ISO Government Crime Coverage Forms And Policies

ISO GOVERNMENT CRIME COVERAGE FORMS AND POLICIES

(July 2019)

INTRODUCTION

The coverage that the Insurance Services Office (ISO) Government Crime Coverage Forms and Policies provide is similar to the coverage that the ISO Commercial Crime Coverage Forms and Policies provide. This analysis addresses only the differences between them.

The following are the Government Crime Coverage Forms and Policies:

This analysis compares CR 00 25–Government Crime Coverage Form (Loss Sustained Form) to CR 00 21–Commercial Crime Coverage Form (Loss Sustained Form) and their Declarations.

Related Articles:

ISO Commercial Crime Coverage Forms and Policies Analysis

ISO Commercial Crime Coverage Forms and Policies Declarations

CR DS 03–CRIME AND FIDELITY COVERAGE PART DECLARATIONS (GOVERNMENT ENTITIES)

CR DS 03–Crime and Fidelity Coverage Part Declarations (Government Entities) differs from CR DS 01–Crime and Fidelity Coverage Part Declarations (Commercial Entities) in only one way. It makes two options available under employee theft coverage. The named insured can purchase coverage on either a per-loss basis or on a per-employee basis.

CR 00 25–GOVERNMENT CRIME COVERAGE FORM (LOSS SUSTAINED FORM)

A. Insuring Agreements

The only coverage difference is adding employee theft-per employee coverage.

 

Example: Meghan, Elizabeth and John work in three separate divisions of the city government. They believe that because of that separation no one will be able to track their various dishonest acts. Unfortunately for them, an internal audit not only identifies the loss of property it follows the money trail right back to them. The total loss to the city is calculated at $125,000.

Scenario 1: The city purchased $50,000 employee theft-per loss coverage. The city receives $50,000 because, although three employees were involved, it was a single occurrence.

Scenario 2: The city purchased $50,000 employee-per employee coverage. The city receives $125,000 because each employee was covered for $50,000.

B. Limit of Insurance

This section is identical in both coverage forms.

C. Limits Deductible

This section is identical in both coverage forms.

D. Exclusions

Exclusion 1. (Applicable to all insuring agreements)

Only the following subparagraphs are amended:

a. Acts Committed by You replaces Acts Committed by You, Your Partners, or Your Members. This is because government entities do not have partners or members. This exclusion does not refer to partners and members.

b. Acts Committed by Your Employees Learned of by You Prior to the Policy Period substitutes the word “officials” for “partners, members, managers, officers, directors, or trustees.”

c. Acts Committed by Your Officials, Employees, or Representatives replaces 1. c. Acts Committed by Your Employees, Managers, Trustees, or Representatives. It substitutes “officials” for “managers, directors, or trustees.”

Exclusion 2. (Applicable to only insuring agreements 1. and 2.)

Two subparagraphs are added, one is deleted, and one is amended:

There is no coverage when a loss is caused by an employee who is required by law to be bonded.

Note: The exclusion applies whether the employee is actually bonded or not.

Coverage does not apply to any loss caused by any employee having treasurer or tax collecting responsibilities. This exclusion applies even if the position is not identified as that of a treasurer or a tax collector.

Exclusion 3. (Applicable to only insuring agreements 4, 5 and 6)

One subparagraph is amended:

E. Conditions

1. Conditions Applicable to all Insuring Agreements

All references to consolidation, merger, purchase, or acquisition of another entity in the Commercial Crime Coverage Form are removed. This is not needed because government entities do not engage in these activities.

This condition in the Commercial Crime Coverage Form is not in the Government Crime Coverage Form because government entities do not engage in mergers or acquisitions.

This condition is revised to be more streamlined and direct because of the differences between commercial and government operations. The commercial version must address multiple benefits plans, joint ventures, and multiple named insureds. Because the government version deals with only one plan and one named insured, additional and unrelated conditions are deleted. The basic elements of the condition are the same in both cases. This means any payment made is for the plan’s benefit and no deductible applies to any plan losses.

The Government Crime Coverage Form does not include the separate paragraph that provides the one-year limitation with respect to employee benefit plans without exception described in the Commercial Crime Coverage Form.

The Government Crime Coverage Form substitutes “official” for the phrase “partner, member, or officer,” in the Commercial Crime Coverage Form. The Government Crime Coverage Form also does not include the separate paragraph that provides the one-year limitation with respect to employee benefit plans without exception described in the Commercial Crime Coverage Form.

All Government Crime Coverage Forms delete all references to countries other than the United States of America and the valuation of money in those countries.

2. Conditions Applicable to Insuring agreements 1. and 2.

The Government Crime Coverage Form substitutes “officials” for the phrase “partners, members, managers, officers, directors, or trustees” used in the Commercial Crime Coverage Form

4. Conditions Applicable to Insuring Agreements 5. and 6.

Special Limit of Insurance for Specified Property

This condition in the Government Crime Form differs from the Commercial Crime Form by because   precious metals, stones, furs, and similar property are not subject to the $5,000 coverage limitation.

F. Definitions

4. Custodian

The Government Crime Coverage Form removes the terms partners and members.

7. Employee

The Government Crime Coverage Form substitutes “officials” for the phrase “partners, members, managers, officers, directors, or trustees” in the Commercial Crime Coverage Form. It also does not refer to mergers or acquisitions or include agents, brokers, factors, consignee, or commission merchant terms that are used in the Commercial Crime Coverage Form.

12. Messenger

The Government Crime Coverage Form removes the terms partners and members.

14. Occurrence

This definition is identical in both coverage forms. However, the Government Crime Coverage Form adds a section for Insuring Agreement. 2. Employee Theft–Per Employee. The slight change in this definition is very significant. Under Insuring Agreement 1, an occurrence includes the actions of all employees who act in collusion with others. Under Insuring Agreement 2, an occurrence includes the actions of each employee who acts in collusion with others.

 

Example: Mary, Paula, and Frank work for a branch of the Bureau of Motor Vehicles. They decide to keep and evenly split the proceeds of every tenth transaction. Mary becomes ill and leaves. Paula and Frank approach her replacement with their scheme but instead of joining in the scheme; she reports everything to her supervisors. The total loss is determined to be $300,000. The BMV occurrence limit is $100,000.

Scenario 1: Coverage is provided under Insuring Agreement 1. There is only one occurrence so $100,000 is the most the BMV can recover.

Scenario 2: Coverage is provided under Insuring Agreement 2. Before three employees were involves, there were three separate occurrences. There are three occurrences.  The maximum payment is based on the $100,000 or the amount the particular employee stole whichever is less. If the money was equally shared, the total payment could be $300,000.

 

The following are not considered defined terms in the Government Crime Coverage Form: