Understanding how commercial crime insurance works is essential for Texas small business owners who may need insurance protection for their businesses. The purpose of the policy is to provide coverage for the business in the event of loss resulting from theft or damages within the business premises. The insured business pays premiums to keep the policy active. In the event of loss resulting from a covered event, the business notifies the insurer and may file a compensation claim. If, after investigations, such a claim is determined to be genuine and occurred while the policy is active, the insurance company will accept the claim and pay it. If the loss is due to damages to money, securities, and/or other properties, the insurance company may pay the actual cash value of the loss. A disagreement in the amount of the cash value of a loss can lead the insured business and the insurance company to arbitration. However, the insurance company may offer a replacement for a damaged item.
Business insurance is based on certain key provisions, these are:
Named peril - For the insurance company to honor a claim, the loss must result from a crime that can trigger coverage as stated in the policy document.
Limit of coverage - Coverage limits apply separately to losses and are not lumped together.
Deductible - The insured business pays separate deductibles for losses where applicable. However, if several related acts by a group of persons lead to losses, such losses are seen as a single loss and are subject to one deductible payment.
In case of a crime, such as theft, robbery, forgery, or employee dishonesty, the business needs to file a claim with the insurer. The following steps outline the process:
Step 1 - File a police report
Step 2 - Collect and itemize all the receipts of payments made in repairing damages or replacement of losses
Step 3 - Complete and send a claim form to help your insurer determine if your claims are among the covered events in your policy. The insurance company also uses this to authenticate your claims and the amount you request as compensation. In filling out the claim form, provide all the necessary information that is outlined
Step 4 - Make copies of your receipts and the claim to protect yourself against any complications that may occur
Step 5 - Review your documents and call your insurer to alert them that you are filing a claim. Also, ask to find out if there are additional documents you should include to expedite the process
Wait for response - While waiting for a response from the insurance company, take note of the date you filed the claim and the date you were given for a payout. If you do not get a response by the due date, contact the insurer. Keep a record of all communication with the insurer for future reference in the event of complications that may come up
If there is a need for you to file a claim, contact your current Texas-licensed commercial insurance agent. You can also file your claim by contacting your insurance company’s staff insurance adjuster.
No, a claim is not a bill in commercial crime insurance. A claim is a formal request sent to the insurance company by the policy owner in expectation of a payout to help cover various costs resulting from the occurrence of an insured event. In contrast, an insurance bill is a statement showing money owed to a service provider for services rendered to a policy owner.
In Texas, the time limit for filing a commercial crime insurance claim is a bit complex and constantly changing and depends on what is written in the contract. It is advisable to seek the advice of an attorney. However, Texas allows up to 3 years after discovering the loss for the policy owner to file a claim. After an insured has submitted a claim, the insurance company has a 30 days discovery period. The discovery period is the time frame for the insurance company to investigate and determine the authenticity of a loss. However, most insurers prefer to be notified immediately after a loss.
Commercial crime insurance claims can be made from two perspectives:
One of the benefits of commercial crime insurance is it allows you to make claims for losses that occur outside the policy’s active period. If the loss is discovered by the insured business during the policy period or even after the coverage ended, regardless of when it occurred, commercial crime pays using the Discovery Form basis. The discovery form allows you to file claims for losses discovered during the policy active period and up to sixty days after. Even if those losses take place outside the current policy active period, even if there is no prior coverage, your claim has full coverage and limits.
Under the Loss Sustained Form basis, the business can recoup the losses sustained during the actual term of the policy or during any extension period. In the event of a loss during a commercial crime insurance active period, the business can make claims up to the extended period of one year after the policy has expired using the loss sustained form.
After filing a claim and submitting a sworn proof of a loss, there is a discovery period in which the insurance company will investigate the validity of the claim. The insurance company has 15 days to acknowledge receipt of your claim.
The insurance company assigns an adjuster who will determine the actual cash value of the loss based on the contract terms and the coverage in place. The actual cash value is the current market value of an item. Insurance companies arrive at the actual cash value by subtracting depreciation from the replacement value. The adjuster will provide an estimate of the payout. In total, the insurance company has 36 days from the day of receiving your claim to make a payment.
If you want to know more about why your claim payout is low or how the cash value was arrived at, consult with a Texas-licensed commercial insurance agent.
In Texas, commercial crime insurance companies pay out claims after thorough investigations to determine the authenticity of a claim, most payments are made by checks. However, the insurer reserves the right to reject a claim that does not meet the conditions set out in the policy declaration document. It is essential to note that a claim can only be successful if the loss happens while the policy is active. The insurer usually pays the claim via a paper check made in the name of the insured business. If you need to expedite the payment, discuss your options with your commercial insurance agent or directly with the insurer.
Typically, Texas law requires that an insurance company should pay for the losses covered by a business crime insurance policy in the event of a loss. However, if there is evidence of fraud or that the claim does not meet the conditions as stated in the policy document, the insurer may refuse to pay it. It is a common practice for the insurance company to ask questions and go to any legal length to determine the authenticity of a claim.
Commercial crime insurance companies may deny insurance claims if such claims do not meet the conditions set out in the policy declaration document, or if they detect fraud during claim assessment. However, some business insurance companies may decide to act in bad faith and deliberately deny insurance claims for no valid reason. Such insurers try to avoid claim payments by:
Deliberately misrepresenting coverage when selling a policy
Delaying response to inquiries initiated by the policy owner
Not investigating the veracity of a claim thoroughly
If an act of bad faith by the insurer is suspected, contact the Consumer Protection division of the Texas Department of Insurance to file a report. take up the case.
The top reasons an insurer may reject a commercial insurance claim in Texas include:
Outstanding premiums - To qualify for coverage, the covered business must pay the premium for the policy when due. If the insured business owes premiums, the insurance company may not honor its claims.
Policy exclusions - If the claim is for a non-covered event, the insurance company will reject it. For instance, commercial crime insurance does not provide coverage for the following and will not accept claims from such losses:
Losses resulting from a data breach
Liabilities resulting from third-party crimes
Losses resulting from accounting errors
Losses resulting from theft by employees with previous records of stealing (Note: When applying for a job, such individuals may be able to obtain a fidelity bond - also known as crime bond insurance)
Crimes committed by business partners or employees in collusion with business partners
Delayed notification - A commercial insurance company may also deny a claim if the poly owner notifies it outside the window period given in the event of a loss
Fraud - Insurance companies may not pay claims if any fraudulent activity is detected. Fraudulent acts by the insured come in different types but the most common ones are:
Application fraud - this is one of the most common types of fraud, whereby the policyholder intentionally provides false information to the insurance company at the time of buying the insurance. Over-valuing an insurable asset to squeeze more payout from the insurance company is a fraud. For instance, assigning a $50,000 value to an asset that is only worth half the price is application fraud.
False claim fraud - some people love inventing claims and have ingenious ways of doing it which include:
Filing claims with false information
Intentionally damaging property to file a claim
Filing a claim that does not exist
Inflation fraud - Adding “a little more” to your claim can make the claim be denied.
Filing a claim for a non-covered loss. Commercial crime insurance notably does not cover:
Property damages caused by fire,
Legal fees, fines, penalties, and professional liability,
Your insurer should give reasons why your commercial crime claim was denied and if you are not satisfied with the explanation, contact a state-licensed commercial insurance agent to discuss your options further.
The amount a business theft insurance (aka commercial crime) pays out after a claim depends on the actual cash value of the loss at its discovery. The actual cash value is the replacement value minus depreciation. It is the worth of the loss subject to depreciation, while the replacement value is the cost of replacing the loss. You may also get a large payout the size of your business property. If you insure a high-value property, you are likely to get a large payout based on the market value of the property at the time of the loss.
If your commercial crime insurance is not paying enough for your claim, speak with your business insurance agent. Ask them to speak to your insurer and help you understand why it is not paying enough. The agent will also help you review your policy. Alternatively:
Study the policy declaration carefully to determine if there is any clause that is affecting the payout
Be persistent with your complaint to the insurance company
Hire an attorney who deals with insurance law to take over the case. Lawyers may be expensive, so make sure not to spend too much of the received claim on legal defense costs.
By law, business crime insurance companies in Texas should acknowledge receipt of a claim within 15 days and can ask for additional documents to back up the claim. After receiving a claim, the company has an extra 15 days to carry out further investigations and must deny or make claim payment within 30 days.
To check the status of a claim filed on your commercial crime insurance policy in Texas, you can:
Contact your insurance agent, who can research on your behalf,
Log on to your insurance web portal, enter your details, and check your status by going through the policy details. Also, you can use the company’s mobile app (if available).
Make a phone call to the claim department of the insurance company and speak to the representative.
If a loss occurs as a result of a commercial crime committed by a business partner, you do not need to inform the insurance company because there is nothing they can do about it. Crimes by partners in business are not covered under commercial crime insurance. The best thing to do is to inform law enforcement. The limit of your coverage is stated in your contract document, but if you are in doubt, contact a state-licensed commercial insurance agent for clarification.
Generally, you may not want to file a commercial crime insurance claim if the benefit you get from it is less than the money you spend on getting this coverage. If a small claim drastically raises the premium, it may not be worth filing. Also, unlike commercial property insurance, with commercial crime insurance, you do not file claims for employee injuries or any type of injury within the business premises. Always discuss your insurance questions with state-licensed insurance professionals.