Chapter 6 Flashcards
Identify three factors relating to personal property that can help business owners determine the potential for loss from a criminal act.
Convertibility, value, portability
Identify two ways in which alarm systems can be controlled.
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
What types of items would normally require point protection?
Safes, vaults, chests, filing cabinets, display cases, expensive equipment
State the purpose of point protection.
Provides direct security for individual items
State three advantages of cameras and closed circuit television when used as a means of area protection.
Hold-up and fraud deterrent value
Assist police in the identification and conviction of criminals
Reduce shoplifting
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.
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
Explain what is meant by partial perimeter protection and state two disadvantages of such systems.
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
State the main purpose of area protection devices.
Restrict unauthorized entry into areas where valuable property is being stored
State the key disadvantage common to motion detector systems.
Frequency of false alarms
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.
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
What is the purpose of a perimeter protection system?
To control access to the premises when the business is closed
Identify five methods used by criminals which can result in loss to real and personal property.
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
What is the main function of physical and electronic protection devices?
To restrict unauthorized access to property
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.
Alarms monitored
Watchman or security guard service provided
Which provides the most effective means of alarm control?
The central station supervised alarm controls
What is the purpose of an alarm system?
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
How are alarm signals usually transmitted?
Through leased telephone lines
What is meant by line security?
Refers to the ability of the telephone line to withstand tampering
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
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.
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
This is the same as the central station
service but no guard is dispatched and the owner may be called to open
the premises
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
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.
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
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.
State two disadvantages of local alarm systems.
Alarm rings on premises only.. neighbors or passers-by must be depended upon to notify policy
Can be easily tampered with
What does it mean when a device has received a ULC approved rating?
The device has met the minimum standards set by ULC for such devices
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.
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
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.
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.
Identify four key coverage areas addressed by all crime insurance riders.
Property covered
Perils insured
Location of property covered
Persons causing the loss
Summarize the general meaning given to burglary in crime insurance riders.
Involves the wrongful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit
State three coverages provided by the Safe Burglary rider.
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
Identify the coverages provided by the Stock and Equipment Burglary rider.
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
Who would be a good prospect for the “Damage to Building by Burglary or Robbery” rider?
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
Identify two coverages provided by the “Damage to Building by Burglary or Robbery” rider?
Actual or attempted burglary or robbery
Vandalism or malicious acts committed on the same occasion
Identify three coverages for each Insuring Agreement contained in the Inside/Outside Robbery rider.
premises while the premises are open for business by a thief or an accomplice having broken the window at the time of the theft
How is the definition of robbery under the Inside/Outside Robbery rider different from that provided for in criminal law?
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
Robbery policies provide coverage only where property is taken from a custodian. Who is qualified to be a custodian?
A custodian includes the Insured(s), their partner(s) or any
employee authorized by them to have the care and custody of
insured property.
What kinds of persons are not deemed to be custodians under the policy?
Persons acting as a guard, janitor, porter or watchman are not “custodians”
Discuss the provisions of the following Conditions: Condition 1. Canadian Currency Clause
All losses under the policy will be paid in Canadian funds
Discuss the provisions of the following Conditions:
Condition 2. Cancellation
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
Discuss the provisions of the following Conditions:
Condition 4. Changes
Any changes requested by the Insured are effective only when consented to by the Insurer
Discuss the provisions of the following Conditions:
Condition 6. Duties in the Event of Loss
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
Discuss the provisions of the following Conditions:
Condition 13. Policy Period, Territory
coverage is provided only for losses which occur during the policy period shown in the declaration and within Canada or the US
Discuss the provisions of the following Conditions: Condition 14. Records
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.
Discuss the provisions of the following Conditions: Condition 18. Valuation
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.
What purpose is serviced by the continuous until cancelled provision which is normally endorsed to the Comprehensive Dishonesty, Disappearance and Destruction policy
This ensures that there are no gaps in coverage
Identify two characteristics of Employee Dishonesty Insurance which differentiate it from other kinds of property insurance.
Amount of loss difficult to predict
Losses may be undiscovered, or discovered only after a significant period of time
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?
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
Provide three examples of persons qualifying as an employee under the terms of employee dishonesty coverage.
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.
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.
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
What recommendation would you make to a client who wanted to purchase Form B only because of the potential for multiple recoveries?
The limits selected should be sufficient to cover their maximum exposure to loss from a single employee.
When a prior fraud of an employee becomes known to the Insured, what is the effect on the coverage provided by this policy?
Coverage ceased to apply from the moment the Insured becomes aware of the prior fraud
Explain how this Insuring Agreement would respond when loss is caused by unidentifiable employees.
If the circumstances clearly support the conclusion that the fraud was committed by an employee and not an “outsider,” the policy will pay.
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.
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
Identify the two distinct phases of a risk management program designed to eliminate or reduce losses due to employee dishonesty.
Pre-Employment Phase
Post-Employment Phase
Identify two risk management techniques which can be used with each phase of risk management.
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
Outline the coverages provided for Money and Securities and provide examples of possible claims situations
Insures the actual destruction, disappearance or unlawful taking of money & securities
State two exclusions applicable to Money and Securities
(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.
Outline the coverages provided for Money and Securities by this Agreement.
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
Indicate when the coverages provided by the Money and Securities Agreement would respond.
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
Provide two examples of risk management techniques which can be used to eliminate or reduce such losses (depositors forgery)
Use of safety paper for cheques
Protection of blank cheques
Controlled use of facsimile machines and plates
Under what conditions would you recommend that the Insured purchase depositors forgery cover?
When a significant number of cheques or other negotiable instruments are written
Describe the basic coverage provided by the Depositors forgery coverage Agreement.
Coverage is provided for the forgery or alteration of the Insured’s cheques, drafts and similar Instruments only
What limits of insurance are generally selected by Insureds who purchase Depositors Forgery coverage?
The limit generally reflects the business’s potential exposure to loss which is usually the same limit selected for the Employee Dishonesty coverage
Physical Protection
Physical protection is concerned with setting up physical barriers to restrict unauthorized access to property
Electronic Protection
Electrical protection is concerned with setting up electronic barriers to restrict unauthorized access to property
Perimeter Protection
Refers to the methods used by owners to secure access to the premises when the business is closed
Area Protection
Refers to the protection provided to areas within the building where valuable property is being stored
Point Protection
Provides direct security for individual items such as safes, vaults, chests, filing cabinets, display cases, expensive equipment
Line Security
Refers to the ability of a telephone line to withstand tampering
Money
Currency & coins in current use and having a face value
Securities
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
Burglary
The unlawful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forceable entry or exit
Robbery
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
Custodian
Includes the insured(s), their partner(s), or any employee authorized by them to have the care and custody of insured property
Theft
Includes all means of taking property without the owner’s consent (insurance meaning)
Employee Dishonesty
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
Discovery Period
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
Messenger
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
Forgery
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
Commercial Crime Insurance Policy contains three separate structural components:
Declarations
General Conditions
General Definitions
