Two different forms may be offered under a crime policy. One form is for employee dishonesty and the other form is for employee theft. Both forms sound very similar, but the wording is very important for understanding what that coverage includes and also what that coverage potentially could exclude.
Employee dishonesty coverage is insurance against loss of money, securities, or other property because of an employee’s dishonest act committed with manifest intent to cause a loss to the insured and to obtain a financial benefit for the employee or another person or organization that the employee wants to receive the benefit.
The policy provisions state that the employee must act dishonestly, but the form does not define “dishonest acts”. This leaves a broad interpretation including “lying”, “cheating”, “deceiving”, and “stealing”. Employee theft coverage is much more precise and includes coverage specifically for acts of employee theft.
The employee dishonesty form requires the employee to act with manifest intent to do both of the following:
- - Cause a loss to the insured
- - Obtain financial benefit for the employee or for a person or entity that the employee chooses to receive the benefit.
Employee theft coverage does not include manifest intent. Therefore the insured does not have to prove that the employee intended to cause a loss to the insured and obtain financial benefit for the employee or another person or entity.
Under the employee dishonesty form, the financial benefit that the dishonest employee seeks to gain must be something “other than employee benefits earned in the normal course of employment, including: salaries, commissions, fees, bonuses, promotions, awards, profit sharing, or pensions.” Some employee dishonesty insurers pay claims involving fraudulent salaries, while other insurers deny coverage.
Employee theft coverage does not include the financial benefit exclusion, therefore, it covers claims as long as the employee’s taking of additional salary or other employee benefits constitutes an unlawful act.
Both coverages are limited to covering the loss of money, securities, and other tangible property only. Neither form provides coverage for indirect losses such as loss of income or business opportunities. It is important to understand the difference between the two forms to know which coverage works best for your business exposures.