1. Forms
2. CR
3. CR-00-16

What the form is

The CR 00 16 Public Employee Dishonesty Coverage Form O is an insurance policy form designed to protect governmental entities against financial losses caused by the dishonest acts of their employees. This coverage applies to the loss of "money", "securities", and "property other than money and securities". A key feature of this form is that the limit of insurance applies on a "per loss" basis. This means that the maximum amount the insurer will pay is for all loss resulting from a single event or a series of related dishonest acts, even if multiple employees are involved in that specific event or series of acts. In some instances, these types of forms are noted as being under the jurisdiction of the Surety Association of America.

Classes of business it applies to

This form is specifically tailored for public, governmental entities. Examples of entities that would utilize this coverage include:

• Municipalities (cities, towns, villages)
• Counties
• School districts
• Special purpose districts (e.g., water districts, park districts)
• Other state and local governmental agencies and authorities

For instance, if a city clerk embezzles permit fees over a period of time, this policy, if in effect, would respond to the cumulative loss as a single occurrence. Similarly, if several employees of a public works department collude to steal equipment, the per-loss limit would apply to the total value of the stolen equipment from that collusive act.

Special considerations

• Public vs. Commercial: This form is exclusively for public entities. Private businesses would typically use other commercial crime forms (e.g., CR 00 21).
• Per Loss vs. Per Employee: The CR 00 16 provides coverage on a per-loss basis. Its counterpart, CR 00 17, offers coverage on a per-employee basis, which could result in different coverage amounts if multiple employees are involved in separate, unrelated dishonest acts, or even in a single collusive act depending on policy wording.
• Manifest Intent: Coverage typically requires that the employee acted with "manifest intent" to cause the loss to the governmental entity and to obtain a financial benefit for themselves or another person/organization. This is a higher threshold than simple negligence or error.
• Exclusion of Individually Bonded Employees: The form may exclude coverage for employees who are required by law to be individually bonded, such as certain treasurers or tax collectors, as their fidelity may be guaranteed by a separate surety bond.
• Faithful Performance: Standard employee dishonesty coverage may not automatically include losses arising from an employee's failure to faithfully perform their duties as prescribed by law if there isn't clear dishonesty. Coverage for "faithful performance of duty" often needs to be added via an endorsement, such as CR 10 44. For example, if a public official negligently fails to collect required fees, resulting in a financial loss to the entity, this might only be covered if faithful performance is endorsed.
• Benefit of Insured: The policy is generally written for the sole benefit of the insured governmental entity. This means that third parties, such as citizens who might be indirectly harmed by an employee's dishonest actions, typically cannot file a claim directly against this policy.

Key information for agents and underwriters

• Risk Assessment: Underwriters should thoroughly evaluate the governmental entity's internal controls, segregation of duties, audit procedures, and oversight mechanisms. The number of employees, their level of access to funds and valuable property, and the entity's prior loss history are critical factors.
• Coverage Gaps Awareness: Agents should clearly explain the "manifest intent" requirement and discuss potential exclusions, such as for individually bonded employees. The necessity and availability of "faithful performance" coverage should be a key discussion point.
• Pricing Considerations: Premiums will be influenced by the selected limit of insurance, the deductible amount, the number of employees, the specific functions and financial exposures of the public entity, and the assessed strength of its internal controls.
• Per Loss vs. Per Employee Implications: It is crucial for agents to help clients understand the practical differences between the "per loss" coverage of CR 00 16 and the "per employee" coverage of CR 00 17. For example, in a scenario where three employees collude in a single scheme causing a $150,000 loss, a CR 00 16 with a $100,000 limit would pay $100,000. A CR 00 17 with a $100,000 per-employee limit might potentially offer up to $300,000 in coverage for that same event (depending on policy specifics), though it would likely come with a higher premium.
• Endorsements: Be aware of state-specific endorsements (e.g., an Illinois Endorsement CR 02 02 was noted in one context ) and other endorsements that can modify coverage, such as those adding faithful performance or adjusting definitions.