When an office manager diverts customer deposits or a crew member sells job material, the property and business owners forms a flooring business usually carries exclude the loss. A commercial crime policy puts back a defined list instead: employee theft, forgery, money and securities, and computer and funds transfer fraud, each with conditions an owner should read first.
The dishonesty exclusions already sitting in your property forms
The shop’s property policy is where most owners look first after a theft, and it hands employee dishonesty straight back. The property page covers what that policy restores.
Under the standard ISO form as commonly written, the Causes of Loss – Special Form (CP 10 30 09 17, the edition we read) excludes loss caused by “Dishonest or criminal act (including theft) by” you, your partners and your “officers, managers, employees (including temporary employees and leased workers)”. Damage an employee does to property can still be covered, “but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.” The same exclusion reaches “theft by any person to whom you entrust the property for any purpose”.
A business owners policy reads the same way. The Businessowners Coverage Form (BP 00 03 07 13, the edition we read) excludes “Dishonest or criminal acts (including theft) by you” and the people who work for you, then adds: “This exclusion does not apply to coverage that is provided under the Employee Dishonesty Optional Coverage.” That option is not automatic. Wisconsin’s insurance regulator, in its consumer’s guide to insurance for small business owners, notes that coverages are added to the basic package by endorsement for an additional premium.
Both forms also exclude being tricked out of property: “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.”
What a commercial crime policy is built to put back
A crime policy is first-party coverage for the business’s own money, securities and property, written as a list of separate insuring agreements you buy one by one. The National Association of Insurance Commissioners’ small business insurance page lists “Crime insurance protection against burglary, theft and malicious damage, such as employee embezzlement” among the coverages a small business should consider.
The California Department of Insurance’s commercial insurance guide adds two points. “Crime insurance provides protection for the assets of your business including merchandise for sale, real property, money and securities.” And “It is considered a property insurance line.”
The form this post reads is one edition of the standard crime policy, the Commercial Crime Policy (Discovery Form) (CR 00 22 05 06, the edition we read). It is an older edition; the policy in force today may be written on a later one or on an insurer’s own form, and the wording can differ. The form itself opens with the right warning: “Various provisions in this policy restrict coverage. Read the entire policy carefully to determine rights, duties and what is or is not covered.”
Crime coverage is not a bond either; a bond guarantees your work to someone else, as bonded and insured explains.
Employee theft: deposits, progress payments and job material
Employee theft is the agreement most flooring owners buy a crime policy for. In the edition we read, it states: “We will pay for loss of or damage to ‘money’, ‘securities’ and ‘other property’ resulting directly from ‘theft’ committed by an ‘employee’, whether identified or not, acting alone or in collusion with other persons.” It adds: “For the purposes of this Insuring Agreement, ‘theft’ shall also include forgery.”
Two definitions matter on a flooring job. “‘Theft’ means the unlawful taking of property to the deprivation of the Insured.” And job material counts: “‘Other property’ means any tangible property other than ‘money’ and ‘securities’ that has intrinsic value.” Plank, tile, carpet rolls and adhesive are other property.
Shrinkage is the hard part. The form excludes a loss “the proof of which as to its existence or amount is dependent upon” an inventory computation. It then softens that: “However, where you establish wholly apart from such computations that you have sustained a loss, then you may offer your inventory records and actual physical count of inventory in support of the amount of loss claimed.”
Tools and material stolen by an outsider, from the van or a customer’s driveway, are a different policy: the tools and equipment floater.
Who counts as an employee, and who does not
Whether a theft is employee theft turns on the policy’s definition of employee, and the edition we read draws it narrowly. It reaches a person “Who you compensate directly by salary, wages or commissions” and “Who you have the right to direct and control while performing services for you”.
Borrowed labor is pulled in. A temporary worker counts: “Any natural person who is furnished temporarily to you”, including one brought in “To meet seasonal or short-term work load conditions”, but “excluding, however, any such person while having care and custody of property outside the ‘premises’”. A temp hauling material to a job site is outside the definition while doing it. A leased worker counts too: “Any natural person who is leased to you under a written agreement between you and a labor leasing firm, to perform duties related to the conduct of your business”.
Then the line most flooring businesses cross every week: “‘Employee’ does not mean any agent, broker, factor, commission merchant, consignee, independent contractor or representative of the same general character”. A 1099 installer who walks off with a customer’s material is not an employee on that wording, and the property form excludes theft by anyone you entrust property to. Ask your agent how your own policy treats subcontractors. The liability side of subcontracted installers is a separate topic on the general liability page, and who counts as an insured there is taken up in who is an insured on a flooring contractor’s policy.
Forged and washed checks
Forgery or alteration covers your own outgoing paper. The edition we read pays for loss “resulting directly from ‘forgery’ or alteration of checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain in ‘money’” made or drawn by you or “Made or drawn by one acting as your agent”. Forgery itself “means the signing of the name of another person or organization with intent to deceive”.
Mailed checks are a common target. The Financial Crimes Enforcement Network’s alert on mail theft-related check fraud warns that “business checks may be more valuable because business accounts are often well-funded and it may take longer for the victim to notice the fraud.” It describes the method: “Check washing involves the use of chemicals to remove the original ink on a check to replace the payee and often the dollar amount.”
One of its warning signs fits a flooring office that pays suppliers by mail: “Customer complains that a check they mailed was never received by the intended recipient.”
The business owners form carries its own small forgery and alteration coverage, including checks “issued by someone who impersonates you or your agent”, with a cap printed in the form.
Real-World Scenario: A flooring shop’s office manager handles customer deposits on residential jobs. A homeowner asks why her balance invoice ignores the deposit she paid, and the owner finds it never reached the business account. Earlier jobs show the same pattern across more than one policy term. The owner calls the agent before confronting anyone and learns the crime policy is on a discovery basis, so what matters is when the theft was first discovered, not when each deposit went missing.
Cash at the shop, the bank run and counterfeit bills
Three narrower agreements cover money handled in person. Inside the premises, the edition we read pays for loss of “‘money’ and ‘securities’ inside the ‘premises’ or ‘banking premises’” from theft “committed by a person present inside such ‘premises’ or ‘banking premises’”. The premises are defined tightly: “‘Premises’ means the interior of that portion of any building you occupy in conducting your business.”
Outside the premises answers for loss of “‘money’ and ‘securities’ outside the ‘premises’ in the care and custody of a ‘messenger’”. That is the staff member carrying the day’s checks to the bank.
The last covers what a customer hands you. The form pays for loss from “your having accepted in good faith, in exchange for merchandise, ‘money’ or services” a money order that is not paid, or “‘Counterfeit money’ that is acquired during the regular course of business.” A business owners form carries a small, capped version of the same coverage.
Computer fraud, funds transfer fraud and the payment your own office sends
The two electronic agreements are narrower than their names suggest. Computer fraud in the edition we read covers loss “resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the ‘premises’ or ‘banking premises’”. Funds transfer fraud states: “We will pay for loss of ‘funds’ resulting directly from a ‘fraudulent instruction’ directing a financial institution to transfer, pay or deliver ‘funds’ from your ‘transfer account’.” A fraudulent instruction is one “which purports to have been transmitted by you, but which was in fact fraudulently transmitted by someone else without your knowledge or consent”.
Neither, by its words, describes your own bookkeeper paying a fake supplier after a convincing email: that payment was sent with your knowledge. Crime forms carry a voluntary-parting exclusion for “Loss resulting from your, or anyone acting on your express or implied authority, being induced by any dishonest act to voluntarily part with title to or possession of any property.” In this edition, that exclusion is written against the inside-premises and outside-premises agreements only. Where other editions place it, and whether a policy adds social-engineering wording, varies; ask your agent.
The FBI’s Internet Crime Complaint Center, in its business email compromise announcement, advises: “Be alert to hyperlinks that may contain misspellings of the actual domain name.” How the scheme works, and the homeowner who pays a fake account, are covered in cyber liability for a small flooring contractor.
Discovery, prior knowledge and the owner’s own hand
A discovery-form crime policy answers for loss it covers “taking place at any time which is ‘discovered’ by you during the Policy Period shown in the Declarations”. Discovery is “the time when you first become aware of facts which would cause a reasonable person to assume that a loss of a type covered by this policy has been or will be incurred, regardless of when the act or acts causing or contributing to such loss occurred”. After the policy ends, the extended window to discover loss “terminates immediately upon the effective date of any other insurance obtained by you”.
The business owners option uses the other trigger. It pays “covered loss or damage sustained during the policy period and discovered no later than” a stated time after it ends. Moving between the two, or between insurers, needs care; check the trigger before you switch. Liability triggers are a separate subject, in occurrence vs claims-made policies.
Knowledge ends coverage. The edition we read excludes loss by an employee who committed a theft before the policy began if you “learned of that ‘theft’ or dishonest act prior to the Policy Period shown in the Declarations”, and the employee theft agreement ends as to anyone once you “learn of ‘theft’ or any other dishonest act committed by the ‘employee’ whether before or after becoming employed by you.” Theft by you or your partners is excluded too.
What to do the week you find a theft
The first steps after a discovered theft are conditions of the policy. The edition we read requires notice to the insurer, and where a loss “involves a violation of law, you must also notify the local law enforcement authorities”, though it sets employee theft and forgery apart from that police duty. It also requires you to “Produce for our examination all pertinent records.”
For a fraudulent transfer, the FBI’s advice is plain: “Regardless of the amount lost, file a complaint with” its Internet Crime Complaint Center, which “may be able to assist both the financial institutions and law enforcement in freezing funds.”
It covers property “That you hold for others whether or not you are legally liable for the loss of such property”, yet “this policy is for your benefit only. It provides no rights or benefits to any other person or organization.” A homeowner whose deposit an employee stole looks to you, not to your insurer. Firing the employee can raise its own claim; see employment practices liability.
The flooring contractor insurance hub shows where crime coverage fits in the program, and reading your policy declarations shows where each agreement appears. If you handle deposits, send us your current forms and we will read the dishonesty wording with you.