1. Forms
2. CR
3. CR-10-44

What the form is

The CR 10 44 Faithful Performance of Duty Endorsement is designed to be added to a commercial crime insurance policy, particularly for public entities. Its primary function is to broaden the scope of coverage beyond traditional employee theft or dishonesty. It specifically includes as a covered cause of loss the failure of an "employee" to faithfully perform their duties as prescribed by law, when such failure directly results in a loss of the insured's covered property. This means that a loss may be covered even if the employee did not act with the manifest intent to cause the loss or to obtain a personal financial benefit, which is a typical requirement under standard employee dishonesty coverage.

Classes of business it applies to

This endorsement is most commonly used for and often required by:

• Public Entities: Such as municipalities, counties, school districts, and other governmental bodies. For example, if a public school district treasurer fails to follow statutory requirements for handling funds, leading to a financial loss, this endorsement could provide coverage.
• Public Officials and Employees: It is particularly relevant for organizations where employees are bound by specific legal or statutory duties regarding the handling of money, securities, or other property. Another example could be a juvenile probation department where employees handle funds or property.

Special considerations

Key considerations for this endorsement include:

• Statutory Requirements: Many public entities are required by law to carry faithful performance coverage for certain officials or employees. This endorsement helps fulfill such requirements.
• Broader Coverage Trigger: Unlike standard employee theft coverage that often requires proving dishonest intent, this endorsement covers losses from an employee's failure to perform duties as prescribed by law, which can be a lower threshold.
• Exclusions: It's important to note specific exclusions. For instance, one common exclusion mentioned is for losses arising from the failure of any depository institution (e.g., bank failure) where the insured's property is held.
• Definition of "Faithful Performance": The interpretation of "faithful performance" and what constitutes a failure can vary and may depend on the specific laws and regulations governing the employee's duties.

Key information for agents and underwriters

Agents and underwriters should consider the following:

• Client Needs Assessment: Agents should determine if their clients, especially public entities or organizations with fiduciaries, have a statutory or contractual need for faithful performance coverage.
• Risk Assessment: Underwriters need to evaluate the internal controls, oversight procedures, and training within the insured organization concerning employees' statutory duties. The clarity of these duties and the systems in place to ensure compliance are crucial risk factors.
• Potential for Expanded Claims: This endorsement can lead to claims in situations that might not be covered under a standard crime policy, such as losses due to negligence or non-compliance with legal mandates without necessarily involving criminal intent.
• Pricing and Limits: The broader coverage afforded by this endorsement should be reflected in the premium. Underwriters must also consider appropriate limits based on the potential exposure.
• Interaction with Other Coverages: It's important to understand how this endorsement interacts with other crime coverage forms (e.g., Public Employee Dishonesty Coverage Form CR 00 16) and any other applicable bonds or insurance policies.