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.
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:
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:
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:
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:
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:
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
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
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:
Commercial Crime Insurance includes various definitions and coverage forms:
There are 14 crime coverage forms; the most commonly used are:
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.
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