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Discovery and Loss Sustained Forms

Summary: The employee theft and forgery policy was last reviewed in 2000; since then the employee theft and forgery and the commercial crime policies have been updated extensively. The 2006 employee theft and forgery policy is virtually identical to the commercial crime policy with minor changes. The exclusion for acts of managers, employees, directors, trustees, or representatives now only applies to insuring agreement two, forgery or alteration. Such acts by managers, employees, etc. that result in theft and do not involve forgery or alteration are covered.

In conditions, the condition for additional employees removes reference to the establishment of any additional premises and only discusses additional employees, either hired or as a result of a consolidation, merger, purchase, or other acquisition.

The definitions that have been removed are banking premises, counterfeit money, custodian, fraudulent instruction, messenger, robbery, and safe burglary.

The differences between the 2000 and the 2006 employee theft and forgery forms are more significant, and will be discussed here. Only policy language that differs will be presented, as there are still many similarities.

The employee theft and forgery policy has two versions, the discovery version and the loss sustained version—CR 00 28 05 06 and CR 00 29 05 06 respectively.

Since the differences between the discovery and loss sustained policies are discussed in the commercial crime policy those differences will not be discussed here. See Commercial Crime Policy .

Topics covered:

Insuring agreements

Limit of insurance

Exclusions

Conditions

Definitions

Insuring Agreements

A.Insuring Agreements

Coverage is provided under the following Insuring Agreements for which a Limit of Insurance is shown in the Declarations and applies to loss that you sustain resulting directly from an “occurrence” taking place at any time which is “discovered” by you during the Policy Period shown in the Declarations or during the period of time provided in the Extended Period To Discover Loss Condition E.1.j.:

1.Employee Theft

We will pay for loss of or damage to “money”, “securities” and “other property” resulting directly from “theft” committed by an “employee”, whether identified or not, acting alone or in collusion with other persons.

For the purposes of this Insuring Agreement, “theft” shall also include forgery.

2.Forgery Or Alteration

a.We will pay for loss resulting directly from “forgery” or alteration of checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain in “money” that are:

(1)Made or drawn by or drawn upon you; or

(2)Made or drawn by one acting as your agent;

or that are purported to have been so made or drawn.

For the purposes of this Insuring Agreement, a substitute check as defined in the Check Clearing for the 21st Century Act shall be treated the same as the original it replaced.

b.If you are sued for refusing to pay any instrument covered in Paragraph 2.a., on the basis that it has been forged or altered, and you have our written consent to defend against the suit, we will pay for any reasonable legal expenses that you incur and pay in that defense. The amount that we will pay is in addition to the Limit of Insurance applicable to this Insuring Agreement.

Analysis

The insuring agreements now state that coverage is provided when a limit shown on the declarations applies to a loss that has occurred as a result of a defined “occurrence”, which was “discovered” by the insured during the policy period or the extended period to cover loss. This restricts the policy so that the nature of the loss and how it is discovered are defined and must fit those definitions before the policy limit can apply.

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ICLC Staff Writer

 

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