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Commercial Crime Coverage Form (Discovery Form) - CR 00 20

The CR 00 20 Commercial Crime Coverage Form (Discovery Form) is an insurance policy component used in Commercial Package Policies (CPPs) to protect businesses against financial losses due to various criminal acts. Its defining characteristic is the "discovery" trigger, meaning it covers losses that the insured discovers during the policy period (or an extended discovery period, typically 60 days, or one year for employee benefit plans), regardless of when the criminal act actually occurred, provided the loss happened after any specified retroactive date. This contrasts with a "loss sustained" form (like the CR 00 21), which covers losses that both occur and are discovered during the policy period, or occur during the policy period and are discovered within a specified time after its expiration.

The CR 00 20 is designed to be flexible, allowing businesses to select from several insuring agreements by showing a limit of insurance and deductible on the declarations page for each desired coverage. Common insuring agreements include:

• Employee Theft: Covers loss of money, securities, and other property resulting from theft by an employee. This can be crucial for meeting ERISA bonding requirements for employee benefit plans, though recent ISO changes may require a separate election for ERISA plan official dishonesty.
• Forgery or Alteration: Protects against losses from forgery or alteration of checks, drafts, promissory notes, or similar written promises. It may also cover legal expenses if the insured is sued for refusing to pay an instrument believed to be forged, provided the insurer consents to the defense.
• Inside the Premises - Theft of Money and Securities: Covers theft, disappearance, or destruction of money and securities from within the insured's premises or banking premises. It also typically covers damage to the premises or to a locked safe, vault, or cash register resulting from actual or attempted theft.
• Inside the Premises - Robbery or Safe Burglary of Other Property: Covers loss of or damage to other property (not money or securities) from actual or attempted robbery of a custodian or safe burglary within the premises. Damage to the premises during such an event may also be covered.
• Outside the Premises: Protects money, securities, and other property while in the care and custody of a messenger or an armored motor vehicle company, against theft, disappearance, destruction, or robbery.
• Computer Fraud: Covers direct loss of money, securities, and other property resulting from the use of any computer to fraudulently cause a transfer of property from inside the premises or a banking premises to a person or place outside those premises.
• Funds Transfer Fraud: Covers loss resulting directly from a fraudulent instruction directing a financial institution to transfer, pay, or deliver funds from the insured's transfer account.
• Money Orders and Counterfeit Paper Currency: Covers loss from accepting counterfeit currency or money orders in good faith.

Classes of Business It Applies To

The CR 00 20 is suitable for a wide range of commercial enterprises, as most businesses face some level of crime exposure. Specific examples include:

• Retail Stores: Highly susceptible to employee theft, robbery of cash on premises, and counterfeit currency.
• Financial Institutions (though they often have specialized policies): Risks include employee dishonesty, forgery, and computer/funds transfer fraud.
• Manufacturing Companies: Exposure to employee theft of inventory or raw materials, as well as computer fraud.
• Service Businesses (e.g., janitorial services, contractors): May need coverage for employee theft of clients' property, which can sometimes be added by endorsement (e.g., CR 04 01 Clients' Property).
• Healthcare Providers: Risks include employee theft of funds or supplies and potential computer fraud related to billing or patient data (though cyber liability policies are also critical here).
• Non-Profit Organizations: Often handle cash donations and employ volunteers, creating exposures to theft and forgery.
• Businesses with Employee Benefit Plans: Require employee theft coverage to meet ERISA fidelity bond requirements.
• Hospitality (Hotels, Restaurants): Risks of theft of money and securities from premises, robbery, and potentially employee theft. Specialized endorsements like CR 04 11 Guests' Property might be relevant for guest-related losses.

Special Considerations

Several factors are important when considering or using the CR 00 20:

• Discovery vs. Loss Sustained: The "discovery" trigger is generally broader as it can cover losses that occurred long before the policy period began, as long as they are discovered during the policy period (and after any retroactive date). This can be particularly beneficial when an insured switches from a loss sustained form or had no prior crime coverage, as it can pick up previously unknown, historical losses.
• Retroactive Date: To limit exposure to very old, unknown losses, insurers may add a retroactive date endorsement (e.g., CR 20 05 Include Retroactive Date). This means the policy will only cover losses that occurred *after* this specified date, even if discovered during the current policy period. This is a key point of negotiation and underwriting.
• Extended Period to Discover Loss: The form includes a provision allowing the insured to report losses discovered within a certain period (typically 60 days for most losses, 1 year for employee benefit plan losses) after policy cancellation. However, this extension often terminates if the insured obtains other crime coverage.
• Prior Acts Coverage: When moving from a "loss sustained" policy to a "discovery" policy, the new discovery form may provide broader coverage for prior acts. The "Policy Bridge–Discovery Replacing Loss Sustained" condition (E.1.m in some versions) addresses how the discovery policy interacts with a prior loss sustained policy's discovery period, often making the discovery policy excess.
• ERISA Compliance: Businesses with employee benefit plans subject to ERISA must ensure their employee theft coverage meets federal requirements. Recent ISO changes mean that ERISA plan official dishonesty coverage might need to be specifically elected in addition to standard employee theft.
• Definition of "Discovery": Loss is considered "discovered" when the insured first becomes aware of facts that would cause a reasonable person to assume that a loss covered by the policy has been or will be incurred, even if the exact amount or details are not yet known. Recent editions may specify "designated persons" (e.g., risk manager, officer) whose discovery triggers coverage.
• Exclusions: Common exclusions include acts committed by the named insured, partners, or members; losses resulting from governmental action; indirect losses (like business interruption); and losses dependent on inventory computation or profit and loss computation to prove their existence or amount. Theft or dishonest acts by employees known to have committed such acts prior to the policy period may also be excluded if specific individuals within the insured organization were aware of the prior acts.

Key Information for Agents and Underwriters

• Pricing: Premiums will depend on the limits and deductibles chosen for each insuring agreement, the nature of the insured's business, loss history, internal controls, and the scope of coverage (e.g., presence or absence of a retroactive date). Computer fraud and funds transfer fraud are increasingly significant exposures and pricing will reflect this.
• Risk Assessment: Underwriters will scrutinize the applicant's internal controls, such as segregation of duties, regular audits, background checks for employees in sensitive positions, and computer security measures. Poor controls can lead to higher premiums, higher deductibles, lower limits, or declination. The underwriter will also assess the moral hazard associated with ownership and management.
• Coverage Gaps:
  • Ensure limits are adequate for potential losses. Quantifying maximum cash exposure is easier than employee theft or computer fraud, where sophisticated schemes can lead to very large losses.
  • Be aware of the distinction between crime coverage and cyber liability coverage. While CR 00 20 covers some computer-related crime, broader cyber risks (data breach, network damage, cyber extortion) typically require a separate cyber liability policy.
  • The form does not cover theft of motor vehicles.
  • Losses due to credit card transactions are generally excluded.
• Underwriting Guidelines:
  • For "discovery" forms, underwriters are particularly concerned about unknown prior losses. A thorough review of the applicant's history and potentially the imposition of a retroactive date are common.
  • Employee theft is a major driver of crime losses. Underwriters will assess employee screening, supervision, and controls over financial transactions.
  • The financial stability and loss history of the applicant are key underwriting considerations.
  • The declarations page (often a CR DS 00 series form, like CR DS 01 or CR DS 02 for commercial entities) is critical as it specifies which insuring agreements are active, the limits, and deductibles.
  • Endorsements can significantly modify coverage. For example, CR 25 04 can include members of an LLC as employees.
• Switching Forms: When an insured switches from a "discovery" form to a "loss sustained" form, there can be coverage gaps for losses that occurred during the discovery policy's term but are not discovered until after its extended discovery period and outside the new loss sustained policy's terms. Careful transition planning is essential.

The CR 00 20, when properly tailored with appropriate insuring agreements and limits, provides vital protection against a variety of criminal acts. Its "discovery" basis offers a broad temporal scope of coverage, which can be a significant advantage for insureds, albeit one that underwriters will carefully assess. The related CR DS 00 is a declarations form used in conjunction with the CR 00 20 to specify the elected coverages, limits, and other policy-specific details.