Crime insurance policies, part of what is broadly known as fidelity coverage, include many kinds of theft, often of money, and can include theft by employees as well as external sources like burglary. That means an employer can file a claim for loss of money, securities, or property resulting directly from theft committed by an employee – acting alone or in collusion with someone else. However, policies won’t cover employees that committed a theft prior to a policy taking effect, and this provision may have ripple effects. Here’s a tragic example:
John owns a small retail shop. In 2010, his employee Mary stole $100 from the register and John found out. Mary confessed, paid John back, and promised never to do that again. In 2019, Mary stole $10,000 of inventory over several months. John fired Mary and reported the claim to his carrier. The carrier denied the claim because John knew of the first theft, prior to the policy period, and decided to keep Mary on staff. Crime policies include an exclusion for any employees who have stolen from the employer before. On its face, this makes sense: insurance companies don’t want to provide financial backup for employees known to have stolen from their employers in the past. By allowing Mary to remain employed, John unintentionally voided his crime policy for coverage to any future acts by Mary.
Exclusions are important details to know before placing insurance coverage so that management can take steps to mitigate losses that insurance won’t cover. Mary should have been let go after the 2010 event, or certainly once John decided to buy crime coverage for employee theft.
If you have questions about your current crime policy, or want to discuss which business risks you want to insure, contact us.