system installed, and follow stringent protocol - there is no way to completely eliminate the risk of crime.

For example, a trusted employee who has fallen on hard times may decide to steal from you out of desperation, or a third-party could possibly break into your facility and steal your merchandise. If you are the victim of these types of scenarios, you could be looking at serious losses. Since a standard commercial property insurance policy will not cover the losses that are associated with employee-related theft and only provide minimal coverage for third-party robberies, investing in a commercial crime policy is a sound investment.

By having this kind of commercial crime coverage in place, you'll have peace of mind knowing that if you do become the victim of fraud, forgery, theft, or robbery, you will have a way to recoup the money that was stolen from you.

If the coverage is written stand-alone, there is only one declarations page plus the policy form. If the commercial crime insurance coverage is written as part of a package policy, the declarations page and coverage form must be completed with the package declarations page and the common policy conditions.

The commercial crime insurance forms are composed of eight separate insuring agreements. Coverage for a particular insuring agreement is provided when a limit is shown beside the insuring agreement on the declarations page.

A limit or the words "Not Covered" should be shown beside each insuring agreement to prevent confusion. Later in this topic, each of the insuring agreements will be discussed, but first the items that are common to all insuring agreements will be reviewed.

Commercial Crime Insurance Policy Conditions

The following conditions apply to all insuring agreements. Under the discussion of each insuring agreement, additional conditions specific to that particular commercial crime insurance insuring agreement are addressed:

Additional Premises or Employees

If the named insured acquires new premises or hires additional employees they are automatically covered under the crime coverages without additional premium charge. There is no requirement that the insurance company receive notice.

Concealment, Misrepresentation or Fraud

When fraud is perpetrated by the insured, coverage is void. Intentional concealing or misrepresenting of material facts about property covered, concerning interest in the covered property or in any claim also voids coverage. When coverage is voided, all existing and future claims are excluded.

Consolidation or Merger

The insured is given 90-days' coverage for newly acquired entities, premises, assets or liabilities of another business, including its employees. The insured must notify the insurer - in writing - of the addition. The insurer can grant or deny coverage after the 90 days.

Cooperation

The insured is required to work with the insurance company in satisfying the terms and conditions of the policy.

Duties in the Event of Loss

The police must be notified of any loss unless the loss is caused by employee theft. The insured must agree to be examined under oath, be willing to sign any statement made, and provide records that the insurance company can copy. Within 120 days of the loss, the insured must provide a sworn statement of loss that includes all details of the loss.

Employee Benefit Plans

When an employee benefit plan is a named insured on a policy, the only insuring agreement that applies to that plan is the employee dishonesty insuring agreement. The coverage applies only to the funds and property of the plan, not the property used to administer the funds. If the employee benefit plan is not the first named insured, any payment made to the first named insured for the fund cannot be commingled with other funds.

If there are two or more employee benefit plans listed and both suffer losses, payment is shared based on the total amount of funds in each plan. If there is a deductible on the declarations, it does not apply to any loss to the employee benefit plan.

Extended Period to Discover Loss

The insured has one year after the expiration date of the policy to discover a loss that occurred prior to the expiration date of the policy. This period ends immediately when another crime policy is purchased at the same time the first policy terminates.

Joint Insureds

When there are multiple named insureds, the first named insured acts for all named insureds for premium payments, notices of cancellation, and other named insured functions. Knowledge of one named insured is considered knowledge of all named insureds; an employee of one named insured is considered an employee of all named insureds; and the limit of insurance applies to all named insureds as a group.

The Extended Period to Discover Loss applies separately to each named insured. A payment can be made to the first named insured to satisfy the claims of all named insureds except when the named insured is an employee benefit plan. The plan must receive payment directly.

Legal Action Against Us

No insured can sue the insurance company until all terms and conditions of the policy have been satisfied. If a suit is filed, it must be filed no earlier than 90 days following the filing of the proof of loss but also no later than two years after the date of discovery. If local law extends the time period, the local law prevails.

Liberalization

If the insurance company broadens coverage without a premium charge, during the policy period or within 45 days of the effective date of the policy, the broadened coverage applies.

A good example is when an insurance company adopts a new edition of a coverage form and the new edition becomes effective during the insured's policy term. The broadened features of the new edition apply automatically to the insured's coverage even though it is not endorsed for the new features.

Loss Covered Under More Than One Coverage of This Insurance

If there is coverage for a loss under more than one of the crime insuring agreements, the limits under the applicable insuring agreements are added together. The maximum payment is limited to the actual loss sustained or the combined limit whichever is less.

Loss Sustained

The only losses covered are those sustained during the policy period and discovered during the policy period or the one-year extended period. This condition must be read in conjunction with the Loss Sustained During Prior Insurance Conditions.

Loss Sustained During Prior Insurance

If, and only if, the insured has had no lapse in coverage, the insured has coverage for losses sustained in prior policy terms that are discovered in the current policy term.

If the prior insurance and the current insurance are with the same carrier (or affiliate), the limit of insurance is the higher of the limit on the current policy or the policy in effect at the time of the occurrence. However, if the prior insurance was with a different carrier, the limit of insurance is the lesser of the two limits.

Other Insurance

Insurance is excess over other insurance or indemnity, less deductible, whether or not the other insurance or indemnity is recoverable, unless the coverage under this policy is identical to coverage on another policy. Under the exception, the loss is handled proportionally.

Ownership of Property: Interest Covered

Owned or leased property, property being held for another, and property for which the insured is legally liable are covered.

Records

The insured must have records on hand to substantiate any loss reported.

Recoveries

Recoveries that the insurer makes (less recovery expenses) are returned to the insured until the insured is made whole (less the deductible). The remainder is paid to the insurer until it is made whole. If there is still money left, the named insured is paid up to its deductible. The insured keeps any excess. Recoveries do not include reinsurance.

Territory

The United States, its territories, possessions, Puerto Rico and Canada. Some insuring agreements have expanded territories but none are more restrictive.

Transfer of Your Rights of Recovery Against Others to Us

All rights of recovery (subrogation) revert from the insured to the insurance company. The insured cannot waive this right for any reason.

Valuation-Settlement

Money is valued up to face value. Foreign currency is valued at face value or its U.S. equivalent on the date of discovery. Securities are valued as of the end-of-day close on the date of discovery.

Damaged property is paid on replacement cost if repaired or replaced; otherwise at actual cash value. All payments are subject to the limit of insurance on the policy.

The commercial crime insuring agreements specify what crimes the insurance company has agreed to pay for in exchange for the premium:

• EMPLOYEE THEFT: This insuring agreement covers loss to money, securities and other property. It covers the unlawful taking of covered property by employees. The covered property can be the insured's property or property of others being held by the insured. It applies whether one or more than one employee is involved in the loss. This is the only insuring agreement that includes acts of employees. Employee theft coverage includes employee forgery.
• FORGERY AND ALTERATION: his insuring agreement covers forged or altered checks of the insured by someone other than the named insured, employees, managers, directors, trustees or representatives. The check could be drawn on the insured's account, another party's account, or an account that no longer exists. This is an unusual crime coverage in that defense coverage is included. If the insured refuses to honor a document considered forged, there is coverage for the legal expenses the insured may incur because of the refusal.
• INSIDE THE PREMISES-THEFT OF MONEY AND SECURITIES: The primary coverage is for the theft of money and securities within the insured's premises or banking location. The person committing the crime must be physically inside the premises. In addition, damage to the interior and exterior of the building and damage to locked safes, vaults, cash boxes, etc., is covered if the damage occurs during a theft or attempted theft. The exterior building damage is covered only if the insured owns the building or is legally liable for the damage.
• INSIDE THE PREMISES-ROBBERY OR SAFE BURGLARY OF OTHER PROPERTY: This is a very limited insuring agreement. The activities are very specific. It covers robbery, which means that an employee who is not a watchperson or janitor must be on the premises for coverage to apply. It also covers safe burglary, which means the safe must show signs of forcible entry or must be totally removed from the premises if coverage is to apply. It is also specific to what items are covered. Only other property is covered. This means that there is no coverage for money or securities.
• OUTSIDE THE PREMISES: There are two parts to this insuring agreement. The first part provides coverage for theft, disappearance and destruction of money and securities while outside the premises with a messenger or in the custody of an armored car company. The second part provides robbery coverage for other property while with a messenger or in the custody of an armored car company. The conditions and exclusions that apply to inside the premises-robbery or safe burglary of other property insuring agreement also apply to this insuring agreement with one exception. The transfer or surrender of property exclusion does not apply if a messenger is unexpectedly threatened with bodily harm or damage to his or her conveyance.
• COMPUTER AND FUNDS TRANSFER FRAUD: Money, securities and other property that are transferred by the computers on the insured's premises or banking premises to a location away from the premises are covered. Money and securities that are transferred out of the insured's financial institution's transfer account based on a fraudulent instruction, is also covered. The coverage is worldwide and the computer that is compromised could even have been accessed from an off-site location.
• MONEY ORDERS AND COUNTERFEIT MONEY: Coverage applies if counterfeit money is accepted in exchange for purchases. There is also coverage for money orders accepted by the insured that are not accepted when presented by the insured for payment. The coverage is limited to the United States, its territories and Canada.

Theft or destruction of money and securities, computer fraud and employee dishonesty are not covered in a typical business property insurance policy. Some of the more common gaps in commercial property insurance for commercial crime insurance include:

EMPLOYEE DISHONESTY

Most property, auto and inland marine policy forms exclude dishonest acts of employees in the theft, or misappropriation of employer funds, merchandise or secrets.

MONEY, BULLION AND SECURITIES

Commercial property basic, broad and special cause of loss forms exclude money, bullion and securities as covered property; thus, their theft or even their destruction by fire or another cause of loss is not covered.

Inland marine policies or specialty endorsements may give back limited bullion coverage but, generally, no actual money or securities coverage is provided.

Jewelers block policies may cover raw gems and precious metals, but again they do not cover currency or securities.

THEFT OF GOODS

Theft of goods is covered under most inland marine coverage forms and the commercial property special cause of loss forms. However, the coverage is subject to coinsurance requirements. Crime forms allow a customer the option to choose a limit.

Because most theft losses represent a small percentage of the actual property, the premium savings can be substantial.

The following exclusions apply to all commercial crime insurance insuring agreements. In the specific insuring agreements discussions, exclusions specific to the particular insuring agreement are discussed.

Acts Committed by You, Your Partners or Members

Any theft or dishonest act committed by the named insured, a partner or a member of the named insured LLC is excluded whether the act is committed alone or with an outside individual or employee.

Acts Committed by Your Employees Learned of by You Prior to the Policy Period

If the named insured, its officers, directors, trustees, partners or members are aware of an employee's history of dishonest acts, any dishonest act committed by that employee is excluded. The one exception is when the person who knows about the employee's history is colluding with that employee to commit a dishonest act.

Acts Committed by Employees, Managers, Directors, Trustees or Representatives

Dishonest acts committed by employees, managers, directors, trustees or representatives are not covered. In addition, dishonest acts committed by such persons working with outside individuals are also excluded. This exclusion DOES NOT apply to the employee dishonesty insuring agreement.

Confidential or Personal Information

The crime policy is not designed to cover losses due to identify theft. Any loss caused by or resulting from any unauthorized disclosure or use of the named insured's or others' confidential or personal information is not covered.

Examples of such information are patents, trade secrets, processing methods, customer lists, and other types of financial or personal information.

Data Security Breach

No coverage exists when access is in any way provided so that personal or confidential information is disclosed.

Government Action

When government seizure, forfeiture or similar government taking or destruction causes a loss, it is not covered.

Indirect Loss

Loss of income, legal liability and the costs incurred to establish the amount of a loss are not covered.

Legal Expenses

Legal expenses are not covered under any insuring agreement except the forgery and alteration insuring agreement.

Nuclear

There is no coverage for any nuclear-related loss.

Pollution

There is no coverage for any loss or damage resulting from pollution.

War and Warlike Actions

There is no coverage for losses caused by war or warlike actions. This exclusion does not exclude terrorism. A separate endorsement must be attached to exclude terrorism.

Commercial crime insurance covers a wide variety of claims. Some examples are listed below:

1. Employee Theft: A business discovers that an employee has been embezzling funds over a long period. The stolen amount is significant and has resulted in substantial financial losses. In this scenario, commercial crime insurance would provide coverage for the monetary loss caused by the employee's fraudulent activity. The insurance coverage would handle the direct loss from the theft and could also help cover legal fees associated with potential litigation or investigation into the matter.

2. Forgery or Alteration: Suppose a business's checks are stolen and forged, leading to substantial financial loss. Commercial crime insurance could help cover the losses resulting from this type of fraudulent activity. The coverage would compensate for the funds lost due to the forgery and could also provide financial assistance for any legal action necessary to address the crime.

3. Computer Fraud: In this era of digital technology, a business may suffer losses from computer fraud, such as hacking or phishing attacks leading to unauthorized financial transactions. Commercial crime insurance would cover the losses incurred from such activities. It would also help the business cover the costs associated with pursuing legal action against the perpetrators or expenses related to digital forensics investigations.

4. Robbery or Burglary: If a business suffers a loss due to a robbery or burglary, commercial crime insurance can help cover the resulting financial loss. The insurance would compensate for the loss of physical assets and cash. Also, if the business decides to pursue legal action against the perpetrators, the coverage can help with the associated legal costs.

5. Vendor or Third-Party Fraud: If a business falls victim to fraud committed by a vendor or a third-party service provider, it could result in significant financial losses. In such a case, commercial crime insurance would cover the losses incurred due to the fraudulent acts of the third party. The policy could also assist with legal expenses if the business decides to sue the third party for the damages caused by the fraud.