Different Types of Crimes

Summary: When the crime insurance program of Insurance Services Office (ISO) was revised the various crime coverage parts were combined into one form, the commercial crime coverage form. That one form now covers theft, robbery, or safe burglary; forgery or alteration; computer fraud; funds transfer fraud; and the acceptance of counterfeit currency. As time has passed computer and funds transfer fraud are larger issues than they were when the form was originally developed.

This treatment summarizes each cause of loss and draws distinctions where appropriate.

Topics Covered: Theft, burglary, and robbery Theft Burglary Robbery Forgery or alteration Computer fraud Funds transfer fraud Acceptance of counterfeit currency

Theft, Burglary, and Robbery

While some might use these terms interchangeably, they really do have different meanings. They have different meanings in everyday English usage and they have different meanings when it comes to the crime forms.

A standard desktop dictionary defines theft as “the felonious taking and removing of personal property with intent to deprive the rightful owner of it.” Thus, theft is a kind of umbrella term—it encompasses all types of wrongful taking. However, the crime form is more specific—the definition of theft is aimed at the types of property covered by the form. While the policy definition incorporates both concepts of wrongful taking and deprivation of the owner, the crime form only covers theft of the following, as defined by the policy:

1.Money — currency, coins, bank notes, travelers checks, register checks, and money orders held for sale.

2.Securities — instruments (both negotiable and nonnegotiable) that represent money or property. Note that the policy specifically says that the word “securities” does not encompass money. Securities may be things like tokens, stamps, or evidences of debt in connection with credit card sales.

3.Other property — is any property, besides money and securities that has “intrinsic value.” The definition specifies that “other property” does not mean property that may be excluded elsewhere in the policy.

That same dictionary says that robbery is “larceny from the person or presence of another by violence or threat.” Thus, robbery is a specialized type of theft. It involves the use or threat of violence against the possessor of the property. The crime form's definition of robbery includes the unlawful taking by use or threat of force, but it goes further. The policy says that property taken from a person who has witnessed the criminal commit an “obviously unlawful act” is also robbery. Note that the definition doesn't specify the types of property to which the robbery definition applies.

The dictionary definition of burglary says it is the “act of breaking into a building with the intent to steal.” Again, burglary is a specialized form of theft. However, the crime form gets even more specific. The only type of burglary defined by the policy—and the only way in which the word burglary is used in the policy—is “safe burglary.” Safe burglary is discussed a bit further down.

Theft

The very first insuring agreement in the crime policy covers “employee theft.” It pays for the unlawful taking of covered property (money, securities, or other property) by an employee. It doesn't matter if the employee can be identified or if he is acting alone or in collusion with others. The policy covers any unlawful taking of covered property from the insured by an employee. In order for coverage to apply, the theft may occur anywhere. The policy is not location specific when it comes to employee theft. The insured is covered if his covered property is taken by an employee anywhere in the coverage territory—the U.S., its territories, and possessions, Puerto Rico, and Canada .

The next type of theft the policy covers is theft of money or securities from inside the premises. The use of the word “inside” along with the definition of “premises” as the “interior of that portion of any building” the insured occupies clearly limits this coverage to a specific location—”inside” the “interior,” if you will.

This coverage applies only to theft of money or securities. Thus, there is no coverage for theft of “other property” under this portion. Note that for money and securities located inside the premises, the policy expands the available perils to include disappearance and destruction. Thus, if money just disappears from a vault, that loss is covered by this portion of the policy.

If the insured owns (or is responsible for) the premises, the policy also promises to pay for damage to the premises or the exterior of the building that may occur during an actual or attempted theft. Finally, the policy also covers damage to locked safes, vaults, cash drawers, etc. that occurs during a theft.

The coverage also applies to theft (the felonious taking) of the insured's money from inside a banking premises. While what a banking premises is may appear to be clear, the policy again defines it as the “interior” of a building that houses a banking institution or “similar safe depository.” Thus, for coverage to apply at a bank, the insured's money must be taken from “inside the interior” of the banking premises.

One final note on the coverage for theft from inside the premises: the crime form broadens coverage considerably by adding as covered the perils of disappearance and destruction. Since those words are not defined, it should be noted that money and securities inside the premises or banking premises are covered simply if they turn up missing or if they somehow get destroyed.

In addition to covering theft of money and securities inside the premises, the crime policy also provides some coverage outside of the premises. It covers money and securities in the care of a messenger or armored car company. Again, this coverage includes theft as well as disappearance or destruction.

Note that the concept of “messenger” is limited. It does not mean just anyone hired by the insured to take the day's receipts to the bank. Rather it must be the insured or a relative; a partner or member of the company; or an employee.

Burglary

Burglary is typically defined as “the act of breaking into a building with intent to steal.” The crime form, however, does not mention just burglary. Covered property that is lost in a burglary is covered by one of the insuring agreements. The crime form only mentions a very specific type of burglary—”safe burglary”—as applying to covered property.

Safe burglary involves the taking of property from a locked safe or vault by someone who has illegally entered the safe of vault. Such illegal entry must be evidenced by marks of forcible entry. Taking of an entire safe from inside the premises is also safe burglary.

The crime form also covers damage to the premises or the safe or vault that occurs during a safe burglary.

Robbery

The classic definition of robbery involves the unlawful taking of property from someone accompanied by the use or threat of force. The crime form adds that robbery includes when the robber has “committed an obviously unlawful act” that was witnessed by the person being robbed.

The crime form covers “other property” for the peril of robbery. However, that robbery must be of property from a “custodian”—not just robbery of anyone who might have custody of the covered property. A covered custodian includes the named insured, partners and members, and employees—all only while they have custody of covered property inside the premises. The policy does not cover if the property is in the custody of a watchperson or janitor. Damage to the building, safe, or vault that occurs during a robbery is also covered.

The policy covers other property for robbery outside the premises if it is in the custody of a messenger or armored car company. Again, a messenger can't be just anyone carrying the property around with him. Rather, the policy says it must be the insured, a partner or member, or an employee with custody of the property outside the premises.

Forgery or Alteration

A standard dictionary definition of forgery is “the crime of falsely and fraudulently making a document.” In that broad sense it could even mean the forging of a painting or manuscript.

The crime form is much more specific. It says that forgery involves signing someone else's name “with the intent to deceive.” It does not mean the signing of one's own name. Thus, if a company president signs his own name on a document where it does not belong, that is not forgery. If an employee signs the company president's name on a document in such a way that it passes review by other employees or the bank, and an employee is able to cash this forged check for a bonus for himself that is a covered forgery.

The crime form covers loss that results from the forgery of orders to pay a certain sum of money. This includes checks, drafts, and notes. The policy includes alteration of such instruments as forgery. An alteration would be the adding of multiple zeros to a $10 check making it look like a $10,000 check. It even provides defense expense coverage (outside the limit) if the insured is sued for not honoring a forged or altered instrument.

Computer Fraud

Since money, securities, and other property can be so readily moved around the world via computers, the real possibility exists that a criminal could access the insured's property via a computer and take it. The crime form covers such an illegal computer transfer from either the insured's premises or a bank. Ove the past few years computer fraud has become rampant; more and more companies are having their information hacked, exposing millions of patients and customers to loss of personal information or funds possibly leading to identity theft. What is involved in the covered computer fraud is entry of fraudulent instructions or data into a computer program, often entered by an employee in good faith that the instruction was legitimate.

Funds Transfer Fraud

Another way the insured could lose money or securities is via a “fraudulent instruction” to his bank to move money out of his transfer account. A transfer account is one where the insured may easily move money or securities via computer or electronic, telegraphic, or facsimile communication. If an unauthorized person gained access to such an account and took the insured's money via fraudulent instruction, the crime form would cover the loss. For example, a thief issues fraudulent instructions to move millions of dollars from a wealthy person's transfer account into a Swiss bank account; the money gets moved only for the wealthy individual to discover that his money has been transferred into an account that he cannot access.

Acceptance of Counterfeit Currency

An exposure faced by all businesses is that they might be paid in counterfeit money or with a money order that is later not honored by the issuing institution. The crime form covers such loss if the insured accepted the counterfeit money or money order “in good faith” in exchange for goods, money, or services. Many retail stores check currency above a particular dollar limit since that is worth trying to counterfeit in order to get legitimate change back; for example using a $100 bill for a $5 purchase.