1. Forms
2. CR
3. CR-20-04

What the form is

The CR 20 04 Change Extended Period to Discover Loss is an endorsement to a commercial crime insurance policy. Its primary function is to modify the standard time limit the insured has to discover a loss after the policy has been terminated or cancelled. Most crime policies provide a basic extended period, often 60 days, for loss discovery. This endorsement allows the insured and insurer to agree upon and schedule a longer, specified number of days for this discovery period. It is important to note that this endorsement typically does not alter the separate one-year discovery period that may apply to losses involving employee benefit plans.

Classes of business it applies to

This endorsement is suitable for any commercial entity that has a crime insurance policy and believes the standard post-policy discovery period is insufficient for their needs. It can be particularly valuable for:

• Businesses with complex financial operations where discrepancies might take longer to surface.
• Companies undergoing significant transitions such as mergers, acquisitions, or large-scale downsizing, during which the discovery of past fraudulent acts could be delayed.
• Organizations with high employee turnover in sensitive positions.
• Businesses that require extended time for thorough internal or external audits following policy expiration.

Real-world example: A national retail company decides to close several underperforming stores. They might attach the CR 20 04 to their crime policy to allow for an extended period beyond the standard 60 days to finalize all accounting for these locations and uncover any employee theft or other financial irregularities that might have occurred prior to closure.

Special considerations

• The specific number of additional days for the extended discovery period must be agreed upon by the insurer and the insured and listed in the schedule of the endorsement.
• This endorsement is designed to provide additional time to discover losses that occurred during the policy period but were not found until after its termination. It does not cover losses occurring after the policy period.
• While it extends the general loss discovery period, it's crucial to remember its limitation regarding the discovery period for employee benefit plan losses, which usually remains at one year.
• The necessity for this endorsement should be evaluated based on the insured's specific risk profile, the complexity of their operations, and the robustness of their internal control and audit procedures.

Real-world example: If a manufacturing company suspects a sophisticated, long-term embezzlement scheme by a former executive but the policy is about to expire, they would negotiate for a CR 20 04 to ensure they have adequate time for a forensic accounting investigation to uncover the full extent of the loss, even after the policy ends.

Key information for agents and underwriters

• Agents: Should proactively discuss the standard discovery provisions in crime policies with their clients. For businesses where a 60-day window might be too short, agents should recommend considering the CR 20 04. They need to clearly explain its benefits and limitations, especially concerning employee benefit plan coverage.
• Underwriters: When evaluating a request for this endorsement, underwriters will assess the potential for increased risk associated with a longer discovery tail. The pricing of the endorsement may be influenced by the length of the extension requested, the nature of the insured's business, their loss history, and the strength of their internal controls. Underwriters must ensure the agreed-upon number of days is clearly stated in the endorsement schedule.
• This endorsement can be a useful tool for managing risk when a policy is non-renewed or cancelled, providing the insured with a more realistic timeframe to identify and report covered losses that occurred during the policy term.