CR 04 01–CLIENTS’ PROPERTY

(July 2019)

INTRODUCTION

The Ownership of Property: Interests Covered Condition in the CR 00 21–Commercial Crime Coverage Form (Loss Sustained Form) limits the coverage to only the following types of property:

• Property the named insured owns or leases
• Property the named insured holds, regardless of the capacity under which it is holding it
• Property the named insured is legally liable for but only if that liability was in place before the loss occurred

This condition also explains that the insurance coverage is for the benefit of only the named insured. This means that the owners of property that the named insured is holding or for which it is legally liable have no standing with the insurance company. The named insured must present any claim on their behalf.

Example: Farley Window Cleaning Service is notified that five laptops are missing from Premium Office’s location. Farley's employees were the last persons on the Premium Office premises. Farley’s commercial crime coverage does not cover this situation because Farley was not holding Premium Office's property. Farley Window Cleaning Service will lose a client if they don’t pay for the loss or are able to prove they did not cause the loss. It is therefore important to have a coverage form that will provide coverage for loss of client’s property when taken by the named insured’s employee. CR 04 01-Client’s Property will fill that gap.

ELIGIBILITY

This endorsement can be attached to only commercial crime coverage forms or employee theft and forgery coverage forms. There are no business restrictions other than those indicated on the coverage forms.

ANALYSIS

This is an endorsement to the Insurance Services Office (ISO) Commercial Crime Coverage Form or Policy. As a result, it is subject to their conditions, definitions, and exclusions. The only changes are those within the endorsement.

INSURING AGREEMENT

This is a separate Insuring Agreement. A limit of insurance must be entered on the declarations and this endorsement must be attached in order for coverage to apply. This coverage is not an extension of any other insuring agreement.

This insuring agreement is similar to the Employee Theft insuring agreement. However, it has a very important restriction. The employee or employees who commit the theft must be identified. There is no coverage if the guilty employee or employees involved are not known.

CONDITIONS

The condition described in the introduction above is replaced by the following.

This insuring agreement limits coverage to only the following types of property:

• Property the client owns or leases
• Property the client holds regardless of the capacity under which it is holding it
• Property the client is legally liable for but only if that liability was in place before the loss occurred

Example: Changing the example above, it turns out that Premium Office did not own the missing laptops after all. It simply held them for one of its customers. Because Premium Office held the laptops for others, coverage for them could be available under Farley's crime coverage which includes CR 04 01.

This is first-party coverage for the named insured’s benefit. It is not for the benefit of third parties. As a result, the client or another party cannot present a claim to the insurance company. The named insured is responsible for satisfying all policy conditions and must present the claim to the insurance company.

Example: The Farley employees who took the laptops were identified and the computers recovered. Unfortunately, they were badly damaged and could not be used. Farley received a letter from Premium Office that stated the laptops’ values and the amount it expected Farley to pay to cover the loss. Farley’s insurance company pays the amount of the claim to Farley. Farley is then responsible for delivering that payment to Premium Office.

DEFINITIONS

This insuring agreement adds two definitions and amends one.

Added Definitions

Client

This is any entityfor whom the named insured performs services.

Note: The American Heritage College Dictionary defines an entity as “something that exists as a discrete (separate) unit.” This means that an entity can be either an individual or a business.

A very important condition is that the services must be subject to the terms of a written contract.

Example: Juan agrees to check on Connie’s store while she is away for a week. He sends Lee, one of his employees, to Connie's store once or twice a day to turn the lights on and off. When Connie returns, she discovers several items missing from her store and notifies Juan. Juan tells Connie that Lee was the only one in the store during her absence. Connie is not a client because there is no contract between her and Juan. This means there is no coverage for any loss Connie may submit.

Occurrence

It is one act, the total of multiple acts, or a series of acts an employee commits during the policy period. The acts are not required to be related but they may be. The employee may commit them alone or in collusion with others.

Revised Definition

Theft

Under this insuring agreement theft occurs when property is taken and the taking deprives the client.

The theft requirement of deprivation to the client means that if the property that is taken has no value to the client, then no theft has occurred. This definition is identical to the one in the CR 00 21 except that the term “insured” is replaced with the term “your client. This means that the client must sustain the deprivation when the property is taken.