1. Forms
2. CR
3. CR-11-00

What the Form Is

The CR 11 00, Crime General Provisions (Discovery Form), is a foundational component of a Commercial Crime insurance policy. Its primary function is to define the 'discovery' trigger for coverage. This means that the policy responds to losses that the insured first discovers during the current policy period, even if the wrongful act that caused the loss occurred prior to the policy's inception. This contrasts with a 'loss sustained' form (like the CR 10 00), which typically requires the loss to be both sustained and discovered during the policy period or a limited time thereafter. The CR 11 00 sets forth the general conditions, definitions, and exclusions that apply when crime coverage is provided on this discovery basis.

Classes of Business It Applies To

Commercial Crime insurance, and therefore the CR 11 00, is relevant to a wide array of businesses and organizations that face exposure to criminal acts such as employee theft, forgery, alteration, computer fraud, and the disappearance or destruction of money and securities. Examples include:

• Financial Institutions (though they often have specialized forms)
• Retail Stores and E-commerce Businesses
• Manufacturing Companies
• Healthcare Providers
• Non-Profit Organizations
• Service Industries (e.g., law firms, accounting firms)
• Governmental Entities

Real-world example: A manufacturing company discovers during its current policy period (which uses CR 11 00) that an employee had been embezzling funds for the past three years. Even though some of the theft occurred before the current policy began, the discovery during the policy period would trigger potential coverage under this form, subject to the policy's retroactive date and other terms.

Special Considerations

• Retroactive Date: A crucial element often used with discovery forms is a retroactive date. Losses caused by acts occurring before this specified date are not covered, even if discovered during the policy period. This prevents the policy from covering losses from the distant past that the insured might have been unaware of when purchasing the coverage. Endorsements like CR 50 06, CR 50 07, and CR 50 08 are used to establish or modify retroactive dates.
• Transitioning Coverage: When an insured switches from a 'loss sustained' policy to a 'discovery' policy, or vice versa, there's a potential for coverage gaps or overlaps. The endorsement CR 50 05 Policy Bridge; Discovery Replacing Loss Sustained is designed to address these situations.
• Continuity of Coverage: Maintaining continuous crime coverage is vital, especially with discovery-based policies, to ensure that there are no uninsured periods for newly discovered past losses.
• Prior Knowledge: Losses known to the insured prior to the policy period are generally not covered, even under a discovery form.

Real-world example: A retail business switches from a loss-sustained crime policy to a discovery crime policy (CR 11 00). Six months into the new policy, they uncover a sophisticated scheme by a former manager that started 18 months prior, under the old loss-sustained policy. If the new discovery policy has a retroactive date that goes back at least 18 months, the loss discovered now could be covered. If the retroactive date is the inception of the current policy, the prior acts would not be covered by the new policy.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriting a policy with CR 11 00 requires a thorough examination of the applicant's internal controls, audit procedures, and prior loss history. The potential to cover previously unknown losses from prior periods (up to the retroactive date) increases the insurer's exposure.
• Pricing Implications: The 'long tail' nature of discovery coverage (covering past acts discovered now) can influence pricing compared to loss-sustained forms.
• Client Education: Agents must clearly explain the discovery trigger, the significance of the retroactive date, and how it differs from loss-sustained coverage. Misunderstanding these concepts can lead to dissatisfaction at the time of a claim.
• Managing Transitions: When moving an insured to a discovery form, underwriters and agents should carefully review prior coverage and consider the use of bridge endorsements like CR 50 05 to prevent gaps.
• Impact of Mergers & Acquisitions: If an insured company has acquired other entities, underwriters need to assess the potential for discovering losses that originated in those acquired companies. Endorsement CR 50 08 (Include Retroactive Date For An Entity Acquired Through Consolidation Or Merger) may be relevant.
• Clarity on 'Discovery': The definition of what constitutes 'discovery' of a loss is critical and is outlined within the policy provisions. This usually involves the point at which an insured first becomes aware of facts that would cause a reasonable person to assume that a covered loss has occurred or is likely to have occurred.