CR 04 15-Identity Fraud Expense

CR 04 15–IDENTITY FRAUD EXPENSE

(July 2019)

INTRODUCTION

Identity theft is a major problem. The individual whose identity was stolen incurs considerable expenses, even when there is no loss of money or property. This endorsement covers those expenses.

This analysis is of the 08 13 edition. The only changes from the 10 10 edition are in format that do not affect coverage.

ELIGIBILITY

This endorsement can be added to the Insurance Services Office (ISO) Commercial Crime Coverage Form or Policy.

SCHEDULE

The endorsement schedule has a space to list the name(s) of any person(s) who are not covered.

ANALYSIS

This is an endorsement to the ISO Commercial Crime Coverage Form and Policy and is subject to their conditions, definitions, and exclusions. The only changes are those within this endorsement.

A. Insuring Agreement

This is expense coverage. It is not compensation for lost or damaged money or property. The expenses must be incurred by either the named insured or any defined insured person. The only expenses paid are those that relate directly to an identity theft.

 

Example: Maggie is the president of Great Images, Inc. She is very surprised when a warrant officer enters her office and demands payment for uncollected bills. Maggie immediately contacts her attorney and soon discovers that her identity has been stolen. She spends considerable time contacting various creditors in order to correct the problems the identity theft created. Her attorney gets involved when various vendors attempt to collect payments for merchandise she did not order. Maggie sends a claim accompanied by all of the bills she incurs for the lost income she sustains because she must address the issues that relate to her identity theft.

B. Exclusions

One exclusion is added and one exclusion is amended.

The amended exclusion is Legal Fees, Costs, and Expenses.  The only change is that it does not apply as it relates to the coverage in this insuring agreement and Insuring Agreement A. 2.

The new exclusion eliminates coverage for any expenses related to theft or any other dishonest act committed by the named insured, any insured persons, or any person on the endorsement schedule. The expenses are excluded whether or not these individuals work alone or in collusion with others.

 

Example: The insurance company investigated Maggie’s claims and worked with local law enforcement to track down the individual responsible for her identity theft. It turns out that Sarah, Maggie’s trusted administrative assistant, had stolen her identity. The insurance company denied the claim because this endorsement considers Sarah to be an insured person.

D. Conditions

The following is added to the Duties in the Event of Loss condition:

The named insured is responsible for sending the insurance company all requests and records and that support any claim this insuring agreement covers. The records must be sent within 60 days of the date the insurance company requests them.

Note: The named insured is responsible – not the insured person. If the records are not sent coverage could be denied so the named insured must work with the insured person to make sure information is sent as required.

E. Definitions

The following three definitions are added to F. Definitions:

1. Expenses

Expenses are all of the following:

a. Advertising costs the named insured incurs to help restore its reputation. This includes incurred public relations expenses directly related to restoring the named insured’s reputation. However, the only such expenses covered are those directly related to the identify fraud.

b. After an identity fraud, financial institutions and others who grant credit or assess credit worthiness must be notified about the fraud. Certain expenses the named insured or the insured person incurs in making such notifications are covered. The covered expenses are the cost of paying others such as a notary to attest to the validity of the named insured or insured person signature on the required documentation.  

c. All certified mail costs that are incurred to send required documentation to  law enforcement agencies, financial institutions and various credit grantors are covered expenses. These costs may be incurred by either the insured person or the named insured.

d. Credit report costs that are incurred by either the named insured or the insured person.

e. Lost income of up to $250 per day. The income must be lost because of the need to complete various forms and to talk with law enforcement agencies or legal counsel. The loss of income can be incurred by either the named insured or the insured person but the  maximum payment is the lesser of the limit of insurance or $10,000.

Note: The coverage form does not state if the limit is per person or per occurrence.

f. Fees for loan re-applications when an initial loan application is rejected because of incorrect credit information. These fees can be incurred by either the named insured or an insured person.

g. Attorney fees that are reasonable but only when the fees are for one or more of the following services:

·         Defense of the named insured against various creditors, financial institutions or collection agencies

·         To remove criminal or civil judgment brought against the named insured

·         To challenge to a credit reporting agency’s accuracy in reporting on the named insured

h. Long distance charges for telephone calls that are related to identity fraud. They can be incurred by either an insured person or the named insured.

i. Many other types of expenses that are incurred by the named insured or the other person may be covered if the insurance company provides written permission for the expenses to be incurred.

2. Identity fraud

The named insured business or of any insured person’s identification being used without proper authority to do so. However, this use does not become fraud unless the activity is taken with the  intent to commit  an unlawful act. The unlawful act must violate Federal law or be considered a felony under state or local law.

3. Insured person

An employee, director, member, trustee, partner, or manager of any insured is an insured person. The spouse, any child under the age of 18 and any relative who lives in the household of any of an insured persons as defined in the first sentence is also an insured person. The only exception to this large list is any person specifically named on the endorsement schedule.

Note: This listing takes some careful analysis. If the named insured is a sole proprietorship, the named insured’s spouse, children and relatives would not be considered insured persons because the sole proprietor is the named insured but not an insured person.

 

Example: Justin Smith DBA Garden Landscaping Plus is a sole proprietorship. He has three employees.

1)     Justin is the named insured so he is not an insured person.

2)     Justin’s employees are all single. One lives with his parents; one lives on his own and one lives with his girlfriend. The employees are all insured persons, the parents of the employee living with his parents are insured persons but the girlfriend living with the employee is not an insured person.

3)     Justin’s wife is not an insured person unless she is also an employee

4)     Justin’s three children who are under 18 are not insured persons unless they or they mother are employees