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Fidelity and Crime Insurance Coverage: Our Miami Insurance Litigation Lawyer Answers Your Questions

Mon Aug 17th, 2020 on     Insurance Law,    

Crime insurance is critical for many businesses to “cover the gaps” in the event that they are subject to losses caused by dishonest employees or third-parties.  After all, systemic fraud committed by an employee can seriously disrupt a business, possibly even sending it into bankruptcy.

If you operate a business and have been affected by the commission of a crime — whether by an employee or a third-party — then you may be entitled to submit a claim with your insurance company under your crime insurance policy.  Unfortunately, insurers will use any excuse available to minimize coverage and avoid having to payout.

We can help.

Here at Ver Ploeg & Marino, P.A., our attorneys have decades of experience working with insurance policyholders, helping them navigate the complexities of submitting a claim and (in the event of an adverse decision) appealing that decision or even bringing a lawsuit.  Our focus on insurance disputes has given us valuable insight into what it takes to secure a favorable result, whether through negotiation or litigation.

In truth, successful insurance litigation is a team effort.  Over the years, we have developed a trusted network of experts and other professionals who can provide expertise throughout the process.

Interested in speaking with a Miami insurance litigation lawyer at VPM Law?  Contact us to schedule a consultation.

Frequently Asked Questions (FAQs)

What is the difference between a crime insurance policy and a fidelity bond?

Crime insurance coverage describes the broader insurance policy that pays out benefits if your business is made the victim of a crime by a third-party.

For example, if you operate a high-end jewelry store, then crime insurance is essential because it will cover you if customers (or other third-parties) steal jewelry from the premises.  Depending on the goods involved, this insurance coverage could protect you from hundreds of thousands of dollars in losses.

Fidelity bonds function as a specialized subset of crime insurance policies.  They may be included as part of the broader crime insurance policy or purchased as a separate and independent policy altogether.  Unlike the “default” crime insurance coverage, a fidelity bond covers crimes committed by one of your employees.

For example, a fidelity bond may protect you from an employee who is defrauding your business by manipulating the accounts.  Similarly — depending on the language used in the fidelity bond — it may protect you from liability If an employee commits a crime against third-parties (i.e., customers).  If an employee steals a customer’s jewelry while conducting repairs at their home, a fidelity bond could protect you from liability.

What is the function of “direct loss” language in a fidelity bond?

Direct loss language is — essentially — limiting language that narrows the applicability of the fidelity bond to crimes that your employee(s) commit against you.  As the financial loss must be directly linked to your business, the language prevents the fidelity bond from applying to crimes that your employee(s) commit against third-parties.

As direct loss language can be read somewhat ambiguously, this often leads to conflict down the line when business owners attempt to submit a claim with their insurer.  It is worth noting that the presence of direct loss language is not a guarantee of a narrow limitation — depending on the way that it is written, a skilled Miami insurance litigation lawyer could secure a more favorable interpretation, allowing you to recover for losses caused by an employee’s crimes against a third-party.

My fidelity bond includes a “manifest intent” requirement.  How could this impact my insurance claim?

The “manifest intent” requirement is quite normal in the fidelity bond context.  It is somewhat strict in that it grants coverage only when the employee at-issue not only intended their conduct but also intended to obtain a financial benefit from such behavior.

Without a “manifest intent” requirement, you could ostensibly submit an insurance claim if your employee entered incorrect sales numbers but had no intention of obtaining a financial benefit for themselves.  They may have simply wanted to avoid workplace criticism, or just wanted to “look good” to their colleagues.

With a “manifest intent” requirement, you would have to show that the employee not only financially benefited from their criminal act, but also that they intended to secure that financial benefit.  That has to form the basis of the criminal act itself.

I’ve heard that coverage under my crime insurance policy will terminate upon my learning that an employee or third-party has committed a crime — is that true?  How does that work, exactly?

Yes, that is correct.  Once you “know” that an individual has committed a crime, that is where coverage ends.  This may seem very unclear at first glance, but it’s actually a fair and relatively straightforward mechanism.

Suppose, for example, that your employee steals money from your business regularly.  You only discover this after a year, when you watch security camera footage revealing the theft at-issue.  Once you find out that the employee is stealing from you (i.e., committing a crime wherein the losses are covered by your insurance policy), then you are required to take action to recover for the losses incurred and to prevent further losses.  If you allow the employee to continue stealing from you, those additional crimes will not be covered by the insurance policy.

Are there any important procedural requirements that I should know about when attempting to submit a claim and potentially litigate against my insurer?

There are several procedural requirements to keep in mind, but these may vary depending on the crime insurance policy that you’ve purchased.  By default, many crime insurance policies include two-year statutes of limitations, preventing you from bringing a claim after two years (running from the date you discovered the loss).  It’s important that you consult a qualified Miami insurance litigation lawyer as soon as possible to evaluate the applicable statute of limitations deadlines (and other procedural requirements). Once this is done, you can avoid any roadblocks in that regard.

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