Because safe deposit boxes are designed for protection of valuables and that protection is expected by customers, safe deposit facilities create an important exposure for insureds offering this service. The exposure is certainly not lessened by the fact that the insured has neither knowledge of nor control over what the customer puts in a box.

Safe depository coverage — for both the insured's legal liability arising out of the bailment and direct damage coverage on customers' property — is designated plan eight in the Insurance Services Office (ISO) commercial crime program. Any insured offering safe deposit facilities, other than financial institutions, is eligible for plan eight. There are several hundred private safe depository companies currently operating in the United States . (Coverage for financial institutions is arranged under a bankers blanket or other financial institution bond.)

Two coverage forms are employed in plan eight, and a safe depository policy may be written using either or both. Each form is written with a separate limit of insurance. Coverage form M, CR 00 14, provides safe depository liability coverage for loss of a customer's property. Coverage form N, CR 00 15 provides safe depository direct loss coverage that covers customers' property against direct loss or damage. Unlike the majority of coverage forms in the commercial crime program, these forms are not subject to the crime general provisions form, but instead are used with a separate safe depository general provisions form, CR 40 00.   For a discussion of coverage form M (safe depository liability) see “Coverage Form M”, Casualty & Surety, Crime pages.  For coverage form N (safe depository direct loss) see “Coverage Form N”, Casualty & Surety, Crime pages.

The safe depository general provisions form begins as follows.

Analysis

The general exclusions section contains four exclusions, each of which appear in virtually identical language in the crime general provisions form. Excluded are losses resulting from, or damage arising out of or the defense of any suit connected with: acts committed by the named insured or partners; governmental action; nuclear reaction, radiation, or contamination; and war and similar actions.

Analysis

There are four general conditions. The first, joint insured, specifies that if more than one insured is named in the declarations, the first named insured acts for itself and every other insured for all coverage purposes. If the first named insured ceases to be covered, then the next named insured becomes the first named insured. In addition, if any insured or partner or officer of any insured has information relevant to coverage, that information is considered knowledge of all insureds. The second condition states that limits do not cumulate from year to year or period to period. The third condition concerns amounts recovered or recoverable under other insurance, stating that the policy does not apply to such amounts, but will cover those amounts not otherwise covered (excluding the deductible), subject to the policy limit. The final general condition makes clear that customers' property (a term defined in coverage forms M and N with a somewhat different meaning in each form) may be both owned and nonowned property in which customers have an interest, whether or not they are liable to others for its loss, destruction, or damage.

Analysis

Five terms are defined in the safe depository general provisions form.

“Money” is defined as “currency, coins, and bank notes in current use and having a face value; and travelers checks, register checks, and money orders held for sale to the public.” Bullion was specifically included in the definition of “money” in pre-1986 crime forms. Because bullion does not have a face value, it can no longer be considered “money,” but can be characterized as “property other than money and securities” (see below).

“Occurrence” is defined as an act, or series of related acts involving one or more persons; or an act or event, or a series of related acts or events not involving any person.

“Premises” means the interior of that portion of any building at a location shown in the declarations that the insured occupies in conducting its business.

“Property other than money and securities” is any tangible property other than “money” and “securities” that has intrinsic value, but does not include any property listed in any crime coverage form as property that is not covered — vehicles, for example. (See the comment about bullion, under “money,” above.)

“Securities” means “negotiable and non-negotiable instruments or contracts representing either 'money' or other property and includes: tokens, tickets, revenue and other stamps in current use; and evidence of debt issued in connection with credit or charge cards which cards are not issued by the customer holding the evidence of debt.” Securities are specifically stated not to include “money.”