Police Employee Fraud with Crime Insurance
Majority of businesses can expect to lose 6% of total revenues to employee fraud.Given the nature of the staffing industry, owners and risk managers must address a number of unique liability exposures that are not frequently covered by standard insurance policies. One such exposure is crime or fidelity.
Crime Insurance protects organizations from loss of money, securities or inventory resulting from the following criminal acts: employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting and more. From fictitious dummy accounts payable andnon-existent suppliers to outright theft of money, securities and property, these schemes take advantage of potential weaknesses in your companys financial controls.
While an agency retains liability for the actions of its employees, those employees are primarily supervised at off-site locations by the agency's clients. This arrangement can create gaps in insurance coverage that are not always evident without a thorough examination of the policy by an expert in temporary staffing insurance. Often times, such gaps are only noticed when an uncovered claim forces the staffing agency to pay full damages out of its own pocket. The following scenario illustrates this point by examining a plausible situation that may not be covered by a traditional policy.
Claim ScenarioA temporary employee is working for one of your clients - an electronics wholesaler. Your client discovers that this employee has been stealing electronic equipment.
Crime PolicyThe Employee Theft insuring agreement under a Crime policy protects a business against theft by its own employees. While Crime policies vary to a degree from carrier to carrier, the Employee Theft insuring agreement typically provides coverage only for money, securities or other property owned or held by your business. Given that temporary employees are working at client sites, the property primarily exposed to theft belongs to your clients. To protect yourself, your Crime policy needs to be specifically endorsed either by scheduling a separate limit or by broadening the definition of Employee Theft to include coverage for client property. Without such an endorsement, you would again find yourself paying for all damages resulting from the described scenario.
Beyond establishing whether coverage is provided for the theft of client property, it's also important to determine how a client is defined on your policy. In many cases, the definition of a client is worded such that coverage is only provided if you have a written agreement in place with your client. Thus, if you don't have contracts in place with 100% of your clients, you need a policy that doesn't base coverage on the existence of a written contract.
Protect YourselfThe scenario above explores a very common example of a claim that could cause trouble for temporary staffing agencies, as well as some possible solutions that can provide a measure of protection.
Nevertheless, even if youve purchased the appropriate coverages, it can be difficult to predict whether your insurance carrier will pay out on a given claim. The often ambiguous nature of insurance, particularly in the staffing industry, makes it crucial for your policy to be carefully scrutinized for coverage gaps by a specialist who is capable of advocating on your behalf during a complex claim. Given the extensive variance in available coverage, finding an insurance broker with the necessary industry expertise is the best way to ensure that the coverage you purchase is adequate to contend with your daily business exposures.
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