Understanding Crime and Fidelity Bonds

Which of the following is covered under the definition of "crime" in Chapter 11?

• Theft

• Fire damage

• Flood

• Earthquake

Answer explanation

Theft is classified as a crime, as it involves the unlawful taking of someone else's property. Fire damage, flood, and earthquake are not crimes but rather natural events or damages.

A public library wants to protect itself from losses due to volunteer dishonesty. Which type of coverage should it consider?

• Government crime coverage

• Commercial property insurance

• General liability insurance

• Workers’ compensation

Answer explanation

The library should consider government crime coverage, as it specifically protects against losses from dishonest acts by volunteers, unlike other insurance types that cover different risks.

What does a fidelity bond primarily protect against?

• Natural disasters

• Employee dishonesty

• Product liability

• Customer injury

Answer explanation

A fidelity bond primarily protects against employee dishonesty, covering losses incurred due to fraudulent acts by employees. It does not cover natural disasters, product liability, or customer injury.

If a business discovers that an employee committed forgery last year but only finds out this year, which form would provide coverage?

• Loss sustained form

• Discovery form

• Occurrence form

• Claims-made form

Answer explanation

The Discovery form provides coverage for losses that are discovered after the fact, making it applicable here since the forgery was committed last year but only discovered this year.

A city clerk misappropriates funds. Which policy would likely cover this loss?

• Government crime policy

• Homeowners policy

• Auto insurance policy

• Health insurance policy

Answer explanation

A government crime policy specifically covers losses due to criminal acts, such as misappropriation of funds by a city clerk. Other policies listed do not provide coverage for this type of loss.

Which of the following is an example of robbery as defined in the text?

• Taking property by force or threat

• Stealing unattended property

• Breaking into a building at night

• Shoplifting

Answer explanation

Robbery involves taking property by force or threat, which is clearly defined in the text. The other options, such as stealing unattended property or shoplifting, do not involve force or threats.

Commercial crime coverage can include which of the following?

• Computer fraud

• Fire insurance

• Health insurance

• Auto liability

Answer explanation

Commercial crime coverage includes protection against losses from criminal acts, such as computer fraud. Fire insurance, health insurance, and auto liability are separate types of coverage and not included in commercial crime policies.

A company discovers in 2024 that an employee stole money in 2022. The company’s crime policy was renewed in 2023 with a discovery form. Is the loss covered, and why?

• Yes, because the discovery form covers losses discovered during the policy period, regardless of when they occurred

• No, because the loss occurred before the current policy period

• Yes, but only if the employee is prosecuted

• No, unless the loss is under $1,000

Answer explanation

Yes, because the discovery form covers losses discovered during the policy period, regardless of when they occurred. The theft was discovered in 2024, which falls under the renewed policy.

Which form covers a theft discovered in 2023 that actually occurred in 2022?

• Loss sustained form

• Discovery form

• Occurrence form

• Claims-made form

Answer explanation

The Discovery form covers losses that are discovered after the fact, making it suitable for a theft discovered in 2023 that occurred in 2022. The other forms do not apply to this scenario.

A business is considering whether to add a clients’ property endorsement to its crime policy. What reasoning should guide this decision?

• If the business regularly handles client-owned property, the endorsement provides coverage for theft of those items while in its care

• The endorsement is unnecessary if the business never handles client property

• The endorsement only increases premiums without adding value

• The endorsement is required by law for all businesses

Answer explanation

If the business regularly handles client-owned property, the endorsement is essential as it provides coverage for theft of those items while in its care, protecting both the business and its clients.