Loss sustained v. loss discovered Crime forms

I found an article … in December 2001 titled “Employee Crime and Claims Made Forms.” I have been an insurance broker for many years and still find that I am confused over the “loss sustained” v. “loss discovered” Crime forms. Your article was the best that I have found on this very complicated issue.

I have a question on a matter that you did not address in your article. Are there potential gaps in coverage that arise when an insured migrates from a loss discovered form to a loss sustained form? If so, does ISO publish a policy bridge endorsement?

I appreciate any help that you might give me in understanding this issue.

-Alec T. Biele

Wm. W. George & Associates, Inc.

Dallas, Texas

Author’s response:

There should be no gap when replacing a crime insurance policy written on a discovery basis with one applying on a loss sustained basis. The concern can be well appreciated, given that the discovery form being replaced usually provides, with the exception of employee benefit plans, an extended period to discover loss of 60 days and that sometimes is not long enough.

The provision of the standard ISO Crime insurance policy, written on a loss sustained basis, that should prevent such a gap is titled “Loss Sustained Under Prior Insurance.” This states that if the named insured or predecessor in interest sustains a loss during the period of any prior insurance that could have been recovered, if it were not for the fact that the time within which to discover loss had expired, coverage of the loss sustained form will apply, subject to the following two conditions:

First, the insurance provided under this loss sustained basis became effective at the time the discovery form had been terminated. second, the loss would have been covered by this loss sustained form had it been in effect when the acts or events causing the loss had occurred.

It is also important to note that the Loss Sustained Under Prior Insurance condition is not to be considered a separate limit of insurance. In fact, the amount recoverable is limited to the lesser of the amount recoverable under (1) the loss sustained form, as of the effective date, or (2) the prior insurance (discovery basis) had it remained in effect.

-Donald S. Malecki, CPCU


Imagine my surprise when I found the item on page 208 of the September issue [“Centuries of Rough Notes”] regarding the St. Louis Tornado of 1927. As four-year-old, I survived certainly one of the worst storms in history.

Living with my grandparents and mother at 4516 McKinley Ave., near Forest Park, damage was extensive on the street. The roof of a two-story apartment was ripped off the building and deposited in the street. I was with my grandmother in the kitchen when a large post was thrown through the window and missed us by about two inches. At that point, my grandmother grabbed me and we went to the basement.

My mother worked in downtown St. Louis and it took her over eight hours to walk home, as there was no transportation of any kind. Normally, it was about a five-mile trip. She walked up one street, then [backtracked] to another street, taking perhaps a 10- to 12-mile trip due to blocked streets. Apprehensive as to what she would find, she was most thankful for our well-being.

Having reached age 81, I never thought I would see photos of this tragedy.

-Jack C. Martin

The Martin Agency

Lafayette, Indiana

Copyright Rough Notes Co., Inc. Nov 2004

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