AINS 23 Commercial Crime and Equipment Breakdown Insurance

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, ABC performed an inventory calculation and determined that the actual physical inventory on hand was $102,000 less than what the company's records indicated. ABC could not establish that it had sustained a loss without the inventory calculation. How much of this loss will be covered by the Employee Theft insuring agreement of the Commercial Crime Coverage part? Select one: A. $0 B. $99,000 C. $100,000 D. $102,000

$0

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, two employees, Beth and Jim, in collusion, stole money and merchandise from ABC. Beth and Jim stole money on May 1, 20X1 and August 13, 20X1. They also stole merchandise on January 15, 20X1 and September 29, 20X1. The amount of the money loss totaled $15,000 while the amount of the merchandise loss totaled $110,000. With respect to applying the limit of insurance applicable to the employee theft loss, how much will the insurer pay for the employee theft loss? Select one: A. $100,000 B. $110,000 C. $115,000 D. $125,000

$100,000

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20x1, ABC performed an inventory calculation and determined that the actual physical inventory on hand was $105,000 less than what the company's records indicated. ABC was able to prove that the loss was a result of employee theft and it was covered under the Employee Theft insuring agreement of ABC's Commercial Crime Coverage Form. How much will the insurer pay for this loss? Select one: A. $0 B. $99,000 C. $100,000 D. $101,000

$100,000

A company has employee theft coverage with a $100,000 limit and a $1,000 deductible. Which one of these is the amount that the insurer would pay if one employee stole $7,000 of covered property? Select one: A. $5,000 B. $6,000 C. $7,000 D. $3,000

$6,000

Which one of these is an example of a loss that would be covered under the Commercial Crime Coverage Form? Select one: A. Loss resulting from the use of a credit card B. A loss caused by a fraudulent entry made by an employee acting on a fraudulent instruction from a computer-software contractor who has a written agreement with the insured C. Loss related to damage to covered property by vandalism D. Loss related to damage to a motor vehicle

A loss caused by a fraudulent entry made by an employee acting on a fraudulent instruction from a computer-software contractor who has a written agreement with the insured

Which one of these describes a situation in which the Acts Committed by Your Employees, Managers, Directors, Trustees or Representatives commercial crime exclusion would not apply? Select one: A. A theft in which several employees participated B. A dishonest act committed by the named insured's authorized representative C. A theft committed by the named insured's manager D. A loss covered under the Employee Theft insuring agreement

A loss covered under the Employee Theft insuring agreement

The Employee Theft insuring agreement of an ISO Commercial Crime Coverage Form includes which one of the following as an employee? Select one: A. A person compensated and subject to the direction of the insured. B. An independent contractor who regularly works for the insured. C. Any agent of the insured corporation. D. Volunteers performing activities for the insured.

A person compensated and subject to the direction of the insured.

Which one of these excludes coverage for an exposure that should be addressed by loss control measures? Select one: A. Government Action exclusion B. Nuclear Hazard exclusion C. War and Military Action exclusion D. Account or Arithmetical Errors or Omissions exclusion

Account or Arithmetical Errors or Omissions exclusion

Which one of these is not an element of the Commercial Crime Coverage Form's definition of occurrence? Select one: A. A series of acts B. An individual act C. The combined total of all separate acts D. An act committed by only one person

An act committed by only one person

The Recoveries condition of the ISO Commercial Crime Coverage Form specifies how Select one: A. Salvage and property recoveries will be valued. B. Other insurance will affect the insured's recoveries under the coverage form. C. The transfer of rights among insurable interests functions. D. Any subrogation or salvage recoveries will be divided between the insurer and the insured.

Any subrogation or salvage recoveries will be divided between the insurer and the insured.

For coverage to apply under an Inside the Premises—Theft of Money and Securities insuring agreement of an ISO Commercial Crime Coverage Form, the thief must Select one: A. Commit an unlawful act and be observed by a "messenger." B. Use a remote computer to steal data. C. Unlawfully enter the premises. D. Be present inside the "premises" or the "banking premises."

Be present inside the "premises" or the "banking premises."

Which one of the following is an example of the exclusion for Indirect Loss in the ISO Commercial Crime Coverage Form? Select one: A. Computer fraud loss B. Counterfeit money loss C. Disappearance of property loss D. Business income loss

Business income loss

Which one of the following insuring agreements of the ISO Equipment Breakdown Protection Coverage Form covers business income and extra expense loss due to equipment breakdown occurring at a location, shown in the Declarations, that the insured does not own or operate? Select one: A. Business Income and Extra Expense B. Expediting Expenses C. Newly Acquired Locations D. Contingent Business Income and Extra Expense

Contingent Business Income and Extra Expense

The XYZ Finance Company is insured under an ISO Commercial Crime policy. One month after the policy inception date, XYZ acquired ownership of a smaller finance company including its premises and employees. Which one of the following best describes XYZ's responsibility under the Consolidation—Merger or Acquisition condition of the policy? Select one: A. Coverage applies automatically for 90 days, but XYZ must promptly notify the insurer and pay the appropriate additional premium for coverage to continue beyond that time. B. XYZ will not be charged any additional premium at the time of the acquisition for coverage to apply for the remainder of the policy term. C. Any loss that occurs after the acquisition will be covered by the acquired company's prior insurer. D. XYZ must immediately add the new company as a named insured to cover the new premises and employees.

Coverage applies automatically for 90 days, but XYZ must promptly notify the insurer and pay the appropriate additional premium for coverage to continue beyond that time.

A general exclusion of the ISO Commercial Crime Coverage Form applies to acts of employees. However, an exception is made for Select one: A. Unauthorized use or disclosure of confidential nonpublic information. B. Acts of employees learned of by you prior to the policy period. C. Coverage provided by the Employee Theft insuring agreement. D. Acts committed by the insured.

Coverage provided by the Employee Theft insuring agreement.

A claim under an ISO Commercial Crime Coverage Form is subject to the Valuation—Settlement condition. Which one of the following is true regarding this Valuation—Settlement condition? Select one: A. Securities are valued at their cost on the date acquired by the insured. B. Foreign money is paid at its U.S. equivalent value as of the date the claim is settled. C. Inventory is valued at its book value at the time the loss occurred. D. Damaged property is valued at replacement cost or the insurer can repair or replace the property.

Damaged property is valued at replacement cost or the insurer can repair or replace the property.

Which one of these sections of the Commercial Crime Coverage Form contains the limit of insurance? Select one: A. Exclusions B. Insuring agreement C. Conditions D. Declarations

Declarations

The Delicious Restaurant suffered a covered money loss under its ISO Commercial Crime Coverage Form. The form had a limit of $10,000. The value of the loss was $14,500. The insurer paid the policy limit. After paying the $10,000 policy limit, the insurer recovered $11,000 of the stolen money. Ignoring any deductibles that might apply, what dollar amount of covered property, if any, would go to Delicious Restaurant and to the insurer? Select one: A. Delicious would receive $4,500 and the insurer $6,500 B. Delicious would receive $11,000 and the insurer $0 C. Delicious would receive $1,000 and the insurer $10,000 D. Delicious would receive $0 and the insurer $11,000

Delicious would receive $4,500 and the insurer $6,500

Policies for the crime loss exposure for financial institutions are called "bonds" because Select one: A. Employee dishonesty, a key coverage, was traditionally called a "fidelity bond." B. They do not resemble typical insurance policies. C. Many insurers have developed their own forms. D. Forgery or alteration, a key coverage, was traditionally called a "fidelity bond."

Employee dishonesty, a key coverage, was traditionally called a "fidelity bond."

James is in the process of forming his own brokerage company which will include several employees. James will be best protected by purchasing which one of the following to cover the crime loss exposures of his company? Select one: A. Fidelity Bond. B. Commercial Crime Insurance. C. Financial Institution Bond. D. Surety Bond.

Financial Institution Bond.

Which one of the following is a policy that covers the crime loss exposures of financial institutions such as banks, savings and loan institutions, and insurance companies? Select one: A. Fidelity bond B. Financial institution bond C. Standard Form number 381 D. Commercial General Liability Crime Form

Financial institution bond

Which one of the following Commercial Crime Coverage Form insuring agreements provides coverage on a full worldwide basis? Select one: A. Employee theft B. Forgery or alteration C. Money orders and counterfeit paper currency D. Outside the premises

Forgery or alteration

Which one of the following exclusions applies to the Computer and Funds Transfer Fraud insuring agreement? Select one: A. Money operated devices B. Trading C. Fraudulent instructions D. Confidential information

Fraudulent instructions

The Suspension condition of an equipment breakdown policy allows an insurer to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be Select one: A. Overvalued. B. Uninsurable. C. Insured by another insurer. D. In a dangerous condition.

In a dangerous condition

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. On June 5, 20X1, a thief entered ABC through an open window while the store was closed and stole $2,500 worth of electronic merchandise. The thief also broke into a safe causing $1,500 damage to the safe and stole $3,000 in cash from the safe. Under which insuring agreement would the damage to the safe be covered? Select one: A. Inside the Premises—Theft of Money and Securities B. None C. Employee Theft D. Forgery or Alteration

Inside the Premises—Theft of Money and Securities

Loss to property after it has been transferred or surrendered is an exclusion that applies under certain circumstances to which one of the following Commercial Crime insuring agreements? Select one: A. Inventory Shortages B. Inside the Premises—Theft of Money and Securities C. Employee Theft D. Computer and Funds Transfer Fraud

Inside the Premises—Theft of Money and Securities

Which one of the following is a key service provided by equipment breakdown insurers? Select one: A. Inspection B. Maintenance C. Source for replacement parts D. Marketplace for resale of used equipment

Inspection

The forgery or alteration insuring agreement to a Commercial Crime Coverage Form applies to loss resulting from dishonest acts of the Select one: A. Insured's employees. B. Insured's customers. C. Insured's partners. D. Insured.

Insured's customers.

Which one of these exclusions applies only to the Employee Theft insuring agreement? Select one: A. Acts Committed by You, Your Partners or Your Members B. Pollution C. Indirect Loss D. Inventory Shortages

Inventory Shortages

Which one of the following is true regarding the ISO Commercial Crime Coverage Form Joint Insured condition? Select one: A. It appoints all insureds as agents of all other insureds. B. It provides that the policy will only have one named insured. C. It provides that information possessed by one insured is not assumed to be known by all insureds. D. It appoints the first named insured as an agent for all insureds.

It appoints the first named insured as an agent for all insureds

Which one of the following statements is correct with respect to the Inside the Premises—Robbery or Safe Burglary of Other Property coverage of an ISO Commercial Crime Form? Select one: A. It covers robbery only if committed against a watchperson. B. It provides coverage for money and securities. C. It covers damage to the insured's premises resulting from a covered cause of loss. D. It provides coverage both inside and outside the insured premises.

It covers damage to the insured's premises resulting from a covered cause of loss.

Many businesses need equipment breakdown insurance because Select one: A. It fills a coverage gap between the Building and Personal Property Coverage Form (BPP) and the Boiler and Machinery Endorsement. B. It is the only source of coverage for physical damage to electrically powered office equipment such as copiers, computers, and telephone systems. C. It covers insured equipment for the same perils as the causes of loss forms used with the Building and Personal Property Coverage Form (BPP). D. It covers loss due to the accidental breakdown of almost any type of equipment that operates under pressure or that controls, transmits, or uses mechanical or electrical power.

It covers loss due to the accidental breakdown of almost any type of equipment that operates under pressure or that controls, transmits, or uses mechanical or electrical power.

ABC Brokerage Company (ABC) is covered by an Insurance Services Office (ISO) Commercial Crime Coverage Form written on a loss sustained basis. The policy was written to replace an identical policy with another insurer that had expired, and there was no lapse in coverage. ABC recently discovered a covered loss that occurred during the prior insurer's policy term. Which one of the following would be true for the current insurer? Select one: A. It will decline the loss as it would be covered under the prior insurer's policy. B. It will pay the lesser of what would be covered under the present or the prior insurance. C. It will pay only if the loss occurred after the current policy's retroactive date. D. It will require that the prior insurer be notified and the loss be pro-rated.

It will pay the lesser of what would be covered under the present or the prior insurance.

Under the Loss Sustained During Prior Insurance Not Issued by Us or Any Affiliate condition of the ISO Commercial Crime Coverage Form written on a loss sustained basis, if certain requirements are met, the insurer agrees to pay a loss that occurred during the prior policy period of another insurer. Which one of the following situations is likely to exist if such a condition were not available? Select one: A. The commercial general liability (CGL) policy would cover the loss. B. It would be nearly impossible to persuade an insured to switch to a new insurer. C. Crime insurance would not be affordable. D. Most employee dishonesty losses would not be covered.

It would be nearly impossible to persuade an insured to switch to a new insurer.

Which one of the following insuring agreements of the ISO Equipment Breakdown Protection Coverage Form extends all of the equipment breakdown coverages to property situated at locations that the insured has purchased or leased after policy inception? Select one: A. Property Damage B. Automatic Extension of Coverage C. Purchased or Leased Locations D. Newly Acquired Premises

Newly Acquired Premises

Entities eligible for financial institution bonds are Select one: A. Excluded under the Commercial General Liability Crime Form. B. Not eligible for the ISO Commercial Crime Forms. C. Required to carry the ISO Commercial Crime Form. D. Insured by the Federal Deposit Insurance Corporation (FDIC).

Not eligible for the ISO Commercial Crime Forms.

The key in determining the maximum amount an insurer is obligated to pay for a covered crime loss under the ISO Commercial Crime Coverage Form is the policy's definition of Select one: A. Event. B. Occurrence. C. Theft. D. Employee Act.

Occurrence

ABC, Inc., is a large, national retailer that sells a variety of consumer goods. ABC carries a Commercial Package Policy that includes Insurance Service Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of insurance for each one of these insuring agreements is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, two employees, Beth and Jim, in collusion, stole money and merchandise from ABC. Beth and Jim stole money on May 1, 20X1 and August 13, 20X1. They also stole merchandise on January 15, 20X1 and September 29, 20X1. The amount of the money loss totaled $15,000 while the amount of the merchandise loss totaled $110,000. With respect to applying the limit of insurance applicable to the employee theft loss, how many occurrences were involved in this loss? Select one: A. One B. Two C. Three D. Four

One

Which one of these is not covered under the Employee Theft insuring agreement? Select one: A. Forgery B. Patents C. Money D. Securities

Patents

Various interests are insured in the ISO Commercial Crime Coverage Form. Which one of the following statements describes what happens if, during the policy period, the insured adds any premises or employees, other than by consolidation, merger, or acquisition? Select one: A. The insurer must endorse the policy for coverage to apply. B. The insurer must revise the policy declarations page to reflect the new exposures. C. Policy coverage will be extended automatically. D. The insured must notify the insurer within 30 days for coverage to apply.

Policy coverage will be extended automatically.

Which one of these would not be subject to a special limit of $5,000 per occurrence under the Inside the Premises—Robbery or Safe Burglary of Other Property coverage under the Commercial Crime Coverage Form? Select one: A. Precious metals B. Furs C. Securities D. Semiprecious stones

Securities

Under the conditions of ISO Commercial Crime Coverage Form, which one of the following is a duty of the insured after discovering a loss or a situation that might result in a loss? Select one: A. Notify the insurer within 60 days. B. File a proof of loss with the police within 10 days of the loss. C. Provide an examination under oath, whether or not the insurer requests it. D. Submit a detailed, sworn proof of loss within 120 days.

Submit a detailed, sworn proof of loss within 120 days.

Crime loss exposures of financial institutions are covered by financial institution bonds. These policies were developed by Select one: A. The Internal Revenue Service (IRS). B. The Surety and Fidelity Association of America (SFAA). C. The Federal Deposit Insurance Corporation (FDIC). D. The National Council on Compensation Insurance (NCCI).

The Surety and Fidelity Association of America (SFAA).

Equipment breakdown insurance is needed because Select one: A. The commercial property causes of loss form excludes electrical breakdown, mechanical breakdown, and steam boiler explosion. B. This coverage constitutes a service contract to repair equipment needed by many businesses. C. Most types of mechanical equipment are not covered under the Building and Personal Property Coverage Form (BPP). D. The Commercial General Liability (CGL) Coverage Form does not cover mechanical or electrical equipment.

The commercial property causes of loss form excludes electrical breakdown, mechanical breakdown, and steam boiler explosion.

Which one of the following is true regarding the Extended Period to Discover Loss condition of the ISO Commercial Crime Coverage Form written on a loss sustained basis? Select one: A. A retroactive date endorsement may be added to limit coverage for occurrences prior to the policy inception date. B. The acts must be committed (or the events must occur) and the loss must be discovered during the policy period for the policy to apply. C. The coverage applies to acts discovered during the policy period or within one year after the policy is cancelled. D. This form covers loss regardless of when the acts were committed or the events occurred if discovered during the policy period.

The coverage applies to acts discovered during the policy period or within one year after the policy is cancelled.

The most widely used financial institution bond is Select one: A. The fidelity bond. B. The Insurance Services Office Financial Institution Crime Policy for Banks and Saving Institutions. C. Standard Form No. 24. D. The commercial general liability fiduciary bond.

The fidelity bond

A small retail store, which carries a $20,000 limit for Robbery of Safe Burglary of Other Property under an ISO Commercial Crime Coverage Form, discovered its building window was damaged and the safe door was missing on Monday morning when an employee arrived at work. The storeowner immediately reported this incident to its insurance carrier. The theft consisted of precious and semiprecious gemstones that totaled $19,000 in value. How much should the retail store's insurer pay for this loss? Select one: A. The insurer should pay nothing because precious and semiprecious stones are excluded from Inside the Premises—Robbery or Safe Burglary of Other Property coverage. B. The insurer should pay $5,000, the special limit for this type of property under Inside the Premises—Robbery or Safe Burglary of Other Property. C. The insurer should pay $19,000, since it is falls within the limit of liability under Inside the Premises—Safe Burglary of Other Property. D. The insurer should pay $20,000, the limit of liability under Inside the Premises—Safe Burglary of Other Property.

The insurer should pay $5,000, the special limit for this type of property under Inside the Premises—Robbery or Safe Burglary of Other Property.

An independent contractor, while working at the insured's premises, gained access to a company computer and diverted a $50,000 shipment of platinum from the insured's premises to another address unauthorized by the insured. The platinum importer is demanding payment for the shipment it delivered. The insured carries a $100,000 computer and funds transfer fraud limit of liability under the ISO Commercial Crime Coverage Form. How much should the insurer pay for this loss? Select one: A. The insurer should pay nothing. Platinum is excluded from the policy since it is a precious metal. B. The insurer should pay $5,000, the occurrence limit for this type of loss. C. The insurer should pay $50,000, which is within the $100,000 limit of liability. D. The insurer should pay the full $100,000 limit of liability.

The insurer should pay $50,000, which is within the $100,000 limit of liability

Which one of the following is the primary reason that loss prevention is a key goal for both the equipment breakdown insurer and the insured? Select one: A. The high cost of equipment maintenance B. The potentially catastrophic effects of equipment breakdown C. The liability risks associated with equipment breakdown D. The desire to keep equipment breakdown premiums low

The potentially catastrophic effects of equipment breakdown

Which one of the following best describes the type of loss covered by the Spoilage Damage insuring agreement of the ISO Equipment Breakdown Protection Coverage Form? Select one: A. Marring, scratching, or denting of the insured's stock resulting from breakdown of covered equipment B. The spoilage of perishable goods resulting from breakdown of covered equipment C. Cost to replace food labels resulting from breakdown of refrigeration equipment D. The spoilage of perishable goods resulting from off-premises power interruption

The spoilage of perishable goods resulting from breakdown of covered equipment

Which one of these would not be covered under the Inside the Premises—Theft of Money and Securities insuring agreement? Select one: A. An observed theft B. Theft committed through a remote computer C. A robbery loss D. A burglary loss

Theft committed through a remote computer

An employee of Argot Architects is taking expensive $20,000 drawings to a client's location 30 miles away. While on the way to the company vehicle, a stranger accosts the employee and takes the drawings. How would the limit of insurance apply to this loss under the Outside the Premises insuring agreement of the ISO Commercial Crime Coverage Form? Select one: A. There is a per occurrence limit of $20,000. B. There is a per occurrence limit of $5,000. C. There is no coverage as the insuring agreement covers only money and securities. D. There is coverage and no special limits apply.

There is a per occurrence limit of $5,000.

Coverage is provided for which one of the following losses under the Inside The Premises—Theft of Money and Securities insuring agreement of the ISO Commercial Crime Coverage Form? Select one: A. Confidential financial information that is disclosed by the insured to a competitor B. Unexplained disappearance of securities from the insured's office C. Money stolen by an officer of the company D. Business income losses that are the result of a covered theft

Unexplained disappearance of securities from the insured's office