We rarely expect our employees to steal from us. Unfortunately, it happens more frequently than other forms of theft and the loss is often significant. Theft can be in forms of money or items like boxes of new books (sold for recycling), shop equipment like large drill presses (stolen for the challenge of theft). Insurance applications often ask questions about your background screening process for purposes of evaluating the coverage they can offer, and the associated cost.
The Commercial Crime Coverage Form states that if you learn of a theft or any other dishonest act (catching an employee lying, deceiving a customer, padding reports, or spinning his own version of an event, etc.) of an employee prior to your policy period, the loss that he/she causes is excluded from coverage.
It is important to note that this dishonest act does not have to involve financial loss to your organization or prior organizations. If the employee was ever dishonest, and you learn of it, the coverage for that employee ceases. If you learn of the dishonesty in conjunction with a loss, the insurer will provide coverage for that event as long as no other exclusions apply.
If you or any of your partners, members, managers, officers, directors or trustees learned of that theft or dishonest act, it is imperative that they report it to you so you can determine appropriate risk management steps. The worst time to find out coverage exclusions is when you have filed a claim and expect to be made whole.
Do not be complacent, it is important to handle the matter promptly. Once a claim is filed regarding employee dishonesty, the insurance company will almost always issue an exclusion of coverage for future losses caused by that employee.
Let’s say you have a situation where you have learned of an employee’s dishonest act. How should you respond? That is a great conversation for you, your broker, and an expert in employment law. Unfortunately, this is not an area where insurers are unwilling to risk giving a good employee a “second chance” or opportunity for rehabilitation. If you are willing, you will be fully aware of the liabilities.
There are some companies that will offer Employee Theft “Amnesty Day” to encourage honesty. By offering no consequences to an employee, for returning anything they had stolen, companies have seen truck-loads of stolen goods returned. This is very employee-friendly, but based on the exclusion we just reviewed, it is probable that insurers would use such information to exclude theft by those employees in the future.
Maybe you have experienced employee theft in the past, in one form or another, in your company or place of employment. Do you think you may have an employee stealing currently? If you have any questions at all regarding this serious matter, my colleagues and I would be happy to speak with you. We look forward to helping you find out if you are properly covered and/or what your options are.