1. Forms
2. CR
3. CR-50-06

What the form is

The CR 50 06 endorsement, "Include Retroactive Date For Named Insured," is an endorsement to a Commercial Crime insurance policy that is written on a "discovery" basis. When a crime policy is on a discovery basis, it covers losses that are discovered during the policy period, regardless of when they actually occurred, unless limited by a retroactive date. This endorsement introduces such a limitation by specifying a date before which losses are not covered, even if they are discovered during the policy period. Its primary function is to prevent an insurer from being liable for losses that occurred long before the inception of the current policy, particularly when an insured switches from a "loss sustained" form or had no prior crime coverage.

Classes of business it applies to

This endorsement applies to any commercial entity purchasing a Commercial Crime policy on a discovery basis. It is particularly relevant for:

• Businesses transitioning from a "loss sustained" crime policy to a "discovery" crime policy.
• Businesses purchasing crime coverage for the first time that opt for a discovery basis.
• Situations where there's a known or suspected gap in prior coverage, and the underwriter wants to limit exposure to past unknown events.

Real-world example: A manufacturing company has had a loss sustained crime policy for many years. They decide to switch to a discovery crime policy for broader discovery terms. The insurer may attach the CR 50 06 endorsement to the new discovery policy, setting the retroactive date as the inception date of the new policy. This means that if the manufacturing company discovers a theft by an employee three months into the new policy period, but the theft actually occurred two years prior (before the retroactive date), the new discovery policy would not cover the loss due to the retroactive date limitation.

Special considerations

• Continuity of Coverage: When this endorsement is used, it's crucial to ensure there are no unintended gaps in coverage, especially when transitioning from a prior policy. The retroactive date should ideally align with the termination date of any prior crime coverage or be a date mutually agreed upon based on the insured's history.
• Impact on Discovery Provision: The core benefit of a discovery form is its broad trigger for losses discovered during the policy period. This endorsement significantly modifies that by excluding losses that occurred before the retroactive date.
• Negotiation: The specific retroactive date can be a point of negotiation between the insured and the insurer, based on the insured's loss history, prior coverage, and risk profile.

Real-world example: A retail store is buying crime insurance for the first time and chooses a discovery form. The underwriter, concerned about potential past employee dishonesty that hasn't yet been discovered, insists on adding CR 50 06 with a retroactive date equal to the policy's inception date. This protects the insurer from claims originating from events prior to their involvement.

Key information for agents and underwriters

• Risk Assessment: Underwriters use this endorsement to manage the risk associated with unknown prior acts when offering discovery-based crime coverage. The decision to use it and the selection of the retroactive date depend heavily on the applicant's history, length of operation, internal controls, and any previous crime insurance.
• Pricing: The presence and date of a retroactive limitation can influence the premium. A policy with no retroactive date (or a very distant one) presents more risk to the insurer and may be priced higher than one with a recent retroactive date.
• Coverage Gaps: Agents must clearly explain the impact of the retroactive date to the insured to avoid misunderstandings at the time of a claim. It's vital to review prior coverage to identify potential gaps created by the new retroactive date.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines on when this endorsement is mandatory, such as for new businesses, businesses with a lapse in crime coverage, or those with a poor loss history where a discovery form is offered.