Identity Fraud Coverage or Cyberscout: Which Should You Choose?
By Melissa Stream, Underwriting Consultant
This time of year, we send a request to our clients to provide data so that we can update our records to properly reflect the number of policyholders to whom our clients are offering the Cyberscout Identity Management and Recovery Assistance Service.
After we send this request, many of our clients ask about the differences between Cyberscout and Identity Fraud Expense Coverage. They are not required to be on the policy together. If you do not participate in the Cyberscout service offered by WRC, you can still add the Identity Fraud Expense Coverage Form. And depending on the type of forms on the policy, you may not be able to add Identity Fraud Expense Coverage, but still can offer the Cyberscout service if your insured thinks they have had an identity theft loss.
Cyberscout is a service that can assist an insured before and after an identity theft occurrence. It does not need to be listed on the policy declaration pages as it’s not a coverage provided by the carrier.
Cyberscout provides the following services:
- Full identity theft recovery assistance
- Unlimited 24/7 access to dedicated fraud specialists
- Document and identification replacement, whether stolen or lost in a natural disaster
- Educational resources for learning how to minimize risk
- Proactive guidance to help protect against identity theft
- Risk reduction and resolution for all types of identity theft
- Protection for every family member who lives in your insured’s household
Identity Fraud Expense Coverage
Identity Fraud Expense Coverage is an optional endorsement that can be used to provide coverage for an insured’s expenses arising out of an occurrence of identity fraud.
The AAIS forms that provide this optional coverage are HO 2786 01 06 or FO 0794 09 02. Both forms have $100 deductible.
HO 2786 is filed to be added to policies using AAIS HO forms 2006 and later only. If your company has updated from AAIS HO 2.0 edition forms to 2008 edition, please check that you are using HO 2786 01 06 and not still using ML 0686 09 02.
FO 0794 09 02 is filed to be used with AAIS FO property forms 1.0 edition. Unfortunately, there is no form available to add to policies using AAIS dwelling or farm property FL forms.
Neither HO 2786 nor FO 0794 can be attached to policies using WMS or FL forms.
Expense is a key word here — and it is defined in both forms.
A few examples of “expenses” from the Identity Fraud Expense Coverage form are:
- Loss of earnings for time off work because the insured needed to meet with attorneys or law enforcement
- The cost to obtain, reproduce, complete and notarize documents required by law enforcement or other agencies to resolve an occurrence of identity fraud
- The necessary and reasonable loan application fees for reapplying for a loan or loans when the original application was rejected solely because the credit information provided to the prospective lender was inaccurate due to the occurrence of “identity fraud”
Another key definition is that of “identity fraud” — the use of personal identifying information of an “insured,” without the “insured’s” permission, in a manner that violates federal, state or local law, including but not limited to:
- Purchasing goods or services
- Obtaining credit
- Borrowing money
- Committing a crime
Who pays for claims?
Only the Identity Fraud Expense Coverage endorsement provides coverage, and if an insured has a covered loss, that loss is paid by the mutual providing the policy on which the Identity Fraud Expense coverage is endorsed. Since Cyberscout is a service, no claims are adjusted, and no payments are made by them. If the insured thinks they have had an Identity Fraud occurrence, but may not have any expenses, they can still call Cyberscout for advice and assistance, which we recommend for their own protection.
What is not covered by Identity Fraud Expense Coverage?
Keep in mind that each claim or incident would be investigated and adjusted based upon its merits and in consideration of any applicable policy provisions. The information in this article should not be construed as legal advice. A few claim examples might be helpful to illustrate how this coverage may or may not respond.
If the insured’s computer was compromised and damaged by a virus, but there was no loss of personal identifying information and no subsequent “identity fraud” loss, there may not be any coverage under the endorsement to repair or replace the computer. The new and required cyber exclusion endorsements may further exclude loss to a computer, systems, data and media. An insured that is a victim of ransomware with no loss of personal identifying information may not covered by Identity Fraud Expense coverage.
If the insured claimed an “identity fraud” loss and money was taken without their permission from bank accounts or items were purchased without their permission by using their credit card(s) or by loans taken out in the insured’s name, those losses of funds or purchases must be settled between the insured and the financial institution. Therefore, I often ask our clients to ensure the dec page reads “Identity Fraud Expense Coverage” for the limit of insurance and not “Identity Theft Coverage.” This could be misleading because the Identity Fraud Expense Coverage endorsement only covers specific “expenses” for specifically defined types of “identity fraud.”
The Bottom Line
Cyberscout is a service from another company and Identity Fraud Expense is a coverage provided by an endorsement added by your company. They are separate and do not have to be offered together. You can participate in offering the Cyberscout service and not add Identity Fraud Expense coverage to all your policies. You can offer the coverage but not offer the Cyberscout service. An insured can call you with a possible Identity Fraud Expense claim and still contact the Cyberscout service (if you participate) even if it turns out the claim is not a covered loss.
Since this article touches on cyber loss exposures such as viruses and ransomware, please remember WRC clients in Wisconsin, Iowa, Missouri, Arkansas and South Dakota are required to add the endorsements that include cyber exclusions:
- HO 5610 09 21
- FL 5613 06 21 (MO uses FL 5613 09 21)
- FO 5611 06 21
These are just a few of the forms; there are others that may need to be added depending on the type of policy. A chart of the endorsements and corresponding disclosure notices are available by logging into the secure WRC website then going to WRC > Documents > Personal Line Underwriting > Resources.