G. OPTIONAL COVERAGES
Optional Coverages do not
apply unless there is a limit for them on the declarations. They are subject to
the property coverage terms and conditions, except for and/or as stated below.
3. Employee Dishonesty (07
13 change)
a. The insurance company pays
for direct loss of business personal property and money and securities due to
dishonest acts its employees commit, whether they act alone or collude with
others to do so. However, it does not include actions by the named insured or a
partner. In order for coverage to apply, the act must intend to cause the named
insured to sustain a loss and also to benefit the employee, other persons, or
other organizations.
Note: The term employee as
used in this optional coverage is broad. It is not defined within the
Definition section but is defined later in this optional coverage.
b. There is no coverage for
loss or damage:
· Due to dishonest acts by
the named insured, its partners, or members, whether they act alone or collude
to do so
· For dishonest acts by
managers or directors who act alone or who collude with others. Such acts are
excluded while they are providing a service for the named insured or are
performing a service for others.
· For dishonest acts
of employees, except as a. above provides, while in collusion, acting alone, or
while they are performing for the named insured or performing services for
others.
· If the only proof that a
loss occurred is an inventory or a profit and loss calculation
· (07 13 addition) Losses an employee causes if
both of the following apply:
o The employee committed a
dishonest act or theft prior to the inception date of this policy
o Any of the named insured’s
partners, members, managers, officers, directors, or trustees knew about that
employee’s prior dishonest act or theft. This item does not apply if the
individual who knew about the incident was in collusion with the employee.
c. The most paid in a single
occurrence is the Employee Dishonesty Limit of Insurance on the declarations.
d. Loss or damage caused by
one or more persons or that involves a single act or a series of acts is
considered a single occurrence.
e. If the current policy and
a previously terminated or cancelled policy that the same or an affiliated
insurance company issued to the named insured both cover a loss, the
amount paid is limited to the largest amount that any policy provided,
regardless of the number of years it was in effect. Limits are not cumulative
from year to year.
Note: This provision eliminates
stacking limits from two or more policies due to a series of acts.
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Example: Floyd’s Meat Market has the best
steaks in town. Ernie is the head butcher and takes steaks home with him at
least once a week for over ten years but never tells Floyd. Ernie finally
recognizes the error of his ways and confesses to Floyd. Floyd suddenly
realizes that Ernie has stolen $6,000 worth of steaks in each of the past ten
years. His claim is for $60,000 since he has been with the same company the
whole time. The loss is capped at $10,000 because the Employee Dishonesty
Limit of Insurance is $10,000.
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f. This coverage is cancelled
with respect to a specific employee as soon as the named insured or one or more
of its partners, members, managers, officers, or directors who are not in
collusion with the employee become aware of dishonest acts the employee
committed before or after he or she was hired.
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Example: Floyd at Floyd’s Meat Market really
likes Ernie and wants to keep him as an employee. The policy permits this but
coverage does not apply to Ernie if he commits any other dishonest acts. Even
if Floyd did not report Ernie’s actions, Ernie is not covered in the future
because Floyd knew about the situation.
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g. Loss must be sustained
during the policy period and discovered not later than one year after the end
of the policy period.
h. If the named insured had a
covered loss in a previous policy period but did not discover it until after
its discovery period expired, the current policy covers the loss as long as
there was no break in coverage from the previous policy and the current policy
would have covered the loss or damage if it was in effect at the time of loss.
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Example: The policy for John’s Pizza and Deli
has been in force continuously since the business started ten years ago. The
policy dates are 01/01 to 01/01 of each year and it has always included
employee dishonesty coverage. John hired Joanne as a cook two years ago.
During the time she was employed, from 01/14/14 to 07/13/14, John noticed a
strange pattern in the inventory. He couldn’t prove anything but suspected
that Joanne was taking inventory. She ended her employment and was arrested
in connection with theft at another pizza place in June 2015. She was a
first-time offender and confessed to all previous crimes, including her
thefts at John’s. John reported the crime as a claim to the company that
provided coverage for the 01/01/14 to 01/01/15 policy period. The company
denied the claim. He then forwarded the claim to the current carrier and its
coverage paid the claim submitted.
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i. The insurance in paragraph
h. above is limited to the lesser of the limits on the current policy or the
limits on the policy in effect when the loss occurred.
j. This Optional Coverage
defines employee. When used in employee dishonesty, an employee is any natural
person:
· In the named insured's
service or for up to 30 days following termination) that the named insured
compensates and controls
· Who acts as a temporary
substitute for a regular employee or one hired for certain short-term
situations
· Leased under a written
agreement with a labor leasing business to perform certain duties. This does
not include temporary employees.
· Who is a former employee,
director, partner, representative, trustee, member, or manager who the named
insured retains as a consultant to perform services for the named insured
· Who is a guest student or
intern while working on the premises but not while working away from them
Independent contractors
are not employees. Managers, directors, or trustees also are not employees
unless they are carrying out the duties of employees.
Note: ISO uses the term “natural
person” in the definition above. A natural person means a living, breathing
individual. Unnatural persons are entities, such as corporations, that have
rights and obligations as defined by law.
Note: This definition of
employee matches the same definition in the ISO crime coverage forms.
Related Article: ISO Commercial Crime
Coverage Forms And Policies Analysis
