CASUALTY TYPES & BONDS · 5 MIN READ
Commercial Crime and Fidelity Coverage
The ISO Commercial Crime Coverage Form (CR 00 20) packages seven principal insuring agreements, and the exam expects you to keep them straight. Employee Theft covers dishonesty by the insured's own workers. Forgery or Alteration (IA-2 in the forgery numbering) covers checks and instruments. Inside the Premises — Theft of Money and Securities covers a broad range of takings but only of money and securities; Inside the Premises — Robbery or Safe Burglary of Other Property (IA-3) covers robbery of a custodian or safe burglary of property other than money and securities while inside; Outside the Premises (IA-4) covers robbery of a messenger carrying money, securities, or other property away from the premises. Computer Fraud (IA-6) responds when a hacker uses a computer to fraudulently transfer property, while Funds Transfer Fraud (IA-7) responds when fraudulent instructions trick the insured's bank into transferring funds — and social engineering losses, where an employee is deceived into sending money voluntarily, generally need their own endorsement. Companion forms serve government entities (CR 00 21) and ERISA plans (CR 00 22). Crime forms also differ by trigger. The Loss Sustained form covers losses that occurred during the policy period and are discovered within a limited window afterward; the Discovery form covers losses discovered during the policy period regardless of when they occurred. Understanding which form responds at a carrier transition is a recurring test point. Closely related is the ERISA fidelity bond. Section 412 of ERISA requires every person who handles plan funds to be bonded against fraud or dishonesty at no less than 10 percent of funds handled, with a statutory floor of $1,000 and a ceiling of $500,000 — raised to $1,000,000 when the plan holds employer securities. This bond is first-party protection for the plan itself. It must not be confused with fiduciary liability insurance, which defends fiduciaries against claims that they breached their duties, nor with an ERISA welfare-plan exemption that relieves certain fully insured plans from bonding.
Key rules
CR 00 20 contains seven insuring agreements, each with its own scope of property and location
Employee theft, forgery/alteration, inside premises (money and securities), inside premises (robbery/safe burglary of other property), outside premises, computer fraud, and funds transfer fraud each cover distinct perils.
Why the exam cares: Most crime questions describe a loss and ask which insuring agreement responds — the property type and location decide it.
IA-3 applies inside the premises; IA-4 covers a messenger robbed outside the premises
IA-3 reaches robbery of a custodian or safe burglary of property other than money and securities inside; IA-4 covers money, securities, or other property taken from a messenger in transit or off-site.
Why the exam cares: The inside/outside boundary is the single most tested distinction on the crime form.
Computer Fraud (IA-6) is a hacker's transfer; Funds Transfer Fraud (IA-7) is a duped bank
IA-6 pays when a computer is used to fraudulently transfer property from the premises or bank; IA-7 pays when fraudulent instructions cause the financial institution to move the insured's funds; voluntary employee-initiated payments need social engineering coverage.
Why the exam cares: Examiners exploit the fine line among these three cyber-crime mechanisms in nearly every crime question set.
Discovery form covers losses discovered during the period; Loss Sustained covers losses occurring then
The Discovery form reaches back to old, undiscovered losses; the Loss Sustained form requires the loss to have occurred during its period, with a limited post-expiration discovery window.
Why the exam cares: Trigger questions at policy transitions test which form picks up an embezzlement that ran for years before detection.
The ERISA §412 bond equals at least 10% of funds handled — $1,000 floor, $500,000 cap
The cap rises to $1,000,000 for plans holding employer securities; the bond protects the plan against fraud and dishonesty and is set at the start of each fiscal year.
Why the exam cares: The 10%/floor/cap/employer-securities ladder is a pure memorization item the exam asks almost verbatim.
Numbers to memorize
- 10% — of plan funds handled, the minimum ERISA §412 fidelity bond amount
- $1,000 — statutory floor for the ERISA §412 bond
- $500,000 — standard ERISA §412 bond ceiling
- $1,000,000 — ERISA §412 ceiling when the plan holds employer securities
- 7 — principal insuring agreements on the ISO CR 00 20 crime form
Common traps
- Confusing Computer Fraud with Funds Transfer Fraud — IA-6 is a hacker moving property via computer; IA-7 is the bank acting on fraudulent instructions; an employee tricked into paying voluntarily is social engineering.
- Confusing the inside-premises agreements — money and securities have their own inside agreement, while IA-3 covers robbery or safe burglary of OTHER property inside.
- Confusing the Discovery form with the Loss Sustained form — discovery-during-the-period versus loss-occurring-during-the-period is the whole difference.
- Confusing the ERISA §412 fidelity bond with fiduciary liability insurance — the bond pays the plan for dishonesty losses; fiduciary liability defends fiduciaries sued for breach of duty.
For every crime scenario, ask three questions in order — what property, where taken, by whom — and the correct insuring agreement falls out automatically.
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