Several Parts of the coverage; “Insuring Agreements” 

 

1. Fidelity / Employee Theft / Employee Dishonesty 

  • Who is considered an employee? Does your client have any independent contractors, leased employees, volunteers or students?  Office-sharing arrangement?  If necessary, make sure subsidiary entities or affiliated (but not “subsidiary”) entities are also covered. 
  • Are belongings of the insured’s clients (patients) also covered / third party coverage?  May need to be added separately. 
  • Is there any coverage for ee’s who have previously stolen?  Is coverage terminated upon discovery of a theft at the insured’s employment? 
  • Coverage for officers/shareholders may be excluded totally, or limited to those with small amount of ownership. 

2. ERISA  This may be part of #1, Employee Theft, and is often a separate limit, not shared.  There is no deductible on the ERISA limit (prohibited by law).   The limit may automatically increase to stay compliant.   Note, this section covers only direct losses to the plan itself; it is NOT fiduciary liability.  

3. Forgery or Alteration of checks, credit card transactions made BY and TO the Insured.   The policy may require the Insured to have complied with all the conditions of the credit card.   

If the Insured is sued for refusing to pay a forged amount, the insurance company might pay defense costs (see if this coverage is inside or outside the limits and whether a deductible applies). 

4. Inside and Outside the Premises 

  • INSIDE the premises.  Inside means the Insured’s locations or the bank
    • MONEY covered for Theft, Disappearance or Destruction 
    • OTHER PROPERTY covered if loss is due to a robbery (actual or attempted) or a burglary of a safe/vault. 
  • OUTSIDE the premises.  Outside means while in the custody of a messenger or in an armored vehicle
    • MONEY covered for Theft, Disappearance or Destruction 
    • OTHER PROPERTY covered for an actual or attempted robbery. 

Property damage that happens during a robbery is usually covered also, i.e. broken windows. 

5. Computer Fraud or Funds Transfer Fraud – using a computer to fraudulently transfer money.  Some policies require the insured to have fully complied with security procedures. 

6. Counterfeit Paper Currency or Money Orders – having accepted these in good faith in exchange for goods or services.   Some policies only cover currency from certain countries (like U.S. and Canada). 

7. Other / optional 

  • Telephone Toll Fraud (long distance charges) 
  • Vendor Theft – often shares with Employee Theft 
  • Identity Fraud (for executives, spouses, & others in same household) 
  • Computer Virus specifically directed at the Insured 
  • Software licensing violations (copying software) 

 

Coverage Language to look for 

  • “Discovery Basis”  vs. a Loss Sustained basis.  Similar to a claims-made vs. occurrence.    Often, employee theft happens for a long time before it is discovered.    See if the policy will cover prior acts, or will it contain a retroactive date (sometimes this is added by endorsement and may not be mentioned in the quote.)  There may be language applicable if the insured is switching from one form to another. 
  • Manifest Intent - Does the coverage require that the employee have manifest intent to 1) harm the insured and 2) obtain improper benefit.   With the language, the crime has to specifically and directly harm the insured.  If the policy does not have this language, the coverage is usually more broad.   
  • Direct Losses vs indirect losses -  This is often found near the beginning of the policy.  Indirect losses may be losses to a third party that the insured is responsible for, or costs to research the loss.  See if there is an exclusion for indirect losses. 
  • Expenses - Costs that the insured pays to hire an independent accounting, audit or investigative firm to determine the existence or the amount of a loss.   Some companies will cover this at a lower limit, or it may be specifically excluded. 
  • Definition of “Occurrence” – May be in one area of the policy or separately under each coverage part.  Usually “a series of acts”.   It is sometimes determined by the individual who causes the loss. 
  • Loss Valuation – Money is often covered at face value and property is covered at replacement cost unless the insured doesn’t replace it, then ACV. 

 

Common Exclusions 

  • Being induced by a dishonest act to voluntarily part with title or property (money is not mentioned). 
  • Losses from the use of credit cards. 
  • Loss of confidential information (personal, financial, credit card info, medical records). 
  • Inventory Shortage – can use inventory records to support a claim, but not as sole proof of the loss. 
  • Personal accounts of executives. 
  • Fire damage.  (Arson?)  Money or a safe/vault may be covered, but other damage not covered. 
  • Kidnap, Ransom, Extortion – extortion for medical records? 
  • Vandalism