Section 3 - Crime Coverages and Endorsements Flashcards
Why Crime Coverage (3 Shortcomings of Special form property policies)
- Dishonesty Exclusion for named insureds and others in the organization
- Voluntary Parting / Unauthorized instruction exclusion
- Low limits for items such as fur, jewelry, patterns, dies, molds, stamps, tickets, letters of credit $2,500 or $250
Loss Sustained vs Discovery Form (2 Each)
Loss Sustained
- Occurrence must take place during the policy period AND
- The occurrence must be discovered by a designated person during the policy period or during the extended period to discover loss
Discovery Form
- The occurrence can take place at any time AND
- The occurrence must be discovered by a designated person during the policy period or during the extended period to discover loss
5 Different Types of “Designated People” to Discover the Loss
REEPH
- Risk Manager
- Elected Officer
- Employee Benefit Plan admin / Trustee
- Partner, LLC member, LLC manager, director, or trustee
- Highest ranking employee at a premise
What is the Extended Reporting Period to Discover a loss? (Loss Sustained Form) (2)
- One year following the cancellation or termination of a policy.
- Also applies when policy is still in effect, but coverage for a particular insured has been removed or when one of the coverages is removed.
3 Requirements for Replacing a Policy with ERISA Coverage (Both Loss Sustained and Discovery)
- At least as broad as the policy being replaced
- Has a limit at least equal to the limit required by ERISA
- Applies to losses sustained prior to its effective date
Loss Sustained Partly During This Insurance and Partly During Prior Insurance (Loss Sustained) (3)
- First settles the current term losses, then goes back to the prior insurance
- Pays Highest single limit applicable
- current policy’s deductible applies
Loss Sustained Entirely during Prior Insurance (3)
- Covered under current policy
- Pays the most recent prior term and then the terms before that
- Uses highest single limit applicable during period of loss and current deductible
Prior Insurance with a Different Carrier (3)
- Loss must be covered under current policy
- Lesser of the prior and current limit
- Current Deductbile Applies
3 Things to Do to Keep Best Coverage when renewing Crime Policy
- Stay Continuous
- Stay with the same insurer
- Don’t lower your limits
Extended Reporting Period for Loss Discovered Form
60 days following the Cancellation or Termination of a policy
3 Fidelity Insuring Agreements
- Employee Theft
- ERISA Plan Official Dishonesty
- Employee Theft of Client’s Property
What is Covered Property - Fidelity (3)
Money: Currency, coins, bank notes, travelers checks, money orders, deposits in accounts at any financial institute
Securities: Tokens, tickets, revenue and other stamps. Evidences of Debt issued in connection with credit or charged cards, which cards are not issued by you
Other Property: Tangible property other than money or securities that has intrinsic value. Doesn’t include computer programs, or electronic data
Does property have to be owned (Fidelity)
No it does not. Can be held by insured in any capacity and can apply if insured legally liable
Who can be the thief? (Fidelity) (8)
LEFT MIND
- Leased workers
- Employee Benefit plan natural persons
- Former employees, partners, LLC members or managers, directors or trustees retained by the insured as a consultant
- Temporary workers
- Merger or Acquisition natural persons employed by them prior to effective
- Interns and Guest students
- Natural persons whom the insured compensates and has the right to direct or control. Includes coverage for 30 days after service unless fired for dishonest, malicious acts
- Directors, trustees, or LLC managers performing acts within the scope of the duties of an employee or acting as a member of a committee to perform specific directorial acts on behalf of NI
What does employee theft include (2)
Loss or damage from employee committing theft, whether identified or not, or in collusion with others
Includes “forgery”
2 People that ERISA Plan Official Dishonesty Covers
- An ERISA Plan official, whether ID’d or not
- You, but only if you are a sole proprietor
3 Terms to Understand ERISA Plan Dishonesty: ERISA Employee Benefit Plan; Fraud or dishonesty; ERISA plan official
- ERISA Employee Benefit Plan: welfare or pension benefit plan subject to ERISA and its amendments
- Fraud or dishonesty: larceny, theft, embezzlement, forgery, misappropriation, wrongful abstraction, wrongful conversion, willful misapplication, or other fraudulent or dishonest acts
- ERISA Plan official: Certain persons in the org handling the ERISA employee benefit plan
4 Conditions for ERISA Plan Official Dishonesty
- The NI is responsible for selecting the limits needed to satisfy ERISA requirements
- If, at time of a loss, limit no longer satisfies the minimum amount of coverage required by ERISA, the limit will automatically be increased to the amount required by law. Insured not required to pay more
- No deductible applies to loss sustained by an ERISA employee benefit plan
- Exclusion for acts committed by the named insured or its partners or members does not apply to losses to ERISA employee benefit plans
Crime Exclusions (12)
AAA KITE VID WC
- Acts committed by You, Your partners, or Members (Exception for ERISA Plan Official Dishonesty)
- Acts committed by Your Employees, ERISA Plan Officials, Managers, Directors, Trustees or Representatives (Exclusion Doesn’t apply to any Fidelity Coverages)
- Acts Committed by Your Employees or ERISA Plan Officials Prior to the Policy Period (can’t rehire someone that has stolen in the past)
- Kidnap, Ransom, Extortion and Other Unlawful Demands
- Indirect Loss: No BI or EE coverage, just compensatory
- Trading: Can add back coverage but for stock and commodity trading
- ERISA Employee Benefit Plan: Only that coverage section applies
- Virtual Currency
- Inventory Shortages: Need more evidence than just shortage
- Data Security Breach (cyber)
- Warehouse Receipts (can add endt)
- Confidential or Personal Information (cyber)
2 Types of Crime that Computer and Funds Transfer Fraud Covers
- Entering or changing of data or computer programs within the computer system of the insured or that of a third-party performing services for the insured (Can be employee device if they signed personal use policy)
- A fraudulent transfer instruction sent to a financial institution, purportedly by the insured, directing the financial institution to transfer money or securities from the insured’s account (must be someone impersonating the insured)
5 Additional Exclusion - Computer and Funds Transfer
I FACE
- Inventory Shortages
- Fraudulent Instruction
- Authorized Access (maybe covered under employee theft)
- Credit Card transactions
- Exchanges or purchases
2 Types of Crimes that Fraudulent Impersonation Covers
- Thief tricks the insured into CHANGING THE TRANSFER INSTRUCTIONS for payment due to a client or vendor so that payment goes to the thief instead
- The insured transfers money or securities based on instructions from a thief IMPERSONATING CLIENT, VENDOR OR PERSON WITHIN ORG
Fraudulent Instruction - Additional Condition (1ab)
You must make a REASONABLE EFFORT TO VERIFY, but not through email, the authenticity of any change of account request with
- the CLIENT OR VENDOR purporting to have issued the change of account request or
- a (DIFFERENT) AUTHORIZED PERSON, but not the authorized person purporting to have issued the change of account request
and document the effort.
Insuring Agreement #2 - Forgery or Alteration (2 Parts of it)
Two Parts
- Forgery of Negotiable Instruments
- Forgery of Payment Card Instruments
