1. Forms
2. CR
3. CR-25-05

Commercial Crime Endorsement: CR 25 05 - Include Employees As Covered Under More Than One Insuring Agreement

1. What the form is

The CR 25 05 "Include Employees As Covered Under More Than One Insuring Agreement" is an endorsement to a Commercial Crime insurance policy. Its primary purpose is to clarify how coverage applies when a single fraudulent act, or a series of related fraudulent acts, committed by an employee could potentially trigger more than one Insuring Agreement within the policy. This endorsement specifies that the culpable employee's actions are considered covered under each of the implicated Insuring Agreements. Crucially, it addresses how the policy's Limits of Insurance and applicable Deductibles will be applied in such overlapping coverage scenarios, aiming to prevent ambiguity and ensure a clear understanding of coverage at the time of a claim.

2. Classes of business it applies to

This endorsement is relevant for a wide range of commercial entities that have a Commercial Crime policy with multiple insuring agreements where employee dishonesty poses a significant risk. It is particularly useful for businesses where an employee's fraudulent activities could be multifaceted. Real-world examples include:

• A manufacturing company where an employee embezzles funds by creating fictitious vendor payments (potentially triggering Employee Theft) and then manipulates the accounting software to hide the discrepancies (which could also implicate the Computer Fraud insuring agreement).
• A service organization where an employee steals incoming checks from clients (Employee Theft) and then forges endorsements to deposit them into a personal account (Forgery).
• A business where an employee in the finance department initiates unauthorized electronic fund transfers to an outside account (Funds Transfer Fraud) while also stealing physical cash from the company vault (Employee Theft).

3. Special considerations

There are several important points to consider regarding the CR 25 05 endorsement:

• Clarification of Limits: While the title suggests broader inclusion, this endorsement typically clarifies that if a loss is covered under more than one Insuring Agreement, the policy will usually pay no more than the largest single Limit of Insurance applicable to any one of those Insuring Agreements for the entire loss. It ensures the employee's act is assessed under all relevant agreements to determine the applicable coverage, rather than allowing for the "stacking" of multiple limits for a single occurrence.
• Application of Deductible: The endorsement helps clarify that generally only one deductible amount will apply to a loss resulting from a single "occurrence," even if that occurrence triggers multiple Insuring Agreements due to the employee's actions.
• Definition of "Occurrence": It's important to remember that commercial crime policies often define an "occurrence" to include all loss caused by one employee or a group of employees acting in collusion, even if it involves a series of acts over time. This endorsement would operate within that definition.
• Proactive Clarity: Utilizing this endorsement can help prevent misunderstandings and potential disputes during the claims process by establishing upfront how complex employee fraud scenarios involving multiple coverage grants will be addressed.

4. Key information for agents and underwriters

Agents and underwriters should note the following practical insights:

• For Agents:
  • Explain to insureds that the primary benefit of this endorsement is clarity and ensuring the employee's actions are considered under all relevant coverages to determine the most applicable limit, not necessarily to provide multiple separate limits for a single event.
  • It is particularly valuable for clients with sophisticated operations or where employees have broad access to assets and systems, increasing the potential for complex fraud schemes that touch upon different types of crime coverage.
• For Underwriters:
  • The use of this endorsement typically does not materially increase the insurer's exposure if the main policy already contains a standard provision limiting payment to the single largest applicable limit when multiple insuring agreements are triggered by one loss. Its main role is to affirm how this applies specifically to employee-driven losses.
  • The underwriting focus should remain on the insured’s overall risk profile, the strength of their internal controls, segregation of duties, and audit procedures designed to prevent and detect employee fraud.
  • Ensure the wording of the CR 25 05 is consistent with the policy's primary terms regarding the treatment of losses covered by multiple insuring agreements to avoid any unintended ambiguity.
  • Pricing impact is generally minimal if the endorsement serves primarily as a clarification. If it were to modify terms to provide broader recovery than standard policy language (which is not its typical function), then a premium adjustment might be considered.