Chapter 6

Question 1

Identify three factors relating to personal property that can help business owners determine the potential for loss from a criminal act.

Answer 1

Convertibility, value, portability

Question 2

Identify two ways in which alarm systems can be controlled.

Answer 2

Locally Supervised: placed on the owner and, generally, the employees of the business

Central Station Supervised: Ensures that the alarm is always turned on and off at the times arranged with the owner

Question 3

What types of items would normally require point protection?

Answer 3

Safes, vaults, chests, filing cabinets, display cases, expensive equipment

Question 4

State the purpose of point protection.

Answer 4

Provides direct security for individual items

Question 5

State three advantages of cameras and closed circuit television when used as a means of area protection.

Answer 5

Hold-up and fraud deterrent value

Assist police in the identification and conviction of criminals

Reduce shoplifting

Question 6

Infrared devices are the most commonly used intrusion detection devices used in commercial buildings. Explain how they work and state two advantages of these systems.

Answer 6

They sense body heat of an intruder as he moves through the area under surveillance. It is a change in the area’s normal heat profile that causes the alarm to trigger. Advantages include:

Several patterns of coverage available, and a number of detection units can be operated from one master device

Question 6

Explain what is meant by partial perimeter protection and state two disadvantages of such systems.

Answer 6

Only the openings of buildings are protected.

Weaknesses:

Forced entry through walls or ceilings will not be detected

Stay behind thieves will not be detected until they leave the premises

Question 7

State the main purpose of area protection devices.

Answer 7

Restrict unauthorized entry into areas where valuable property is being stored

Question 8

State the key disadvantage common to motion detector systems.

Answer 8

Frequency of false alarms

Question 9

Explain what is meant by complete perimeter protection and identify two kinds of physical and electronic perimeter protection devices which can be effective in restricting access into the Insured’s premises.

Answer 9

Detect intrusion regardless of where the attempt is made around the perimeter of the premises.

Physical: locks, bars and screening

Electronic: magnetic contact switches, glass breakage alarms

Question 10

What is the purpose of a perimeter protection system?

Answer 10

To control access to the premises when the business is closed

Question 11

Identify five methods used by criminals which can result in loss to real and personal property.

Answer 11

Forced entry into the building

Forced entry into protected enclosures

Unforced entry into building or protected enclosures

Forced opening of building and protected enclosures

Vandalism and malicious acts

Espionage

Shoplifting

Employee Theft

Question 12

What is the main function of physical and electronic protection devices?

Answer 12

To restrict unauthorized access to property

Question 13

Insurers provide rate credits when certain property protection systems are installed. Identify two other factors which would increase the amount of the credit available to Insureds.

Answer 13

Alarms monitored

Watchman or security guard service provided

Question 14

Which provides the most effective means of alarm control?

Answer 14

The central station supervised alarm controls

Question 15

What is the purpose of an alarm system?

Answer 15

To detect any breach of or attempt to breach the physical security of the premises and to provide a warning signal so that effective and immediate response can be instituted

Question 16

How are alarm signals usually transmitted?

Answer 16

Through leased telephone lines

Question 17

What is meant by line security?

Answer 17

Refers to the ability of the telephone line to withstand tampering

Question 18

The receiving point of an alarm signal affects the level of protection provided by it. Discuss the level of supervisory service provided by Central station service

Answer 18

This is the highest level of supervisory service as it monitors all opening and closing times of the premises, automatically activates the alarm system at closing time, screens after-hours users and provides a report for the subscriber, provides immediate notice to police when an alarm is received and
dispatches a company rep to the premises immediately after the police are informed.

Question 19

The receiving point of an alarm signal affects the level of protection provided by it. Discuss the level of supervisory service provided by Monitoring station service

Answer 19

This is the same as the central station
service but no guard is dispatched and the owner may be called to open
the premises

Question 20

The receiving point of an alarm signal affects the level of protection provided by it. Discuss the level of supervisory service provided by Emergency station service

Answer 20

The owner turns the system on and off. Once it is on, the alarm condition is centrally monitored and police are alerted if the alarm should sound.

Question 21

The receiving point of an alarm signal affects the level of protection provided by it. Discuss the level of supervisory service provided by Digital Communicator Service

Answer 21

The owner turns the system on and off. When an alarm is activated, it is sent along the subscriber’s standard telephone system to the alarm control centre. The alarm control centre responds by calling the police immediately.

Question 22

State two disadvantages of local alarm systems.

Answer 22

Alarm rings on premises only.. neighbors or passers-by must be depended upon to notify policy

Can be easily tampered with

Question 23

What does it mean when a device has received a ULC approved rating?

Answer 23

The device has met the minimum standards set by ULC for such devices

Question 24

Some business owners believe that the installation of sophisticated intrusion detection devices on their premises eliminates the need to purchase insurance coverages. Discuss how you would deal with this point of view.

Answer 24

Physical and electronic protection systems are not always 100% effective, 100% of the time. Because of this, you must look beyond the installation of such protection and explore an additional dimension of protection for your valuables - Insurance

Question 25

Your client is insured under a Broad Form commercial property insurance policy. As this policy provides coverage against theft, he is of the opinion that there is no need to purchase separate crime insurance coverage(s). Discuss.

Answer 25

Items such as money, furs, jewelry and property in the custody of a sales representative are excluded from coverage under the Broad Form. Businesses having such property have an exposure to crime losses which can only be covered by Crime Insurance.

Question 26

Identify four key coverage areas addressed by all crime insurance riders.

Answer 26

Property covered Perils insured Location of property covered Persons causing the loss

Question 27

Summarize the general meaning given to burglary in crime insurance riders.

Answer 27

Involves the wrongful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit

Question 28

State three coverages provided by the Safe Burglary rider.

Answer 28

The unlawful taking of insured property from a locked vault or safe The unlawful taking of the safe from within the premises Resultant damage to premises and property inside the premises insured

Question 28

Identify the coverages provided by the Stock and Equipment Burglary rider.

Answer 28

insures stock and equipment against actual or attempted burglary, robbery of a watchman, vandalism or malicious acts committed on the same occasion. Damage to the interior of the premises, showcases or show windows is also insured when due to any of the above perils

Question 29

Who would be a good prospect for the “Damage to Building by Burglary or Robbery” rider?

Answer 29

Tenants who assumed responsibility for burglary or robbery damage to the portion of the premises they occupy Owners of buildings who do not have this coverage under their commercial property insurance policy

Question 30

Identify two coverages provided by the "Damage to Building by Burglary or Robbery" rider?

Answer 30

Actual or attempted burglary or robbery Vandalism or malicious acts committed on the same occasion

Question 31

Identify three coverages for each Insuring Agreement contained in the Inside/Outside Robbery rider.

Answer 31

premises while the premises are open for business by a thief or an accomplice having broken the window at the time of the theft

Question 32

How is the definition of robbery under the Inside/Outside Robbery rider different from that provided for in criminal law?

Answer 32

a robbery involves the wrongful taking of property from the possession of another against their will, accomplished by means of force or fear. The definition of robbery under the Inside/Outside Robbery rider goes beyond the criminal law definition of robbery to include other acts

Question 33

Robbery policies provide coverage only where property is taken from a custodian. Who is qualified to be a custodian?

Answer 33

A custodian includes the Insured(s), their partner(s) or any employee authorized by them to have the care and custody of insured property.

Question 34

What kinds of persons are not deemed to be custodians under the policy?

Answer 34

Persons acting as a guard, janitor, porter or watchman are not "custodians"

Question 35

Discuss the provisions of the following Conditions: Condition 1. Canadian Currency Clause

Answer 35

All losses under the policy will be paid in Canadian funds

Question 36

Discuss the provisions of the following Conditions: Condition 2. Cancellation

Answer 36

insured entitled to 30 days notice when insurer elects to cancel policy. However, in the event of non-payment of premium, insurer can cancel after 15 days notice

Question 37

Discuss the provisions of the following Conditions: Condition 4. Changes

Answer 37

Any changes requested by the Insured are effective only when consented to by the Insurer

Question 38

Discuss the provisions of the following Conditions: Condition 6. Duties in the Event of Loss

Answer 38

The Insured is required to notify the Insurer of any loss as soon as possible. Within 120 days of its discovery, a sworn proof of loss must be provided to the Insurer. If the loss involves securities, the Insured must take all reasonable means to prevent their negotiation, sale of conversion. If the loss is in violation of a law, it must also be reported to the police. Insureds must, if required by the Insurer, submit to an examination under oath and provide the Insurer with a signed statement of their answers

Question 39

Discuss the provisions of the following Conditions: Condition 13. Policy Period, Territory

Answer 39

coverage is provided only for losses which occur during the policy period shown in the declaration and within Canada or the US

Question 40

Discuss the provisions of the following Conditions: Condition 14. Records

Answer 40

The Insured's records be maintained for the purpose of verifying the amount of any loss. A claim which cannot be substantiated as to amount will not be paid.

Question 41

Discuss the provisions of the following Conditions: Condition 18. Valuation

Answer 41

The value of securities is limited to their actual cash value at the close of business on the business day immediately preceding discovery of the loss. Other property is subject to settlement on an actual cash value basis. Any disputes involving valuation will be settled by arbitration.

Question 42

What purpose is serviced by the continuous until cancelled provision which is normally endorsed to the Comprehensive Dishonesty, Disappearance and Destruction policy

Answer 42

This ensures that there are no gaps in coverage

Question 43

Identify two characteristics of Employee Dishonesty Insurance which differentiate it from other kinds of property insurance.

Answer 43

Amount of loss difficult to predict Losses may be undiscovered, or discovered only after a significant period of time

Question 44

Losses insured by this Insuring Agreement are those “resulting directly from one or more Fraudulent or dishonest Acts committed by an Employee, acting alone or in collusion with others.” What two conditions are necessary to be present to constitute a Fraudulent or Dishonest Act?

Answer 44

There was clear intent to cause the Insured to sustain a loss There was clear intent to obtain financial benefit, other than those earned during the course of employment, for the employee or any other person or organization

Question 45

Provide three examples of persons qualifying as an employee under the terms of employee dishonesty coverage.

Answer 45

Natural persons hired by the Insured in the ordinary course of his business affairs. Directors or trustees of the business who are also actively involved in the business as an officer or employee. Persons hired by an intervening employment agency or employer and whose activities are directed and compensated by the Insured. Persons who become employees through consolidations or mergers.

Question 46

This Insuring Agreement provides the Insured with two different Blanket Bond options. Discuss three key differences between Form A: Commercial Blanket Bond and Form B: Blanket Position Bond.

Answer 46

Form A - All employees are covered. - Coverage automatically extends to new employees and terminates on those leaving the insured's services. - Limit purchased is the maximum payable regardless of the number of employees involved in the loss - Discovery period one year from date of expiry Form B - Coverage does not have to be purchased for all employees. - Different limits can be purchased for different classes of employees. - Limit purchased is available for each employee involved in the loss - Discovery period is two years from the date of expiry

Question 47

What recommendation would you make to a client who wanted to purchase Form B only because of the potential for multiple recoveries?

Answer 47

The limits selected should be sufficient to cover their maximum exposure to loss from a single employee.

Question 48

When a prior fraud of an employee becomes known to the Insured, what is the effect on the coverage provided by this policy?

Answer 48

Coverage ceased to apply from the moment the Insured becomes aware of the prior fraud

Question 48

Explain how this Insuring Agreement would respond when loss is caused by unidentifiable employees.

Answer 48

If the circumstances clearly support the conclusion that the fraud was committed by an employee and not an "outsider," the policy will pay.

Question 49

Claims require special handling when a loss under a previous bond is discovered after coverage has been replaced with a new Insurer. Explain how this policy would respond to pay a loss which occurred under a prior bond or policy.

Answer 49

The new policy will pay if the loss - Would have been covered under the previous policy. - Can't be claimed under previous bond due to expiration of discovery period. The amount paid shall be a part of the limits carried previously and shall not be higher than the limit previously carried

Question 49

Identify the two distinct phases of a risk management program designed to eliminate or reduce losses due to employee dishonesty.

Answer 49

Pre-Employment Phase Post-Employment Phase

Question 50

Identify two risk management techniques which can be used with each phase of risk management.

Answer 50

Pre-Employment Phase - Written application -Verify references - Personal Interview Post-Employment Phase - Cheques should require two signatures - Ensure employees take holidays - If possible, employees should rotate job positions and responsibilities -Surprise audits conducted - Bank accounts should be rotated periodically and special reconciliations prepared

Question 51

Outline the coverages provided for Money and Securities and provide examples of possible claims situations

Answer 51

Insures the actual destruction, disappearance or unlawful taking of money & securities

Question 51

State two exclusions applicable to Money and Securities

Answer 51

(1) Money contained in vending machines unless the machine is equipped with a continuous recording instrument. (2) Loss by fire to property other than money, securities, a safe or vault. (3) Loss of money, securities and other property which has been transferred by any computer on the basis of unauthorized instruction.

Question 52

Outline the coverages provided for Money and Securities by this Agreement.

Answer 52

Insures the actual destruction, disappearance or unlawful removal of money and securities while being conveyed by a messenger, any armoured motor vehicle company or within the living quarters in the home of any messenger

Question 53

Indicate when the coverages provided by the Money and Securities Agreement would respond.

Answer 53

When a money order is not paid upon presentation to the post office or if money taken in the regular course of the Insured's business is found to be counterfeit

Question 54

Provide two examples of risk management techniques which can be used to eliminate or reduce such losses (depositors forgery)

Answer 54

Use of safety paper for cheques Protection of blank cheques Controlled use of facsimile machines and plates

Question 54

Under what conditions would you recommend that the Insured purchase depositors forgery cover?

Answer 54

When a significant number of cheques or other negotiable instruments are written

Question 54

Describe the basic coverage provided by the Depositors forgery coverage Agreement.

Answer 54

Coverage is provided for the forgery or alteration of the Insured's cheques, drafts and similar Instruments only

Question 54

What limits of insurance are generally selected by Insureds who purchase Depositors Forgery coverage?

Answer 54

The limit generally reflects the business's potential exposure to loss which is usually the same limit selected for the Employee Dishonesty coverage

Question 55

Physical Protection

Answer 55

Physical protection is concerned with setting up physical barriers to restrict unauthorized access to property

Question 56

Electronic Protection

Answer 56

Electrical protection is concerned with setting up electronic barriers to restrict unauthorized access to property

Question 57

Perimeter Protection

Answer 57

Refers to the methods used by owners to secure access to the premises when the business is closed

Question 58

Area Protection

Answer 58

Refers to the protection provided to areas within the building where valuable property is being stored

Question 59

Point Protection

Answer 59

Provides direct security for individual items such as safes, vaults, chests, filing cabinets, display cases, expensive equipment

Question 60

Line Security

Answer 60

Refers to the ability of a telephone line to withstand tampering

Question 61

Money

Answer 61

Currency & coins in current use and having a face value

Question 62

Securities

Answer 62

Means all negotiable and non negotiable instruments or contracts representing money or other property and includes revenue and other stamps in current use, tokens and tickets, but does not include money

Question 63

Burglary

Answer 63

The unlawful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forceable entry or exit

Question 64

Robbery

Answer 64

Robbery means the taking of insured property from a custodian by a person or persons who have; caused or threatened to cause the custodian bodily harm; or - committed an over unlawful act witnessed by the custodian; or taken such property from a custodian who has been killed or rendered unconcious

Question 65

Custodian

Answer 65

Includes the insured(s), their partner(s), or any employee authorized by them to have the care and custody of insured property

Question 66

Theft

Answer 66

Includes all means of taking property without the owner's consent (insurance meaning)

Question 67

Employee Dishonesty

Answer 67

Loss which the insured shall sustain resulting directly from one or more fraudulent or dishonest acts committed by an employee, acting alone or in collusion with others

Question 68

Discovery Period

Answer 68

The time permitted by an Insurer, commencing with the expiry date of the policy, in which a claim must be discovered by the insured if it is to be covered by the policy

Question 69

Messenger

Answer 69

The insured or partner of the insured or any employee who is duly authorized by the insured to have the care & custody of the insured property outside the premises

Question 70

Forgery

Answer 70

A person is guilty of forgery if he fraudulently alters any writing of another without his authority or makes completes, executes, authenticates, issues, or transfers any writing so it purports to be the act of another who did not authorize that act

Question 71

Commercial Crime Insurance Policy contains three separate structural components:

Answer 71

Declarations General Conditions General Definitions