17. Commercial Crime Insurance
Terms in this set (20)
An insured who owns a convenience store arrives at the store one morning and finds the door unlocked. There is no sign of forced entry but several items, including money in the cash register, are missing. Based only on this information, the insured has suffered a:
Theft means any act of stealing. It includes robbery and burglary in addition to other forms of stealing. Robbery is the taking of property from a person by one who has caused or threatened to cause that person harm or who has committed an unlawful act witnessed by that person. Burglary is the taking of property from inside a building by unlawful entry or departure from the building. Marks of forcible entry or exit must be evident. Normally, burglary is accomplished when the business is closed, whereas robbery most often occurs when the business is open. Disappearance can include not only a crime but also unknown causes of loss. Theft, burglary, and robbery tend to be losses from a known location at a known time; disappearance may lack these elements.
In commercial crime insurance, shoplifting is classified as:
B) malicious mischief.
Shoplifting is a type of theft. Although robbery and burglary are also types of theft, they involve the use of or threat of force and the forcible entry into a premises to steal property. Shoplifting involves neither force nor a forcible entry. Malicious mischief, or vandalism, is the act of willfully and maliciously damaging or destroying property.
In the commercial crime forms, the definition of theft does NOT include:
B) mysterious disappearance.
Theft is any act of stealing. This broad term covers robbery, burglary, and larceny. Mysterious disappearance is the disappearance of property without knowledge as to the place, time, or manner of its loss. Losses that cannot be identified as to time and place are generally excluded from property insurance policies.
To be defined as a burglary, an event must include which of the following conditions?
A) Fear or threat of violence.
B) Bodily injury.
C) Mysterious disappearance.
D) Visible signs of forced entry or exit.
Burglary is the forcible entry into or out of an insured's premises with the intent to carry off property belonging to the insured. Visible signs of forcible entry or exit must be present. The forcible entry may be made by tools, explosives, electricity, chemicals, or physical damage to the premises.
Which one of the following acts involves visible signs of forced entry or exit?
A) Breaking and entering.
Burglary is the forcible entry into or exit from premises with the intent to carry off property belonging to the insured, and visible signs of forcible entry or exit must be present. Robbery is the forcible removal of an insured's property by use or threat of violence or injuring or murdering a messenger or custodian. Theft is any act of stealing and includes robbery, burglary, and larceny.
How is burglary defined?
A) Taking of property from inside the premises by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit.
B) Illegal entry onto the premises of another.
C) The use of force to enter a premises after business hours.
D) Uninvited entry onto the premises of another with the intent to commit an illegal act.
The definition of burglary requires that there be signs of forcible entry or exit. Whether the entry or exit takes place during business hours is irrelevant. However, if the burglar came into the presence of the insured or an employee and used force or the threat of force against that person, the crime would become one of robbery instead of burglary.
Which of the following insuring agreements of the commercial crime coverage form would best protect an insured from losses caused by an employee's deceit?
A) Employee theft.
B) Forgery or alteration.
C) Inside the premises-theft of money and securities.
D) Inside the premises- robbery or safe burglary of other property.
Employee theft covers loss of, and loss from damage to, money, securities, and property other than money and securities. Loss must be caused directly by employee dishonesty. The act must be committed with the intent to cause the insured to sustain a loss and obtain financial benefit for the employee or a person or organization intended by the employee.
The inside the premises--robbery or safe burglary of other property insuring agreement in the commercial crime policy covers which one of the following perils?
A) Alteration of a check issued by the insured.
B) Disappearance of money while transported by armored car.
C) Burglary of a security guard while a store is closed.
D) Employee theft.
This insuring agreement has two primary coverages: loss of other property (not money or securities) while inside the premises from actual or attempted robbery of a custodian; and loss of other property from a safe or vault inside the premises from actual or attempted safe burglary.
The commercial crime policy covers loss to money and securities outside the insured's premises while money or securities are in the care and custody of a:
C) bank employee.
Losses outside the premises are covered if they occur anywhere else in the policy territory, provided the money or securities are in the care and custody of a messenger the time of the loss. A messenger is the named insured or any partner or employee of the named insured while having care and custody of the money or securities outside the insured's premises. A custodian is the named insured, any of the named insured's partners, or any employee. A watchperson is any person the named insured retains specifically to have care and custody of property inside the premises and who has no other duties.
An insured bank has commercial crime coverage form with all 7 coverage parts. During a particularly busy day, an employee is given false account information and electronically transfers a large sum of money to another account in another bank. The amount of this improper funds transfer is:
A) excluded under the Inside the Premises-Theft of Money and Securities insuring agreement.
B) excluded under the Computer Fraud insuring agreement.
C) covered under the Funds Transfer Fraud insuring agreement.
D) covered under the Outside the Premises insuring agreement.
The Fund Transfer Fraud coverage covers losses that are a result of the insured receiving fraudulent instructions to transfer money to someone else.
Which one of the following losses would be covered under the inside the premises--robbery or safe burglary of other property insuring agreement in the commercial crime policy?
A) A business owner files suit to recover property wrongly taken by a taxing authority and to recover her legal fees.
B) The safe at a furniture store is taken after the store is burglarized.
C) The silent partner in a jewelry wholesale business steals a shipment of diamonds.
D) The county taxing authority seizes and sells a taxpayer's merchandise to satisfy a tax debt.
All of the commercial crime insuring agreements exclude theft committed by the insured, partners, or members and seizure or destruction of property by government authority. Defense costs are only covered under the forgery or alteration insuring agreement.
Which of the following losses could be covered under a crime insurance policy?
A) Theft committed by the insured.
B) Loss due to seizure of property by government authority.
C) Indirect losses.
D) Theft of retail merchandise.
None of the insuring agreements in the commercial crime policy cover theft by an insured, seizure or destruction of property by government authority, or indirect or consequential losses. Theft of retail merchandise is covered.
In a crime policy, all of the following are acceptable ways to value covered property EXCEPT:
A) replacement cost.
B) estimated value.
C) face value.
D) market value.
Valuations clauses in crime insurance policies are different from those in property insurance policies. Specific valuation clauses cover such items as money, which is valued at its face value, and securities, which are valued at their market value as of the close of business on the day the loss is discovered. Losses to other types of property are paid at replacement cost, repair cost, or the limit of insurance. Estimations are not acceptable means of establishing the value of a loss.
In commercial crime forms, the insured has all of the following duties in the event of a loss EXCEPT
A) providing a sworn proof of loss within 120 days.
B) cooperating with the insurer in the investigation of the claim.
C) reporting all theft losses to the police.
D) notifying the insurer as soon as possible.
The insured is expected to notify the police if a law may have been broken. However, this requirement does not apply to employee theft or forgery or alteration losses.
A corporation located in Chicago has added an extortion-commercial entities (CR 04 03) to its commercial crime coverage form. One of the directors of the corporation is captured and held for a $3 million ransom in La Paz, Bolivia. The policy:
A) pays only if there is a threat of bodily harm.
B) excludes coverage for directors and officers who are traveling in foreign countries.
C) excludes coverage in foreign countries.
D) pays only if Bolivia is listed on the endorsement Schedule as a covered territory.
Click for Answer and Explanation
The extortion-commercial entities endorsement covers payments made in response to threats of bodily harm to employees of the insured and relatives or invitees who are also captured in the covered territories. The territory is the U.S. (including its territories and possessions), Puerto Rico, Canada and other locations shown on the endorsement Schedule. In this case, Bolivia must be listed as a location on the Schedule for the loss to be covered.
A hotel has added a guests' property endorsement to its commercial crime coverage form. A guest at the hotel removes her jewelry and leaves it wrapped in a towel at the front desk while she uses some exercise equipment. When she finishes her workout, the jewelry is gone. The policy provides:
A) no coverage because the guest was negligent.
B) coverage for jewelry only inside a safe deposit box inside the insured's covered premises.
C) coverage for guests' jewelry in the amount shown on the declarations page.
D) no coverage because the jewelry was not in the insured's possession.
The guests' property endorsement provides coverage for legal liability losses involving damage to guests' property and/or customer property while on the insured's premises, in the insured's possession, in safe deposit boxes, or inside the premises.
Which one of the following statements describes a major difference between surety bonds and insurance?
A) Different types of companies sell bonds and insurance.
B) Insurance has three parties to the contract. Bonds have only two.
C) Insurance contracts give the insurer the right to recover from third parties. Bonds only permit the surety to recover from its insured.
D) Bonds guarantee something will happen. Insurance protects if something happens.
A surety bond is a financial guarantee that something will happen (the building will be completed, the employee will be honest, the materials will be supplied, etc.). Insurance provides protection if an event insured against occurs. Insurance companies can sell both bonds and insurance. There are three parties to a bond agreement; insurance contracts have only two.
Which one of the following bonds is purchased to protect an employer from the actions of dishonest employees?
A fidelity bond is purchased to protect employers from the actions of dishonest employees. A surety bond provides monetary compensation if the bonded party fails to perform a certain act, such as a contract. A performance bond guarantees to the owner (obligee) that the contractor (principal) will complete the contract as drawn.
What is one of the major differences between the application of commercial blanket bond's policy limit versus a blanket position bond's policy limit?
A) A commercial blanket bond's policy limit applies for each loss. A blanket position bond's policy limit applies separately to each employee in that position.
B) A blanket position bond's policy limit applies for each loss. A commercial blanket position bond's policy limit applies separately to each employee in that position.
C) A commercial blanket bond's policy limit applies for each employee. A blanket position bond's policy limit applies separately to each loss.
D) A commercial blanket bond's policy limit applies for each loss. A commercial blanket position bond's policy limit applies separately to each employee in that position.
A commercial blanket bond's policy limit applies for each loss. A blanket position bond's policy limit applies separately to each employee in that position.
Which of the following statements regarding employee theft is NOT true?
A) Coverage is not cancelled for employees causing the loss.
B) The insurer pays only the amount of the loss that exceeds the deductible.
C) The insured must notify the insurer as soon as possible of any loss insured against.
D) Coverage is automatically cancelled for employees causing the loss.
Employee theft insurance provides coverage in the event of an employee's theft resulting in the loss of money, securities, or other property. Coverage is automatically cancelled for employees causing the loss. The insurer pays only the amount of the loss that exceeds the deductible.
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