Commercial Crime

A Commercial Crime policy protects the Insured’s money and other property against theft by employees. It also covers malicious damage and theft committed by non-employees through computer hacking, extortion and fraudulent transfer instructions.

In addition, the policy also covers the contractual penalties which businesses often face when they can't deliver as a result of theft.

Question: Fuel Retailers example – third party Computer Fraud and Fraudulent Transfer Instruction
  • Question: The Insured is a fuel retailer who uses garage cards to facilitate payment for the dispensing of fuel. It could happen that a stolen card is used to fraudulently purchase fuel. The bank might only detect this fraud some time after the transaction was effected and then reverse the transaction. As a result the fuel retailer will suffer the loss. Can the commercial crime policy be used to cover these losses?
  • This example would be covered in terms of Computer Fraud as it meets all the criteria in terms of the definition of Computer Fraud.
    • Something was stolen - the fuel belonging to the retailer
    • A computer system was accessed to achieve this - the handheld computerised garage card reader
    • There was intent to defraud (note the definition does not specify who the intended victim ought to be)
    • Systems were used of the institution that deals with the money of the Insured.
    • The theft was completed electronically
  • Would it also be covered in terms of a Fraudulent Transfer Instruction? The definition states that fraudulent "instructions purport to have been transmitted by the Insured ". So the question is ‘were the instructions purported to have been sent on behalf of the Insured and not the Insured’s customer?’
    • Camargue view is that in this case the instructions were purported to have been sent on behalf of the Insured – so the loss would be covered.
Question: Apportionment of Recoveries example

The following is an example of how the recovered money would be allocated:

  • An employee stole R500,000 from the Insured. The excess was R10,000 and the indemnity limit was R200,000. This means that there was an uninsured amount of R290,000 in addition to the R10,000 excess.
  • Making the recovery cost R25,000 and the amount recovered was R400,000 the recovered money would be allocated as follows:
    • The first R25,000 is used to pay the costs of making the recovery
    • The next R290,000 would be given to the Insured to cover the uninsured amount
    • The remaining R85,000 would be paid to Insurers to offset the R200,000 they paid