The Big Picture: What Is Commercial Crime Coverage?
Commercial Crime = Insurance Against Dishonesty
This coverage protects businesses from financial losses caused by employee theft, forgery, robbery, burglary, computer fraud, and other criminal acts. Think of it as the "dishonesty" insurance for your business.
ISO's 2000 Modernization
In 2000, ISO simplified crime coverage by creating a new program that consolidated the most common crime coverages into single forms.
Key Feature: Pick-and-Choose Coverage
The new crime forms include EIGHT separate insuring agreements. Each coverage is activated only if a limit of insurance is shown in the declarations for that specific coverage.
Think of It Like a Menu
The policy lists all 8 coverages, but you only pay for (and get coverage for) the ones you select by adding a limit to them in the declarations.
The 8 Crime Coverage Insuring Agreements
Exam Alert: Know All Eight
You'll need to identify what each coverage does and understand the key differences between them. Use the accordion below to study each one.
1. Employee Theft
Covers loss of money, securities, and other property caused directly by employee theft.
What's Covered:
- + Theft of company money or property by employees
- + Both on-premises and off-premises theft
- + Coverage extends to employees temporarily outside territory (up to 90 days)
Key Point:
This is the ONLY coverage that negates the employee exclusion. All other coverages exclude employee theft!
2. Forgery or Alteration
Covers loss from forgery or alteration of checks, drafts, promissory notes, or similar written promises to pay.
Examples:
- + Someone forges your company's signature on a check
- + An authorized check for $100 is altered to read $10,000
- + Fake payroll checks are created and cashed
Note: This covers forgery whether done by outsiders OR employees.
3. Inside the Premises - Theft of Money and Securities
Covers loss of money and securities by theft, disappearance, or destruction from inside the premises or banking premises.
What's Covered:
- + Money and securities stolen from inside your business
- + Money stolen from night deposit box or banking premises
- + Damage to premises, safe, vault, cash register from break-in
Important:
Does NOT cover employee theft (that's Coverage 1). This is for outsider theft from inside premises.
4. Outside the Premises - Theft of Money and Securities
Covers loss of money and securities by theft while outside the premises in the care and custody of a messenger or armored car company.
Common Scenarios:
- + Employee carrying cash deposit to bank is robbed
- + Armored car is held up while transporting your funds
- + Messenger's vehicle containing company money is stolen
Key Difference: This covers money in transit, while Coverage 3 covers money inside your building.
5. Inside the Premises - Robbery or Safe Burglary of Other Property
Covers loss of other property (not money or securities) by:
- + Robbery of a custodian
- + Safe burglary - breaking into a locked safe or vault
- + Damage to premises from such events
Special Limit: $5,000
Per occurrence for precious metals, stones, pearls, furs, and manuscripts.
NOT Covered:
Motor vehicles, trailers, and semi-trailers and their equipment.
6. Computer Fraud
Covers loss of money, securities, and other property resulting from the use of a computer to fraudulently transfer property from inside the premises.
Examples:
- + Hacker gains access to your system and transfers funds out
- + Computer virus causes fraudulent transactions
- + Unauthorized computer entry results in theft of property
Modern Coverage:
This was added in 2000 to address the growing threat of cybercrime and electronic theft.
7. Funds Transfer Fraud
Covers loss of funds from your transfer account resulting from a fraudulent transfer instruction directing a financial institution to transfer funds.
What This Means:
Someone impersonates your company or uses fraudulent instructions to get your bank to wire money out of your account.
Example: Fraudster sends fake wire transfer instructions appearing to be from your CFO, directing the bank to send $100,000 to an overseas account.
Difference from Computer Fraud: This specifically covers fraudulent wire transfers and electronic funds transfers, while Computer Fraud is broader.
8. Money Orders and Counterfeit Currency
Covers loss from accepting counterfeit money or money orders in good faith exchange for merchandise, money, or services.
Common Scenarios:
- + Retail store accepts counterfeit $100 bills as payment
- + Business receives fake money orders as payment for goods
- + Counterfeit currency is discovered after deposit to bank
Key Requirement:
You must have accepted it in "good faith" - meaning you didn't know or have reason to know it was fake.
Memory Trick: The 8 Coverages
Think in groups:
- Employee Issues: 1 = Employee Theft
- Paper Fraud: 2 = Forgery
- Inside/Outside Money: 3 & 4 = Money theft in/out
- Other Property: 5 = Robbery/burglary of other property
- Electronic Crime: 6 & 7 = Computer & funds transfer fraud
- Counterfeit: 8 = Fake money/money orders
General Exclusions
These Apply to ALL Crime Coverages
Know these exclusions - they appear on exam questions testing what's NOT covered.
Acts Committed by Insured, Partners, Members
No coverage for dishonest acts by:
- + The named insured
- + Partners or members
- + Managers, directors, trustees while acting on behalf of the insured
Why? You can't insure against your own intentional wrongdoing!
Acts of Employees Learned of Before Policy Period
No coverage for employee dishonesty if you knew about the employee's prior dishonest acts before the policy period.
Example: You hire Joe knowing he stole from his previous employer. If Joe steals from you, no coverage - you knew the risk when you hired him!
Confidential Information Disclosure
No coverage for loss from unauthorized disclosure or use of confidential information.
Examples: Trade secrets stolen, customer lists sold to competitors, proprietary formulas disclosed.
Data Security Breach Fees and Costs
No coverage for costs related to a data breach, such as:
- + Notification costs to affected customers
- + Credit monitoring services
- + Legal fees related to breach response
- + Public relations costs
Note: Need Cyber Liability Insurance for this!
Government Action (Seizure/Destruction)
No coverage for loss due to seizure or destruction of property by government order.
Example: Government seizes cash during a raid or investigation.
Indirect Losses
No coverage for consequential losses - only direct theft is covered.
Example: Employee steals $10,000. Covered! But the lost business income from being unable to operate due to the theft? NOT covered.
Legal Fees, Costs and Expenses
No coverage for legal fees you incur in prosecuting or defending claims (except defense costs we agree to pay).
Example: You hire a lawyer to prosecute the employee who stole from you - those legal fees aren't covered.
Nuclear Hazards
No coverage for loss from nuclear reaction, radiation, or contamination.
Pollution
No coverage for loss caused by pollutants.
War and Military Action
No coverage for loss caused by war, military action, or similar events.
Employee Theft - Detailed Coverage
The Most Important Crime Coverage
Employee theft accounts for the majority of crime claims. Understanding this coverage is critical for the exam.
What's Covered
Theft of money, securities, or other property by employees, whether acting alone or in collusion with others.
Key Features:
- + Covers theft from anywhere (inside or outside premises)
- + Includes theft by employees temporarily outside the territory (up to 90 days)
- + Only coverage that negates the employee exclusion
Auto-Cancellation Rule
Coverage automatically terminates for that employee immediately when you discover they were involved in ANY dishonest act, whether or not it resulted in a loss.
Example: You catch Jane stealing $20 from petty cash on Monday. Even if you don't fire her, coverage for Jane ends immediately. If she steals $10,000 on Tuesday, NOT covered!
Additional Exclusions for Employee Theft
Beyond the general exclusions, Employee Theft also excludes:
Inventory Shortage
Loss established solely by inventory shortage (need additional evidence of theft).
Trading Losses
Loss from trading in commodities, futures, or securities.
Warehouse Receipt Fraud
Fraudulent or dishonest warehouse receipts.
Coverage Extension: Temporarily Outside Territory
Coverage extends to theft by employees temporarily working outside the coverage territory for up to 90 consecutive days.
Example: Your employee is on a 60-day overseas assignment and steals from the company while abroad - still covered!
Inside Premises - Theft of Money and Securities
Coverage for Outsider Theft from Your Building
This is the "burglary" coverage for money and securities kept inside your premises.
What's Covered
- + Theft, disappearance, or destruction of money and securities from inside the premises
- + Loss from inside the banking premises
- + Loss while in a night deposit box or safe deposit box
- + Damage to the premises, exterior of building, locked safe, vault, cash register, or cash box
Additional Exclusions
Accounting or Arithmetic Errors
Missing money due to bookkeeping mistakes.
Exchange, Purchase, or Surrender
Giving property away in transaction (unless by robbery).
Fire
Loss by fire (covered by property policy instead).
Money-Operated Machines
Loss from coin-operated machines unless they have continuous recording instruments.
Motor Vehicles
Loss from motor vehicles, trailers, or related equipment.
Transfer in Reliance on Instructions
Tricked into giving property away (inducement).
Transfer Outside Premises
Loss that occurs outside the premises (use Coverage 4 instead).
Vandalism
Vandalism without theft attempt (property policy covers).
Voluntary Parting
Willingly giving property to another person who doesn't return it.
Exam Tip:
Many exclusions relate to "voluntary parting" - if you willingly gave the money away (even if tricked), it's not covered. True theft means the property was TAKEN from you.
Inside Premises - Robbery or Safe Burglary of Other Property
Coverage for Property OTHER Than Money
This covers loss/damage to inventory, equipment, merchandise - not cash.
What's Covered
Loss of or damage to OTHER PROPERTY by:
- + Robbery of a custodian (forceful taking in presence of custodian)
- + Safe burglary (breaking into locked safe or vault)
- + Damage to premises from such events
Special Limit: $5,000
Per occurrence for:
Precious metals and alloys
Precious and semi-precious stones
Pearls
Furs
Manuscripts
Drawings and records
NOT Covered
- + Money or securities (use Coverage 3 instead)
- + Motor vehicles, trailers, semi-trailers, and their equipment
Same Exclusions as Coverage 3
All the exclusions that apply to Inside Premises - Money also apply here (accounting errors, voluntary parting, etc.)
Inside Premises - Robbery or Burglary of Other Property (Extended)
Important Distinction: Burglary vs. Robbery
Understanding these definitions is critical for determining coverage.
Burglary
Taking of property from inside the premises by someone who:
- + Unlawfully enters or exits
- + Leaves visible marks of forcible entry or exit
Example: Broken window, forced door, cut lock - evidence of forced entry.
Robbery
Taking of property from a person by:
- + Causing or threatening violence
- + Causing fear of bodily harm
- + Using force
Example: Armed gunman holds up cashier and demands money from register.
Burglary Coverage Requirements
For burglary to be covered, there MUST be:
Visible Evidence of Forcible Entry or Exit
If someone enters through an unlocked door and steals property with no signs of forced entry, it's NOT burglary under the policy - NOT covered!
Extended Coverage: Watchperson Robbery
Coverage extends to include robbery of a watchperson who is:
- + Employed exclusively by the insured
- + While inside the premises
Example: Your security guard is held up at gunpoint inside the building and forced to open the safe - covered!
Exam Tip: The "Marks" Requirement
Many exam questions test whether you know burglary requires visible marks of forced entry. If there are no marks (unlocked door, open window), it's not covered burglary!
Key Numbers to Memorize
8
Insuring Agreements in Commercial Crime Coverage
$5,000
Special limit for precious items (metals, stones, furs, etc.)
90 Days
Coverage extension for employees temporarily outside territory
2000
Year ISO released new commercial crime program
1
Only ONE coverage (Employee Theft) negates employee exclusion
10
General exclusions that apply to all coverages
Exam Tips: Commercial Crime Coverage
1. Know All 8 Coverages
Be able to identify what each coverage does. Focus on Employee Theft (1), Inside/Outside Money (3&4), and the difference between them.
2. Employee Theft is Special
Only Employee Theft coverage (1) covers losses caused by employees. All other coverages EXCLUDE employee dishonesty.
3. Burglary Requires Marks
Burglary coverage requires visible evidence of forcible entry/exit. No marks = no coverage!
4. Voluntary Parting = No Coverage
If you willingly gave property away (even if tricked), it's excluded. Crime coverage is for THEFT, not fraud inducement.
5. Inside vs. Outside
Coverage 3 = money stolen from inside premises. Coverage 4 = money stolen while in transit outside. Know the difference!
6. Auto-Cancellation Rule
Coverage for an employee ends immediately when you discover ANY dishonest act by that employee.
7. Modern Threats
Computer Fraud (6) and Funds Transfer Fraud (7) were added in 2000 to address electronic/cyber threats. Know what each covers.