Dishonest Acts and Employee Dishonesty Coverage

Some version of this question comes up with some regularity.

“We just learned of something an employee did in the past. Does this affect our bank’s insurance coverage?”

I ask the caller what the employee did. The replies I have heard recently are:

-Cheated on income taxes.

-Got caught shoplifting.

-Forged a signature with intent to defraud.

-Lied on their employment application.

-Lied on their expense account.

-Broke into the house of a former lover.

-Helped a customer submit fraudulent documents in a loan application.

All of the above are dishonest acts. Every financial institution fraud-bond has a provision removing coverage for dishonest acts when the employee is known to have committed a past dishonest act. Some limit the qualifying acts to events related to employment. Some require a monetary value of $5000 or some other amount in order to disqualify coverage.

So, let’s make this simple. You have no coverage for employee dishonesty when the dishonest employee is known to be dishonest. If you have a dishonest employee and you want them to be covered for stealing from you then you will need to tell your insurer of the dishonest employee and ask if they will forgive and specifically provide coverage when (yes, when) your dishonest employee is dishonest again.

By the way, I have never had an insurer agree to cover a dishonest employee for acts of dishonesty. I wonder why that is?