Crime Insurance: Discovery or Loss Sustained?

        Protect Yourself Against Illegal Acts with Crime Insurance


While standard property and inland marine insurance policies provide some protection from criminal acts, oftentimes they do not cover losses resulting from employee dishonesty. Crime insurance was developed to deal with the limitations of other policies and extend protection to include the fraudulent activities of employees. Standard policies cover such employee actions as:

     • Theft

     • Safe burglaries

     • Embezzlement

     • Forgery

     • Computer fraud

     • Credit card fraud

     • Counterfeiting

Discovery or Loss Sustained

Crime insurance can be written as one of two forms: discovery or loss sustained. While the loss-sustained form was the popular choice in the past, ISO restructuring of the commercial crime program has made discovery more appealing.

Using the loss sustained form, losses occurring during the policy period that are discovered during the period or within one year of its expiration are covered. Normally claims are covered by the policy in force when the loss occurred. However, if the policy in force when the loss occurred has expired and coverage has been continuously maintained since then, the current policy can be used to pay out at a reduced amount.

In basic terms, the discovery form covers losses upon discovery. The loss itself could happen at any time, but as long as it is first discovered during the active policy period it is covered. If coverage is not renewed it has a 60-day tail. When considering the discovery form, look for policies without a retroactive date endorsement. Some discovery policies use such endorsements to eliminate responsibilities for losses that occurred before a certain date, even if they are first discovered during the policy period.

You may feel that your employees would never steal from you or that your business would never be the victim of theft, but the harsh reality is that nearly every business is eventually victimized by fraud or theft. In this day and age, thieves (including your employees) do not need direct access to cash to steal from you; merchandise, supplies and securities are all fair game. You may also be susceptible to losses in the event that finished products or even raw materials are stolen right from under your nose. Essentially, any product can be a target for thieves if there is an opportunity to make a resale profit.