Banker's Indemnity Insurance

The business of banking has grown phenomenally in recent years, expanding both in diversity and extent. Alongwith this development, incidence of crimes has also grown to alarming proportions and it has become very necessary for bankers to protect themselves adequately against such losses. It is in the context of banking expansion in developing economy that insurers have devised a comprehensive policy called the Banker's Indemnity Policy. In effect, this cover is a combination of several specific covers, such as fire, burglary, cash in transit, fidelity guarantee. Since 31.3.1978, Banker's Indemnity business is tariffed. This Tariff has been revised from 1.1.1987.

Scope of Cover

The cover provided under the policy is very wide and is divided into various sections as under:

• On Premises:
  Money/Securities lost, destroyed or otherwise made away with by Fire, Riot and Strike. Burglary or Housebreaking, Theft, Robbery or hold-up whether by employees of the insured or any other person or persons, whilst such money/securities are in their own premises (including Mobile Offices) or in the premises of their Bankers or in any recognised place of safe deposit within a certain area. Such loss of money or securities lodged or deposited with their issuers or with any person for exchange, conversion or registration is also covered.


• In Transit:
  Loss of money/securities whilst in transit carried by Bank's employees. The money/securities may be lost, stolen, mislaid, misappropriated or made away with, by negligence or fraud of the employees or otherwise.


• Forgery or Alteration:
  i. Payment made in respect of bogus, fictitious or forged cheques, drafts, and/or ii. Genuine cheques, drafts, Fixed Deposits, Receipts, Traveller's Cheques bearing forged endorsements, or iii. Establishment of any credit to any customer on the faith of such documents.


• Dishonesty:
  Loss of money/securities by dishonest or criminal act of its employees, wherever committed.


• Hypothecated Goods:
  Loss due to fraud or dishonesty in respect of goods or commodities pledged or hypothecated to the insured and under his control.


• Registered Postal Sendings:
  By reason or robbery, theft or any other causes not herein excepted whilst in direct transit or intended to be dispatched as such, excluded, provided that each postal sending is insured with the Post Office. Provided that the Company's liability for any one consignment or loss is limited to 10% of the basic sum insured or Rs. 1,00,000 whichever is less.


• Appraisers:
  By reason of infidelity or criminal acts of approved appraisers, provided the insured has taken reasonable precaution and safeguards in the selection and appointment of such Appraisers / Valuers. Limit of liability per loss and for all losses due to such act during the policy period is restricted to 5% of basic sum insured or Rs. 50,000 whichever is less for any loss or losses during Policy period.


• Janata Agents, Chhoti Bachat Yojana Agents, Pygmie Collectors:
  By reason of their infidelity or criminal act, subject to total liability during the policy period in respect of each such agent is limited to 5% of the basic sum insured or Rs. 20,000 whichever is lower. The agents are regular, part time commercial agents of the bank, appointed by the bank after full scrutiny duly guaranteed by two reliable independent persons.

Indemnity

• The indemnity will not exceed the sum insured:
  
  i. In respect of any loss or losses caused by acts/omissions of any employee(s), either as a single act or series of acts or omissions during the period of insurance.
  ii. in respect of any one casualty or event.


• Subject to the above, twice the basic sum insured in respect of all losses in any one period of insurance.

The policy defines, "Money", "Securities" and also "Employee."

Provisions

• Deductibles:
  i. Insured shall bear the first 25% of each loss under items 'A' to 'E' o 2% of the basic sum Insured whichever is higher but not exceeding Rs. 50,000. Each loss in respect of each dishonest or criminal act shall be treated as a separate loss. This excess however, will not apply to loss or damage arising out of Fire, Riot, Strike, Burglary and Housebreaking risks. However, for other types of losses it will be applicable.
  
  ii. In respect of items 'F', 'G' and 'H' of the policy, the deductibles applicable will be 25% of the claim amount.


• Reinstatement:
  The Policy is subject to compulsory reinstatement, that is "continuous cover to the full extent" provided that the liability of the company will be limited to twice the sum insured in any one period of insurance. Prorata additional premium will have to be collected for the unexpired period. This will be deducted from the claim amount payable under the policy.


• Retroactive Period of Cover:
  The policy covers losses discovered during the Policy period. It may happen that frauds perpetuated years ago are discovered subsequently. To limit such unknown exposure, condition of retroactive period is included under the policy.

The company is not liable:

• for losses not discovered during the policy period.
• in the event of on-renewal or cancellation, for losses not discovered within 6 months from the date of expiry of cancellation.
• for loss not sustained within a retroactive period not exceeding 2 years from the date of discovery of such loss or losses, provided the policy was continuously in force in such retroactive period.
• No liability for loss sustained prior to inception of the first original policy.
• Valuation of Securities:
  Average market price or value in Rupees on the date of discovery of such loss. In the absence of this price or value, the value may be agreed between respective parties, or in the event of dispute, reference may be made to arbitrator.

Exclusions:

• Earthquakes, volcanic eruption or other convulsions of nature.
• Flood, inundation, storm, cyclone, hurricane, tornado or atmospheric disturbance (These could be covered by charging additional premium at the rate of 2 1/2% of the total premium under the policy). These do not apply to Mobile Office.
• War and allied perils.
• Mutiny, popular uprising, rebellion, revolution etc.
• Resulting from wrongful act or default of any Directors or Partners of the Bank, other than salaried employees.
• Trading losses whether actual or fictitious.
• Nuclear weapons material.
• Losses attributable to faulty computer programme or its fraudulent use by an employee or outsiders.
• Losses due to any acts/omissions committed by the concerned employee after discovery of a loss in which the said employee was involved.
• Any consequential loss or legal liability thereof.

Claim Procedure:

Upon occurrence of any event giving rise to a claim, the insured should

• Forthwith lodge a complaint with the Police and take all practicable steps to recover the property lost, apprehend the culprits and take appropriate departmental action against them;


• Give immediate notice to the Company and thereafter furnish to the Company, at insured's own expense, detailed particulars of the amount of the loss together with all evidence to substantiate the claim.


• Examination of Account Books:
  The Company or its Agent is entitled to examine Books and documents so far as they relate to the claim in order to ascertain the correctness thereof or the quantum of liability.


• Right of recoveries:
  The Company will have priority rights to any monies, estate or effects of the employee concerned in the claim so that they could be applied towards making good the amount of the claim paid by the Company.


• Subrogation:
  These rights will subsists before or after insured's indemnification by the Company.


• Contribution:
  In the event of more than one insurance on the same interest and property, Company will not be liable for more than its rateable proportion of the loss.


• Fraud:
  In the event of fraud, by the insured, or any one acting on their behalf all benefits under the policy shall be forfeited.


• Arbitration:
  Will apply to disputes regarding quantum only (liability being otherwise admitted).


• Time-Bar:
  12 months from the date of disClaimsr unless a suit is filed in Court against the Company.