Renee Snead was an attorney approved to handle mortgage closings for Fidelity National Title Insurance Company. On two different occasions, her office received closing-related funds that were not returned when the closings were not completed. In both cases, the parties that provided the funds sued Fidelity to have them returned. Fidelity then sued Renee and she turned to OHIC Insurance Company, her insurance provider, for coverage.
OHIC denied coverage when its investigation determined that one of Renee’s employees took the funds. While the OHIC policy clearly excluded such activities, Renee argued that other criminal activities exclusions in the policy had exceptions for innocent parties. She argued that she was an innocent party and maintained that the misappropriated funds exclusion should be read as the other exclusions so that she could be covered.
The court ruled that policy exclusions stand alone. Just because one has an exception does not mean that another related exclusion must also have a similar exception.
Nearly every coverage form or policy excludes employee theft or misappropriation of funds. This coverage is usually available only under an employee dishonesty bond or a crime employee theft coverage form.
If Renee were your client, would she be properly protected?
Unfortunately, coverage gaps are usually discovered only when someone looks for them. In most cases, claims persons discover them and deny the claim. Isn't it better to uncover coverage gaps before a loss occurs so that your client can make decisions about whether to insure them or not?
Have you discussed employee dishonesty coverage with your clients?
Newspapers and online news organizations regularly report stories about embezzlements and other events involving employee dishonesty. Those stories can be used very effectively to encourage your client to take action.
PF&M analyzes both the ISO and the American Association of Insurance Services (AAIS) coverage forms. Some of the recent AAIS updates include:
Personal Umbrella
Artisan Contractors
Non-filed Inland Marine Coverages
Farmowners
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