After a break-in at their office, a client realized about $50,000 of extra fuel was purchased on a credit card that was stolen. What coverage is there for unauthorized use of the card?
A client had an unauthorized use of their business gas card after a break-in at their office. They were not aware that the card was stolen until they saw their monthly statement. About $50,000 of extra fuel was purchased in communities that they do not travel to.
Q: What potential coverage is there for unauthorized use of a business credit card?
Response 1: It will be hard to answer this without knowing what policies the insured has, along with applicable endorsements and exclusions. Although the card itself was stolen, that would fall under theft, which is probably a covered cause of loss. Broadly speaking, the loss could be considered forgery since someone was impersonating the cardholder.
The only place I know which has this is the commercial crime coverage form. In personal lines, the HO3 Section 1 – Coverages includes “Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money," but the sublimit is $500. Regardless, the client will need to file a police report.
Response 2: Insurance isn't the first place to look for relief—I recommend you check out an article from the Federal Deposit Insurance Corp (FDIC) on unauthorized credit card transactions. The loss needs to be immediately reported to the card issuer and any insurance companies that might be on the case. Then the client's attorney needs to research the laws in your state and the fine print in the credit card agreement.
If there's any potential liability, you can look more closely at your policies for any extension endorsements or crime forms. The "goodie endorsements" are not identical from company to company, so you'll have to dig out all the forms and endorsements and read through them.
Response 3: Is it a card issued to an individual or to a corporation? Did the client notify the issuer of the fraudulent charges when they appeared on the monthly statement?
The first step is to go to the credit card company to investigate the compromised account and learn what limitations might apply. As to coverage, review the crime insurance policy.
Did your client check with the credit card company fraud division to learn if liability is limited for fraudulent charges by the Fair Credit Billing Act to $50 or other protections offered by the credit card company? There are various state and federal regulations that might apply that would limit your client's liability. Some card issuers have a zero-liability policy.
Response 4: If this is truly a "client," and they pay you directly for your services and you are not compensated by commissions from carriers, I'd look at your errors & omissions coverage. If they are a customer, and they buy insurance from you and you are compensated by commissions, then there might be coverage in some crime or cyber forms, and in some personal lines residential forms if this is a sole proprietor.
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