1. Forms
2. CR
3. CR-15-25

What the form is

The CR 15 25 is an endorsement designed to amend Commercial Crime insurance policies, specifically impacting how losses are valued under certain insuring agreements, such as Forgery or Alteration. Its core function is to ensure that when a covered loss occurs (e.g., forgery of a check or other financial instrument), the amount recoverable by the insured can include the selling price of the goods or services related to the instrument, or any processing charges the insured has already borne. This provides a broader basis for recovery than typical valuations which might be limited to face value or actual cash value.

Classes of business it applies to

This endorsement is beneficial for a variety of businesses where a loss from forgery or alteration could mean more than just the intrinsic value of an instrument or item. Examples include:

• Manufacturers: If goods are shipped based on a fraudulent instrument, this endorsement can help recover the selling price of those goods, not just their manufacturing cost.
• Retailers and Wholesalers: For losses involving forged checks or payment instructions related to sales, this allows for the recovery of the item's retail or wholesale selling price, including the profit margin.
• Service Providers: If services are rendered based on a forged instrument, or if instruments representing service fees are forged, this endorsement can help recover the value of those services or fees.
• Businesses with significant pre-sale processing costs: Companies that incur substantial costs in preparing goods or documents before a sale is finalized can protect these invested costs if a related financial instrument is forged or altered.

Real-world example: A custom furniture maker ships an order worth $10,000 (selling price) after receiving a (forged) certified check. Without this endorsement, their crime policy might only cover the cost of materials if the check is valued at its 'actual cash value' or face value if it was a legitimate check that was altered. With CR 15 25, they could potentially recover the $10,000 selling price, covering their costs and expected profit.

Special considerations

• Valuation Basis: This endorsement explicitly changes the valuation method for specified losses, moving towards a recovery that makes the business whole up to its expected revenue or incurred charges for the specific transaction.
• Premium Impact: Due to the increased potential payout, adding this endorsement typically incurs an additional premium. Search result indicates a potential rating modification, such as multiplying the premium for the underlying coverage by a factor (e.g., 1.33).
• Policy Language: It's crucial to review the specific wording of the endorsement and the base policy to understand how 'selling price' and 'processing charge' are defined and to which insuring agreements the endorsement applies.
• Documentation: In the event of a claim, the insured will need to provide documentation to substantiate the selling price (e.g., sales contracts, invoices) or processing charges (e.g., cost accounting records).

Key information for agents and underwriters

For Agents:

• Needs Assessment: Identify clients whose potential forgery or alteration losses would not be adequately covered by standard valuation clauses. This is particularly true for clients with higher profit margins or significant pre-transaction costs.
• Client Education: Clearly explain the benefit of valuing losses at selling price or including processing charges, and also the associated premium cost.
• Coverage Gaps: Highlight how this endorsement can fill potential gaps in recovery under standard crime policy terms.

For Underwriters:

• Risk Assessment: The inclusion of selling price or processing charges increases the potential severity of a claim. Underwriters must evaluate the insured's sales verification processes, internal controls regarding financial instruments, typical profit margins, and the nature of their processing costs.
• Pricing: Apply appropriate rating modifications, such as the 1.33 multiplier mentioned in search result , to reflect the increased exposure. Ensure pricing is adequate for the broadened coverage.
• Clarity of Terms: Verify that the terms 'selling price' and 'processing charge' are well-understood and, if necessary, defined within the policy context to prevent ambiguity during claims.
• Limits: Consider if specific sub-limits are appropriate for losses valued on this basis, depending on the overall risk profile.