(July 2019)
This analysis is of the 08 13 edition. Changes from the 10 10 edition are in bold print. It does not address changes in format that do not affect coverage.
This endorsement can be used in either of two different ways. One is to replace other employee theft insuring agreements. This means that coverage is available for only the employee or position entered on the endorsement schedule. The other is to use it as excess coverage over the employee theft insuring agreements for specific employees or positions. This means that blanket protection available for all employees is provided with one limit and another limit applies to specific employees or positions.
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Example: Do It Yourself, Inc. knows it needs employee theft
coverage for all employees. It determines the best limit for most of the
employees is $10,000. However, three employees who have important
responsibilities need a limit of $1,000,000. Do It Yourself purchases the commercial
crime coverage form with the $10,000 limit and then attaches |
This endorsement can be used with any Insurance Services Office (ISO) Commercial Crime Coverage, Employee Theft and Forgery Coverage, Government Crime Coverage, or Government Employee Theft and Forgery Coverage.
The schedule is the key part of this endorsement and must be completed accurately. Either or both of the two schedules can be used. It is important to note that coverage applies only when an employee can be specifically identified. This is more restrictive than under Insuring Agreement 1 but is this is an important feature because coverage is limited to only the employees specifically named or who occupy the positions scheduled.
This is an endorsement to the ISO Commercial Crime or Government Crime Coverage Forms and Policies and is subject to their conditions, definitions, and exclusions. The only changes are those within the endorsement.
The employee or employees to be covered must be named. A limit and deductible amount must also be entered for each named employee. Coverage is specific to the person’s name and must be accurate. A claim could be denied if the wrong name is entered.
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Example: Rebecca Williams was the manager of the finance department
at Pioneer Motors. Pioneer purchased crime coverage with an employee theft
limit of $50,000. Pioneer requested a $1,000,000 limit specifically for
Rebecca. The CR 04 08 was therefore attached to the crime coverage form
listing only Rebecca for a limit of $1,000,000. Susan Montgomery was promoted
to manager of the finance department after Rebecca retired. Susan left town 11
months later and Pioneer discovered that she had embezzled over $500,000
during her short tenure. Pioneer presented the claim to the insurance company
but it paid only the $50,000 limit for Insuring Agreement 1. because the CR
04 08 schedule had not been updated upon Rebecca’s retirement to add Susan. |
Both the positions and locations where coverage applies must be listed and described when position schedule coverage is selected. A limit and deductible amount must also be entered. Coverage can be denied if an employee in a position not described or at a location not listed on the schedule causes a loss.
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Example: Hellenic Products decided to purchase coverage for
all purchasing managers in the company for a $100,000 limit and keep $10,000
as the limit for employee theft under Insuring Agreement 1. for all other
employees. A change in overtime rules caused Hellenic to review a number of
position titles. They renamed and combined many responsibilities. Most of the
purchasing managers became inventory control representatives. One of them
diverted nearly $50,000 of the inventory to his home. The only coverage
available for the loss was $10,000 because the inventory control
representative position was not listed on the schedule. |
Using this endorsement has some drawbacks but there are two significant advantages:
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Examples: Scenario 1: Ten employees are involved in a theft ring. Each steals $100,000 in merchandise, for a total loss of $1,000,000. The named insured was covered by only Insuring Agreement 1 with a $100,000 limit The insurance company pays $100,000 for this loss. Scenario 2: Using the same situation above, the named insured
purchased a commercial crime coverage form and in lieu of purchasing Insuring
Agreement 1 purchased CR 04 08–Employee Theft – Name or Position Schedule.
The ten employees involved in the theft ring are named and each is covered
for a $100,000 limit of insurance. In this case, the insurance company pays
the entire $1,000,000 loss. |
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Example: Riddlers Electronics
purchases employee dishonesty coverage with a $100,000 limit on its 100
employees. The premium is very high because of the type of merchandise
involved. The owners analyze their exposure and decide to purchase coverage
with a $1,000,000 limit on ten positions and a reduced limit of $25,000 for all
other employees. The premium change is negligible but coverage is
significantly improved at the most important positions. |
Insuring Agreement 1. applies but a paragraph is added providing coverage for loss of or damage to money, securities, and other property that results directly from theft by an employee who can be identified and who acted either independently or in collusion with others.
The following replaces B. Limit of Insurance in the Coverage Form or Policy.
1. The maximum payment for all losses that result directly from an occurrence is the limit of insurance on the endorsement schedule that applies to the particular loss.
2. The maximum aggregate payment is the highest limit of insurance that applies to the specific employee, regardless of the number of years that coverage applied. It is very important to note that this aggregate applies whether or not there were gaps in coverage for that employee or if the amount of insurance for that employee changed.
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Example: Maria was listed on Creative Solutions’ CR 04 08
with a limit of $500,000 for the time period 12/01/09 to 12/01/10. The limit
was increased to $600,000 for the policy periods from 12/01/07 to 12/01/13.
The limit was decreased to $300,000 for the policy periods from 12/01/17 to
12/01/19. A hedge fund decides to buy Creative Solutions and its auditor
discovers Maria’s quite clever embezzlement that started in 2009. She had
stolen more than $3,000,000 but the maximum payment is $600,000 because that
was the highest limit in effect during the period of her embezzlement. |
3. The following conditions also apply if this insurance covers on a Position Schedule basis:
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Example: Ten employees were listed on the position schedule
but 12 employees were actually in those positions at the time the loss was
discovered. The limit available to pay the loss is 10/12 of the limit of
insurance or the amount of the loss, whichever is less. |
All of the exclusions
that apply to Insuring Agreement 1. apply to this endorsement.
Note: This endorsement has been modified to include wording from the mandatory CR 25 47– U.S. Department of Labor – ERISA Plan Coverage Amendments to eliminate exclusions 2.b and 2.c, when the coverage is for an employee benefit plan.
There are a number of changes, exceptions, or amendments to the conditions in the Coverage Form or Policy. They apply to only the coverage this endorsement provides:
1. The Additional Premises or Employees and the Additional Employees conditions are eliminated.
2. The Consolidation–Merger or Acquisition condition is eliminated.
3. The requirement in the Duties in the Event of Loss that law enforcement be notified is eliminated because it does not apply to any coverage that Insuring Agreement 1. provides.
4. All references to Insuring Agreement 1. in the Employee Benefits Condition also apply to this endorsement.
5. The Termination as to any Employee is rewritten so that it can apply to any crime coverage part or policy that provides employee theft coverage. However, there is no change in the actual condition.
There are three changes to F. Definitions.
1. The following change is made to the definition of occurrence:
The word “each” applies before employee instead of the word “an.” This changes the occurrence to an each employee event rather than an all employee event.
2. The following replaces the definition of employee. Employee means:
3. Paragraph c. (1) in the definition of
money that states deposits in the named insured’s account at a financial
institution are considered money also applies extends to this endorsement. (08
13 addition)