Surety Bond Quarterly - Fall 2016 - 12


of the employee's "manifest intent,"
but rather specify coverage solely
for "theft," which is typically defined
as "the unlawful taking of 'money',
'securities' or 'other property' to the
deprivation of the Insured." These
coverage provisions deviate from
the more traditional dishonesty
coverage language of the commercial crime insurance policy because
coverage is not conditioned upon
dishonest or fraudulent conduct, or
any real demonstration of "intent."
Thus, from a coverage perspective,
whether the thief intended to cause
the insured a loss is not considered.
As a result, "theft" coverage typically requires (1) a requirement of
direct causation; (2) a requirement
of a loss of money, securities, or
other property; (3) a requirement
that the theft be carried out by the
employee; and (4) a provision that
the dishonest employee in question
may act either alone or in concert
with someone else.
Because claims arising from
employee theft and dishonesty
are the most common ones under
commercial crime insurance coverage, a brief discussion of the exclusions applicable to claims under
the employee dishonesty or theft
insuring agreement is warranted,
especially as they can apply to construction contractors. For instance,
commercial crime insurance policies
do not provide coverage for shortages of money, securities, or other
property if the only proof of loss is
discovery of a shortage following an
inventory.The scope of this exclusion
also includes profit or loss calculations. However, if the claim is otherwise covered, the insured can use
its books and records to substantiate
the amount of the loss.
Inside the premises-theft
of money and securities
This insuring agreement covers
three types of basic losses. First, it
pays for the loss of money or securities occurring inside the premises
and resulting directly from theft,
disappearance, or destruction. The
insuring agreement also provides
additional coverage for damage

12

SURETY BOND QUARTERLY | FALL 2016

to the interior of any portion of a
building the insured owns or is
liable for and occupies in conducting its business, resulting from an
actual or attempted theft of money
or securities.
Inside the premises-robbery or
safe burglary of other property
In order to obtain coverage under
this insuring agreement, the
insured must demonstrate that it
has suffered loss of or damage to
"other property" inside the "premises" resulting directly from an
actual or attempted robbery or safe
burglary. "Other property" means
property other than money and
securities having intrinsic value
and not otherwise excluded. Losses
from robberies either during normal business hours or after hours
that do not involve watch persons
or janitors would be covered by this
insuring agreement.
Outside the premises
Under this insuring agreement,
money and securities are covered for theft, disappearance, and
destruction while outside the premises and in the custody of a messenger or armored car company, and
includes coverage for theft, robbery,
or other instances of accidental loss.
Property other than money and
securities are covered outside the
premises when it is in the custody
of a messenger or an armored car
company but only for robbery.
The situation described above
involving John Speer, Deleson Steel,
and the stolen payroll included an
analysis of policy language similar
to the "outside the premises" coverage. The insurer denied the claim on
the basis that Speer was not in the
process of "conveying" the payroll
at the time of the theft. However,
the court disagreed, finding that the
payroll was under Speer's supervision, care, custody, and control
when it was stolen, even though it
was left unattended.
Computer fraud
More now than ever, with the relative ease of check fraud and cybercrime, the computer fraud insuring
agreement has become of high

relevance. This insuring agreement provides coverage for loss of
or damage to money, securities, and
other property due to the use of a
computer to fraudulently transfer
that property from inside the premises or banking premises to a place
or person (other than a messenger)
outside the premises, anywhere in
the world.
That said, an insured seeking coverage under the Computer Fraud
insuring agreement must prove
more than an electronic withdrawal
from a bank. Merely alleging a fraud
involving a computer does not trigger coverage. Additionally, proof of
loss may not be based on an inventory shortage or profit or loss computation. The insured must prove
that it was a victim of "computer
fraud" as defined in the policy, that
its loss arose directly from the use
of any computer to fraudulently
cause a transfer of that property,
and that it incurred a loss of covered
property.
Exclusions to commercial
crime insurance coverage
As you would expect, with coverage comes exclusions to coverage.
A comprehensive list of exclusions is
beyond the scope of this article, but
the following exclusions are among
those that apply to each of the insuring
agreements discussed above.
Acts committed by the named
insured, its partners or members
Any dishonest act or theft of the
named insured, whether committed
alone or with another individual or
an employee, is excluded. In other
words, the named insured cannot
recover for losses arising from the
dishonest act of an employee if the
named insured, its partners or members are involved in the scheme.
Acts of employees learned of
by the insured prior to or during
the policy period
The second common exclusion
applies to losses committed by
employees who have a history of
committing dishonest acts. If the
named insured or its representatives
hire an individual that one or more



Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2016

NASBP Upcoming Meetings & Events
2016-2017 Executive Committee
From the CEO: Success Comes with Sharing Perspective and Knowledge
Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
2016 NASBP Resource Directory
Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover1
Surety Bond Quarterly - Fall 2016 - cover2
Surety Bond Quarterly - Fall 2016 - 3
Surety Bond Quarterly - Fall 2016 - 4
Surety Bond Quarterly - Fall 2016 - 5
Surety Bond Quarterly - Fall 2016 - 6
Surety Bond Quarterly - Fall 2016 - 2016-2017 Executive Committee
Surety Bond Quarterly - Fall 2016 - From the CEO: Success Comes with Sharing Perspective and Knowledge
Surety Bond Quarterly - Fall 2016 - 9
Surety Bond Quarterly - Fall 2016 - Practical Insights: A Contractor’s Risk Management Portfolio Should Include a Commercial Crime Policy
Surety Bond Quarterly - Fall 2016 - 11
Surety Bond Quarterly - Fall 2016 - 12
Surety Bond Quarterly - Fall 2016 - 13
Surety Bond Quarterly - Fall 2016 - Rethinking the Change Order Process: NECA Foundation’s Guidelines Offer New Approach, Substantially Reducing Change Order Costs
Surety Bond Quarterly - Fall 2016 - 15
Surety Bond Quarterly - Fall 2016 - 16
Surety Bond Quarterly - Fall 2016 - Six Considerations in Underwriting Subdivision Bonds (Part 2 of 2)
Surety Bond Quarterly - Fall 2016 - 18
Surety Bond Quarterly - Fall 2016 - 19
Surety Bond Quarterly - Fall 2016 - Affirmative Action and the Office of Federal Contract Compliance Programs: What Surety Professionals and Their Contractors Should Know
Surety Bond Quarterly - Fall 2016 - 21
Surety Bond Quarterly - Fall 2016 - 22
Surety Bond Quarterly - Fall 2016 - 23
Surety Bond Quarterly - Fall 2016 - Surety Data Standards: What are They, and Why Should Surety Professionals Care about Them?
Surety Bond Quarterly - Fall 2016 - 25
Surety Bond Quarterly - Fall 2016 - 26
Surety Bond Quarterly - Fall 2016 - 2016 NASBP Resource Directory
Surety Bond Quarterly - Fall 2016 - 28
Surety Bond Quarterly - Fall 2016 - 29
Surety Bond Quarterly - Fall 2016 - 30
Surety Bond Quarterly - Fall 2016 - 31
Surety Bond Quarterly - Fall 2016 - 32
Surety Bond Quarterly - Fall 2016 - 33
Surety Bond Quarterly - Fall 2016 - 34
Surety Bond Quarterly - Fall 2016 - 35
Surety Bond Quarterly - Fall 2016 - 36
Surety Bond Quarterly - Fall 2016 - 37
Surety Bond Quarterly - Fall 2016 - 38
Surety Bond Quarterly - Fall 2016 - 39
Surety Bond Quarterly - Fall 2016 - 40
Surety Bond Quarterly - Fall 2016 - 41
Surety Bond Quarterly - Fall 2016 - Index to Advertisers
Surety Bond Quarterly - Fall 2016 - cover3
Surety Bond Quarterly - Fall 2016 - cover4
Surety Bond Quarterly - Fall 2016 - outsert1
Surety Bond Quarterly - Fall 2016 - outsert2
Surety Bond Quarterly - Fall 2016 - outsert3
Surety Bond Quarterly - Fall 2016 - outsert4
http://www.nxtbook.com/naylor/SBPQ/SBPQ0118
http://www.nxtbook.com/naylor/SBPQ/SBPQ0417
http://www.nxtbook.com/naylor/SBPQ/SBPQ0317
http://www.nxtbook.com/naylor/SBPQ/SBPQ0217
http://www.nxtbook.com/naylor/SBPQ/SBPQ0117
http://www.nxtbook.com/naylor/SBPQ/SBPQ0416
http://www.nxtbook.com/naylor/SBPQ/SBPQ0316
http://www.nxtbook.com/naylor/SBPQ/SBPQ0216
http://www.nxtbook.com/naylor/SBPQ/SBPQ0116
http://www.nxtbook.com/naylor/SBPQ/SBPQ0415
http://www.nxtbook.com/naylor/SBPQ/SBPQ0315
http://www.nxtbook.com/naylor/SBPQ/SBPQ0215
http://www.nxtbook.com/naylor/SBPQ/SBPQ0115
http://www.nxtbook.com/naylor/SBPQ/SBPQ0414
http://www.nxtbook.com/naylor/SBPQ/SBPQ0314
http://www.nxtbook.com/naylor/SBPQ/SBPQ0214
http://www.nxtbookMEDIA.com