Not enough limits? Time to reassess what crime limits my customers need.


Agents will many times be asked, what limits should my business carry?  This is one of those “loaded” questions and you risk an E&O exposure if you answer directly.  You can always come back with the response, “What limits do you feel comfortable carrying?”, but this won’t really help.  Other answers:

  • Many similar businesses such as your own, carry $X,XXX,XXX limits.
  • I recommend carrying a minimum of $X,XXX,XXX limits.
  • Since we are trying to protect your assets, let’s look at the amount of assets we are trying to protect.

Whatever answer you give, always offer quotes for limits above that so they can see what they cost and they can potentially accept those higher limits.

Where I see the most shortsightedness in terms of both coverage and limits is with crime insurance.  Many times the limits offered under a BOP are not sufficient and the agent fails to offer higher limits.  I believe crime insurance is the most “undersold” coverage that agents handle.  Many clients do not believe they are ever going to have a loss and therefor do not request higher limits than they are offered.

Let me give you some examples of some recent losses to exhibit the point I am trying to make:

  • $3,300,000 embezzled from a school district
  • $728,143 stolen from a trucking company
  • $2,900,000 embezzled by a caregiver of a blind patient
  • $350,500 embezzled from an electrical contractor
  • $20,000,000 embezzled by a credit union CFO
  • $510,000 embezzled by CEO of mental health agency
  • $500,000 embezzled from insurance agency over 10 year period and discovered when the sale of the agency revealed the loss (they only had $10,000 limits under their BOP)
  • $410,000 embezzled by church administrator
  • $5,000,000 embezzled by bank assistant branch manager
  • $8,000,000 embezzled from an industrial processing firm

You can see where I am going with this.  Losses have grown and the thought process behind offering higher limits has not.   We look at general liability limits and property valuation limits and barely give a thought to proper crime insurance limits.  Keep in mind that for every embezzlement news story you hear, there are 5 or 10 that you DO NOT hear about.  Think about it….  Do you want your customers to know that one of your “trusted” employees embezzled from you?   Will they think you don’t have “good controls” in your business and are poorly running it?  If it was a large amount taken over a period of time, would they think you don’t know what is going on in your operation?  Many times in family operations they don’t want this information to get out for fear of hurting the rest of the family or ruining their reputation.

Some statistics for you:

  • 80% of workplace crime is committed by employees
  • One in four employees has either witnessed or committed workplace fraud or abuse
  • One in four employees committing fraud against their employer has been with the company for more than 10 years.
  • Only one in three of those witnessing a workplace crime bothers to report it.
  • The average organization loses 6% of its total annual revenue to fraud and abuse committed by its own employees.

So what should you do?

  1. First, learn more about crime insurance. I have run across very few agents who had an in-depth knowledge of crime insurance and would be able to subsequently explain to a client what they needed to properly cover their operation.  I found one online that would be a good starting point:
  2. Get familiar with the new ISO endorsements that just came out that pick up some of the cyber crime exposures. It is amazing at how much has changed recently and this gives you a good reason to discuss this area with your clients including discussing cyber liability coverage.
  3. Get familiar with your carriers forms since many of them may not use ISO endorsements and their forms may differ from ISO.
  4. Get familiar with the type of losses happening out there and have claims examples ready to show your clients so they can see just how prevalent it is and “it can happen to them”.
  5. Look at monoline crime coverage if your carrier can not offer higher limits or cannot offer the comprehensive crime forms available in the market. If you are going to use more than one carrier, make sure the coverage is coordinated between the carriers.
  6. Always, always, always quote higher limits. This avoids them saying in court in an E&O trial that if they had known it only would cost a little bit more, they would have bought more coverage.

I truly believe this is a coverage area that can “come back and bite you”.  It is viewed more as a fringe coverage and not as essential coverage.  I think you have to view it as a required coverage and then push for sufficient limits.  A uncovered crime loss can put a company out of business!


Ken KukralKenneth Kukral, CIC – VP of Special Risks – That means, call me if you need help on placing a unique, difficult, large or more complex risk.  800-937-3497 ext 2079


Additional Insured Pitfalls

By Ken Kukral

­­E&O Warning!

On a daily basis I see requests coming in asking for additional insured status for accounts we write or ones that we are currently quoting.  As a general rule this would be standard operating procedure but in reality it IS NOT!   Why you ask?  Most of the requests we receive for additional insured status do NOT include the specific additional insured form that should be added.   The requests usually advise who needs to be added as an additional insured but do not list the interest of the additional insured.

This gets into a philosophical debate on whose responsibility it is.  The insured (who is bidding a job, or needs to produce a certificate with an AI in order to get paid for a job), the agent, the wholesale broker or the carrier?  If an insured loses a bid because the wrong AI form was used, whose fault it is?  I think a lot of the responsibility falls back onto the agent since they are the ones dealing directly with the client, the ones gathering the information and the one who is “advising” the client.

So what should you do about it?

1.     Discuss additional insured endorsements with the client when originally writing a client.  Make sure they understand that they are allowing another party to potentially tap their insurance coverage and they may not have sufficient limits when they have a loss.  This would also be a good time to discuss writing higher limits for the client.

2.     Have a certificate/additional insured request form that you use so the client is aware of what information you will need in order to add an additional insured.  Many times these requests come at the last minute (a couple hours before having to submit a bid, or when there is a hold up in getting paid due to lack of a certificate) and the “pressure is on”.  I am sure you will agree that these “moments of truth” can make the difference between a satisfied client or one that will have a good reason to let other agents quote the business at renewal.  Besides, don’t you love dropping everything you are doing just to take care of a certificate/AI request?

3.     Increase your knowledge of the available additional insured endorsements.  By understanding the use of AI endorsements you can better fit the AI endorsement to the situation.  Does the insured need to provide additional insured status for completed operations?  Many times the requests that come in for contractors do not specify this requirement so in reality the additional insured endorsement on the policy does not provide any coverage once the insured finishes the work and leaves the jobsite.

4.     What additional insured endorsements does the company you are quoting with offer?  You should find this out upfront, including whether there will be a charge for the AI endorsement or not.  Also find out the cost and the form to add blanket additional insured.  You may find out that the carrier does not offer the AI form you will most likely need later on.  It would be better to know that up front rather than after writing the account.  Some contracts still call for the CG2010  (11/85) form.  Since many carriers use the most “current” ISO forms (per their filings with the state insurance department) this form may no longer be available.  Keep in mind that not all blanket additional insured’s are created equal.  Some give coverage to new additional insured’s as long as the carrier is made aware that they have been added.  If you fail to notify them they may not have coverage at the time of a loss.

5.     Confirm what additional insured’s are needed on each renewal.  There may be provisions in the contract your insured signed that require AI status be continued for a specific period of time after a job has been completed.  Keep in mind that the insured exposes their limits to claims of other parties so keeping an on AI longer than required can expose their limits for an extended period of time.

6.     Check out the insured versus insured exclusion on the insured’s policy.  I have seen where a carrier’s insured versus insured exclusion excluded claims from ANY insured versus ANY insured.  This effectively excludes losses if they are sued by the additional insured.

7.     Read the umbrella policy.  Additional insured endorsements may not follow form in the umbrella.  The “other insurance” provision of the umbrella could state that the additional insured’s own coverage must be tapped before the umbrella would pay.

8.     For company specific endorsements, READ THEM!   They may be a derivative of the ISO form but one or two word difference could make a huge difference.

9.     As I have mentioned in the past, don’t try to amend the policy via the certificate of insurance.  In many states this is illegal and you could get dinged by the department of insurance.  If needed, show them the department of insurance bulletins on this subject and make sure you take the “straight and narrow” or risk getting in trouble.

10.     Get a full copy of the contract.  Many times clients only send you the “insurance” provisions but there are a number of other areas that could affect coverage.

Knowing the pitfalls of additional insured endorsements can help to keep you out of trouble.  Be proactive about dealing with these type of situations and your customers will be better taken care of.  Standardize the procedures in your office on dealing with additional insured’s so that they are handled systematically and will keep your E&O exposure to a minimum.  There is nothing worse than a $100 additional insured endorsement leading to a $1,000,000 E&O claim.