Risk & Business Magazine Knight Archer Insurance Spring 2016 | Page 30

R
&
Crime
Insurance
B Discovery or Loss Sustained?
BY: KNIGHT ARCHER COMMERICAL INSURANCE

N

o employer wants to believe that
their trusted employees would steal
from them. Unfortunately, the reality is
that employee theft is all too common.
Because of their trusted positions, it is
often far easier for employees to steal
from a company than any outsider. Also,
once an employee begins stealing from
his or her employer, it often continues
over a sustained period, resulting in
higher losses.
While standard property and inland
marine insurance policies provide some
protection from criminal acts, they
frequently 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

30 SPRING 2016

• Embezzlement
• Dishonesty, Disappearance and
Destruction
• 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 polic