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Insurance is simply the transfer of risk, and it is important to understand which risk you are transferring.  Or in other words;

1. Who is covered

2. What is covered

3. What is not covered

When it comes to Employee Dishonesty there are certain potential scenarios that can arise that may or may not be covered by your insurance policies.  We'll address these briefly here.  For full coverage conditions please consult your insurance policy.

Professional Insurance (Professional Liability, Directors & Officers, Etc.)

Almost all "professional" insurance policies contain an exclusion for fraudulent or criminal activity.  They are not intended to provide coverage for fraud, embezzlement, theft, etc.  These policies generally have provisions for "innocent insureds" and may provide defense only coverage, but are not the products you need in place to coverage potential fraud.

Employee Dishonesty policies are relevantly low cost risk management tools that you can purchase to protect yourself from theft, embezzlement and fraud from your employees and non-employees.  General Liability Policies, BOPs, and some professional liability endorsements will sometimes include limited coverage for Employee Dishonesty but will typically not cover third party exposures and may provide defense only coverage.

First Party Coverage

If your employee steals funds, property, etc directly from you, this is considered a "first party" claim

Third Party Coverage

If your employee steals funds, property, etc from your client, this is considered a "third party" claim.  This is a concern if you are providing any services where you have "legal liability" (care, custody, or control) of client funds.  This would include bill paying services, payroll, and any check signing authority.  Consider that computer access may be considered control of client funds.  The policy may also be endorsed to provide coverage for employee dishonesty while your clients are working at your client's premises.

Crime Coverage

If a non-employee steals funds, property, etc directly from you, this is considered "crime coverage".  Your employee dishonesty policy may be extended to provide coverage for this including, theft, burglary, disappearance, computer fraud, and forgery.

For more information regarding NAPLIA's Employee Dishonesty policy* offering the above coverage click here.

*Satisfies ERISA bonding

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Employee Dishonesty FAQ's

Compare the difference of The Hartford Employee Dishonesty policy with the AICPA Employee Dishonesty endorsement