CO 1006, CO 1007 AND CO 1008–COMMERCIAL OUTPUT PROGRAM CRIME COVERAGE PARTS

(August 2019)

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INTRODUCTION

Three Crime Coverage Parts are available for use with the AAIS Commercial Output Program:

CO 1006–Crime Coverage Part Employee Fraud and Dishonesty Money and Securities provides coverage for employee dishonesty and fraud and/or money and securities losses only on a loss sustained basis.
CO 1007–Crime Coverage Part Loss Sustained provides coverage for Employee Fraud and Dishonesty, Computer and Telecommunications Fraud, Counterfeit Money, Forged Credit Card Written Instruments, Forged Checks, and/or Money and Securities. Coverage is on a loss sustained basis.
CO 1008–Crime Coverage Part Discovery Basis provides the same coverage as CO 1007 except on a discovery basis.

This article begins with an analysis of CO 1007. It then provides an analysis of CO 1006 by reviewing the differences between it and the CO 1007. The last part of this article compares the differences between CO 1007 and CO 1008.

Crime Schedules

The CO 1050 and 1051–Schedules of Coverages used with the property coverage part do not contain a crime section. Separate and specific Crime Schedules must be attached to provide the coverage.

The Crime schedules to attach are based on the coverage part being used and how limits and locations are to be displayed.

Crime Coverage Form	Available Crime Schedules	When to use
CO 1006–Crime Coverage Part Employee Fraud and Dishonesty Monday and Securities	CO 1054–Crime Schedule	If coverage is blanket over all locations
	CO 1055–Crime Schedule – Scheduled Limits and Locations	If coverage limits apply per location.
	CO 1056 –Crime Schedule – Covered Locations	If the blanket coverage described on CO 1054 is to be limited to only Scheduled locations.
CO 1007-Crime Coverage Part – Loss Sustained	CO 1057–Crime Schedule – Specific Limits	If a different limit applies to each coverage being provided.
	CO 1058–Crime Schedule – Single Limits	If one single limit applies over all coverages being provided.
	CO 1059–Crime Schedule – Covered Locations	If the blanket coverage described on CO 1057 or CO 1058 is to be limited to only Scheduled locations.
CO 1007-Crime Coverage Part – Loss Sustained	CO 1057–Crime Schedule – Specific Limits	If a different limit applies to each coverage being provided.
	CO 1058–Crime Schedule – Single Limits	If one single limit applies over all coverages being provided.
	CO 1059–Crime Schedule – Covered Locations	If the blanket coverage described on CO 1057 or CO 1058 is to be limited to only Scheduled locations.

CO 1058–CRIME SCHEDULE SINGLE LIMIT

Limits

A limit and a deductible must be entered. These apply separately to each of the coverages listed and selected on the schedule.

The box next to one or more of the listed coverages must be checked to select that the particular coverage applies.

Location Coverage

The coverage may be issued without restriction to locations. If so, the Blanket Location Coverage box is selected. If the coverage is to be limited to only specific locations, that box must be selected and CO 1059–Crime Schedule–Covered Locations be attached.

Note: The default is for coverage to apply at all covered locations. The addition of the CO 1059 is a restriction of this coverage. There are no limits on the CO 1059 which means the single limit continue to apply.

Coverage Extensions

Outside the Coverage Territory (Employee Fraud and Dishonesty) provides a space to enter a limit and/or a number of days. The coverage part makes no reference regarding the days or the limit on this schedule.
Conveyance by Armored Vehicle (Money and Securities). This extension is provided with no default limit. An entered limit would be subject to the policy limit.
Personal Accounts Extension (Forged Credit Card Written Instruments)

Coverage is extended for the personal accounts of the named insured, its partners, officers, and LLC members. An entered limit would be subject to the policy limit.

Personal Accounts Extension (Forged Checks)

Coverage is extended for the personal accounts of the named insured, its partners, officers, and LLC members. An entered limit would be subject to the policy limit.

Supplemental Coverage

Inventory and Proof of Loss Expense can be increased above the defaulted $5,000 provided in the coverage part.
Loss Sustained Prior to the Policy Period is informational only. No entry can be made.

Coverage Options

The default for Other Covered Property is replacement cost. If the Actual Cash Value is selected, the valuation for Other Property will be on an Actual Cash Value basis instead.

Employee Welfare or Pension Benefit Plan

The name of any and all Employee Welfare or Pension Benefit Plans that are to be covered by this coverage part must be listed in the space provided. If they are not listed, they are not covered.

Cancellation of Prior Insurance

This section is a notification that any previous bond or crime coverage is cancelled on the same date that the crime coverage under this coverage part takes effect.

Optional Endorsements

Optional or additional endorsements are listed in the spaces provided by form number and title.

CO 1057–CRIME SCHEDULE–SCHEDULED LIMITS AND LOCATIONS

This schedule is identical to the Crime Schedule Blanket Limits schedule with one exception. Instead of coverage applying to all covered locations, only the single location listed on this schedule is covered. When multiple locations are to be covered, a separate CO 1057 must be completed for each such location.

CO 1059–CRIME SCHEDULE – COVERED LOCATIONS

This schedule is a supplemental declaration used with CO 1058–Crime Schedule Single Limit to restrict coverage. It is activated by an entry on the CO 1058. This schedule restricts the crime coverage to only the locations listed on it. There are no separate limits, so all are subjects to the limits and coverages shown on the CO 1058. There is no coverage at any location unless it is listed.

CO 1007–CRIME COVERAGE PART–LOSS SUSTAINED

Agreement

This coverage part is complete only when attached to CO 1000–Commercial Output Program–Property Coverage Part because the following sections of the Property Coverage Part are referenced in the Crime Coverages.

Common Policy Conditions
Definitions
What Must be Done In Case of Loss
Loss Payment
Other Conditions

Definitions

1. Computer Fraud

The use of hardware, software, or other computer-related devices to fraudulently transfer, make payments, or to deliver covered property to a person or place away from a covered location is considered computer fraud. The activity can take place at a covered location, on the named insured’s computer or at a bank premises. The hardware, software, and related devices are not required to be owned or in the control of the named insured.

Examples:

The comptroller of Medical Technologies travels with a company-issued laptop computer. When the computer is stolen it is used to access Medical Technologies’ files to order funds transferred to an offsite bank location and account. Coverage applies.

2. Employee

An employee is an individual or natural person (as opposed to a corporation) who provides a service to the named insured, is paid in the form of salary, wages or commissions, and who is under the direction and control of the named insured while performing the service. These individuals are considered employees while actively employed and for up to 30 days after employment ends. Employee also includes:

Individuals who are employed by an employment contractor but are subject to the named insured’s direction and control on a long-term, short-term, or temporary basis. It does not include when short-term or temporary employees have care and custody of the insured's property while outside a covered location.
Non-compensated volunteers performing services for the named insured. Volunteers engaged in fund raising activities are not included as employees. Non-compensated means that the volunteer cannot be receiving payment or services in kind from the named insured or from any other source.
Student interns while performing duties that fall into the scope of employees but only if they are receiving work experience for course credit.
Directors or trustees when handling funds of employee welfare or pension plans that is insured under this policy. In addition, officers with a 25% or higher ownership interest in a named insured are employees if engaged in handling one of the mentioned plans.
Individuals involved with an insured employee welfare or pension plans as an administrator, employee, manager, or trustee. Plan administrators or managers who are independent contractors are not employees.

The following are not employees:

Brokers, factors, commission merchants, consignees, independent contractors, agents or any individual or organization operating in a similar capacity.
Directors, trustees, or managers of limited liability companies except when performing activities that fall into the scope of normal duties for an employee.

3. Forgery

There are three components to forgery.

The signature of a person must be altered or fabricated
The intent of the alteration or fabrication must be to deceive
The person doing the altering or fabricating must not be the person who owns the signature

All three components must be present to constitute forgery.

Note: Mechanical signatures are treated the same as handwritten signatures.

4. Manager

A manager is the person in a limited liability company who provides direction for the company.

5. Other covered property

This is tangible property owned by the named insured or by others that is not excluded elsewhere in the coverage part.

6. Telecommunications Fraud

The term refers to fraudulent transfer, payment, or delivery of covered property from inside a covered location, financial institution, or the named insured’s computer to a location or individual outside the covered location. The method used to perpetrate this fraud must be one of the following:

Telecommunication transmission, including facsimile, telephone, telegraph, cable, or teletype
An electronic funds transfer from a financial institution when sent based on fraudulent written orders claiming to be from the named insured or an agent of the named insured.

Coverage

Property referenced in the following coverages is covered unless it is excluded. A covered item may be subject to a limitation. To be covered a loss must occur during the policy period on the declarations.

Losses covered are those caused by a peril described in one of the selected coverages.

When CO 1058–Crime Schedule Single Limit is used, all coverages selected are covered. When CO 1057–Crime Schedule Specific Limits is used, all coverages that are selected and for which a limit and deductible is entered are covered. When a coverage is not selected and the words “Not Covered” appears beside a coverage on the CO 1057, that coverage does not apply and all references to that coverage are considered to have been deleted from the policy. Similarly, if a coverage is not selected on the CO 1058, that coverage does not apply and all references to that coverage are considered to have been deleted from the policy.

1. Employee Fraud and Dishonesty

Money, securities and other property is covered. The named insured must either own the item or be holding it for someone else. It may also be property for which the named insured is legally liable. The property is covered even when it is on the premises of a customer of the named insured. Only coverage for direct physical damage or direct loss from damage to the property is provided.

The loss or damage must result from a dishonest or fraudulent act committed by an employee of the named insured. The employee may be working alone or in collusion. The actual identify of the employee is not required for coverage to apply. The types of fraudulent and/or dishonest acts covered are theft, computer fraud, forgery, and alteration but coverage is not limited to only these.

The most paid in a single occurrence is the coverage part single limit or the limit for Employee Fraud and Dishonesty on the Crime Schedule. As used in this coverage, an occurrence is the sum of all loss that results from one or a series of fraudulent or dishonest acts. These acts can be caused by one or more employees and still be a single occurrence.

Example: Mary and Bill conspire to remove merchandise from their employer’s warehouse. Because she is in bookkeeping and he is in warehousing, the plan works until a surprise audit catches them. Mary and Bill committed twelve separate thefts but because each was part of a series of acts, coverage for the sum of all twelve acts was limited to the single occurrence limit on the crime schedule.

2. Computer and Telecommunications Fraud

Loss of or direct loss from damage to money, securities or other property is covered if caused by computer or telecommunication fraud. The coverage territory is worldwide and applies to both computer and telecommunication fraud. The most paid in a single occurrence is the coverage part single limit or the limit for Computer and Telecommunications Fraud on the Crime Schedule. An occurrence includes both single acts as well as a series of related acts committed by one or more persons. Coverage applies even if the individual responsible for the crime is not identified.

Related Court Case: Wire Transfer Qualifies As Computer Fraud

3. Counterfeit Money

A loss that occurs because the named insured accepts any of the following is covered, provided the items were accepted in good faith during a normal business exchange of goods, money, or services:

Counterfeit United States or Canadian paper money
Money orders that may be counterfeit or stolen or for any other reason are not paid when presented
Travelers checks that may be counterfeit or stolen or for any other reason are not paid when presented
Other countries’ counterfeit paper money but only if the insured is conducting business in that country

The limit is the limit shown on the Crime Schedule or included in the single limit on the Schedule.

The limit is per occurrence. An occurrence is one act or event or a series of related acts by one of more individuals, known or unknown.

4. Forged Credit Card Written Instruments

If a credit card, debit card or charge card that is issued to the named insured, partners, members, officers, employees, or managers is used and the written documentation needed to complete the transaction is forged or altered, there is coverage up to the limit on the Crime Schedule subject to the following:

The coverage is worldwide
The named insured is legally liable to the issuer of the card
The named insured has complied with all agreements with the card issuer.

The insurance company will pay for all defense costs associated with the denial of payment to the card issuer. However, before the named insured starts to incur defense costs it must receive written permission from the insurance company to do so. The cost of the defense is pay in addition to the limit of insurance.

The limit is per occurrence and the definition of occurrence is all forgery or alteration by one person without regard to how many acts or written transactions are involved.

Example: George's wallet was stolen while he was traveling. Because his wife was traveling with him, they used her cash and credit cards and waited until returning home to notify the credit card company and the insurance company of the theft. The credit cards included a requirement that the card issuer be notified of the loss of a card as soon as practicable after the card is lost. Because George did not do so, he did not comply with his credit card agreements and therefore this coverage did not apply to the losses on the credit cards.

5. Forged Checks

If a check, draft, promissory note or similar written promise document or order from or alleged to be from the named insured or its agent is forged or altered, there is coverage up to the limit on the Crime Schedule subject to the following.

The coverage is worldwide.
The insurance company will pay for all defense costs associated with the denial of forged or altered documents. However, before the named insured starts to incur defense costs it must receive written permission from the insurance company to do so. The cost of the defense is pay in addition to the limit of insurance.
The limit is per occurrence and the definition of occurrence is all forgery or alteration by one person without regards to how many acts or written documents are involved.

6. Money and Securities

Money, securities, bullion, and lottery tickets which are owned by the named insured or for which it is legally liable are covered for loss caused by theft, disappearance, or destruction. The covered property must be at a covered location or at a bank or other savings institution. The items are covered away from the covered location but only while in the care, custody, or control of the named insured, its partners, officers, managers, employees or LLC members or within the residence of any of those listed above. The time in the residence must be considered temporary but there is no requirement that one of the parties must be in the residence at the time of the loss.

Example: Jerry was in charge of taking the deposit to the bank after closing the restaurant on Saturday night. He decided to visit a few bars on the way home. Once home he put the deposit bag in the freezer and had a good night’s sleep. He attended church the next morning before golfing in the afternoon. On Monday morning he took the deposit bag out of the freezer and headed to the bank. When he opened the bag, it was empty. The loss is covered because either the money was with Jerry or in his residence the entire time it was away from the premises.

The most paid in a single occurrence is the limit on the Crime schedule. In this coverage, occurrence is an act, an event, or even a series of related acts or events. The number of persons involved in the acts or events is not taken into consideration in determining an occurrence.

Coverage Extensions

The limits that apply to the Coverage Extensions are those listed on the Crime Schedule. However, if a limit is not shown for a Coverage Extension, the full limit for the coverage being extended applies. All coverage limits are part of and not in addition to the policy limits.

1. Employee Fraud and Dishonesty–Outside Coverage Territory

This is merely a temporary territorial extension and does not provide additional coverage or limits of insurance. Coverage applies to direct physical loss of and direct loss to money, securities, and other covered property due to fraudulent or dishonest acts committed by any employee while that employee is temporarily outside the territorial limits of the policy for 90 days or less. Coverage includes loss or damage due to theft, computer fraud, forgery, or alteration but is not limited to only these actions. Loss payment is subject to the Employee Fraud and dishonesty deductible, if any.

Example: Justin is in Mexico on company business. His employer does not know that Justin is also a drug dealer. When a connection he makes on his business trip gives him a chance to purchase high quality cocaine to sell in the United States, Justin uses his company expense checks to buy the drugs. Justin figures he will repay the company from the money he makes when he sells the drugs. As soon as he returns, his luggage is searched, the drugs are confiscated, and he is arrested. Justin's company has coverage up to the limit of the Employee Fraud and Dishonesty limit because of this Coverage Extension.

Note: The Crime Schedule permits entry of a limit and a number of days but this coverage does not specifically mention either. If a limit is entered, based on the opening paragraph of Coverage Extensions, instead of the full policy limits, the coverage would be no more than the limit entered. However, if a limit higher than the policy limits was entered, it would not be considered because the limit paid is part of and in addition to the policy limits.

2. Personal Accounts Extension (Forged Credit Card Written Instruments)

The named insured, its partners, officers, and members with ownership interest in the limited liability company are additional insureds as regards their personal accounts covered under the Forged Credit Card Written Instruments Coverage.

Example: Frances is a partner with Craig and James. Her wallet is stolen, and the credit cards are used. She reports the theft correctly and on a timely basis. However, the company that issued the card in her name demands payment and threatens to sue her. When she contacts the insurance company, she is informed that she is an additional insured and is covered.

3. Personal Accounts Extension (Forged Checks)

The named insured, partners, officers, and members with ownership interest in the limited liability company are additional insureds as regards forged or altered checks, drafts or promissory notes for their personal accounts under the Forged Check Coverage.

4. Money and Securities–Conveyance by Armored Vehicle

Coverage applies for loss caused by theft, disappearance, or destruction of money, securities, bullion and lottery tickets owned by the named insured, or for which it is legally liable, when in the care, custody, or control of an armored vehicle company. Coverage only applies for the amount that cannot be recovered from the armored vehicle company and its insurance carrier.

The most paid in a single occurrence is the Money and Securities Conveyance by Armored Vehicle limit on the schedule of coverages. This is a sublimit – not an additional limit of insurance. If no limit is entered, the entire limit of the crime schedule is available.

Supplemental Coverages

Supplemental coverage limits are separate from and not part of the applicable limits for coverages described under Coverage. If no limit is displayed for a Supplemental Coverage, coverage applies up to the full limit of the coverage to which it is supplemental. The limit available for a described Supplemental Coverage is the only limit available for it and is not the total of the limit plus the limit for the coverage for which it is supplemental.

1. Inventory Fees and Proof of Loss Expenses

The reasonable expenses incurred by the named insured as a response to the insurance company's request to prove that a loss occurred and to determine its value are covered. There is no coverage for expenses for a public adjustor or those incurred due to the Appraisal Provision. The limit of insurance is $5,000 unless a different limit is on the Crime Schedule. No deductible applies.

2. Loss Sustained Prior to the Policy Period of this Insurance

If a loss occurs during a prior policy period, the discovery period for that prior policy period has expired and the insured cannot recover under that prior policy, this Supplemental Coverage pays for that loss. This is subject to the termination date of the prior policy corresponding with the inception date of this policy and the loss being covered by this policy if it had been in force at the time of the loss.

The amount paid is limited to the lesser of the limit of coverage under the current policy and the prior policy. The deductible that applies to the loss is the lower of the deductibles in the two policies.

Example: Thyme and Rhyme Shop has crime coverage in its COP policy that runs from 1/1/18 to 1/1/19 and provides Employee Dishonesty coverage with a $100,000 limit and a $2,500 deductible. The prior policy period had an Employee Dishonesty limit of $25,000 with a $1,000 deductible. Thyme’s owner discovers that a former clerk had a shipment of products routed to her home instead of to the proper destination. The order was placed on 2/1/17 and the prior policy denied coverage because the discovery period expired. The current policy covers the loss for up to the previous policy limit of $25,000, subject to a $1,000 deductible.

Note: Once there is a gap in coverage, this supplemental coverage ceases to exist. However, if there are multiple policy years without gaps, this coverage applies back to the earliest policy on which this coverage was provided.

Example: Lionel has the following coverages:

Policy Period	Limit of Insurance	Amount of Loss	Date of discovery
1/1/14-1/1/15	25,000	100,000	1/21/19
1/1/15-1/1/16	75,000
1/1/16-1/1/17	75,000
1/1/17-1/1/18	100,000	10,000	1/15/19
1/1/18-1/1/19	100,000
1/1/19-1/1/20	100,000

On 1/15/19, an ex-employee confesses that he stole $10,000 from Lionel during the policy year 1/1/17-1/1/18. Coverage is provided under the current policy for the $10,000. This action causes Lionel to hire an outside firm to investigate potential lapses in its internal controls. The firm discovers that a former bookkeeper had stolen $100,000 in small increments starting in the 1/1/14-1/1/15 policy period and continuing through 1/1/17. Even though $100,000 is available on the current policy period, recovery is limited to the $25,000 limit on the prior policy.

Perils Excluded

1. Broad Exclusions

The doctrine of concurrent causation holds that coverage applies to a property loss that can be attributed to two causes, one excluded and one covered. As a result, coverage has been found for earth movement, flood, and other specifically excluded events. This set of exclusions, often called anti-concurrent causation exclusions, attempts to avoid concurrent causation by stating that the event is excluded, regardless of any other causes that contribute to or aggravate the loss. With this approach, there is no coverage, even if the contributing cause of loss is normally covered.

a. Civil Authority

Loss or damage caused by order of any civil authority is excluded. Seizure, confiscation, destruction, and quarantine of any property are examples of excluded civil authority actions.

b. Nuclear Hazard

Loss caused by nuclear reaction, nuclear radiation, or radioactive contamination is not covered. Any loss that is caused by the nuclear hazard is not considered a loss caused by fire, explosion, or smoke. Coverage for nuclear risk is available only through nuclear coverage associations.

c. War and Military Action

There is no coverage for loss or damage caused by any of the following:

· War, undeclared war and civil war

· Warlike action by a military force. Actions taken by the government to prevent or defend against an expected or actual attack by any government or other authority using military personnel or agents is also excluded.

· Rebellion, revolution, insurrection, or unlawful seizure of power. Actions taken by the government to prevent or defend any of these is also excluded.

If any action involves nuclear reaction, nuclear radiation, or radioactive contamination, this exclusion applies in place of the Nuclear Hazard exclusion.

2. Limited Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully.

a. Criminal, Fraudulent, Dishonest or Illegal Acts

Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion by any of the following:

· The named insured

· Partners

· Limited liability company members with ownership rights

· Officers who have more than 25% ownership rights in a named insured entity

b. Discovery After the Policy Period

If a loss is discovered more than one year after the end of the policy period or date of cancellation, there is no coverage. If coverage is terminated for a particular employee, there is no coverage if a loss caused by that employee is discovered more than one year after that employee was removed from coverage under this policy.

Example: Leslie Products had crime coverage on its COP during the period 3/1/17 to 3/1/18. One of the employees, Kelsey, was caught in a dishonest act on 3/20/17. She was terminated from coverage under the policy and fired. On 4/1/18, Leslie discovers the Kelsey had committed another and separate dishonest act on 3/10/17. Coverage does not apply to this loss because it was discovered more than 12 months after Kelsey’s 3/20/17 coverage termination date.

Leslie might have coverage under her current policy’s Loss Sustained Prior to the Policy Period of This Insurance Supplemental Coverage.

c. Indirect Loss

An indirect loss occurs as a result of a direct damage loss. Examples are loss of income, expenses to prove and determine a loss and legal liability. These examples and all other indirect losses are excluded from this coverage part. There are exceptions when the coverage is specifically described in the coverage part.

d. Intangible Property or Trade Secrets

There is no coverage for loss of confidential information, processing methods, trade secrets or any other kind of intangible property.

e. Inventory Shortage or Profit/Loss Computation

If the only proof that a loss occurred is based on the taking of inventory or an accounting calculation, there is no coverage for that loss. This information will be necessary to support a loss ~~claim~~claim, but it cannot be the only way to prove the existence of a loss.

f. Legal Expenses

All legal expenses related to the defense or the prosecution of a legal proceeding or a claim is excluded. The only exceptions are those described in the Forged Credit Card Written Instruments and the Forged Checks Coverages.

g. Trading

Trading losses from stocks, commodities, bonds, futures or other financial instruments, either in the name of the named insured or in the name of a genuine or fictitious account, are not covered.

3. Employee Fraud and Dishonesty Exclusions

The following exclusions apply to only Employee Fraud and Dishonesty Coverage.

a. Discovery of Dishonest Acts

Fraudulent or dishonest acts committed by an employee are not covered if the named insured, its partners, officers, director, manager, or LLC members with ownership rights knew the employee had committed fraudulent or dishonest act before or after being hired. When the person with knowledge was acting in collusion with the employees this exclusion does not apply, and coverage remains in place.

Example: Philip is the son of one of the owners of the company. He's had a rough start in life and has already spent time in prison, but his mom decides to give him one more chance and puts him to work in the warehouse. Philip learned a lot in prison and leaves with $50,000 in goods one day after work. Coverage does not apply to this loss.

b. Employee Cancelled Under Prior Insurance

If an employee of the named insured or an employee of a firm acquired by the named insured was excluded from a prior employee dishonesty coverage part and had never been reinstated, that employee continues to be excluded under this coverage.

c. Vandalism

Loss or damage caused by any form of vandalism is not covered. Damage caused by a computer virus or from hacking into the insured's computers, networks or web sites are examples of one type of vandalism that is not covered.

4. Computer and Telecommunications Fraud

This exclusion applies only to Computer or Telecommunications Fraud coverage. Coverage does not apply to loss or damage caused by or resulting from:

a. Criminal, Fraudulent, Dishonest or Illegal Acts

Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion by any of the following:

· Employees of the named insured

· Officers, directors, trustees, managers of the named insured

· Authorized representatives of the named insured

b. Client Access

When electronic data put into the named insured’s client-controlled computer causes a loss, there is no coverage if the data was entered by a person with authorized access to the client's authentication code or device.

5. Counterfeit Money

This exclusion applies only to Counterfeit Money coverage.

Criminal, Fraudulent, Dishonest or Illegal Acts

Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion by any of the following:

· Employees of the named insured

· Officers, directors, trustees, managers of the named insured

· Authorized representatives of the named insured

6. Forged Credit Card Written Instruments and Forged Checks

This exclusion applies only to Forged Credit Card Written Instruments and Forged Checks coverages.

Criminal, Fraudulent, Dishonest or Illegal Acts

Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion by any of the following:

· Employees of the named insured

· Officers, directors, trustees, managers of the named insured

7. Money and Securities

The following exclusions apply to only Money and Securities coverage.

a. Criminal, Fraudulent, Dishonest or Illegal Acts

Loss caused by criminal, fraudulent, or dishonest acts is not covered if the act(s) is committed alone or in collusion by any of the following:

· Employees of the named insured

· Officers, directors, trustees, managers of the named insured

· Authorized representatives of the named insured

b. Errors or Omissions

Losses due to errors or omissions in mathematical calculations or accounting entries are not covered.

c. Exchanges or Purchases

Coverage does not apply when the loss is due to property being given away or surrendered in a purchase or exchange transaction.

Example: Perry buys office equipment advertised on eBay. He sends in his money, expecting to receive a full-sized desk and bookshelves. He receives a dollhouse-sized desk and bookshelf instead. Perry tries to locate the seller but discovers he has vanished. There is no recovery available from Perry's Money and Securities coverage, so he writes a really harsh review.

d. Money Operated Devices

Loss of covered property contained in a machine or device operated by money deposited in it is not covered unless the device is designed to constantly monitor and record the money deposited in it.

e. Property Surrender or Transfer

There is no coverage when a loss occurs because property is given or transferred away from a covered location or banking premises based on unauthorized instruments. There is also no coverage when property is given or transferred away from a covered location or banking premises because of a threat. The only exception applies to the threat portion of this exclusion. If the property is taken from covered persons when it is off premises and the person with the property was not aware of the threat, there is coverage. Also, if the off premises property was taken in an action that was not related to a threat there is coverage.

Examples:

Katie receives a phone call that instructs her to take the day’s receipts and place them in a bag outside the building or the building will be detonated. She follows the instructions. Coverage does not apply in this case.

Katie takes the day’s receipts to the bank. While she is gone a threat is phoned into her company. A man approaches her and threatens to harm her with a knife if she does not surrender the money. She complies with the demand. This loss is covered because it was off premises and the person with the property was not aware of the threat.

f. Vandalism or Malicious Mischief

Loss or damage to a covered location, cash box, cash drawer, safe, vault or similar receptacles caused by or resulting from vandalism or malicious mischief is not covered.

Example: Thieves enter Marco’s office after it closes on Friday evening and spend hours ransacking it. Coverage applies for the money and securities taken but there is no coverage for the spray painting and general trashing of the office and equipment.

Note: Vandalism and malicious mischief should be covered under the property coverage part.

g. Voluntary Parting

When the named insured or any party acting on behalf of the named insured voluntarily gives up or hands over covered property in a fraudulent scheme or trick or under false pretenses, there is no coverage.

What Must Be Done In Case Of Loss

The following provisions replace the Notice and Proof of Loss Conditions in the What Must Be Done In Case of Loss Section in the Commercial Output Program–Property Coverage Part, but only as they relate to this Coverage part. All other conditions in the section apply without change.

1. Notice for Crime Coverage

If a loss occurs, the named insured must give the insurance company or agent prompt notice of it and include a description of the property. In addition, the following circumstances require additional notification measures:

If the loss involves the commission of a crime, the police must be notified. However, such notification is not required if the loss is an Employee Fraud and Dishonesty loss, a Forged Credit Card Written Instruments loss or a Forged Check loss.
If the loss involves a credit or charge card, the issuing charge or credit card company must be notified
If the loss involves a debit card, the financial institution that issued the debit card must be notified

2. Proof of Loss–Crime Coverage

The named insured must send the insurance company a signed and sworn proof of loss within 120 days after the company requests it. The proof of loss must include the following:

The time, date, location of the loss and other details concerning the loss
Disclosure of any other insurance policies that may cover the loss
Disclosure of the named insured's interest and the interests of others in the lost property. All mortgages and liens must be provided.
Repair or replacement cost of covered property with detailed cost estimates
Lists or inventories of damaged and undamaged property. These lists must include quantities and values. The documents needed to substantiate the valuation must be attached.

Additional Crime Conditions

These conditions are in addition to CL 0100– Common Policy Conditions and CO 1000–Commercial Output Program–Property Coverage Part Conditions.

CL 0100–AAIS Commercial Lines Common Policy Conditions

CO 1000–Commercial Output Program Property Coverage Part Analysis

1. Acquisition of Employees or Additional Locations

Employees and locations acquired by the named insured because of consolidation, merger or purchase, are automatically covered. This coverage extends for no more than 90 days starting from the date of consolidation, merger, or purchase. Notification of the consolidation, merger, or purchase must be supplied to the insurance company within those 90 days. Premium must be paid for the additional employees and locations and is prorated from the date of the consolidation, merger, or purchase through the end of the policy period.

If an employee welfare or pension benefit plan is acquired as a result of a consolidation, merger or purchase, and is sponsored by the named insured, it is included as an insured under Employee Fraud and Dishonesty Coverage without any notification requirement.

Example: Iona owns a bookstore and purchases the stationary store next door. Sara is a clerk at the stationary store and is upset because she knows she will lose her job as a result of the purchase. She removes stock valued at $50,000 from the store and leaves town. The loss occurs 45 days after the purchase is finalized. Even though Iona had not yet reported the purchase, coverage applies because the purchase was still within the 90-day automatic coverage period.

Note: There is no statement that this automatic 90 consecutive days of coverage ends on the expiration date of the policy. So, if the policy term was 1/1/19-1/1/20 and the acquisition was on 12/30/20, would the 90-days coverage from the 1/1/19 time period remain in effect until the insurance company was made aware of the acquisition?

2. Discovery Period Extension

While coverage ends when the policy period ends or the policy is cancelled or terminated, the named insured has one year in which to discover and report a loss that happened prior to the termination point.

Example: Gretel's COP policy runs from 12/1/19 to 12/1/20. On 1/1/20, Gretel requests that the crime coverages be deleted from the policy. Gretel's discovery period changes from 12/1/20 to 12/1/21 to 1/1/20-1/1/21.

3. Multiple Named Insureds

If more than one insured is named on the policy, the following applies:

Duty of First Named Insured

The first named insured acts on behalf of all other insureds with respect to insurance issues under this policy. If the first named insured is removed from the coverage part, the next insured named becomes the first named insured.

Employee Status

An employee of any named insured is considered an employee of all named insureds.

Pertinent Knowledge

Knowledge by any insured, or a partner or officer of that insured, is considered knowledge on the part of each insured.

Note: The term insured is used here and not named insured.

Payment to the First Named Insured

When payment is made to the first named insured or any other named insured for a loss, the insurance company no longer has any liability for that loss to any other named insured.

4. Employee Welfare or Pension Benefit Plans

These conditions are required to comply with the Employee Retirement Income Security Act of 1974 (ERISA).

The Employee Benefit plan is treated as an insured under Employee Fraud and Dishonesty coverage.
Combining two or more plans in one policy is permitted if the Employee Fraud and Dishonesty limits available to each plan are at least equal to those required by ERISA if each was insured separately.
If payment for a loss under the Plan is made to a party other than the Plan, that party must hold the payment for use by the Plan.
If money, securities and other property for two or more plans is commingled, any loss payment must be shared by each Plan on a pro rata basis according to the amount of coverage required of each plan by ERISA.
No deducible applies to an ERISA loss.

5. Records Pertaining to Money and Securities

The named insured has a responsibility to keep its records in such a way that the insurance company can use them to verify the amount of any reported loss.

Valuation

The valuation provisions in this section are in addition to the valuation provisions in CO 1000–Commercial Output Program–Property Coverage Part.

1. Bullion

Bullion is valued on what is actually paid to replace it or the average cost for replacement as published by the London Metals Market for the 14 days before the date on which the loss was discovered. Because bullion is a tradable commodity, a time period for valuation must be established. The smaller of the two valuation methods is used.

2. Money

Money losses are adjusted according to face value and are paid in United States currency. However, loss involving foreign currency can be paid in the currency of that country or in its United States equivalent based on the rate of exchange published by the Wall Street Journal on the day the loss was discovered. The insurance company has the sole option on deciding how to adjust foreign currency losses.

3. Other Covered Property

Other covered property is valued based on its replacement cost unless actual cash value is selected on the Crime Schedule. Replacement cost and actual cash value are defined and explained in the Valuation Section of CO 1000–Commercial Output Program–Property Coverage Part.

4. Securities

The value of securities is its value at the close of business on the day the loss is discovered. The insurance company has the option to pay the value of the securities or to replace them.

Example: Thieves steal Paul’s stock securities and other items kept in his office safe. He had 100 shares of Folksy stock. The value of each share was $50 on the date of loss but it dropped to 10 cents the very next day (the date of loss discovery) when Folksy petitioned for bankruptcy protection. The insurance company can pay Paul $5,000 or purchase 100 shares of the stock for 10 cents per share and give those shares to Paul.

How Much We Pay

These provisions apply in addition to the How Much We Pay provisions in CO 1000–Commercial Output Program–Property Coverage Part.

1. Limit of Insurance

Any loss payment made under this coverage part does not reduce the limit of insurance available to pay other losses. However, the payment cannot exceed the limit of insurance shown on the Crime Schedule that is available for the particular coverage.

2. Deductible

The insurance company pays only after the loss exceeds the deductible amount for the coverage involved. If two or more deductibles could apply to the same loss, only the highest is applied.

3. Prior Insurance That We Issued or Any Affiliate Issued

This provision addresses how a loss covered in part by this coverage part and in part by prior insurance issued by the same company or an affiliate is handled. In those cases, the most paid for a covered loss is the largest amount available under this Crime Coverage Part or any previous coverage issued by the company or its affiliates that was cancelled or terminated. The insured cannot collect more than the amount of the loss, regardless of the number of coverages that apply to it.

Example: Prissy worked in Family Motors’ parts warehouse for ten years. A new accounting manager noticed discrepancies. Careful research implicated Prissy in theft of parts. When she was confronted with the evidence, she confessed to thefts throughout the length of her employment. The total amount of the loss was $125,000. The current policy limits were $150,000 but prior time periods limits were as low as $25,000. Because Family Motors had the same carrier throughout the time the thefts were committed, the $150,000 limit applies, and the entire loss can be paid.

Note: Compare this to the Supplemental Coverage – Loss Sustained Prior to the Policy Period of This Insurance.

4. Insurance Under More Than One Policy

When another policy or policies cover the same loss, the insurance company pays only the amount of loss that exceeds the limit due from the other coverage, whether it can be collected or not, subject to the limit of insurance of this coverage part.

5. Limits and Multiple Years of Coverage

The limits of insurance under the Crime Coverage Part do not accumulate from year-to-year, regardless of the length of time coverage has been in force. The limits for each year stand alone and are not added to limits for any other year.

6. Payment of Loss Sustained By More Than One Named Insured

The insurance company does not pay more for a loss sustained by two or more named insureds than the amount that would be due one named insured if it had sustained the entire loss.

CO 1006–CRIME COVERAGE PART - EMPLOYEE FRAUD AND DISHONESTY, MONEY AND SECURITIES

This form offers only two coverages. The following summarizes the form differences.

Coverage Schedules

CO 1054–CRIME SCHEDULE–BLANKET LIMITS

This form is identical to CO 1058–Crime Schedule–Single Limit except for the following:

Limits

Entries are available for only Employee Fraud and Dishonesty and for Money and Securities because those are the only coverages available on the CO 1006–Location Coverage.

If coverage applies only at scheduled locations, CO 1056–Crime Schedule–Covered Locations must also be completed and attached.

· Coverage Extensions

Extensions for Forged Credit Card Written Instruments and Forged Checks coverage to personal accounts do not apply.

CO 1055–CRIME SCHEDULE SCHEDULED LIMITS AND LOCATION

CO 1056–CRIME SCHEDULE – COVERED LOCATIONS

This schedule is used when location coverage is selected on either the CO 1054. All locations that are to be covered must be listed.

Definitions

The definition for Telecommunications Fraud is not included because this coverage is not part of this coverage form.

Coverage

Four optional coverages are not part of this coverage form:

Computer and Telecommunications Fraud
Counterfeit Money
Forged Credit Card Written Instruments
Forged Checks

Coverage Extensions

Two Coverage Extensions do not apply because the coverages are not part of the CO 1006:

Personal Accounts Extension (Forged Credit Card Written Instruments)
Personal Accounts Extension (Forged Checks)

Perils Excluded

The exclusions that are specific to the following coverages do not apply because the coverages are not part of the CO 1006:

Computer and Telecommunications Fraud
Counterfeit Money
Forged Credit Card Written Instruments and Forged Checks

CO 1008–CRIME COVERAGE PART DISCOVERY BASIS

This Coverage Part is identical to CO 1007–Crime Coverage Part Loss Sustained with one exception and that is in the first paragraph of the Coverage section. CO 1007–Crime Coverage Part Loss Sustained covers losses that occur during the policy period. CO 1008–Crime Coverage Part Discovery Basis covers losses discovered during the policy period.

This is a simple, but substantial difference that could result in the named insured being surprised by coverage denials. When coverage is being switched from one basis to the other it is important that the named insured understands the difference or unexpected denials can occur.

Because of the difference between loss sustained and discovery, additional changes also apply.

Supplemental Coverages

2. Loss Sustained Prior to the Policy Period of this Insurance does not apply to CO 1008 because it is irrelevant when coverage is on a discovery basis.

Perils Excluded

2b. Discovery after the Policy Period

Under CO 1007, the insured has 12 months after the policy expiration, termination or cancellation date to discover losses covered by the policy. Under CO 1008, this period is reduced to 90 days.

Additional Crime Conditions

The wording of one condition is revised and another condition is added.

2. Discovery Period Extension

This condition matches the Discovery after the Policy Period exclusion outlined above. CO 1008 states that the loss must be sustained prior to the end of the policy in order for the 90 days extension to apply but if other coverage takes effect at any time during those 90 days, the discovery period extension automatically ends.

Example: The Crime Coverage Part runs from 1/1/19 to 1/1/20. Nancy has been dipping into the payroll twice a month for the past five years. Nancy becomes ill, is unable to work during the week of 2/15/20, and all of her illegal activities are revealed. The Crime Coverage Part for the 1/1/19-1/1/20 period pays the losses that occurred during the previous five years but does not respond to the two transactions that occurred in January 2020. In addition, if another coverage part took effect on 1/1/20, the coverage part in effect from 1/1/19-1/1/20 would not respond to the loss at all.

Note: If insurance applies to an Employee Welfare or Pension Benefit Plan, the discovery period extension is one year after the policy expiration, cancellation or termination date, as long as the loss occurred before that date. However, if other coverage takes effect at any time during the one-year period, the discovery period extension automatically ends on the date that coverage takes effect.

3. Loss Discovery

This condition applies to only this form. It explains that discovery occurs as soon as the named insured is aware of information from which a reasonable person could deduce a loss has either occurred or is about to occur. This information is not required to have specifics or details about the loss.

Note: The named insured is not required to have superhuman powers of deduction. However, the named insured can be expected to be able to draw reasonable conclusions.

Example: Jane receives emails from two different customers who complain that they have been checking their invoices and noticed a pattern of over billing. Jane decides they are cranks and does not investigate. When Jane’s bookkeeper is later discovered to have skimmed money through a combination of techniques, including over billing, the insurance company sets the date of discovery as the date that Jane received her customers’ over billing complaints.

How Much We Pay

One provision is deleted, and another is changed significantly.

3. Prior Insurance That We Issued or Any Affiliate Issued does not appear in CO 1008 because coverage is written on a discovery basis.

4. Insurance Under More Than One Policy is broadened by the addition of the following new section.

Bridge Provision–Discovery Basis Replacing Loss Sustained Basis.

This provision responds to situations where the previous coverage was written on a loss sustained (occurrence) basis and is now written on a discovery basis. If a loss occurs during the loss sustained policy period and is discovered during the extended discovery period of the loss sustained form, the coverage available on the discovery basis is excess over the coverage provided by the loss sustained form. The excess amount is the difference between the coverage amount on the prior policy and the current policy. This means that if the loss sustained policy had a $100,000 blanket limit and the discovery policy also had a $100,000 blanket limit, there would be no excess coverage available.

Example: Gingus’s crime coverage was first written on 1/1/12 and it was issued on loss sustained basis. There is a one-year discovery period after the policy expiration date. Gingus’s coverage is changed to a discovery basis for the 1/1/19-1/1/20 period. A loss that actually occurred on 6/1/18 is discovered on 3/1/019. In this case, the loss sustained coverage for the 1/1/18-1/1/19 period responds and the discovery coverage form for the 1/1/19-1/1/20 period is excess. Gingus’s coverage limits were the same for both terms so the discovery policy will not respond at all.