CASH INSURANCE

L. D. Joshi Center for Insurance Studies & Research National Law University, Jodhpur

INTRODUCTION
This Policy is intended to protect Banks and industrial Business establishments against loss of money which may be carried by messengers and which may be in transit from one place to another. Cash Insurance is essentially a modified version of Burglary Insurance.

DEFINITION OF CASH
"CASH" Unless otherwise stated means current coin bank and currency notes, cheques, Postal Orders, and current postage stamps.

INSURED PERILS
1.Loss of Cash for the payment of wages, salaries and other earnings or for petty Cash in direct transit form the Bank to the Insured's premises from the time the cash is received at the Bank by the Insured or the authorised employees of the Insured until delivered at the premises or other places of disbursement and whilst there until paid out provided that out of business hours such cash shall be secured in locked safe or locked strong room on the premises. Cheques drawn by the insured to provide for such cash are covered in transit from the premises to the Bank. 2. Loss of Cash other than described in item 1) in the personal custody of the insured or the authorised employees of the insured whilst in direct transit between the premises and the Bank or Post Office. Loss of Cash (other than described in Item 1 and 2) collected by and in the personal custody of the Insured or the authorised employees of the Insured whilst in transit to the premises or Bank within a period not exceeding forty-eight hours from time of collection.

3.

Furthermore, the implication of the provision relating to the time limit of 48 hours is that loss due to fraud or dishonesty of any cash carrying employee of the insured is not covered unless the same has occurred whilst in transit and is discovered within 48 hours from the time of collection. In other words a loss attributable to an employee is covered only if: a) the employee has been entrusted with the duty of carrying cash; b) the dishonest act is committed by such an employee during transit; c) the theft is accompanied by simultaneous flight of the employee; and d) the dishonest act and the flight of the employee are discovered within 48 hours from the time of collection of cash by employee.

Other acts of dishonesty by the employees, entrusted with the work of carrying of cash, like "stage managing" robbery enroute, of concealing the property and raising a false alarm of snatching of the property by strangers, are not covered. 4. Loss of Cash (other than described in item 1) whilst on the premises during business hours or whilst secured in locked safe or locked strong room on the Insured's premises out of business hours against the risk of burglary, house-breaking, dacoity, robbery and hold-up.

EXCEPTIONS/ EXCLUSIONS
1) 2) 3) Shortage due to error or omission. Loss of Cash entrusted to any person other than the Insured or an employee of the Insured. Loss of Cash where insured or his business staff is concerned as principal or accessories except loss due to fraud or dishonesty of any cash carrying employees of the 'insured occurring whilst in transit and discovered within 48 hours. Loss for .which at the time of its occurrence indemnity is provided by or would but for the existence of this Policy be provided by any other existing policy or Policies except in respect of any excess beyond the amount which would have been payable under such other policy or policies had this insurance not been effected. Loss occasioned by Strike. Riot or Civil Commotion. Nuclear risks. War and Kindred risks.

4)

5) 6) 7)

EXTENSIONS
The Policy may be extended to cover SRCC risks by paying appropriate extra premium.

RATING NONTARIFF
Fixation of rates depend upon the, client, the estimated total carrying, the liability of the company any one time, the mode of conveyance distance involved, safety measures etc. Normally 35 Paise per mille on ordinary risks in good locality may be charged. But the same may also be reduced suitably, by the appropriate authorities, where the risk involved is less. Similarly where the locality is a remote-isolated place or the area is not good and the risk involved is much higher, the rate may be increased upto 50 paise per mille as well as stipulation for security measures etc.

SPECIAL FEATURES
1) This policy should not be extended to grant Fidelity Guarantee Cover, even by charging extra premium. F.G. policy, if required, may be issued separately. 2) Where only "Cash - in-safe" is proposed for cover, this policy should not be used and instead a "Burglary Policy" should be used. 3) At the end of the Policy year a declaration giving actual carrying throughout the year should be obtained from the insured and premium finally adjusted accordingly, within 30days from the date of expiry of the policy.

CLAIMS PROCEDURE
It is mandatory for the insured to report all losses to the police authorities and have a formal written complaint registered with them, a copy of which should be sent to the insurer alongwith the FIR number/diary registered number under which police register the case. The Insured should also furnish the proof of ownership and other evidence to substantiate the claim. In the event of a claim amount exceeding Rs. 2,500- a survey/ Investigation is arranged by the insurer. Initially the copy of the First Information Report of the Police authorities and the duly completed claim form must be submitted by the insured. Reinstatement of Sum Insured does not arise after settlement of Cash-in-Transit claims. For cash-in- safe claims, the Sum Insured should be reinstated as is done under Burglary Insurance.

PROPOSAL FOR CASH INSURANCE

1. Name in full 2. Address

3. Trade or business 4. In case, you are a corporate Body or co-op. society, please state the paid-up capital: 5. (a) Description of premises e. g , shop office warehouse, factory, etc. (a)______________ (b) Are the whole of the premises occupied by you ? If not. give particulars of other tenants (b)___________ (c) Are the premises occupied at night? (c)__________ 6. Are the employees engaged in the handling of wages and / or cash guaranteed under a Fidelity Policy ?

7. Description of Cash to be Insured :- (If no Insurance required for any items insert 'Nil'
Ite m No. CIRCUMSTANCE OR SITUATION Limit any one loss Estimated total amount of cash (other than crossed cheques) in transit during ensuing twelve months.

1.

Cash for the payment of wages, salaries and other earnings or for petty cash in direct transit from the bank to the Insured's premises from the time the cash is received at the bank by the Insured or authorized employees of the Insured until delivered at the premises or other place of disbursements and whilst there until paid out provided that out of business hours Cash shall be secured in locked safe or locked strong room on the premises; Cheques drawn by the Insured to provide for such Cash are covered and in transit from the premises to the bank.

2.

Cash (other than described in Item 1) in the personal custody of the insured or the authorised employees of the Insured whilst in transit between the premises and the bank or post office.

3.

Cash (other than described in items 1 and 2) collected by and in the personal custody of the Insured or the authorised employees of the Insured whilst in transit to the premises or bank within a period not exceeding forty eight hours from the time of collection. Cash (other then described in item 1) whilst on the Premises during business hours, or whilst secured in locked safe or locked strong room on the Insured's premises out of business hours against the risk of burglary, house breaking, dacoity, robbery and hold up.

4.

ESTIMATED TOTAL AMOUNT OF CASH IN TRANSIT per annum

8. Approximate distance between bank and proposer premises______________________________ 9. a) Is there any transit to or from branches, outlaying contracts Or elsewhere?________________________________________ b) If so, give, particulars including addresses_____________ (c) How !s" the Cash conveyed and how many employees have charge of it?________________________________________ 10. State estimated maximum amount of wages, salaries and petty cash retained in safe or strong room overnight_______________ 11. (a) State following particulars of safe and/or strong room in which cash will be kept out of business hours -:_____________________

Maker's Name

Weight I

Dimensions

Identification Number

b) Where and on which floor is the safe situated?_________________ c) Is it fixed to the walls or floor, if, so how?____________________ d) By whom are the keys of the sale and/or strong room held?_______ e) Are all such keys removed from the premises after business hours ? 12. a) Are you now, or have you been insured in respect of loss of Cash ? If so, state name of Insurer___________________________________ b) Has any Insurer in respect of an insurance against loss bf Cash (i) Declined your proposal or renewal ?_________________________ (ii) Terminated your Insurance? __________________________ (iii) Required an increased premium or __________________________ Imposed special conditions?___________________________________ 13. Have you ever sustained any loss of cash? If so, give particulars________ 14. Period of Insurance From____________to_________________

I/We desire to effect an insurance with THE ORIENTAL INSURANCE COMPANY LIMITED as set forth above l/We warrant that the above statements are true and complete and that nothing materially affecting the risk has been concealed by me/us. L, We undertake to keep the records necessary for the due adjustment of the premium and to render at the end of each period of insurance a statement in the form required by the Company of the total amount of Cash in transit which is the subject of this proposal and I/We agree that this proposal and declaration shall be held to be Promissory and shall form the basis of the contract between me/us end THE ORIENTAL INSURANCE COMPANY LIMITED. Date __________19______ Signature of Proposer_________ Insurance is in force until a premium or deposit has been paid ho acknowledgement of any premium or deposit is

MONEY-IN-TRANSIT CLAIM FORM:

The issue of this form is not to be taken as admission of Liability. Questions to be answered by the Claimant
1. Name of the Insured in full 2. Address; 3. Occupation 4. When the loss discovered ? 5. What were the places between which money was intrasit? 6. When and were did the loss occur? 7. In whose custody was the money at the time of loss? 8. How was the money being carried? i.e. whether in begs, trunks etc and how many of them 9. What means of transport was being used by the persons conveying the money? 10. Were the person conveying the money accompanied by an armed guard? If no state what protection if any was provided ? 1. Where the persons conveying the money covered under a fidelity Guarantee policy or policies? If so, for what sum/s and with which office's?

12. Give (full particulars must be given) the circumstances of the loss or damage. 13. What was the amount or the money being carried ? 14. What is the amount of loss ? 15. Have you informed the police authorities ? If so, when and where? 16. What steps have been taken to recover the lost money ? 17. Are there any other insurances upon the same money ? If so, give full particulars. 18. Have you ever before sustained loss of the same nature? If so, give particulars I/we, the above named, do hereby to the best of my/our knowledge and belief, warrant the truth of the foregoing statements in every respect; and l/we agree that if l/we have made, or in any further declaration the Company may. .require in respect of the said loss, shall make any false or fradulent statement, ex any suppression of concealment my/our claim shall be absolutely forfeited, and the policy shall henceforth be null and void. DATED :_ WITNESS: Signature

Fidelity Guarantee Insurance

L. D. Joshi

FIDELITY GUARANTEE INSURANCE

INTRODUCTION The broad purpose of this insurance is to indemnify the employer against direct pecuniary losses sustained through acts of fraud or dishonesty by an employee's in course of employment. The basis of Fidelity Guarantee originates from an employer and employees relationship or a fiduciary relationship. The three parties are Employer, Employee and the Insurance Company. This Insurance can be classified as follows: Commercial Fidelity Guarantee. Court Bonds. Government Bonds. The first type namely Commercial Fidelity Guarantee Policies which are mostly in use are of the following types. Individual Policy:- To cover one named employee. Collective Policy:- To cover a number of named employees upto an agreed amount against each. Floater Policy :-To cover a number of employees, without specifying the name of the employees and the amount against each. Only the total guaranteed is stated and any loss upto that sum is covered whether resulting form default of one or more employees.

INSURED PERILS
The perils covered under commercial fidelity guarantee policy are mentioned in the operative clause which suggests that the policy will indemnify the person insured against any pecuniary loss sustained by him on account of fraud or dishonesty of his employees, subject of course, to the limits of indemnity incorporated in the schedule of the policy. The Terms fraud or dishonesty are wide enough to cover losses suffered by the insured on account of forgery, embezzlement, larceny and misappropriation and default of the employees. The principle underlying the coverage of these risks is to be clearly understood. The policy hinges on the employer- employee relationship and therefore in all the monetary transactions or transactions assessable in terms of money entrusted to the employee, the employee is expected to discharge his duties honestly and faithfully. If the employee breaches the trust reposed by the employer, and creates any loss, the fidelity guarantee policy covers it. On the other hand, the policy will not cover theft committed by the employee because in theft no breach of trust is involved. Whereas in the case of larceny, embezzlement, forgery and default, breach of trust is an essential ingredient.

The terms under which the risk is insured may be summarized as below: 1) Fraud: It means obtaining an advantage by the perpetrator of the fraud, through unfair or wrongfully means. Frauds may result in pecuniary loss or other losses like loss of trade secrets. Under the insurance policy, only the pecuniary loss to the employer on account of fraud of the employee is covered. This term is defined in Sec. 17 of the Indian Contract Act in the same light as discussed. 2) Dishonesty: Dishonest act always refers to breach of faith. As frauds, they may also either result in financial loss or other losses. The intention of the fidelity guarantee policy is to cover the loss resulting from the breach of faith on the part of the employees. 3) Forgery: Forgery means fraudulent alteration of any document or the circulation of any forged or fraudulently altered document by the employee whereby, he obtains possession of money or goods of the insured. Here also breach of trust in there and so any loss on account of forgery is within the scope of this insurance.

4. Embezzlement: It refers to the misappropriation by any employee of monies or goods of the employer coming into possession of the employee before the possession passes on to the employer. 5. Larceny : The term 'larceny' is understood to mean theft but larceny is different form theft in the sense that it is taking possession dishonestly, without employer's consent of any movable property, the safety of which is entrusted to the employee, while actually it is not in his possession. In other words, the employee has every knowledge about the safe custody of the movable property (say Silver nitrate); but he does not possess it actually. If he pinches it in small dose daily and takes it home, it becomes larceny. In fact, this is the difference between embezzlement and larceny. The theft which is excluded under the policy is different from the larceny because larceny is a theft committed by one who is lawfully in the premises. 6. Default : The term refers to failure of some duty and in relation to Fidelity Guarantee Policy, it means non remittance of money collected by the employee or entrusted to him or non-deposit of goods entrusted to him. All dishonest defaults, resulting in pecuniary loss to the employer is covered under the .policy. In other words, the default intentionally committed by the employee with a view to cause loss to the employer alone is covered. e.g. : 'A' employer entrusts money to employee 'B' is lost accidentally due to theft and 'B' committed default in making that payment. The loss is not covered under the fidelity guarantee policy covering 'B'.

It has been mentioned that the fidelity guarantee policy covers the pecuniary loss of the employer due to fraud or dishonesty of employees. This coverage is subject to time limit for discovering the loss, known as period of discovery. As in other cases, fidelity guarantee policy is' also issued for a period of one year. However, it may not be possible that all losses would be discovered within the policy period. The insured may take time to discover the loss due to fraud committed diligently by the employees. Hence under the policy time limit for discovering the loss has been given i.e. losses must be discovered by the insured (i) within 12 months form the date of dismissal, demise, retirement, resignation or retrenchment of the employee/s involved in the fraud or (ii) within 12 months from the expiry date of the policy, whichever shall first happen or within a Retroactive period not exceeding two years from the date of discovery of any such loss or losses .

RATE- NON TARIFF Usually a rate of 1% is charged but the same maybe reduced, depending on the merit of each individual case, by the appropriate authority. In case of Floater F.G. Policies suitable additional premium 'per capita' for the number of employees covered is also charged.

SPECIAL FEATURES
1. The following particulars regarding the person to be guaranteed should be satisfactory. (a) Character, (b) Financial position and Domestic responsibility, (d) Previous experience, (e) Previous record or service, (f) Amount guaranteed in relation to the employees remuneration. 2. It is necessary to be satisfied that the employer's business methods are appropriate and accounts are audited timely. 3. Floater F.G. Policies should be discouraged except when it is necessary to accommodate . 4. The person to be insured must be salaried employee.

EXCEPTIONS/EXCLUSIONS
The Company shall not be liable In respect of losses arising elsewhere than in India. RETROACTIVE PERIOD OF COVER : The Company shall not be liable : i) for losses not discovered within the period of this insurance ; ii) in the event of non-renewal or cancellation of this policy, for losses not discovered within twelve months next following the dale of expiry or the date of cancellation as the case may be (provided only that if (hero be any other insurance in force during the said twelve months whether effected by the employer or otherwise this policy shall not cover or contribute to any loss covered by such other Insurance.) The reinstatement provision will nor apply to such losses discovered within twelve months from the. date of non-renewal or cancellation iii) For losses not sustained within a retroactive period not exceeding two years from the date of discovery of any such loss or losses. Provided that in such retroactive period the insurance was continuously In force but In no event-the Company shall be liable to pay any claim in respect of loss or damage sustained Prior to the, Inception or the original policy. Further provided that losses which become payable under this Clause shall be subject-to the terms conditions exceptions of the policy currently In force on the date of discovery.

CLAIMS
While dealing with condition of policy on claims procedure, it is observed that the employer (insured) shall give immediate notice to the Company on any discovery of loss due to the fraudulent act of the employee insured under the policy and shall furnish to the Company further particulars of the claim together with explanations and evidences to substantiate the claim as the Company reasonably requires. Therefore the insured shall on getting any hint about loss of money on account of the insured employee can contact the insurance company and collect the claim form for completion of formalities within the time stipulated.

The claim form contains the following questions :

1) Details about the employee responsible for the loss e.g. name, address, designation, nature of duties etc. 2) Details about the toss e.g. the date of discovery, modus operandi of the employee in causing the loss, the period during which the misappropriation or embezzlement has been committed. 3) Actions taken against the defaulting employee e.g. police case, (copy of first information report to be provided), disciplinary proceedings and departmental enquiries etc. (copies of reports to be provided). 4) Details about the amount of loss e.g. the extent of loss as discovered from the books .of accounts, direct recoveries, if any, made from the defaulting employee, amounts due to the employee, cash security given by the employee, etc. 5) Details of immovable properties owned by the employee, if known. 6) Details about other insurances if any held by the insured.

On receipt of a claim form with the details explained above, investigation of the matter should be undertaken in order to ascertain the following:
a) b) c) The loss has been reported by the insured immediately on discovery The insured has provided all relevant documents and details Within a period Provided by Insurer after giving notice of loss. The loss been discovered within the period of twelve months from the date of expiry of the policy or within 12 months form the date of dismissal, retirement or death of the employee or within Retroactive period of two years. The details furnished in the claim form fully tally with the details already given in the proposal form as are relevant. The system of checks and method of supervision as stated in the proposal have been maintained by the insured during the time of loss. There is no change in risk involved making the policy void. The insured has taken proper steps to pursue recovery against the defaulting employee and has also taken adequate steps to prosecute him. The insured or any members of his household is not involved in the fraudulent act The amount of loss claimed by the insured is actual and not magnified.

d) e) f) g) h) i)

Investigation
The investigation for claim is entrusted to independent surveyors, preferably chartered accountants . The Chartered Accountant will go into the books of accounts thoroughly and the circumstances of loss, and finally make his recommendations about the admissibility of the claim and the actual amount of loss payable under the policy.

Compliances of Terms and Conditions

It-is a condition precedent to liability that the insured shall comply with all the terms and conditions of the-policy before making his claim for the benefits available under the policy. Therefore the insured shall comply with claims procedure condition in the sense that he should take appropriate action against the defaulting employee. If the employee who has committed dishonesty is absconding, the insured must take honest and sincere efforts to trace his whereabouts and arrange for his prosecution.

Subrogation
Even under right of subrogation, the insurers do not have a right to prosecute the employee, because there is no privity of contract between the employee and the insurer Therefore, prosecution of employee has to be done by the employer only. It may happen in some cases that the employers may not wish to prosecute their employees for social reasons or out of sympathy. Besides, some, employers also strongly feel that the prosecution diminishes the chances of recovering the amount from the employee. In such cases the insurers also may not insist on prosecution. As a matter of practice, in most of the claims, the insurers normally do not insist on. prosecuting the defaulting employees but use persuasive methods to recover the amount involve. Wherever the proof of loss has become nebulous, prosecution is insisted upon by the insurers, that is, where collusion between the employer and the employee is strongly suspected. However, it must always be remembered that insistence on prosecution is not to determine the amount of insurer's liability but, at the most it serves as proof of loss in some cases. Probably the other advantage of prosecution is that it serves as a warning to the fellow employees.

After the formalities with regard to survey and procurement of documents are completed, the claim papers will banish and a claim note is put up to the competent authorities recommending payment of claim. But before actually payable, the cash security held by the employer amounts due to the employee on account of wage, bonus, incentive and allowances and direct recoveries made from the employee from the misappropriated amount shall be deducted to arrive at the net loss payable to the employer. If this net loss is more than the amount guaranteed as sum insured under the policy, only the sum insured shad be paid and the balance amount shall be borne by the-employer himself. If on the other hand the net amount of toss arrived at as above is less than the sum insured, then the net loss shall be paid as such. It should be noted that the question of under-insurance is not relevant in fidelity guarantee insurance because there is no possibility to decide on the amount of full insurance. Therefore, all losses are settled subject to a limit under the policy in respect of any one employee or in respect of any one occurrence as in the case of excess floating policy.

Contribution
The net loss arrived at as above is also subject to the condition of contribution under the policy. Hence the insurers will collect details on other insurances and work out their ratable share of loss.

Reinstatement
If the claim is settled under floating policy, the amount of indemnity stated in the policy is reduced to the extent of loss paid. This has to be pointed out to the insured who may have to decide on reinstating the amount by applying appropriate additional premium.

Action by Insurers
After the claim is paid, the individual policy is deemed to have been cancelled. In the case of collective policy, the cover is deemed to be cancelled only in respect of that employee on account of whose fraud the loss has been suffered by the employer. Secondly, the employer is entitled to recover the amount of loss from the defaulting employee and therefore in addition to passing on the right of subrogation to the insurer, he has to assist and furnish documents to the insurers for vigorously pursuing recovery action against the defaulting employee.