Chapter 6 - Crime Insurance

Crime Losses

• Crime losses (theft, vandalism, arson, etc.) are a major cause of property loss; around 40% of property crimes involve commercial property.

• Crime is also a major contributor to business failure (estimated ~25% of bankruptcies).

Property susceptible to crime losses:

• Real property – damage to buildings and structures from vandalism, burglary, arson.

• Personal property – stock and equipment are prime targets.

Characteristics of prime crime “targets”:

1. Convertibility – easily turned into cash (e.g., electronics, cigarettes).

2. Value – higher value increases exposure.

3. Portability – easier to carry away from premises.

• For many businesses, damage to the premises and other property during a crime can exceed the value of items stolen.

Sources of Crime Losses

1. Forced entry into the building

   • Through doors, windows, roof, walls, vents, other openings.

2. Forced entry into protected enclosures (safes, vaults, locked rooms)

   • Using mechanical tools, heat (torches), or explosives.

3. Unforced entry

   • Use of stolen/borrowed keys or combinations; insider assistance.

4. Coerced opening of premises/safes

   • Owners or staff threatened or kidnapped to open doors or vaults.

5. Vandalism and malicious damage

   • Deliberate property damage, often exceeding value of items stolen.

6. Espionage

   • Theft of confidential designs, data, prototypes—especially in high‑tech firms.

7. Shoplifting

   • Customer theft of merchandise; major retail loss source.

8. Employee theft

   • Internal dishonesty; very significant financial impact.

Physical & Electronic Protection

Businesses can reduce crime losses by using physical barriers and electronic systems.

Physical protection (restricting access with hardware):

• Steel doors and frames

• High‑security locks

• Window locks, bars, security screens

• Tempered / security glass

• Safes and vaults

• Secure showcases

Electronic protection (detecting unauthorized entry):

• Magnetic door/window contacts

• Motion or infrared detectors

• Pressure mats / stair tread sensors

• Hold‑up / panic alarms

• Vibration and shock sensors

• Glass‑break detectors

• CCTV systems

• Wire/infrared perimeter lacing

Alarms aren’t a substitute for good physical security, but together they provide defence in depth and strong psychological deterrence.

Rate Credits & Protection Levels

• Insurers often grant premium (rate) credits when effective property protection systems are installed—especially monitored alarms or watchman/security‑guard services.

• Properties lacking adequate physical and electronic security may be refused coverage.

Effective security is viewed in three layers:

1. Perimeter Protection – securing the outer boundary (fences, exterior doors/windows, lighting, etc.).

2. Area or Space Protection – protecting internal areas within the perimeter (interior alarm zones, motion detectors).

3. Point Protection – protecting specific high‑value items or enclosures (safes, vaults, showcases, equipment rooms).

Insurers assess the overall quality of these protections when determining eligibility and the size of any rate credit.

Perimeter Protection

Partial protection weaknesses:

• Only doors/windows/vents/skylights secured; walls/ceilings not monitored.

• Intruders who stay inside after hours may go undetected.

Complete protection system should cover:

• Enclosing walls

• Ceilings

• Floors

Using both physical and electronic measures.

Physical perimeter protection:

• Locks – first line of defence; quality deadbolts resist jimmying/credit‑card opening.

• Bars and screening – protect basement/ground‑floor windows with bars or heavy wire mesh.

Electronic perimeter protection:

• Magnetic contact switches on doors/windows to trigger alarms when opened.

• Glass‑breakage alarms (metallic foil, window tape, or sensors) to detect broken glass.

Together, these measures help detect or deter intrusion at the outer boundary of the premises.

Area Protection

1. Interior trapping devices (older method):

• Single‑beam photo‑electric devices

• Magnetic contact switches on interior doors

• Pressure‑sensitive mats under carpets or tiles

(Still used as supplementary protection but now largely replaced by modern detectors.)

2. Motion / heat / infrared detectors (modern method):

• Detect unauthorized movement or body‑heat changes in a room.

• Highly sensitive and invisible; good against stay‑behind or wall‑cutting intruders.

• False alarms can result from moving drapes, signs, fans, etc.

3. Area protection during normal hours:

• Hold‑up alarms – concealed buttons at tills or workstations; send signal to off‑site alarm centres or police.

• Cameras & CCTV – deter theft, assist identification, support prosecutions, help reduce shoplifting.

• Scanning devices – electronic article surveillance; tags on merchandise trigger alarms if taken past sensors without being deactivated.

Together, these measures provide layered area/space protection inside the premises.

Point Protection

• Focuses on directly securing specific high‑value items or receptacles, such as:

  • Safes

  • Vaults

  • Chests

  • Filing cabinets

  • Display cases

  • Expensive equipment

• Security provided to each receptacle must be strong enough to deter or significantly delay access; for large amounts of cash or very high‐value items, an efficient alarm in conjunction with the safe/vault is usually required.

Alarm Control

• Whoever controls turning the system on and off controls the alarm. Two main types:

a) Locally supervised alarm controls

• System turned on/off by owner or employees via keypad on premises.

• Weakness: people forget to arm the system when leaving, leading to many losses.

b) Central station supervised alarm controls

• Owner/staff still arm/disarm, but a central station monitors that this is done at agreed times and can take action if the system isn’t set.

Alarm Signalling

Purpose of an alarm:

• Detect any breach or attempted breach of physical security.

• Provide a warning signal so response can occur.

Levels of alarm signalling (from highest to lowest protection):

a) Central Station Service – ULC‑approved monitoring centre:

• Monitors opening/closing times.

• Automatically activates system at closing if forgotten.

• Screens after‑hours users; identifies alarm sources; notifies police and subscriber immediately.

b) Monitoring Station Service – similar to central station but with less stringent guard/dispatch requirements.

c) Emergency Station Service – signals received only when the system is on; no open/close reports; suitable for low risks.

d) Digital Communicator Service – premises equipment sends encoded alarm message via standard phone line to control centre.

e) Local Alarms – bells or sirens only, no off‑site monitoring; weaknesses include:

• Alarm rings on premises only.

• Easy to tamper with.

ULC‑approved alarm equipment/services meet minimum national standards and are preferred by insurers.

Commercial Crime Insurance Policy

• Standard property policies give only limited crime coverage (mainly fire/vandalism). They usually exclude major crime exposures such as:

  • Money, currency, securities, tickets, evidence of debt or title.

  • Furs, garments, jewellery, watches, pearls, precious and semi‑precious stones (except small amounts).

  • Property in the custody of a sales representative.

• To cover these, businesses should purchase a Commercial Crime Insurance Policy, which:

  • Uses clear‑language wording to insure most crime exposures faced by a business.

  • Has three main sections:

    1. Declarations – identifies insured, policy period, limits, and which of the nine crime coverages are selected.

    2. General Conditions – basic rules governing the policy.

    3. General Definitions – defines the crimes/terms that determine what is insured.

• Each optional crime coverage is provided via a separate coverage rider, which includes:

  • Insuring Agreement – describes what is covered.

  • Limit of Insurance – amount payable.

  • Exclusions – what is not covered.

Format for Analyzing Crime

When reviewing any crime insurance rider, evaluate four key questions:

1. Property covered – What types of property (money, securities, stock, etc.) are insured?

2. Perils insured – Which crime causes of loss (theft, robbery, forgery, etc.) are covered?

3. Location of property covered – Where must the property be (on premises, in transit, in safe, with messenger)?

4. Persons causing the loss – Whose dishonest or criminal acts are insured against (employees, outsiders, partners, etc.)?

All crime riders address these four areas, so this framework helps brokers compare and explain coverages.

Commercial Crime - Property Covered

• Each crime rider defines which property is insured. Common specific definitions include:

  • Jewellery – jewellery, watches, gems, pearls, precious/semiprecious stones, and similar articles.

  • Money – “currency and coins in current use and having a face value” (can vary by policy).

  • Securities – negotiable and non‑negotiable instruments or contracts representing money or other property (e.g., cheques, stocks, bonds), but not including money.

• Because definitions vary between forms/insurers, the broker must always read the wording carefully.

Commercial Crime - Perils Insured

• Crime policies do not always use the same peril definitions.

• Narrowly defined perils (e.g., kidnapping, robbery, safe burglary, forgery) contrast with broader terms such as theft, destruction, disappearance, wrongful abstraction.

• Understanding the exact peril wording is critical to knowing what losses are covered.

Commercial Crime - Location of Property Covered

• Coverage depends on location specified in each rider; examples:

  • On‑premises coverage – may apply to all property on the premises or only to property in specific locations (e.g., a safe or vault).

  • Off‑premises coverage – applies when property is away from the insured’s premises; restrictions are usually tighter.

• Always check where the property must be at the time of loss for coverage to apply.

Commercial Crime - Persons Causing the Loss

• Crime insurance generally covers loss caused by outsiders, not by the insured or partners.

• Most forms exclude losses caused by “any fraudulent, dishonest or criminal act committed by the insured or any partner.”

• Many also exclude employees, unless a specific employee dishonesty or similar rider is purchased.

Burglary – insurance vs. criminal law

• Criminal law: wrongful taking of property from premises when closed, often requiring evidence of forcible entry/exit.

• Insurance definition: “unlawful taking of property by a person unlawfully entering or leaving the premises,” usually evidenced by visible marks of forcible entry or exit.

• Burglary riders typically require:

  • Premises closed, and

  • Visible signs of forcible entry/exit (e.g., marks on doors/frames, damaged locks, bars).

Robbery – insurance vs. criminal law

• Criminal law: wrongful taking of property from a person by force or fear.

• Insurance riders often broaden this to include additional acts (e.g., robbery inside or outside the premises, or while a messenger is carrying property).

• Key feature remains: property taken directly from a person, with threat or use of force.

Theft (including robbery & burglary)

• Criminal law: “theft” includes all means of taking property without the owner’s consent.

• In insurance, theft coverage is broad – there is usually no need to prove force or fear (unlike burglary/robbery).

• If property is taken without the insured’s permission and theft is an insured peril, the loss is generally covered, subject to other policy terms.

Stock and Equipment Burglary Rider

• Stock and equipment inside the premises against:

  • Actual or attempted burglary

  • Robbery of a watchman

  • Vandalism or malicious acts committed on the same occasion

Key conditions

• Premises must be closed, except that stock/equipment within showcases or show windows that do not open directly into the interior is covered at all times (e.g., “smash‑and‑grab” losses).

• Excludes burglary/robbery by the insured, partners, employees, or their authorized representatives.

Safe Burglary Rider

1. Unlawful taking of insured property from a vault or safe inside the premises, by someone unlawfully entering the vault/safe and a vault/safe which:

   • Has a combination lock, and

   • Is located within the premises; and

2. The unlawful entry must be evidenced by visible marks of forcible entry on the exterior of the vault/safe and/or any vault containing the safe; or

3. The unlawful taking of the safe or its entire contents from within the premises.

Property insured

• Contents of described safes/vaults, such as:

  • Money, securities and property

  • Securities only, or

  • Stock only (as shown in Declarations).

Important requirements

• Only safes/vaults identified in the Declarations are covered.

• Must be ULC‑rated equipment with an approved combination lock.

• Coverage applies only when there are visible marks of forcible entry.

• Also pays for:

  • Removal of the safe (no need to recover it to show damage), and

  • Resulting damage to premises and other property from actual or attempted safe burglary.

Damage to Building by Burglary or Robbery Rider

• Commonly used by tenants responsible for burglary/robbery damage to premises, or by owners wanting extra protection.

Coverage

• Insures damage to the premises caused by:

  • Actual or attempted burglary or robbery

  • Vandalism or malicious mischief committed on the same occasion

Key points

• Applies only to the building, including permanent fittings and fixtures.

• Excludes damage to glass, lettering, ornamentation, tapes or foils—a separate glass rider is needed for “smash‑and‑grab” window damage.

Inside/Outside Robbery Rider

• Broadens criminal‑law robbery; “robbery” means taking insured property from a custodian by a person who:

  1. Causes or threatens bodily harm to the custodian;

  2. Commits an overt unlawful act witnessed by the custodian; or

  3. Takes property from a custodian who has been killed or rendered unconscious.

Additional insurance interpretations

• (a) Wrongful taking from a custodian by actual or threatened violence.

• (b) Taking by a person who commits any overt wrongful act witnessed by the custodian.

• (c) Taking from a custodian who has been killed or rendered unconscious.

Property insured

• Options (as shown in Declarations):

  • Money, securities and property

  • Securities only

  • Other specified property

Who is a custodian?

• “You or your partner or any employee authorized by you to have the care and custody of insured property, excluding any person while acting as a guard, janitor, porter, or watchman.”

• Separate limits apply to inside and outside robbery, and can be adjusted for peak periods (e.g., weekends).

Inside/Outside Robbery Rider - Insuring Agreements

1) Inside Robbery

Covers loss inside the premises for:

a) Actual or attempted robbery of a custodian on the premises, including:

• Damage to the premises caused by that actual or attempted robbery.

b) Kidnapping – loss of insured property when the premises are closed and the custodian is forced, by violence or threat, to give a robber access or means of access to insured property on the premises.

c) Theft from a window display area inside the premises while open for business, provided the thief (or accomplice) breaks the window at the time of the theft.

“Premises” means the interior of the insured building, excluding show windows/open display windows and public entrances, halls, or stairways.

---

2) Outside Robbery

Covers robbery of insured property while away from the premises within Canada or the U.S., including:

a) Actual or attempted robbery of a custodian off‑premises while performing regular duties with insured property (e.g., taking deposits to the bank, carrying receipts to a night depository).

b) Theft from within the custodian’s home (up to the lesser of the policy limit or $500) when the property is taken home overnight or for the weekend for accounting or safekeeping purposes.

c) Theft from a night depository safe of a bank or trust company that the insured uses for deposits, including:

• Loss of money due to forcible removal of the depository safe,

• Loss when the safe is forcibly opened, and

• Theft by an unauthorized person entering the night depository area with the safe still on the premises.

Key exclusions to discuss with the insured include:

• No coverage for glass/lettering/ornamentation damage (handled by separate glass rider).

• No coverage if the custodian or guard is criminally implicated as a principal or accessory.

Commercial Crime Policy - General Conditions

1. Canadian Currency Clause

   • All losses are paid in Canadian funds.

2. Cancellation

   • Insurer must give 30 days’ notice to cancel (15 days for non‑payment of premium).

3. Change of Interest

   • Coverage does not automatically transfer to a new owner; insurer’s consent required.

4. Changes

   • Policy changes take effect only when consented to by the insurer (usually via endorsement).

5. Discovery Period for Loss

   • Insured has up to one year after policy expiry to discover and claim a loss.

6. Duties in the Event of Loss

   • Insured must give prompt notice and within 120 days submit a sworn proof of loss.

   • If a crime violates law, insured must promptly notify police and cooperate with the insurer (including examinations under oath).

7. Inspection

   • Insurer may inspect premises at any reasonable time.

8. Legal Action Against Us

   • No legal action against insurer after two years from date the loss was discovered.

9. Loss Sustained During Prior Insurance

   • If the insured had prior continuous crime insurance, certain late‑discovered losses may be treated as if they occurred on the first day of the current policy, subject to conditions.

10. Policy Period & Territory

    • Coverage applies only to losses during the policy period and within Canada or the U.S.

11. Records

    • Insured must keep adequate records; unsubstantiated claims will not be paid.

12. Valuation

    • Securities valued at their actual cash value at close of business on the business day before discovery.

    • Other property also settled on ACV; disputes resolved by arbitration.

Comprehensive Dishonesty, Disappearance and Destruction Policy

• A packaged crime policy with five optional insuring agreements:
  
  I – Employee Dishonesty
  
  II – Loss Inside Premises
  
  III – Loss Outside Premises
  
  IV – Money Orders & Counterfeit Paper
  
  V – Depositors Forgery

• Insured can select any combination by choosing limits in the Declarations.

• Extra crime exposures can be added by endorsement.

• Written on a continuous until cancelled basis to avoid gaps, especially for employee‑dishonesty coverage.

3-D Policy - Employee Dishonesty

• Employee theft is a major crime exposure: insider fraud is costly, hard to predict, and often discovered long after it occurs (e.g., padding expense accounts, skimming cash, overcharging customers).

• Two coverage options under Agreement I:

1. Form A – Blanket Employee Dishonesty

   • Covers loss of money, securities and other property the insured sustains, up to the aggregate limit shown for Form A.

   • Loss must result from one or more fraudulent or dishonest acts of an employee (alone or in collusion with others).

   • Single limit applies across all employees collectively.

2. Form B – Employee Dishonesty – Name or Position Schedule

   • Also covers loss of money, securities and other property caused by fraudulent or dishonest acts of employees.

   • Insurance amount applies separately to each employee or position listed in the schedule (not a single blanket limit).

• Key characteristics:

  • Losses may be large, difficult to estimate, and may involve undocumented/unrecorded assets.

  • Discovery often occurs years after the dishonest acts began.

Meaning of Employee Dishonesty

Coverage applies only to losses “which the Insured shall sustain resulting directly from one or more Fraudulent or Dishonest Acts committed by an Employee, acting alone or in collusion with others.”

Two conditions must both be present:

1. There must be a clear intent to cause the insured to sustain a loss; and

2. There must be a clear intent to obtain financial benefit (other than normal employment earnings) for:

   • the employee, or

   • any other person or organization.

If either element (intent to harm the insured or intent to gain a benefit) is missing, the act is not “employee dishonesty” under the policy.

“Employee” Defined

Under Agreement I, employee has a specific meaning; it includes, while in the regular service of the insured in the ordinary course of business:

• Natural persons – individual workers, not corporations.

• Directors or trustees who are actively involved in the business as officers or employees.

• Persons supplied by employment agencies or similar firms, whose activities are directed and compensated by the insured.

• Persons who become employees through consolidation/merger or purchase of another business’ assets, provided the insured notifies the insurer within 30 days and pays any additional premium.

Persons NOT deemed employees include:

• Any broker, factor, commission merchant, consignee, contractor or other agent or representative of the same general character (typically independent contractors paid on commission or margin, over whom the insured has limited control).

3-D Policy - Employee Dishonesty - Analyzing Coverage

Form A – Commercial Blanket Bond

• All employees are insured automatically.

• Insured does not need to identify which employee caused the loss.

• Useful when employer wants broad protection without underwriting each employee.

Form B – Blanket Position Bond

• Coverage is purchased by position or category (e.g., cashiers, bookkeepers).

• Allows different limits for positions with higher potential for loss.

• More flexible but requires the insured to select which positions are covered.

3-D Policy - Employee Dishonesty - Limits and Basis of Settlement

Form A – Limit per loss (aggregate for all employees)

• The limit chosen is the maximum amount payable per loss, regardless of how many employees are involved.

• Example: $5,000 limit – if four employees collude to cause a $20,000 loss, policy still pays only $5,000 total.

Form B – Limit per employee

• The limit purchased applies separately to each employee involved in the loss.

• Using the same example and a $5,000 limit, if four employees collude, policy could pay up to $5,000 for each (total potential $20,000), subject to policy wording.

• Important for brokers to stress: the limit is per employee, not per occurrence.

3-D Policy - Employee Dishonesty - Discovery Period

• Discovery period = the time after policy expiry during which a loss must be discovered for coverage to apply.

• Form A – Commercial Blanket Bond

  • Discovery period: one year from the date of expiry.

• Form B – Blanket Position Bond

  • Discovery period: two years from the date of expiry.

• Prior fraud, dishonesty, or cancellation

  • Once the insured becomes aware that an employee has committed a prior fraudulent or dishonest act, coverage for that employee ceases immediately under this Agreement.

  • Removing coverage for that employee does not affect coverage for other employees.

3-D Policy - Employee Dishonesty - Loss Caused by Unidentifiable Employees

• Sometimes it is impossible to pinpoint exactly which employee committed the dishonest act.

• Coverage still applies as long as the circumstances support that the loss was caused by one or more employees with access (e.g., theft from a warehouse where only certain staff had keys).

• Payment is still limited to the policy limit regardless of Form A or B.

3-D Policy - Employee Dishonesty - Loss Under Prior Bond or Policy

Employee dishonesty often spans long periods, sometimes over several policy terms. When a new insurer takes over, the new policy will respond to earlier acts if:

1. The loss was covered under the previous bond/policy; and

2. The claim can no longer be made under that prior insurance because its discovery period has expired.

For such losses, under the new policy:

• The amount payable must be part of (not in addition to) the limits that existed under the previous bond or policy.

• The payment will be the lesser of:

  • The old limit; or

  • The limit under the replacing policy.

This arrangement encourages insureds to switch insurers without losing protection for long‑developing employee dishonesty losses.

3-D Policy - Employee Dishonesty - Risk Management

1) Pre‑employment phase

Better screening = better control of future risk. Recommended practices:

• Obtain a written application.

• Conduct a personal interview.

• Verify all references thoroughly.

• For middle and top management, consider psychological / stress testing and checks of personal finances and family background.

---

2) Post‑employment phase (ongoing internal controls)

Good operating standards help detect and deter dishonesty. Examples:

• Duplicate and store off‑premises all sensitive data.

• Require two signatures on all cheques.

• Use external consultants periodically to assess internal controls.

• Rotate job positions and responsibilities when possible.

• Require employees to take regular vacations and use relief staff.

• Conduct surprise audits in all departments.

• Rotate bank accounts and reconciliation personnel periodically.

• Large firms should appoint a separate audit committee to set and monitor business‑control standards.

Even with good risk management, controls can fail—insurance is there to fill the gap when internal controls are circumvented.

3-D Policy - Loss Inside the Premises Coverage

1. Money & Securities inside the premises or at recognized places of safe deposit

   • Loss of money or securities caused by actual destruction, disappearance, or wrongful abstraction:

     • Inside the insured’s premises; or

     • Inside or within any banking premises or similar recognized place of safe deposit.

   • Includes loss from Safe Burglary or Robbery within the premises, or attempted burglary/robbery.

   • Also covers damage to the premises or its containers caused by burglary, robbery, or their attempts (when the insured is the owner or liable for that damage).

2. Other Property inside the premises

   • “Other property” = property other than money and securities (e.g., stock, equipment) located inside the premises.

   • Coverage is limited to loss caused by Safe Burglary, Robbery, or attempt threat.

   • Also covers property kept in a locked cash drawer, cash box or cash register against felonious entry/attempt threat.

Key extensions / examples

• Loss of money due to felonious entry into locked safes, drawers, or registers.

• Wrongful abstraction of money by outsiders once they’re inside the premises.

• Damage to premises from burglarious entry or attempt threat (e.g., broken doors, pried safes).

Major exclusions & notes

• No coverage for:

  • Money operated devices unless there’s a continuous recording instrument (e.g., vending machines without meters).

  • Losses due solely to errors in bookkeeping or failure to record deposits.

  • Losses arising from unauthorized computer instructions – those are handled under employee dishonesty (Agreement I) if caused by employees.

• Insurers are cautious about covering computer‑related money transfers; demand and underwriting for “computer fraud” has been limited.

This agreement focuses on money, securities, and other property while they are inside the premises or bank, filling gaps left by standard property coverage.

3-D Policy - Loss Outside the Premises Coverage

1. Money & Securities outside the insured premises

   • Insures loss of money and securities caused by destruction, disappearance or wrongful abstraction while:

     • Being conveyed by a messenger, or

     • Being conveyed by an armoured motor vehicle company, or

     • Located within the living quarters of the home of any messenger.

   • Perils are essentially the same as those that apply while the property is inside the premises (robbery, attempted robbery, disappearance, etc.), but only while in these specified situations.

2. Other Property outside the premises

   • Covers other property (e.g., stock or equipment) while being conveyed by a messenger or armoured motor vehicle company, or while in the home of a messenger, against robbery or attempt threat, including theft from the messenger’s home.

Who is a “messenger”?

• Defined as the insured, a partner of the insured, or any employee whom the insured authorizes to have the care and custody of insured property outside the premises.

Key exclusions / limitations

• No coverage for:

  • Loss while in the custody of an armoured vehicle company unless the loss exceeds what can be recovered from that company. This rider pays only the excess above the armoured carrier’s liability.

  • Losses already recoverable under other insurance carried by the insured or contracted armoured carrier.

• In effect, the Agreement is excess over any insurance or liability of the armoured car company.

This Agreement fills the gap for money, securities, and other property in transit or temporarily outside the premises under the control of authorized messengers.

3-D Policy - Money Orders and Counterfeit Paper Currency

• Loss to the insured due to accepting in good faith, in exchange for merchandise, money or services:

  • Any post‑office or express money order that is:

    • Not paid upon presentation, or

    • Issued or purported to have been issued by a post office or express company; or

  • Counterfeit Canadian or U.S. paper currency received in the regular course of business.

Key points

• Protects against losses when a business unknowingly accepts bogus money orders or counterfeit paper currency.

• Typically, only a modest limit is needed, as such losses are infrequent and usually small.

3-D Policy - Depositors Forgery Coverage

• Loss that the insured or any bank shown in the insured’s proof of loss sustains due to the forgery or alteration of:

  • Any cheque, draft, or similar instrument drawn on the insured’s accounts; or

  • Any such instrument drawn in the insured’s name or purported to be so.

• Includes:

  • Forged cheques drawn in the insured’s name, with fictitious payees.

  • Cheques made payable to the insured but endorsed and cashed by an imposter.

  • Cheques, payroll cheques, drafts or notes drawn by someone other than the named payee and then endorsed without authority.

Notes & risk‑management tips

• If a person fraudulently alters or creates any writing without authority, the policy treats it as forgery, even if criminal law might not.

• Common risk‑reduction steps:

  • Use safety paper for cheques.

  • Protect blank cheque stock.

  • Control access to facsimile signature machines and plates.

• Many firms buy limits for Agreement V that are equivalent to their Employee Dishonesty limits, since large cheque frauds can be very costly.

T - Physical Protection

Physical protection is concerned with setting up physical barriers to restrict unauthorized access to property.

T - Electronic Protection

Electronic protection is concerned with setting up electronic barriers to restrict unauthorized access to property.

T - Perimeter Protection

Refers to the methods used by owners to secure access to the premises when the business is closed.

T - Area Protection

Refers to the protection provided to areas within the building where valuable property is being stored.

T - Point Protection

Provides direct security for individual items such as safes, vaults, chests, filing cabinets, display cases, and expensive equipment.

T - Line Security

Refers to the ability of a telephone line to withstand tampering.

T - Money

Currency and coins in current use and having a face value.

T - Securities

Means all negotiable and non‑negotiable instruments or contracts representing money or other property and includes revenue and other stamps in current use, tokens and tickets, but does not include money.

T - Burglary

The unlawful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit.

T - Robbery

Robbery means the taking of insured property from a custodian by a person or persons who have caused or threatened to cause the custodian bodily harm, or committed another unlawful act witnessed by the custodian, or taken such property from a custodian who has been killed or rendered unconscious.

T - Custodian

Includes the insured(s), their partner(s), or any employee authorized by them to have the care and custody of insured property.

T - Theft

Includes all means of taking property without the owner’s consent (insurance meaning).

T - Employee Dishonesty

Loss which the insured shall sustain resulting directly from one or more fraudulent or dishonest acts committed by an employee, acting alone or in collusion with others.

T - Discovery Period

The time permitted by an insurer, commencing with the expiry date of the policy, in which a claim must be discovered by the insured if it is to be covered by the policy.

T - Messenger

The insured or a partner of the insured or any employee who is duly authorized by the insured to have the care and custody of the insured property outside the premises.

T - Forgery

A person is guilty of forgery if he fraudulently alters any writing of another without his authority, or makes, completes, executes, authenticates, issues, or transfers any writing so it purports to be the act of another who did not authorize that act.