Property and Casualty Insurance · Casualty Insurance · 8 min read
Commercial Crime Forms and Agreements
- Differentiate between the ISO loss sustained form and the discovery form, including their extended discovery periods and discovery rules.
- Identify the primary commercial crime insuring agreements, key property definitions, and distinct peril requirements.
- Explain specialized commercial crime coverages, standard exclusions, and valuation rules.
Policy Structure and Form Types
Commercial crime coverage can be written as a monoline policy or included as part of a commercial package policy. Standard commercial crime insurance forms are published by the Insurance Services Office (ISO). Commercial crime coverage addresses exposures such as employee theft and theft of money or securities that commercial property coverage may exclude or limit; commercial property policies can cover some theft losses.
ISO commercial crime policies can be written on either a loss sustained form or a discovery form. A loss sustained form covers losses that occur during the policy period and are discovered during the policy period or within a specified extended discovery period. Under a standard ISO loss sustained crime form, the extended discovery period is one year after the insurance ends, but it can end sooner when replacement insurance takes effect. When loss sustained crime coverage is replaced without a break, a prior insurance condition may help cover an eligible loss that occurred under the earlier policy but was discovered later, subject to policy conditions.
In contrast, a discovery form covers an eligible loss first discovered during the policy period or an applicable extended discovery period, subject to its provisions for prior losses and other insurance. Under a standard ISO discovery crime form, the extended discovery period is 60 days after the insurance ends, but it can end sooner when replacement insurance takes effect. A discovery form may use a retroactive date to exclude losses that occurred before that date, so you must check the policy for any such restriction.
Under both forms, a loss is discovered when the insured first becomes aware of facts that would cause a reasonable person to assume a covered type of loss has occurred or will occur, even if the amount or details are unknown. For example, if an audit reveals unexplained ledger discrepancies that point to theft, the loss is officially discovered at that moment, even if the full tally of missing funds takes months to calculate.
| Feature | Loss Sustained Form | Discovery Form |
|---|---|---|
| When the loss must occur | Must occur during the policy period (unless covered by prior insurance condition) | Can occur at any time, subject to retroactive date restrictions |
| When the loss must be discovered | During the policy period or within the extended discovery period | During the policy period or within the extended discovery period |
| Standard extended discovery period | One year after insurance ends (ends sooner if replacement coverage begins) | 60 days after insurance ends (ends sooner if replacement coverage begins) |
Common mistakes
- Confusing the discovery form with the loss sustained form by assuming the discovery form requires the crime to occur during the policy period.
- Assuming safe burglary covers theft when there are no signs of forced entry and the safe was left unlocked or opened by an unauthorized key.
- Believing that an inventory shortage calculation is sufficient on its own to prove a covered theft loss under commercial crime policies.
- Failing to recognize that employee theft coverage terminates immediately for an individual worker once the employer learns of that worker's dishonest acts.
Key points
- Commercial crime coverage can be written as a monoline policy or part of a commercial package policy using standard ISO forms.
- Loss sustained forms cover losses that occur during the policy period and provide a one-year extended discovery period; discovery forms cover eligible losses discovered during the policy period and provide a 60-day extended discovery period.
- A loss is officially discovered when an insured becomes aware of facts that would cause a reasonable person to assume a covered loss occurred or will occur.
- Key property types include money, securities, and other property, with separate agreements covering perils such as employee theft, forgery, and inside or outside premises risks.
- Under the ISO crime definitions, robbery involves bodily harm, a threat of bodily harm, or an obviously unlawful act witnessed by the person with custody; safe burglary involves marked forcible entry into a locked safe or vault, or the taking of a safe or vault from inside the premises.
- Commercial crime forms generally exclude indirect losses and dishonest acts by the insured, and they do not cover a loss whose existence or amount is proved only by an inventory or profit and loss computation; employee theft coverage for a particular employee ends when a person specified in the policy learns of that employee's theft or other dishonest act.
- Commercial crime forms generally value money at face value and securities at their value as of the close of business on the day the loss is discovered; limits generally apply per occurrence.
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