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3. CR-25-07

Endorsement CR 25 07: Include Designated Persons Or Classes Of Persons As Employees

The CR 25 07 endorsement, titled "Include Designated Persons Or Classes Of Persons As Employees," is a crucial component of Commercial Crime insurance. Its primary function is to amend the standard definition of "employee" within the crime policy. This allows the policy to extend coverage for losses caused by individuals who might not traditionally meet the policy's definition of an employee, such as volunteers, former employees retained as consultants, or members of specific committees. This endorsement is used with base Commercial Crime forms like CR 00 20 (Discovery Form) or CR 00 21 (Loss Sustained Form).

Classes of Business It Applies To

This endorsement is versatile and can be beneficial across a wide range of industries and business types. It is particularly relevant for organizations that rely on the services of individuals who aren't salaried employees in the traditional sense. Examples include:

• Non-profit organizations: These entities often depend heavily on volunteers for various functions, including handling funds or property. For instance, a non-profit's treasurer who is a volunteer could be specifically scheduled on this endorsement to ensure coverage for dishonest acts.
• Organizations with active committees: Businesses or associations that have committees (e.g., finance committees, event planning committees) comprised of individuals who are not direct employees can use this form to include those committee members.
• Companies utilizing temporary or seasonal workers not on direct payroll: If these individuals have access to company assets and don't fall under the standard "employee" definition, this endorsement can bridge the coverage gap.
• Businesses engaging former employees as consultants: If a retired employee is brought back on a contract basis and has access to sensitive information or assets, this endorsement can clarify their status as an "employee" for crime coverage purposes.

Special Considerations

There are several important factors to consider when utilizing the CR 25 07 endorsement:

• Specificity is Key: The endorsement requires the insured to specifically designate the persons or classes of persons to be included as employees in the schedule section of the form. Vague descriptions can lead to coverage disputes. For example, instead of "volunteers," it might be more precise to list "Volunteer cash handlers for the annual fundraising event."
• Underwriting Scrutiny: Insurers will likely scrutinize the individuals or classes of persons being added. They may require additional information about these individuals' roles, responsibilities, and the controls in place to mitigate potential losses.
• Potential for Increased Risk: Adding non-traditional "employees" can sometimes increase the insurer's exposure to loss. For example, volunteers may not undergo the same level of background checks as permanent employees.
• Interaction with Other Endorsements: The CR 25 07 is one of several endorsements that can modify the definition of an employee. It's important to ensure that the chosen endorsements accurately reflect the insured's needs without creating overlapping or conflicting coverage. For instance, there are specific endorsements for leased employees (CR 25 05) or non-compensated officers (CR 25 08) which might be more appropriate in certain situations.
• No Automatic Coverage: This endorsement does not automatically include all non-traditional workers; they must be explicitly designated.

Key Information for Agents and Underwriters

Agents and underwriters should pay close attention to the following when dealing with the CR 25 07:

• Risk Assessment: A thorough assessment of the risks associated with the designated persons or classes is crucial. Underwriters will need to understand the extent of these individuals' access to money, securities, and other property. They should also inquire about the internal controls and oversight applicable to these designated individuals.
• Pricing Considerations: The premium for the Commercial Crime policy may be adjusted based on the individuals or classes of persons added via this endorsement. The perceived increase in risk will likely influence pricing.
• Coverage Gaps: Agents should identify potential coverage gaps if individuals performing employee-like duties are not formally recognized under the policy. The CR 25 07 can effectively fill these gaps. For example, if a community organization relies on a volunteer to manage its finances, and that volunteer is not covered under the standard definition of "employee," a theft by that volunteer would likely not be covered without this endorsement.
• Underwriting Guidelines: Underwriters should establish clear guidelines for accepting individuals under this endorsement. This may include requiring background checks for certain designated persons, especially those in positions of financial trust. They should also verify that the insured has adequate supervision and controls over the activities of these designated individuals.
• Clarity in Scheduling: Ensure the schedule clearly and unambiguously identifies the designated persons or classes of persons. For example, "All members of the Board of Directors" or "John Doe, volunteer event coordinator."
• Relationship to Primary Insuring Agreements: This endorsement modifies who is considered an "employee" primarily for the Employee Theft insuring agreement. It's important to understand how this broadened definition interacts with the terms and conditions of that specific coverage.

By carefully considering these aspects, insurance professionals can effectively utilize the CR 25 07 endorsement to provide appropriate and comprehensive Commercial Crime coverage tailored to the specific operational realities of their clients.