Crime, Farm, Boiler and Professional Liability | Achievable Property & Casualty

Commercial Crime Insurance

Crime policies include generic definitions that identify the types of crime covered. Various forms of crime are defined in personal or commercial lines contracts. Some of the more common definitions include:

Theft

This is simply a broad term describing the pilfering of property without the owner’s consent. Theft is a wide-encompassing term that includes all forms of dishonestly taking property.

Burglary

This is a type of theft that involves the illegal taking of property by one party from another with no person to person encounter. It concerns property that has been stolen. To qualify as a burglary, the burglar must leave signs of a forcible entry. Burglaries generally take place when a business is closed.

Robbery

Another type of theft, robbery involves the illegal taking of someone’s property. However, unlike burglary, robbery involves a person to person encounter between the robber and his/her victim.

Extortion

If money or property is taken by threatening someone with an illegal act, it is extortion. If money or property is taken by threatening someone with something that is not necessarily illegal, it is blackmail.

Mysterious Disappearance

Property may be lost or has “disappeared” but neither its owner nor the insurer is able to determine how it happened. Coverage for this cause of loss is available, but is commonly excluded by policies protecting against theft.

Custodian

This is a person defined in crime insurance policies as one who has custody of the property of another while in the insured location.

Messenger

This is a person who possesses custody of the insured property while outside the covered area.

Types of crime insurance

Commercial crime insurance includes a commercial crime declarations page, a crime general provisions section, which lists the aforementioned theft definitions, and a crime coverage form. There are fourteen crime coverage forms identified as forms A through N. Prospective licensees should be familiar with the 5 most commonly utilized crime coverage forms (A, B, C, D and E).

Form A

Employee Dishonesty

Coverage under this form protects an employer against fraudulent acts by employees. It covers all of an insured’s property, including money and securities.

There are three different formats for dishonest acts of employees:

Name Schedule. Only covers individuals named in the Declarations. If a named employee leaves, the insurance company must be notified to delete the former employee’s name and add the new employee to have proper coverage.
Position Schedule. Covers the individuals who hold the position. It is not necessary to notify the insurer when an employee leaves and a new employee is hired.
Blanket Coverage. Covers loss by any employee. Under the Blanket Coverage, the employer must establish a reasonable case that the employee(s) caused the loss.

Form B

Forgery or Alteration

This form protects an insured if he/she suffers a loss caused by forgery or any alteration of financial documents. It does not cover employee dishonesty.

Form C

Theft, Disappearance, and Destruction

This coverage form may be added to the commercial crime coverage part to provide open-peril coverage for loss of money and securities.

There are two sections of coverage under this form:

Coverage A protects against loss of money and securities inside the premises.
Coverage B protects against the loss of money and securities while being transported by an insured or her employee outside or away from the premises.

Form D

Robbery and Safe Burglary

This coverage form covers property other than money and securities and is generally written to protect an insured against three exposures, including:

On premises robbery
Off premises robbery
Safe burglary

This form protects an insured against robbery inside or outside the insured premises. The policy also covers burglary of a safe, including any damage done by burglars to the safe.

Form E

Premises Burglary

This form covers loss of merchandise, furniture, fixtures, and equipment within the covered premises as a result of burglary. Damage to the premises and to windows by burglars is covered.

The robbery of security personnel is also covered while the business is not open. This guard must be an exclusive employee of the insured while on duty within the premises.

The Discovery Condition

While burglary and robbery losses are usually discovered immediately, certain crime losses, such as extortion and embezzlement, may not be discovered until weeks, months, or years after they occur.

The Discovery Clause in the Loss Sustained Form states that losses that occur during the policy period but are not discovered for up to one year after the policy has expired can be covered under the expired policy.

Other Coverage Forms Available

Additional coverage forms are available to be attached to the commercial crime coverage part, including:

Computer fraud
Safe depository liability
Lessees of safe deposit boxes
Liability for guest’s property
Premises theft and robbery on site but outside the premises

Boiler and Machinery

This coverage part may be added to the CPP as well. It provides property and liability protection resulting from an accident to an insured object. Coverage is provided for damage to the insured’s property and for liability arising out of the damage to property of others in the care, custody, or control of the insured if the loss is caused by a covered peril. The definition of “object” is simply the equipment described in the declarations. Insurers utilize any of an assortment of definitions for objects including:

Pressure and refrigeration objects
Mechanical objects
Electrical objects
Turbine objects

The covered cause of loss under this coverage part is an accident to an insured object, which is listed in the declarations. The definition of accident does not include corrosion, erosion, wear and tear, deterioration, or depletion. Standard exclusions found in this form include ordinance or law, war, and nuclear hazard. Accidents to objects while being tested are also not covered.

There are four available extensions of coverage:

Expediting expenses provides payment for the reasonable cost of temporary repairs and expediting permanent repairs. Standard coverage is $5,000 but may be increased for an additional premium
Automatic coverage provides protection for newly acquired objects of the type insured for up to 90 days
Defense costs are paid if the insurer defends the insured in a legal suit
Supplementary payments are provided similar to that of other liability policies, but the included amount is $250 per day for loss of earnings

Sidenote

Know this...

These extensions are automatically included in the policy and are not optional coverages.

Any of three endorsements may be added to the boiler and machinery coverage part, including:

Business interruption provides coverage for loss due to a total or partial interruption of business as a result of an accident to an insured object
Extra expense coverage functions just as it does under commercial property insurance
Consequential damage provides indemnity for the actual loss of insured property due to spoilage resulting from lack of power, light, heat, and refrigeration at described premises caused by an accident to an insured object

Farm Property Coverage

This coverage part is available to be added to the CPP to cover an insured’s farm exposures. It includes its own declarations page. Either a standard or special form may be added to provide coverage. Ten coverage sections are included in either form, providing a combination of property and liability protection. The ten sections are:

1) Coverage A Dwelling

This section covers the dwelling and any attached structures. It also covers materials used to maintain the farm. Coverage is allocated on a replacement cost basis.

2) Coverage B Other Private Structures

This section covers unattached structures up to specified limits.

3) Coverage C Household Personal Property

This coverage is the equivalent of personal property coverage under a homeowners policy.

4) Coverage D Loss of Use

This section covers additional living expenses similar to the homeowners policy.

5) Coverage E Scheduled Farm Personal Property

This section covers all of the farmer’s itemized personal property used for farming purposes.

6) Coverage F Unscheduled Farm Personal Property

Coverage is provided for all unscheduled items of farm personal property on the premises.

7) Coverage G Other Farm Structures

Coverage is provided by this section for structures on the farm not used for dwelling purposes such as fences and grain silos.

8) Coverage H Bodily Injury and Property Damage Liability

This section of coverage provides liability protection to an insured arising out of ownership of the premises or as a result of farm operations. Custom farming operations with revenues less than $2,000 are excluded.

9) Coverage I Personal and Advertising Injury Liability

Coverage provided by this section is almost identical to Coverage B in a CGL policy.

10) Coverage J Medical Payments

Applicable payments are covered as long as they are reported within 3 years of occurrence.

There are additional forms available that may be added to the Farm Coverage Part, including the mobile agricultural machinery and equipment form and the livestock form (when livestock are the only property owned).

The insured may select a cause of loss form to be attached to the Farm Property Coverage Part. The form specifies the perils insured against. These forms are similar in scope to the cause of loss forms available under the Commercial Property Coverage Part (basic, broad, and special).

The conditions, definitions and exclusions of the Farm Property Coverage part are similar to the corresponding sections of the Commercial Property Coverage Part.

Professional Liability

Professional liability insurance is a specialized type of liability insurance protection for individuals such as physicians, attorneys, certified public accountants, insurance producers or directors, or officers of corporations. Professional liability refers to liability arising from a failure to use care (negligence) according to the degree of skills expected from the professional. There are several forms of professional liability insurance:

Malpractice

Medical malpractice insurance is available to physicians, surgeons, dentists and hospitals for protection in case an injured third party takes legal action as a result of the insured’s negligence in his/her duties.

An insured is protected for his responsibility for bodily injury or property damage to others. Many policies also provide coverage for personal injury as well, such as the mental anguish suffered by the injured third party as a result of the insured’s negligence or non-performance.

Many professional liability policies also include a provision that requires the insurer to secure the insured’s consent before it can settle a claim. The reason for this requirement is to protect the name and status of the professional.

Errors and Omissions

A wide variety of professions use an errors and omissions policies. Accountants, insurance producers or adjusters, architects, attorneys, stockbrokers, real estate brokers or engineers are examples of those who would purchase E&O coverage.

The coverage provided is tailored to the needs of the profession in question. It pays for liability arising out of the performance of one’s professional duties due to negligence. For example, if an insurance agent makes an inadequate recommendation to a customer that somehow damages the customer, any forthcoming suit will likely be covered by the agent’s E&O policy.

Directors and Officers

Another type of professional liability contract is available to provide legal liability protection to a corporation director or due to an officer’s errors and/or omissions. This type of policy protects the corporate officer from legal suits by stockholders or others arising out of mismanagement.

Other types of policies are available which are tailored to the individual profession to be insured include:

Druggists Liability
Fiduciary Liability
Employee Benefit Plan Liability
Professional Architects Liability

Lesson Summary

Commercial Crime Insurance includes various definitions and coverage forms:

Theft - a broad term for taking property without consent
Burglary - theft with no person-to-person encounter
Robbery - theft involving a person-to-person encounter
Extortion - taking property by threatening with an illegal act
Mysterious Disappearance - unexplained loss of property
Custodian and Messenger definitions

There are 14 crime coverage forms; the most commonly used are:

Form A - Employee Dishonesty
Form B - Forgery or Alteration
Form C - Theft, Disappearance, and Destruction
Form D - Robbery and Safe Burglary
Form E - Premises Burglary

Commercial Crime Insurance covers discovery of losses and additional coverage forms like Computer fraud, Safe depository liability, and more.

Boiler and Machinery Coverage provides property and liability protection for accidents to insured objects, with standard exclusions.

Farm Property Coverage under CPP covers farm exposures with sections for dwelling, structures, personal property, and liability.

Professional Liability Insurance includes forms for Malpractice, Errors and Omissions, and Directors and Officers coverage tailored to different professions.

Malpractice - for physicians, surgeons, dentists, etc.
Errors and Omissions - for various professions
Directors and Officers - for legal liability protection

Chapter Vocabulary

Definitions

Arson: The deliberate setting of a fire.
Boiler & Machinery or Equipment Breakdown: Coverage for the failure of boilers, machinery, and other electrical equipment. Benefits include (1) property of the insured, which has been directly damaged by the accident; (2) costs of temporary repairs and expediting expenses; and (3) liability for damage to the property of others. Coverage also includes inspection of the equipment.
Burglary: An individual or an intruder who steals property from a premises and leaves evidence or signs of forced entry at the location.
Commercial Farm and Ranch: A commercial package policy for farming and ranching risks that includes both property and liability coverage. Coverage includes barns, stables, other farm structures, and farm inland marine, such as mobile equipment and livestock.
Crime Insurance: Term referring to property coverages for the perils of burglary, theft and robbery, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.
Crop Insurance: Protection against damage to growing crops from hail, fire, or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield-reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.
Custodian: An employee or other person who has possession of an insured’s property on premise.
Embezzlement: A fraudulent act involving taking property or money from the one who has been entrusted with such property.
Employee Dishonesty Coverage: Covers direct losses and damage to businesses resulting from the dishonest acts of employees.
Errors and Omissions Liability: Liability coverage of a professional or quasi-professional insured to persons who have incurred bodily injury or property damage or who have sustained any loss from omissions arising from the performance of services for others, errors in judgment, breaches of duty, or negligent or wrongful acts in business conduct.
Farmowners Insurance: Farmowners insurance sold for personal, family, or household purposes. This package policy is similar to a homeowners policy in that it has been developed for farms and ranches and includes both property and liability coverage for personal and business losses. Coverage includes farm dwellings and their contents, barns, stables, other farm structures, and farm inland marine, such as mobile equipment and livestock.
Kidnap/Ransom Insurance: Coverage for ransom or extortion costs and related expenses.
Larceny: A theft loss that occurs during a period of time when access was granted to the stolen property.
Malpractice: Alleged misconduct or negligence in a professional act resulting in loss or injury.
Medical Malpractice: Insurance coverage protecting a licensed health care provider or health care facility against legal liability resulting from the death or injury of any person due to the insured’s misconduct, negligence, or incompetence, in rendering or failure to render professional services.
Messenger: A person conveying money, securities, or other property from one location to another on behalf of an insured.
Mysterious Disappearance: An article is known to have disappeared, but it is impossible to determine how such disappearance occurred.
Premises: The particular location of the property or a portion of it as designated in an insurance policy.
Robbery: The dishonest taking or stealing of property from an individual in possession of that property. Involves a face-to-face confrontation.
Theft: The dishonest taking of property without the owner’s consent.
Watchman: One who watches over an insured’s property.