INSURANCE I.Q

from AASP-MN News December 2022

D.E.G. TIPS

Understanding Employee Dishonesty Insurance

According to SheerID, businesses lose $50 billion to employee theft each year. On top of that, some face reputational damage and legal trouble when customer data or an employee’s paycheck is stolen.

Even more alarming, 75 percent of employees steal from their employer at least once. Whether that’s a few pens or an entire client list, employee theft puts financial, legal and emotional strain on employers.

What Does Employee Dishonesty Insurance Cover?

• Theft of money or money & securities • Loss of business property • Forgery and alterations • Fraud and embezzlement • Unauthorized electronic fund transfers • Computer fraud

Examples:

• An employee of a property management firm stole rent paid in cash by a resident. The property manager's crime policy paid out $2,062 for the loss. • A bike messenger employed by a trade association to courier cash deposits to a local bank was taking the cash and hiding it in the trunk of his car parked a few miles away. The theft was discovered when the employee was involved in a car accident, subsequently destroying a majority of the cash. The cash loss totaled $13,000, of which, $5,000 was salvageable from the wreck. The trade association's crime policy paid out the remaining $7,000, after the insured paid their $1,000 retention. • A jobsite foreman of a remodeling company would purposely over order materials needed for a job. The leftovers disappeared only to be used in the foreman’s side jobs done on weekends and evenings. Total loss was over $300,000. • Office manager for a small residential service contractor was furnished signed blank checks for purchases while the owner was out. The office manager cashed some of those checks to fund her gambling addiction. • Over several years, an employee conspired with vendors to inflate product and service prices while the employee kept the difference. Losses totaled over $1 million; most of which was covered by the insured's crime policy. • A receptionist was discovered taking cash refunds of false returns and crediting her personal credit card. The insured made a claim for the recovery of the funds in the amount of $17,186 for the cash paid and credit card refunds paid to her personal credit card. The claim was a covered loss under insured's crime policy. In the meantime, the former receptionist was prosecuted by the local district attorney's office for the theft.

Make sure you regularly reconcile all the funds coming in and going out of your bank accounts. Have one employee who is not a designated signee be the one to reconcile the bank accounts for all payables.

Contact Brad Schmid at CBIZ at (763) 549-2247 or bschmid@cbiz. com to get your coverage checkup today!