Alabama Property and Casualty Practice Exam

What does the Forgery and Alteration coverage in a Commercial Crime policy involve?

1. Incoming counterfeit money

2. Incoming counterfeit money orders

3. Ongoing instruments

4. Ongoing instruments altered by an employee

The correct answer is: Ongoing instruments

The Forgery and Alteration coverage in a Commercial Crime policy specifically addresses the risk associated with the alteration or forgery of written instruments. This coverage protects the insured from financial loss due to the forgery of documents or instruments, which can include checks, drafts, promissory notes, and similar items. When considering ongoing instruments as the correct interpretation, it highlights the policy's focus on safeguarding against risks related to instruments that are forged or have been altered fraudulently during transit or handling. These ongoing instruments can be a vital part of a business’s financial operations, and any alterations done to them without authorization can result in significant losses. In the context of the options presented, while incoming counterfeit money and counterfeit money orders may generally fall under different specific coverages in commercial crime policies, they do not pertain directly to the definition of forgery and alteration. Rather, these options involve different facets of fraud and theft protection. Similarly, the mention of ongoing instruments altered by an employee would imply an internal risk rather than the broader category of forgery as a whole. Thus, ongoing instruments align more closely with the intended purpose of the coverage regarding the risks it protects against.