Christee Lee took her time. Over a period of 13 months, she embezzled $190,000 from American Commerce Insurance Brokers. She was also innovative because she used different techniques to take the money, which helped in concealing her dishonesty.

American Commerce had only a $10,000 employee dishonesty limit. As a result, it was not pleased when the carrier offered only $10,000 for the loss because it considered all of Christie Lee’s thefts to be a single occurrence. The carrier later agreed that the events could be categorized as two distinct types of occurrences and offered $20,000. This offer made American Commerce unhappy enough to sue the carrier for the entire $190,000.

Click here to see why the court decision resulted in a payout of only $20,000.

Employee dishonesty coverage is unique because of the way it defines an occurrence. The policy defines it as a series of events by one or more employees. These events can take place over a number of years. This leads to confusion about which policy responds. Conditions in the policy explain that there are two different answers. One applies if the coverage has been with a single carrier continuously. The other applies if the coverage has been with different carriers.

However, continuous coverage is vital. If employee dishonesty coverage ends for even a day, there is no coverage under the current policy for events that took place before the break in coverage.

Click here to review the PF&M analysis on the Loss Sustained during Prior Insurance conditions.

You have monitored your client’s employee dishonesty coverage and there are no breaks in coverage. This means there is continuous coverage for all events if an employee is embezzling.
Coverage is in place but the problem is similar to American Commerce’s problem. It had the coverage but the limits were woefully inadequate.

First, consider your own limits. Do you have sufficient limits to pay for an employee’s dishonesty over a number of years?

Next, consider your clients’ limits.

Click here for wording you could place in a letter or an email to your clients to encourage having this important discussion.

The Producer's Commercial Lines Risk Evaluation System questionnaire does not determine the correct limit of insurance to carry. However, it does help you discover your client’s exposure to help determine the limits that should be carried.

Click here to view questions specific to the employee dishonesty exposure.