In "My Adventures with Your Money," author T.D. Thornton writes that, as newspaper subscriptions rose in an increasingly literate America, so did con artistry: "One constant of con artistry is how potential marks never think they'll get suckered themselves...An 1860 survey of New York police officers estimated one out of every ten city criminals was a confidence man."
The exposure to loss of money, securities, or other property due to trick, scam, etc. has been around for millennia (for the latest scam, Google “fake presidents fraud”), but from an insurability standpoint, traditional “ISO standard” insurance products have excluded this exposure as a business risk. For example, the ISO CP 10 30 special causes of loss form excludes:
Voluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
Similarly, ISO’s commercial crime forms have excluded, except for certain types of computer fraud, the loss of money, securities, or other property due to a “fraudulent instruction,” as defined by the policy forms. Until now. In the October 30, 2015 edition of the VUpoint newsletter, we ran the following “From the Editor” blurb:
New ISO Crime Coverage Forms for Scams and Bitcoin Currency
ISO has made Forms Filing CR-2015-OFR15 which includes two major changes for “virtual currency” and “fraudulent impersonation.” The filing discusses how federal agencies grapple with how and whether to regulate virtual currencies like Bitcoin (money, securities, something else?). In the meantime, ISO is introducing endorsements to clarify how crime coverage extends to digital currency.
Perhaps a more important change is the new CR 04 17 11 15 – Fraudulent Impersonation endorsement which allows, under separate coverage parts, coverage for fraudulent impersonation of employees and fraudulent impersonation of customers and vendors. Coverage for tricks, scams, etc. has historically been excluded by both commercial property and crime forms.
The purpose of this article is to take a closer look at the new ISO CR 04 17 11 15 – Fraudulent Impersonation endorsement that can be used with ISO’s 12 primary policy/coverage forms, from the CR 00 20 to the CR 00 31. In a nutshell, the new endorsement covers fraudulent impersonation scams where the insured is tricked into transferring money, securities or other property by someone impersonating an employee, customer or vendor of the insured. As detailed in the filing, the endorsement has two parts:
Fraudulent Impersonation of Employees
According to ISO, under this part, coverage is provided for loss resulting directly from the insured, in good faith, transferring money, securities or other property in reliance on a transfer instruction purportedly issued by an employee of the named insured, partners, members, managers, officers, directors, or trustees, but which actually was issued by an imposter without the knowledge or consent of a person listed above.
Each of these coverages has 3 options:
Option A requires verification for all transfer instructions.
Option B requires verification for all transfer instructions in excess of the amount shown in the endorsement schedule.
Option C does not require verification of transfer instructions.
This can be a VERY valuable endorsement for many, if not most, customers. It is currently not available in ISO’s BOP program, which is yet another reason why a BOP, given its very limited number of coverage options compared to a Commercial Package Policy, may not be the best choice for many customers with the exposures they face today.
Last Updated: December 3, 2015