Employee Theft Claims: Fidelity Bonds and Commercial Crime Coverage

Understanding Employee Theft Coverage

Employee theft — also referred to as employee dishonesty or internal theft — is one of the most common and underreported crimes affecting businesses. When an employee steals money, inventory, equipment, or proprietary information, the financial impact can be significant. Fortunately, businesses can protect themselves through fidelity bonds and commercial crime insurance policies, which provide coverage for losses resulting from dishonest acts committed by employees.

Fidelity Bonds and Commercial Crime Policies

A fidelity bond is a type of insurance that protects a business against losses caused by fraudulent or dishonest acts of its employees. There are several types:

• Business services bonds:Protect clients of service companies (janitorial, home care, etc.) from employee theft while on the client's premises.
• Employee dishonesty bonds (blanket bonds): Cover all employees under a single bond, protecting the business against theft by any employee.
• ERISA bonds: Required for businesses that manage employee benefit plans, protecting plan participants from fiduciary dishonesty.

A commercial crime policy is broader and may cover employee theft, forgery, computer fraud, funds transfer fraud, and money and securities losses. These policies are common for businesses that handle significant cash, inventory, or financial transactions.

What Employee Dishonesty Coverage Includes

Employee dishonesty coverage typically applies to direct financial losses resulting from theft, embezzlement, forgery, or other fraudulent acts committed by an employee. This can include cash theft, unauthorized transfers, inventory theft, falsified expense reports, and misappropriation of company funds. The coverage generally requires that the employee's act was committed with the intent to cause the business a financial loss and to obtain a financial benefit for the employee or a third party.

Investigation and Documentation

Employee theft claims require thorough investigation and meticulous documentation. The insurer will want to see evidence of the theft, including financial records, audit trails, surveillance evidence, witness statements, and police reports. You should file a police report as soon as the theft is discovered and preserve all evidence. The insurer may also conduct its own investigation, including interviews with employees and a forensic accounting review.

Accurately quantifying the loss is often the most challenging part of an employee theft claim. If the theft occurred over an extended period, reconstructing the total amount stolen may require going through months or years of financial records. The insurer will scrutinize these calculations carefully, and any gaps in documentation can result in a reduced payout.

How a Public Adjuster Helps

A licensed Public Adjuster can assist with every aspect of an employee theft claim — from reviewing your fidelity bond or crime policy to identify all applicable coverages, to working with forensic accountants to quantify the loss, to preparing and presenting the claim documentation to the insurer, and negotiating the final settlement. Because these claims involve complex financial analysis and specific policy provisions, having professional representation ensures your claim is properly handled and maximized.