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Employees can be dishonest – (Gasp!)

October 8, 2013
Nancy Swenson Commercial Lines Account Manager

Nancy Swenson
Commercial Lines Account Manager

Thank you to Nancy Swenson one of our Commercial Lines Account Managers for imparting her wisdom on Employee Dishonesty…

It happens. Employees can steal from you and we aren’t just talking money!

If you sit back and look at your company – really look at your company – you will notice a lot of things that can easily go missing. This is where Employee Dishonesty Coverage comes into play. Get it, you won’t regret it! Before you ask, every carrier is different so coverages will be different – have that discussion with your agent.

On average, an Employee Dishonesty policy or bond will cover the employer from financial loss due to the fraudulent activities of an employee or group of employees. The loss can be the result of the employee’s theft of money, securities or other property of the employer. Employee dishonesty coverage is also called Crime Coverage, Employee Dishonesty Bond, Fidelity Bond or Crime Fidelity Insurance. (We don’t make it simple in insurance, do we?!)

This really happened…

In one case I know of, the employer’s insurance company paid out over $200,000 then went after the employee and was able to recover some of that money before that person went to jail.

In another case the employer had no clue what was going on (because they had poor controls in place) until Homeland Security (believe it or not) knocked on the door and said they were investigating large sums being transferred from a business to a personal checking account (I’m talking over $500,000). That employer was extremely grateful their agent sold them the coverage!

Even a smaller business has the potential to lose enough to employee theft that they have a hard time recovering. It just takes one person, one time to destroy what the employer has built up over the years.

Here are some details

In General – Employee Dishonesty is frequently included in a commercial package or available and almost 100% is included on a BOP. Usually $10,000 with options to increase up to $100,000. So this can be a standalone policy or part of an enhancement.

In order to collect for a claim there must be a police report. Sometimes employers are hesitant to take action. They worry about retaliation.

Who is covered? – Have this discussion with your agent! It should include all current and former employees, partners, members, directors, volunteers, trustees, seasonal employees and temporary persons under your direction.

What about ERISA? – The Employee Retirement Income Security Act or ERISA protects your employees retirement investment. Usually an endorsement can be made to include your ERISA compliance so you don’t need a separate bond!

What is Third Party Coverage and do you need it? This coverage, added by endorsement, extends coverage to a client with which you are under written contract to perform services. The policy will pay for loss of or damage to money, securities and other property owned or leased by a client from theft by an employee of the policyholder. This endorsement modifies the policy to include coverage at the client’s premises. If you fall into this category – then yes you need it!

How much coverage do you need? Again – you need to have a very open discussion with your insurance agent (that’s us!). Limits will vary dependent on your needs. If you handle cash and or securities, estimate the annual volume and multiply by 20% to get a starting point. Minimum limits are usually $100,000 and many will cover $500,000 without a big bump in premium. The bottom line: what are your risks? Have enough to cover them.

Exclusions – it’s insurance so of course there is fine print aka exclusions: These will vary by carrier – so again, have the discussion with your agent ( that’s us!). Typically accounting or math errors are excluded. Seizure or destruction of property by the government is excluded. You can’t steal from yourself ( obvious we know – but people have tried!)

Give Founders Insurance Group a call – let’s have that frank and honest discussion about your business!  www.foundersgrp.com

860-482-3506

Nancy Swenson

Commercial Lines Account Manager

nswenson@foundersgrp.com

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