Form CR 00 21: Commercial Crime Coverage Form (Loss Sustained Form)
1. What the form is
The CR 00 21 Commercial Crime Coverage Form (Loss Sustained Form) is an insurance policy component that provides coverage for certain types of financial losses resulting from criminal acts. This form is designed to be included in a commercial package policy. The core principle of the "Loss Sustained" basis is that it covers losses that both occurred and were discovered during the policy period. It may also cover losses that occurred during the policy period but are discovered within a specified time after the policy ends, typically one year (this is known as the extended discovery period). The form lists several insuring agreements, and coverage only applies to those for which a limit of insurance is shown on the declarations page. This allows businesses to select and pay for only the specific crime coverages they need.
2. Classes of business it applies to
This form is broadly applicable to a wide range of commercial entities. It is not industry-specific but rather addresses common crime exposures faced by many businesses. Examples of businesses and scenarios where this form would be used include:
- Retail Stores: Coverage for theft of money and securities from the premises or employee theft of cash from registers.
- Manufacturing Companies: Protection against forgery or alteration of company checks by an outside party.
- Service Businesses (e.g., accounting firms, law firms): Coverage for employee theft of client funds or company assets.
- Non-Profit Organizations: Protection against theft of donations or fraudulent disbursements.
- Any business with employees: Employee theft coverage is a common insuring agreement selected under this form.
- Businesses handling cash or securities: Coverage for theft, disappearance, or destruction of money and securities, both on and off premises (e.g., during transport by a messenger or armored car).
- Companies susceptible to check fraud: Forgery or alteration coverage protects against losses from forged checks, drafts, or promissory notes.
It's important to note that there are separate, similar forms for governmental entities (e.g., CR 00 25).
3. Special considerations
There are several important considerations when using the CR 00 21:
- Loss Sustained vs. Discovery: The primary distinction is the coverage trigger. Under a "Loss Sustained" form like CR 00 21, the loss must generally occur and be discovered during the policy period (or the extended discovery period). This differs from a "Discovery" form (e.g., CR 00 20), which covers losses discovered during the policy period, regardless of when they actually occurred (subject to any retroactive date). Understanding this difference is crucial, especially when switching between form types, as coverage gaps can occur.
- Prior Insurance: The Loss Sustained form may provide coverage for losses that occurred under a prior policy if that prior policy's discovery period has expired and the current policy would have covered the loss had it been in effect. This "continuity of coverage" is a key feature.
- Extended Discovery Period: If the policy is terminated (for reasons other than non-payment), there's typically a one-year period to discover and report losses that were sustained during the policy period.
- Definition of "Occurrence": The policy defines "occurrence" differently for various insuring agreements. For example, multiple acts of employee theft by the same employee are typically considered a single occurrence. Understanding this definition is vital for determining how deductibles and limits apply.
- Exclusions: The form contains specific exclusions. For example, losses due to voluntary parting with property due to unauthorized instructions or threats may be excluded under certain insuring agreements. Losses related to virtual currency were also historically excluded, though endorsements may be available to add back some coverage.
- Declarations Page (CR DS 00): The CR DS 00 (or a similar declarations form like CR DS 01 for commercial entities or CR DS 03 for government entities) is crucial as it specifies which insuring agreements are active and their respective limits and deductibles. No coverage applies to an insuring agreement unless a limit is shown.
Real-world example: A company had a CR 00 21 policy from January 1, 2022, to January 1, 2023. In March 2023, they discover an employee had been embezzling funds throughout 2022. Because the loss was sustained during the policy period and discovered within the one-year extended discovery period, it would likely be covered, subject to policy terms and limits. However, if the embezzlement occurred in 2021 and was discovered in March 2023, it would likely not be covered under the 2022-2023 policy unless there was continuous prior "loss sustained" coverage that would respond.
4. Key information for agents and underwriters
Agents and underwriters should focus on the following when dealing with CR 00 21:
- Risk Assessment: Thoroughly evaluate the applicant's internal controls for handling money, securities, and other property. This includes segregation of duties, regular audits, and employee background checks. Weak controls increase the risk of employee theft and other covered losses.
- Selecting Insuring Agreements: Guide the insured in selecting the appropriate insuring agreements and limits based on their specific exposures. Not all businesses need all seven standard insuring agreements (which typically include Employee Theft, Forgery or Alteration, Inside the Premises – Theft of Money and Securities, Inside the Premises – Robbery or Safe Burglary of Other Property, Outside the Premises, Computer Fraud, and Money Orders and Counterfeit Money).
- Pricing: Pricing will depend on the selected insuring agreements, limits, deductibles, the nature of the insured's business, loss history, and the strength of their internal controls. For example, a business with a large number of employees handling cash will likely pay more for Employee Theft coverage.
- Coverage Gaps: Be mindful of potential coverage gaps, especially when an insured is switching from a "Discovery" form to a "Loss Sustained" form, or if there have been lapses in coverage. The "Loss Sustained" form's provision for covering losses under expired prior policies can be beneficial but requires careful review of the prior coverage.
- Endorsements: Numerous endorsements are available to tailor coverage, such as adding coverage for clients' property (CR 04 01) or funds transfer fraud (CR 04 02). Recent changes to ISO crime programs also introduced options like fraudulent impersonation coverage.
- ERISA Compliance: For businesses with employee benefit plans subject to ERISA, ensure that the Employee Theft coverage is structured to meet federal bonding requirements. Recent ISO changes may require specific election of ERISA plan official dishonesty coverage.
- Definition of "Designated Person" for Discovery: Recent ISO updates to crime forms (June 2022 editions) changed the discovery trigger to loss discovered by a "designated person" rather than just "you" (the insured). This defined list includes roles like risk managers, officers, and partners, which is an important detail for claims.
- Motor Vehicle Theft: Note that theft of motor vehicles is generally covered under commercial auto policies, not typically under the CR 00 21.
Underwriting Guideline Example: For a new business with no prior crime insurance, underwriting a "Loss Sustained" form like CR 00 21 means the insurer is primarily concerned with losses that occur and are discovered during their policy period. However, for a business with a history of continuous "Loss Sustained" coverage, the underwriter must also consider the potential for "prior acts" that might be discovered during the new policy term and fall back to the prior policy's terms but be paid under the current policy's limits if the prior discovery period has expired. This requires a careful review of the expiring coverage and limits.