What is the time frame within which losses must be discovered for coverage to apply under the Commercial Crime Coverage Part Loss Sustained Form?

Under the Commercial Crime Coverage Part Loss Sustained Form, losses must be discovered within a specific time frame to be eligible for coverage. The correct response indicates that losses must be discovered within one year from the expiration of the policy. This time frame ensures that the insured has adequate time to identify losses that occurred during the policy period.

This requirement is critical as it aligns with the intent of the coverage, which is designed to protect against employee dishonesty, forgery, and other commercial crimes that may lead to financial loss. By allowing a one-year period post-expiration for the discovery of losses, it provides a balance that favors both the insurer and the insured, ensuring that legitimate claims can still be pursued while also limiting the insurer's exposure to long-tail claims.

Reflecting on the other options, the choices of six months or two years do not conform to the established norms of the policy structure, thereby failing to provide the insured with the necessary timeframe to adequately assess and detect losses after the policy period. The option indicating "no specific time frame" would imply a lack of coverage certainty, which is unacceptable for both parties in a contractual relationship. The one-year timeframe supports sound risk management practices, ensuring both coverage clarity and appropriate limits on liability.